Consensus community valuation
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.
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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
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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
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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.
Hi @THOR , @Garfield and @thunderhead who hold SDF and @raymon68 who has posted about SDF, what are your thoughts on the acquisition of Sure Insurance. I have held SDF IRL for some time now as a recommendation from another service and without doing a deep dive into them I have always been impressed by management producing a steady flow of positive results. The chart below shows everything you usually want to see - bottom left to top right. I like the fact that they are not an insurance company (subject to natural disasters) but more of a clip the ticket broker. The founders of Sure are retaining 30% of the company which should drive continued motivation to do well. They expect the acquisition to to be immediately EPS accretive
For more detailed info - SDF Investor-Presentation Nov 2023.PDF
- Summary: Appendix 3Y
Name of Director: Vicki Allen
Value/Consideration: details and estimated valuation $27,950 ($5.59 per share)
Securities held after change 50,000
More about SDF
Board And Management - Steadfast
Vicki Allen
Non-Executive Director (independent)
Vicki has over 30 years of business experience across the financial services and property sectors. She held senior executive roles at a number of organisations including Trust Company, MLC Limited and Lend Lease Corporation. Vicki is currently the Chair of the BT Funds board, and a Non-Executive Director of Bennelong Funds Management. She is a fellow of the Australian Institute of Company Directors.
The Business:
Our underwriters have years of experience in local and open markets. We look to provide a holistic solution to your insurance needs, using our expertise as well as the latest technology and resources.
Exotic Car Insurance link below
Equity brokers (including Network) aggregate underlying EBITA +27.7% (refer slide 20)
Underwriting agencies’ aggregate underlying EBITA +15.7% (refer slide 21) Diluted EPS growth
Diluted EPS growth driven by organic and acquisition growth Acquisition growth
Completed EPS accretive acquisitions for an outlay of $574.2m1 including IBA (refer slide 7) Future growth
As at today, debt facility capacity of $378.5m available to fund acquisitions (plus free cash flow
Participating on the SCTP across four product lines – Commercial Property & ISR, Strata, Liability and Professional Indemnity
You dont like paying insurance.. Well buy these dudes: SDF
Return (inc div) 1yr: 10.90% 3yr: 22.73% pa 5yr: 16.71% pa
Steady growth.
Put the premiums up .. they will pay
Fillin the truck ....errr the Van up with more units.......
Class of securities Number of securities Person’s votes Voting power
Ordinary 52,068,661 52,068,661 5.014%
SDF had a good year Quality stuff here Some capital growth , EPS growth is good
Gross Divi at 3.3%
Pe ratio is up high 20% signs of quality stuff here..
Inflate the Premiums the customer will pay..
Steadfast Group Limited (SDF) provides services to steadfast Network brokers, distribution of insurance policies via insurance brokerages and underwriting agencies, and related services. The Group's corporate structure includes equity investments in insurance intermediary entities (insurance broking and underwriting agencies), premium funders and complementary businesses. They majorly operate in Australasia, with growing operations in Asia and Europe.