AUB Group (ASX:AUB) reported a “strong” first half of FY2026, pointing to organic profit growth, expanding margins, and an upgraded full-year profit outlook as the company continued to invest in acquisitions and technology initiatives, including a broad rollout of artificial intelligence tools across the group.
First-half earnings and guidance upgrade
CEO and Managing Director Mike Emmett said the first-half result “reinforces the durability of the model” AUB has built, highlighting three themes: resilience, capital discipline, and positioning for the future. Underlying net profit after tax (UNPAT) rose 13.9% to AUD 90.4 million, with underlying margin expanding to 33.9%. Earnings per share increased in line with UNPAT to AUD 0.7754.
Following the first-half performance and acquisitions—“most notably Prestige”—AUB upgraded its FY2026 UNPAT guidance to AUD 220 million to AUD 230 million, representing growth of 9.9% to 14.9% over FY2025. The board declared an interim dividend of AUD 0.27 per share, up 8% on the prior corresponding period, which the company said reflected confidence in earnings and balance sheet strength.
Divisional performance: strength across most units, New Zealand decline
Emmett said the portfolio effect was evident across the half: International, BizCover, Australian Broking, and Agencies delivered “good” revenue, margin, and profit before tax growth, while New Zealand profits declined.
- Australian Broking: Average income per client increased 7.8%, which management said was notable given premium rate increases have moderated to low single digits over the past year. Broking margins expanded to 37.7% despite lower interest income, which Emmett attributed partly to improved operating efficiency. He described the division as structurally strong and highly cash generative, with continued opportunities for equity stake increases in partners and selective consolidation.
- BizCover: Revenue grew 13.3% and EBIT increased 22.1%, with “meaningful” margin expansion. Management highlighted the Blaze technology rollout as improving onboarding efficiency and product integration and helping BizCover launch new capacity and products faster.
- Agencies: Revenue increased 10.8% and margins expanded to 42.4%. Specialty lines performed strongly and Pacific Indemnity was said to have integrated well, while the Strata business remained challenging and weighed on results. Profit commissions “rebounded strongly” after a weaker prior corresponding period.
- New Zealand: Profits fell 10.9% on a constant-currency basis. Emmett cited broader economic and operating challenges in New Zealand and the cost of a market share push that “didn’t deliver anticipated results,” with impacts most evident in ICIB BrokerWeb and NZbrokers. The company said remediation initiatives are underway, alongside strategy reshaping, tighter cost control, and accelerated portfolio optimization, while acknowledging near-term performance is muted.
- International: The company reported strong profit growth, driven by wholesale cost initiatives, retail startups gaining traction, and recent acquisitions contributing, despite foreign exchange headwinds. Emmett reiterated international—particularly UK retail—as an important growth area over the next few years.
Prestige acquisition: accelerating UK retail strategy
Emmett described the Prestige acquisition as strategically significant, saying it “meaningfully advances” AUB’s UK retail strategy in a large and fragmented market. He said AUB has been deliberately assembling a UK platform with retail broking, appointed representative networks, MGA capabilities, and wholesale expertise, rather than attempting to replicate the Australian model quickly.
According to management, Prestige brings a national retail presence, regional brands, insurer relationships, and experienced leadership, and is culturally aligned with AUB. Emmett emphasized that scale in retail broking improves leverage with insurers, operating efficiency, and competitive positioning, and enhances resilience through diversification. He also highlighted the role of owning or investing in MGA capability to improve margin mix and strategic flexibility, particularly when insurer appetite tightens.
On synergies, management said expected benefits were primarily cost-related—such as middle and back-office scale, technology rationalization, procurement efficiencies, and removal of duplicated corporate costs—while taking a “deliberately conservative” approach by excluding revenue synergies.
Later in the call, Emmett said the company received FCA clearance for the investment “late last week” and expects the acquisition to settle on or before 1 May.
Capital position, leverage, and risk exposures
New CFO Nick (formally appointed ahead of the presentation) detailed the group’s funding position and sensitivities. He said the leverage ratio rose from 1.97x to 2.49x at the end of calendar year 2025 following a AUD 239 million increase in total debt, used to fund acquisitions including an additional 30% interest in Pacific Indemnity and a further 6% interest in AUB 360, as well as the final earn-out payment related to Pacific Indemnity.
In January, AUB completed an AUD 400 million institutional equity raise and secured an additional AUD 200 million debt facility. These funds are intended to be applied primarily to the AUD 432 million Prestige acquisition, with surplus directed to repay existing debt. On a pro forma basis, after transaction and hedging costs, available cash and undrawn funding increases to AUD 300 million and leverage reduces to 2.41x.
Nick also noted AUD 500 million of existing syndicated facilities mature in January 2027, and the company intends to begin refinancing discussions in March. He said interest-earning assets are broadly aligned with look-through debt and are predominantly floating rate, but flagged mismatches in currency composition: 24% of interest-earning assets are denominated in US dollars while AUB has no US dollar-denominated debt, and Australian dollar debt exceeds Australian dollar interest-earning assets by about AUD 360 million at December 2025.
On FX exposure, Nick said the most material sensitivity relates to unhedged US dollar brokerage income from international operations, while GBP exposure is “largely neutral” after the US dollar to GBP hedging program. He said approximately $36 million of US dollar brokerage income remains unhedged in the second half of FY2026. A 1% move in the average realized AUD/USD exchange rate versus the outlook assumption would imply about a plus or minus 0.3% movement in the midpoint of second-half UNPAT guidance.
AI rollout: productivity tools and a pending BizCover ChatGPT app
Emmett said AUB has implemented or is in the process of implementing more than 35 AI solutions across BizCover, retail, agencies, and wholesale, aimed at improving service speed and quality. He positioned AI as “a growth enabler and operational accelerator,” intended to augment—not replace—broker expertise by reducing administrative tasks and improving technical precision, including policy comparisons and identification of wording gaps.
One highlighted initiative was a BizCover ChatGPT app, which management said has been lodged for review and approval and is awaiting OpenAI approval for release. Emmett said the app would allow micro-SME clients to explore commercial insurance options through natural language interaction, compare quotes, and bind policies via a link to BizCover. He added that similar functionality will also be delivered through an AI voice agent planned for launch in coming months to extend call center capacity and operating hours, and that capabilities will be released to brokers as part of the rollout of a new Australian broking platform.
In Q&A, Emmett said the app does not provide advice, emphasizing regulatory accountability remains with the license holder and that the tool is intended to provide fact-based comparisons. He also said early AI initiatives were “not at the scale yet” to attribute directly to margin performance, but could help the company reach margin targets faster by enabling parallel automation where technology capacity had previously constrained deployment.
About AUB Group (ASX:AUB)
The Company is focused on insurance broking, underwriting agency and risk management businesses.
