Steadfast says the market has reached the “bottom of the barrel” and AUB has called for insurer discipline following an acceleration in rate softening.

Steadfast’s Australian base premium renewal prices averaged a 2% gain last financial year, but the pace slowed to 1.1% in the fourth quarter, in a continuation of a two-year downward trend. Rates had increased 6.5% in the final three months of fiscal 2024.

 

Steadfast base premium change

 

“My feeling is we’re at the bottom of the cycle,” CEO Robert Kelly told a results briefing.

He says Steadfast’s earnings forecast for this year assumes a 2%-3% increase in premium pricing in Australia.

A slump this June was driven by increased competition, and some insurers “made some silly mistakes” about how they were pricing products, Mr Kelly says.

“There was an overreaction to losing business, so renewal premiums were sliced by the insurers,” he said.

“I don’t think that will continue and we saw an uplift in July whereas last year we saw a big drop in July.”

AUB Group CEO Mike Emmett has urged insurers to maintain sustainable pricing and underwriting discipline, particularly in New Zealand and parts of the UK.

“Ultimately, we want our clients to be paying fair prices. We don’t want them to be exposed to volatility,” he told a results briefing. “New Zealand is definitely too soft, needs some remediation, and we’re hoping that flows through in the next six to 12 months.”

Some hardening in the UK is more likely in the next 18-24 months, while in Australia the market varies by class.

Mr Emmett says strata is “incredibly competitive”, irrationally priced and needs to harden, with no underlying reasons for rates dropping, although there is no evidence yet of a turnaround.

The Steadfast and AUB CEOs both highlighted that their companies continued to increase group revenues and delivered earnings growth in the past financial year.

“I think what we’ve evidenced is, through feast and famine, we’ve been able to do that consecutively for seven or eight years at least now, so for me that’s the key message,” Mr Emmett said.

Insurer reserve releases that often happen “when insurance profits are inadequate” could indicate an improvement in rates will follow, he says.

“That normally pre-empts an adjustment in terms of the way in which they price underwriting risks.”

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