Shares in insurance broker Steadfast Group Ltd (ASX: SDF) rallied 7% on Tuesday to $1.60 after the company released a strong set of half year results for the six months ending December 31.
Steadfast is Australia's largest general insurance broker network in Australia and New Zealand with a current run rate gross written premium of $4.6 billion. There are currently 343 Steadfast Network brokers.
Steadfast is also the largest underwriting agency group in Australia and New Zealand with a current run rate annual gross written premium of $765 million. There are currently 22 Steadfast underwriting agencies.
With a market leading position and without the significant fluctuations and risks that come from operating an insurance business which the likes of QBE Insurance Group Ltd (ASX: QBE), Insurance Australia Group Ltd (ASX: IAG) and Suncorp Group Ltd (ASX: SUN) must contend with, Steadfast is a stock which could appeal to long-term investors.
Here are the highlights from the interim results:
- Underlying revenue soared 109% to $226 million
- Underlying earnings before interest, tax and amortisation (EBITA) leapt 73% to $60 million
- Underlying net profit after tax but before amortisation (NPATA) increased 81% to $38 million
- Underlying cash earnings per share (EPS) increased 26% to 5.1 cents per share (cps)
- The fully franked interim dividend was increased by 20% to 2.4 cps
Foolish takeaway
While investors shouldn't extrapolate the recent growth rates into the future, Steadfast does have an appealing growth profile thanks to its ability to acquire brokers within its network and like its peer AUB Group Ltd (ASX: AUB) it is set to benefit from a hardening insurance market.
This in turn has the company forecasting underlying cash EPS growth of between 10% and 14% for the full year. This implies EPS of between 10.8 cps and 11.2 cps and a price-to-earnings multiple (at the low end) of 14.8 times.
