AUB Earnings: Lifting Margin Targets as Acquisitions Propel Growth

We increase our AUB Group fair value estimate by 14% to AUD 33, with shares 12% undervalued against our revised valuation. Most of the increase reflects higher medium-term earnings estimates. In addition to insurance price increases expected to continue at a double-digit rate in fiscal 2024, compared with our prior mid-single-digit forecast, margin improvement across the firm in fiscal 2023 prompts us to raise our midcycle assumptions for each division. Our midcycle group EBITDA margin of 37% is up from 36%. This is a material step up from the 33% reported in fiscal 2023. The Australian broking and agency businesses continue to benefit from operating leverage on rate increases, New Zealand should enjoy reduced technology spending, and Tysers is expected to extract cost savings.