Last Thursday, Steadfast Group, Australasia’s biggest brokerage network, presented its FY23 results to investors. Steadfast CEO and industry stalwart Robert Kelly (pictured above) discussed his firm’s year of acquisitions in the context of organic growth and rising insurance premiums.
According to Kelly’s investor presentation, Steadfast completed more than half a billion dollars’ worth of acquisitions during FY23. About half of that amount was spent on buying Insurance Brands Australia (IBA), the other half on more than 50 trapped capital acquisitions.
Kelly said the acquisition strategy has focused on buying “quality businesses” and then working with them to achieve organic growth.
“I say that with particular reference to organic growth because one could say a drover’s dog could have made money in insurance broking for the last two years,” he said. “I’d probably argue that maybe the drover but not the drover’s dog could have made money.”
However, he said the firm’s organic growth strategy is also a way of protecting Steadfast from the day when insurance premiums stop going up so rapidly.
“Essentially there is going to be tailing up on this accretive, year on year, compounding growth of insurance premiums and our job, beginning when this started, was not to sit back and say how clever we were for making more money,” said Kelly.
Instead, he said, Steadfast was looking ahead to the day when insurance premiums increases are going to drop.
“Our job is to make completely sure that when it starts to plateau - and it’s not going to start in the next 12 months or two years, I can tell you, there’s still a long way to go - but when it starts, we want to make sure that organic growth that we’ve been able to take out of the capital that we’ve deployed makes up for that difference,” said Kelly.
Kelly’s presentation also gave a summary of the current regulatory landscape relevant to brokers. He said commissions are accepted by “most regulators worldwide” as the most efficient way to distribute general insurance products that are intermediated.
“People think it’s the best way to do it,” said Kelly.
The overall result of both the Hayne Royal Commission and this year’s Quality of Advice (QAR) review by Michelle Levy “is that the consumer should be well informed at any time about the total cost of remuneration for any insurance product they buy,” said Kelly.
“In broad terms,” he said, the industry supports this view.
Following the Levy review, he said the definition of a retail client has been confirmed as the one contained in current legislation. However, he said the issue of general advice “remains a grey area and is subject to interpretation by the seller of the policy at the time of sale.”
“That [transparency], has to underline everything we do,” he said.
Kelly referenced the popular drama series, Succession, during the presentation.
“I don’t know who they’re modelled on but they’re not very nice people,” said Kelly. “Oh! this is about our succession! Sorry! Okay then.”
The Steadfast CEO said for more than two years his firm has worked on its own succession plans to make sure the company “is well placed if any of us walk out the front and a tram runs us over.”
“Succession is something that we’ve had front of mind,” said Kelly. “Well ahead of the people who’ve started asking me how old I was, whether I was going to hang around and whether I could still manage to get out of my car and get to our office unaffected - well, I can, between you and I.”
However, he said he was “also smart enough to realise” that there does need to be a succession plan in place.
“This juggernaut that we’ve created at Steadfast needs people smarter than me coming through to take it to its next level,” said Kelly. “Hopefully, when you meet the people that are doing this, you’ll be very impressed with what we’ve done there.”
He mentioned Nigel Fitzgerald who joined Steadfast Group in April as chief operating officer (COO) and Samantha Hollman, who moved from the COO position now occupied by Fitzgerald to become CEO – International.
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