Takeover speculation - Steadfast Group targeted by Blackstone in $7bn buyout talks | The Australian

AUB’s larger insurance broking rival, Steadfast Group, is now the topic of private equity interest, with talk that New York-based powerhouse Blackstone is assessing a possible buyout of the $5.5bn business.

It comes at an opportunistic time, with Steadfast’s share price still to fully recover after chief executive and managing director Robert Kelly became the centre of a workplace complaint, from which he has since been cleared.

The shares fell from a $6.63 high for the year and closed on Thursday at $5.

Mr Kelly is the founder of the business, which launched in 1996 with 43 brokerages and has over 52 years of industry experience.

He has grown the company to become Australia and New Zealand’s largest general insurance broker network and group of insurance underwriting agencies.

Also hurting share price performance is that insurance premium growth has come under pressure, with forecasts downgraded.

It comes just days after private equity firms CVC Capital and EQT walked away from a plan for a joint $5.3bn bid for Steadfast’s smaller rival, AUB.

While it’s unclear what spooked the private equity bidders, sources say the logical reason is that the company’s premium growth was lower than they anticipated, causing them to determine the company was not worth $45 per share amid due diligence.

Steadfast said at its October annual general meeting that the first three months of the 2026 financial year had seen a lower increase in the premium rate in Australia compared with its expectations of a three to five per cent increase when the 2026 financial year guidance was originally set.

“We now anticipate the average premium rate increases for the full year will be between one and two per cent,” Steadfast chairman Vicki Allen said in her speech.

AUB said at its AGM that it had not observed the same industry trends surrounding premium rates during the first quarter, and rather, observed premium rate rises in Australian broking in the range of 5 to 7 per cent.

In October, Blackstone bought a major stake in India’s Ace Insurance Brokers.

The private equity firm is the world’s largest asset manager with more than $US1 trillion ($1.5 trillion) under management and has owned other insurance brokers in the past.

However, some were cautious about whether Blackstone would move on the target, given the sheer size of the company, making a deal tougher to execute.

Adding a 30 per cent premium, buying Steadfast would cost Blackstone over $7bn.

But further consolidation is expected in the insurance broking space.

Last year, the Australian-listed PSC was sold to Ardonagh for $2.26bn.

Private equity firms are drawn to insurance brokers because they are capital-light, have recurring revenue streams and it is a fragmented market that is ripe for consolidation.

It also has defensive characteristics.

Another drawcard is that the groups hold cash that they receive from customers that they can earn interest on before making payments to insurance providers for products.

Per Macquarie:

Key Points Jun '25 was a strong pricing month for Business Pack and Workers Comp. Weaknesses remained in Commercial Motor, Home and Strata. We estimate a portfolio with SDF's product mix would have achieved +7.2% pricing in the Jun '25 qtr, compared with their guidance of mid-single-digit. SDF is trading at a ~20.8% discount (vs a 2.3% long-term premium) to international brokers.

Comprehensive report into strata insurance

$6.80 Price Target

The CHU factor: We estimate CHU (owned by SDF, capacity with QBE) had a ~43% market share in FY24 (down from ~50% in FY22). This is significant given we estimate Australian Strata risks are now one of QBE Group's top-three catastrophe exposures, and would be adversely affecting the cost of their Group reinsurance covers. In response, QBE has purchased a ~12.5% Quota Share, and will exit the Flex business, whilst also picking up lower share on SDF's contestable platform. As a result, new entrants such as Hutch are quickly picking up share, and with Sure recently changing its capacity to AXA XL (from Liberty), customers appear likely to receive more choice going forward.

...

 IAG and SUN’s market-share losses align with their strategies to pull back from a product that earned sub-optimal returns for a long period of time

QBE (via the CHU agency) effectively became the buyer of last resort in FY22, but this began to turn in FY23 as Lloyds and Allianz capacity begun taking share. In the last 12 months, Hutch has entered the market and Sure Underwriting Agency changed its Strata capacity to AXA XL (from Liberty), thus we expect CHU's market share to continue to contract in FY25. Overall, the additional competition should be good for customers and assist brokers to source three quotes

....

We estimate ~25% of CHU's GWP is up for renegotiation in CY24/25. Þ If we assume a fixed-cost base for CHU, should a quarter of the 25% of GWP be redirected away from CHU (~7% of the total), we estimate this could equate to ~4.7% of SDF Group EPS in FY23, excluding the impact to SDF's Strata brokers (e.g., BAC and BCB). Having said that, to our understanding, all contracts have been retained thus far.

Use of broker platforms is significantly below that of Business Package, or even Commercial Motor products, because very few broker platforms have a Strata offering. This adds to the inefficiencies across the broker market

Outlook • The Strata market is likely to continue to garner negative press over the medium term, spurred by affordability challenges. Ongoing uplift of disclosure in NSW is already in train, and we would expect this to follow in other states. For brokers, the pathway to improvement has been outlined in the Trowbridge report for some time, and we expect media attention to be the catalyst for industry-wide change

...

Appendix A: What is Strata insurance? • Strata insurance typically covers a building, as well as contents/property in common areas (as defined on the title of the property) in the event of loss or damage. Strata insurance must also include liability cover in the event people are injured on common property. This form of insurance is compulsory under each Australian state’s legislation for both residential and commercial Strata properties.

Volumes: Asset volume growth has been very strong due to: #1) a construction boom pre-Covid in Australia and #2) migration towards more urban living pre-COVID. This supported ~3.8% growth pa of Strata schemes nationally over 2018-20. Þ According to a University of NSW study in 2022, nearly 10% of Australians and almost 14% of households live in apartments. 

• Pricing: Price rises have been consistently strong, ranging mostly 8%-12% on average between 2018 and 2021, accelerating until Dec '22, and now stabilising at 14%-17%. Pricing was led by reinsurance costs, claims cost inflation and higher distribution costs. Looking forward, we believe the reset of sums insured and higher regulatory costs will lead prices higher, while the Rate On Line could stabilise.