Morningstar adds AUB Group to 'best ideas' list
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The news: Analysts at Morningstar have added AUB Group to their 'Global Equity Best Ideas' list citing the insurance broking and underwriting network’s highly cash-generative business and long term competitive advantage.
The numbers: AUB Group upgraded its full-year profit guidance in February after reporting a 50% jump in first-half profit. Morningstar holds a fair value estimate of $34 per share on the company.
Its shares were up 1.6% to $29.4 in early trading on the ASX.
The context: AUB owns equity stakes in a network of insurance brokers, which combined are responsible for around 10% of premiums written by intermediaries in Australia. Morningstar analysts said they expect the group will benefit from price increases as insurers seek to improve margins and returns amid escalating claims costs, inflation, more frequent and intense large natural hazard events, and the rising cost of reinsurance.
What they said: “We also see room for brokers to take market share from the direct channel as customers faced with rising prices seek out insurance brokers to find a better deal," the analysts said in a note.
"AUB's increasing ownership interests in brokers that are part of the network is a low-risk M&A strategy that further supports earnings growth."
The source: Morningstar research
