AUB buys 70% stake in underwriting agency Pacific Indemnity
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The news: AUB Group will launch a $200 million equity raising to fund the purchase of a 70% equity stake in specialty underwriting agency Pacific Indemnity.
The numbers: AUB said the acquisition gives Melbourne-based Pacific Indemnity an enterprise value of $192 million, representing 13x its FY23 EBIT. Pacific Indemnity delivered gross written premiums of $177 million and EBIT of $15 million in the 2023 financial year.
The upfront consideration for AUB's 70% stake is $105 million to be paid on completion of the deal, with the remaining amount payable 18 months after completion on a sliding scale subject to FY25 performance.
AUB's fully underwritten equity raising at $27.50 per share is a discount on its last closing price of $29.46.
The Pacific Indemnity management team will remain with the business and continue to own a 30% stake.
Elsewhere, AUB reaffirmed its FY24 underlying NPAT will come in "towards the top end" of its guidance range of $161 million to $171 million.
The context: AUB said the acquisition is "highly complementary" for the group, continuing its strategy to invest in underwriting agencies and build a portfolio of agencies that offer risk products relevant to its clients and their insurance needs.
AUB owns equity stakes in a network of insurance brokers, which combined are responsible for around 10% of premiums written by intermediaries in Australia.
Last month, Morningstar analysts added AUB to their 'Global Equity Best Ideas' list citing the insurance broking and underwriting network’s highly cash-generative business and long term competitive advantage.
What they said: AUB's CEO and managing director Mike Emmett said: "We are delighted to announce the acquisition of Pacific Indemnity, a high calibre business with an excellent management team which has delivered impressive growth to date."
"The acquisition of Pacific Indemnity will add scale, diversify our capabilities, and expand our expertise in financial lines," he said. "The acquisition also presents opportunities for mutual benefits across the business, through collaboration between Pacific Indemnity and the broader AUB Group."
The sources: ASX announcement, ASX announcement
