Coverforce will be accretive for 10 months given the timing. It was a competitive process run by an investment bank but SDF was well known by Coverforce. SDF had to pay full value, so that accounts for it to initially be 12x.
Organic growth will moderate a little from FY 21 due to higher costs - some wage pressure, but revenue will continue increasing as projected.
Too hard to 'crystal ball' on lockdowns.
Costs general insurers face in Australia are dramatically rising, such as labour costs. Their distribution costs are static but insurers' technology can be outmoded so it needs spending, plus reinsurance costs up and APRA close supervision. They are playing catch-up on technical rates.
There is a lot of pressure re acquisitions with SDF, AUB, and MQB among others competing. Vast majority of brokers dealing with SDF would prefer to sell to SDF as in some cases since 1996 it's been a 'safe home'.
SDF is 34 per cent into its Trapped Capital program so quite a way to go.
Coverforce has computer programs that can be converted to SDF's Insight, including some 'add-ons' CF have.
No downward pressure on SDF-received commissions as here they are sustainable. London commissions for UK similar entities have decreased from an unsustainable 40 per cent down to the 20 per cent area.
The technology spend rose mostly due to rising amortisation. It will continue to rise somewhat given the Coverforce merging.
Market conditions - an analyst said a broker was complaining about poor profitability - but Mr Kelly said the gent was referring to the pricing of retail.
hj
SDF Price at posting:
$4.69 Sentiment: Hold Disclosure: Held
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