Steadfast Earnings: Growth Across the Board

Higher insurance premiums are a tailwind for insurance broking and underwriting, given commissions are tied to premiums, but Steadfast’s first-half fiscal 2024 revenue growth of 19% with EBITA growth of 21% is more than a rate story. There's no denying that higher premiums are playing a large role, but volume growth from new client wins and new brokers joining should not be discounted—nor should higher interest income earned on premium payments. Steadfast deposits customer premiums in cash accounts and earns interest before passing on the premium to the insurer, and we estimate the benefit of higher cash rates is responsible for around one third of EBITA growth in the half. The profit impact is tempered by higher interest costs on the firm’s debt. Acquisitions remain a core contributor to growth, and Steadfast has a good track record of buying and integrating businesses. Organic and acquired EBITA growth was split roughly 60/40 in the half, with stronger contributions expected from recent acquisitions in the second half. At a group level, EBITA margins improved by 50 basis points to 29% in the first half.