AUB GROUP LIMITED — Investor Presentation 2012

Aug 26, 2012

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27[th] August 2012

The Manager Company Announcements Australian Securities Exchange Level 6, Exchange Centre, 20 Bridge Street Sydney, NSW 2000

Dear Sir / Madam,

Re: Presentation on Results for the Year ended 30[th] June 2012

Attached for immediate release is Austbrokers Holdings Limited (AUB) Presentation on results for the Year ended 30[th] June 2012.

Yours faithfully,

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Stephen Rouvray Company Secretary Austbrokers Holdings Limited

For further information, contact Steve Rouvray Tel: (02) 9935 2201

Mobile: 0412 259 158

AUSTBROKERS HOLDINGS LIMITED

Financial Year 2012 Results Presentation Monday 27[th] August 2012

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Lach McKeough CEO Steve Rouvray CFO

Agenda

• Overview

• Business Overview

• FY 2012 Financial Highlights

• FY 2012 Operational Highlights

• FY 2012 Financial Performance

• FY 2013 Outlook

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1

Business Overview

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Insurance Broking Network
Underwriting Agencies
Top 4 broking network in Australia
Act on behalf of insurers
Owner driver model
$160 million in premium
Strong regional presence
Niche & general agencies – most classes
SME base
Presence in 5 states
Corporate capability
No underwriting risk
$1.3 billion base premium
Austbrokers Holdings Limited
Back office services
Risk management & compliance
IT & DataCentre
Management
Corporate governance
Acquisitions
Joint Venture with IBNA – A&I
Member Services Premium Funding
Interface with underwriters Arrangement with Hunter Premium
Funding to assist clients with financing
Policy terms conditions
insurance premiums
Represents $2.4 billion base premium
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2

Business Overview con’t

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Owner Driver Model
21 50% owned
17 51% to 85%
4 100%
42 Businesses Broking Over 110 Locations
Financial Services
General & Specialist Insurance Broking
Operations – Life &
Brokers Network
Superannuation
Total of $1.3 billion base
Over 85 Partner
premium (premium
Shareholder Principals
before charges)
1,600 Personnel
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3

FY2012 Financial Highlights

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Adjusted NPAT up 15%
Reported NPAT up
Total revenue up 9.7%
20%
Market cap $388M at
EPS up 17% Austbrokers
30 [th] June 2012
Dividend per share up
TSR for FY2012 13.5%
22% 31 cents
Underwriting Agency
profits up 54%
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4

FY2012 Operational Highlights

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New arrangement for
Premium Funding – Agreement to
Hunter Premium continue AIMS JV with
Funding for 5 years IBNA
on improved terms
Austbrokers
Appointment of new Appointment of
CIO to take IT to next General Manager to
level focus on acquisitions
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5

con’t FY2012 Operational Highlights

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Acquisition Taggart
Associates 1 [st] July
Acquisition Dittman & 2012 Network Acquisitions
Associates Gladstone 6 businesses /
1 [st] January 2012 portfolios
Acquired remaining
iClose EDI platform
50% Insurics 1 [st] July
rolled out to Network
2012 Insurance Broker
Network
Austbrokers Business
Profit Contribution up
Centre now servicing
10.7%
20 businesses
Total Revenue up Premium Funding
12.5% income up 16.3%
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6

con’t FY2012 Operational Highlights

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Millennium
Underwriting
transferred in 1 [st] July
2012
Increased total income
Acquired FIUA 1 [st] 57%
January 2012
Austagencies Securing New
Development of Start
Underwriting Underwriters for
Up Businesses
Agencies Products
Continued to invest in
Profit Growth 54% resources for future
growth
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7

FY 2012 Financial Performance

$’000	FY FY % change
	2012 2011
Broker Revenue(net of commission	253,683 225,470 12.5
Paid)
Brokers & Agencies Profit	48,845 42,930 13.8
(AHL share)
Profit (before tax and amortisation	39,905 34,203 16.7
of intangibles and sales of businesses)
NPAT Reported	25,640 21,365 20.0
NPAT (before amortisation of intangibles	27,395 23,813 15.0
and sales of businesses) – Adjusted NPAT

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8

AUB Total Shareholder Return Performance to 30[th] June 2012

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1 Year 3 Year 5 Year
35
30
25
20
15
AUB
10 ASX All Ords
ASX 200 Index
5
0
-5
-10
-15
% 13.5 (9.5) (9.0) 31.2 7.1 6.8 16.8 (4.2) (4.2)
% Annualised TSR
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9

Agenda

• Overview

• FY 2012 Financial Performance:

• Income statement – as per Financial Report

• – Reconciliation to Adjusted NPAT

• – Profit and loss statement – detailed

• – Balance sheet

• Other financials

• Changes to accounting standards

• FY 2013 outlook

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10

FY 2012 Results – Financial Statement Presentation

	FY 2012 FY 2011	Variance
	$’000 $’000	%
Revenue from ordinary activities	125,430 114,288	9.7
Profit from sale of interests in controlled entities
& adjustments to contingent consideration	192 249	(22.9)
Expenses from ordinary activities	(85,678) (79,963)	7.1
Borrowing costs	(2,576) (2,446)	5.3
Profit before tax	37,368 32,128	16.3
Income tax expense	(7,697) (7,109)	8.3
Net profit	29,671 25,019	18.6
Profit attributable to minority interest	(4,031) (3,654)	10.3
Net profit attributable to members	25,640 21,365	20.0

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11

FY 2012 Reconciliation of Reported NPAT to Adjusted NPAT

Reported Profit attributable to members Profits on sale of interest in associates and controlled entities Adjustment in contingent consideration on acquisition of controlled entity Tax credit relating to prior years Profit from ongoing operations Amortisation of intangibles net of tax Net profit after tax from operations before amortisation of intangibles (Adjusted NPAT)	FY 2012 $’000 FY 2011 $’000 25,640 21,365 - (105) (192) - (631) -
	24,817 21,260 2,578 2,553
	27,395 23,813

• This information has been derived from the consolidated financial statements which have been subject to review by the company’s auditors

Elimination of the items above provides a basis for analysis of the underlying performance of the company. Amortisation of intangibles is a non cash item and may fluctuate depending on acquisitions and their timing. It may also reduce as existing intangibles are fully amortised. These items may or may not recur and can distort underlying performance compared to prior periods

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12

FY 2012 Compared to FY 2011 - Highlights

• Adjusted NPAT for FY 2012 at $27.4 million (2011 $23.8 million)

• Adjusted NPAT excludes $0.2 million adjustment to contingent earn out payments, $2.6 million amortisation of intangibles expense, $0.6 million tax credit relating to prior period

• Exceeded 2011 Adjusted NPAT by $3.6 million – 15%

• Expensing of acquisition costs and amortising discount on contingent consideration payments reduced growth by almost 2%

• 2HY contributed $15.9 million NPAT to 30 June 2012 result, a 13.6% increase (58% of FY - 59% in 2011)

• 2HY growth lower than 1HY at 13.6% due to movement of business and lower interest rates

• 15% growth largely from insurance brokering 10.7% and underwriting agencies 6.2% off set by increased corporate expenses and tax

• Direct acquisitions in broker network and underwriting agencies contributed approximately 5% of growth

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13

Profit Growth 2007 – 2012

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30 Reported NPAT
Adjusted NPAT
$M
25
$27,935
20
$25,640
15
10
5
0
2007 2008 2009 2010 2011 2012
Increase N/A 15.3% 13.7% 18.5% 11% 14.7% 11.5% 12.1% 17.5% 18.1% 15.0% 20.0%
Adjusted NPAT – Net profit after tax before amortisation of intangibles and profits on
businesses / portfolios sold
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14

Earnings Per Share FY 2007 - 2012

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Cents
50
Reported NPAT
45 Adjusted NPAT 49.5 cents
40 46.3 cents
35
30
25
20
15
10
5
0
2007 2008 2009 2010 2011 2012
Increase N/A 15.1% 13.6% 18.4% 11.0% 14.5% 11.5% 9.2% 12.2% 12.8% 16.9% 11.9%
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15

2012 FY Compared to 2011 FY

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25
$M 20
15
2HY
Adjusted
1HY
NPAT
10
5
0
2006 2007 2008 2009 2010 2011 2012
Financial Year
2HY 64% 65% 59% 60% 61% 59% 58%
1HY 36% 35% 41% 40% 39% 41% 42%
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16

Dividend

Dividend

• 21.5 cents per share fully franked – up from 17 cents last year

• Full year dividend 31.0 cents per share up 21.6% on FY 2011

• Above eps growth of 11.9% on an adjusted NPAT basis or 16.9% on reported NPAT

• Eligible for reinvestment under Dividend Reinvestment Plan

• Payout ratio on Adjusted NPAT plus tax credit 62% (FY 2011 58%)

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17

Increase in Adjusted NPAT FY2012 vs FY2011

$’000

$’000
20000 21000 22000 23000 24000 25000 26000 27000 28000 FY2011 Corp Exp Tax Borrowing Costs Corp Income Interest Austagencies Broker Profits FY2012 % of Adjusted 23,813 (197) (345) (127) 235 1,477 2,539 27,395 NPAT of growth (0.8)% (1.4)% (0.5)% 1.0% 6.2% 10.7%

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18

Increase in Pre-Tax Broker Profits FY2012 from FY2011

$’000

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76000
74000
72000
70000
68000
66000
64000
62000
60000
FY2011 Profit Other Life Premium Interest Increase in FY2012
Commissions Funding Income Earnings Other inc net of
exps
66,625 (940) (407) 623 2,566 860 4,624 73,951
Note: These are before deducting outside interests
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19

Broker Profits as % of Broker Income

Profits (before tax) as a percentage of Broker Income

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30
Including Austagencies
29
Insurance Broking Only
28
27
26
25
24
23
22
21
20
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
20.8 22.3 23.4 25.2 24.8 26.7 28.3 28.5 29.4 29.3
24.2 26.8 28.4 28.6 29.5 29.2
Base commission and fees represented 17.6% of base premiums (2011 17.9%)
Commission and fee split 65% / 35% (2011 65% / 35%)
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Commission and fee increase across the network excluding acquisitions was approximately 5% - 6% (net organic growth)

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20

Austagencies

Growth in NPBT after minorities of 54% to almost $6 million

• Approximately half growth from acquisitions of FIUA and flow on from CEMAC

• Increase in total income excluding acquisitions of 20%

• Commission and fees income increased 18% excluding acquisitions

• Profit commissions were up by $631,000 ($547,000 excluding acquisitions)

• Expenses excluding acquisitions were up 19% - increased resourcing and higher incentive payments linked to growth

• Contributed 6.2% of Austbrokers Adjusted NPAT growth

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21

Balance Sheet (con’t)

	30 June 2012	30 June 2011
Assets	$000	$000
Current Assets
Cash at Bank	40,743	37,326
Cash at Bank – Trust	74,859	65,008
Receivables	117,167	102,090
Other financial assets	1,316	679
Total Current Assets	234,085	205,103
Non Current Assets
Receivables	261	173
Plant Equipment	5,058	4,508
Investments equity accounted	79,553	78,690
Other financial assets	152	182
Intangibles & Goodwill	82,836	74,961
Deferred Tax Assets	5,194	3,710
Total Non current Assets	173,054	162,224
Total Assets	407,139	367,327

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22

Balance Sheet (con’t)

	30 June 2012	30 June 2011
Liabilities	$000	$000
Current Liabilities
Payables	181,420	160,017
Tax Liabilities	3,655	4,718
Provisions	8,418	8,194
Interest bearing loans and borrowings	1,130	622
Total Current Liabilities	194,623	173,551
Non Current Liabilities
Provisions	1,871	1,510
Borrowings	33,384	34,279
Deferred Tax Liabilities	4,971	4,671
Total Non Current Liabilities	40,226	40,460
Total Liabilities	234,849	214,011
Net Assets	172,290	153,316
Equity
Contributed Equity	76,036	70,750
Retained earnings	77,017	65,349
Other reserves	3,873	2,255
Asset Revaluation Reserve	2,109	2,656
Outside equity interest	13,255	12,306
Total Equity	172,290	153,316

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23

Cash Flow

Cash flows from operations Cash flows from investing activities - Acquisitions - Sales proceeds / loan repayments - Plant equipment Cash flows from financing activities - Dividends - Proceeds from share capital & DRP - Net borrowings - Payments for deferred settlements Net increase in cash ex broker trust account Increase in broker trust account cash Net increase in cash	2012 $’000 27,357 (7,703) 184 (2,111) (9,630) (15,078) 2,380 (426) (1,186) (14,310) 3,417 9,851 13,268	2011 $’000 27,127 (8,017) 2,214 (1,346) (7,149) (10,463) 4,761 522 (1,312) (6,492) 13,486 7,861 21,347

Note $8.9 million spent on acquisitions and $4.0 million committed for contingent consideration

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Funding

• Facility from St George Bank

• limit $38 million at holding company level

• • $27 million drawn

• $11 million undrawn

• Facility term is 5 years to August 2013

• Estimated $6 million committed for future payments for completed acquisitions and acquisition since 30 June 2012

• Funding available from facility for future acquisitions around $11 million with free cash around $10 million over the next twelve months

• • Key ratios – consolidated

• Interest cover ratio – 16.5 times (EBITDA basis)

• Gearing 19%, range up to 30% (debt to debt plus equity)

• Comfortably meet financial undertakings to Bank

• Borrowing by associates at 30 June 2012 not on Austbrokers balance sheet - $41.5 million which has increased by $5 million due to funding of acquisitions

• Borrowings largely for acquisition funding

• Interest cover ratio 16 times (as a group)

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25

Agenda

• Business Overview

• FY 2012 Financial Performance

• FY 2013 Outlook

• Market conditions

• Strategy

• Outlook

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26

Market Conditions FY 2013

• Premium rates

• Underwriters continue to seek increases particularly property classes

• Competition restrains extent of increases achievable

• Premium rate movements vary across classes

• Lower interest rate environment

• Moderate economic growth forecast but patchy economic outlook may have impact on SME

• Age demographics in insurance broking industry indicates that continued acquisition opportunities for direct acquisitions or portfolio / bolt on businesses should be available

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27

Strategies FY 2013

• Growth – acquisition activity to continue

  • business development – marketing strategies to expend customer base – to increase cross sell of insurance products

• Expand underwriting agency capability through product and acquisition growth

• Centralised services to create efficiencies

• IT Central DataCentre

• Compliance and Risk Management

• Business Centre services – accounting, tax, payroll, HR and Treasury

• Automation of broking processes to develop efficiencies – further development of iClose, business intelligence reporting

• Underwriter relationship / product development via AIMS (IBNA Joint Venture) for marketing advantage

• Premium funding – continued growth and development through Hunter arrangement

• Life risk and superannuation - continue to develop cross sell

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28

Outlook FY 2013

• Premium rate increases being sought by underwriters

• Economic outlook uncertain – impact on SME sector

• Insurance broking industry consolidation – continuing acquisition opportunities

• Organic growth expected to continue to emerge through broker network initiatives and premium rate increases

• Uncertainty over profit commissions depending on underwriting results

• Organic growth and acquisitions are budgeted to increase the underlying NPAT (before amortisation of intangibles profits on sale and adjustments to contingent consideration) for FY 2013 in the range of 5% - 10% over FY 2012

---

This presentation may contain forward looking statements relating to future matters, which are subject to known and unknown risks, uncertainties and other important factors which could cause the actual results, performance or achievements of Austbrokers and the Austbrokers Group to be materially different from those expressed in this announcement. Except as required by law and only to the extent so required, neither Austbrokers nor any other person warrants that these forward looking statements relating to future matters will occur.

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29

Appendix 1

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FY 2012 Results – Management Presentation

	FY 2012	FY 2011	VARIANCE	VARIANCE
	$'000	$'000	$'000	%
BROKER OPERATIONS
COMMISSION AND FEES	209,144	183,633	25,511	13.9%
LIFE INCOME	9,243	8,620	623	7.2%
PROFIT COMMISSIONS	970	1,910	(940)	-49.2%
PREMIUM FUNDING	18,312	15,746	2,566	16.3%
INTEREST	11,541	10,681	860	8.1%
OTHER INCOME	4,473	4,880	(407)	-8.3%
REVENUE	253,683	225,470	28,213	12.5%
EXPENSES	(179,732)	(158,845)	(20,887)	13.1%
PROFIT FROM BROKING OPERATIONS	73,951	66,625	7,326	11.0%
PROFIT FROM UNDERWRITING AGENCIES	6,941	4,022	2,919	72.6%
PROFIT BEFORE TAX, CORPORATE EXPENSES AND AMORTISATION OF INTANGIBLES	80,892	70,647	10,245	14.5%
PROFIT ATTRIBUTABLE TO OTHER PARTIES	(32,048)	(27,718)	(4,330)	15.6%
PROFIT BEFORE TAX, CORPORATE OFFICE EXPENSES AND AMORTISATION OF
INTANGIBLES (AFTER OUTSIDE EQUITY INTERESTS)	48,845	42,930	5,915	13.8%
CORPORATE OFFICE
INCOME	2,124	1,789	335	18.7%
EXPENSES	(11,064)	(10,516)	(548)	5.2%
NET CORPORATE OFFICE EXPENSES	(8,940)	(8,727)	(213)	2.4%
PROFIT BEFORE TAX AND AMORTISATION OF INTANGIBLES	39,905	34,203	5,702	16.7%
INCOME TAX	(12,510)	(10,389)	(2,121)	20.4%
NET PROFIT AFTER TAX AND BEFORE AMORTISATION OF INTANGIBLES	27,395	23,813	3,582	15.0%

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FY 2012 Results – Management Presentation

$'000

$'000	FY 2012	FY 2011	VARIANCE	VARIANCE
			$	%
CONSOLIDATED BROKERS
COMMISSION AND FEES	70,963	63,055	7,908	12.5%
LIFE INCOME	5,607	4,965	642	12.9%
PROFIT COMMISSIONS	453	820	(367)	-44.8%
PREMIUM FUNDING	5,246	4,840	406	8.4%
INTEREST	3,282	3,093	189	6.1%
OTHER INCOME	1,298	1,395	(97)	-7.0%
REVENUE FROM CONSOLIDATED BROKERS	86,849	78,168	8,681	11.1%
EXPENSES FROM CONSOLIDATED BROKERS	(61,838)	(55,037)	(6,801)	12.4%
PROFIT FROM CONSOLIDATED BROKERS	25,011	23,131	1,880	8.1%
EQUITY ACCOUNTED BROKERS
COMMISSION AND FEES	138,181	120,578	17,603	14.6%
LIFE INCOME	3,636	3,655	(19)	-0.5%
PROFIT COMMISSIONS	517	1,090	(573)	-52.6%
PREMIUM FUNDING	13,066	10,906	2,160	19.8%
INTEREST	8,259	7,588	671	8.8%
OTHER INCOME	3,175	3,485	(310)	-8.9%
REVENUE FROM EQUITY ACCOUNTED BROKERS	166,834	147,302	19,532	13.3%
EXPENSES FROM EQUITY ACCOUNTED BROKERS	(117,894)	(103,808)	(14,086)	13.6%
PROFIT FROM EQUITY ACCOUNTED BROKERS	48,940	43,494	5,446	12.5%
PROFIT FROM BROKING OPERATIONS	73,951	66,625	7,326	11.0%

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Appendix 2

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Austagencies Results

$’000 Commission and fees Profit commission Claims handling fees Interest Other income Expenses Net Profit before income tax Other shareholder interest Net Profit after other shareholder interest	FY 2012 20,064 1,173 635 724 98 22,694 15,753 6,941 (948) 5,993	PROFIT IMPACT FY 2011 INCR / (DECR) 12,905 7,159 542 631 325 310 532 192 232 (134) 14,536 8,158 10,514 5,239 4,022 2,919 (140) (808) 3,882 2,111	INCR / (DECR) % 55.5 116.4 95.4 36.1 (57.8) 56.1 49.8 72.6 . 54.4

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