Aub Group Limited · ASX:AUB
Aub — Investor Presentation (May 2022)
70 slides from Aub's investor presentation, May 9, 2022
Slide 1: Investor Presentation - Tysers Acquisition and Capital Raising
9 May 2022 The Manager Market Announcements Office Australian Securities Exchange Ltd Level 6, Exchange Centre 20 Bridge Street Sydney NSW 2000 FOR RELEASE TO THE MARKET Investor Presentation - Tysers Acquisition and Capital Raising Please find attached for immediate release in relation to AUB Group
Slide 2: AUB Acquisition of Tysers: Investor Presentation & Equity Raising Overview
AUB ACQUISITION OF TYSERS INVESTOR PRESENTATION & EQUITY RAISING OVERVIEW 9 May 2022 Mike Emmett CEO and Managing Director Mark Shanahan CFO Not for release to US wire services or distribution in the United States
Slide 3: Important Notice and Disclaimers
IMPORTANT NOTICE AND DISCLAIMERS This investor presentation (Presentation) is dated 9 May 2022 and has been prepared by AUB Group Limited (ACN 000 000 715) (AUB). By accepting this Presentation you represent and warrant that you are entitled to receive this Presentation in accordance with the restri
Slide 4: Important Notice and Disclaimers
IMPORTANT NOTICE AND DISCLAIMERS NOT FINANCIAL PRODUCT ADVICE This Presentation is for information purposes only and is not a prospectus, disclosure document, product disclosure statement or other offering document under Australian law or the law of any other jurisdiction. This Presentation is not f
Slide 5: Important Notice and Disclaimers
IMPORTANT NOTICE AND DISCLAIMERS ROUNDING Certain figures, percentages, estimates, calculations of value and fractions provided in this Presentation are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in the Presentation. FU
Slide 6: Important Notice and Disclaimers
IMPORTANT NOTICE AND DISCLAIMERS PAST PERFORMANCE Past performance and pro forma historical financial information in this Presentation is given for illustrative purposes only and should not be relied on and is not an indication of future performance including future share price information. Historic
Slide 7: Important Notice and Disclaimers
IMPORTANT NOTICE AND DISCLAIMERS AUB AND THE UNDERWRITERS None of the underwriters nor any of their respective Extended Parties, nor the advisors to AUB, have authorised, permitted or caused the issue, lodgement, submission, dispatch or provision of this Presentation and do not make or purport to ma
Slide 8: Important Notice and Disclaimers
IMPORTANT NOTICE AND DISCLAIMERS In connection with the institutional bookbuild, one or more institutional investors may elect to acquire an economic interest in the New Shares (Economic Interest), instead of subscribing for or acquiring the legal or beneficial interest in those securities. Each und
Slide 9: Contents & Agenda
CONTENTS & AGENDA 9 Summary 11 Transaction Overview 14 AUB’s Strategic Priorities 19 Overview of Tysers 26 Maximising Tysers’ Potential 28 The Merged Group 34 Funding 39 Conclusion 41 Appendices 8
Slide 10: Summary
Summary
Slide 11: Transformational Acquisition and Capital Raising
TRANSFORMATIVE ACQUISITION AUB has agreed to acquire Tysers, a leading London and Lloyd’s wholesale broker with global distribution and access to specialist underwriting expertise AUB ▪ AUB is delivering against its strategy Strategy ▪ Continuing to grow gross written premium (GWP) and improve EBIT
Slide 12: Transaction Overview
Transaction Overview
Slide 13: Transformative Transaction
TRANSFORMATIVE TRANSACTION Tysers is a leading independent foreign Lloyd’s broker that complements AUB’s existing portfolio and allows AUB to drive further value for its shareholders ✓ Global insurance broker with AUD 3.6bn GWP and direct access to the Lloyd’s market Builds on AUB’s track record of
Slide 14: Financial Highlights
FINANCIAL HIGHLIGHTS ▪ Acquisition consideration of AUD 880m1,2 (GBP 500m): ‒ Implies c. 12x EV / FY22 pro forma EBITDA (pre synergies) and c. 9x EV / FY22 pro forma EBITDA (post synergies) ‒ Potential for additional deferred consideration of up to AUD 176m1 (GBP 100m), which may be payable two year
Slide 15: AUB's Strategic Priorities
AUB’s Strategic Priorities
Slide 16: Strategy: Clearly Articulated, Delivery on Target
STRATEGY: CLEARLY ARTICULATED, DELIVERY ON TARGET 105 ✓ Consolidation 75 Network GWP (AUD bn) Premium Retention2,3 ✓ Fixed underperformers optimisation ✓ Exited sub-scale business 4.0 93% and focus 90% ✓ Increased specialisation FY19 FY21 3.2 Total Partner Business Count 11.8 % CAGR 2.2 1.8 Successf
Slide 17: Acquisition of Tysers Captures Further Economics in the Broking Value Chain
ACQUISITION OF TYSERS CAPTURES FURTHER ECONOMICS IN THE BROKING VALUE CHAIN Distribution of insurance Authority to design product on Clients (SMEs and Key conduit into products (key focus is behalf of underwriter individuals) Lloyd’s market the client relationship) (N.B. no underwriting risk) Ongoin
Slide 18: Market Leading Customer and Financial Outcomes
MARKET LEADING CUSTOMER AND FINANCIAL OUTCOMES Customer Outcomes Financial Outcomes GWP Margin Synergies Redirect ~AUD 200m of GWP from international 1 wholesale brokers to Tysers (over time likely to be more) creating uplift in margin and revenue ✓ ✓ AUD 10m Improved access to Lloyds and internatio
Slide 19: Joint Venture Proposed for Tysers UK Retail Business
JOINT VENTURE PROPOSED FOR TYSERS UK RETAIL BUSINESS AUB Group announces a non-binding term sheet with PSC Insurance (PSC) to create a 50% owned joint venture that will acquire the Tysers UK retail broking business Overview ▪ AUB Group have entered into a non-binding term sheet with PSC to PSC is a
Slide 20: Overview of Tysers
Overview of Tysers
Slide 21: Tysers Overview
TYSERS OVERVIEW Tysers is a leading independent wholesale broker in the Lloyd’s marketplace with a strong brand and reputation supported by 200 years of industry expertise and heritage Business Overview CY21 Key Stats1 Revenue by Practice Area4 ▪ Leading specialist international insurance broker Oth
Slide 22: Integrated and Experienced Governance
INTEGRATED AND EXPERIENCED GOVERNANCE AUB will be adding highly experienced members to Tysers’ Board, providing relevant experience and facilitating expedient integration of Tysers from a governance perspective Peter Harmer Mike Emmett Current NED of AUB CEO of AUB New director of Tysers Board New d
Slide 23: Tysers: History and Portfolio Highlights
TYSERS: HISTORY AND PORTFOLIO HIGHLIGHTS Tysers encapsulates a full range of insurance capabilities, products, specialisms and clients with leading positions in the London market, and able to service internationally Company History Portfolio Overview 2005 Foundation of global, multi-specialty risk C
Slide 24: Tysers – Experienced Management Team
TYSERS – EXPERIENCED MANAGEMENT TEAM 30+ ▪ Joined November 2020 ▪ Lloyd’s Blueprint architect and market sponsor for data Focused leadership team with complementary skills and experiences to drive meaningful ▪ Previously Vice Chairman and UK Insurance head at Deloitte. Founder and value creation CEO
Slide 25: Tysers – Historical Financials
TYSERS – HISTORICAL FINANCIALS A highly profitable business, expected to return to growth in CY22 Financial Overview Commentary ▪ CY22 revenue is expected to return to growth, as the effects of COVID-19 start to unwind. AUD m CY19 CY20 CY21 ▪ Q1 CY22 revenue of GBP 51.1 million (AUD 89.9 million) wa
Slide 26: Tysers EBITDA Adjustments
TYSERS EBITDA ADJUSTMENTS AUB Group adjustments to reflect the underlying, go-forward EBITDA being acquired Financial Overview Commentary CY21 GBP m AUD m The new CEO, supported by the current owner, has invested significant resources and capital into uplifting Tysers’ capabilities. This has seen Ty
Slide 27: Maximising Tysers' Potential
Maximising Tysers’ Potential
Slide 28: AUB Is Well Placed to Mitigate the Risks of the Transaction
AUB IS WELL PLACED TO MITIGATE THE RISKS OF THE TRANSACTION • Equity and debt funding is fully underwritten Risks • FX risk of upfront payment is hedged • Potential 50/50 JV with PSC in respect of Tysers UK Retail post completion of the acquisition will leverage the retail expertise of AUB and PSC L
Slide 29: The Merged Group
The Merged Group
Slide 30: Integration, Management Reporting and Retention
INTEGRATION, MANAGEMENT REPORTING AND RETENTION As part of the Acquisition, AUB will retain Tysers’ experienced management team with key changes across Tysers’ Board and Leadership to deliver appropriate governance Management Reporting Structure Mike Emmett CEO and Managing Director Mark Shanahan Be
Slide 31: Overview of the Consolidated Group
OVERVIEW OF THE CONSOLIDATED GROUP The consolidated future delivers a stronger AUB Group with an enhanced broker and client proposition, uplift in capabilities, stronger financials, and a more diversified business 1 + Insurance broking, underwriting agencies and International wholesale insurance bro
Slide 32: Integration, Structure & Capability Model
INTEGRATION, STRUCTURE & CAPABILITY MODEL Following the Acquisition, AUB Group will be restructured to optimise our breadth of capabilities across the Insurance value chain Retail Broking Wholesale Broking Agencies Direct & Platform Australia Australia General Direct Channel Commercial New Zealand N
Slide 33: Pro Forma Financials
PRO FORMA FINANCIALS CY21 Pro Forma Income Statement Commentary AUD m AUB Tysers Adj. Combined ▪ Revenue and expenses represent 100% of the revenue and expenses of subsidiaries and associates Revenue 670.5 322.1 10.0 1,002.6 ▪ The non-controlling interests (NCI) represents the non-AUB shareholders s
Slide 34: Pro Forma Financials
PRO FORMA FINANCIALS CY21 Pro Forma Balance Sheet1 Commentary AUD m AUB Tysers Adjustments Pro forma ▪ New five-year AUD 675m fully underwritten multi-currency debt facility will replace AUD 250m existing syndicated facility: Assets ▪ Interest expected to be ~5% per annum based on current rates Cash
Slide 35: Funding
Funding
Slide 36: Underwritten Equity and Debt Funding
UNDERWRITTEN EQUITY AND DEBT FUNDING Sources GBP m AUD m % Commentary AUD 350m fully underwritten offering to be undertaken via ANREO Equity raising 198.9 350.0 37.5% and Institutional Placement. Given completion timeline, c. AUD 192m will be used to pay down the existing debt facility AUD 880m1 £10
Slide 37: Increased Leverage in the Short Term, Moving Lower Post Completion
INCREASED LEVERAGE IN THE SHORT TERM, MOVING LOWER POST COMPLETION, NOT IMPACTING DIVIDEND Gross Debt / EBITDA1 (x) Commentary ▪ Pathway to reduce leverage to around 2.4x and gearing to 33% within 12 months of completion2 Pathway to ~2.4x within 12 4.0x months of completion – this leverage may be hi
Slide 38: Equity Raising Summary
EQUITY RAISING SUMMARY AUB is undertaking an equity raising to raise AUD 350m with proceeds to be used to fund the Acquisition in conjunction with Vendor Placement and new debt ▪ Underwritten AUD 350 million equity raising (Equity Raising) consisting of: ‒ An institutional placement (Placement) to r
Slide 39: Equity Raising Timetable
EQUITY RAISING TIMETABLE Event Date Announcement of Equity Raising Monday, 9 May 2022 Institutional Entitlement Offer and Placement opens Monday, 9 May 2022 Institutional Entitlement Offer and Placement closes Tuesday, 10 May 2022 Announcement of results of Institutional Entitlement Offer and Placem
Slide 40: Conclusion
Conclusion
Slide 41: Strategic and Financially Attractive Transformative Acquisition
STRATEGIC AND FINANCIALLY ATTRACTIVE TRANSFORMATVIE ACQUISITION Strategically Attractive Financial Highlights Acquisition of well established global insurance Estimated run-rate synergies of c. AUD 25m of broker with AUD 3.6bn GWP and direct access to incremental EBITDA, through margin uplift and th
Slide 42: Appendices
Appendices
Slide 43: Appendix A – Supplementary Materials
Appendix A – Supplementary Materials
Slide 44: The London Wholesale Market
THE LONDON WHOLESALE MARKET The London Insurance Market is one of the world’s most comprehensive, sophisticated and stable insurance markets, with centuries of knowledge in underwriting and brokerage1 London Market Metrics Competitive Landscape (by revenue, in millions)7 ▪ Competitive landscape of w
Slide 45: Appendix B – Key Risks
Appendix B – Key Risks
Slide 46: Summary of Key Risks
SUMMARY OF KEY RISKS This section discusses some of the key risks associated with any investment in AUB (including matters in relation to the Acquisition), which may affect the value of AUB shares. The risks set out below are not listed in order of importance and do not constitute an exhaustive list
Slide 47: Summary of Key Risks
SUMMARY OF KEY RISKS Integration of Tysers Consistent with AUB’s business model, Tysers will continue to operate largely as a stand-alone business, with certain functions being integrated with AUB group functions. There is and cost and revenue nevertheless a risk that those aspects of integration of
Slide 48: Summary of Key Risks
SUMMARY OF KEY RISKS Due diligence risk AUB undertook a customary due diligence investigation process in respect of the Acquisition and was provided with the opportunity to review detailed information provided by or on behalf of Tysers. AUB satisfied itself with its due diligence enquiries to-date b
Slide 49: Summary of Key Risks
SUMMARY OF KEY RISKS Risk from ongoing AUB is aware that the United Kingdom’s Serious Fraud Office (SFO) has an ongoing investigation into suspicions of bribery and corruption in relation to the conduct of business in investigations Ecuador between 2013 and 2017 by Integro Insurance Brokers Limited,
Slide 50: Summary of Key Risks
SUMMARY OF KEY RISKS UK Pension Schemes Tysers historically provided defined benefits to its employees in the United Kingdom, through two defined benefit pension schemes (Pension Schemes). AUB is aware that the Pension Schemes have funding deficits. AUB also understands that the trustee of one of th
Slide 51: Summary of Key Risks
SUMMARY OF KEY RISKS Substantial holding Immediately after completion of the Acquisition, the vendor of Tysers (and related entities) (each, a Vendor Shareholder) will beneficially own in aggregate up to 8.9% of the Company’s issued share capital following the issue of the scrip consideration under
Slide 52: Summary of Key Risks
SUMMARY OF KEY RISKS BUSINESS RISKS Reduction of gross AUB derives most of its revenue as a result of sales of general insurance products either as agent of the customer through its broker network or as agent of the insurer through its written premium in underwriting agency business. A substantial p
Slide 53: Summary of Key Risks
SUMMARY OF KEY RISKS Business model of An important part of AUB’s business model and its growth strategy is to acquire and hold equity in insurance broking, underwriting agency or risk services businesses. While AUB acquiring and holding ordinarily has veto rights on most decisions concerning AUB gr
Slide 54: Summary of Key Risks
SUMMARY OF KEY RISKS Compliance and AUB operates in a highly regulated environment which has been and continues to be subject to regulatory review and change. Failure to act in accordance with regulation, industry regulatory risk standards and codes, internal policies and procedures and principles o
Slide 55: Summary of Key Risks
SUMMARY OF KEY RISKS Investment AUB's balance sheet includes a significant level of investments and intangible assets recognised as a result of its various acquisitions. Investments and intangible assets must be impairment regularly tested for impairment. Impairment results from a decrease in value
Slide 56: Summary of Key Risks
SUMMARY OF KEY RISKS Changes to Changes to Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act could affect AUB's reported accounting standards results of operations in any given period or AUB's financial condition
Slide 57: Summary of Key Risks
SUMMARY OF KEY RISKS Fraudulent or AUB has in place policies and procedures implemented in relation to the risk of fraud. However, particularly in relation to businesses where AUB does not control the day-to-day Inappropriate conduct operations (including AUB network partners in which AUB has an equ
Slide 58: Summary of Key Risks
SUMMARY OF KEY RISKS Environmental, social Evolving community attitudes towards, and increasing regulation and disclosure in relation to, ESG issues may impact the operation of AUB’s business. Some of the areas of focus for and governance AUB are diversity and inclusion, modern slavery, general empl
Slide 59: Appendix C – Summary of Material Contracts
Appendix C – Summary of material contracts
Slide 60: Summary of Stock Purchase Agreement
SUMMARY OF STOCK PURCHASE AGREEMENT Transaction overview AUB has agreed to acquire (through its wholly owned subsidiaries) 100% of the shares in each of: (i) Galileo Insurance Services LLC; (ii) Integro Insurance Brokerage Services LLC; (iii) Integro Insurance Brokers Holdings Ltd and (iv) Tysers (B
Slide 61: Summary of Underwriting Agreement
SUMMARY OF UNDERWRITING AGREEMENT AUB entered into an underwriting agreement with the Underwriters (being Goldman Sachs Australia Pty Ltd and Macquarie Capital (Australia) Limited) in respect of the Offer on 9 May 2022 (Underwriting Agreement). The Underwriters' obligations under the Underwriting Ag
Slide 62: Summary of Underwriting Agreement
SUMMARY OF UNDERWRITING AGREEMENT • AUB becomes required to give or gives a correcting notice under certain sections of the Corporations Act relating to the requirement to correct a defective cleansing notice; • there is introduced, or there is a public announcement of a proposal to introduce, into
Slide 63: Summary of Syndicated Facility Agreement
SUMMARY OF SYNDICATED FACILITY AGREEMENT Facility amount and AUD 675,000,000 syndicated facility comprising: underwriter • AUD 120,000,000 revolving tranche; and • AUD 555,000,000 amortising term tranche. Syndicated facility agreement also include an accordion tranche to fund potential deferred cons
Slide 64: Appendix D – International Offer Restrictions
Appendix D – International Offer Restrictions
Slide 65: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in any
Slide 66: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS Canada (British Columbia, Ontario and Quebec provinces) (continued) Statutory rights of action for damages and rescission. Securities legislation in certain Provinces may provide a purchaser with remedies for rescission or damages if an offering memorandum contains a
Slide 67: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS Hong Kong WARNING: This document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Futures Commission in Hong Kong
Slide 68: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS Norway This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007 no. 75. Accordingly, this document shall not be deemed to constitute an offer to the public in Norway with
Slide 69: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS United Arab Emirates This document does not constitute a public offer of securities in the United Arab Emirates and the New Shares may not be offered or sold, directly or indirectly, to the public in the UAE. Neither this document nor the New Shares have been approve
Slide 70: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS United States This document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. The New Shares have not been, and will not be, registered under the US Securities Act of 1933 or the securities laws of any state