AUB : 1HFY19 Results Presentation and Announcement

25th February 2019

The Manager

Market Announcements Office Australian Securities Exchange Limited Level 6, Exchange Centre,

20 Bridge Street

Sydney NSW 2000

FOR RELEASE TO THE MARKET

Dear Sir / Madam,

Re: AUB 1H19 Results Presentation and Announcement

Attached for immediate release in relation to AUB Group Limited (ASX:AUB) 1HFY19 results are the following documents:

• • Announcement

• • Results Presentation

Yours faithfully,

David Franks Company Secretary

For further information, contact David FranksTel: [phone] or 0414 899 [e-mail]

ASX release

25 February 2019

AUB Group delivers continued growth

Half Year Results Summary:

• - Adjusted NPAT1 $17.0 million (1H18: $16.7 million) up 1.8%, which includes costs relating to Austbrokers Canberra fraud of $1.6 million.

• - Adjusted earnings per share 25.9 cents up 0.23%, with 1H18 TERP2 adjusted.

• - Organic growth the key driver of business performance.

• - Reported Net Profit After Tax $19.8 million (1H18: $23.8 million), down 16.5%.

• - Interim fully franked dividend of 13.5 cents per share, up $1.3m in cash terms.

• - The Group expects Adjusted NPAT to be in the lower end of the previously announced range of 7-12% growth over FY18.

AUB Group Limited (ASX:AUB) has reported a 1.8% increase in Adjusted Net Profit After Tax (Adjusted NPAT1), to $17.0m (1H18: $16.7m), including costs relating to the Austbrokers Canberra fraud of $1.6m. Good performances in Australian and New Zealand Insurance Broking and Underwriting Agencies were partially offset by the planned investment costs in Risk Services together with the short-term impact of the NSW workers compensation changes versus prior comparable period. On an Adjusted basis, earnings per share increased to 25.9 cents per share, up 0.23% over the prior comparable period.

Consolidated Net Profit After Tax (Reported NPAT) decreased 16.5% to $19.8m in 1H19 (1H18: $23.8m) due to adjustments to carrying value of investments, and other non-cash accounting adjustments relating to mergers and acquisitions.

AUB Group CEO and Managing Director, Mark Searles, said: "Strong revenue and profit growth has been achieved in Insurance Broking in Australia and New Zealand and also in SURA, our underwriting agency business. This has been driven by a combination of organic growth and anticipated premium rate increases, together with increased cross collaboration across our businesses. Offsetting these strong results has been the planned investment for growth in Risk Services, together with the revenue impact of NSW workers compensation changes."

The company has declared an interim dividend of 13.5 cents per share fully franked (1H18: 13.5 cps), payable on 5th April 2019.

Highlights of the 1H19 results by operating area include:

Australian Broking

•  11% increase in profit contribution from Australian Broking in the half. Australian Broking contributed $22.6m (1H18: $20.4m) to the Group in the period. Excluding costs relating to the Austbrokers Canberra fraud, pre-tax profit contribution increased by 21.9%

•  Organic growth was delivered through increases in client numbers, policy numbers and an improvement in cross sales.

•  Commercial lines insurance premiums increased on an average basis by mid-single digits over the period.

• 1 NPAT excluding adjustments to carrying values of associates, profit on sale and deconsolidation of controlled entities, contingent consideration adjustments, impairment charges, and amortisation of intangibles. Performance measure used by management to assess underlying business performance. Includes one-off adjustments of $1.6m in Austbrokers Canberra

• 2 Theoretical Ex-Rights Price

New Zealand

•  15% increase in profit contribution from New Zealand to $3.2m (1H18: $2.8m), primarily driven by strong organic income growth partially offset by investment in NZ group management and infrastructure to support growth.

•  Organic growth has been delivered as a result of increases in new clients and premium funding income in a positive premium rate environment.

•  The market strength of NZbrokers has been further enhanced and NZbrokers now manages in excess of NZ$675m GWP, building on its position as the largest broking management group in NZ.

Underwriting Agencies

•  11% increase in profit contribution from Underwriting Agencies to $5.1m (1H18 $4.6m) with strong organic growth in revenue (up 14%) driven by increased policy count (+6.7%), and average mid-single digit premium rate increases.

•  Positive revenue and profit impact from most businesses, in particular AustRe and Strata.

•  The implementation of the new underwriting system will deliver improved operational efficiencies, governance and service delivery in future years.

Risk Services

•  Profit contribution from Risk Services was $1.8m (1H18: $4.3m).

•  Revenue was down 1.2% due to headwinds relating to changes in NSW Workers Compensation.

•  Costs have increased 10.6% due to strategic investment in new ancillary risk and injury management services across states. The investment in new propositions, national capability and quality service models provides a positive outlook for growth in the medium term.

•  Revenue growth outside NSW continues with new panel appointments and expanded client base.

Group Services and Corporate Costs

•  The Corporate cost base was flat compared to the prior comparable period

Capital Management

•  Net assets at 31 December are $474.5m (FY18: $357.2m) up due to the equity capital raising towards the end of the reporting period.

•  AUB Group raised $116m via a fully underwritten 4 for 27 accelerated pro-rata non-renounceable entitlement offer at $12.30 per share. Proceeds from the capital raising are being used to provide additional financial flexibility for growth initiatives and to fund further acquisitions.

•  Look through gearing has decreased to 16.4% (FY18: 31.0%), the parent entity has cash and undrawn committed facilities of $117.7m at 31 December 2018.

Dividends

The Board has declared an interim fully franked dividend of 13.5 cents per share. This dividend is payable on 5th April 2019 to shareholders on the record date of 7th March 2019. No Dividend Reinvestment Plan (DRP) arrangements will be offered for the interim dividend.

In light of the recent equity capital raising, the interim dividend is maintained at 13.5cents per share. In cash terms this represents an increase of $1.3m over prior comparable period.

Outlook

•  The Group will continue to maintain its disciplined approach to executing our business model, operating model and strategy. The Group's client-focused strategy accords with potential directional outcomes of the Financial Services Royal Commission.

•  The benefits of acquisitions undertaken toward the end of 1H19 and in early 2H19 will benefit the Group into the future, particularly FY20 and beyond as synergies are realized.

•  There are contingent liabilities with respect to the Austbrokers Canberra fraud. Due to the complexity of the matter and the ongoing nature of investigations, it is not yet possible to determine whether there is a financial exposure, and if there is, to reliably quantify the amount of any possible loss net of insurance recoveries.

•  The Group remains focused on driving organic growth that accords with the strategy. Furthermore, we will continue to investigate acquisitions and start-up investment opportunities.

•  We remain focused on geographic diversification and cross-sell opportunities in our Risk Services businesses. We expect the impact of the NSW workers compensation changes to lessen in 2H19, supporting a return to growth in FY20.

•  In the context of a mid-single digit premium rate environment, partner investment, and the impact of Risk Services and Austbrokers Canberra, the Group expects Adjusted NPAT to be in the lower end of the previously announced range of 7-12% growth over FY18.

Webcast

Mark Searles, CEO & Managing Director and Mark Shanahan, Chief Financial Officer will host a webcast today at 10:00am AEST followed by a Q&A session - details below:

Direct DDI(s) for Teleconference:	Australia Access:	1800 093 431
New Zealand:	0800 452 257
International:	[phone]
Teleconference Participant Pin Code:	60622882#
Webcast Audience Link:

http://event.onlineseminarsolutions.com/wcc/r/1904799-1/3C4CE693A148450ECDE55C0DFDDCDC73

M. P. L. Searles

CEO & Managing Director

For further information, contact Mark Searles Tel [phone]

Mark Shanahan Tel [phone]

- Ends -

This release contains "forward-looking" statements. Forward-looking statements can generally be identified by the use of forward-looking words such as "anticipated", "expected", "projections", "guidance, "forecast", "estimates", "could", "may", "target", "consider", "will" and other similar expressions. Forward looking statements, opinion and estimates are based on assumptions and contingencies which are subject to certain risks, uncertainties and change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements including projections, indications or guidance on future earnings or financial position and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Should one or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, there can be no assurance that actual outcomes will not differ materially from these statements. To the fullest extent permitted by law, AUB Group and its directors, officers, employees, advisers, agents and intermediaries do not warrant that these forward looking statements relating to future matters will occur and disclaim any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions.

AUB GROUP FY18 PRESENTATION OF FINANCIAL RESULTS

Table 1 Financial Results Summary

FINANCIAL RESULTS SUMMARY

1H19 $ 000

1H18 $ 000

Variance %

Revenue from ordinary activities1

Adjusted NPAT2

Profit before tax

Net profit after tax (before non-controlling interests)

Net profit attributable to members (Reported NPAT)

Reported earnings per share (TERP adjusted3)

Adjusted earnings per share (cents)2 (TERP adjusted)

Dividend per share (cents)

145,439 17,014 29,673 23,972 19,826 30.10 25.86 32.0

Dividend proposed per share

14.0

129,830 12.0% 16,706 1.8% 33,772 -12.1% 28,073 -14.6% 23,752 -16.5% 36.68 -17.94% 25.80 0.23% 29.5 8.5% 13.5 3.7%

1	Revenue from ordinary activities includes the Group's share of net profit after tax from associates which are companies and the Group's share of net profits before tax from associates which are unit
trusts.
2	Adjusted NPAT represents the underlying profitability of the business used by management and the board to assess performance of the business. Further details are provided in the table below. Adjusted
earnings per share is earnings per share calculated with reference to Adjusted NPAT.
3	Theoretical ex-rights price factor

Table 2 Reconciliation of Adjusted NPAT to Reported NPAT1

The Reported profits of the business include non-operational items, such as profits and losses on sale of equity interests, fair value adjustments to carrying values on ownership changes, changes to estimates or payments of deferred contingent consideration amounts, impairment adjustments and amortisation of intangible assets. These profits or losses are not part of the regular trading activities and can distort the underlying performance of the business. These items have been eliminated to provide a clear representation of the underlying trading performance. This measure, labelled Adjusted NPAT, is used by management and the board to assess operational performance, and is reconciled below.

RECONCILIATION OF ADJUSTED NPAT TO REPORTED NPAT1	1H19	1H18	Variance
$ 000	$ 000	%
Net Profit after tax attributable to equity holders of the parent	19,826	23,752	-16.5%
Reconciling items net of tax and non controlling interest adjustments for:
Adjustments to contingent consideration for acquisitions of controlled entities and associates 2	(22)	169
Add back offsetting impairment charge to the carrying value of associate & goodwill, related to above3	1,400	-
Add back impairment charge to the carrying value of controlled entity - net of non controlling interests 2	22	-
Net adjustment	1,400	169
Less / plus profit on sale or deconsolidation of controlled entities net of tax4	(1,220)	(1,101)
Plus movement in put option liability5	269	-
Less profit on sale of associates/insurance broking portfolios net of tax4	(795)
Adjustment to carrying value of entities (to fair value) on date they became controlled or deconsolidated4	(4,548)	(8,117)
Net Profit from operations	14,932	14,703	1.6%
Add back amortisation of intangibles net of tax6	2,082	2,003	3.9%
Adjusted NPAT	17,014	16,706	1.8%

1	The financial information in this table has been derived from the financial statements which were reviewed by AUB Group auditors. The adjusted NPAT is non-IFRS financial information and as such has
not been audited in accordance with Australian Accounting Standards.
2	The Group's acquisition policy is to defer a component of the purchase price, which is determined by future financial results. An estimate of the contingent consideration is made at the time of acquisition
and is reviewed and varied at balance date if estimates change, or payments are made. This adjustment can be a loss (if increased) or a profit (if reduced). Where an estimate or payment is reduced, an
offsetting adjustment (impairment) may be made to the carrying value.
3	Where the carrying value of a controlled entity or associate exceeds the fair value an impairment expense is recognized during the period.
4	The profit on sale/ adjustments to carrying values of associates or controlled entities arise where the Group increases its equity in associates whereupon they became controlled entities or decreases its
equity in a controlled entity and it becomes an associate (deconsolidated). As required by accounting standards the carrying values for the existing investments have been adjusted to fair value and the
increase included in net profit. Such adjustments will only occur in future if further acquisitions or sales of this type are made.
5	Movement in value of the put option liability mainly due to the unwind of finance charges recognized in the accounts at present value.
6	Amortisation expense is a non-cash item.