Insurance broker AUB Group Ltd (ASX: AUB) has announced the acquisition of 360 Underwriting Solutions, a group of ten leading underwriting agencies that covers $170 million in policy premium. Following the announcement, and in the opening minutes of this morning’s trade, the AUB Group share price has fallen 1.14% lower to $16.50.
Details of the deal
AUB Group says the deal is worth $127 million – facilitated by cash payments of $25 million, with the rest paid in equities in a newly created subdivision.
According to the company, the deal is aligned with its growth agenda, as 360 Underwriting Solutions is an established partner of Austbrokers, and will allow AUB Group to strengthen and expand the scale of its agencies business.
As part of the acquisition, the company will restructure its underwriting agencies division by creating a new subdivision called general commercial underwriting. This new entity will have a total gross written premium (GWP) of $270 million and commence operation from today.
AUB Group has been on an acquisition spree this year, spending $275 million to acquire shares in insurance brokers MGA Whittles and Bizcover in February.
What management said
AUB Group chief executive, Mike Emmett, said:
360 Underwriting Solutions is highly regarded for its underwriting expertise and insurance servicing capabilities in the Australian market. They have a strong presence across SME general insurance and enjoy a leading position in key market segments.
The acquisition is aligned to the Group’s disciplined approach to M&A in acquiring businesses that accelerate our portfolio scale and growth, whilst adding to our core capabilities.
More about AUB Group
AUB Group is an insurance broker servicing more than one million client policies across more than 600 locations in Australasia. Combined, the company covers more than $3.2 billion in policy premium. AUB has three main business lines – broking service, underwriting, and workplace risk management services.
For FY20, the company reported an underlying net profit before tax (NPAT) of $53.4 million, up 15.2% from FY19.
The group also issued an upgrade on its FY21 outlook earlier this month. It said that the underlying NPAT for FY21 will be in the range of $60 to $62 million – an upgrade from 25 August guidance of $58.5 to $61 million.
AUB Group share price performance in 2020
The AUB Group share price has increased by 80% since its low of $9.20 back in March. The share price is 40% higher on a year-to-date basis, and has a 52-week high of $18.10.
Based on the current AUB share price, the company commands a market capitalisation of around $1.2 billion.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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