AUB profit jumps, Tysers makes first contribution

AUB Group says a strong performance across broking and agency operations and a first contribution from the UK Tysers acquisition drove a 52% increase in underlying net profit in the first half.

“All parts of the business are performing very well, the momentum is strong and our strategic initiatives are continuing to deliver on-going benefits,” CEO Mike Emmett told a results briefing this morning.

AUB underlying profit rose to $46.7 million from $30.6 million a year earlier, the company confirmed, after last week releasing the figure, along with upgraded full-year guidance. Earnings excluding Tysers rose 32.6% to $40.6 million.

The company today also upgraded medium term margin targets for its existing divisions and added an initial 30% target for Tysers, which began contributing to earnings in October.

“The various strategies to consolidate and optimise the portfolio as well as the deployment of technologies and enhanced insurer arrangements and products has enabled AUB to make better progress against medium-term margin targets than originally anticipated,” Mr Emmett said.

Australian Broking underlying pre-tax profit rose 30.3% to $49.9 million as revenue increased and margins expanded as growth in existing operations was supplemented by bolt-on acquisitions and equity step-ups. Rate increases of 9.5% were put through for renewing business.

The agencies business profit increased 38% to $12.3 million with organic growth partially offset by non-recurrence of some profit commissions.

AUB says its Strata Unit Underwriters (SUU) acquisition is exceeding expectations, SURA speciality growth is strong, particularly in construction, professional and technology risks and growth across the general commercial 360 portfolio of agencies “continues at pace”.

New Zealand, previously identified as a focus area, reported an improved result. Profit for the half rose to $4.8 million from $3.5 million, while progress has continued on a technology project. A new platform went live at a brokerage during the half, paving the way for a further roll out.

BizCover, which targets smaller businesses, reported that profit rose to $5.7 million from $4.9 million, while revenue growth slowed especially in intermediated channels, with comparator sites recently focusing more on areas outside general insurance such as mortgages and energy.

AUB says initiatives are underway to enhance BizCover products and lead sources, a “new major insurer” will be joining the platform in the second half, and it remains strongly cash flow positive.

Tysers contributed pre-tax profit of $18 million for the three months to December 31, with revenue and profit above expectations.

Mr Emmett told the briefing that rate gains are shifting more from financial lines to property and casualty, while stressing that AUB’s strategy focuses on achieving growth through the premium cycle, as demand for cover and advice increases.

“Our outlook is very positive, and I would emphasise, irrespective of the rate cycle,” he said.

AUB Group reported net profit was $364,000 compared to $29.68 million a year earlier, with the figure affected by acquisition related expenses, mainly for Tysers.