STEADFAST GROUP LIMITED — Investor Presentation 2016

May 4, 2016

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5 May 2016

Market Announcements Office ASX Limited Exchange Centre 20 Bridge Street Sydney NSW 2000

Dear Sir/Madam

CONFERENCE PRESENTATION

Please see attached Macquarie Conference presentation.

Please contact the undersigned with any questions on +61 2 9495 6595, +61 401 990 866 or linda@steadfast.com.au.

Yours faithfully

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Linda Ellis

Group Company Secretary & Corporate Counsel

STRENGTH WHEN YOU NEED IT

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Steadfast Group Limited ABN: 98 073 659 677 ACN: 073 659 677 Level 3, 99 Bathurst Street, Sydney NSW 2000 t 02 9495 6500 f 02 9495 6565 www.steadfast.com.au

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Macquarie Conference Presentation 5 May 2016

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Presented By:

Robert Kelly – Managing Director and CEO – Stephen Humphrys Chief Financial Officer

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Important notice

This presentation has been prepared by Steadfast Group Limited (“Steadfast”).

This presentation contains general information in summary form which is current as at 5 May 2016. This presentation is not a recommendation or advice in relation to Steadfast or any product or service offered by Steadfast or its subsidiaries and associates. It is not intended to be relied upon as advice to investors or potential investors, and does not contain all information relevant or necessary for an investment decision or that would be required in a prospectus or product disclosure statement prepared in accordance with the requirements of the Corporations Act 2001 (Cth). It should be read in conjunction with Steadfast’s other continuous and periodic disclosure announcements filed with the Australian Securities Exchange, ASX Limited, and in particular the Steadfast 2016 Half Year Financial Report. These disclosures are also available on Steadfast’s website at investor.steadfast.com.au.

To the maximum extent permitted by law, Steadfast, its subsidiaries and associates and their respective directors, employees and agents disclaim all liability for any direct or indirect loss which may be suffered by any recipient through use of or reliance on anything contained in or omitted from this presentation. No recommendation is made as to how investors should make an investment decision. Investors must rely on their own examination of Steadfast, including the merits and risks involved. Investors should consult with their own professional advisors in connection with any acquisition of securities.

The information in this presentation remains subject to change without notice. Steadfast assumes no obligation to provide any recipient of this presentation with any access to any additional information or to notify any recipient or any other person of any other matter arising or coming to its notice after the date of this presentation.

To the extent that certain statements contained in this presentation may constitute “forward-looking statements” or statements about “future matters”, the information reflects Steadfast’s intent, belief or expectations at the date of this presentation. Steadfast may update this information over time. Any forward-looking statements, including projections or guidance on future revenues, earnings and estimates, are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that are outside Steadfast’s control and may cause Steadfast’s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Any forward-looking statements, opinions and estimates in this presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Neither Steadfast, nor any other person, gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur. In addition, please note that past performance is no guarantee or indication of future performance. Possible factors that could cause results or performance to differ materially from those expressed in forward looking statements include the key risks on pages 26-27 of Steadfast’s 2015 Annual Report.

Certain non-IFRS financial information has been included within this presentation to assist in making appropriate comparisons with prior periods and to assess the operating performance of the business. Steadfast uses these measures to assess the performance of the business and believes that the information is useful to investors. Non-IFRS information, including underlying P&L items, pro-forma P&L items, EBITA, NPATA and Cash EPS (NPATA per share), have not been subject to review by the auditors. FY13 and FY14 results are pro-forma and assume the Pre-IPO Acquisitions and the IPO Acquisitions were included for the full reporting period (all of the IPO Acquisitions completed on 7 August 2013). Prior period cash EPS have been adjusted to reflect the re-basing of EPS post the February/March 2015 1:3 rights issue. All references to Aggregate refer to the 100% aggregation of all investees’ results regardless of Steadfast’s ownership interest.

This presentation does not constitute an offer to issue or sell securities or other financial products in any jurisdiction. The distribution of this presentation outside Australia may be restricted by law. Any recipient of this presentation outside Australia must seek advice on and observe any such restrictions. This presentation may not be reproduced or published, in whole or in part, for any purpose without the prior written permission of Steadfast.

Local currencies have been used where possible. Prevailing current exchange rates have been used to convert local currency amounts into Australian dollars, where appropriate. All references starting with “FY” refer to the financial year ended 30 June. All references starting with “1H FY” refer to the financial half year ended 31 December.

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© 2016 Steadfast Group Limited | 2

Resilient SME customer base

1,2,3

Steadfast Network Brokers’ GWP mix

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Corporate
2%
Other Retail
2%
Retail –
Home/Motor
9% Medium
enterprises
32%
Small
enterprises
55%
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• 87% of customer base relates to small to medium size enterprises (SMEs) less pricing volatility

• Focus is on advice

• Low exposure to Corporate ( 2% ) more significant pricing pressure

• Low exposure to retail insurance markets ( 11% ) dominated by direct players

• 1 Based on 1H FY16 GWP excluding New Zealand.

• 2 Allocation based on policy size (retail <$1k, small $1k – $9.9k, medium $10k – $299k and corporate $300k+).

• 3 Metrics above consist of non-IFRS financial information used to measure the financial performance and condition of Steadfast.

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© 2016 Steadfast Group Limited | 3

1H FY16 highlights

• Strong earnings growth in 1H FY16 vs 1H FY15

• Flat market conditions

• Solid organic performance

• Acquisitions overall performing ahead of expectations

• Interim dividend up 20% pcp

• FY16 guidance re-affirmed

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© 2016 Steadfast Group Limited | 4

Network GWP and price movement

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1
Price and total growth in Network GWP
1H FY14 2H FY14 1H FY15 2H FY15 1H FY16
4%
2%
0.6%
0.1%
0%
-2%
-2.2%
-4%
-4.0%
-6%
-8% -7.1% -3.9% since
1H FY15
Price Total GWP
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Pricing moved from soft to flat; volume growth continues

• Price growth flattened to +0.1% in 1H FY16 compared to 2H FY15 (-4.0%)

• Volume growth continuing at 1.7% for 1H FY16, following 1.8% growth 2H FY15

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“The current insurance cycle resembles a bath tub and we are now past the plug hole.” Robert Kelly

1 Data based on year-on-year change in average price per premium and total GWP placed by Steadfast Network Brokers excluding new brokers and New Zealand.

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© 2016 Steadfast Group Limited | 5

Network Brokers GWP growth

Network Brokers

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1,2
Gross Written Premium (GWP)
5.0
2H
$4.4b
4.5 $4.1b 1H
$3.9b
4.0
$3.4b
3.5
2.3
3.0 2.1
2.0
2.5 1.8 2.6% pcp
2.0
1.5
2.2
1.0 1.9 2.0 2.1
1.6
0.5
0.0
FY12 FY13 FY14 FY15 1H FY16
$billion
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2.6% pcp

1H FY16 vs 1H FY15

• 3.9% AU price[(-$83m)]

• +3.5% AU volume[($74m)]

• +2.4% New AU brokers ($51m)

• +0.6% NZ[($13m)]

2.6% total[($55m)]

• Volumes increases have mitigated price reduction

• Insight brokers should add further $160m annual GWP[3]

• 1 GWP excludes fire service levies which generate no income for brokers.

• 2 Based on 1.0m policies in 1H FY16.

• 3 Excluding pet and group life insurance.

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© 2016 Steadfast Group Limited | 6

Underwriting Agencies GWP growth

Steadfast Underwriting Agencies

Gross Written Premium (GWP)

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450
400 $385m 273% pcp
350
300
250
$284m 1H
$378m
200
2H
$145m
150
100 $88m
50 $101m
$58m
0
Pf FY14 FY15 1H FY16
$million
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• GWP growth enhanced significantly by Calliden and the QBE agency acquisitions

• On track to generate annual GWP of $765m+

• Steadfast is the largest underwriting agency group in Australia

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© 2016 Steadfast Group Limited | 7

Operating highlights from FY15 acquisitions

Performance from largest acquisitions exceeded our initial expectations

	1H FY16 vs
	normalised
Acquisitions	historical EBITA	Operating highlights
Calliden agencies	+$1.2m	Cost savings generated from staff and systems rationalisation
		New management invigorating business
		Expanding broker channel distribution
CHU	+$0.5m	Cost synergies through transition off QBE IT systems
		Benefiting from rise in multiple housing developments,
		particularly on the East Coast
		Benefits from infrastructure boom in NSW and QLD more
UAA	+$0.9m	than mitigates the decline in mining sector
		Management better incentivised with 10% buy-in

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© 2016 Steadfast Group Limited | 8

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Financial information

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Strong growth from acquisitions

					Growth from
	Underlying	Underlying		Organic	acquisitions,
Six months ended 31 December	1H FY16	1H FY15		growth %	& hubbing %1
Revenue ($m)	226.1	108.4	109%	6%	102%
EBITA pre CO expenses ($m)	66.0	37.9	74%	1%	73%
EBITA1 ($m)	60.4	34.9	73%	1%	72%
NPAT ($m)	26.6	15.3	74%
Reported EPS (cents)	3.58	2.94	22%
NPATA ($m)	37.9	21.0	81%
Cash EPS (cents)	5.10	4.03	26%

• Continued underlying cash EPS growth for shareholders despite flat market

• Strong growth from acquisitions; 1H FY16 includes full impact of recent acquisitions including Calliden and QBE agencies

• Solid organic performance complemented by bolt-on acquisitions

• Bolt-on acquisitions transacted by individual brokers and therefore viewed as organic

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1 Includes growth from associates converted to consolidated entities in FY15.

© 2016 Steadfast Group Limited | 10

Track record of strong earnings growth

Cash EPS

EBITA pre Corporate Office expenses

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10.0 1H
2H
8.0
5.76
6.0
4.32 26% pcp
3.50
4.0
5.10
2.0 4.03
3.62
3.27
0.0
Pf FY13 Pf FY14 FY15 FY16
cents per share
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74% pcp
70 66.0
1H
61.0
60 2H
50
40 37.4 37.9
32.2 33.1
28.9
30
20
10
0
Pf FY13 Pf FY14 FY15 FY16
$million
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• 2H FY16 NPATA and Cash EPS split expected to be 53%+ assuming flat market conditions and no material acquisitions

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© 2016 Steadfast Group Limited | 11

Fully franked interim dividend of 2.4 cents, up 20%

• In line with dividend payout ratio target of 65% to 85% of underlying net profit after tax and a minimum of 50% of net profit after tax before amortisation and impairment of intangibles

• 1H/2H target dividend split 40%/60%

• Dividend Reinvestment Plan (DRP) to apply to interim dividend; no discount

• DRP shares will be acquired on market

• Key dates for interim FY16 dividend

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6.0
Interim dividend
5.0 Final dividend
4.0
3.0
2.7
3.0 20% pcp
2.0
2.4
1.0 1.8 2.0
0.0
FY14 FY15 FY16
cents per share
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• Ex date: 8 March 2016

• Dividend record date: 9 March 2016  DRP record date: 10 March 2016  DRP pricing period: 14-24 March 2016  Payment date: 14 April 2016

All dividends are fully franked

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© 2016 Steadfast Group Limited | 12

Strong conversion of profit to cash

Statutory cash flow statement

Statutory cash flow statement
Six months ended 31 Dec, $ millions	1H FY16	1H FY15
Cash flows from operating activities
Receipts from customers	178.9	111.9
Payments to suppliers and employees, and network broker rebates	(130.7)	(95.3)
Dividends received from associates and joint venture Interest received/(paid) net of interest and other finance costs paid	6.6 (1.1)	9.9 0.4
Income taxes paid	(6.6)	(5.8)
Net cash from operating activities before customer trust accounts movement	47.1	21.1
Net movement in customer trust accounts Net cash from operating activities Net cash used in investing activities	41.8 88.9 (50.2)	1.3 22.4 (53.7)
Net cash from financing activities	17.1	87.8
Net increase/(decrease) in cash and cash equivalents	55.8	56.5
Cash and cash equivalents at 1 July	239.2	114.6
Cash and cash equivalents at 31 December	295.0	171.1
split into: Cash held in trust	215.1	116.7
Cash on hand	79.9	54.4

 >100% of underlying NPATA converted into cash flow

 Collected prior year NPATA and portion of 1H FY16 profits

 Cash used in investing is shown net of cash balances acquired – including trust cash

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© 2016 Steadfast Group Limited | 13

Healthy balance sheet

Statutory balance sheet

$ millions	31 Dec 15	30 Jun 15
Cash and cash equivalents Cash held on trust	79.9 215.1	67.6 172.2
Receivables & other	266.1	343.3
Total current assets	561.1	583.1
Equity accounted investments	126.6	122.4
Property, plant and equipment Identifiable intangibles Goodwill	28.9 173.1 684.0	25.8 181.0 669.3
Deferred tax assets & other	48.5	33.9
Total non-current assets	1,061.1	1,032.4
Total assets	1,622.2	1,615.5
Trade and other payables	394.8	429.0
Loans and borrowings	1.5	1.1
Deferred consideration Other Total current liabilities	7.3 64.7 468.3	27.5 59.4 517.0
Loans and borrowings	195.6	160.9
Deferred consideration	16.4	27.8
Deferred tax liabilities & other	71.1	68.2
Total non-current liabilities	283.1	256.9
Total liabilities	751.4	773.9
Net assets	870.8	841.6
Non-controlling interests	22.8	18.7
Gearing ratio (Corporate)1	17.1%	14.9%

• Corporate gearing ratio[1] at 17% versus maximum target gearing ratio of 25%

• $285m syndicated debt facility with 3 and 5 year tranches, established in Aug15

• Significant headroom in financial debt covenants

• ~$100m capacity for future acquisitions and deferred consideration after completing recent bolt ons and follow through investments.

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1 Gearing ratio calculated as corporate debt/(corporate debt plus equity).

© 2016 Steadfast Group Limited | 14

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Strategy & Outlook

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Strategic initiatives

Business Development

Steadfast Direct

Hubbing

New Zealand

Offshoring

Asian presence

Roll out common IT systems

Acquisition pipeline

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© 2016 Steadfast Group Limited | 16

Common IT systems

• IT is a competitive advantage as it creates significant cost synergies and efficiencies

• We have elected to build our own systems – we don’t want to have a third party controlling our destiny or our data

• Broker quoting and underwriting system, formerly known as SVU

• quotes and issues policies more efficiently than our competitors

• broker back office system, formally known as eClipse

• better access to quality data compared to our competition

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• operates the UnderwriterCentral underwriting system used by underwriting agencies

• purchased by Steadfast in April 2016

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© 2016 Steadfast Group Limited | 17

Re-affirm FY16 outlook

• FY16 underlying Cash EPS growth guidance range of 10-14%, driven by:

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1
Underlying NPATA
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41-46%
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• Uplift from 2H FY15 acquisitions

• Organic growth

• FY16 underlying NPATA guidance range of $80$83m, up 41-46%

• Key assumptions include flat market conditions and no material acquisitions[2]

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85
$80 – $83m
75
65 56.7
55
41.2
45
35.2
35
25
FY13 FY14 FY15 FY16 est
$ millions
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• 2H NPATA split expected to be 53%+ in FY16

• Strong pipeline of acquisition opportunities continues unabated

• Increased volumes position us for any upturn in pricing cycle

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1
Underlying cash EPS
13
10-14%
10.8-11.2 cps
9.8
10
7.9
8
6.8
5
FY13 FY14 FY15 FY16 est
cents per share
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• 1 FY13 and FY14 are both pro-forma; FY15 and FY16 estimate are both underlying.

• 2 Also refer to the key risks on pages 26-27 of Steadfast’s 2015 Annual Report

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© 2016 Steadfast Group Limited | 18

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Questions

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