Steadfast: Small Step in U.S. Expansion but Ambitions Remain Large

Narrow-moat insurance broker Steadfast SDF marks its expansion into the United States with the acquisition of ISU Group for USD 55 million. ISU operates an independent insurance broker network in the U.S., providing 220 broker members with access to insurers and other services like coaching and best practices. Revenue is split roughly evenly between member payments and commission fees from insurers based on volumes and the claims ratio within the network.

The acquisition is expected to be EPS-accretive but EBITDA of AUD 8 million is small in the context of our prior fiscal 2024 EBITDA forecast of AUD 517 million. We have made minor upward revisions but they are not material enough to move our AUD 6 fair value estimate.

This is unlikely to be the last acquisition Steadfast makes in the U.S., but given timing and size are unknown, we have not made any explicit assumptions. We think the approach is logical. We like that this is a small acquisition, giving Steadfast a foothold to better understand the market and opportunities without putting material capital at risk.

We think the fragmented U.S. market presents good opportunities for Steadfast to make more acquisitions and places it in a good position to win market share organically by attracting members of other networks with a superior offering. Leveraging the trading platform used in Australia will take years to implement if Steadfast can convince insurers to connect products to the platform. Steadfast’s scale could also provide member brokers better access to global insurance markets, and leveraging other services like risk assessment, claims handling support, and premium funding, can happen quickly.

Steadfast also noted ISU brokers looking to retire or exit have often sold to new owners who left the network. Steadfast would be a logical buyer of these broking businesses to keep them in the network, whereas ISU did not have the appetite for taking equity stakes.