This ASX 200 share is tumbling despite reporting a 75% profit boost

The ASX 200 insurance broker has revealed strong revenue and profit growth for FY23.

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The AUB Group Ltd (ASX: AUB) share price opened more than 4% higher this morning after the ASX 200 insurance broker revealed its full-year FY23 results. But, the ASX financial share has since retreated and is currently trading for $28.55, down 1.60%.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is currently down 0.19%.

AUB share price down despite mega profit jump

Here are the highlights of the report:

  • Underlying revenue of $1,111.4 million, up from $689.5 million in FY22
  • Underlying net profit after tax (NPAT) of $129.1 million, up 74.4% from $74 million in FY22
  • Underlying earnings per share (EPS) of 129.32 cents, up from 96.7 cents per share (cps) in FY22
  • Reported net profit after tax of $65.3 million, down from $80.8 million in FY22
  • Fully franked final dividend of 47 cps, up from 38 cps in FY22.

The final dividend is 23.7% higher than in FY22, which makes AUB one of the biggest dividend-boosting-ASX shares of the season so far. The full-year dividend totals 64 cps, an increase of 16.4% on FY22.

The dividend reinvestment plan (DRP) remains suspended.

What else happened in FY23?

The FY23 results included profits from the Tysers acquisition for the first time. Tysers made a nine-month contribution that was higher than expectations with underlying pre-tax profit of $76.9 million.

The Australian broking division delivered revenue growth and margin expansion from ongoing network
optimisation, organic growth and bolt-on acquisitions, and enhanced broker propositions.

The division contributed underlying pre-tax profit of $104.8 million, up 21.6% on FY22, as well as an EBIT margin of 35.1%, up 140 basis points on FY22.

Agency growth led to profit improvements as a result of enhanced scale and capabilities. Acquisitions contributing to growth in FY23 included Strata Unit Underwriters, which was purchased in September.

Underlying agency pre-tax profit rocketed 53.9% to $35.1 million and the EBIT margin rose to 38.4%, up 520 basis points on FY22, excluding profit commissions.

The New Zealand broking division had a stellar year. Underlying pre-tax profit rose 59.4% to $14.3 million, partly due to premium increases.

During the course of FY23, AUB upgraded its earnings guidance several times.

This delighted shareholders, with the last upgrade producing a 6.25% bump in the AUB share price.

The insurance sector has been one of the big winners of the inflationary economy in FY23. So much so that many fundies have sold out of ASX 200 bank shares to invest in insurance shares instead.

What did AUB management say?

AUB Group CEO and Managing Director, Michael Emmett, said:

I am delighted with these results. All of our teams, new and old and across multiple businesses and geographies, have delivered exceptionally.

Particularly pleasing is the continued growth of Agencies and the significant turnaround in New Zealand.

Early signs are that Tysers was an excellent acquisition and that our estimates of potential synergies and efficiencies were conservative.

What's next for AUB Group?

The company has provided guidance for FY24 and expects more profit growth ahead.

AUB expects underlying NPAT in the range of $154 million to $164 million.

This would represent a growth of 19.3% to 27% compared to FY23.

The company said its guidance assumes "continued strong premium rate rises" and FX rates of GBP:AUD 1.87 and GBP:USD 1.2568.

AUB share price snapshot

The AUB share price has risen by 29% in the year to date and by 38% over the past 12 months.

AUB was among the 5 top performing ASX financial shares for price growth in FY23.

Motley Fool contributor Bronwyn Allen 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 Aub Group. 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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