Category: Technical Picks
Well it is very important to look at the momentum, price action and volume weighted average price of a stock other than fundamental screeners.
This is what our team has come up with another important feature for selecting the stocks on the basis of more than 10 technical screeners, which can help our investors & members to look for short term positional investing, short term trading and identifying the long term price action trends of their favourite stocks.
Business Strategy and Outlook
AUB operates the second-largest general insurance broker network in Australia and New Zealand. AUB brokers derive revenue from commissions paid by insurers, based on gross written premiums. AUB owns or has equity stakes in each broking business within the network. Post the exit of rehabilitation services in 2021, around 85% of group EBITA is delivered by the broker network, while the underwriting agencies generate about 15%.
A key value proposition over smaller brokers is AUB’s ability to negotiate more favourable policy wording and pricing. Scale also provides the capacity to spend more on technology, which helps facilitate greater analytical and processing capabilities, and marketing to help attract and retain customers. Other services such as claims support and premium funding support the value proposition.
AUB’s underwriting agencies distribute insurance products but take no underwriting risk. Underwriting agencies act on behalf of insurers to design, develop, and provide specialised insurance products and services.
The earnings outlook is positive. It is expected further insurance price rises over the medium term as insurers seek to cover claims inflation and weak investment income. This follows a weak pricing environment due to excess global reinsurance capacity, soft economic conditions, and elevated competition.
Financial Strength
AUB is in sound financial health. It has strong cash flow generation with a high conversion of earnings to operating cash flow and a relatively high dividend pay-out ratio. Gearing as reported by the company (corporate, subsidiary and look through share of associate debt/debt plus equity) ratio is reasonable, at 28.5% and below the firm’s maximum 45% ratio. Excluding customer cash for premium held by AUB but payable to insurers, AUB holds AUD 90 million in cash, which when included lowers gearing further. The current debt load looks manageable, with EBITDA interest cover of over 16 times and the nature of its businesses being relatively low risk. It is assumed AUB will use operating cash flows to fund increased positions in existing broker partners, with headroom to fund small acquisitions from cash on hand.
Bulls Say’s
- AUB’s scale and expertise in insurance products and services leave it well placed to benefit from higher insurance pricing.
- BizCover and the Kelly+Partners partnership see AUB placed to take market share in the smaller end of the SME market.
- The firm’s acquisition strategy, both new investments and increased equity stakes, likely boosts EPS growth.
Company Profile
AUB Group is the second-largest general insurance broker network in Australia and New Zealand. It has an ownership in 55 brokerage businesses, which collectively write over AUD 3 billion in premiums. It also owns equity stakes in 27 underwriting agencies. AUB derives revenue from commissions (from insurers, ultimately paid for by AUB’s customers) based on gross written premium, or GWP, from agencies it owns, and a share of profits from associates and joint ventures. GWP is split between personal (6%), small to medium enterprises (68%), and corporates (26%).
(Source: MorningStar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
