Portfolio Changes - Buy AUB Group (AUB)

Recent changes to Blended Australian Equities Portfolio

AUB is an equity-based network of insurance brokerages and underwriting agencies, operating across 595 locations in Australia, New Zealand, and international markets including Asia and the UK following the acquisition of Tysers. The group manages over A$10 billion in gross written premium (GWP).

In 1H25 AUB delivered a solid result with underlying EBIT rising 10.4% to $228 million, supported by stable revenue growth of 12% and margin expansion across its core segments. Underlying NPAT rose 13%, driven by robust organic growth of 9.3% and 15% from acquisitions. The interim dividend of 25 cents per share was 25% higher than the prior period and exceeded market expectations. FY25 guidance for underlying NPAT was reaffirmed at $190-220 million, representing growth of 11-17% over FY24.

The Australian Brokering segment (50% of total group EBIT) delivered $114 million EBIT at a 37.6% margin, underpinned by 9.2% growth in commission rate enhancement and fee increases. Given its primary exposure to the SME market, company highlighted strong levers in place to drive further pricing and fee optimisation. In Agencies (19% of total group EBIT), profit before tax rose 52.6% in 1H25, driven by 18.4% organic growth from higher premiums, and 34.2% from acquisitions. Tysers, a Lloyd’s specialist wholesale broker acquired in FY23, contributed $32 million in EBIT (14% of group) at a margin of 15.6%. While Tysers’ margins were weaker due to the impact of a previously departed team and a one-off bonus period realignment, underlying performance was solid once these were normalised.

After de-rating by more than 2x P/E in recent months, AUB now trades at 16.5x forward P/E (a 17.5% discount to its 5-year average). We believe this presents a compelling entry point given its strong earnings growth prospects, improving clarity around Tysers, and the defensive nature of its earnings. The stability and resilience in insurance broking provide attractive downside protection in a more volatile market environment.