AUB GROUP LIMITED — Investor Presentation 2021

Aug 25, 2021

==> picture [50 x 50] intentionally omitted <==

==> picture [327 x 119] intentionally omitted <==

26 August 2021

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

FOR RELEASE TO THE MARKET

FY2021 Results - Investor Presentation Speaking Notes

Please find attached for immediate release in relation to AUB Group Limited ( ASX: AUB ) the following document:

• FY2021 Results - Investor Presentation Speaking Notes.

ENDS

This release has been authorised by Mike Emmett, CEO and Managing Director.

For further information, contact Richard Bell, Group General Counsel and Company Secretary, on +61 2 9935 2222 or richardb@aubgroup.com.au.

About AUB Group

AUB Group Limited is an ASX200 listed group comprising insurance brokers and underwriting agencies operating in ~500 locations across Australia and New Zealand. Over 3,000 team members work with our 850,000 clients to place more than $4.0bn in insurance premiums with local and foreign insurers.

==> picture [595 x 84] intentionally omitted <==

==> picture [123 x 45] intentionally omitted <==

==> picture [312 x 109] intentionally omitted <==

26 August 2021

AUB Group FY21 Results – Presentation Notes

Cover – Opening [Michael Emmett]

• I am proud of the way in which the AUB family have dealt with the personal and commercial stresses of the past year

• The business continues to demonstrate a remarkable resilience although one we do not take for granted

• Our teams have worked tirelessly to support our clients and each other and it is an honour to share in their success today as we announce a very strong result.

Slide 2 – Key Messages [Michael Emmett]

• Highlighting three key messages:

• First, the transformation of AUB Group has continued at pace during FY21.

• Revenue and Underlying Net Profit after Tax grew strongly while the EBIT margin expanded.

• Underlying NPAT at $67.1m, pre the SaaS adjustment we will talk to later, exceeded the upgraded guidance range of $63m -$65m set at the half year

• Secondly, the strategic initiatives and remedial actions we are taking to improve our portfolio and drive growth are delivering strong returns.

• Exit from Health and Rehabilitation Services is complete

• Performance improvement in Austbrokers has accelerated

• BizCover continues to grow both revenue and profit at an impressive rate

• Remediation of Agencies is starting to deliver results with both margin and profit improvement during the period – however far from complete.

• New Zealand operations are still in the early stages of transformation, planned to run until FY23. We have restructured key elements of the New Zealand business, have a technology investment underway and plan a series of acquisitions to enhance broking product and geographic capability and grow scale in New Zealand Agencies.

• Thirdly we expect FY22 to be another year of solid growth.

• The progress we are making with our strategic priorities is providing a positive trajectory supporting growth plans for FY22 and beyond. We anticipate Underlying Net Profit after Tax in FY22 of between $70m and $73m representing growth on continuing operations of 15.7% to 20.7%. Continuing operations exclude JobKeeper receipts and profits from the now-disposed Altius Group.

Slide 4 Financial Highlights [Michael Emmett]

• Revenue growth of 11.6% on prior year, a significant 360bps strengthening of the EBIT margin, and Underlying NPAT growth of 25.7% before accounting for the SaaS accounting policy adjustment.

• Underlying revenue, margin, and profit growth have all accelerated over the past few years.

• The Board has determined a final dividend of 39cps resulting in FY21 total dividends of 55cps, an increase of 10% on FY20.

Slide 5 FY21 UNPAT Performance [Michael Emmett]

• Strong Organic profit growth contributed $8.7m to underlying net profit representing 16.3% growth on prior year and arose from increased revenue and carefully managed costs.

==> picture [472 x 65] intentionally omitted <==

==> picture [123 x 45] intentionally omitted <==

==> picture [312 x 109] intentionally omitted <==

• $4.7m of the total of $5.8m of the growth in profits from acquisitions was contributed by BizCover and Experien, both of which are proving to be excellent acquisitions.

• JobKeeper receipts contributed $0.5m to the year on year increase. Most receipts relate to Procare, a people intensive services business which was particularly impacted by COVID-19. All JobKeeper receipts ceased at the end of September 2020.

Slide 6 – FY21 UNPAT Performance [Michael Emmett]

• Half-on-half growth in Underlying Net Profit after Tax indicates a 54.2% weighting in the second half.

• During FY21 the Premium placed through the network grew 17.6% to $4bn, bolstered in part by premium rate rises of 6.2% for the full year and 5.5% in the second half, in line with our forecasts of 5% to 6%.

• Our premium retention has lifted further to a new all-time high of 93%, surpassing expectations set this time last year.

Slide 7 – FY20 & FY21 UNPAT: SaaS IMPACT [Mark Shanahan]

• In April 2021 the IFRS Interpretations Committee issued a new interpretation requiring that configuration costs for IT projects utilising Software as a Service be fully expensed rather than capitalised and amortized over five years as was previously our practice. AUB Group has adopted this change in the FY21 results and adjusted Underlying NPAT in FY21 and prior years accordingly.

• The slide indicates the additional expense impact on both FY20 and FY21 Underlying NPAT.

• The main impact is to reduce FY21 and FY22 results reversing out in future years.

Slide 8 – FY20 & 21 Performance: including SaaS Impact [Mark Shanahan]

• Waterfall from slide 5 updated to reflect the impact of the SaaS adjustment on Underlying NPAT for FY20 and FY21.

• FY20 restated from $53.4m to $53.2m and FY21 restated from $67.1 to $65.3m.

• Underlying NPAT for FY21 of $65.3m represents adjusted year-on-year profit growth of 22.9%.

Slide 9 – AUB Corporate Cash Flow and Funding [Mark Shanahan]

• Strong operating cash inflow of $60mn, including dividends from Altius which was sold in the financial year.

• The Group’s Balance Sheet remains strong as we:

• ensured that debtors books remained clean

• prudently managed capital in response to an uncertain business environment

• At the end of FY20 we had access to $89.5mn of cash and debt.

• Our gearing ratio was 28.5% and leverage 1.99:1.

• The strong cash generation and balance sheet strength position us strongly to fund organic growth initiatives and disciplined acquisitions in FY22.

Slide 10 – Shareholder Returns [Mark Shanahan]

• The Group’s Underlying Earnings Per Share grew by 22% in comparison to FY20.

Slide 12 – FY21 Divisional Performance [Michael Emmett]

• For the first time we separately reflect BizCover as a new division. We also reflect, for the final time, the now exited Health and Rehabilitation Services Division. You’ll note we’ve added a ‘sub-total’ column for continuing operations to aid future comparisons.

• At the bottom of the slide, we’ve indicated the impact of the SaaS adjustment noting this predominantly affects New Zealand due to the new Lola technology platform project commenced in FY21

==> picture [472 x 65] intentionally omitted <==

==> picture [123 x 45] intentionally omitted <==

==> picture [312 x 109] intentionally omitted <==

Slide 13 – Australian Broking [Michael Emmett]

• Highlights positive outcome of actions we’ve taken in Australian Broking to manage costs whilst also growing revenue, partially by leveraging data and technology to better target and segment clients and portfolios.

Slide 14 – BizCover [Michael Emmett]

• Cumulative growth in BizCover revenue of 34% and profit before tax of 69% since AUB Group’s investment in February 2020 vs the prior corresponding period.

• BizCover customer satisfaction is at an exceptional NPS score of 72.

• Several initiatives have been implemented by BizCover to continue their strong performance including the imminent launch of Blaze, a fully re-platformed version of the BizCover technology and a new referral portal to partner with professional advisory firms. Growth and expansion of the New Zealand business is building and is a priority for FY22.

Slide 15 – Underwriting Agencies [Michael Emmett]

• As you’ll see from slide 15, a new operating structure, the acquisition of 360 Underwriting in December, and the roll out of the new Sentinel Agency system are contributing to improved agency results. Profit before tax grew by 15% and margin expanded by 100bps.

• We recently acquired TLC as a first step in the plan to expand our agency presence in New Zealand.

• During FY22 we will focus on increasing the penetration of AUB-invested Agencies into the Austbrokers and NZbrokers networks.

Slide 16 – New Zealand [Michael Emmett]

• Over the past 12 months a new regulatory regime has been implemented to enhance professional qualifications and standards in the broking industry. We welcome this change and have applied significant focus and resource to meet regulatory milestones and implement these changes.

• Against flat premium rate rises, our Profit Before Tax growth of 3.6% (excluding the SaaS adjustment) could ordinarily be seen as reasonable however this does not meet our ambitious growth targets.

• To address this, we commenced a restructure of the business including making several senior broking leadership changes and commenced Project Lola, the new broking and fast-flow platform for New Zealand. We have seen some early market success with the recent win of a large corporate account from a global broking competitor. In addition to the restructure programme, we intend to continue to grow by acquisition with investments in broking and agency.

Slide 17 – Supporting our team through the pandemic [Michael Emmett]

• There is no question the pandemic has been challenging to workforces.

• We have used this as an opportunity to transform our work practices and implement policies that rely on a fundamental trust in our employees. We’ve enabled our teams, as a standard practice, to work from home, for 4 days per week but with the desire that they will be together in a shared space on one pre-planned day of the week. We’ve provided financial assistance to improve home-work environments, activated ongoing fortnightly allowances to cover additional personal costs such as increased utilities, provided remote ergonomic assessments with bespoke advice and implemented a number of technology-enabled tools to support remote working. In addition to virtual productivity and video conferencing solutions, these include employee engagement tools, mental and physical health solutions, virtual fitness challenges and a workplace booking platform. We have added flexibility to leave policies including providing bonus leave for team members that have used all their leave and offering bonus leave to those that are fully vaccinated.

==> picture [472 x 65] intentionally omitted <==

==> picture [123 x 45] intentionally omitted <==

==> picture [312 x 109] intentionally omitted <==

Slide 19 – Delivering on our Strategic Priorities [Michael Emmett]

• Our Strategic priorities have been critical to the progress we’ve made over the past two years.

Slide 20 – Network Optimisation [Michael Emmett]

• There are some simple principles underpinning our desire to optimise the network.

• Larger businesses have better margins and economies of scale

• Specialised businesses win new business in their chosen areas of expertise more readily and often operate at premium margins.

• The fewer businesses we manage, the lower the complexity and hence the lower the risk

• Equally important to note, many of our business leaders are ambitious. They want to grow and expand, and we can cater for these ambitions by facilitating business combinations and acquisitions.

• Over the past two years we have reduced the number of operating businesses from 105 to 75 through a variety of business mergers, realigned client portfolios, disposals, and entity rationalisation to simplify the AUB Group.

• Consequently, we have improved the performance of low profit and, in some cases, loss-making portfolios, we have created specialised businesses that are winning new clients in the market, and we have leveraged the scale and margin benefits of larger Austbrokers members.

• This is evolution not revolution. We are evolving the network, optimizing it to grow, to improve margin and to reduce risk and meet the growth ambitions of our partners.

Slide 21 – Acquisitions [Michael Emmett]

• Our approach to acquisition has been to acquire or invest in businesses that complement and accelerate our strategic ambitions.

• To illustrate this, over the past two years we invested in:

• BizCover for their dominant position in the micro- and small-SME segment and their market-leading technology platform

• Experien for their life advisory capabilities and dominant position in the medical and dental professions

• Bestmark to complement and facilitate the merger and creation of Austbrokers Comsure

• QRM to supplement our Heavy Motor Industry specialist skills

• 360 Underwriting to form the cornerstone of our drive to grow our General Commercial Agencies

• ydr to build on our ability to deliver assistance to clients with complex, specialist claims

• TLC, to enable the expansion of 360 Underwriting into New Zealand

• We have a disciplined approach to acquisitions and expect to make further investments to accelerate our strategy.

Slide 22 – Technology [Michael Emmett]

• The transformation and deployment of technology across AUB Group has been rapid over the past two years. Enhancements to our core broking system have been implemented, our infrastructure and various operating software components have been upgraded, new systems such as ExpressCover and Sentinel have been widely rolled out and new enabling solutions such as the AMS Analytics service and a portfolio of Bots and automation tools have been deployed to much of our network. In New Zealand we’ve commenced Project Lola, a new broking and quote-to-bind solution, for roll out later in FY22.

• Not all has gone to plan. Our desire to add Personal lines products to ExpressCover has been delayed to match Insurer technology roll-out plans. Notwithstanding this, we now have a portfolio of compelling technology solutions that enhance the way in which our brokers operate and complement other aspects of our partner proposition.

==> picture [472 x 65] intentionally omitted <==

==> picture [123 x 45] intentionally omitted <==

==> picture [312 x 109] intentionally omitted <==

Slide 23 – Partner Proposition [Michael Emmett]

• In addition to technology, additions to the Austbrokers and NZbrokers propositions include

• new and exclusive Insurance products and wordings,

• renegotiated, and improved commercial insurer contracts and remuneration,

• claims delegation authorities and payments from insurers

• bespoke assistance from AMS analytics to enhance customer retention and optimisation

• complex insurance risk placement support

• The suite of services now delivered by Austbrokers Member Services has led to increasing enquiries and interest in the market for access. As a result, we launched The Insurance Alliance which is a non-equity network initially partnering with The Broker Coop to deliver a sub-set of these services to independent brokers.

Slide 25 – FY22 Priorities – Continue the momentum [Michael Emmett]

• Most of FY22 Priorities will now look very familiar. As they say – if it ain’t broke, don’t fix it. So, in FY22 we will again be laser-focused to deliver the following:

• continue agency reinvigoration by increasing scale, penetration into AUB networks, and improve margin

• continue network optimisation momentum, particularly in Austbrokers

• invest in carefully selected businesses that complement our portfolio and accelerate our strategy

• drive adoption of our new technologies to benefit clients and our portfolio of businesses

• further enhance partner propositions by building scale, adding new non-equity members, and working with external partners to offer propositions that are important to our clients and of benefit to our network.

Slide 26 – FY22 Outlook [Michael Emmett]

• More complex outlook slide than we ordinarily provide. Reading from the left you’ll note we are using Underlying Net Profit after Tax of $65.3m and reducing this to adjust for FY21 non-continuing receipts from JobKeeper and Altius.

• Using the resultant Underlying Net Profit after Tax from continuing operations of $60.5m, we anticipate FY22 Underlying Net Profit After Tax to be in the range of $70m to $73m, representing profit growth of 15.7% to 20.7% from continuing operations. This translates to similar EPS growth with an EPS outlook of 94.26 to 98.3 cps.

• • In determining this outlook, we assume the following:

• Premium rate rises for the AUB Group portfolio during FY22 will be between 5% and 6%, the same as FY21

• Minor bolt-on acquisitions and step-up investments, as is our standard practice, are included in the outlook and reflected in the waterfall

• Major acquisitions are excluded and will be disclosed with relevant guidance updates if they were to arise

• The broking market continues to emulate prior years

• We do not know whether the current Delta outbreak will have a meaningfully different impact on the Australian economy than was the case with previous outbreaks. We do know the business was resilient last year so we’ve assumed operating conditions in FY22 similar to last year.

==> picture [472 x 65] intentionally omitted <==