AUB Group (AUB) | Operating update
Overall: AUB has provided an operational update. The company confirmed 3Q20 earnings growth has continued in line with the momentum seen in 1H20 at around 25%, while premium rates continue to increase and the group has available liquidity of $82m.
Earnings update: AUB has reported 3Q20 unaudited underlying cash NPAT of $9.2m, up 25% on the pcp and in line with the profit momentum seen in 1H20 (also 25% growth). Whilst this is solid progress, the third quarter typically accounts for around 15% of annual profitability so it is less relevant than the upcoming June renewals period.
Keydrivers: AUB cited 6.3% premium rate increases over the quarter, a healthy increase in line with the increases seen in 1H20 and also in line with our expectations. AUB also noted a higher uptake of premium funding by customers (logical given a need for some customers to manage cash flow during this time) and cash collections “continued to be strong”. Elsewhere, the company’s cost rationalisation program continues.
Liquidity: The company has stated it had available liquidity of $82m at 31 Mar-20 from current facilities, with the company savings around half of that amount due to the deferral of both the MGA Whittles acquisition and the interim dividend payment.
Outlook: As stated in our recent update on 2 Apr-20, we expect some drop in premium volumes through the June renewals period due to the COVID-19 crisis. So, whilst 3Q20 momentum is positive, it is perhaps less relevant than the next few months. That said, we continue to see valuation as relatively attractive (Pe of 14x on our recently downgraded forecasts)