AUB expects earnings jump after strong first quarter, Tysers deal

AUB Group has upgraded its full-year earnings guidance after a first quarter “strongly ahead” of original expectations and has provided details on the anticipated additional profit contribution from the Tysers acquisition.

Underlying net profit after tax, including Tysers and group debt costs, is expected to be $107.5-115 million, representing growth of 45.2-55.4% over the past financial year.

“We are pleased to report AUB stand alone is performing well with upgraded earnings expectations for the full year,” CEO Mike Emmett said today.

“We are also pleased to provide investors with more transparency on Tysers’ performance. Tysers is a high-quality business and is performing ahead of the expectations we had when we first announced the transaction in May.”

Underlying earnings excluding Tysers and group debt costs are expected to reach $90-92 million, up from August 24 guidance of $86-91 million and representing growth of 21.6-24.3% on last year.

The $880 million acquisition of Lloyd’s wholesale broker Tysers was completed at the end of the first quarter, with AUB expecting it will contribute underlying earnings of $45-52.5 million for the nine months to June 30.

Mr Emmett told the annual general meeting in Sydney this morning that significant insurance rate rises and other cost pressures faced by businesses mean brokers are working harder than ever to assist clients, while increased insurer risk aversion has seen placing specific risk categories become more complex.

“Whilst we understand the challenge faced by insurers in the light of significant increases in the frequency and severity of climate-related losses, our priority remains to assist our clients,” he said.

“We are therefore seeing an unprecedented rise in the need to place risks on behalf of our clients in the international market.”

The Tysers acquisition enhances the ability of the group’s brokers and agencies to access capabilities and facilities in the Lloyd’s and international markets and to place these global risks to the benefit of clients, he says.

Chairman David Clarke said the group’s strategic focus is mainly a continuation of the past year’s objectives, with a particular focus on New Zealand business performance, technology delivery and successful integration and delivery of synergies from Tysers.

The company also said that former Deloitte Australia CEO Richard Deutsch would join the board as a non-executive director effective from the end of the meeting.

The company is undertaking a search to appoint a new chairman to the Tysers Board, with the successful candidate expected to also join the AUB Group board.