AUB share price outperforms on double-digit NPAT growth in FY22

Let's dissect the results.

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Key points

  • The AUB share price jumped after it reported a pleasing FY22 result with double-digit profit growth 
  • Growth in customer policies and insurance premiums helped drive organic growth in the business 
  • AUB is expecting the good times to roll on with FY23 underlying NPAT tipped to range from $86m to $91m - or 16%-23% over FY22 

The AUB Group Ltd (ASX: AUB) share price is outpacing the market after it posted a double-digit increase in full-year earnings.

The insurance broking group reported a 13.3% uplift in FY22 underlying net profit to $65.3 million compared to a year ago.

The increase would be a more impressive 22.2% from a "continuing operations" basis. This excludes Job Keeper payments and the sale of the Altius business, which bolstered its FY21 profit numbers.

The AUB share price added 3.23% in morning trade to $21.12 while the All Ordinaries (ASX: XAO) inched up 0.4%.

Summary of AUB's FY22 results

  • Underlying earnings per share (EPS) of 96.70 cents per share:
    • up 12.3% on FY21 underlying EPS of 86.12 cents
    • up 21.1% on FY21 underlying EPS from continuing operations of 79.85 cents
  • Reported Net Profit After Tax (NPAT) of $80.8mn (FY21: $70.6mn), up 14.5%
  • Fully franked final dividend of 38.0 cents per share (FY21: 39.0 cps), down 2.6% taking FY22 total dividend to 55.0 cents per share (FY21: 55.0 cps)

What is driving AUB's FY22 growth

The group attributed profit growth to strong organic growth in Australian Broking and Agencies. Australian Broking enjoyed an increase in commercial lines premiums and the number of clients and policies.

Ongoing cost reductions from merging some of its businesses also helped. But this was partially offset by higher wages and increased cost of corporate insurances.

AUB's Agencies division recorded a 53.5% increase in underlying pre-tax profit to $22.8 million. The increase is due to strong organic growth and the full-year contribution from 360 Underwriting Solutions.

Its BizCover business also contributed to group profits as the platform gained scale, but its New Zealand expansion detracted due to additional technology investments the group had to make in FY22.

What AUB said about its full-year results

AUB Group managing director, Michael Emmett, said:

FY22 has been a challenging year for our partners and clients with the ongoing COVID-19 pandemic, major flooding events in Australia and uncertain geopolitical and macroeconomic environments.

Despite the challenges, I'm pleased to report another strong operational and financial result for FY22, a reflection of the efforts and support our brokers and teams provide to our clients.

Outlook and guidance

AUB noted that its growth momentum is carrying through into the first half of FY23. It expects to deliver FY23 underlying NPAT in the range of $86 million to $91 million. This would represent a gain of 16.2% to 23% versus FY22.

The results might even be better than guidance as management is not counting contribution from its Tyser acquisition.

AUB share price snapshot

Despite the good FY22 result, the AUB share price has shed 15% of its value over the past year. In contrast, the All Ordinaries (ASX: XAO) has lost 7% of its value.

The AUB share price is also lagging other ASX insurers. The Suncorp Group Ltd (ASX: SUN) share price is down 13% while the QBE Insurance Group Ltd (ASX: QBE) share price is flat over the period.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Austbrokers Holdings Limited. 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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