2022
ANNUAL
REPORT
CONTENTS
Chair’s Message
CEO’s Message
Directors’ Report
Environmental, Social and Governance Report
Auditors Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
Dividend Details
Corporate Information
1
3
6
51
71
72
73
74
76
77
130
131
136
138
139
AUB GROUP ANNUAL REPORT 2022 CHAIR’S MESSAGE
David Clarke
Chair
Dear Shareholders,
On behalf of the Board of Directors, it is my great pleasure
to present AUB Group’s 2022 Financial Year (FY22)
performance and Annual Report.
FY22 has seen further uncertainty and challenge - an
external environment clouded by geopolitical tensions,
increasing inflationary pressures, supply chain constraints
and financial volatility, combined with catastrophic floods
across Australia. This has resulted in exacerbating an
uncertain outlook for the future, specifically for insurance, as
underwriters increase premiums by shifting rates to improve
returns and profitability. With this backdrop, AUB Group
partners understand the vital role we play in supporting our
clients in managing their risk to safeguard a better future
and remain focused on delivering in their best interests.
FINANCIAL PERFORMANCE AND CAPITAL
STRENGTH
FY22 continued to deliver ongoing macroeconomic
challenges, however AUB’s Strategic agenda has once again
allowed us to deliver a resilient financial performance driven
by strong organic growth fundamentals. In FY22, AUB Group
delivered above our original guidance with another strong
result where Underlying Net Profit After Tax (UNPAT) from
continuing operations increased by 22.2% compared to
FY21, to $74.0m. Throughout the period we maintained a
strong balance sheet and capital position. Divisionally, our
Australian Broking business grew pre-tax profit by 23.4%
as a result of major and strategically important acquisitions
and increasing commercial premiums. The performance
was assisted by the ongoing benefits of cost-efficiency
programs, delivering EBIT margin expansion of 250 basis
points (bps) in FY2022 to 33.7%. BizCover continues to
deliver accelerated growth, with an increase of 24.7% in
pre-tax profit via 21.0% growth in revenue and a further
150bps EBIT margin expansion. FY22 had a strong focus
on Agencies remediation and creating a platform for growth,
which delivered an increase in pre-tax profit of 53.5%,
primarily as a result of the full-year contribution from the
360 Underwriting acquisition, as well as additional cost-
remediation efforts to lift the EBIT margin by 510bps to
37.0%. New Zealand experienced slow growth in revenue
of 0.5%. This was primarily due to underperformance in
BWRS, while remaining businesses performed in-line with
expectations. When grouped with the impact of our ongoing
technology investment, an important lever for future growth,
the overall business experienced a decrease in pre-tax profit
by 15.3% compared FY2021.
Our divisional performance is encouraging and
demonstrates continued progress against our medium-term
EBIT margin targets, with the overall Group margin improving
240bps compared to FY21 (and 470bps since FY19) despite
operating in a challenging external environment.
Post the $350mn equity capital raising in May 2022, AUB
Group used a portion of the proceeds to discharge its
debt obligations to its lenders and the existing debt facility
was cancelled.
PROGRESS ON STRATEGIC AGENDA
The Group continues to stay focused on its Strategic Agenda
and annual priorities, which delivered successfully and
resulted in the strong financial performance. Key highlights
during the year include strategically important acquisitions
including AUB acquiring iaAnyware, 360 Underwriting
acquiring Anchorage Marine and Finsura acquiring
Vaughan & Monaghan. Additionally, we continued to focus
on optimising our network to create scale, efficiency, and
market leadership via a number of consolidations and/or
portfolio restructures, as well as equity step-ups in existing
businesses to capture future growth potential. Our focus
on Agencies delivered outperformance, primarily as a result
of our acquisition of 360 Underwriting and restructure
of our Agency portfolio in FY21, increasing scale and
Austbrokers penetration.
1
AUB GROUP ANNUAL REPORT 2022 With respect to Governance, at the completion of the Tysers
acquisition (subject to regulatory approval), we will propose
the appointment of an additional Non-Executive Director to
the AUB Group Board, an individual with strong knowledge,
experience, expertise, and relationships in the London
Wholesale Insurance market adding further depth to the
AUB Board.
CONCLUSION
I would like to conclude by thanking all our employees and
partners for their contributions during the year. Our strong
result in FY22 reflects their effort, discipline and ongoing
commitment to the Group’s success and demonstrate a
business that is built on strong foundations by a focused and
committed team. I’d also like to acknowledge the ongoing
support from our clients and shareholders who continue to
place their trust in our business and look forward to further
updating you on our progress at our AGM in November.
David Clarke
Chair
CHAIR’S MESSAGE (CONTINUED)
In May 2022, AUB Group announced a transformative
acquisition of Tysers, a leading London and Lloyd’s broker
with access to specialist underwriting expertise and global
distribution capabilities. The acquisition is highly strategic
for AUB Group’s existing business and will result in market
leading capacity access and offerings for AUB brokers.
The regulatory approval process is progressing well and
completion of the Tysers acquisition is targeted for late
2022, subject to receipt of final regulatory approvals.
We will keep the market updated on progress over the
coming period.
Looking ahead, the Group’s FY23 strategic focus will be
primarily a continuation of FY22 objectives, with a particular
focus on New Zealand business performance, technology
delivery and successful completion of the Tysers
transaction.
DIVIDENDS
As a result of our financial performance, the Directors
have declared a final fully franked dividend of 38.0 cents
per share, payable on 7 October 2022. This, together with
the interim dividend of 17.0 cents, results in a full year
dividend of 55.0 cents, in line with FY21. The payout ratio
of 64.5% is lower than last year, and the Board believes this
is appropriate given the equity raising in anticipation of the
Tysers acquisition completion in late 2022.
Strong business results as well as disciplined M&A growth
also led to historic underlying Earnings per Share from
continuing operations increasing by 21.1% compared
to FY21.
ENVIRONMENT, SOCIAL AND GOVERNANCE
Our recent focus on uplifting the Group’s environmental,
social and governance (ESG) practices have resulted in a
number of key initiatives being implemented and further
planned. Our approach as well as progress in FY22 is
reported on page 51 of this report. Key highlights include:
– AUB Group was officially certified as a ‘Great Place
to Work’
– The recent launch of AUB Giving, allowing employees to
support causes they are passionate about via pre-tax
donations, with AUB Group matching donations
– The imminent launch of AUB Community Day, where
employees are granted a day of paid volunteer leave to
participate in community activities such as volunteering,
mentoring, and working with charities and other not-for-
profit organisations
– 31.5% increase in employee training hours compared to
FY21 across the network
– Improved outcomes across key gender diversity metrics
– 17% decrease in our carbon footprint per FTE, with
further improvements expected in FY23 through a
switch to renewable energy and carbon offsetting
efforts at the head office.
2
AUB GROUP ANNUAL REPORT 2022 CEO’S MESSAGE
Michael Emmett
Chief Executive Officer
and Managing Director
Dear Shareholders,
This has been another eventful year and another good year
of performance from businesses across our diverse Group.
It would be remiss of me not to recognise the continued
challenges our clients and our teams are experiencing,
having moved very rapidly from a period of COVID-lockdown
to a period of rising inflation and supply chain challenges.
At the beginning of FY20, we set out a plan to transform
AUB Group to deliver sustained profit growth to
shareholders. Fundamental to this plan was our ability
to grow revenue and expand margins by focusing on our
core Insurance Broking capabilities and directly related
businesses such as Underwriting Agencies.
Over the past three years, we have refocused the
business by exiting our Health and Rehabilitation Services
investments. We have demonstrated our ability to grow
broking organically and through strategic acquisitions,
including broadening the spectrum of clients we serve by
expanding in the Mid-Market/Corporate as well as the micro-
SME segments. Our deployment of technology to support
our brokers and service our clients is continually expanding;
however, the take-up in some areas is slower than we’d like.
With a few exceptions, our broking businesses in Australia
and New Zealand are performing outstandingly, consistently
growing premium, revenue and margin above market rates.
Our expansion of Underwriting Agencies to support our
brokers and clients has delivered robust scale and profit
improvement over the past 18 months. The utilisation
of these agencies and products by AUB Group brokers
continues to increase.
It is, however, a challenging environment for our clients.
Significant insurance rate rises and other cost pressures
faced by our clients mean that brokers are working harder
than ever to assist clients in managing the cost of insurable
risks in their businesses. This, combined with increased
Insurer risk aversion, means placing specific risk categories
is becoming more complex. Whilst we understand the
challenge faced by Insurers in the light of significant
increases in the frequency and severity of climate-related
losses, our priority remains to assist our clients. We are
therefore seeing an unprecedented rise in the need to place
risks on behalf of our clients in the international market.
Completion of the potential acquisition of Tysers is targeted
for late calendar 2022, and will enhance the ability of Brokers
and Agencies across the AUB Group to access capabilities
and facilities in the Lloyd’s and International markets to place
these global risks and better serve our clients.
We have delivered a strong track record of growth and
performance since FY19, which continued in FY22. We grew
underlying revenue by 12.2% on the prior year to $689.5m
and expanded the underlying margin by 240bps to 34%. The
underlying NPAT of $74m grew by 22.2% on the prior year
on a continuing operations basis and was at the very top of
the outlook range provided earlier this year. This represents
an Underlying EPS of 96.7cps, an increase of 21.1% on FY21
on a TERP adjusted and continuing operations basis. The
Board has proposed a final dividend of 38.0cps giving a
full-year dividend of 55cps, flat on the prior year representing
a dividend payout ratio of 64.5% of Underlying NPAT. The
decision to hold year on year dividend per share flat was
made in light of the potential Tysers acquisition and strives
to maintain our policy to pay dividends in the range of 50%
to 70% of Underlying NPAT and ideally at the midpoint of
this range.
3
AUB GROUP ANNUAL REPORT 2022 CEO’S MESSAGE (CONTINUED)
The overall performance of AUB Group was underpinned by
continued momentum in Australian Broking and continued
growth and profitability in BizCover. The strong performance
in BizCover’s Australian Direct business was partially offset
by slower growth through intermediary channels and the
investment cost for early-stage growth in foreign markets.
The AUB Agencies enjoyed an exceptional year, and we
made good progress towards our goal to achieve significant
scale in this area. New Zealand Broking has also performed
well; however, this has been counterbalanced by reduced
profits in BWRS, our largest broker and the considerable
investment in Project Lola. Good progress has been made
with the transformation of BWRS with a new team of branch
managers. Many new brokers and team members are now
on board with a focus on business growth. Project Lola will
implement a market-leading broking and insurance platform,
improving margin and revenue growth in future years.
Profit momentum across the AUB Group, together with
interest savings arising from the deployment of proceeds
from a capital raise in May, gives us the confidence to
provide a forecast for FY23 Underlying NPAT of $86m to
$91m, representing growth of 16.2% to 23% versus FY22.
These forecasts do not include the consequences of the
potential Tysers acquisition announced in May.
Each year we define and describe execution priorities for the
year ahead. In FY22, we highlighted the following priorities:
– Reinvigorate Insurance Agencies
– Optimise our network
– Execute strategically aligned acquisitions
– Deliver market-leading technology capabilities
– Enhance our Partner proposition
Whilst I won’t go through each of these, I would like to
highlight the progress we’ve made in not only continuing
to optimise and consolidate our existing network but also
expanding through acquisitions that enhance our scale and,
more importantly, our capabilities. In particular, I’d like to
recognise our Agency teams for a spectacular year while
our technology investments and deployments continue
at pace with our recent acquisition of the iaAnyware core
broking system, significantly enhancing our ability to
strengthen broker technologies. Project Lola in New Zealand
will transform our proposition to members of our broking
network and our engagement with Insurers.
I want to acknowledge and thank our broking and agency
partners and all other members of the AUB Group
businesses in Australia and New Zealand. The pace and
success with which we are progressing AUB Group’s
strategic priorities is a consequence of their professionalism,
passion, capability and a focus on putting the client first.
Michael Emmett
Chief Executive Officer
and Managing Director
4
AUB GROUP ANNUAL REPORT 2022 DIRECTORS’
REPORT
5
AUB GROUP ANNUAL REPORT 2022 DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2022
DIRECTORS
Your Directors submit their report for the year ended 30 June 2022. The names and details of the Company’s Directors in
office during the financial year and until the date of this report are as follows. Directors were in office for this entire period
unless otherwise stated.
D.C. Clarke LLB MAICD
(Independent Non-Executive Chair)
M.P.C. Emmett B Com, H.Dip. Acc CA (SA)
(CEO and Managing Director)
Appointed: Non-Executive Director from 3 February 2014;
Chair from 26 November 2015
Board Committees: Board Audit & Risk, Nomination (Chair),
Remuneration & People
Background and experience:
David Clarke was Chief Executive Officer of Investec Bank
(Australia) Limited from 2009 to 2013. Prior to joining
Investec Bank, he was the CEO of Allco Finance Group and
a Director of AMP Limited, following five years at Westpac
Banking Corporation where he held a number of senior roles,
including Chief Executive of BT Financial Group. David has 35
years’ experience in investment banking, funds management,
property and retail banking. He was previously employed at
Lend Lease Corporation Limited where he was an Executive
Director and Chief Executive of MLC Limited. David is the
Chair of Charter Hall Group Limited.
Directorships of other listed entities (last 3 years):
– Charter Hall Group Limited (April 2014 to present)
Appointed: 11 March 2019
Board Committees: Nil
Background and experience:
Mike Emmett serves on a number of boards for companies
in Austbrokers, AUB New Zealand and Austagencies, in
addition to his role as Group CEO. Prior to joining AUB Group,
he was Group CEO for Cover-More, previously an ASX-listed
global travel insurer and now part of the Zurich Group.
Earlier, Mike was QBE Group Executive of Operations and EY
Managing Partner for Financial Services Advisory. Prior to
moving to Australia, Mike held senior roles in Finance and
Consulting in the UK and South Africa.
Directorships of other listed entities (last 3 years):
– 1ST Group Limited (January 2019 to May 2021)
6
AUB GROUP ANNUAL REPORT 2022 DIRECTORS (CONTINUED)
P. G. Harmer Harvard Advanced Management
Program
(Independent Non-Executive Director)
Appointed: 22 July 2021
Board Committees: Board Audit & Risk, Nomination,
Remuneration & People (from 22 July 2021)
Background and experience:
Peter Harmer was previously Managing Director and Chief
Executive Officer of Insurance Australia Group (IAG) Limited
and is currently a Non-Executive Director of Commonwealth
Bank of Australia Limited and nib holdings limited, and the
Chair of Lawcover Insurance Pty Limited. Prior to IAG he was
Chief Executive Officer of Aon Limited UK and a member
of Aon’s Global Executive Board, and spent seven years as
Chief Executive Officer of Aon’s Australian, New Zealand
and Pacific operation. Peter has over 40 years’ experience in
the industry spanning insurance, reinsurance broking, and
insurance broking.
Directorships of other listed entities (last 3 years):
– Commonwealth Bank of Australia Limited (March 2021
to present)
– nib holdings limited (July 2021 to present)
– Insurance Australia Group Limited (November 2015
to November 2020)
P. A. Lahiff BSc Agr, GAICD
(Independent Non-Executive Director)
Appointed: 1 October 2015
Board Committees: Board Audit & Risk, Nomination,
Remuneration & People (Chair)
Background and experience:
Paul Lahiff was previously Managing Director of Mortgage
Choice Limited (2003 - 2009) and prior to that was CEO
and an Executive Director of Heritage Bank and Permanent
Trustee and held senior roles in Westpac in Sydney and
London. Paul is the Chair of Harmoney Corp Limited, 86400
Holdings Limited and NESS Super, and a director of Sezzle
Inc. He is also the Chair of the Steering Committee for ISO
20022 Migration for the Australian Payments System.
Directorships of other listed entities (last 3 years):
– Sezzle Inc. (May 2019 to present)
– Harmoney Corp Limited (February 2021 to present)
7
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 DIRECTORS (CONTINUED)
R. J. Low B Com, FCA, GAICD
(Independent Non-Executive Director)
C. L. Rogers CFA, B Com, MBA, GAICD
(Independent Non-Executive Director)
Appointed: 3 February 2014
Board Committees: Board Audit & Risk (Chair), Nomination,
Remuneration & People
Appointed: 3 May 2018
Board Committees: Board Audit & Risk, Nomination,
Remuneration & People
Background and experience:
Robin Low was a Partner at PricewaterhouseCoopers.
She has over 30 years’ experience in financial services,
particularly insurance, and specialises in assurance and
risk management. She is a Director of Appen Limited, IPH
Limited and Marley Spoon AG. Robin also serves on the
boards of Australian Reinsurance Pool Corporation, Gordian
Runoff Limited, and not-for-profit organisations: Guide Dogs
NSW/ACT and the Sax Institute. Robin is a member of the
audit committee of the University of New South Wales,
and is a past Deputy Chair of the Auditing and Assurance
Standards Board.
Directorships of other listed entities (last 3 years):
– IPH Limited (September 2014 to present)
– Appen Limited (October 2014 to present)
– Marley Spoon AG (January 2020 to present)
– CSG Limited (August 2014 to February 2020)
Background and experience:
Cath Rogers is a Partner at Antler, a global early-
stage venture capital firm. She is a member of the
Commercialisation Committee of the Heart Research
Institute and was previously a Non-Executive Director of
fintech Digital Wallet Pty Limited which trades as Beem It
(2018-2021) and McGrath Limited (2016-2018). She has a
background in financial services, private equity and venture
capital both in Australia and overseas including with AirTree
Ventures, Anchorage Capital Partners, Masdar Capital and
Credit Suisse.
Directorships of other listed entities (last 3 years):
– Nil
R. J. Carless BEc
(Independent Non-Executive Director)
Appointed: 1 October 2010
Retired: 31 August 2021
Board Committees: Board Audit & Risk, Nomination,
Remuneration & People (to 31 August 2021).
Background and experience:
Ray Carless has over 40 years’ experience in the insurance
industry based in Australia but with management
responsibilities throughout the Pacific Rim. Until 2000 he
was Managing Director of reinsurance brokers Benfield Greig
in Australia, a position he had held for over 14 years, and he
had also been a director of the worldwide holding company
located in London for 10 years. He has been a director of a
number of companies involved in the Australian insurance
industry since 2000.
Directorships of other listed entities (last 3 years):
– Nil
8
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 INTERESTS IN THE SHARES AND RIGHTS OF THE COMPANY
Details of shares and rights held by Directors and KMPs are set out in the Remuneration Report.
DIRECTORS’ MEETINGS
The number of Directors’ meetings held (including meetings of Committees of Directors) and attendance of Directors during the
year ended 30 June 2022 is as follows:
Director
Board
Board Audit & Risk
Committee
Remuneration & People
Committee
Nomination Committee
Held1
Attended
Held1
Attended
Held1
Attended
Held1
Attended
David Clarke
Michael Emmett2
Ray Carless3
Peter Harmer4
Paul Lahiff
Robin Low
Cath Rogers
21
21
2
21
21
21
21
21
21
2
20
21
21
21
6
6
1
6
6
6
6
6
6
1
6
6
6
6
7
7
2
7
7
7
7
7
7
2
7
7
7
7
4
4
1
4
4
4
4
4
3
1
4
4
4
4
The number of meetings held during the time the Director was a member of the Board or of the relevant Committee.
1
2 Michael Emmett was not a member of any Committee, and attended Committee meetings as an invitee.
3
4
Ray Carless retired as a Director on 31 August 2021.
Peter Harmer was appointed as a Director on 22 July 2021.
COMPANY SECRETARIES
Richard H. Bell, LLB, B.Comm (Law) (Group General Counsel and Company Secretary)
Richard Bell joined AUB Group on 15 June 2021 as Group General Counsel and was appointed Company Secretary on 29 June
2021. Before joining AUB Group, he was General Counsel (Corporate) & Group Company Secretary at Aristocrat Leisure Limited
and previously in private practice specialising in Mergers & Acquisitions at Allens Linklaters.
Elizabeth M. McGregor, BA, MBA, FGIA, FCIS, GAICD (Joint Company Secretary (from 29 October 2021))
Elizabeth McGregor joined AUB Group on 1 October 2021 and was appointed Joint Company Secretary on 29 October 2021.
She was previously company secretary of a number of ASX listed entities, through her work with the professional services
companies Automic Group and Mertons Corporate Services. Elizabeth is a non-executive director of Exopharm Limited.
Allan K. T. Luu, BBus, LLB, MCom, LLM, FGIA, Dip IT (Joint Company Secretary (to 29 October 2021))
Allan Luu was Joint Company Secretary of AUB Group from 20 December 2018 to 29 October 2021. He was previously Legal
Counsel at DXC (formerly CSC) and the Transurban Group and General Counsel and Company Secretary at a number of SMEs.
Prior to that, he was in private practice at K&L Gates, Baker & McKenzie and Ogier. Allan is currently the Group Commercial and
Legal Manager of AUB Group.
9
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 OUR PURPOSE AND VALUES
We place clients at the heart of everything we do – providing products, services and solutions that help protect them from
harm, damage and financial burden. Our partners and advisers provide trusted support and guidance to clients on the optimal
combination of physical, people and financial risk solutions. Our approach is backed by the same commitment to high-quality
service that we’ve had from the start. Our services are designed to help our partners operate safely, manage the business more
profitably and achieve better outcomes for clients. Together we’re providing a safer and stronger future for all.
At AUB Group we are guided by a universal set of values that describe the focus of our efforts.
AUB GROUP
SERVICES
SOLUTIONS
& PRODUCTS
PARTNERS
& ADVISORS
CLIENTS
ple
P e o
cial risk
n
a
n
i
F
e
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n
a
Fin
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artn
P
v
elo
su
p
p
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m
er
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nt
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P
e
o
p
l
e
r
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s
k
T
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n
o
l
o
g
y
g
etin
ark
M
C
o
m
plia
n
ce
Physical r i s k
Acquisition
e n t
In v e st m
Our goal is for all of our decisions and actions to reflect these core values. We believe that putting our values into practice
creates the greatest benefits for our shareholders, partners, employees, suppliers and communities in which we serve.
For further information on our stakeholders and measurements of success please refer to our ESG Report on page 51.
10
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
PRINCIPAL ACTIVITIES
AUB Group Limited (ASX: AUB) is an ASX200 listed group comprising insurance brokers and underwriting agencies operating in
~520 locations across Australia and New Zealand. Over 3,000 team members work with our 900,000 clients to place more than
$4.4bn in insurance premiums with local and foreign insurers.
AUB Group operates through four key business segments. The Group’s core revenue is derived from arranging insurance
policies and from related products and services. The amount of revenue earned is determined by premiums placed, sums
insured and the general level of economic activity.
Australian Broking businesses provide insurance broking and advisory services primarily to SME clients. The division
encompasses 45 broking businesses, complemented by established capabilities in member services, life insurance broking,
premium funding, and claims management.
In New Zealand Broking our businesses provide insurance broking and advisory services primarily to SME clients. AUB Group
holds equity stakes in 5 major insurance broker partners as well as ownership of NZbrokers (the largest broking management
group in New Zealand representing 47 member businesses).
Agencies distribute and manage insurance products on behalf of licensed insurance companies through General Commercial,
Strata and Specialty sub-divisions with a total of 33 underwriting agencies with access to delegated global underwriting
capacity. These products and services are available to customers of insurance brokers, in and outside the AUB Group’s broking
networks.
Support service businesses provide a diverse range of services to support the Broking, Agency, and New Zealand segments,
and external clients. Services include:
a. Platforms division: automated quoting & binding, white-labelling, and technological support. This division includes BizCover,
Australia’s leading digital SME insurance platform with multi-channel presence and a comprehensive insurance offering. The
business also supports/provides the Austbrokers network with ExpressCover, Australia’s newest SME insurance platform
utilising the BizCover quote and bind engine.
b. Corporate: AUB Group Head office corporate entities.
These sub segments are not individually reportable.
TOTAL INCOME BY SEGMENT1
UNDERLYING PROFIT BEFORE TAX
BY SEGMENT1
3%
13%
12%
12%
(11)%
8%
2022
2021
16%
2022
60%
18%
58%
24%
14%
(3)%
11%
16%
2021
81%
76%
Australian Broking
Agencies
New Zealand Broking
Support Services
The Group owns equity stakes in its partner businesses, which in turn provide trusted support and guidance to clients relating to
physical, people and financial risks. This is backed by services the Group provides that help our partners operate with less risk,
manage their businesses more profitably and ultimately achieve better client outcomes. These services include broker member
services, claims and loss adjusting businesses, technology support, a centralised data-center and related infrastructure support,
common broking and back-office platforms, finance, tax, M&A, human resources, risk, compliance and other operational
support services.
1 Total Income is presented on a statutory basis whilst Underlying Net Profit Before Tax is a non IFRS measure. Refer to Note 3 within the Financial Report for
further information.
11
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 OPERATING AND FINANCIAL REVIEW
Reconciliation of Reported Net Profit After Tax to Underlying Net Profit After Tax
The following reconciliation from Reporting NPAT to UNPAT is presented on the basis attributable to equity holders of
the parent:
Net Profit after tax attributable to equity holders of the parent
Add back/(less) net impact (after tax and non controlling interests), of the following items:
- Share of Amortisation of broking registers
- Adjustments to value of entities (to fair value) on the day they became controlled entities
- Remeasurement of put option liability (net of Interest unwind)
- Share of impairment charge
- Share of movements in contingent consideration, net of impairment charge
- (Profit)/Loss on deconsolidation of controlled entity
- Capital losses not previously recognised
- Share of Profit from sale or dilution of interests in associates, controlled entities and broking
portfolio
- Share of Impairment of the Right of Use Asset and Onerous Lease Expense
- Share of Legal, due diligence and debt costs
Underlying Net Profit After Tax
2022
$’000
2021
$’000
80,836
70,621
11,143
(41,046)
1,104
7,537
(337)
(3,303)
–
10,948
(3,851)
5,587
2,679
(372)
(18,138)
(1,791)
(2,591)
(2,050)
219
20,456
74,018
611
1,057
65,301
Operating results for the year
In the year ended 30 June 2022 (FY22) Reported Net Profit After Tax attributable to equity holders of the parent (Reported
NPAT) was $80.83m (FY21: $70.62m), a 14.46% increase from the prior year. The increased Reported NPAT was due to strong
organic growth in Australian Broking and Agencies along with fair value adjustments in the current period from the step-up
investment and consolidation of 3 entities previously held as associates, partially offset by acquisition expenses. The prior year
result included the profit on sale of Altius.
On a Reported NPAT basis, earnings per share was 105.60 cents for the full year, 13.39% above the prior comparable period*.
Underlying Net Profit After Tax (Underlying NPAT) is the key measure used by management and the board to assess and review
business performance. Underlying NPAT excludes non-controlling interests and the impact of fair value adjustments to the
carrying value of associates, profits on sale and deconsolidation of controlled entities, contingent consideration adjustments,
amortisation of intangibles, impairment charges and acquisition costs.
Underlying NPAT increased 13.35% to $74.02m in FY22 (FY21: $65.30m) due to strong organic growth in Australian Broking and
Agencies.
*
The Reported EPS in prior periods have been adjusted by the theoretical ex-rights price factor (TERP) resulting from the number of new shares issued following
a non-renounceable entitlement offer. The TERP adjustment factor applied to the EPS values previously reported is 0.9794.
12
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Underlying NPAT
74.02
65.30
43.52
46.71
53.15
80
70
60
50
40
30
20
10
0
FY18
FY19
FY20
FY21
FY22
Underlying NPAT ($’m) •••••••••••••••• Linear (Underlying NPAT ($’m))
On an Underlying NPAT basis, earnings per share (EPS) increased by 9.97% over the prior year to 96.70.
Dividend per share paid and declared for FY22 totaled 55.0 cents.
Underlying EPS and Dividend Growth
65.82
65.74
45.5
46.0
70.16
50.0
86.12
96.7
55.0
55.0
120
100
80
60
40
20
0
FY18
FY19
FY20
FY21
FY22
Underlying EPS (cents)
Dividend per share (cents)
•••• Linear (Underlying EPS) •••• Linear (Dividend per share (cents))
The Reported EPS in prior periods have been adjusted by the theoretical ex-rights price factor (TERP) resulting from the number of new shares issued following
a non-renounceable entitlement offer. The TERP adjustment factor applied to the EPS values previously reported is 0.9794.
13
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Results by operating division
Australian Broking – underlying pre-tax profit for the year increased by 19.71% to $86.15m. Excluding $2.13mn non-recurring
JobKeeper receipts in the prior period, the Underlying pre-tax profit for the year increased by 23.36% This increase was
predominantly driven by organic growth which included:
– Increased Commercial Lines premiums;
– Growth in client and policy counts;
– Ongoing cost reductions from network rationalisations;
– Partially offset by wage inflation and the increased cost of corporate insurances.
Acquisition related profit growth included the investments in iaAnyware (1 October 2021) and Vaughan & Monaghan
(1 October 2021).
New Zealand Broking – underlying pre-tax profit for the year decreased by 15.31% to $8.95m. NZ technology investment costs
of $4.57m were incurred in the current period (FY21: $2.23m) to transform and enhance the NZ broking experience via a new
platform. Excluding NZ technology investment costs from both periods, the Underlying pre-tax profit for the year increased by
5.65% which included:
– Revenue and profit growth for the majority of NZ businesses, supported by increased Commercial lines premiums;
– Partly offset by profit reduction in BWRS with remediation plan underway.
Agencies – underlying pre-tax profit for the year increased by 53.52% to $22.78m. The current year includes the full period
benefit of the investment in 360 Underwriting Solutions from 1 December 2020, which has accelerated AUB Group’s scale
in Agencies.
Strong organic growth especially across Construction and Engineering, Technology Risks, and Farm and Regional businesses.
Platforms – underlying pre-tax profit for the year increased by 18.39% to $10.50m. Excluding $0.45mn non-recurring JobKeeper
receipts in the prior period, the Underlying pre-tax profit for the year increased by 24.71%. This increase was due to organic profit
growth assisted by operating leverage and scalability of the platform. Future accelerated growth anticipated in foreign markets.
FINANCIAL CONDITION
Shareholders’ equity increased from $598.29m to $997.68m at 30 June 2022, due to the impact of the current year financial
performance as well as the proceeds of a $350mn equity capital raising to fund the Tysers acquisition which is expected to
complete in FY23.
The Group generated positive cash flow from operating activities before customer trust account movements of $101.96m (2021:
$83.84m). Cash inflow of $112.44m from investing activities in FY22 were due mainly to the purchase of iaAnyware Unit Trust.
Cash flows from financing activities were primarily from a $350m capital raising, used temporarily to repay debt until the Tysers
acquisition is completed. Other finance activity related cash flows were to increase our shareholding in controlled entities and
to fund dividends paid to shareholders. Cash held at the end of the period totaled $259.33m (2021: $76.59m), excluding monies
held in trust).
Interest-bearing loans and borrowings decreased by $164.48m to $47.80m. This is largely due to the proceeds of the equity
capital raising being used to extinguish the Group’s previous syndicated debt facility. At the end of FY22, whilst some debt still
exists in subsidiaries and associates, the absence of debt at Group level means we do not report on debt covenant outcomes.
Subsidiaries had debt of $47.80m and the look through share of borrowings by associates (including contingent obligations)
of $21.67m (2021: $17.54m)1 are not included in the Group balance sheet as these entities are not consolidated.
The borrowings by subsidiaries and associates relate largely to funding of acquisitions, premium funding and other
financing activities.
1
Total debt of associates, after considering AUB Group’s percentage shareholding.
14
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 BUSINESS STRATEGY
AUB Group’s strategy remains consistent – exploit the latent potential in our existing business supplemented with strategically
aligned and disciplined inorganic growth.:
– Deliver a market leading proposition for our brokers, and in-turn our clients, by investing in processes and technologies that
drive efficient and effective outcomes;
– Continued focus on optimising our portfolio through consolidation and targeted involvement to improve underlying business
performance; and
– Manage our active pipeline of external M&A opportunities through a disciplined and strategic approach to investment.
In FY23, the business will continue to evolve its focus from FY22 priorities with specific accountability for the following:
– Improve and enhance New Zealand performance
– Successful pilot implementation of Project Lola including interfaces to select Insurers and commencement of roll-out to
NZbrokers network
– Accelerated revenue and profit growth for AUB NZ’s portfolio of brokers
– Optimise our network
– Continue to optimise our portfolio of business to outperform by consolidating into more efficient operating entities or to
expand specialistion
– Execute on strategically aligned acquisitions
– Disciplined and targeted approach to acquisitions, either bolt-ons that deliver synergy benefits or to expand capabilities
and footprint
– Increased investments in current network businesses to aid consolidation/optimisation
– Stabilise and optimise Tysers post acquisition
– Optimise Tysers 2H23 contribution to AUB Group UNPAT
– Deliver on key outcomes related to broker retention and performance, Tysers Retail, regulatory projects and acquisition
Synergies
– Enhance partner proposition
– Enhancement of member arrangements with external partners especially for Premium Funding and Technology
Insurance
PROSPECTS FOR FUTURE FINANCIAL YEARS
AUB Group has benefited from investment in our core capabilities, cost management and pricing tailwinds. The Group continues
to hold a modest outlook on the underwriting cycle with a premise that we are in the midst of a positive phase with potential for
extension considering recent ongoing losses in key global underwriting markets. The anticipated growth could be reduced by
unforeseen impacts of COVID-19.
In May 2022, AUB entered into a binding agreement to acquire 100% of Tysers subject to some customary matters and
regulatory approval. Tysers represents a material acquisition for the Group including its future prospects as well as associated
risks with international expansion.
CORPORATE GOVERNANCE
The 2022 Corporate Governance Statement can be found at the AUB Group website: aubgroup.com.au/corporate-governance.
15
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 RISK MANAGEMENT
Effective risk management is an integral element in AUB Group achieving its strategic objectives.
Overseen by the Board and the Board Audit and Risk Committee, the Risk Management Framework underpins identification and
management of enterprise-wide and emerging risks and allows for effective decision-making that is within the Board approved
risk appetite and specific limits.
The content and status of risk profiles and mitigation plans is considered and updated, in line with changes to the environment
and operations, through regular reviews by management.
The Board reviews the Group’s key risks and assesses the effectiveness of the risk management framework annually in
accordance with the ASX Corporate Governance Principles and Recommendations.
AUB Group continues to review and enhance its governance structure and processes in accordance with the ‘three lines model’
recommended by the Institute of Internal Auditors (see below).
– Management: responsible for achieving the organisation’s objectives through first-and second-line activities and risk-based
decision-making. Businesses, the ‘first line’, are responsible for evaluating their risk environment, putting in place appropriate
controls and ensuring that these controls are implemented effectively. The ‘second line’ provides complementary expertise
and continuous monitoring systems in areas including legal and compliance, information and technology security,
sustainability, and risk management.
– Internal audit function: undertake assurance and activities to promote and facilitate continuous improvement.
– the Board: responsible for organisational oversight through integrity, leadership, and transparency.
GOVERNING BODY
Accountability to stakeholders for organizational oversight.
Governing body roles: integrity, leadership, and transparency
MANAGEMENT
Actions (including managing risk) to
achieve organizational objectives
First line roles:
Second line roles:
Provision of
products/
services to clients;
managing risk
Expertise, support,
monitoring and
challenge on
risk-related maters.
INTERNAL AUDIT
Independent assurance
Third line roles:
Assurance on
key processes
and the control
environment.
E
X
T
E
R
N
A
L
A
S
S
U
R
A
N
C
E
P
R
O
V
D
E
R
S
I
KEY
Accountability, reporting
Delegation, direction,
resources, oversight
Alignment, communication,
coordination, collaboration
(source: The Institute of Internal Auditors, Australia.)
16
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
KEY BUSINESS RISKS
The Group is exposed to various risks during its operations and achievement of its strategic objectives. Broad risk categories,
which may impact the Group’s business strategy and prospects for the future financial year, include:
Strategic
Clearly defining and successfully executing the AUB strategy.
Risk description
strategy is unclear, misaligned or fails to take into account the changing competitive, regulatory and technological landscape.
Failure to successfully execute the strategy, including M&A, and deliver strategic objectives and outcomes.
2022 Commentary
Management and Mitigation
Business model of acquiring and holding equity in operating
business
An important part of AUB’s business model and its growth
strategy is to acquire and hold equity in insurance broking,
underwriting agency.
Key considerations include the likely future performance of the
business being acquired and the extent to which the business
will fit strategically within the AUB Group.
When due diligence related to acquisitions, mergers or when
AUB makes a strategic or financial investment in an entity, fails
to detect substantial issues, the transactional documents may
not contain corresponding safeguards including representations,
warranties or indemnities, to protect AUB against existing and
potential liabilities of the target businesses.
AUB can be made financially liable and subjected to legal
proceedings for past non-compliances of laws and regulations.
These may affect AUB’s business operations and hinder its
corporate growth. A failed merger and acquisition transaction
may also damage AUB’s reputation
While AUB ordinarily has veto rights on most decisions
concerning AUB group members, it may not have the capacity
to implement its decisions in all cases.
There can be no assurance that the anticipated benefits and
synergies expected to result from all or some of the integrations
of these acquisitions will be realised.
Increased competition or market change
An increase in competition or deterioration in the competitive
positioning of AUB may have an adverse impact on AUB network
members and could potentially result in a reduction in gross
written premium placed through AUB network members due
to a loss of market share; a reduction in fees and commissions;
and/or a reduction in margins which may adversely impact the
revenue and earnings of AUB network members.
Increased competition from new entrants and existing
market participants, including increased commoditisation
of business insurance products, may have an adverse impact
on partner network and AUB earnings. If there are changes
in the remuneration model for, or the use of, insurance brokers,
underwriting agencies, or risk services businesses, this may
adversely impact AUB’s earnings and/or financial position
and performance.
AUB in some cases acts as agent of the insurers. Insurers
may choose to reduce their reliance on insurance brokers
and underwriting agencies including through an increase in
their direct web-based distribution models.
Continued consolidation in the general insurance industry
may result in a more limited product set and/or greater pricing
power for insurers which may result in downwards pressure
on commissions and fees.
As part of the annual assessment of strategic risks, the
Board and Management team assess potential risks from
both external and internal factors. Actions to mitigate
these risks are designed as appropriate. Changes to these
key risks and status of actions are reviewed monthly at
the Risk Management Executive Committee meetings
and biannually at the Board Audit and Risk Committee
meetings.
Specific mitigation actions include:
– Engagement with relevant government stakeholders,
regulators, insurers and industry bodies. Responses
to relevant reviews including Quality of Advice Review
– Investment and acquisition approach involving skilled
resource, due diligence and negotiated representations
and warranties.
– Designing and implementing the ESG Program of work.
17
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 Environmental, social and governance (ESG) risks and
expectations
Evolving community attitudes towards, and increasing regulation
and disclosure in relation to ESG issues may impact the
operation of AUB’s business. Increased expectations, and in
particular the failure to meet those expectations, with respect to
ESG may impact on the profitability or value of AUB’s business,
restrict AUB’s ability to attract financing or investment, result in
heightened compliance costs associated with meeting prevailing
regulatory and disclosure standards, or adversely impact on the
reputation of AUB, which may have an adverse effect on AUB’s
business, financial position and prospects.
Financial
Risks relating to funding and liquidity management, expected return on investments and mitigation of fraud, client disputes and
professional indemnity claims.
Risk description
Multiple factors could lead to the Group having insufficient capital or cash flow to meet its obligations including unfavourable
outcomes from inappropriate management of interest rate, foreign exchange, counterparty credit, liquidity and self-insurance
risks, adverse effects from capital structure and funding or losses associated with fraud, claims or disputes.
2022 Commentary
Economic conditions risk
The operating and financial performance of AUB is influenced by
a variety of general economic and business conditions, including
levels of consumer spending, inflation, interest rates and exchange
rates and government fiscal, monetary and regulatory policies.
Changes in general economic conditions may result from many
factors including government policy, international economic
conditions, significant acts of terrorism, hostilities or war
or natural disasters, as well as the impacts of COVID-19. A
prolonged deterioration in general economic conditions could
be expected to have an adverse impact on AUB’s operating and
financial performance and financial prospects.
The ability of AUB to secure debt financing, or financing on
acceptable terms, may be affected by volatility in the financial
markets, globally or within a particular geographic region, industry
or economic sector. An inability to obtain, or increase in the costs
of obtaining, financing on acceptable terms could adversely
impact AUB’s financial position and performance. AUB is exposed
to movements in interest rates through its debt facility.
Fraudulent or inappropriate conduct
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 operations, there is a
risk that funds of the business or of those held on behalf of clients
may be the subject of fraudulent behaviour. Any such fraudulent
behaviour would likely have an adverse impact of AUB’s financial
position, performance and reputation.
Management and Mitigation
AUB Group proactively manages these risks and
opportunities through its established corporate
governance structures, through the Compliance
Framework, Risk Management Framework, and Assurance
program supported by company policies, standards and
procedures.
We employ specialised and experienced resources and
teams to oversee and educate stakeholders of relevant
regulatory requirements and monitor potential changes.
Where required, we also engage specialist advisors to
support internal resources where required.
Other specific mitigation plans include:
– Finance specialists undertake forecasting and financial
scenario testing activities
– The organisation operates with segregation of duties
and a Board approved delegation of authority
– Actions to improve fraud reporting and dashboards to
facilitate more effective oversight
– Implementation of external advisory channels for
improved accessibility, accuracy and consistency.
18
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 Compliance and regulatory risk
Risk of non-compliance with obligations (legal, regulatory, contractual) or failure to identify or appropriately respond to changes
in the regulatory environment.
Risk description
AUB operates in a highly regulated environment which has been and continues to be subject to regulatory review and change.
2022 Commentary
Management and Mitigation
AUB Group proactively manages these risks and
opportunities through its established corporate
governance structures, through the Compliance
Framework, Risk Management Framework, and Assurance
program supported by company policies, standards and
procedures.
We employ specialised and experienced resources and
teams (Legal, Compliance, Finance, etc.) to oversee and
educate stakeholders of relevant regulatory requirements
and monitor potential changes. Where required, we also
engage specialist advisors to support internal resources
where required.
Other specific mitigation plans include:
– Continuous disclosure policy and Management
Disclosure Committee
– Improved oversight and reporting at a Group and Board
level
– Policies, Frameworks and Procedures
– Defined approach for Regulatory change
implementation
Government policies and regulations
Failure to act in accordance with regulation, licenses, industry
standards and codes, internal policies and procedures and
principles of good governance could result in regulatory or legal
action, licences being suspended or withdrawn, significant
fines, penalties, other costs, reputation damage and/or reduced
investor confidence. This, in turn, may adversely impact AUB’s
reputational, financial performance and position.
Regulatory changes may also impact AUB and/or its operating
entities through costly and burdensome regulation and may
have consequences which cannot be foreseen. Additionally,
compliance with these regulatory obligations may require
considerable investment into the establishment of compliance
systems and the monitoring and maintenance of such systems
to minimise the risk of noncompliance in the future.
AUB also faces the risk of failing to identify or appropriately
respond to changes in the regulatory environment or of
damaging AUB’s standing with its regulators as a result of
AUB not meeting regulatory expectations. A key emerging
regulatory risk is that commission-based remuneration of
general insurance brokers may cease to be exempt from bans
on conflicted remuneration. The Australian Government has
commenced the Quality of Advice Review, which will consider
(among other things) the effectiveness of measures that have
been implemented by regulatory bodies and financial services
entities to improve the quality of financial advice, and whether
each remaining exemption to the ban on conflicted remuneration
(such as commissions) remains justified, including the
exemptions for general insurance products and consumer credit
insurance products. Any changes resulting from the Quality of
Advice Review may impact AUB’s remuneration structure.
19
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 Operational
A disruption that impacts the ability of AUB to operate effectively.
Risk description
AUB may be unable to continue to operate effectively due to inadequate or failed internal systems and processes, disruption
including inability to access premises, inability to use technology or systems (may be information security or cyber related), an
infrastructure failure, impact to people and third-party disruption (including loss of Binder arrangements).
2022 Commentary
Management and Mitigation
Loss of capacity for underwriting agencies
Unexpected loss of underwriter capacity, whereby an underwriter
fails to renew a binder or withdraws capacity for strategic
reasons (such as exiting lines of business or a specific country
exit) is likely to result in significant loss of income.
Further risk may be as a result of an underwriter withdrawing
capacity due to uneconomic underwriting results. This would
severely constrain the ability of underwriting agencies to write
new business and may restrict them from renewing existing
business. Any such scenario would have an adverse impact on
the financial performance of AUB’s underwriting business.
Technology and cyber security risk
AUB’s information technology systems (including those
provided by third party technology vendors) are vulnerable to
damage or interruption from a number of sources. Information
security breaches or Cyber incidents could significantly curtail
AUB’s ability to conduct its business and generate revenue
and lead to losses associated with investigation, rectification
and remediation activities. Loss of sensitive (personal or
organisational) information can lead to reputational damage,
client distrust and regulatory inquiries or actions.
We apply the Three Lines model to operational risk
management, with each Line having defined roles,
responsibilities and escalation procedures to support
effective design and implementation of controls to
manage the risks. We are committed to continuous
monitoring and improvement to ensure our approach to
operational risk continues to meet organisational needs
and regulatory requirements.
Specific mitigation actions include:
– Binder management approach
– Business Continuity Framework and Plans
– Disaster recovery plans and annual disaster recovery
tests
– Information security strategy, framework, roadmap
– Tactical controls such as malware, multi-factor
authentication, network segmentation among others
– Ongoing delivery against the Cyber Roadmap
Group has designed and implemented a suite of core
capabilities to manage cyber security and cyber risk.
From the establishment of a set of strategic objectives,
to an industry aligned cyber security framework, to a
roadmap focused on embedding solid foundations,
we have developed an ecosystem whereby our cyber
posture is continually assessed and enhanced. Taking
a risk-based approach to prioritising the cyber roadmap
initiatives, we are focused on meeting our strategic
information security objectives and managing risk
within the enterprises risk appetite and tolerance levels.
Mitigation plans include:
– a security operations centre with technologies such as
managed detection and response (MDR) and security
information and event management (SIEM).
– cyber awareness training,
– phishing simulation exercises,
– vulnerability and patch management,
– risk and threat assessments,
– third party audits,
– penetration testing, and
– incident and disaster recovery exercises.
The minority of member firms within the group who
manage their own IT services and security, are subject
to AUB’s IT Service Standards and periodic assurance
audits and attestations.
20
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 Partnering and Outsourcing
AUB failing to identify, develop and manage Broker partnerships and third party relationships to best deliver the long term
strategy
Risk description
Inability to identify, onboard and effectively manage insurers and third parties by AUB may result in missed opportunities,
financial losses, inability to deliver the strategy, reputation damage and increased concentration risk.
2022 Commentary
Management and Mitigation
Business partnering and third party risks
Specific mitigation actions include:
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. These
relationships are a significant contributor to AUB Group success.
Failure to manage these relationships effectively could lead
to reduced revenues, increased costs and an inability for AUB
Group to deliver its strategy.
AUB utilises third party suppliers to bring external expertise
and support to the business. Insufficient or uncommercial
contractual arrangements may impact the Groups ability
to maintain efficiency and ensure third parties meet
their obligations.
– Contract development and review approach
– Third party Service Level Agreements (SLAs)/Key
Performance Indicators (KPIs) embedded in contracts
and monitored
– Partner Development Manager Roles
People
AUB relies on the recruitment, retention and engagement of skilled personnel.
Risk description
Ineffective recruitment, retention and engagement of skilled/key personnel, or failure to appropriately manage work health
and safety, may result in AUB being unable to operate efficiently and effectively, leading to potential financial and reputational
impacts and inability to successfully execute its strategy.
2022 Commentary
Management and Mitigation
Succession risks, ability to attract and retain talent
Specific mitigation plans include
A loss of key personnel by AUB may lead to material business
interruption and loss of key customer or partner relationships.
AUB also relies on the need to be able to attract staff with the
right experience and expertise to assist AUB with successful
execution of its strategic priorities and growth plans. Particularly
given the presently competitive labour market, there can be no
certainty that AUB will be able to attract the people it desires.
Skilled/Key personnel may include key persons noted on
Binder Authorities, Responsible Managers as noted on AFSL’s,
incumbents in key roles or individuals who hold business
critical knowledge.
– Succession plans and review approach
– KPI setting and performance reviews
– Regular monitoring of staff hours and skills gaps to
identify recruitment needs
– Workforce planning including recruitment and
employee development plans to assist achieve the
organisation’s future goals and keep talent engaged
– Use of employee engagement surveys and anonymous
feedback to be pro-active in employee satisfaction,
work-life balance, and mental health
21
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 ENVIRONMENTAL REGULATION AND
PERFORMANCE
The Directors are satisfied that adequate systems are in
place for management of the Company’s environmental
responsibility and compliance with various requirements
and regulations. The Directors are not aware of any
material breaches of these requirements, and to the best
of their knowledge, all activities have been undertaken
in compliance with environmental requirements. Refer
to the Environmental, Social and Governance Report
for more details.
INDEMNIFICATION AND INSURANCE
OF DIRECTORS AND OFFICERS
During or since the end of the financial year, the Company
has paid premiums in respect of a contract insuring all
the Directors and Officers of AUB Group Limited against
liabilities, past, present and future.
In accordance with normal commercial practice, the
disclosure of the total amount of premiums under and the
nature of the liabilities covered by the insurance contract
is prohibited by a confidentiality clause in the contract.
INDEMNIFICATION OF AUDITOR
To the extent permitted by law, the Company has agreed to
indemnify its auditor, Ernst & Young Australia, as part of the
terms of its audit engagement agreement, against claims
by third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Ernst
& Young during or since the financial year.
SIGNIFICANT CHANGES IN THE STATE
OF AFFAIRS
There were no significant changes in the state of affairs of
the Group during the financial year, other than acquisitions
and disposals disclosed above, a capital raising during
the period, and repayment of the Company’s syndicated
debt facility.
SIGNIFICANT EVENTS AFTER THE
BALANCE DATE
On 9 May 2022 AUB entered into a binding agreement to
purchase 100% of Tysers for GBP 500m, with a potential
further deferred consideration of GBP 100m subject to
meeting revenue growth hurdles.
The acquisition is expected to complete in FY23 subject
to customary conditions and regulatory approvals.
AUB will fund the acquisition through the recent equity
capital raising of $350m, a private placement with the
vendors of $176m in AUB issued shares (escrowed for
24 months post completion) and a committed Syndicated
Debt facility of $675m. The facility includes an accordion
feature to fund the potential deferred consideration.
Effective 1 July 2022, Austbrokers Corporate Pty Ltd (AUC),
a controlled entity of the Group acquired 100% of SRS
Broking Pty Ltd. AUC partially funded the acquisition by
issuing shares, resulting in AUB diluting its ownership in
AUC by 20% to 80%.
Effective 1 July 2022, AUB acquired an additional 10.7% of
AUB Group NZ Limited, increasing it’s shareholding to 100%.
On 29 July 2022, the Group disposed of its 50% investment
in SRG Group Pty Ltd.
On 24 August 2022, the Directors of AUB Group Limited
determined a final fully franked dividend on ordinary shares
of 38.0 cents per share in respect of the 2022 financial year.
Based on the current number of ordinary shares on issue,
the total amount of the dividend is estimated to be $35.1m.
22
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 REMUNERATION & PEOPLE
COMMITTEE CHAIR’S LETTER
Dear Shareholders
On behalf of the Board of AUB Group Limited (AUB Group),
I am pleased to present our Remuneration Report for the
financial year ended 30 June 2022.
The purpose of this report is to describe AUB Group’s
remuneration strategy and framework for its Key
Management Personnel (KMP), in particular the links
between AUB Group’s executive remuneration framework
and business strategy, performance and reward.
Key financial highlights and governance measures
for FY22
Key FY22 financial highlights include:
– Underlying revenue (including associates) of $689.5m,
representing growth of 12.2% from FY21;
– Underlying NPAT of $74.02m, representing growth of
13.35% from FY21; and
– Underlying earnings per share of 96.70 cents, an uplift
of 12.3% in comparison to FY21.
Key remuneration governance measures and areas of focus
include the following:
– Introducing a deferral component into the Short Term
Incentive (STI) program for Group Executives, under
which part of the STI outcome is delivered in cash and
the remainder is deferred into equity for up to 24 months.
Deferred STI supports retention, more closely aligns the
interests of executives and shareholders and enhances
risk management and governance.
– For all LTI grants after FY20, the Board has shifted to a
policy of no retesting of vesting conditions at the end of
the three year performance period. Any PSRs that do not
vest following testing, lapse.
– Following strong support from shareholders (99.5%
of votes were cast in favour at the 2021 AGM), an
Outperformance (OP) Plan was introduced for certain
Group Executives which complements the annual
executive remuneration framework by providing a
reward for significant longer term outperformance. The
OP plan is delivered in the form of Share Appreciation
Rights (SARs), where vesting will require stretch
performance well exceeding regular Long Term Incentive
(LTI plan) and market expectations. It will also need
successful execution of growth initiatives in a highly
competitive landscape.
The Board believes that these changes further enhance AUB
Group’s remuneration framework and people strategy, and
the additional disclosure practices mean that AUB Group
continues to provide clear and transparent disclosure.
“Performance Options” issued under the Long Term
Incentive Plan have been renamed “Performance Share
Rights” (PSRs). These securities are issued to employees
under the Long Term Incentive Plan, and convert to
shares, subject to satisfaction of the vesting conditions.
The reason for the name change is to better reflect the
actual nature of these securities, and provide greater
transparency to AUB shareholders and the broader market.
There is no change to the terms of the securities – it is a
name change only. The name “Performance Share Rights”
will be used both for securities already issued, and for any
future grants.
Alignment between performance and
remuneration outcomes
AUB Group’s remuneration strategy and framework is based
on a ‘pay for performance’ philosophy which supports
sustainable value for our shareholders.
Group Executives received on average 135% of their
STI target award (compared to the maximum target STI
opportunity of 150%), supported by Underlying NPAT
increasing by 13.35% to $74.02m from FY21. This strong
Underlying NPAT growth was driven by both underlying
organic growth and acquisition driven growth, primarily
in the Australian Broking division.
This Remuneration Report discloses the outcomes of both
the FY19 LTI grant (performance period ending 30 June
2021, with a 4th year retesting in August 2022) as well as
the FY20 LTI grant (performance period ending 30 June
2022). Based on sustained long-term performance over
these relevant performance periods, 96.50% (in total) of
LTI PSRs across these two grants will vest following testing
against the TSR and EPS performance measures. This was
driven by strong EPS growth, combined with high relative
TSR performance resulting in AUB Group significantly
outperforming its Peer Comparator Group.
Looking ahead – FY23 and beyond
The international expansion of AUB’s business reinforces
the need for AUB’s remuneration structures to evolve and
take into account global pay philosophies, while also being
regionally appropriate. The Board therefore continues to
monitor and review the structure of AUB’s incentive schemes
to ensure they are competitive across its respective markets
and effective in retaining and attracting the leadership
and talent it needs to drive business strategy and financial
performance in the interests of shareholders, while
continuing to reflect our ‘pay for performance’ philosophy.
We invite you to read the Remuneration Report and
welcome your feedback.
Paul Lahiff
Chair of Remuneration & People Committee
23
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
REMUNERATION REPORT OVERVIEW
This Remuneration Report for the financial year ended 30 June 2022 has been prepared in accordance with section 300A of the
Corporations Act and has been audited as required by section 308(3C) of the Corporations Act.
Terms used in this Remuneration Report are defined in the Glossary in Section 7 of this report.
List of KMPs – Reporting Period
Table 1 below outlines the KMP during the Reporting Period
Name
Position
Term as KMP
Non-Executive Directors
David Clarke
Ray Carless1
Peter Harmer2
Paul Lahiff
Robin Low
Cath Rogers
Executive KMP
Michael Emmett
Mark Shanahan
Chair; Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Full financial year
To 31 August 2021
From 22 July 2021
Full financial year
Full financial year
Full financial year
Chief Executive Officer and Managing Director
Full financial year
Chief Financial Officer
Full financial year
1
2
Ray Carless retired as a Director on 31 August 2021.
Peter Harmer was appointed as a Director on 22 July 2021.
Contents
This Remuneration Report is set out in the following sections:
Section 1 – Group Executive Remuneration Framework
Section 2 – How variable remuneration is structured
Section 3 – Remuneration Outcomes and Alignment to Performance
Section 4 – Remuneration Governance
Section 5 – Non-Executive Director Remuneration
Section 6 – Statutory Remuneration Tables and Data
Section 7 – Glossary of terms commonly used in this Remuneration Report
24
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 1 GROUP EXECUTIVE REMUNERATION FRAMEWORK
OUR REMUNERATION PRINCIPLES
The following principles guide AUB Group’s remuneration strategy and ‘pay for performance’
philosophy, which are designed to attract, retain and motivate highly skilled individuals.
Alignment to shareholder
interests & sustainable
shareholder returns
Encourage behaviours consistent
with values & deliver good
partner outcomes
Reflect the markets
we recruit from
and need to be
competitive in
Performance based –
link rewards to business
results and strategy
Robust governance
with focus on risk
management
SENIOR EXECUTIVE REMUNERATION STRUCTURE
FIXED
STI
LTI
FIXED REMUNERATION
Base salary, superannuation
& other benefits
SHORT-TERM INCENTIVE (STI)
Reward for strong individual and
group performance during the
performance period
LONG-TERM INCENTIVE (LTI)
Reward for sustainable longer-term
AUB Group performance
VALUE DETERMINED BY
– Experience, position and
responsibilities
– Competitive fixed
remuneration in the market
(market median)
Achievement of annual financial
and non-financial performance
hurdles at a:
– TSR – 40% weighting
– EPS – 60% weighting
– Group level
– Business unit level
– Individual level
AT RISK
HOW DOES IT LINK WITH STRATEGY & PERFORMANCE
– Provides competitive ongoing
remuneration in recognition
of day-to-day responsibilities
and accountabilities
– Supports annual delivery of
– Focuses on multi-year metrics
key strategic and operational
targets and to recognise and
reward individual performance
– Deferred STI supports
retention and more closely
aligns the interest of
executives and shareholders
that support sustained
shareholder value creation
– Delivered in equity to align
the interests of executives
and shareholders
– Supports retention
25
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 1 GROUP EXECUTIVE REMUNERATION FRAMEWORK (CONTINUED)
Group Executive Remuneration Mix
Total remuneration includes both a fixed component and an at-risk or performance-related component, comprising both
short-term and long-term incentives. The Board views the at-risk component as an essential driver of a high-performance
culture and one that contributes to achievement of sustainable shareholder returns.
The following illustration shows the remuneration mix for the Group Executives in FY22. It has been modelled on the average
of the Group Executive’s target opportunity (but excluding any contractual severance entitlements or the one-off grant of SARs
under the OP Plan).
The Board aims to achieve a balance between fixed and performance-related components of remuneration. The actual
remuneration mix for the Group Executives will vary depending on the level of performance achieved by the AUB Group,
as well as realised value of PSRs that vest and convert into shares.
CEO Remuneration Mix
Target Remuneration
Maximum Remuneration
Actual Remuneration
36%
32%
33%
28%
36%
34%
36%
32%
33%
0%
20%
40%
60%
80%
100%
Fixed
STI*
LTI
Group Executive (ex-CEO) Remuneration Mix
Target Remuneration
Maximum Remuneration
Actual Remuneration
0%
37%
33%
34%
20%
*
15% of STI is deferred is deferred for 1 year, a further 15% is deferred for 2 years.
26%
34%
32%
37%
33%
34%
40%
60%
80%
100%
Fixed
STI*
LTI
26
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
SECTION 1 GROUP EXECUTIVE REMUNERATION FRAMEWORK (CONTINUED)
Group Executive remuneration time horizon
The following diagram provides an illustrative indication of how remuneration is delivered to Group Executives.
Fixed Remuneration
STI cash component (70%)
STI deferred component (15%)
STI deferred component (15%)
LTI
Year 1
Year 2
Year 3
Year 4
Date granted
End of deferral/performance period
Date paid/eligible for vesting
Adjustments to ongoing CEO remuneration
There were no adjustments to ongoing CEO remuneration during the reporting period. A summary of CEO & Managing Director
remuneration arrangements is as follows:
Per annum ($)
Fixed remuneration
STI (at target)*
FY23 LTI opportunity**
Total target remuneration
Current
1,000,000
750,000
1,000,000
2,750,000
In addition to the annual grant of LTI, the CEO & Managing Director was granted SARs under the OP Plan in FY22. This plan is
intended to be one-off in nature with no additional grants to be made.
* Maximum Short-Term Incentive opportunity is capped at 150% of target STI award.
** Face value of LTI award. The FY23 LTI grant is subject to being approved by shareholders at the Annual General Meeting in November 2022.
27
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED
SHORT TERM INCENTIVE (STI) – HOW DOES IT WORK?
Description
Group Executives have the opportunity to earn an annual incentive award which is delivered in cash.
The STI Plan recognises and rewards short-term performance.
STI opportunity
The STI Plan is considered to be at-risk remuneration and is not a guaranteed part of Group
Executive remuneration.
A target opportunity is set for each Group Executive, which is earned if individual performance is
on target and the participant performs against a balanced scorecard set of KPIs, which includes
both financial and non-financial measures that have weighted allocations and are aligned to AUB
Group’s strategic priorities (the Balanced Scorecard). The Board determines the total STI pool to be
distributed.
Group Executives (including the CEO) have (on average) a target STI opportunity of 70% of fixed
remuneration. The maximum STI payout is capped at a maximum of 150% of a participant’s target
STI opportunity.
Performance
conditions
Group Executive performance is assessed against a Balanced Scorecard (for further details of the
CEO’s Balanced Scorecard, refer to Table 4).
Individual targets as set out in the Balanced Scorecard include consideration as to role-related
accountabilities and responsibilities in the context of business strategy and objectives.
A behavioral gateway is incorporated into the performance review process and operates to reduce
an incentive payment should there be conduct that is inconsistent with AUB Group’s values,
irrespective of performance. The Group CEO’s behavior is assessed by the Board. Group Executives’
behaviors are assessed by the CEO, who recommends eligibility for Group Executive STI to
the Board.
Underlying NPAT is the key financial performance measure in the Balanced Scorecard, is used by
management and the Board to assess operational performance and is a strong indication of the
underlying health of the business.
Why were these
performance
conditions chosen?
The Board considers that a Balanced Scorecard which contains weighted allocations to both
financial and non-financial performance conditions is appropriate as they are aligned with AUB
Group’s objectives of delivering sustainable growth and returns to shareholders.
Group Executives have a clear line of sight to KPIs and are able to directly affect outcomes through
their own actions. Group Executives are also assessed on behavior metrics (the ‘how’) which
contribute to that individual’s overall performance rating. This operates to reduce an incentive
payment should there be conduct that is inconsistent with AUB Group’s values, irrespective of
performance.
For all individuals, the Board may apply discretion in determining the STI outcomes to ensure they
appropriately reflect performance.
How STI outcome
is then determined
On an annual basis, a rating is determined for each Group Executive based on an evaluation of their
performance against the balanced scorecard. This individual performance rating metric is then
applied to the individual’s STI target award.
Individual STI Payment = STI Target Incentive Award x Scorecard Performance Rating
STI outcomes are therefore scaled up or down to reflect performance against the agreed KPIs
in their Balanced Scorecard. The KPIs are set and reviewed annually.
Prior to an award, the scorecard outcome is assessed holistically against individual and Group
performance to determine if any discretion to vary from scorecard results should apply. The level
of incentive outcome reflects the performance of AUB Group and the individual, thereby ensuring
it is aligned with shareholders’ interests.
28
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED)
SHORT TERM INCENTIVE (STI) – HOW DOES IT WORK?
Deferral terms
The following STI deferral arrangements have been introduced for Group Executives: 70% of STI
outcome will be paid in cash and the remaining 30% is deferred in the form of an equity award of
PSRs, with these PSRs vesting as follows:
– half of the deferred component (15% of the STI outcome) after 12 months; and
– half of the deferred component (15% of the STI outcome) after 24 months.
No additional performance conditions apply to the vesting of PSRs, with the exception of the
continued employment by the relevant Group Executive as described below.
The number of PSRs is calculated using the VWAP over the 60 trading days immediately prior
to and including the last day of the performance period.
An amount (based upon dividends paid by AUB during the deferral period) accrues on the PSRs
and is paid in cash at the end of the deferral period if the PSRs vest.
The Board has broad ‘clawback’ powers to lapse unvested PSRs in a number of circumstances,
including in the event of fraud, dishonesty, gross misconduct, breach of duties or obligations, a
material misstatement, error or omission in the financial report, to prevent a participant being
entitled to an inappropriate benefit or if there is a change of control event.
The clawback policy also permits clawback of any shares allocated on exercise of the PSRs, as well
as cash payments received on vesting and exercise of PSRs.
Eligibility for
dividends
Forfeiture and
clawback
Who assesses
performance?
The Board assesses performance of the CEO and Managing Director against the Balanced
Scorecard (as described in Table 4) with the benefit of recommendations from the Remuneration
and People Committee.
The CEO and Managing Director assesses the other Group Executives’ performance based on the
Group Balanced Scorecard outcomes and achievement against individual goals. The CEO and
Managing Director then recommends an STI award for consideration by the Remuneration and
People Committee, which then recommends an STI award for approval by the Board.
The Board believes the abovementioned methods in assessing performance are an appropriate way
to assess the performance of AUB Group and the Group Executives’ individual contribution, and to
determine their remuneration outcomes.
In addition, the aggregate of annual STI payments available for all employees is subject to review
by the Remuneration and People Committee and approval of the Board.
Cessation of
employment
A Group Executive will only remain eligible to receive an STI outcome if that person ceases
employment prior to the STI entitlement date and is a ‘good leaver’ (e.g., ceases employment by
reason of retirement or bona fide redundancy), unless the Board determines otherwise.
If a Group Executive has ceased employment and is a ‘good leaver’, then unvested PSRs (deferred
STI) will remain on foot and vest in the ordinary course, unless the Board determines otherwise.
If a Group Executive has ceased employment and is not a ‘good leaver’, then unvested PSRs
will automatically lapse on or around the date of cessation of employment, unless the Board
determines otherwise.
Restrictions on
transfer or hedging
PSRs granted under the plan are not transferable and participants are prohibited from entering into
hedging arrangements in respect of unvested PSRs.
29
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED)
FY22 LONG TERM INCENTIVE – HOW DOES IT WORK?
Description
Under the FY22 LTI Plan, annual grants of PSRs are made to eligible participants to align
remuneration outcomes with the creation of sustainable shareholder value over the long term.
Group Executives are eligible to participate, as these employees on an individual basis have the
ability to impact AUB Group’s longer term financial performance.
Non-Executive Directors are not eligible to participate in the LTI Plan.
LTI opportunity
The number of PSRs granted to a Group Executive is calculated by dividing the dollar value of the
Group Executive’s LTI Opportunity by the VWAP over the 60 trading days prior to the start of the
relevant performance period.
In determining the ‘LTI Opportunity’, the Board will take into account the nature of the position, the
context of the current market, the function and purpose of the long-term component and other
relevant information.
Vesting conditions
PSRs will only vest to the extent that the vesting conditions and ongoing employment conditions
(set out below later in this table) are satisfied over the relevant three year performance period.
PSRs are tested against two vesting conditions over a three year performance period:
– 60% of PSRs are tested against an EPS hurdle; and
– 40% of PSRs are tested against a Relative TSR hurdle.
Vesting outcomes for FY18 and FY19 LTIP PSRs and subsequent PSRs exercised during FY22 are
detailed in Note 18 of the Financial Report.
The EPS vesting condition is measured by comparing the Average Annual Growth Rate (AAGR) of
the Underlying EPS from the financial year immediately preceding the start of the performance
period to the Underlying EPS for the final year of the performance period. AAGR is therefore
measured using the most recent financial year-end prior to the grant as the base year, and the final
financial year in the three-year performance period as the end year.
The percentage of EPS PSRs granted in FY22 that may vest is determined based on the following
vesting schedule (see hurdles and outcomes of FY19 and FY20 grants in Section 3 of this report:
AAGR of Underlying EPS
Less than 5%
5%
PSRs subject to EPS vesting condition
that vests (%)
0%
50%
Greater than 5% to less than 10%
Straight line vesting between 50% and 100%
10% or more
100%
EPS – 60%
weighting
30
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED)
FY22 LONG TERM INCENTIVE – HOW DOES IT WORK?
Relative TSR –
40% weighting
The Board approves a Peer Comparator Group and has the discretion to periodically review and
adjust the composition of the Peer Comparator Group, including to take into account acquisitions,
mergers, or other relevant corporate actions.
For purposes of calculating the growth in AUB Group’s share price over the performance period, the
following opening and closing share prices will be used:
– for the opening share price, the VWAP during the 60 trading days ending on the first day of the
performance period, and
– for the closing share price, the VWAP during the 60 trading days ending on the last day of the
performance period.
Relative TSR performance is assessed over a three-year period which commences at the start of
the financial year during which the PSRs are granted.
For any PSRs to vest pursuant to the Relative TSR vesting condition, AUB Group’s compound TSR
must be equal to or greater than the median ranking of constituents of the Peer Comparator Group.
The percentage of TSR PSRs that may vest is determined based on the following vesting schedule:
AUB Group’s TSR ranking relative to Peer
Comparator Group
PSRs subject to Relative TSR vesting
condition that vests (%)
Below the 50th percentile
50th percentile
0%
50%
Between the 50th and 75th percentile
Straight line vesting between 50% and 100%
At or above the 75th percentile
100%
The Board is confident that it has the right arrangements in place to drive performance and
retention in line with shareholders’ interests.
EPS
– Is a relevant indicator of increases in shareholder value
– Is a target that provides a suitable line of sight to encourage executive performance
Relative TSR
– Ensures alignment between comparative shareholder return and reward for the executive
– Provides a relative test that reflects AUB Group’s performance against the market and an
objective test reflective of management’s performance in growing earnings per share
– Is widely understood and accepted by key stakeholders
Why were these
performance
conditions chosen?
31
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED)
FY22 LONG TERM INCENTIVE – HOW DOES IT WORK?
Who assesses
performance
and when?
EPS results are calculated by AUB Group and an external remuneration advisor tests the TSR
results as soon as practicable after the end of the relevant three year performance period. The
calculations are considered by the Board to determine vesting outcomes.
The vesting conditions are therefore tested at the end of the performance period and the Board
determines the relevant number (if any) of PSRs that will vest and convert into shares.
Calculation of the vesting conditions and achievement against the vesting conditions is
determined by the Board in its absolute discretion, having regard to any matters that it considers
relevant (including any adjustments for unusual or non-recurring items that the Board considers
appropriate).
From FY20, the Board shifted to a policy of no retesting of vesting conditions at the end of the three
year performance period. Any PSRs that do not vest following testing, lapse.
PSRs vest following testing by the Board at the end of the relevant three year performance period.
Prior to vesting, the outcome is assessed holistically against individual and Group performance to
determine if any discretion to vary from formulaic results should apply. If PSRs vest, the Board has
discretion to issue new shares, acquire shares on-market or to cash settle to satisfy the PSRs that
will vest.
Participants receive one share for each PSR that vests or, if the Board determines, an equivalent
cash payment.
Shares allocated on vesting of the PSRs are subject to the terms of AUB Group’s Share Trading
Policy and carry full dividend and voting rights upon allocation.
Holders of PSRs are not entitled to dividends or voting rights until the PSRs have vested and
converted into shares.
If the CEO and Managing Director ceases employment before his PSRs vest, then the following
treatment applies:
– if employment is terminated in accordance with Mr Emmett’s employment agreement, without
notice, for serious misconduct or by reason of illness, injury or incapacity of Mr Emmett, all
unvested PSRs will automatically lapse; and
– if employment is terminated with notice given by the Company or Mr Emmett, all unvested PSRs
remain on foot and will be tested in the ordinary course.
If a participant ceases employment before his/her PSRs vest, then the following treatment applies,
unless the Board determines otherwise:
– if employment is terminated for cause, as a result of the participant being unable to perform
duties due to ill health, injury or incapacity or if the participant resigns, then all unvested PSRs
automatically lapse;
– if employment ceases in any other circumstances, then a pro rata portion of the participant’s
PSRs (based on the portion of the performance period that has elapsed up to the date of
cessation) remain on foot and are tested in the ordinary course in accordance with the vesting
conditions.
If a participant ceases employment and holds vested PSRs which have not been exercised, then the
following treatment applies, unless the Board determines otherwise:
– if employment is terminated for cause, then all vested PSRs automatically lapse; or
– if employment ceases in any other circumstances, then all vested PSRs must be exercised
within three months of cessation of employment. After this time, all vested PSRs are
automatically exercised at a time determined by the Board.
Vesting
Are PSRs eligible
for dividends?
Cessation of
employment –
CEO and Managing
Director
Cessation of
employment –
Group Executives
other than the CEO
32
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED)
FY22 LONG TERM INCENTIVE – HOW DOES IT WORK?
Forfeiture and
clawback
The Board has broad ‘clawback’ powers to lapse unvested PSRs in a number of circumstances,
including in the event of fraud, dishonesty, gross misconduct, breach of duties or obligations,
a material misstatement, error or omission in the financial report, to prevent a participant being
entitled to an inappropriate benefit or if there is a change of control event.
The clawback policy also permits clawback of any shares allocated on exercise of the PSRs,
as well as cash payments received on vesting and exercise of PSRs.
What happens
in the event of a
change of control?
There is no automatic vesting of PSRs on a change of control. The Board will (in its discretion)
determine the appropriate treatment regarding PSRs in the event of a change of control.
Where the Board does not exercise this discretion, there will be a pro-rata vesting of PSRs
based on the proportion of the performance period that has passed at the time of the change
of control event.
Restrictions on
transfer or hedging
PSRs granted under the LTI Plan are not transferable and participants are prohibited from
entering into hedging arrangements in respect of PSRs.
OUTPERFORMANCE PLAN – HOW DOES IT WORK?
As disclosed in the 2021 Notice of Annual General Meeting and following strong support from shareholders (99.5% of votes
were cast in favour at the 2021 AGM), an Outperformance Plan was introduced for certain Group Executives designed to
enable meaningful participation in longer term outperformance of returns to shareholders, through a one-off grant of share
appreciation rights exceeding regular LTI plan expectations, needing successful execution of long-term growth initiatives in a
highly competitive landscape.
The key objectives of the Outperformance Incentive Plan are as follows: (i) complement the current LTI Plan by providing a
potential reward for transforming the business and longer-term outperformance of market expectations, (ii) provide a longer-
term focus in order to see through strategy and action that may not have a sufficiently material impact on value in a three-year
performance cycle, and (iii) ensure that executives retain share ownership after vesting.
The key terms of SARs under the Outperformance Incentive Plan are outlined below.
Description
Key design features of the Outperformance Incentive Plan are as follows:
– Awards are in addition to current annual remuneration arrangements of fixed remuneration,
STI award and LTI award.
– Involve a one-off grant of SARs to select executives, including the CEO.
– SARs entitle the executive to receive Shares equal in value to the difference between the 60-day
VWAP at the time of grant and the 60-day VWAP at the end of the five-year performance period.
– Five-year performance period, but with a further post exercise holding lock of two years. The
five-year performance period is intentionally longer than the LTI Plan period and the two-year
holding lock is designed to act as an additional mechanism with executives having additional
AUB Group equity ownership.
– SARs will be tested against a Compound Annual Growth Rate (CAGR) of the EPS of the
Company during the five-year performance period.
– Vesting will require stretch performance exceeding regular LTI plan maximum, together with
5 years of ongoing employment from 1 July 2021.
– The terms of the Outperformance Incentive Plan are governed by the terms of the Company’s
standard Equity Incentive Plan and relevant offer documentation.
1,016,776 SARs (in total for all awards).
On a full vesting and conversion, and subject to certain variables and assumptions, the estimated
dilution impact would be less than 1% of Shares (currently on issue) if Shares are issued in order to
satisfy all entitlements at the end of the 5-year performance period.
SARs Pool
Dilution impact
of SARs Pool
33
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED)
FY22 LONG TERM INCENTIVE – HOW DOES IT WORK?
Performance Period Initial awards of SARs will be tested against the vesting conditions over a five-year period, from
1 July 2021 to 30 June 2026.
Vesting conditions
SARs will only vest to the extent that the vesting conditions and ongoing employment conditions
(set out below later in this table) are satisfied over the relevant five year performance period,
commencing on 1 July 2021.
EPS Vesting
Condition
SARs are tested against a CAGR of the EPS of the Company during the Performance Period.
If SARs vest, they will be automatically converted into Shares (at no cost to the executive) on or
around 31 August 2026.
The EPS hurdle is based on the CAGR of the Underlying EPS of the Company.
The percentage of SARs subject to the EPS hurdle that will be eligible to vest, if any, will be
determined by reference to the CAGR (expressed as a percentage) of Underlying EPS from 1 July
2021 (being 87.93 cps) to the Underlying EPS to 30 June 2026, in accordance with the following
table.
CAGR of Underlying EPS
Vesting level of SARS
14% or more
100%
Greater than 12% but less than 14%
Pro-rata straight line vesting between 25% and 100%
12%
Less than 12%
25%
0%
Holding Lock
There will be a holding lock for a period of two years from the date the SARs vest and convert into
Shares, during which period the executive will be restricted from dealing with any of the Shares
allocated on vesting.
Who assesses
performance?
The vesting conditions will be tested at the end of the performance period and the Board
determines the relevant number (if any) of SARs that will vest.
Calculation of the vesting conditions and achievement against the vesting conditions will be
determined by the Board in its absolute discretion, having regard to any matters that it considers
relevant (including any adjustments for unusual or non-recurring items that the Board considers
appropriate).
There is no retesting for SARs that do not vest. Any SARs that do not vest following testing will
lapse unless the Board determines otherwise.
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DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED)
FY22 LONG TERM INCENTIVE – HOW DOES IT WORK?
Vesting and
automatic
conversion
Prior to vesting, the outcome is assessed holistically against individual and Group performance
to determine if any discretion to vary from formulaic results should apply. SARs will vest and
automatically convert into Shares if the vesting conditions have been satisfied, expected to be
on or around 31 August 2026.
There is no conversion price or exercise price payable for the conversion of vested SARs.
If the vesting conditions are satisfied, the SARs will convert into that number of Shares based
on the following formula:
Number of vested SARs x
Conversion Price-Initial VWAP
Conversion Price
Where:
– Number of vested SARs means the number of SARs that vested after the EPS calculation has
been undertaken at the end of the 5 year performance period.
– Initial VWAP means $20.33, being the VWAP of the Shares traded on the ASX over the 60
trading days prior to 1 July 2021 (the first day of the Performance Period).
– Conversion Price means the VWAP of the Shares traded on the ASX over the 60 trading days
prior to 30 June 2026.
The Board, at its discretion, may determine to make an equivalent value cash payment in lieu of an
allocation of Shares. The vesting date, conversion price and the portion of SARs to vest and convert
may be changed at the Board’s discretion.
Shares allocated on the vesting and conversion of SARs are subject to the terms of AUB Group’s
Share Trading Policy and carry full dividend and voting rights upon allocation.
SARs do not carry any dividend or voting rights. Shares allocated on vesting and conversion
of SARs carry the same dividend and voting rights as other Shares.
If the executive ceases employment before SARs vest and convert, then the following treatment
applies, unless the Board determines otherwise:
– if the executive resigns, or if employment is terminated in accordance with the executive’s
employment agreement, without notice, for serious misconduct or by reason of illness, injury
or incapacity, then all unvested SARs will automatically lapse; or
– if the executive ceases employment in any other circumstances, a pro rata portion of SARs
(based on the portion of the performance period that has elapsed up to the date of cessation
of employment) will remain on foot and will be tested in the ordinary course in accordance with
the vesting conditions, as though the executive had not ceased employment.
No eligibility for
dividends
Cessation of
employment
35
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
SECTION 2 HOW VARIABLE REMUNERATION IS STRUCTURED (CONTINUED)
FY22 LONG TERM INCENTIVE – HOW DOES IT WORK?
Forfeiture and
clawback
The Board has broad ‘clawback’ powers to lapse SARs in a number of circumstances, including
in the event of fraud, dishonesty, gross misconduct, breach of duties or obligations, a material
misstatement, error or omission in the financial report, or to prevent an executive being entitled to
an inappropriate benefit.
The clawback policy that applies to SARs permits clawback of any Shares allocated on exercise, as
well as cash payments received on vesting and exercise of SARs.
Change of control
event
There is no automatic vesting of SARs on a change of control. The Board will (in its discretion)
determine the appropriate treatment regarding SARs in the event of a change of control, including
determining that all or a specified number of SARs vest or lapse.
Reorganisation
If any reorganisation (including consolidation, subdivision, reduction or return) of the issued capital
of the Company is effected, SARs will be adjusted in the manner required by the Listing Rules.
Restrictions on
dealing/hedging
Participation in new
issues and bonus
issues
Ranking of shares
issued
SARs are not transferable and executives are prohibited from entering into hedging arrangements in
respect of SARs.
SARs carry no entitlement to participate in new issues of shares by the Company prior to the
vesting and conversion of the SARs. In the event of a bonus issue, SARs will be adjusted in the
manner required by the Listing Rules.
Any ordinary shares in the Company issued upon exercise of the SARs will rank equally with the
existing ordinary shares in the Company on issue, except for entitlements which had a record date
before the date of issue of those shares.
SECTION 3 REMUNERATION OUTCOMES AND ALIGNMENT TO PERFORMANCE
Alignment between remuneration and group performance
Numerous elements of AUB Group’s remuneration strategy and framework are directly linked to group performance.
The table below sets out information about movements in shareholder wealth for the financial years ended 30 June 2018 to
30 June 2022 highlighting alignment between AUB Group’s remuneration strategy and framework and group performance over
the past 5 years.
Further details about AUB Group’s performance over this period can be found in the Operating and Financial Review section
contained in this Directors’ Report.
36
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 3 REMUNERATION OUTCOMES AND ALIGNMENT TO PERFORMANCE (CONTINUED)
Table 2: Summary of movement in shareholder wealth
Underlying NPAT ($m)*
Underlying EPS (cents)*
TSR (%)*
Share price ($)
Change in share price ($)
Dividends paid and proposed (cents)
2022
74.02
96.70
(18.58)
17.68
(4.71)
55.0
2021
65.30
86.12
60.99
22.39
7.69
55.0
2020
53.15
70.61
5.20
14.70
4.26
50.0
2019
46.71
65.74
(10.50)
10.44
(3.14)
46.0
2018
43.52
65.82
14.90
13.58
0.59
45.5
The underlying earnings per share (EPS) in previous periods have been adjusted by the theoretical ex-rights price factor (TERP)
resulting from the number of new shares issued following a non-renounceable entitlement offer. The TERP adjustment factor
that has been applied to the EPS values previously reported is 0.9794.
Previously reported
TERP adjusted
87.93
86.12
72.10
70.61
67.12
65.74
67.20
65.82
Executive remuneration is directly aligned with group performance through STI measures of profitability, LTI measures of EPS
growth, and LTI measures of TSR performance relative to constituents of the S&P/ASX Small Industrials Index.
$31.00
$26.00
$21.00
$16.00
$11.00
$6.00
Jun-17
AUB Group Limited (AUB) v S&P/ASX Small Ordinaries Industrials Index (AXSID)
+7.3%
+3.9%
Jun-18
Jun-19
Jun-20
Jun-21
Jun-22
AUB ($)
Comparable Group - 50 th percentile
Comparable Group - 75 th percentile
Remuneration outcomes
The remainder of this section of the Remuneration Report discloses the outcome of awards made under:
– the FY22 STI award (performance period 1 July 2021 – 30 June 2022)
– the FY20 LTI grant (performance period 1 July 2019 – 30 June 2022) – no 4th year retest
– the FY19 LTI grant (performance period 1 July 2018 – 30 June 2022) – 4th year retest
*
For LTI purposes, prior periods have not been restated as a result of TERP adjustments related to EPS outcomes.
37
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 3 REMUNERATION OUTCOMES AND ALIGNMENT TO PERFORMANCE (CONTINUED)
FY22 STI Outcomes
FY22 continued a run of strong performance for the Group and therefore the Committee considered STI for FY22 and has
provided for a pool in the sum of $4.74m for all AUB Group Limited employees (including deferred components of STI granted
in prior periods).
Table 3: Group STI pool outcome
($`m)
Cash bonuses
2022
4.74
2021
4.01
2020
3.57
2019
0.88
2018
218
Table 4: FY22 CEO Balanced Scorecard
Performance Category and
Weighting
Measures
FY22 Balanced Scorecard
Financial
(73.3%)
– % Growth in Group UNPAT
– Network growth, including value of M&A transactions (excl. Tysers)
– % Growth in ExpressCover GWP
– % Profit Growth in Agencies
– $GWP to grow Scale
– $GWP placed by AUB members
– $GWP Placed on Sentinel
Network Partners
and Customers
(16.7%)
– Board Assessment of Network, Customer and Team progress
– Number of network optimisations
– Continued uplift in effectiveness of risk management processes and reporting
Other
(10%)
– New or renewed Premium Funding Arrangements
– Scaling of IT platforms, including Lola development and Pilot Launch (key
STI Scorecard Outcome
milestone)
Achieved
(% of max)
95.45%
100%
35.56%
90.22%
This resulted in an STI award of $1,015,000 of which 70% will be paid in cash in with the balance allocated to PSRs and will vest
over 12 and 24 months. See Section 2 of this report for further details.
LTI Outcomes
2019 LTI grant outcomes (4th year retest)
1,199 EPS PSRs will vest under the 2019 LTI covering the 4 year period 1 July 2018 to 30 June 2022:
– In the previous year (FY21) 100% of the Relative TSR component vested as AUB Group’s TSR exceeded its Peer Comparator
Group returns by more than 125.98% over the performance period. No further testing was therefore required.
– In the previous period, 14,876 or 75.33% of EPS PSRs vested with the balance of 4,873 to be retested. Based on a 4 year EPS
CAGR of 8.88%, 81.40% of the EPS will vest, resulting in a further 1,199 EPS PSRs vesting.
– The balance of 3,674 unvested 2019 EPS PSRs will lapse.
38
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 3 REMUNERATION OUTCOMES AND ALIGNMENT TO PERFORMANCE (CONTINUED)
Table 5 below discloses the 2019 LTI grant EPS performance hurdle and 4th year retest outcome.
Vesting hurdles for 2019 EPS PSRs
1 July 2018 to
30 June 2022
Minimum entry
target for vesting
Straight line
for vesting
Straight line for
vesting
Actual 3-year CAGR
achieved (%)
Actual 4-year CAGR
achieved (%)
4% CAGR
4%-7% CAGR
7% -10% CAGR
8.52%
8.88%
EPS vesting
percentage
(of the 60%)
25%
25%-50%
50% -100%
75.33%
Total EPS PSRs vesting in FY23 under the 2019 LTI Plan (4th year retest)
81.40%
1,199
2020 LTI grant outcomes
100% of the total 2020 LTI grant will vest:
– 100% of the Relative TSR component will vest given that AUB Group’s TSR was 83.55%, which resulted in AUB’s percentile
rank at 93.90% over the performance period.
– 100% of the EPS component will vest given that AUB Group’s actual EPS AAGR across the performance period was 13.35%.
– 101,219 PSRs will vest.
Table 6 below discloses the outcomes of the 2020 LTI grant. All unvested PSRs after testing will lapse
Relative TSR (40%)
1 July 2019 to 30 June 2022
TSR of AUB Group Limited
Percentile Rank
Number of TSR PSRs vesting percentage under the 2020 LTI plan
100% vesting of TSR PSRs where AUB Group’s TSR ranking relative to Peer Comparator Group
exceeds 75% percentile.
Actual outcome
83.55%
93.90%
100%
1 July 2019 to
30 June 2022
Minimum entry
target for vesting
Straight line
for vesting
Maximum threshold
target for vesting
Actual 3-year AAGR
achieved (%)
Actual vesting
outcome
5% AAGR
5%-7% AAGR
7% AAGR
13.35%
N/A
EPS (60%)
EPS vesting
percentage
(of the 60%)
50%
50%-100%
100%
N/A
Total percentage of EPS PSRs vesting under the 2020 LTI Plan
100.00%
100%
39
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 3 REMUNERATION OUTCOMES AND ALIGNMENT TO PERFORMANCE (CONTINUED)
Results of the 3 year testing of the 200,000 PSRs sign on grant.
A sign-on bonus of 200,000 PSRs was granted to the CEO and Managing Director that vest over five years. One third of the
PSRs will be tested over a three year performance period from 1 July 2019 to 30 June 2022. To the extent that any sign-on PSRs
satisfy the performance hurdles at this point, they will remain on foot and will vest following the end of the five year performance
period ending on 30 June 2024, subject to the CEO’s continued employment; and the remaining two thirds of the PSRs, and any
PSRs that did not satisfy the vesting conditions at 30 June 2022, will be tested over the full five year performance period. Any
PSRs that do not vest at the end of the five year performance period will lapse.
The TSR and EPS hurdles for the sign-on PSR grant were the same as the hurdles for the FY20 grants. One third (66,667) sign-
on PSRs were tested after the completion of the FY22 year.
Based on the TSR and EPS outcomes in table 6 above, all 66,667 PSRs (both TSR PSRs and EPS PSRs) satisfied the
performance hurdles and will therefore remain on foot and vest at the end of the 5 year period ended 30 June 2024, subject to
the CEO’s continued employment.
The remaining balance of 133,333 PSRs (TSR and EPS) will be tested after the completion of the 5 year period ended 30 June
2024. Any unvested PSRs at that time will lapse.
SECTION 4 REMUNERATION GOVERNANCE
Overview
The following diagram illustrates AUB Group’s remuneration governance framework.
BOARD
The Board reviews, amends and approves the recommendations from the Board’s Committees around governance,
strategy, performance, and the remuneration arrangements for all Group Executives and Non-Executive Directors.
REMUNERATION & PEOPLE COMMITTEE
Oversees our remuneration philosophy
and framework.
The Committee is responsible for reviewing
compensation arrangements for the Directors, CEO
and Group Executives, including the Company’s
KMP and making recommendations in that regard
for determination by the Board. The Committee
comprises all Non-Executive Directors of the Board.
EXTERNAL ADVISORS
The Board and the Committee seek advice from
independent experts and advisors from time to time
on various matters, including remuneration. The
Committee appoints remuneration consultants and
external advisors and ensures independence.
CEO & MANAGING DIRECTOR (CEO) AND MANAGEMENT
The CEO makes recommendations to the Committee regarding Executives’ remuneration. These recommendations
take into account performance, culture and values. Together with management, the CEO also provides information and
recommendations for deliberation and implements arrangements once they have been approved.
40
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
SECTION 4 REMUNERATION GOVERNANCE (CONTINUED)
Use of remuneration advisors
In making recommendations to the Board, the Remuneration & People Committee seeks advice from external advisors from
time to time to assist in its deliberations.
Remuneration advisors are engaged by the Chair of the Remuneration & People Committee with an agreed set of protocols that
determine the way in which remuneration recommendations would be developed and provided to the Board. This process is
intended to ensure there can be no undue influence by Executive KMP to whom any recommendations may relate.
No remuneration recommendations, as defined by the Corporations Act, were made by the remuneration advisors during the
Reporting Period.
Executive Service Agreements
The remuneration and other terms of employment for the Executive KMP are formalised in employment agreements, which have
no specified term. Each of these agreements provide for performance-related bonuses under the STI Plan, and participation,
where eligible, in the LTI Plan. Other major provisions of the service agreements of the Executive KMP are as follows:
Table 7: Executive Service Agreement terms
Name
CEO and Managing Director
Michael Emmett
Other Executive KMP
Notice to be given
by executive
Notice to be given
by AUB Group*
Termination
payment
Post-employment
restraint
12 months
12 months
12 months fixed
remuneration
12 months
Mark Shanahan
6 months
6 months
6 months fixed
remuneration
12 months
*
Payments may be made in lieu of notice period.
Disclosures under Listing Rule 4.10.22
No shares were acquired on-market during the Reporting Period to satisfy AUB Group’s obligations under various equity and
related plans.
Share Trading Policy
AUB Group’s share trading policy prohibits Group Executives from entering into margin lending or similar arrangements in
relation to AUB Group’s securities, including transferring securities into an existing margin loan account and/or selling securities
to satisfy a call pursuant to a margin loan.
Breaches of AUB Group’s share trading policy are regarded very seriously and may lead to disciplinary action being taken
(including termination of employment).
41
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 5 NON-EXECUTIVE DIRECTOR REMUNERATION
Details of the Non-Executive Directors of AUB Group during the Reporting Period are provided in the Directors’ Report.
Components and details of Non-Executive Director remuneration
Non-Executive Directors receive a fixed fee (inclusive of superannuation) for services to the Board and each Board Committee
on which the Director serves.
There was an increase to Non-Executive Director remuneration from 1 July 2021. The current fees are shown in Table 8.
A further review will be undertaken in 2023.
The Board has been disciplined in reviewing Non-Executive Director remuneration. The previous increase to Non-Executive
Director remuneration was in 2018.
Non-Executive Director remuneration is reviewed from time to time by the Committee to ensure that fee levels:
– reflect workloads, expectations and responsibility in connection with the regulated landscape in which AUB Group operates;
and
– are competitive, providing the Board with the ability to attract and retain high calibre directors, which is important in the
context of the Board’s ongoing orderly renewal and succession planning process.
If a Non-Executive Director serves on a subsidiary board a further fee is payable.
Non-Executive Directors do not receive retirement benefits other than amounts paid by way of the superannuation guarantee,
nor do they participate in any incentive programs, but they may be reimbursed for expenses reasonably incurred in the course of
carrying out their duties.
AUB Group does not make sign-on payments to new Non-Executive Directors and does not provide for retirement allowances for
Non-Executive Directors.
Aggregate fee pool approved by shareholders
Non-Executive Directors’ fees are set by the Board within the maximum aggregate amount of $1,100,000 per annum approved
by shareholders at the Annual General Meeting in November 2021.
A proposal to increase this maximum amount by $400,000 to $1,500,000 to, among other things, support Board succession,
will be presented for shareholder approval at the upcoming Annual General Meeting in November 2022.
Table 8: Non-Executive Director fees payable during the Reporting Period
1 July 2021 to 30 June 2022
Board fees per annum
Chair
Non-Executive Director
Committee Chair (Board Audit & Risk)
Committee Chair (Remuneration & People)
Committee Chair (Nomination)
Subsidiary Boards
Committee member
$ Amount (incl of statutory superannuation)
240,000
120,000
Additional 25,000
Additional 15,000
N/A
Additional 10,000
N/A
42
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 6 STATUTORY REMUNERATION TABLES AND DATA
Table 9: LTI Outcomes
The LTI grants for FY22 and movements in all unvested PSRs previously granted to Senior Employees are summarised in the
LTIP tables below:
GROUP EXECUTIVES (including KMPs)
LTIP Financial Year
(tranche)
Opening
Granted
Lapsed
Exercised
Remaining
Earliest
vesting date
Lapse date
Fair
value per
option
at grant
date ($)
Fair value
to be
expensed in
the future ($)
(6,077)
(27,509)
– 23-Nov-20
23-Nov-24
8.99
(28,041)
4,873
31-Oct-21
31-Oct-25
10.72
–
–
2018 (13th)
2019 (14th)
2020 (15th
-5 year PSRs)
2020 (15th
-3 year PSRs)
2021 (16th)
2022 (17th)
33,586
32,914
200,000
101,219
–
–
–
–
125,688
38,748
– 144,879
–
–
–
–
–
–
–
–
–
200,000
31-Aug-24
31-Aug-28
8.91
670,208
101,219 31-Aug-22
31-Aug-26
9.37
–
164,436 31-Aug-23
31-Aug-27
11.27
794,779
144,879
31-Aug-24
31-Aug-28
18.02
1,305,504
Total
493,407 183,627
(6,077)
(55,550)
615,407
–
–
–
2,770,491
Total Share
Appreciation Rights
– 1,016,776
–
–
1,016,776
31-Aug-26
31-Aug-26
3.79
2,312,148
Shares issued as a result of the exercise of PSRs
During FY22, 27,509 PSRs were exercised to acquire shares in AUB Group Limited under the 2018 LTIP and 28,041 PSRs were
exercised under the 2019 LTIP. The hurdles and vesting conditions for 2018 and 2019 LTIP were detailed in the FY21 financial
statements.
All PSRs are granted over shares in the ultimate controlling entity AUB Group Limited.
Unissued shares
As at the date of this report, there were 615,407 unissued ordinary shares under PSRs as part of the LTIP that have not vested.
Refer to Note 18 of the Financial Report for further details of the PSRs outstanding.
Holders of PSRs do not have any right, by virtue of the option to participate in any share issue of the Company or any related
body corporate.
43
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED)
Table 10: Shares held in AUB Group Limited at 30 June 2022
Directors
D. C. Clarke (Chair)
M. P. C. Emmett (CEO)
R. J. Carless1
P. G. Harmer2
P. A. Lahiff
R. J. Low
C. L. Rogers
Executives
M. J. Shanahan
Total
Balance at
30-Jun-21
Shares acquired
during the year
Director retired
during the year
Balance at
30-Jun-22
23,087
–
25,395
–
10,334
20,536
6,000
4,068
89,420
6,500
5,405
–
2,497
1,988
2,660
1,154
10,233
30,437
–
–
25,395
–
–
–
–
–
25,395
29,587
5,405
–
2,497
12,322
23,196
7,154
14,301
94,462
1. Ray Carless retired as a Director on 31 August 2021.
2. Peter Harmer was appointed as a Director on 22 July 2021.
Table 11: PSRs/SARs holdings of KMP at 30 June 2022
Balance at
30-Jun-21
Granted as
remuneration
PSRs
exercised
PSRs
lapsed/
forfeited
Balance at
30-Jun-22
Vested/
exercisable
Not vested/
not
exercisable
Total PSRs /SARs at year end
Directors
M. P. C. Emmett (CEO)
PSRs
SARs
Executives
M. J. Shanahan (CFO)
PSRs
SARs
354,824
53,277
–
508,388
–
–
40,237
29,302
10,233
–
254,194
–
–
–
–
–
408,101
508,388
59,306
254,194
–
–
–
–
408,101
508,388
59,306
254,194
The outstanding PSRs have an exercise price of $NIL.
During the current year a total of 183,627 PSRs were granted (82,579 to KMP) and 1,016,776 SARs were granted
(762,582 to KMP).
Loans or other transactions with KMP
No KMP or their related parties held any loans from the AUB Group during or at the end of the year ended 30 June 2022 or prior
year. Apart from the details disclosed in this Report, there were no transactions between KMP (or their related parties) and AUB
Group or any of its subsidiaries during the Reporting Period.
44
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED)
Compensation of Directors and other Key Management Personnel
Table 12: Statutory Reporting Basis – period ending 30 June 2022
The table below outlines Directors and other KMP remuneration as calculated in accordance with accounting standards and the
Corporations Act requirements. The amounts shown are equal to the amount expensed in the Company’s Financial Report for
the particular year.
Year
Salary &
fees
Cash
short term
incentive*
Non
monetary
benefits
Superannuation
Post
employment
Share-
based
payment
Equity
PSRs/
SARS**
Total
remuneration
Total
performance
related
30 June 2022
$
Non Executive Directors
D. C. Clarke (Chair)
2022
218,182
2021
191,781
R. J. Carless
2022
18,182
2021
90,001
P. G. Harmer
2022
102,937
2021
–
P. A. Lahiff
2022
122,727
2021
105,023
R. J. Low
2022
145,000
2021
126,000
C. L. Rogers
2022
109,091
2021
95,890
$
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
$
21,818
18,219
1,818
24,999
10,294
–
12,273
9,977
–
–
10,909
9,110
$
–
–
–
–
–
–
–
–
–
–
–
–
$
240,000
210,000
20,000
115,000
113,231
–
135,000
115,000
145,000
126,000
120,000
105,000
%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Executive Directors
M. P. C. Emmett
(CEO)
Executives
M. J. Shanahan
(CFO)
2022
973,410
1,015,000
2,922
27,500 1,352,767
3,371,599
2021
828,392
884,375
2,644
25,000
823,709
2,564,120
70.23%
66.61%
2022
454,425
521,033
71,060
27,500
365,598
1,439,616
61.59%
2021
395,740
457,517
26,168
25,000
124,854
1,029,279
56.58%
Total Remuneration
2022 2,143,954
1,536,033
73,982
112,112 1,718,365
5,584,446
Total Remuneration
2021 1,832,827
1,341,892
28,812
112,305
948,563
4,264,399
Statutory remuneration represents the accounting expense of remuneration in the financial year. It includes salary remuneration,
annual and long service leave payments, the amortisation expense of deferred share awards previously granted and an accrual
for STIs.
*
STI amounts included above relate to the accrued provision in respect of the current year’s performance that will be paid during the following financial year.
The 2022 amounts have been approved by the Remuneration Committee.
** Share based payments are calculated on the accrued cost to the Company recognising that PSRs issued to KMP will vest over 3 years (5 years for CEO sign-on
PSRs and 5 years for SARs) after taking into account a 75% -100% probability that the Group will achieve the performance hurdles required for those PSRs/SARs
to vest.
45
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED)
Table 13: Cash and vesting basis - period ending 30 June 2022
The table below outlines remuneration received individually during the year including the prior year STI paid in cash in the
reporting year and the benefit received from vesting of shares granted under the Employee Share Option Scheme.
Post
employment
Share-
based
payment
Year
Salary &
fees
Cash
short term
incentive*
Non
monetary
benefits
Superannuation
Equity
options**
Total
remuneration
Total
performance
related
$
$
$
30 June 2022
$
Non Executive Directors
D. C. Clarke
2022
218,182
2021
191,781
C. L. Rogers
2022
109,091
2021
95,890
P. A. Lahiff
2022
122,727
2021
105,023
R. J. Carless
2022
18,182
2021
90,001
P. G. Harmer
2022
102,937
2021
–
R. J. Low
2022
145,000
2021
126,000
Executive Directors
$
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
21,818
18,219
10,909
9,110
12,273
9,977
1,818
24,996
10,294
–
–
240,000
210,000
120,000
105,000
135,000
115,000
20,000
114,997
113,231
–
145,000
126,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
M. P. C. Emmett
2022
973,410
884,375
2021
828,392
875,000
2,922
2,644
27,500
25,000
Executives
1,888,207
46.84%
1,731,036
50.55%
M. J. Shanahan
2022
454,425
457,517
71,060
27,500
235,052
1,245,554
55.60%
2021
395,740
452,669
26,168
25,000
–
899,577
50.32%
Total Remuneration
2022 2,143,954
1,341,892
73,982
112,112
235,052
3,906,992
Total Remuneration
2021 1,832,827
1,327,669
28,812
112,305
–
3,301,613
STI amounts paid during each financial year for performance during the prior financial year based on agreed KPIs.
*
** The actual remuneration relating to share based payments is based on the market value on the date the PSRs were exercised multiplied by the actual number of
PSRs vested during the year.
46
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
SECTION 6 STATUTORY REMUNERATION TABLES AND DATA (CONTINUED)
Table 14: Number of PSRs and SARs granted as part of remuneration
30 June 2022
(Grant year FY22)
Directors
M. P. C. Emmett
PSRs
SARs
Executives
M. J. Shanahan
PSRs
SARs
Total
Granted no.
Grant date
Fair value per
PSR/SAR at
grant date
(see Note 16)
Exercise price
per PSR/SAR
(see Note 16)
$
Expiry date
First
exercise
date
Last
exercise
date
53,277
11-Nov-21
508,388
11-Nov-21
11.27
3.79
0.00
31-Aug-27
31-Aug-24
31-Aug-27
0.00
31-Aug-26
31-Aug-26
31-Aug-26
29,302
11-Nov-21
254,194
11-Nov-21
11.27
3.79
0.00
31-Aug-27
31-Aug-24
31-Aug-27
0.00
31-Aug-26
31-Aug-26
31-Aug-26
845,161
The fair value above is the weighted average price of the EPS and TSR PSRs at the date the PSRs were granted. All PSRs were
issued with an exercise price of $NIL and the expiry date of the PSRs is four years after the vesting date.
SARs
Mr Emmett’s grants of 53,277 PSRs and 508,388 SARs under the Long Term Incentive Plan were approved at the Annual
General Meeting of the Company on 10 November 2021, and this approval was for all purposes, including ASX Listing Rule 10.14.
Table 15: Value of PSRs/SARs granted as part of remuneration (including PSRs/SARs vested or lapsed during the year)
Shares issued on exercise of
PSRs
Percentage of
remuneration
consisting
of value
share based
payments
incurred during
the year***
**Value of
PSRs/SARs
exercised
during the
year**
Number of
shares issued
on exercise of
PSRs
Paid per
share on
shares issued
on exercise of
PSRs
$
–
–
–
%
–
–
58.58%
No.
–
–
–
*Value of
PSRs/SARs
granted during
the year
$
960,158
1,926,791
2,886,949
528,080
235,052
963,395
–
–
–
1,491,475
235,052
58.14%
4,378,424
235,052
10,233
–
10,233
10,233
Number of
PSRs vested
during the
year
Number of
PSRs lapsed
during the
year
No.
No.
–
–
–
10,233
–
10,233
10,233
–
–
–
–
–
–
–
$
–
–
–
0.00
–
0.00
0.00
30 June 2022
Directors
M. P. C. Emmett
PSRs
SARs
Total
Executives
M.J. Shanahan*
PSRs
SARs
Total
Total
Total gross value of PSRs granted during the year which will vest over three years if all performance hurdles required for PSRs and SARs to vest, are met.
*
** Total value of PSRs exercised during the year is calculated based on the fair value of the PSRs at exercise date multiplied by the number of PSRs exercised.
*** Share based payments as a percentage of remuneration is calculated on the accrued cost to the Company recognising that PSRs issued to KMP will vest over
3.years after taking into account a 60 - 100% probability that the Group will achieve the performance hurdles required for those PSRs to vest.
47
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
SECTION 7 GLOSSARY
AAGR
Average annual growth rate (expressed as a %)
Balanced Scorecard
a balanced scorecard set of KPIs, which includes both financial and non-financial measures
that have weighted allocations and are aligned to AUB Group’s strategic priorities
CAGR
Compound annual growth rate (expressed as a %)
Corporations Act
Corporations Act 2001 (Cth)
EPS
Underlying earnings per share
Executive KMP
M Emmett (CEO and Managing Director) and M Shanahan (Chief Financial Officer)
Group Executives
The CEO, CFO and heads of Australian Broking and Agencies
KMP
LTI Plan
OP Plan
Persons who, directly or indirectly, have authority and responsibility for planning, directing and
controlling the activities of AUB Group during the Reporting Period
AUB Group’s Long-Term Incentive Plan
AUB Group’s Outperformance Plan
Peer Comparator Group
Constituents of the S&P/ASX Small Ordinaries Industrials Index (AXSID), defined at the
commencement of the performance period
PSR
Performance Share Right, with each right entitling the holder to receive one fully-paid ordinary
share in AUB on vesting (or, if the Board determines, an equivalent cash payment). Vesting of
PSRs may be subject to vesting conditions and performance hurdles
Relative TSR
AUB Group’s compounded TSR measured against the ranking of constituents of the Peer
Comparator Group
Reporting Period
12 months period ended 30 June 2022
SAR
STI Plan
TSR
Underlying EPS
Underlying NPAT
Share Appreciation Right, with each right entitling the holder to receive fully-paid ordinary
shares in AUB on vesting (or, if the Board determines, an equivalent cash payment). calculated
in accordance with the formula outlined in Section 2 of this report
AUB Group’s Short-Term Incentive Plan
Total shareholder return measures the percentage growth in the share price together with
the value of dividends paid during the relevant three year performance period, assuming all
dividends are reinvested into new securities
Underlying earnings per share, being, in respect of any financial year, the Underlying NPAT
divided by the weighted average number of shares on issue during the financial year.
Underlying net profit after tax, being, in respect of any financial year, the consolidated net profit
after tax of AUB Group for that year excluding NCI, fair value adjustments to the carrying values
of associates, profit on sale of entities and assets or deconsolidation of controlled entities,
contingent consideration adjustments, impairment charges and amortisation of intangibles.
Other adjustments to the Underlying NPAT calculation may be made in limited circumstances
where the Board considers it to be appropriate.
VWAP
Volume weighted average price of shares in AUB Group traded on the ASX
48
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 ROUNDING
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding
is applicable) under the option available to the Company under ASIC instrument “Rounding in Financial/Directors’ Reports”
2016/191. The Company is an entity to which this legislative instrument applies.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The Directors received an independence declaration from the auditors of AUB Group Limited. Refer to page 71 of the
Annual Report.
Non-audit services provided to the AUB Group by the entity’s auditor, Ernst & Young, in the financial year ended 30 June 2022
were predominantly in relation to tax matters. Other services included independent reviews. The directors are satisfied that
the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act (2001) Cth. The nature and scope of each of the non-audit services provided means that auditor independence
was not compromised. The amounts received or due to be received are detailed in Note 21 of the Financial Report.
Signed in accordance with a resolution of the Directors.
D.C. Clarke
Chair
Sydney: 24 August 2022
M. P. C. Emmett
Chief Executive Officer and Managing Director
49
DIRECTORS’ REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2022
ENVIRONMENTAL
SOCIAL AND
GOVERNANCE
REPORT
50
AUB GROUP ANNUAL REPORT 2022 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
YEAR ENDED 30 JUNE 2022
1.
APPROACH TO ESG
Doing the right thing by our people, our partners, our customers, our environment, and the communities in which we
operate is part of our ethos. AUB Group considers ESG from the perspectives of the environment; fair treatment of
customers, employees and suppliers; ethical decision making and contribution to the community.
We are a services organisation operating in more than 520 locations in Australia and New Zealand. AUB Group’s network
of insurance intermediaries conduct business with clients and other stakeholders both face-to-face and remotely. We
maintain office space in the locations in which we operate and our team travels to these office locations and client venues.
We do not consume raw materials or manufacture any physical products so our environmental footprint and exposure to
supply chain risks is limited to our direct operations.
This report covers AUB Group’s ESG management approach and associated activities for the year ending 30 June 2022.
Unless otherwise indicated, ESG data is presented for the period from 1 May 2021 to 30 April 2022 (the ‘reporting period’).
This report includes the activities of our subsidiaries and their controlled entities in Australia.
This report has been prepared with reference to the Global Reporting Initiative (GRI) Standards 2016. As we continue to
develop our insight and activities in ESG, we plan to build on our sustainability reporting in line with the GRI Standards. We
plan to transition to a globally accepted ESG reporting standard by FY24.
Our MSCI rating is now AA, up from our initial BBB in June 19. This is pleasing progress although we acknowledge we have
more work to do, and in particular we will focus on improving our performance in relation to the social pillar.
ESG FRAMEWORK
Our ESG framework highlights what we believe are the most important ESG impacts to AUB Group and our stakeholders.
The three areas of employees, customers and social and environment are the themes under which our material impacts are
organised. Our strong relationship with our 70 partner businesses across Australia and New Zealand is an essential component
of our framework, and our ethics and integrity underpin everything that we do; they guide us in our approach to all of our
stakeholders and business activities.
ETHICS AND INTEGRITY
PARTNER ENGAGEMENT AND ADVOCACY
EMPLOYEES
CUSTOMERS
•
•
•
Employee engagement
and development
Diversity and inclusion
Workplace health
and safety
•
•
Customer engagement
and retention
Technological
transformation
•
Product innovation
SOCIAL AND
ENVIRONMENT
•
•
•
Community investment
Environmental
management
Responsible supply
chain
51
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
MATERIALITY
In 2021 we conducted a materiality assessment to develop our fundamental ESG principles and identify our most important
focus areas. The materiality assessment involved:
– engaging expert advisors;
– a desktop review and of industry trends and leading practice in ESG;
– interviews with internal and external stakeholders to determine material topics and their relative importance; and
– an assessment of our impact areas against the UN Sustainable Development Goals (SDGs).
During 2022 we reviewed the outcomes of the materiality assessment and confirmed that the topics identified last year
remained our most important focus areas. We plan to undertake a materiality assessment every 3 years.
STAKEHOLDERS
We engage with all our stakeholder groups on a regular basis to ensure we are responsive to their needs and concerns.
ESG matters are becoming a growing area of concern for many of our stakeholders. Our key stakeholders and methods
of engagement are:
STAKEHOLDER
DESCRIPTION
INTEREST
CUSTOMERS
SHAREHOLDERS
EMPLOYEES
Our network partners are in regular direct contact with
their customers. They collect and analyse customer
feedback through a range of interactions such as one
on one meetings, online surveys, social media and focus
groups. This helps to ensure that we are aware of, and able
to respond to, the evolving needs of customers. A hardening
commercial insurance market over the past 5 years has
impacted the price and availability of insurance cover for
our customers .
Acting fairly and in their best
interest.
Providing access to insurance.
Reducing cost pressures.
We have regular discussions, briefings and meetings
with investors, analysts and proxy advisors to keep them
informed of our performance and any emerging risks
and opportunities.
Responsible investing.
Good governance practices.
Oversight of decentralised group.
We conduct regular employee engagement surveys,
industry benchmark research, company-wide town halls
and regular team meetings to keep our employees up-to-
date on the latest company and industry developments.
Using feedback and research we set targets to
appropriately respond to employee issues.
Development opportunities.
Market tested salaries.
Technology to eliminate repetition.
Flexible arrangements.
Diversity targets and plans.
Good governance practices
and risk mitigation.
Strong asset management
and protection.
GOVERNMENT
AND REGULATORS
We engage with Federal and state-level governments,
regulators and industry bodies through meetings and
formal policy consultation submissions to advocate for
issues important to our stakeholders. We ensure we
comply with regulation and proactively adopt key principles
of upcoming changes and best practice.
SUPPLIERS
COMMUNITY
We hold formal and informal meetings with our top
suppliers including IT, product suppliers, insurance
underwriters and finance providers.1
Prompt payments to small
businesses.
Supply chain integrity.
We engage with the communities in which we operate
through volunteering, fundraising initiatives and events,
workshops and funded programs.
Being a good corporate citizen.
Giving back through
volunteering and charity.
1. AUB Group 2021 Sustainability Report (p. 5)
52
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 UN SDGs
AUB Group identified five priority SDGs where we believe we can have the greatest impact. We have incorporated the goals into
our broader ESG framework.
SDG
WHAT AUB GROUP IS DOING AND WHERE IS OUR FOCUS
We ensure our employees have a safe working environment and offer them health and wellbeing
programs and initiatives. With greater numbers of employees working remotely in the aftermath of
COVID-19, we are mindful of the need to monitor and address the impact on their mental wellbeing
as well as look to broader health and wellbeing challenges in our customers and communities.
As with others in our industry, reaching gender balance throughout AUB Group remains a
challenge. We intend to assess our recruitment, selection and retention processes and explore
opportunities to improve gender equality at all levels across the organisation.
We stay at the forefront of market developments so that we can offer our customers the best
technology and product solutions for their needs. Developments and better use of customer data
have lead to greater choice, and a more efficient & customised experience. We negotiate terms with
underwriters to enable our customers to obtain the most affordable and appropriate protection for
themselves, their workers and their families. We provide our employees opportunities to develop
their careers with us through internal and external training and study assistance. We plan to
strengthen our training platform and program, with the objective organisation-wide engagement
and alignment with key policies and commitments. We are committed to addressing potential
modern slavery issues in our supply chain and intend to focus on developing our approach to
quantifying and managing impacts.
We contribute to our communities through volunteering and fundraising. Our decentralised
business model means that our partner businesses are free to contribute to causes and local
communities at their own discretion. We plan to support this activity by developing partnerships
with our community stakeholders and our partner business to address inequalities.
We make efforts to manage our environmental footprint. We are working to improve how we
measure and report on our environmental impacts and our long-term approach to mitigate climate
change, including by developing our ESG reporting.
53
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 AUB GROUP LIMITED (AUB)
Multi-Line Insurance & Brokerage | AU
Robust talent management initiatives; leads peers in
governance practices
RARATING A
LLAST REPOR
TING ACCTION D
AST REPORT UPD
TION DAATE:TE: April 27, 2022
T UPDAATE:TE: May 19, 2022
Score attribution by key issue
FY22 HIGHLIGHTS:
Our rating from MSCI has consistently improved since their
This chart highlights the company's positioning relative to the industry average for each Key Issue that contributed
to its ESG Rating as of May 19, 2022.
initial assessment in 2019. For our stakeholders on average
the most material areas of focus relate to the Governance
Pillar. In this regard we have proactively worked to uplift
the Group’s governance through hiring skilled employees
in the right positions, and a drive to achieve best practice
outcomes. The improvement in our score is a reflection
of this journey.
ESG Rating history
ESG Rating history
ESG Rating history shows five most recent rating actions
ESG Rating distribution
Universe: MSCI ACWI Index constituents, Multi-Line Insurance &
Brokerage, n=26
Acquisition of Tysers,
a London wholesale
broker to increase
capacity for hard to
place risks
>$750k in donations
and sponsorships
across the network
17% decrease in our
carbon footprint
eight ScorScore (0-10)
e (0-10)
per FTE
WWeight
7.77.7
6.2
6.5
5.1
7.6
5%
53%
42%
Positive
Industr
Industryy
AAvvererageage
Negative
ata
y & D
urity
c
a
Priv
c
e
S
e
g
n
a
h
bility
ate C
era
Clim
uln
V
65% of
promotions female
cial
n
a
31.5% increase in
er Fin
Employee training
hours
m
ctio
u
s
Prote
n
o
C
n
Last ESG Rating action
Rating action date: April 27, 2022
Rating action date: April 27, 2022
Switch to renewable
electricity & carbon
offsets for travel at
head office
AUB Group has been upgraded to 'AA' from 'A'.
pital
nt
a
e
n C
m
p
a
elo
m
u
v
H
e
D
Employees
Customers
We equip our employees
with the best skills to
deliver to our customers
whilst maintaining a culture
of inclusivity and diversity.
Our customers are at the
heart of everything we do.
Providing support through
market leading technology
and products
e
c
n
a
ern
v
o
G
Social and Environment
Key scores
Support our communities, manage risks
is our supply chain and manage our
environmental footprint.
AUB Group Limited (‘AUB’) exhibits robust talent development initiatives. It partners with the National
Insurance Brokers Association, Australia, for trainings and offers cloud-based learning to staff. Further, its
two-year (2020-2021) staff turnover ratio of ~11% improved y-o-y and is now on par with peers. Further,
increased weightage on governance assessment is a key driver of the upgrade: AUB leads global and
domestic peers on corporate governance.
Industry-Adjusted Score
(Last Updated: April 27, 2022)
(Last Updated: April 27, 2022)
◤ Weighted-Average Key Issue Score
(Last updated: Ma
y 19, 2022)
(Last updated: May 19, 2022)
◤ Environmental Pillar Score
◤ Social Pillar Score
◤ Governance Pillar Score
AUB's board has an independent majority, split roles for the chair and CEO, and an independent
chair for providing management oversight.
Inclusion of the Corporate Behavior Theme in
Governance resulted in a greater emphasis on business ethics practices and on exposure to
risks related to corruption. AUB operates mainly in Australia and New Zealand, where corruption
risks are perceived to be low. Its ethics practices are on par with those of peers and include
whistleblower protection.
Methodology enhancements to the Consumer Financial Protection Key Issue resulted in
reassessment of the company’s practices to pre-empt mis-selling of financial products. AUB has
a board-level oversight of complaints. However, it lags peers in policies and employee trainings
related to fair advertising to protect consumer interests.
– An independent review conducted by Great Place to Work benchmarked the staff of
Report table of contents
AUB’s Sydney office against peers globally and certified AUB as a Great Place to Work.
Of approximately 300 employees surveyed:
– 98% believe it is a safe place to work
– 96% believed they are treated fairly regardless of their race or sexual orientation
– 92% believed they are treated fairly irrespective of their age
– 90% believed they can take off time when they believe it’s necessary
– 89% average score for justice
Corporate governance
summary
– AUB rolled out a work from home risk assessment for all Head office employees, conducted
P02P02 Corporate governance
P03P03 Key issue details
Recent developments
ESG Rating tearsheet
ESG Rating tearsheet
Rating model details
P04P04 Appendix
eportt
Data repor
Data r
data
ESG Rating drill down
P05P05 Glossary
Evidence suggests AUB has proactive data security measures such as vulnerability diagnostics
and staff trainings. However, it lags peers in the industry best-practice of conducting regular
external audits of its systems.
by an outside specialist health services provider.
P07P07
P29P29
P42P42
P58P58
Analysts:
Analysts: Saumya Agarwal, Marie Abigail Reyes
What is an ESG Rating?
What is an ESG Rating? MSCI ESG Ratings aim to measure a
company's resilience to long-term ESG risks. Companies are
scored on an industry-relative AAA-CCC scale across the most
– At AUB we strive for gender balance – 40:40:20 (40% men, 40% women and 20% open) – at all
relevant Key Issues based on a company's business model.
levels of our organisation. We recognise this is a long-term commitment and that the insurance
industry as a whole will require substantial work in this space.
– We have exceeded 30% female representation at Board level.
– We are strengthening our hiring processes in order to continually challenge unconscious
bias including implementing a formal hiring process at head office and number of controlled
entities. More recognise that further work is required in this area, and strategic goals will be set
later in the year.
We have completed a number of benchmarking activities and will identify initiatives to support
longer term gender balance ambitions.
Page 11 of 6060
©2022 MSCI Inc. All rights reserved.
54
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022◥
◥
◥
– We recognise that certain risks are becoming harder to insure due to climate change and
changing risk appetite of insurers.. As a strategic response to safeguard access to cover for
AUB customers, we have entered into an agreement to acquire Tysers Insurance Brokers
Limited (Tysers). Tysers is the 6th largest independent London wholesale broker providing
direct access to the world’s largest insurance market, Lloyd’s. The acquisition will better place
our network to help customers with specialty and harder to insure risks. Our newly formed
business unit known as Austplacements will assist our brokers and agencies in Australia and
New Zealand to access Tysers.
– We deployed a centralised learning and development (L&D) platform, LITMOS to our Sydney
office to modernise and better serve our employees in their development. Training includes
topics related to human resources, workplace health & safely, ethics, as well as cyber
awareness training. This is in addition to industry specific training platforms which continue to
play a part in our overall L&D program.
– We intend to roll out a volunteering and employee donation model during FY23 to bolster the
social and community impact of the network.
– We have switched to 100% renewable energy sources for our electricity needs at Head office
and a number of other business across the group. We have observed a 17% reduction in CO2
emissions per employee year on year.
– We have signed up to offset all carbon greenhouse gas emissions associated with Head office
employee corporate travel.
– We continue to encourage our people to minimise travel in order to reduce our overall
environmental footprint; a core element of which is our commitment to our a 4-day at home
operating model.
FY23 COMMITMENTS:
We have identified priority activities for FY23 across our head office and the broader Group. These activities have been
informed by market research, internal surveys, and through the work of advisors and may evolve. We apply a materiality lens
whilst considering the priorities of our stakeholders. The resulting short list was endorsed by the Board and has rollout periods
between 6 months and 5 years.
We understand the evolving landscape and the greater responsibility businesses owe to all stakeholders. In order to continually
improve our business and enhance our social license to operate, we will add new goals as existing ones are achieved. Our core
commitments include:
– Minimum of 20 hours training in addition to ethics training for all AUB Group head office staff facilitated by the new L&D
platform;
– Rollout of a donation and volunteering model;
– Extend renewable energy and carbon offset model to others in the Group;
– ESG metrics formally codified within M&A checklist;
– Assess strategic measures to be implemented to achieve long term gender balance objective of 40/40/20; and
– Benchmark and assess strategic measures to assess and eliminate any gender wage gap.
We anticipate that other goals and activities may be added as part of our annual goal setting cycle post our strategy day in Q2
of FY23.
55
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 2.
ETHICS AND INTEGRITY
OUR CORE VALUES
Our values ensure that we act ethically and with integrity in all our interactions. We seek to embed these values throughout
our company by giving all new starters training on our values and by providing people managers training on how they can
lead by example and foster a safe, supportive environment for their teams.
ASPIRATIONAL
We are progressive, explore opportunities for growth
and continually raise the bar
– We aren’t afraid to fail, we learn from our mistakes and look for opportunities to improve and grow.
– We take ownership, break outside our bubble, and challenge the status quo.
– We expect, encourage and value different opinions to get the best outcome.
– We seek opportunities to develop and have a good understanding of our competitors, the industry
and economy.
PARTNERSHIP AND RELATIONSHIP DRIVEN
We are respectful, collaborative and seek to amplify potential
– We take time to understand each other’s objectives and drivers before making a decision.
– We confront difficult situations head on, if we see or hear something that is unacceptable, we act.
– We value and are respectful of each other’s time and contribution, we actively listen to and acknowledge
each other.
– We find synergies with partners, following through on commitments, communicate early and seek to
understand individual circumstances.
GENUINE
We are easy to deal with, honest and fair
– We listen to requests, if we have to say no, we say no respectfully and provide an explanation as to why.
– When we say we will do something, we will do it. We are careful not to over promise.
– We willingly step into conversations that might be uncomfortable having prepared ourselves by setting clear
intentions and being prepared to listen with compassion.
– We are in ongoing conversations with each other to create clarity and transparency.
RESOURCEFUL
We are creative and agile in our delivery of the best outcome
– We take the initiative to be self-motivated, we apply a growth mindset and support people and processes to
change and grow.
– We know our strengths; we collaborate and network to share knowledge.
– We know when not to over complicate things, we are respectful of each other’s time.
– We are forward thinking and provide opportunities to test ideas, we change to improve.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
OUR APPROACH TO GOVERNANCE
AUB Group is committed to high standards of corporate governance. We believe that strong corporate governance is the
foundation of our success and business growth and is critical for us to deliver value to our shareholders.
Board structure and responsibilities
AUB GROUP LIMITED BOARD
BOARD AUDIT & RISK COMMITTEE REMUNERATION & PEOPLE COMMITTEE NOMINATION COMMITTEE
AUB Group’s Board comprises three Board Committees that
guide our governance activities in respective areas according
to their Committee Charters and Group policies.
The Board of Directors is responsible for the corporate
governance of AUB Group and ensuring high standards of
governance are maintained across all the aspects of Group’s
business and operations. The Board guides and monitors the
business and affairs of AUB Group on behalf of stakeholders.
Its activities are governed by our Constitution. The Board
Charter sets out the Board’s specific roles, responsibilities
and composition, and the responsibilities of the Chief
Executive Officer.
Our corporate structure ensures that the Board maintains an
appropriate level of oversight over our operations. The Board
delegates the responsibilities of day-to-day operational
activities to senior management to ensure that key matters
are given the appropriate level of consideration while
retaining overall responsibility.
Our Corporate Governance Statement is founded on the
ASX Corporate Governance Council’s Corporate Governance
Principles and Recommendations (4th Edition). We review
and revise our Corporate Governance Statement to reflect
the changing standards and expectations of our industry
annually. It is available on our website: www.aubgroup.com.
au/corporate-governance.
BOARD INDEPENDENCE AND COMPOSITION
With the exception of AUB Group’s Chief Executive Officer
and Managing Director, the Board is made up entirely of
Independent Non-executive Directors. These directors
provide objective oversight that helps us deliver value to our
stakeholders. The Board annually reviews the independence
of each Director and discloses any changes in status to
the ASX.
The Board comprises directors with a diverse range of
skills, experience and backgrounds. The Board evaluates its
performance and composition annually to ensure that Board
members have the appropriate mix of expertise to effectively
carry out its duties. We engage an external independent
consultant every three years to assist with this process.
ESG GOVERNANCE
The Board, in consultation with the Board Audit and Risk
Committee (BARC), oversees and approves AUB Group’s
ESG activities, including our strategy and policies and
procedures. The Board delegates responsibility for ESG
to management, with our Chief Executive Officer having
ultimate responsibility of our ESG activities.
The BARC endorses all ESG targets, progress is formally
reported in BARC meetings held every 2 months, and reviews
all ESG materials, and outcomes of ESG rating agencies
assessments.
Our ESG Policy sets out how we work towards being a
socially and environmentally responsible corporate citizen.
It outlines policies and procedures we adopt across all our
businesses to support socially and commercially ethical
practices, reduce our environmental footprint and manage
our environmental risks. We have a number of more specific
policies that cover other ESG areas, such as diversity and
inclusion, workplace health and safety, and modern slavery.
OUR CODE OF CONDUCT
AUB Group’s Code of Conduct (Code) sets out the ethical
standards expected of all directors, officers, and employees
of AUB Group and its controlled entities. AUB Group
encourages any businesses in which AUB Group has a direct
or indirect equity investment to adopt the code.
The Code is designed to ensure AUB Group delivers on its
commitment to corporate responsibility and sustainable
business practice. It establishes a foundation to our
business decisions and provides clear, consistent guidelines
on ethical behaviour.
The Code requires our people to:
act with honesty and integrity in dealing with
all stakeholders, including shareholders and
the community
manage conflicts of interest
comply with the law
adhere to company policies and procedures
respect confidentiality and privacy.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 All employees are required to complete ethics training
annually. Breaches of our code of conduct will impact an
employee’s annual performance rating and in turn the
at-risk portion of their remuneration. Except for fixed term
contractors and other labour hire staff, all employees
have a portion of their remuneration at risk based on
performance measures.
AUB Group is committed to complying with its obligations
under the Australian Privacy Act 1988 (Cth) (the ‘Privacy Act’)
(including the Australian Privacy Principles set out in the
Privacy Act) and continues to invest in and mature its cyber
security and data privacy programs, with strong progress
achieved to strengthen processes, awareness and tools to
protect against cyber-attacks and data breaches.
In additional to standard HR policies, and our code of
conduct, our businesses have policies governing (1)
complaints, (2) Financial Hardship, and (3) Domestic
Violence and (4) flexible working.
EMPLOYEE AND CUSTOMER GRIEVANCE TOOL
There are risks which may arise from our decentralised
operation such as pockets of poor culture or leadership. In
addition to grievance and escalation policies that exist within
each of our businesses we provide an anonymous access
point for any employee of any company in the Group or any
customer to contact the head office. Submissions are jointly
reviewed by the Group legal counsel & Head of People and
Culture on any grievance they may have.
This tool is designed to pro-actively manage a range of
issues including mismanagement across the decentralised
Group. Although these issues may not constitute
whistleblower events, we believe it is best practice to enable
them to surface and be dealt with.
Whistleblower events are dealt with through our
Whistleblower portal - Whisplii. We do not report the number
of whistleblower or grievance instances to protect the
anonymity of any submitted.
OUR APPROACH TO INFORMATION SECURITY
Data privacy
AUB Group is committed to protecting the privacy of
personal and sensitive information collected as part of its
business operations in line with the Australian Privacy Act
(1988). Our Privacy Policy sets out our privacy principles
and provides guidance to member firms on the collecting,
using, holding, disclosing, and otherwise managing
personal information.
At the time that the personal information is collected (or
as close as practicable to it), AUB Group takes reasonable
steps to ensure that the individual is aware of:
– why personal information is being collected;
– what personal and/or sensitive information is collected
and held;
– how personal information is collected;
– use and disclosure of personal information;
– information about how the individual is able to access
and correct the information held; and
– how to contact AUB Group, including making
a complaint.
Cyber security
AUB Group has designed and implemented a suite of core
capabilities to manage cyber security and cyber risk. From
the establishment of a set of strategic objectives, to an
industry aligned cyber security framework, to a roadmap
focused on embedding solid foundations, we have developed
a capability whereby our cyber posture is continually
assessed and enhanced. Taking a risk-based approach to
prioritising the cyber roadmap initiatives, we are focused on
meeting our strategic information security objectives and
managing risk consistent with enterprise risk appetite and
tolerance levels.
A range of activities have been mobilised and controls
enacted such as cyber awareness training, phishing
simulation exercises, vulnerability and patch management,
risk and threat assessments, third party audits, penetration
testing, and incident and disaster recovery exercises. In
addition, a security operations centre has been stood up
with technologies such as managed detection and response
(MDR), security information and event management (SIEM)
and security orchestration, automation and response (SOAR)
in operation.
The minority of partner firms within the group who manage
their own IT services and security, are subject to AUB’s
IT Service Standards and periodic assurance audits and
attestations.
3.
PARTNER ENGAGEMENT
AND ADVOCACY
We have 70 partner businesses across 500 locations in
Australia and New Zealand, representing over 850,000
clients. Our partners are at the core of our business model.
They are key to our business success and an essential
part of achieving our ESG objectives. We have an equity-
based business model where the partner businesses
remain directly responsible for their day-to-day operations
while being able to leverage the scale, infrastructure
and operational know how of the broader AUB Group
(Our Business Areas - AUB Group). We support our partner
businesses by providing them with the platform, tools and
services needed to run their businesses smoothly as well
as agency to determine and work towards their priority
ESG impact areas.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
INSURANCE BROKERS
AUB Group established Austbrokers Member Services
(AMS) in Australia and NZbrokers in New Zealand to deliver
market-leading products, services and business support to
AUB Group’s partner brokers. AMS and NZbrokers represent
all their partner brokers across their respective countries.
Each partner leverages the strength and capability of these
national groups, while retaining their successful formula of
local knowledge and long-standing relationships.
We provide a range of services and assistance to our partner
brokers. We leverage our market position to design, source
and negotiate market leading products including industry
leading common policy wordings for our partners’ clients.
This extends to the negotiation of insurance capacity and
commercial terms as well as assistance with placement of
hard to place risks into alternative markets. We also leverage
our buying power to secure competitive insurance coverage
for our partners helping them safeguard a stronger future for
their own businesses and people. Our strong relationships
with premium funders enable our partners to offer premium
funding services to their customers at competitive rates,
assisting their customers with cash flow management.
We are working with our partners to better understand
how we can enable them to contribute to causes that are
meaningful to them, and how we can collectively create
value for all our stakeholders.
ADVOCACY
We engage in industry research, public relations initiatives
and policy advocacy on behalf of our partners. Our activities
include engaging with governments, regulators and industry
bodies through official consultations and meetings in order
to provide information and perspectives on our industry and
our members.
COMMITMENT TO RESPONSIBLE INVESTING
A core part of our business approach is growth through
acquisition of new businesses and expansion of existing
business into new markets. When selecting acquisition/
expansion targets, we have a rigorous due diligence
process and conduct a cultural fit assessment to ensure
they are aligned with our values and goals. Our M&A
playbook and acquisition checklists include a number of
governance and sustainability related questions. Given the
industry, the businesses we acquire generally have a similar
environmental footprint to our existing businesses. We have,
thorough market research and from our advisers, obtained a
range of specific ESG questions to consider when analysing
a target for acquisition. We will incorporate this within our
M&A checklist in FY23.
Our commitment to responsible investing includes (1)
acquisitions of ethical businesses with ethical leadership
(2) a long term view of ownership and sustainable operating
models (3) consideration of all stakeholders. We do not
purchase businesses with an intention of making quick
profits through resale or with the intention of engaging in
large scale employee restructuring or engaging in actions
resulting in worse outcomes for customers.
4.
EMPLOYEES
Our employees are a critically important asset and a key
pillar of our ESG framework. We aim to equip our employees
with the skills they need to deliver for our customers and
to provide them with opportunities so that they can reach
their full potential. We know that a diverse and inclusive
workforce is the foundation for innovative thinking and new
ideas. We look to recruit talent from diverse backgrounds
and encourage employees to contribute their unique ideas,
capabilities, experiences, and characteristics to their work.
EMPLOYEE ENGAGEMENT AND DEVELOPMENT
Development
We are committed to ensuring that our employees get a
sense of fulfilment from their work. We do this by providing
them with ongoing development opportunities through AUB
Group learning and development programs as well as further
study assistance.
Our Broking Division has an Education Committee
comprising senior broking management from across the
country. The Committee ensures that insurance broker
employees receive the necessary training and education
through the National Insurance Brokers Association,
Australia (NIBA), the Australian and New Zealand Institute
of Insurance and Finance (ANZIIF), LMI College and other
specialist providers.
Our Agency Division and Head Office employees complete
their ongoing training requirements online through the
LITMOS learning management system. Our agencies’
training managers are responsible for running LITMOS,
ensuring that the available learning material meets the
relevant training requirements and ensures that agency staff
complete their training in a timely manner.
We are planning to extend LITMOS to the broader AUB Group
partner network to support our partner employees’ training
needs and to foster a culture of risk awareness.
Our training programs consider needs for Group and Agency
employees as well as the broker network, along with the
changing regulatory landscape. Over the course of the year,
we have invested in developing and rolling out the following
training modules:
– Directors’ responsibilities and duties;
– Cyber security awareness;
– Electronic communication and social media;
– Work, health and safety;
– Sexual harassment in the workplace;
– Workplace bullying;
– Anti-discrimination and equal opportunity;
– Whistle-blower awareness;
– Privacy awareness;
– Modern slavey;
– Combatting modern slavery;
– Fraud awareness; and
– Business Continuity Management;
– Anti-Money Laundering awareness;
– Misleading Conduct and Competition Law; and
– Regulatory training – Breach reporting and Complaints.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
Technical and soft skills training is provided periodically to staff using a mix of internal and external resources. In addition, we
provide opportunities for staff to further their education through recognised higher learning education institutions as well as
soft skills through providers such as the Institute of Strategic Leadership.
In FY22, employees undertook an average of 19.1 (FY21: 17.8) hours of training each, including our broker and agency
employees.
2022
Hours
2021
Hours
Movement
%
Employee training hours (includes compliance related)
23,127
17,587
31.5
Employee training hours were impacted by COVID-19 in the prior year in a number of ways:
– Broking and agency teams devoted a huge effort to assisting many customers navigate the challenges and uncertainty of
the COVID environment, in some cases diverting available time for training. Examples of increased client support provided
during this time include:
– Amendments to levels and classes of insurance cover
– Obtaining premium funding to alleviate cash flow pressures
– In addition, traditional face to face learning was limited in centres affected by lockdowns.
Engagement
We value our employees’ views and we ensure that they have a range of opportunities to share their perspectives with us. This is
now more important than ever, with many of our people working remotely 4 out of 5 days per week (‘4/1 work from home’).
We utilise Officevibe, a dynamic online employee engagement platform. The platform prompts employees to complete
fortnightly surveys anonymously and provides resulting insights to management. The tool enables us to collect continuous
feedback on employee sentiment and dive deeper into emerging trends and developments amongst our workforce.
Officevibe has been rolled out to our head office teams as well as to all Sydney, Melbourne and Brisbane teams in our agencies,
and a number of brokers in the Group.
We use our Employee Net Promoter Score (eNPS) to assess employee engagement based on their willingness to recommend
the organisation to others. AUB Group’s head office employee satisfaction across each metric for the period from
implementation is shown below. It reflects a strong level of overall satisfaction, especially with respect to how our employees
feel about their relationships with peers and their managers. We have found that there are areas where we can improve to better
support our employees’ wellbeing, especially given the impact of COVID on our employees’ working lives. We are committed to
continue finding ways to support our people in the transition to our 4/1 work from home model.
8.2
Relationship with manager
0.2pt
7.8
Relationship with peers
7.5
Ambassadorship
7.7
Happiness
0.4pt
7.5
Alignment
0.4pt
7.1
Recognition
60
7.8
Personal growth
0.4pt
7.6
Feedback
0.6pt
7.5
Satisfaction
0.2pt
7.5
Wellness
0.7pt
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
We have also been benchmarked using the Great Place to work platform:
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 – programs focused on attracting women to the insurance
industry and development plans for key talent
– regular remuneration reviews to ensure remuneration
is relevant to the market and commensurate to the role
regardless of gender.
We report annually to the Workplace Gender Equality Agency,
in line with the Workplace Gender Equality Act. These reports
provide valuable insights into our workforce composition
and flag areas where we can improve our employee value
proposition and retention and recruitment practices. The
latest filing is available on our website.
Throughout the year we monitor performance for gender
balance across the following broad position categories:
– Executive: C-Suite (CEO, CFO, CIO, CRO) or equivalent
at Group level or any of our subsidiaries.
– Non-Executive Management: An employee who has
strategic control and direction over a substantial part of
the business, but whose responsibilities do not extend
across an entire corporate group, such as the head of
a brand within a group.
– Professionals: Qualified, or partially qualified staff such
as brokers, underwriters, claims handlers, allied health
professionals, non-book-keeping finance staff etc.
– All other employees: These are typically support staff
such as executive assistants, bookkeepers, and other
administrative staff within the organisation.
These reporting categories align with our WGEA reporting
to and ensure comparability with the market and our peers.
EMPLOYEE GENDER COMPOSITION (%)
100
80
60
40
20
0
18
82
43
57
70
59
30
41
Executives
Non-Executive
Management
Professionals
Other
Employees
Female
Male
Positively, there was no statistical difference (3% higher from
female respondents) in scoring between male and females
employees of the Group.
Areas of focus for us include transparency in salary
benchmarking, a clear short term incentive program,
increased social events, better staff benefits program and
better communication with staff on significant changes, as
these were areas we scored the lowest. With the exception
of a fair share in profits (we do not offer employee share
schemes) and providing unique/special benefits, all metrics
received a score of at least 57% positive.
Turnover
We see increasing demand for talent across several skill
sets.
We monitor employee turnover to understand trends in
demand for skills and to assist us adjusting our retention
strategies to ensure our high performers are fulfilled and
engaged with their roles. We conduct exit interviews to
help management ensure that organisational issues are
identified and dealt with.
Employee turnover across the Group was 20% in 2022
compared to 10% in 2021. The volatility was experienced
particularly around new starters and casual employees
as the industry and Australia as a whole struggles with
a shortage in the employment market.
Employee absenteeism (personal/sick leave and leave
without pay) across the Group was 1.5% (average 3.8 days
per person) in 2022. Absenteeism can be a lead indicator for
poor wellbeing. We recognise equally a very low absentee
rate indicates employees being over worked. We aim to keep
absentee rates below 5%. Please note this does not include
paid annual leave. We encourage all our employees to utilise
their full entitlement to paid leave each year.
DIVERSITY AND INCLUSION
Gender equality
Gender parity is integral to a dynamic balanced workforce.
We are working to improve gender balance across the AUB
Group. In FY21, we conducted a review of our Diversity and
Inclusion Policy. From this review, we made a number of
improvements to our recruitment, selection and succession
processes, incorporating psychometric testing as part of
the recruitment process and ensuring succession planning
is evaluated on an ongoing basis and continuously updated
and monitored.
AUB Group is committed to the development, promotion and
retention of women in leadership. Some of these initiatives
include:
– seeking to achieve gender diversity in the composition
of our board and with a target of 30% female directors
– mentoring and career resiliency programs that are
focused on giving female staff equal opportunity to rise
to senior positions
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 PROMOTIONS 2022
PROMOTIONS 2021
35
Female
Male
32
Female
Male
65
68
BIRTHPLACE OF WORKFORCE (%)
100
80
60
40
20
0
66
59
34
41
49
51
77
23
Executives
Non-Executive
Management
Professionals
Other
Employees
Overseas
Australia
As at 30 June 2022 AUB Group and its controlled entities
had a total of 1,208 (FY21: 988) employees with women
representing 61% (FY21: 58%) across the Group.
We’re pleased to report that throughout the year
approximately 65% (FY21: 68%) of our internal promotions
were female, demonstrating that the efforts we are making
to support the careers of our female employees are
delivering results.
Gender equality is only one dimension of diversity and
inclusion. As part of our Diversity and Inclusion Policy,
we have introduced a number of aims. These include:
– promote a culture that embraces diversity when
recruiting employees, senior management and the board
– ensure that recruitment and selection practices at all
levels are appropriately structured so that a diverse
range of candidates are considered, and addressing any
conscious or unconscious biases that might discriminate
against certain candidates
– value diversity of perspective – leveraging the diverse
thinking, skills, experience and working styles of our
employees and other stakeholders
– flexible work practices and provide opportunities for
work arrangements that accommodate the diverse
needs of individuals at different career and life stages.
We also recognise our workforce and that of Australia as a
whole is built on migration. 30% of Australians were born
overseas, and our workforce reflects this at all levels.
We will build processes in the next period to assess and
report on cultural diversity within our workforce. We also
plan to focus on broader diversity in the future to improve
representation across other groups, including the indigenous
and LGBTQIA+ communities, as well as people living with a
disability and people of different ages, to align our workforce
makeup with the communities that we serve.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 WORKPLACE HEALTH AND SAFETY
We aim to provide a physically and psychologically safe
workplace for our people. All health and safety incidents are
reported to AUB Group Board’s Remuneration and People
Committee and Board Audit & Risk Committee. There
was one workplace safety incident relating to bullying and
harassment reported during FY22 (FY21: one).
In FY21, we completed a review of AUB Group’s Health and
Safety Policy, which found that the policy reflected current
law and best practice.
With the disruption caused by COVID-19, mental health has
increasingly come into focus. We have a dedicated free
and confidential Employment Assistance Program (EAP)
to support our employees and their families 24/7. Since
the start of COVID-19, we have not witnessed any increase
in reported incidents related to mental health, however, we
acknowledge that with most of our workforce carrying out
desk work remotely, workplace health and safety incidents
may not be as visible to us. We encourage our employees
to provide feedback to us about their physical and
psychological health through our regular online employee
surveys, their direct managers and HR.
FAIR REMUNERATION
Many of our employees are highly skilled and their
remuneration reflects their value to AUB and the market. We
recognise our responsibility to ensure all our staff are able to
achieve a livable wage (60% of the median wage of $62,400).
We have benchmarked the lowest paid employees to an
FTE equivalent to ensure their pay meets the higher of this
benchmark and the related industry award.
Based on the benchmark there were 2 employees marginally
below the threshold ($37,400), both of whom were school
leaver/interns. Such opportunities represent an alternative
pathway to higher education with an expectation to complete
industry qualifications after gaining sufficient relevant
practical experience. A number of non-cash benefits such as
work from home allowances, complimentary or discounted
insurance coverage available to staff, are not considered in
the analysis above. The average salary across the Group
was $126k, and median salary was $96k.
We have also engaged an external party to review all casual
rates to ensure compliance with all industry standards. In
addition to benchmarking current pay and conditions we
engaged the same external party to review all termination
entitlement payments to ensure employees are paid what
they are owed at all times.
5.
CUSTOMERS
Our customers are at the heart of everything we do. Our
approach is based on our commitment to high-quality
service and seeks to support our customers in safeguarding
their future. Every day we provide valuable support through
market-leading technology and products backed by strong
customer service.
CUSTOMER ENGAGEMENT AND RETENTION
Our partners and their employees actively engage with our
customers and earn their long-term trust by providing high
standards of customer service.
We strive to provide all our customers with products that are
appropriate to their financial objectives and circumstances.
We do this as part of our customer service standards and
to ensure we are compliant with the relevant financial
services laws.
The government has extended unfair contract terms
legislation to cover certain insurance contracts. This
legislation provides better protection to consumers and
small businesses by requiring certain insurance contracts
covered under the ASIC Act, to be clearly worded. In
response to this legislation, AUB Group worked with its
insurance partners to amend distributed policy wordings
to comply with policy wording guidelines.
As part of our commitment to high quality customer service,
our partner businesses must also ensure robust dispute
resolution processes are in place to handle complaints in a
timely and fair manner. AUB Group provides all partner firms
with access to up-to-date resources on these requirements
and provides support, as and when required, to meet
regulatory notification and ongoing reporting obligations.
Any customer complaints are also reported to the Group
Board Audit and Risk Committee at each Committee
meeting to ensure central oversight.
TECHNOLOGICAL TRANSFORMATION
To deliver a stable, reliable and secure service to our partner
members. We provide centrally managed network and
infrastructure services. This centralised technology service
leverages our scale and helps partners better serve their
clients confidently. All data is backed up and secured in
our dedicated Sydney datacenter with a second back up
datacenter site in Melbourne.
AUB Group has made several strategic acquisitions which
uniquely position us to transform our broker platform
experience. We now have the building blocks to create a
cohesive modern suite of digital broker solutions. In addition,
our Underwriting Agencies have transitioned to a new digital
platform which will better enable them to serve brokers
and clients.
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
PRODUCT ACCESS AND INNOVATION
We keep abreast of product innovation to ensure our
partners are constantly meeting our customers’ needs.
We provide our partners with insurance services that
enhance their ability to support their customers including
claims services, specialist estimating, forensic and
investigation support. Further to enable our partners to
concentrate more on their customers we provide a range of
opt-in administrative support services in accounting, payroll,
tax and analytics.
We also assist our partners to optimise their businesses
by facilitating financial advice, legal advice, management
support, succession advice and support, funding, mergers
and acquisitions support, and strategy formulation and
execution. The acquisition of Tysers represents significant
opportunity to increase capacity and support hard to place
insurance risks.
6.
COMMUNITY
AUB Group is committed to supporting the communities
in which operate, and to managing our wider social
responsibilities. We recognise the importance of focusing
on economic and social wellbeing, today and into the future,
by supporting our local communities and by operating as a
responsible corporate citizen. We also know the importance
of managing our environmental impact and continue to
adopt better ways of working in order to reduce our footprint.
COMMUNITY INVESTMENT
AUB Group and its related entities in Australia and New
Zealand have over 3,000 team members in 500 locations,
serving over 850,000 clients. At our core we are a people
business: providing a service to the community by helping
our customers manage their risks.
AUB Group and our partners support community
organisations, such as charities and sporting clubs, through
fundraising, sponsorship, and volunteering. Because our
partners are located all throughout Australia and New
Zealand, we adopt a decentralised approach to community
support, allowing our partners to determine how they can
have the greatest impact in their local communities.
During the reporting period, AUB Group as a whole
donated and sponsored in excess of $750k (FY21: $1m) to
community initiatives. Our employees also volunteered their
time, contributing hundreds of hours to charity events. These
activities and efforts have been impacted by COVID-19 and
resulting government lockdowns.
COMMUNITY INITIATIVES
Our agency and Austbrokers divisions contributed monetary
donations to, and participated in, a range of fundraising and
community initiatives during the year, including as:
– Sponsor of the annual Insurances Ashes, which is a
cricket event run by charity the Primary Club of Australia
(PCA). The event raises funds for the PCA, which gives
people with disabilities the opportunity to experience
the joy and exhilaration that comes from playing cricket.
We also actively support other PCA events that take
place throughout the year.
– Sponsor of Insurance Rocks (event cancelled during
this year), which is a proposed battle of the bands event,
where the insurance industry comes together for a great
night of music and fun. All proceeds from this event go to
the Australia Cancer Research Foundation.
– Major sponsor of the Lloyd’s Australia Golf Day. In 2021,
the event supported SpinalCure Australia in their work to
find a cure for spinal cord injury.
– Charity partner with AllKids, which is a not-for-profit
organisation providing education to disadvantaged
children in the coastal commune of Ream in Sihanouk
Province, Cambodia. Our sponsorship enables the AllKids
staff to work with local public schools, teachers and
principals, local government, commune officials and
families to give all children in their community access
to quality education. Throughout the year we sponsored
the education of 10 children in Cambodia through the
AllKids Kids to School program.
65
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
– Sponsor of the Outback Car Trek, which donates the funds
it raised each year to the Royal Flying Doctor Service of
Australia.
– Sponsorship of St Vincent De Paul Charitable Society
since 2019.
We also provided donations to, and sponsorship of,
community and sporting clubs around Australia, including
AllKids, the St George Australia Football Club, Primary Club of
Australia and Drummoyne Water Polo Club.
In July 2021, NZbrokers recently established the NZbrokers
Foundation, which will provide four senior leader scholarships
along with a number of broker scholarships to build financial
services skills within the community.
Our partners determine the best approach to engage with and
support their local communities, some examples include:
The Insurance Advisernet Foundation supports local
Australian and New Zealand organisations that work
to help change the lives of individuals, families and
communities for the better. Over the past 10 years, IA
and its Foundation has contributed over $3m to more
than 50 different charities. During FY22, over $400k
was donated to a variety of community fundraising
initiatives, including charities such as Men’s Shed
Association, Tour De Cure, Act for Kids, South
Australian Health and Medical Research Institute,
Starlight Foundation and Pancare.
Adroit Insurance and Risk, based in regional Victoria
and Albury holds strong community values at the
heart of their organisation. The team has raised
over $2m for local community organisations and
foundations since it was established in 1978. In the
reporting period, Adroit made donations to a variety
of local community groups, organised and hosted
many fundraising events and volunteered over 200
hours of staff time. Adroit has proudly supported
foundations and their projects including, Geelong
Youth Engagement – a resilience and mentoring
program for at risk youth, Ballarat Health Services –
It Takes Two speech therapy program and The Border
Trust Foundation – various projects within the Albury
Wodonga region including, financially assisting
families to get their children back to school.
66
FY23 COMMITMENTS:
AUB Initiatives - “Do good, be better.”
We recognise that our teams are passionate about the needs
and challenges of the communities in which we operate. As
such, AUB Group is pleased to launch our new initiative “Do
good, be better.”
‘Do good, be better’ is designed to support the aspirations
of our teams and employees to make a difference, initially
offering paid volunteer leave and donation matching, in
partnership with The Good Company.
1. AUB Community Day
AUB will grant a day of paid volunteer leave to all AUB Head
Office employees to participate in community activities such
as volunteering, mentoring, and working with charities and
other not-for-profit organisations. The AUB Community Day
will include partnerships with community groups who benefit
from our involvement and support to deliver their mission –
whether by assisting the homeless, supporting children in
need, working at schools or volunteering at animal shelters.
The AUB Community Day will also serve a secondary
purpose of being a great team-building exercise. Seeing
our colleagues in a different and less formal context, while
making a positive community contribution, is a wonderful
way to build trust and strengthen professional bonds.
2. AUB Giving
The AUB Giving programme will allow our team members
the freedom to support causes they are passionate about
via pre-tax donations, deducted directly from their pay,
with AUB Group matching each donation up to a maximum
of $1,000 per head office employee per annum. The
program will also become part of AUB Group’s performance
recognition process with the option to receive ‘charity gift
cards’ instead of other financial awards. At launch, all head
office employees will receive a one-off $50 in their AUB
Giving account to facilitate donations to the charities of
their choice.
RESPONSIBLE SUPPLY CHAIN
AUB Group acknowledges that modern slavery can occur in
every industry, sector, and country, including those where we
operate. AUB Group has a zero tolerance policy for modern
slavery in our supply chain and is committed to continual
improvement in combating all forms of modern slavery such
as forced labour, debt bondage, deceptive recruiting, human
trafficking and child labour.
AUB Group’s ESG policy promotes ethical and sustainable
practices, in particular respecting human rights through
developing high quality and ethical partnerships with
suppliers and service providers. AUB Group encourages all
employees and business partners to escalate any concerns
internally or through our anonymous reporting service. We
comply with all relevant laws and expect the same from all
our stakeholders.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 During the reporting period, AUB Group introduced a Modern
Slavery Policy to address modern slavery risks within our
operations, supply chains and investment activities.
To comply with all modern slavery obligations, we are in
the process of identifying and managing risks within our
business and supply chain. We have conducted a preliminary
review of AUB Group and its controlled entities’ supply
chain partners and assessed it against government and
international organisations’ data and resources. In response,
we have initiated a Modern Slavery Compliance Program
to complement our Modern Slavery Policy and the existing
Risk Management Framework over the course of the coming
reporting period. This program comprises of enhanced
supplier assessments and questionnaires, standardised
contractual clauses for use in supplier arrangements
across the AUB Group network, specific whistle-blower and
grievance provisions, internal reviews of modern slavery
process embedment across the Partner network, exploring
process enhancement tools (e.g. risk assessment tools and
online repositories) and internal awareness and compliance
training. Our Modern Slavery Policy and Statement are
available on our website.
Commitment to fair tax contributions
AUB recognises that without taxes, communal investment
including development of future talent through formal
education opportunities would suffer. We benefit from this
communal investment and as such believe we have an
obligation to pay a fair share of taxes.
AUB’s Board has a strict policy to operate within the law
and not to take aggressive tax positions, or operate within
tax havens. Our aim is to avoid any tax controversies and to
pay a fair share of our profits as taxes in each country we
operate in.
In FY22 the Group paid $26.90m (FY21: $20.1m) in income
tax, and $6.7m (FY21: $6.5m) in payroll tax. In addition,
our associates (companies we don’t control) pay taxes at
similar rates. The effective tax rate of the Group is 30.49%
(FY21: 30.30%).
7.
ENVIRONMENT
ENVIRONMENTAL MANAGEMENT
Environmental sustainability is integral to a strong, secure
future. AUB Group is committed to being a responsible and
sustainable organisation.
Climate change presents a number of risks and opportunities
for all sectors, including the insurance industry. These
include direct damage to assets or property from climate-
related events, pricing and demand changes flowing from
the transition to a low-carbon economy, and business
disruption from a changing regulatory environment.
Increasing frequency and severity of climate-related events
pose increased risk to some customers and as these events
become more regular, the cost of insurance may become
prohibitive and certain risks may become uninsurable.
AUB Group believes that we must take climate risks seriously
to ensure the viability of our business as well as identify
opportunities to change and grow in a changing world.
We acknowledge the science and are supportive of global
efforts to decarbonize the economy. We intend to align our
business practices with the goals set in the Paris Agreement,
including to limit global warming to well below 1.5 degrees.
We are also committed to further developing our climate risk
reporting, with a view to aligning our reporting practices to
the recommendations of the Financial Stability Board’s Task
Force on Climate-related Financial Disclosures (TCFD).
We have made an initial assessment of our risks and
opportunities against the TCFD, and aim to comply with
a globally accepted ESG reporting standard by FY24.
We factor climate-related risks into our client risk
assessments and are continuing to ensure we understand
how to advise clients on these risks and the impact these
risks have on their insurance options and cover.
With increasing community and stakeholder concern about
the consequences of climate change and impacts businesses
have on the surrounding environment, it is important to
improve how we measure and report on our climate change
impacts and our long-term approach to mitigate them.
AUB Group’s Environmental, Social, and Governance Policy
details how we seek to be a responsible and sustainable
business and outlines our requirements for a robust
management approach.
67
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022
AUB Group’s environmental objectives and how we are achieving them are summarised below.
OUR OBJECTIVES
HOW WE ACHIEVE IT
Reducing and consolidating office space.
4/1 work from home program for Sydney-based agency and head
office staff, where employees work from home 4 days a week.
Measuring Scope 1 and 2 emissions across the AUB Group.
Monitoring and reducing water consumption year-on-year.
Monitoring and encouraging carbon offsets purchase and
renewable energy consumption. Head office and a number of other
businesses’ energy supply switched to fully renewable sources.
Further transitions to occur in FY23.
Choosing green buildings for our office, including our North Sydney
head office, which boasts a 5.5 Star NABERS energy rating and a
4.0 Star NABERS water rating.
Use of energy efficient lighting in our office buildings.
– 5 buildings in the target emissions group have an average energy
rating of 4.5.
– 4 buildings in the target emissions group have an average water
rating or 4.5.
Actively encouraging recycling of paper, glass and aluminium. We
also provide printer toner cartridge recycling stations in each office.
Encouraging our employees to use reusable water bottles, cups,
and mugs while in the office to reduce waste.
2 buildings in the target emissions group have an average waste
rating of 2.8.
Providing office space in central locations near public transport
hubs. Most employees travel to and from work via public transport
(train, bus, ferry) or active transport (walking and cycling).
Encouraging video and audio communication to reduce air
and road travel.
Carbon offset purchase for corporate travel.
Procuring environmentally friendly office supplies.
Adopting digital solutions to reduce our use of paper and our need
for business travel.
Reducing our paper usage by setting printers to print double-sided
output.
Equipping our employees with knowledge and training to minimise
their own environmental footprint.
Actively engaging with our network partners on good
ESG practices.
Reduce water and
energy consumption
Minimise waste, and
encourage the reuse
and recycling of
waste items
Promote sustainable
transport to
employees, clients
and suppliers
Support sustainable
procurement and
other sustainable
work practices
68
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 Carbon emissions reduction
AUB Group’s emissions reporting covers ours and our partners’ tenanted offices and car fleets. Our primary measures of these
activities are scope 1 and 2 emissions.1
– Scope 1 emissions relate to emissions from our car fleets.
– Scope 2 emissions relate to energy we purchase from the electricity grid.
Scope 1 & 2 Emissions
1500
1000
500
0
Scope 1 – Diesel & Petrol
Combustion and Natural Gas
via Pipeline
Scope 2 –(cid:4)Electricity from
National Grid
PE22
PE21
Total Scope 1 & 2
The Graphs include impacts of newly acquired entities if they had been in the Group for the full period (PE21 has not been
restated). The increase has been due to the growth of the business, primarily through acquisitions. Pleasingly carbon
emissions per employee has fallen, and initiatives completed in FY22 are expected to have positive impacts in FY23.
CO2-e emissions per employee, with the annual results outlined below:
Scope 1 & 2 Emissions, tCO2-e/employee
2022
0.94
2021
1.13
Movement
%
(17.1%)
AUB operates a 4/1 work from home program for our North Sydney head office, where employees of AUB Group, our agencies
and two brokerages work from home four days a week. This has allowed our staff greater flexibility and control over their
working hours and reduced our office space needs. We have sub-let or surrendered a number of offices. We continue to monitor
our emissions across the AUB Group and explore initiatives to reduce them.
As we exited COVID lock downs energy and transport demand have increased, this was offset by continued emphasis to
reduce our environmental footprint, leading to an increase on an absolute value but a decrease per employee of 17% (down
23% compared to PE20). In addition, AUB switched to renewable energy in April and carbon offsetting in June 2022, with
improvements in our Score 1 & 2 Emissions expected in FY23.
WATER CONSUMPTION
We strive to monitor and reduce our water consumption across our businesses. Consolidating our office space, as well as
promoting flexible working arrangements have been the key factors in reduction of water consumption in the reporting period,
compared to the prior year.
1
Scope 1 and 2 emissions are prepared according to National Greenhouse and Energy Reporting Act 2007 (‘NGER Act’). Following the NGER Act’s guidelines, we
report on emissions where the AUB Group has operational control over the facility, thus excludes Scope 3 Emissions. Emissions reported includes both Australia
and New Zealand.
69
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2022AUB GROUP ANNUAL REPORT 2022 FINANCIAL
REPORT
70
AUB GROUP ANNUAL REPORT 2022 AUDITORS INDEPENDENCE DECLARATION
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo tthhee DDiirreeccttoorrss ooff AAUUBB GGrroouupp LLiimmiitteedd
As lead auditor for the audit of the financial report of AUB Group Limited for the financial year ended 30 June 2022, I declare to the
best of my knowledge and belief, there have been:
a.
b.
c.
No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
No contraventions of any applicable code of professional conduct in relation to the audit; and
No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit.
This declaration is in respect of AUB Group Limited and the entities it controlled during the financial year.
Ernst & Young
Michael Wright
Partner
24 August 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
71
AUB GROUP ANNUAL REPORT 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 30 JUNE 2022
Notes
2022
$’000
2021
$’000
4 (a)
4 (b)
4 (c)
4 (d)
4 (e)
4 (f)
4 (g)
5 (a)
Revenue from contracts with customers
Other Income
Share of profit of associates
Cost to provide services and administrative expenses
Finance costs
Adjustments to carrying value
Profit from sale or dilution of interests in associates, controlled entities and
broking portfolios
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Net movement in foreign currency translation and other reserves
Income tax benefit relating to currency translation and other reserves
Other comprehensive income after income tax for the period
Total comprehensive income after tax for the year
Profit for the year attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive income after tax for the year attributable to:
Equity holders of the parent
Non-controlling interests
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
6
6
332,502
313,338
1,035
39,053
1,030
37,328
(282,701)
(260,651)
(6,750)
83,139
(7,618)
83,427
31,817
(4,105)
7,250
22,881
122,206
102,203
(22,322)
99,884
(18,477)
83,726
(5,206)
(32)
(5,238)
(132)
(75)
(207)
94,646
83,519
80,836
19,048
70,621
13,105
99,884
83,726
76,322
18,324
70,339
13,180
94,646
83,519
105.60
105.24
93.13
92.86
The above Consolidated Statement of Comprehensive Income (SOCI) should be read in conjunction with the notes to the
Financial Report.
72
AUB GROUP ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
ASSETS
Current Assets
Cash and cash equivalents
Cash and cash equivalents - Trust
Trade and other receivables
Lease Net Investment
Other financial assets
Total Current Assets
Non-current Assets
Trade and other receivables
Other financial assets
Investment in associates
Property, plant and equipment
Intangible assets and goodwill
Right of Use Asset and Lease Net Investment
Deferred tax asset
Total Non-current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Deferred revenue from contracts with customers
Income tax payable
Provision for employee entitlements
Lease liabilities
Interest-bearing loans and borrowings
Total Current Liabilities
Non-current Liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Lease liabilities
Interest-bearing loans and borrowings
Total Non-current Liabilities
Total Liabilities
Net Assets
EQUITY
Issued capital
Retained earnings
Foreign currency translation reserve
Other reserves
Put option reserve
Share based payments reserve
Equity attributable to equity holders of the parent
Non-controlling interests
Total Equity
Notes
2022
$’000
2021
$’000
10
10
11
11
8
12
5 (b)
259,329
333,131
117,679
1,020
1,868
76,588
205,232
64,081
1,045
554
713,027
347,500
739
9,214
3,532
40
250,100
280,643
6,347
7,534
622,510
469,677
23,851
14,694
22,618
14,574
927,455
798,618
1,640,482
1,146,118
14
425,625
242,904
15
14
5 (b)
15
17
14
10,384
7,967
29,104
8,187
8,941
7,166
9,706
20,680
7,786
11,474
490,208
299,716
67,627
9,754
17,603
18,752
38,861
152,597
642,805
997,677
608,520
247,278
(5,057)
(867)
(8,161)
12,781
854,494
143,183
997,677
10,530
3,767
14,929
18,080
200,809
248,115
547,831
598,287
266,659
210,424
(1,519)
108
(7,057)
10,139
478,754
119,533
598,287
The above Consolidated Statement of Financial Position (SOFP) should be read in conjunction with the notes to the Financial Report.
73
AUB GROUP ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2022
Attributable to equity holders of the parent
Issued
capital
$’000
Retained
earnings
$’000
Foreign
currency
translation
reserve
$’000
Put option
reserve
$’000
Other
Reserves
$’000
Share
based
payments
reserve
$’000
Non-
controlling
interests
$’000
Total
$’000
Total
equity
$’000
At 1 July 2021
266,659 210,424
(1,519)
(7,057)
108
10,139 478,754
119,533 598,287
–
80,836
–
–
–
(3,538)
–
80,836
(3,538)
–
–
–
–
–
80,836
19,048
99,884
(975)
–
(4,513)
(725)
(5,238)
(975)
–
76,323
18,323
94,646
–
(3,408)
–
–
–
–
(3,408)
6,619
3,211
–
–
–
–
–
–
–
14,131
14,131
–
–
–
–
–
–
–
(436)
(436)
Net Profit After Tax for
the year
Other comprehensive
income
Total comprehensive
income for the period
Transactions with
owners in their capacity
as owners:
Ownership changes
without gaining/losing
control (see Note 9)
Non-controlling
interests relating
to new acquisitions
(see Note 7(a))
Non-controlling interests
relating to disposals
(see Note 7(b))
Transfer to put option
reserve & impact of put
option release
Net cost of share-based
payment
Issue of shares
341,861
–
–
1,104
–
(1,104)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,642
2,642
341,861
–
–
–
–
–
–
2,642
341,861
Equity dividends
–
(41,678)
(41,678)
(14,987)
(56,665)
At 30 June 2022
608,520
247,278
(5,057)
(8,161)
(867)
12,781 854,494
143,183 997,677
The above Consolidated Statement of Changes in Equity (SOCIE) should be read in conjunction with the notes to the Financial
Report.
74
AUB GROUP ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2021
Attributable to equity holders of the parent
Issued
capital
$’000
Retained
earnings
$’000
Foreign
currency
translation
reserve
$’000
Put option
reserve
$’000
Other
Reserves
$’000
Share
based
payments
reserve
$’000
Non-
controlling
interests
$’000
Total
$’000
Total
equity
$’000
At 1 July 2020
258,947
177,769
(1,129)
(14,778)
–
8,469
429,278
61,140
490,418
Net Profit After Tax for
the year
Other comprehensive
income
Total comprehensive
income for the year
Transactions with
owners in their capacity
as owners:
Ownership changes
without gaining/losing
control (see Note 9)
Non-controlling interests
relating to disposals (see
Note 7(b))
Transfer to put option
reserve & impact of put
option release
Net cost of share-based
payment
Shares issued under
dividend reinvestment
plan
Equity dividends
–
70,621
–
–
–
(390)
–
70,621
(390)
–
–
–
–
–
70,621
13,105
83,726
108
–
(282)
75
(207)
108
–
70,339
13,180
83,519
–
(5,434)
–
–
–
–
(5,434)
(13,526)
(18,960)
–
–
–
–
–
–
–
72,385
72,385
–
5,587
–
7,721
–
–
13,308
–
13,308
–
–
–
–
–
1,670
1,670
–
1,670
7,712
–
–
(38,119)
–
–
–
–
–
–
–
–
7,712
–
7,712
(38,119)
(13,646)
(51,765)
At 30 June 2021
266,659
210,424
(1,519)
(7,057)
108
10,139
478,754
119,533
598,287
75
AUB GROUP ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 30 JUNE 2022
Notes
2022
$’000
2021
$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Dividends/trust distributions received from associates
Management fees received from associates/ related entities, and interest received
Payments to suppliers and employees
Income tax paid
Interest paid
Interest paid - lease liabilities
Net cash from operating activities before customer trust account movements
Net (decrease)/increase in cash held in customer trust accounts
NET CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Cash inflows/(outflows) from acquisition of consolidated entities, net of cash acquired
Cash inflow from sale/deconsolidation of controlled entities
Disposal costs on sale of controlled entities
Payment for new associates and increases in holdings in associates
Proceeds from disposal of interests in associates
Payment for contingent and deferred consideration on prior year acquisitions
Payment for new broking portfolios purchased
Proceeds from sale of broking portfolios
Net payments from purchases/sales of plant and equipment, capitalised projects,
and other assets
Net repayment of loans to associates/related entities
NET CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
4
7 (a)
7 (b)
7 (b)
8
8
14
345,154
316,676
43,149
15,988
34,252
14,530
(268,931)
(254,025)
(26,904)
(20,190)
(5,489)
(1,006)
101,961
(6,426)
(6,225)
(1,178)
83,840
28,746
95,535
112,586
109,303
(13,436)
5,330
–
(5,408)
8,124
(5,179)
(523)
533
(2,193)
2,500
48,824
(2,232)
(11,231)
2,106
(2,186)
(2,192)
828
(699)
3,451
112,487
23,233
Capital raising
17
341,861
–
Dividends paid to shareholders of the Group
Dividends paid to shareholders of non-controlling interests
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of capital to non controlling interest
Payments of principal for lease liabilities
Proceeds from deferred consideration on prior year disposal
Payment for increase in interests in controlled entities
Proceeds from partial disposal of interests in controlled entities
NET CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of the period
Impact as a result of foreign exchange
10 (b)
10 (b)
10 (b)
9
9
(41,678)
(46,712)
(14,987)
(13,646)
32,103
51,551
(208,352)
(61,796)
5,967
(7,392)
–
–
(9,346)
1,920
(3,136)
(21,417)
380
2,458
104,766
(96,988)
312,788
38,831
281,820
243,151
(2,148)
(162)
Cash and cash equivalents at the end of the period
10
592,460
281,820
The above Consolidated Statement of Cash Flows (SOCF) should be read in conjunction with the notes to the Financial Report.
76
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
CORPORATE INFORMATION
1
The consolidated financial statements are those of
AUB Group Limited (the parent ‘Company’) and all entities
that AUB Group Limited controlled (together the ‘Group’)
during the year and at the reporting date.
The financial report of AUB Group Limited for the year ended
30 June 2022 was authorised for issue in accordance with a
resolution of the directors on 24 August 2022. The Directors
have the power to amend and reissue the financial report.
AUB Group Limited is a for profit company limited by shares
incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange.
The principal activities during the year of entities within the
consolidated Group were the provision of services across
Australia and New Zealand for insurance broking, agency,
and distribution of ancillary products within the support
services businesses.
The registered office and principal place of business of the
Company is Level 14, 141 Walker Street, North Sydney NSW
2060, Australia.
2.1
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
a. Basis of preparation of the financial report
The financial report is a general purpose financial
report which has been prepared in accordance with the
requirements of the Corporations Act 2001, Australian
Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards
Board.
The financial report has been prepared under the historical
cost convention, as modified by applying fair value
accounting to certain financial assets and financial liabilities
(including derivative instruments) measured at Fair Value
through Profit or Loss (FVTPL) or in other comprehensive
income (OCI).
The financial report is presented in Australian dollars ($) and
all values are rounded to the nearest $1,000 (where rounding
is applicable), unless otherwise stated, under the option
available to the Company under ASIC instrument “Rounding
in Financial/Directors’ Reports” 2016/191.
The Company is an entity to which this legislative instrument
applies.
The functional currency of the Group and all segments other
than New Zealand is Australian Dollars. The New Zealand
segment’s functional currency is New Zealand dollars. The
New Zealand segment’s result is converted to Australian
dollars for presentation in the Group’s financial statements.
The financial statements have been prepared on a going
concern basis.
Certain comparative information has been revised in
this financial report to conform with the current period’s
presentation.
b. Statement of compliance
The financial statements comply with Australian Accounting
Standards as issued by the Australian Accounting Standards
Board and International Financial Reporting Standards (‘IFRS’)
as issued by the International Accounting Standards Board
(‘IASB’).
c. Basis of consolidation
Information from the financial statements of controlled
entities is included from the date the parent entity obtains
control until such time as control ceases. Generally, there
is a presumption that a majority of voting rights results
in control. To support this presumption, the Group also
considers all relevant facts and circumstances in assessing
whether it has control over an entity, including rights arising
from contractual arrangements with the entity and/or other
vote holders of the entity.
Where there is a loss of control of a controlled entity, the
consolidated financial statements include the results for the
part of the reporting period during which the parent entity
had control.
The financial information in respect of controlled entities
is prepared for the same reporting period as the parent
Company using consistent accounting policies. Adjustments
are made to ensure conformity with the Group’s accounting
policies.
All intercompany balances and transactions, including
unrealised profits arising from intra-group transactions, have
been eliminated in the consolidated accounts.
Non-controlling interests represent the portion of profit
or loss and net assets in subsidiaries which are not 100%
owned by the Group. These are presented separately in the
Consolidated Statement of Comprehensive Income and
within equity in the Consolidated Statement of Financial
Position.
Transactions with owners in their capacity as owners
A change in ownership interest without loss of control is
accounted for as an equity transaction. The difference
between the consideration transferred and the book value of
the share of the non-controlling interest acquired or disposed
is recognised directly in equity attributable to the parent entity.
Where the parent entity loses control over a controlled entity,
it derecognises the assets including goodwill, liabilities and
non-controlling interests in the controlled entity together
with any accumulated translation differences previously
recognised in equity. The Group recognises the fair value of
the consideration received and the fair value of the investment
retained together with any gain or loss in the Consolidated
Statement of Comprehensive Income.
77
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
2.1
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
See Note 7(a) and Note 8 for further details on current year
transactions and Note 14 for movements in all contingent
and deferred considerations.
Re-estimation of financial liability
A financial liability has been recognised representing
an estimate of the value the Group could be required to
pay on the future exercise by holders of put options over
non-controlling interests and the value of units held by
others for consolidated trusts. The Group re-estimates
the financial liability at the reporting date, taking into
account the estimated future outcomes for income or
profit. Generally this involves projecting the EBIT of the
entity to the first exercise date multiplied by the expected
EBIT multiple and projected net debt (based on known
information and the company’s gearing targets). Historical
trends and any relevant external factors are taken into
account in determining the likely outcome. See Note 14
for further details.
Deferred Tax Assets
Deferred tax assets (DTA) are recognised for deductible
temporary differences when management considers
that it is probable that future tax profits will be available
to utilise those temporary differences. Judgement is
required in relation to DTAs recognised in relation to carry
forward losses. The future profitability of each entity or tax
consolidation group (if a part of a tax consolidation group)
needs to be assessed including where a capital loss is made,
the probability of a future capital gain to offset the carry
forward capital loss. See Note 5 for further details.
Climate Change
Climate change is a material risk to the global economy
including the insurance sector. As a result of an increased
frequency and severity of climate related events, the
availability and cost of insurance coverage for some of
our customers may be materially impacted.
Our decentralised operating approach and diversified
investment strategy helps manage concentration risk to
locations, industries, and products. As a result, we are not
materially exposed to industries expected to be significantly
impacted by climate change.
Fair value of assets acquired
The Group measures the identifiable assets and liabilities
acquired in a business combination at their fair value at
the date of acquisition. Any previously held interests of the
acquiree are remeasured to fair value, with the movement
reflected in the Consolidated Statement of Comprehensive
Income as either a profit or loss. Fair value is estimated with
reference to the market transactions for similar assets or
discounted cash flow analysis. If new information becomes
available within one year of acquisition about the facts and
circumstances that existed at the date of acquisition, then
any revisions to the fair value previously recognised, are
retrospectively adjusted.
d.
Significant accounting judgements,
estimates and assumptions
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates its
judgements and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses.
Management bases its judgements and estimates on
historical experience and on other various factors it believes
to be reasonable under the circumstances, the result of
which form the basis of the carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under
different assumptions and conditions.
Management has identified the following critical accounting
policies for which significant judgements, estimates and
assumptions are made. Actual results may differ from these
estimates under different assumptions and conditions
and may materially affect financial results or the financial
position reported in future periods.
Further details of the nature of these assumptions and
conditions are found in the relevant notes to the financial
statements.
The carrying amounts of certain assets and liabilities are
often determined based on estimates and assumptions of
future events. The key estimates and assumptions that have
a significant risk of causing a material adjustment to the
carrying amounts of certain assets and liabilities within the
next annual reporting period are:
Impairment of goodwill/intangibles and investments in
associates
The Group determines whether goodwill is impaired at
least on an annual basis and for any identifiable intangibles
and investments in associates that have an indicator of
impairment. This requires an estimation of the recoverable
amount of the cash-generating units to which the goodwill
is allocated. The resulting recoverable amounts derived
from the appropriate measures described in Note 13 are
compared to the carrying value for each CGU and in the event
that the carrying value exceeds the recoverable amount, an
impairment loss is recognised. COVID-19 was considered
in our assessment of (1) EBIT market multiples, (2) required
return on equity in relation to Discounted Cash Flow (DCF)
models and (3) future cash flow projections in DCF models.
The assumptions used in this estimation of recoverable
amount and the carrying amount of goodwill are discussed
in Note 13.
Measurement of contingent consideration
The Group recognises contingent consideration at fair value
through profit or loss. Contingent considerations terms vary
between transactions but generally involves either (1) an EBIT
or Revenue (fixed) performance hurdle (generally 2-3 years)
post the acquisition date (i.e. high water mark) or (2) future
dated (generally 2-3 years) EBIT or Revenue times a fixed
multiples less historic payments made.
78
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
Discrete financial information about each of these segments
is reported to management on a regular basis and the
operating results are monitored separately for the purposes
of resource allocation and performance assessment.
Each segment, except Support Services, contains entities
which operate within a uniform regulatory environment,
and contains similar characteristics in relation to customer
profile and operational risks.
Underlying Net Profit Before Tax
Performance of segments are reviewed by Chief Operating
Decision Maker (‘CODM’) on an Underlying Net Profit Before
Tax (UNPBT) basis. UNPBT excludes the effects of non-
recurring events or other items not representative of the
underlying operations items of income and expenditure
which do not represent the underlying performance of the
Group and segments of the Group, such as restructuring
costs, acquisition costs, fair value gain/losses, profits on
sale, amortisation of broking registers and impairments.
Such items are considered to be a result of non-recurring
events or non-representative of the underlying operations
of the Group and segments of the Group. UNPBT also
excludes non-controlling interests to reflect the performance
attributable to the shareholders of the Group.
OPERATING SEGMENTS
3
An operating segment is a component of an entity that
engages in business activities from which it may earn
revenues and incur expenses, whose operating results are
regularly reviewed by members of the senior executive
management team who are the entity’s chief operating
decision makers (CODM) to make decisions about resources
to be allocated to the segment and assess its performance
and for which discrete financial information is available.
Operating segments that meet the quantitative criteria as
prescribed by AASB 8 are reported separately. However,
an operating segment that does not meet the aggregation
criteria is still reported separately where information about
the segment would be useful for the users of the financial
statements. Information about other business activities and
operating segments that are below the quantitative criteria
are combined and disclosed in a separate category.
The Group’s corporate structure is organised into four
business units which have been identified as separate
reportable segments as follows:
1.
2.
3.
4.
Australian Broking: assess the insurable risks and risk
appetite of customers and sources relevant insurance
products from insurers and underwriters which meets
the needs of the customer. Post policy binding services
primarily include claims handling services on behalf
of the customer (claims preparation). Customers are
generally comprised of Small and Medium Enterprise
(SME) businesses, however services are also provided to
large institutions and individuals.
Agencies: on behalf of the insurer, assessment of risk
profile and pricing of policies requested by brokers. Post
policy binding services primarily include claims handling
services on behalf of the insurer (claims processing).
Customers are generally comprised of brokers operating
within the SME insurance industry sector. These entities
do not incur or hold policy liabilities.
New Zealand Broking: provides broking and agency
services within the New Zealand market. Operations are
centrally monitored and managed by AUB Group NZ head
office. As a distinct overseas operation and investment,
performance of the segment is separately monitored.
Support Services: provides a diversified range
of services to support the Broking, Agency, and
New Zealand segments, and external clients. Services
includes post claim rehabilitation, investigation, loss
adjusting, legal, white labelling, Group captive insurance
and AUB Group head office support. These sub
segments are not individually reportable.
The support services segment include the Health
& Rehab* and platforms divisions.
* Health and Rehab division ceased during the prior period on disposal of Altius Group Holdings Pty Ltd on 31 March 2021.
79
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
OPERATING SEGMENTS (CONTINUED)
3
UNPAT reconciles to the Profit after income tax attributable to equity holders of the parent (Reported NPAT) within the
Statement of Comprehensive Income (SOCI) as follows:
Net Profit after tax attributable to equity holders of the parent
Add back/(less) (net of NCI and income tax):
– Share of Amortisation of broking registers
– Adjustments to value of entities (to fair value) on the day they became controlled
entities
– Remeasurement of put option liability (net of Interest unwind)
– Share of impairment charge
– Share of movements in contingent consideration, net of impairment charge
– Profit on deconsolidation of controlled entity
– Capital losses not previously recognised
– Share of Profit from sale or dilution of interests in associates, controlled entities
and broking portfolios
– Share of Impairment of the Right of Use Asset and Onerous Lease Expense
Notes
SOCI
2022
$’000
2021
$’000
80,836
70,621
11,143
10,948
(41,046)
(3,851)
1,104
7,537
(337)
5,587
2,679
(372)
(3,303)
(18,138)
–
(1,791)
(2,591)
(2,050)
219
20,456
611
1,057
74,018
65,301
106,086
94,399
(32,068)
74,018
(29,098)
65,301
– Share of Legal, due diligence and debt costs*
Underlying Net Profit After Tax
Represented by:
Underlying profit pre tax
Tax Expense
Underlying Net Profit After Tax
Segment Financial Performance
Inter-segment revenue**
Revenue from external customers
Total revenue and other income
Share of Net Underlying Profits of Associates
accounted for using the equity method before
amortisation on broking registers and income
tax expense
Total income
Less: Expenses
Total underlying cost to provide services
and administrative expenses
Inter-segment expenses*
Interest paid and other borrowing costs
Non-controlling interest
Underlying Net Profit Before Tax
Australian
Broking
$’000
2,846
192,659
195,505
30 June 2022
New Zealand
Broking
$’000
–
48,524
48,524
Agencies
$’000
–
92,120
92,120
Support
Services
$’000
1,841
234
2,075
Total
$’000
4,687
333,537
338,224
42,689
2,724
238,193
94,844
1,669
50,193
10,497
12,572
57,579
395,803
(132,366)
(60,717)
(36,911)
(20,061)
(250,055)
(2,862)
(640)
(16,177)
86,149
–
(31)
(11,314)
22,782
(1,825)
(530)
(1,974)
8,953
–
(4,309)
(4,687)
(5,510)
–
(29,465)
(11,798)
106,086
Excludes non operation expenses, refer to preceding table for reconciliation between statutory profit and underlying profit before tax.
Includes acquisition costs in relation to Tysers. Refer to Note 20 for further details.
*
** Management fees and interest on loans are recognised as revenue within the Support services segment, and as an expense within other segments.
80
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
3
OPERATING SEGMENTS (CONTINUED)
Segment Financial Performance
Inter-segment revenue*
Revenue from external customers
Total revenue and other income
Share of Net Underlying Profits of Associates
accounted for using the equity method before
amortisation on broking registers and income tax
expense
Total income
Less: Expenses
Total underlying cost to provide services and
administrative expenses
Inter-segment expenses*
Interest paid and other borrowing costs
Non-controlling interest
Underlying Net Profit Before Tax
Australian
Broking
$’000
2,301
173,640
175,941
30 June 2021
New Zealand
Broking
$’000
–
44,812
44,812
Agencies
$’000
–
64,043
64,043
Support
Services
$’000
3,442
31,873
35,315
Total
$’000
5,743
314,368
320,111
43,053
218,994
2,024
66,067
2,158
46,970
8,866
56,101
44,181
376,212
(130,126)
(46,222)
(32,137)
(40,669)
(249,154)
(2,715)
(810)
(13,377)
71,966
(1,339)
–
(3,667)
14,839
(1,689)
(491)
(2,082)
10,571
–
(4,924)
(1,565)
(2,977)
(5,743)
(6,225)
(20,691)
94,399
Excludes non operation expenses, refer to preceding table for reconciliation between statutory profit and underlying profit before tax.
Segment Non-Current Assets
The total of non-current assets other than financial instruments and deferred tax assets are provided in the following graphs.
The measurement of segment non-current assets follows the accounting policies of the Group.
14%
16%
8%
18%
2022
51%
19%
19%
2021
54%
Australian Broking
Agencies
New Zealand Broking
Support Services
Intangible assets such as Goodwill, and investment in associates have been presented within the segment the respective
underlying operations is contained.
Disaggregated information by segment of the carrying value of associates are disclosed in Note 8.
*
Management fees and interest on loans are recognised as revenue within the Support services segment, and as an expense within other segments.
81
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
4
REVENUE AND EXPENSES
Revenue recognition
Revenue from contracts with customers
The Group will recognise as revenue the amount of the
transaction price that is allocated to the performance
obligation, excluding any amounts that are highly probable
of significant reversal, when the performance obligation has
been satisfied.
Australian Broking, Agencies, and New Zealand
Broking segments
Commission, brokerage and fees
In most instances the Group receives short-term advances
from its customers, being the receipt of the premium and
fees on bound policies prior to due date to the insurer. Using
the practical expedient in AASB 15, the Group does not adjust
the consideration for the effects of a significant financing
component if it expects, at contract inception, that the period
between the transfer of the promised service to the customer
and when the customer pays for that service will be one year
or less.
Non-Variable component
Policy Issuance
Commission, brokerage and fee income is generated by
brokers primarily through assessment of insurable risks and
risk appetite of customers and sourcing relevant insurance
products from insurers and underwriters which meets the
needs of the customer. For agencies services are provided
to brokers (the customer), through assessment of risk profile
and pricing of policies requested by brokers.
The Group recognised commissions, brokerage and fee
revenue at invoice date on the basis that: (a) the Group
acts primarily as an agent of the customer when acting
in the capacity as a broker, and as an agent of the insurer
while acting in the capacity as an agent; (b) the Group’s
performance obligations are distinct from those of the
insurer; and (c) the Group’s performance obligations are
predominantly completed prior to the inception of the
insurance policy, the invoice date is the relevant date to
recognise the fixed components of revenue.
Claims handling
Claims handling for agencies refers to claims processing
on behalf of insurers. In certain arrangements (separate
contract or distinct clause within binding agreements
with insurers) the cost per claim processed is separately
identifiable. For such claims the revenue is recognised over
time based on the number of claims processed and the
percentage of completion of claims assessment in progress
at the balance sheet date.
Variable components
The Group recognises the variable amount of revenue only to
the extent that it is highly probable that a significant reversal
of revenue will not occur when the uncertainty associated
with the variability is resolved.
82
Claims handling and premium settlement activities
In most arrangements for agencies, claims handling services
forms part of the binding arrangement with insurers. Claims
handling for brokers refers to claims preparation services
on behalf of the insured. Premium settlement refers to post
policy issuance activities such as payment processing and
bordereaux/settlement reporting.
Revenue associated with claims handling services and
premium settlement activities is recognised over time as
the services are provided to the customer and variable
consideration is constrained to reflect potential cancellations.
Premium Funding Commissions
Premium funding companies provide services to a similar
customer base as the brokers within the Group. The services
provided by these companies involve short term lending of
the upfront Gross Written Premium (‘GWP’) in return for the
principal loan repaid over the term of the insurance cover
plus interest and fees.
The Group receives commission from Premium Funding
companies on successful referral of customers contingent
on the customer’s ongoing repayments. Additionally the
Group receives commissions payments on volume based
incentives provided typically as a percentage of GWP based
on hurdle targets, with a minimum floor to generate the
volume based incentive payments. Such arrangements exist
at both the Group and individual broker level, subsequently
the outcome of broker/agencies may be contingent on both
future sale volume and performance of related entities
contributing to the scheme.
The Premium Funding Commission is recognised monthly by
the Group on receipt of cash or notification by the Premium
Funding Company on the commission due to the Group. No
component of the commission is deferred as no ongoing
obligation exists for the Group.
Profit Commissions
Profit Commissions refer to the share of profits provided to
the broker or agencies by the insurer in relation to the book
of policies (the ‘book’) bound by the broker or agency in any
given underwriting year. Insurers calculate the profit based
on the GWP less any cost incurred to maintain the book, and
satisfy its obligations under the policies within the book such
as claim acquisition, and maintenance costs. The variable
consideration is contingent on the performance of the book
and in particular the quantum of claims.
The Group recognises profit commission at the earlier of:
– receipt of payment;
– receipt of the insurers’ advice of the amount earned; or
– where the recipient is an agency who administers the
related claims handling services, the point at which the
profit commission no longer contains a highly probable
risk of significant reversal of revenue.
Future years profit commissions could be impacted if the
policy lapse rates increase compared to prior years as a
result of COVID-19. There have been no material known
impacts to profit commissions in the current financial year.
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
4
REVENUE AND EXPENSES (CONTINUED)
Support Services segment
Fees
Fee revenue earned is recognised upon issue of an invoice for services rendered, plus an accrual for a percentage of completion
of any work in progress (including a profit margin), which has yet to be invoiced, but for which the Group has an enforceable right
of payment. No ongoing performance obligation exists after the issuance of the invoice.
Other Revenue
Other income is recognised when the service has been performed and the right to receive the payment is established.
Management fees from related entities
Management fees and other revenue are recognised over time as the performance obligation is satisfied.
Interest income
Interest income is recognised as interest accrues using the effective interest method.
Dividends and Distributions from trusts
Dividends and distributions from trusts are recognised when the shareholder’s right to receive the payment is established.
Share of profits of associates
The Group recognises its share of profits of associates using the equity accounted method, being the recognition of a post-
tax share of profits at the Group’s economic interest of each associate. The share of profits excludes any fair value changes
or impairments incurred within the associate as a result of a downstream transaction such as bolt on acquisitions or changes
in control. Additionally differences between the Group and entity accounting policies are adjusted at the Group level, primarily
in relation to intangibles recognised by the acquirer (i.e. the Group) which were not recognised at the associate level. The
amortisation of such intangibles over its useful life (generally 10 years) is separately disclosed.
a. Revenue from contracts with customers
Commission, brokerage and fee Income
Management fees from related entities
Other revenue
Total revenue from contracts with customers
Recognised at a point in time
Recognised over time
b. Other income
Interest income from related parties
Interest from other persons/corporations
Total other income
c. Share of Profit of Associates
Share of Associates’ Profit After Tax but Before Amortisation
Share of amortisation of intangibles – Associates
Total share of profit of associates
2022
$’000
2021
$’000
312,765
296,068
13,774
5,963
332,502
312,496
20,006
169
866
1,035
45,853
(6,800)
39,053
12,273
4,997
313,338
255,821
57,517
203
827
1,030
44,219
(6,891)
37,328
83
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
4
REVENUE AND EXPENSES (CONTINUED)
Expenses
Expenses including salaries and wages, business technology and software costs, insurance, advertising and marketing, and
interest are recognised as incurred or as services are provided to the Group.
Salary related statutory obligations such as long service leave is accrued on a probability weighted basis to the vesting date.
Assumptions are applied in relation to annual and long service leave with respect to expected wage growths and risk free
discount rates over the next 10 years.
Amortisation of broker registers are conducted on a straight line basis over the useful life of the asset, generally 10 years.
Amortisation of Right of Use Asset is made on a straight line basis over the shorter of the lease term and the estimated useful
life of the underlying asset. The Right of Use Asset incorporates fixed rental increases, with changes based on indexes and rental
market reviews incorporated when such changes are known. The Group applies practical expedients in relation to short term
(less than 12 months) and low value (less than $7,000 AUD) leases. Such leases are recognised on a straight line basis of the
expected gross expense over the term of the lease.
Depreciation/Amortisation of all other assets are recognised on a straight line basis over the useful life of the asset, refer to Note
24 for more details.
Commission expenses are sub agent and referral fees paid to another party in return for introductory services on insurances
brokered by the Group. The expense is recognised in full when the related insurance policy is invoiced. For broking entities
typically, they are the principal in the arrangement and as such the commission income and expense are not offset. For
agencies and in some arrangements for broking entities the commission is recognised on a net basis as the entity was
determined to be an agent in the arrangement.
Legal fees/acquisition costs are recognised as they are incurred except in relation to acquisition of a non-financial asset,
borrowing facility, or associates. The costs that are directly attributable to bringing the asset to its intended use are capitalised
and depreciated over the useful life of the asset. The costs directly attributable to obtaining funding are capitalised and
amortised over the term of the facility to a maximum of 5 years. The cost directly attributable to acquisition of an associate is
capitalised as part of the carrying value of the associate.
Further disclosures in relation to non-operating gains and losses such as fair value adjustments to carrying value or gains/
losses from sale are made in Notes 7-9.
d. Expenses
Salaries and wages
Business technology and software costs
Commission expense
Amortisation/impairment of right of use asset and rent expense
Amortisation of broking registers
Amortisation of other financial assets
Amortisation of capitalised project costs
Depreciation
Insurance
Advertising, marketing and travel costs
Consulting, accounting, and audit fees
Legal fees/acquisition costs
Share based payments
Other expenses
Total cost to provide services and administrative expenses
e. Finance costs
Interest paid and other borrowing costs
Interest unwind on lease liability
Interest unwind on put option liability
Total finance costs
84
2022
$’000
2021
$’000
162,400
166,601
20,190
17,990
10,369
9,341
839
675
2,333
12,778
7,924
6,470
20,862
2,365
8,165
282,701
5,510
1,006
234
6,750
14,783
14,151
12,176
9,530
–
281
3,142
9,367
7,763
6,660
1,743
1,126
13,328
260,651
6,225
1,178
215
7,618
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
4
REVENUE AND EXPENSES (CONTINUED)
f. Adjustments to carrying value
Adjustments to carrying value of entities (to fair value) on the date they became controlled
entities
Adjustment to contingent consideration on acquisitions
Remeasurement of put option liability
Impairment charge relating to the carrying value of goodwill (see Note 13)
Total adjustments to carrying value
g.
Profit from sale or dilution of interests in associates, controlled entities and broking
portfolios
Profit on sale of controlled entities leading to deconsolidation (Note 7(b))
Disposal costs on sale of controlled entities (see Note 7 (b))
Profit from sale or dilution of interests in associates, controlled entities and broking portfolios
Total profit from sale or dilution of interests in associates, controlled entities and broking
portfolios
2022
$’000
2021
$’000
40,715
411
(870)
(8,439)
31,817
3,851
416
(5,372)
(3,000)
(4,105)
3,928
–
3,322
23,620
(2,232)
1,493
7,250
22,881
INCOME TAX
5
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from
or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the year end date as presented in the Consolidated Statement of Financial Position.
Deferred income tax is provided on all temporary differences at the date of the Consolidated Statement of Financial Position
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
– when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit
or loss; or
– when the taxable temporary differences associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future. No deferred tax liability has been recognised in respect of any
potential profit on the disposal of an associate or controlled entity by the Group as there is no intention of disposing of
these assets in the foreseeable future. Any tax liability will be recognised before the date of asset’s disposal, when it is
considered probable that the temporary difference will reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:
– when the deductible temporary differences arise from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
– when the deductible temporary differences associated with investments in subsidiaries, associates or interests in joint
ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference
will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be
utilised.
The carrying amount of deferred income tax assets is reviewed at each year end date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each year end date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.
85
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
INCOME TAX (CONTINUED)
5
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the year-
end date as presented in the Consolidated Statement of Financial Position.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation
authority.
Tax consolidation
For the purposes of income taxation, AUB Group Limited (AUB) entered into a Consolidated Tax Group with its 100% owned
subsidiaries. Tax consolidation results in the controlled entity members being treated as part of the Head Company for tax
purposes rather than as a separate taxpayers. The Income Tax Assessment Act (1997) provides that the Consolidated Tax
Group is to be treated as a single entity for Australian tax purposes with the Head Company responsible for the tax payable.
AUB formally notified the Australian Taxation Office of its adoption of the tax consolidation regime.
The Consolidated Tax Group was formalised by entering into tax sharing and tax funding agreements in order to allocate income
tax payable to group members. Each member of the group calculates tax expense on an entity basis. The agreement also
provides that AUB carries forward tax funding assets or tax funding liabilities for which an intercompany loan is recognised
between the parties.
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the
allocation of current taxes to members of the tax consolidated group in accordance with their accounting profit for the period,
while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112
Income Taxes. Allocations under the tax funding agreement are made at the end of each quarter.
Effective Tax Rate
AUB Group is conscious of its social responsibility to pay corporate taxes. The Group’s effective Australian corporate tax rate for
30 June 2022 was 30.49% (2021: 30.30%). The information reported by the Australian Taxation Office (ATO) (as prescribed by
statute) in respect of corporate tax entities will not necessarily provide the complete picture, particularly for organisations such
as the AUB Group that receive the majority of its income through franked dividends.
The AUB Group consists of AUB Group Limited, the parent entity and ASX listed entity, and over 300 entities in which the parent
has a direct or indirect economic interest
The AUB Tax Consolidation Group (AUB TCG), comprises only AUB Group Limited (the parent entity) and its 100% wholly owned
entities. The primary income of the AUB TCG is the receipt of franked dividend income received from the partly owned entities.
Given tax has already been paid in respect of the franked dividends, the AUB TCG is entitled to a credit equal to that tax. That is,
the franking credits attaching to the dividends reflect tax that has already been paid by the individual entity paying the dividends.
While the franking credits represent tax paid, they are reflected in the income tax return of the AUB TCG as an offset against
AUB’s gross tax, thereby reducing the amount disclosed as ‘tax payable’. The amount disclosed by the ATO in their report is
after the franking credits have been taken into account, which does not reflect the tax paid by the Group.
a.
i.
Income tax expense
Major components of income tax expense are as follows:
Current income tax
Current income tax charge
Adjustment for prior years
Deferred tax credit
Origination and reversal of temporary differences
Total income tax expense in Consolidated Statement of Comprehensive Income
2022
$’000
2021
$’000
21,810
18,460
(15)
587
527
22,322
(570)
18,477
86
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
5
ii.
INCOME TAX (CONTINUED)
A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the
company’s applicable income tax rate is as follows:
Profit before income tax
At the company's statutory income tax rate of 30% (2021: 30%)
Impact of:
Equity accounted income/distributions from entities operating as trusts
Gains on sale
Adjustments to carrying value (see Note 4(f))
Benefit of tax losses not previously recognised
Income taxed at different tax rates on overseas operations
(Over)/under provision prior year
Acquisition costs and other non-deductible expenses
Income tax expense reported in the Consolidated Statement of Comprehensive Income
2022
$’000
2021
$’000
122,206
102,203
36,662
30,661
(8,998)
(1,375)
(9,545)
–
(115)
(16)
5,709
22,322
(9,246)
(3,360)
1,232
(1,791)
(95)
587
489
18,477
b. Deferred income tax
Deferred Tax Assets and Liabilities are netted where arising within the same tax payer and to the same tax authority and
expected to unwind in the same period.
i.
Movement in deferred income tax during the year relates to the following:
Unamortised broking registers (and other intangibles)
Non assessable income
Accrued expenses and provisions
PPE & ROU tax timing differences
Carry forward capital losses
Carry forward operating losses
Other
Netting of deferred taxes (arising within same tax consolidated
group or entity)
Deferred tax assets/(liabilities)
Assets
2022
$’000
–
–
2021
$’000
–
–
15,357
14,857
3,947
123
1,505
932
2,761
133
1,794
105
Liabilities
2022
$’000
(16,793)
(7,595)
2021
$’000
(15,007)
(4,527)
–
–
–
–
–
–
–
–
(385)
(471)
(7,170)
14,694
(5,076)
14,574
7,170
5,076
(17,603)
(14,929)
Unrecognised deferred tax assets
ii.
Deferred tax assets for tax losses incurred are recognised to the extent that the Group expects the carry forward losses to be
utilised in the future. Deferred tax assets arising from unused tax losses not recognised at 30 June 2022 was $1.24m (2021:
$1.24m). Deferred tax assets arising from unused capital losses not recognised at 30 June 2022 was $nil (2021: $nil).
87
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
EARNINGS PER SHARE (EPS)/DIVIDENDS PAID AND PROPOSED
6
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing
equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
– the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as
expenses; and
– other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares;
– divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element.
Earnings Per Share (EPS)
a.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Net profit attributable to ordinary equity holders of the parent
2022
$’000
2021
$’000
80,836
70,621
2022
Thousands
Shares
2021
Thousands
Shares
Weighted average number of ordinary shares for basic earnings per share
76,546
74,266
Effect of dilution:
Share Options
Weighted average number of ordinary shares adjusted for the effect of dilution
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
269
76,815
105.60
105.24
222
74,488
93.13
92.86
The Group is committed to issue to the vendors of Tysers Insurance Brokers Limited (Tysers) 9,018,974 ordinary share as
part of the consideration for the acquisition of Tysers by the Group. The transaction will complete subject to some customary
conditions and regulatory approvals. Refer to Note 20 for further information.
Restatement of earnings per share
Basic earnings per share- previously reported
Diluted earnings per share- previously reported
TERP adjustment
Adjusted basic earnings per share
Adjusted diluted earnings per share
2021 cents per
share
95.09
94.81
0.98
93.13
92.86
The Basic and Diluted earnings per share (EPS) for the year ended 30 June 2021 as previously reported has been restated for
the bonus element of the non-renounceable entitlement offer in May 2022, as described in Note 17.
b. Changes in weighted average number of shares
There have been no significant transactions involving ordinary shares or potential ordinary shares that would significantly
change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of
completion of these financial statements.
Information on the classification of securities
c.
Options granted to employees as described in Note 18 are considered to be potential ordinary shares and have been included
in the determination of the diluted earnings per share to the extent they are dilutive. These options have not been included in
the determination of the basic earnings per share. The amount of the dilution of these options is the average market price of
ordinary shares during the year minus the exercise price.
88
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
6
EARNINGS PER SHARE (EPS)/DIVIDENDS PAID AND PROPOSED (CONTINUED)
d.
Equity dividends on ordinary shares
Dividends paid or recognised as a liability during the year
Final franked dividend for financial year ended 30 June 2020: 35.5 cents
Interim franked dividend for financial year ended 30 June 2021: 16 cents
Final franked dividend for financial year ended 30 June 2021: 39 cents
Interim franked dividend for financial year ended 30 June 2022: 17 cents
Total dividends paid/provided in current year
In addition to the above, dividends paid to non-controlling interests totalled $14.98m.
Dividends proposed and not recognised as a liability
Final franked dividend for financial year ended 30 June 2021: 39.0 cents
Final franked dividend for financial year ended 30 June 2022 38.0 cents
Dividends paid and accrued per share (cents per share)
Dividends proposed per share (cents per share) not recognised at balance date
Franking credit balance
e.
The amount of franking credits available for the subsequent financial year are:
2022
$’000
2021
$’000
26,206
11,903
38,109
29,017
29,017
55.00
39.00
29,017
12,661
41,678
35,115
35,115
55.00
38.0
franking account balance as at the end of the financial year at 30% (2021: 30%)
52,547
47,818
–
–
franking credits that will arise from the payment of income tax payable as at the end of the
financial year
The amount of franking credits available for future reporting periods
–
impact on the franking account of dividends proposed or declared before the financial report
was authorised for issue but not recognised as a distribution to equity holders during the year
The amount of franking credits available for future reporting periods after payment of dividend
The tax rate at which paid dividends have been franked is 30% (2021: 30%).
Dividends proposed and accrued will be franked at the rate of 30% (2021: 30%).
–
(61)
52,547
47,757
(15,049)
37,498
(12,436)
35,321
89
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
7
BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL
a. Business combinations
A major strategy of the Group is to acquire part ownership in insurance broking, agency and other complementary services
businesses or portfolios. The terms of these acquisitions vary in line with negotiations with individual vendors but are structured
to achieve the Group’s benchmarks for return on investment.
The business combinations referred to below relate to insurance broking and agency businesses in Australia except Rosser
Underwriting Limited and Dawson Insurance Brokers Limited which operate within and were incorporated in New Zealand.
The acquisition method of accounting is used to account for all business combinations. Consideration transferred is measured
as the fair value of the assets given, shares issued or liabilities assumed at the date of exchange. All acquisition costs including
legal fees are charged against profits to acquisition and legal fees (see Note 4(d)) as incurred, except stamp duty which is
recognised in acquisition costs as incurred.
An estimate is made of the fair value of the future contingent consideration. Any variation to this amount in future periods
(either up or down) is recognised through the Consolidated Statement of Comprehensive Income. Over accruals are recognised
as income in the year the amount is reversed and any under accruals are charged as an expense against profits. Contingent
considerations are recognised in the Consolidated Statement of Financial Position at fair value. Refer to Refer to Note 2.1d and
Note 14 for further information on measurement and critical assumptions.
When a business combination occurs, the acquiree’s identifiable assets and liabilities are measured at their fair value at the
date of the exchange transaction to determine the amount of any goodwill associated with the transaction. Any previously
held interests of the acquiree are remeasured to fair value, with the movement reflected in the Consolidated Statement of
Comprehensive Income as either a profit or loss. If new information becomes available within one year of acquisition about the
facts and circumstances that existed at the date of acquisition, then any revisions to the fair value previously recognised, will be
retrospectively adjusted.
Non-Controlling Interest is initially measured at fair value.
When the Group increases their interest in a company leading to the Group obtaining control in the company the Group
derecognises the investment in associate and recognises the acquiree’s identifiable assets and liabilities measured at their
fair value in line with other business combinations. The shares held immediately preceding the Group obtaining control is
remeasured based on the implicit value of the shares acquired, resulting in a fair value gain or loss. The cumulative amount
recognised through Other Comprehensive Income is reclassified to profit or loss when the control is obtained.
Where there is a change in ownership and the Group loses control, the gain or loss will be recognised in the Consolidated
Statement of Comprehensive Income and the net assets of the entity including the carrying value of non-controlling interests is
derecognised.
Change in the ownership interest in a controlled entity (without loss of control) is accounted for as a transaction with owners
in their capacity as owners and these transactions will not give rise to a gain or loss in the Consolidated Statement of
Comprehensive Income.
Refer to Note 9 for all transactions between owners.
a.
i) During the current period, the following transactions occurred:
– Effective 1 July 2021, the Group acquired a further 8.8% of HQ Insurance Brokers Pty Ltd (HQ) for $2.74m cash. On this
date the entity became a controlled entity of the Group, and the transaction resulted in a fair value gain on step up of
$7.73m.
– Effective 1 October 2021, the Group acquired 100% of iaAnyware Unit Trust (iaAnyware) for $18.15m cash plus
estimated contingent consideration of $11.85m. iaAnyware is a leading software platform business providing licensing
of their proprietary software to brokers across Australia and New Zealand. The deferred consideration is based on
estimated normalised EBIT in 2 years from the acquisition date and is uncapped.
– Effective 1 October 2021, a controlled entity of the Group, acquired 90% of Rosser Underwriting Limited (Rosser),
including 50% from another controlled entity of the Group. On this date Rosser became a controlled entity of the
Group, and the transaction resulted in a fair value gain on step up of $1.19m. The Group’s effective ownership has
increased by 2.3%, however control was established as the Group controls an entity which in turn controls Rosser.
– Effective 30 June 2022, The Group acquired a further 5.5% of Insurance Advisernet Unit Trust (IAA) & Insurance
Advisernet New Zealand Unit Trust (IAH). On this date IAA & IAH become controlled entities of the Group, and the
transaction resulted in a fair value gain on step up of $29.06m.
The above acquisitions have been provisionally accounted for as the initial accounting for the business combinations are
incomplete at the reporting date. The accounting will be completed within 12 months of the acquisition date.
90
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
7
a)
BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL (CONTINUED)
i) During the current period, the following transactions occurred (continued):
Business Acquired
Transaction date(s)
HQ Insurance Pty Ltd
iaAnyware Unit Trust
Rosser Underwriting Ltd*
Dawson Insurance Brokers Limited
Insurance Advisernet Unit Trust
Insurance Advisernet New Zealand Unit Trust
All other transactions
Business Acquired
01-Jul-21
01-Oct-21
01-Oct-21
01-Apr-22
30-Jun-22
30-Jun-22
Various
Total consideration attributed to all additional interests acquired
Less contingent/deferred consideration
Less shares issues by the Company
Less shares issued by a subsidiary of the Group
Less cash acquired
Less trust cash acquired
Cash acquired from acquisition of consolidated entities, net of payments for acquisitions
Goodwill and identifiable intangibles arising on acquisition related to the Group
Goodwill and identifiable intangibles arising on acquisition relating to non-controlling interests
Total Goodwill and identifiable intangibles arising on acquisition
Financial liabiltiy at amortised costs arising on acquisition payable to other unit holders
Net increase in non-controlling interests
2021
%
57.2
0.0
44.7
44.7
46.5
46.5
Various
2022
%
66.0
100.0
47.0
57.2
52.0
52.0
Various
$’000
(55,729)
13,484
–
–
29,065
122,483
109,303
99,644
62,220
161,864
50,239
14,131
*
The Group’s effective shareholding in the entity is less than 50%, but the Group assessed it still has control, as a subsidiary of the Group has more than 50%
interest and rights in the entity.
The total Revenue and Net Profit After Tax recognised during the financial year ended 30 June 2022 in relation to the current
period acquisitions were $20.61m, and $9.03m respectively. Had the entities been acquired at the beginning of the financial year
ended 30 June 2022, the Revenue and Net Profits would have been $52.92m and $17.92m respectively.
Insurance Advisernet Unit Trust &
Insurance Advisernet New Zealand Unit Trust
$’000
ASSETS
Cash and cash equivalents
Cash and cash equivalents - Trust
Receivables
Intangibles and other
Property plant and equipment
Total Assets
LIABILITIES
Payables and provisions
Financial liability attributable to external unitholders
Borrowings
Deferred tax liabilities
Total Liabilities
Net Liabilities
Cash paid
Goodwill arising on acquisition relating to the Group
10,055
121,683
37,048
–
1,017
169,803
157,177
50,239
11,768
–
219,184
(49,381)
8,860
103,812
91
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
7
a.
BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL (CONTINUED)
ii. During the prior period, the following transactions occurred:
– Effective 1 August 2020, the Group acquired 73.2% of Experien Insurance Services Pty Limited for $17.15m ($12.07m
in cash, and $5.60m in Company shares). The agreement contained put options exercisable after 3 years. A total put
option liability of $6.85m was recognised in relation to both put options covering all non-controlling interests. This was
booked directly against the Put Option Reserve and resulted in $nil impact on the comprehensive income on initial
recognition.
– Effective 26 November 2020, a controlled entity of the Group acquired a further 30% of Fleetsure for $5.50m
increasing its shareholding to 80%. A $3.85m fair value gain on step up was recognised on obtaining control of
Fleetsure.
– Effective 1 December 2020, a controlled entity of the Group acquired 100% (AUB’s effective interest of 52.3%) of 360
Investments Pty Ltd and its controlled entities and associates (360) through a share swap with 360’s vendors and
$19.52m in cash consideration.
Loss of Control
b.
When a 100% disposal occurs the Group derecognises all assets and liabilities previously recognised in relation to the disposed
entity including associated goodwill. A gain or loss is recognised in relation to the disposal based on the difference between the
carrying value of net assets (including goodwill) associated with the entity and the sale price.
When a partial disposal occurs leading to the Group losing control of the entity, the Group derecognises all assets, liabilities and NCI
previously recognised in relation to the disposed entity including associated goodwill with an investment in associate recognised in
relation to the remaining interest continued to be held by the Group. A gain or loss is recognised in relation to the disposal based on
the difference between the share (portion of interest being disposed) of net assets (including goodwill) associated with the entity
and the sale price.
i. During the current period, the following transactions occurred:
b.
During the period there were no individually significant transactions which resulted in the Group losing control of any of its
subsidiaries. The aggregate results of all transactions are outlined below. A gain on disposal of $ 3.9 m was recognised during
the period.
Business Disposed
All other transactions
Total consideration receipted to all additional interests disposed
Less cash disposed
Less contingent consideration
Less non-cash settled (share swap)
Receipts for disposal of consolidated entities, net of cash acquired
Total goodwill derecognised on disposal
Total intangibles derecognised on disposal
Total non-controlling interest derecognised
Transaction
date(s)
Various
2022
%/$‘000
Various
2021
%
Various
9,370
(270)
(377)
(3,393)
5,330
(5,320)
(797)
(436)
ii. During the previous period, the following transactions occurred:
– On 31 March 2021, the Group disposed all of its interest in Altius Group Holdings Pty Ltd for $51.76m for cash, with no
deferred or contingent consideration. On that date Altius ceased to be a controlled entity. An after tax profit on sale of
$20.34m was recognised. Costs of disposal attributable to the sale of $2.23m was recognised in the comprehensive
income. A charge to comprehensive income of $5.37m was also recognised on re-measurement of the put option
liability in relation to the Altius non-controlling interest. Furthermore, during the year but prior to the sale the Group
increased its shareholding resulting in a cost of $3.50m recognised directly in retained earnings as a transaction
between owners. In total the resulting series of transactions increased equity attributed to the shareholders of the
Group by $9.24m at balance date.
b.
92
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
INVESTMENT IN ASSOCIATES
8
The Group’s investments in its associates are accounted for under the equity method of accounting in the Consolidated
Financial Statements. These are entities in which the Group has significant influence and which are not controlled entities.
The Group deems they have significant influence if they have more than 20% of the voting rights.
The financial statements of the associates are used by the Group to apply the equity method. The reporting dates of the associates
and the AUB Group are identical and adjustments are made to bring into line dissimilar accounting policies used by associates.
The investment in associates is carried in the Consolidated Statement of Financial Position at cost plus post-acquisition
changes in the Group’s share of net assets of the associates, less dividends and any impairment in value. The Consolidated
Statement of Comprehensive Income reflects the Group’s share of the results of operations of the associates.
Refer to Note 13 Impairment Testing of Identifiable Intangible Assets and Goodwill.
On partial acquisition whilst maintaining significant influence the purchase price is added to the investment in associate
carrying value, and on partial disposal whilst maintaining significant influence the portion of interest in the entity being sold is
proportionately derecognised from the investment in associate carrying value. As part of impairment testing we consider the
recent purchase/disposal prices when determining if there are indicators of impairment.
Except for the step up acquisitions of HQ, Rosser, Dawson, IAA and IAH (refer to Note 7) which resulted in the entities ceasing
to be associates of the Group (became controlled entities), there were no other individually significant transactions related to
associates during the period.
a) During the current period, the following transactions occurred:
Entity
Increase in voting shares
Various
Transaction
date(s)
30 Jun 2022
%/$‘000
30 Jun 2021
%/$‘000
Various
Various
Various
Total cash consideration paid for all interest acquired
5,532
Decrease in voting shares
Various
Total consideration received for all interest disposed
Less carrying value of shares being sold
Less Capital Gains Tax on shares being sold
Net gain/(loss) on disposal of interest
Various
Various
Various
8,910
(6,047)
370
3,233
b) During the previous period, the following transactions occurred:
There was no individually significant transactions with associates in the prior year.
93
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
8.
INVESTMENT IN ASSOCIATES (CONTINUED)
c)
The Group’s investment in associates ownership at balance date is as follows:
Australian Broking
Adroit Specialty Risks Pty Limited
Austbrokers ABS Aviation Pty Ltd
Austbrokers AEI Transport Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers Kelly Partners Pty Ltd
Austbrokers RIS Pty Ltd
Austbrokers SPT Pty Ltd
Austral Insurance Brokers Pty Ltd
Bluestone Insurance Pty Ltd
Brett Grant and Associates Pty Ltd
Broker Claims Pty Ltd
Countrywide Insurance Holdings Pty Ltd**
Cruden & Read Pty Ltd
Global Assured Finance Pty Ltd
Insurance Advisernet Unit Trust*
Insurance Advisernet New Zealand Unit Trust*
JMD Ross Insurance Brokers Pty Ltd
KJ Risk Group Pty Ltd
Lea Insurance Broking Pty Ltd/ Lea Insurance Broking Unit Trust**
Markey Group Pty Ltd
MGA Management Services Pty Ltd
Nexus (Aust) Pty Ltd
National Rural Insurance Group Pty Ltd
Oxley Insurance Brokers Pty Ltd/Coffs Harbour Insurance Brokers Unit Trust
Oxley Insurance Brokers Pty Ltd/Port Macquarie Insurance Brokers Unit Trust
Peter L Brown & Associates Pty Ltd
Rivers Insurance Brokers Pty Ltd
SRG Group Pty Ltd
Supabrook Pty Ltd
The Procare Group Pty Ltd
Western United Financial Services Pty Ltd
YDR Pty Ltd
Agencies
Anchorage Marine Underwriting Agency Pty Ltd
Longitude Insurance Underwriting Agency Pty Ltd
Millennium Underwriting Agency Pty Ltd
SURA Hiller Marine Pty Ltd
Sura Professional Risks Pty Ltd
Tasman Underwriting Pty Ltd
2022
%
34.0
50.0
40.0
50.0
50.0
49.9
50.0
50.0
50.0
50.0
47.5
52.5
50.0
49.9
52.0
52.0
40.0
49.0
53.4
49.9
49.9
–
25.0
-
42.7
50.0
49.9
50.0
49.9
49.0
49.9
50.0
26.2
75.0
49.9
50.0
50.0
50.0
2021
%
-
50.0
38.5
50.0
50.0
49.9
50.0
50.0
50.0
50.0
47.5
49.9
50.0
49.9
46.5
46.5
40.0
49.0
53.4
49.9
49.9
50.0
25.0
37.5
49.9
50.0
49.9
50.0
49.9
49.3
49.9
50.0
–
75.0
49.9
50.0
50.0
50.0
The Group obtained control of the entity during the period as a result of further shares obtained.
*
** Whilst the Group holds more than 50% interest in the entity, the Group’s voting rights are capped at 50%, hence it was determined that the Group maintains
significant influence and does not have control of the entity.
94
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
8
INVESTMENT IN ASSOCIATES (CONTINUED)
New Zealand Broking
BWRS (North Shore) Limited
Commercial and Rural Insurance Limited
Dawson Insurance Brokers*
McDonald Everest Insurance Brokers Limited
Rosser Underwriting Ltd*
Support Services
BizCover Pty Limited
2022
%
44.7
44.7
57.2
44.7
47.0
2021
%
44.7
44.7
44.7
44.7
44.7
40.6
40.2
*
The Group obtained control of the entity during the period as a result of further shares obtained.
Other information in respect of associated entities which carry on business directly or through controlled
entities:
i)
The principal activity of each associate is insurance broking, except for associates owned by Austagencies Pty Ltd which
are agents for insurance underwriters and The Procare Group Pty Ltd which offers rehabilitation, investigation, and loss
adjusting services.
ii) There have been no significant subsequent events affecting the associates’ profits for the period.
iii) There have been nil impairments relating to the investment in associates during the current year.
iv) All associates, including unit trusts, were incorporated, or established in Australia, except for associates owned by AUB
Group NZ Limited which is a controlled entity incorporated in New Zealand.
d) The Group’s reconciliation of its carrying value in its investment in associates are presented below:
Share of Revenue
Share of operating profits before income tax
Share of amortisation of intangibles
Share of net profit before income tax
Share of income tax expense attributable to operating profits
Share of associates’ net profits
e. Reconciliation of carrying value of associates:
Balance at the beginning of the period
Acquisition of associates
Disposal or dilution of interest in associates
Reclassification of investment in associates to controlled entities
Reclassification of controlled entity to investment in associate on losing control
Share of associates’ profit after income tax
Impairment loss on carrying value of associates
Dividends/trust distributions received
Net foreign exchange and other movements
Balance at the end of the period
2022
$’000
2021
$’000
198,886
146,919
58,853
(6,800)
52,053
(13,000)
39,053
57,091
(6,891)
50,200
(12,872)
37,328
280,643
271,041
9,552
(6,048)
(29,957)
34
11,231
(1,302)
(3,482)
–
39,053
37,328
–
–
(43,149)
(34,252)
(28)
79
250,100
280,643
95
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
8
INVESTMENT IN ASSOCIATES (CONTINUED)
f. The entity’s share of the assets and liabilities of associates:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
2022
$’000
2021
$’000
165,777
234,063
94,250
74,712
(145,137)
(217,099)
(28,335)
86,555
(17,931)
73,745
SHARES IN CONTROLLED ENTITIES
9
New acquisitions of controlled entities or transactions which lead to the Group obtaining or losing control in an entity during
the current and previous period are disclosed in Note 7. The following transactions involve transactions between owners where
there is no change in the control assessment.
i)
During the current period, the following transactions occurred:
– On 1 October 2021 AUB Three Sixty Pty Ltd undertook a capital raise of $6m to fund the acquisitions of Rosser
Underwriting Limited and Anchorage Marine Underwriting Agency Pty Ltd.
There were no other significant transactions between owners during the period.
Entity
Increase in voting shares
All other transactions
Transaction
date(s)
2022
%
2021
%
Various
Various
Various
Total consideration paid for all interest acquired
Less adjustment to non-controlling interest
Transfer to retained earnings on equity transactions between owners
3,137
(1,124)
2,013
Decrease or no change in voting rights
AUB Three Sixty Pty Ltd
All other transactions
Total consideration received for all interest disposed
Less adjustment to non-controlling interest
Less Capital Gains Tax payable
Transfer to retained earnings on equity transactions between owners
01-Oct-21
52.3
52.3
Various
Various
Various
(6,375)
7,743
27
1,395
ii) During the previous period, the following transactions occurred:
There was no individually significant transactions with controlled entities in the prior year. Refer to prior year annual report for
further information.
96
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
9
SHARES IN CONTROLLED ENTITIES (CONTINUED)
Other information
i)
All controlled entities are incorporated in Australia except for AUB Group NZ Limited (AUBNZ), AUB Three Sixty NZ Limited
and Insurance Advisernet New Zealand Unit Trust and their controlled entities which are incorporated in New Zealand and
Colonnade Pte Ltd (Colonnade) which is incorporated in Singapore.
ii)
Colonnade is the Group’s insurance captive. Given the size and scale of the Group including associates, certain insurable
risks are internally manageable. Furthermore, the entity provides the Group opportunities to insure certain non-insurable or
hard to place risks at more equitable terms for all participants in the scheme. During the current period cover placed through
the Colonnade covers only the parent and the head office entities.
iii) Material non-controlling interests (NCI) of the Group’s controlled entities include the following:
As at 30 June 2022
AUB Group NZ Limited
AUB Three Sixty Pty Ltd
As at 30 June 2021
AUB Group NZ Limited
AUB Three Sixty Pty Ltd
Principal place of business
New Zealand
Australia and New Zealand
Non
Controlling
Interest
%
Profit or loss
attributed to
minority
$’000
Total NCI
balance at
balance date
$’000
10.7
47.7
668
6,542
17,153
81,912
Principal place of business
New Zealand
Australia and New Zealand
Non
Controlling
Interest
%
Profit or loss
attributed to
minority
$’000
Total NCI
balance at
balance date
$’000
10.7
47.7
1,083
1,968
11,985
71,321
No other NCI or minority interest is material to the Group.
97
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
9
SHARES IN CONTROLLED ENTITIES (CONTINUED)
The Group’s shares in controlled entities ownership at balance date is as follows:
Name and Interests in controlled entities:
Australian Broking
AB Phillips Group Pty Ltd and its controlled entities
Adroit Holdings Pty Ltd and its controlled entities
ABFS (NSW) Pty Ltd and its controlled entities
Austbrokers Canberra Pty Ltd
Austbrokers Coast to Coast Pty Ltd and its controlled entity
Austbrokers CityState Pty Ltd and its controlled entity
Austbrokers Member Services Pty Ltd
Austbrokers RWA Pty Ltd and its controlled entity
Austbrokers Southern Pty Ltd
Austbrokers Sydney Pty Ltd and its controlled entities
Austbrokers Trade Credit Pty Ltd
CityCover (Aust) Pty Ltd and its controlled entities (Austbrokers Comsure)
Experien Insurance Services Pty Ltd
Finsura Holdings Pty Ltd and its controlled entities
Insurance Advisernet Unit Trust*
Insurance Advisernet New Zealand Unit Trust*
Austbrokers Corporate Pty Ltd and its controlled entities
McNaughton Gardiner Insurance Brokers Pty Ltd and its controlled entity
North Coast Insurance Brokers Pty Ltd and its controlled entity
Northlake Holdings Pty Ltd (Country Wide Insurance Brokers WA)
Terrace Insurance Brokers Pty Ltd and controlled entity
The Insurance Alliance Pty Ltd
WRI Insurance Brokers Pty Ltd
Agencies
Austagencies Pty Ltd and its controlled entities
AUB Three Sixty Pty Ltd and its controlled entities
New Zealand Broking
AUB Group NZ Limited and its controlled entities
Brokerweb Risk Services Limited and its controlled entities
Runacres Limited and its controlled entities
Support Services — Australia
AUB Group Services Pty Ltd
Austbrokers Investments Pty Ltd
Austbrokers Employee Share Acquisition Schemes Trust
Austbrokers Pty Ltd
Colonnade Pte Ltd
Ludgate Limited**
Ludgate US Corp**
2022
%
2021
%
60.8
100.0
95.1
85.0
51.0
60.0
100.0
60.0
80.0
100.0
75.0
83.5
73.2
70.0
52.0
52.0
100.0
75.0
75.0
90.5
53.7
100.0
83.5
100.0
52.3
89.3
89.3
67.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
57.5
100.0
95.1
85.0
51.0
60.0
100.0
60.0
80.0
100.0
75.0
83.8
73.2
70.0
46.50
46.50
100.0
70.0
75.0
90.5
53.7
100.0
100.0
100.0
52.3
89.3
89.3
67.0
100.0
100.0
100.0
100.0
100.0
–
–
The Group obtained control of the entity during the period as a result of further shares obtained. The entity was previously an associate of the Group.
*
** Ludgate UK Limited and Ludgate C Corp LLC are incorporated within the UK and US respectively.
98
AUB GROUP ANNUAL REPORT 2022
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
10 CASH AND CASH EQUIVALENTS
Cash and cash equivalents, and cash and cash equivalents - trusts (trust cash), in the Consolidated Statement of Financial
Position comprise cash at bank, in hand and short-term deposits with an original maturity of three months or less.
Although there is a concentration of cash and cash equivalents held with major banks, the lifetime expected credit losses on
cash and cash equivalents are insignificant.
Trust cash relates to cash held for insurance premiums received from policyholders which will ultimately be paid to insurers.
Trust cash cannot be used to meet business obligations/operating expenses other than payments to underwriters and/or
refunds to policyholders.
For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents as defined above are shown net of
outstanding bank overdrafts.
Cash and cash equivalents
Cash and cash equivalents - Trust
Total Cash and cash equivalents
a. Cashflow from operating activities
Profit after tax for the period
Equity accounted (profits) after income tax
Dividends/trust distributions received from associates
Amortisation of intangibles
Amortisation of capitalised project costs
Amortisation and impairment of Right of Use Asset
Depreciation of fixed assets
Share options expensed
Interest unwind on put options and contingent considerations
Adjustments to carrying value
Profit/Loss from sale of associates, controlled entities and broking portfolios
Changes in assets and liabilities
(Increase) in trade and other receivables
Decrease in trade and other payables
Increase in deferred revenue from customers
Increase/(decrease) in trust payables
Increase in provisions
Decrease in deferred tax asset
(Decrease) in deferred tax liability
Increase/(decrease) in provision for tax
Net cash flows from operating activities
2022
$’000
259,329
333,131
2021
$’000
76,588
205,232
592,460
281,820
2022
$’000
99,884
(39,053)
43,149
10,180
675
7,171
2,333
2,366
(234)
(31,817)
(6,782)
(7,387)
12,949
2,108
(7,486)
12,061
196
(3,529)
(1,249)
2021
$’000
83,726
(37,328)
34,252
9,530
281
8,938
3,141
1,126
(215)
4,105
(22,451)
(3,116)
9,505
923
18,684
3,198
1,335
(4,186)
1,138
95,535
112,586
AUB GROUP ANNUAL REPORT 2022
99
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
10 CASH AND CASH EQUIVALENTS (CONTINUED)
b. Changes in liabilities arising from financing activities
Listed below are the disclosure requirements in respect of the changes in the liabilities arising from financing activities, including
both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses).
Year ended 30 June 2022
1 July
2021
$’000
Cash flows
$’000
Foreign
exchange
movement
$’000
New
Acquisitions
$’000
New
consolidated
entity/
deconsolidation
$’000
Other
$’000
30 June
2022
$’000
Current interest bearing loans and
borrowings (excluding items listed below)
Current lease liability
Current Unsecured Loan Other
10,508
(4,558)
7,786
750
43
(182)
(80)
(42)
(15)
Non current interest bearing loans and
borrowings (excluding items listed below) 200,345
(166,764)
(513)
Non current lease liability
Non Current Unsecured Loan Other
18,080
680
(296)
(448)
(43)
(1)
2,518
400
–
9,250
1,011
–
Total liabilities from financing activities
238,149
(172,205)
(694)
13,179
–
–
–
–
–
–
–
–
–
8,388
8,187
553
(3,688)
38,630
–
–
18,752
231
(3,688)
74,741
Year ended 30 June 2021
1 July
2020
$’000
Cash flows
$’000
Foreign
exchange
movement
$’000
New
Acquisitions
$’000
New
consolidated
entity/
deconsolidation
$’000
Other
$’000
30 June
2021
$’000
Current interest bearing loans and
borrowings (excluding items listed below)
Current lease liability
Current Unsecured Loan Other
10,095
8,224
807
421
(408)
(57)
(8)
(5)
–
Non current interest bearing loans and
borrowings (excluding items listed below) 220,067
(10,490)
(235)
Non current lease liability
21,443
(8,938)
Non Current Unsecured Loan Other
801
(120)
(8)
(1)
–
872
–
–
6,876
–
Total liabilities from financing activities
261,437
(19,591)
(258)
7,748
–
–
–
–
–
–
–
10,508
(897)
7,786
–
750
(8,997) 200,345
(1,293)
18,080
–
680
(11,187)
238,149
TRADE AND OTHER RECEIVABLES
11
Trade and other receivables which generally have 30 day credit terms, are initially recognised at fair value and subsequently
measured at amortised cost.
The Group acts as an agent in the collection of amounts due from customers for premiums and amounts payable to insurers on
broking/agency operations, as the Group is not liable for the underlying insurance contract. As such these balances do not meet
the definition of a financial liability or financial asset respectively. The Group recognises amounts due from customers in relation
to uncollected fees and commissions due to the Group for services rendered, adjusted for the expected credit loss. The Group
only recognises amounts due to insurers for premiums when collected but yet to be transferred to the insurer.
Amounts due from premium funding operations include amounts due from policyholders in respect of insurances arranged
by a controlled entity. These arrangement with policyholders have repayment terms up to 12 months from policy inception.
The individual funding arrangements are used to pay insurers. Should policyholders default under the premium funding
arrangement, the insurance policy is cancelled by the insurer and a refund issued which is credited against the amount due.
The Group’s credit risk exposure in relation to these receivables is limited to commissions and fees charged plus any additional
interest charged under the premium funding arrangement.
100
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
11
TRADE AND OTHER RECEIVABLES (CONTINUED)
Other receivables are loan receivables and short term intercompany funding to related entities.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate
cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the
financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the
objective to hold financial assets in order to collect contractual cash flows.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised
when:
i)
the rights to receive cash flows from the asset have expired;
ii)
the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without
material delay to a third party under a ‘pass-through’ arrangement; or
iii) the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the
risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset and has neither transferred or retained
substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of
the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred
asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received
that the Group could be required to repay.
As at 30 June 2022
Due not later
than 6 months
$’000
6 months to
no later than
1 year
$’000
Later than
1 year and
not later than
5 years
$’000
Later than
5 years/
No maturity
$’000
Trade receivables
Amount due from customers on broking/ agency
operations
Amount due from clients in respect of premium
funding
Related party receivables
Other receivables
Total trade and other receivables
24,414
74,967
1,018
14,279
2,128
116,806
–
–
873
–
–
873
45
–
–
694
–
739
–
–
–
–
–
–
As at 30 June 2021
Due not later
than 6 months
$’000
6 months to
no later than
1 year
$’000
Later than
1 year and
not later than
5 years
$’000
Later than
5 years/
No maturity
$’000
Trade receivables
Amount due from customers on broking/ agency
operations
Amount due from clients in respect of premium
funding
Related party receivables
Other receivables
22,024
37,582
1,342
1,022
960
–
–
1,151
–
–
Total trade and other receivables
62,930
1,151
–
–
–
3,485
47
3,532
–
–
–
–
–
–
Total
$’000
24,459
74,967
1,891
14,973
2,128
118,418
Total
$’000
22,024
37,582
2,493
4,507
1,007
67,613
101
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
11
TRADE AND OTHER RECEIVABLES (CONTINUED)
Expected Credit Losses (ECL)
For Trade receivables and Other receivables, an allowance is made for anticipated losses based upon historical information,
adjusted for forward-looking information, and specific credit information of counterparties where available.
Amounts overdue more than 30 days are assumed to have a significant increase in credit risk. Amounts due from customers on
broking/agency operations are generally cancelled after 90 days (60 days overdue, assumed default date) in line with binding
agreements.
Based on historical records on other loans and receivables, debts overdue by 90 days have a significant risk of default, as such
debts overdue by 90 days are assumed to be in default by the Group, and the net (of expected credit losses) receivable reduced
to the expected recoverable amount (taking into consideration any collateral or security associated with the debt) less costs of
recoveries.
Expected credit losses are recorded on receivables, including trade and other receivables, interest-bearing loan assets,
investments and other financial assets. The Group applies the simplified approach to its trade receivables, and measures the
loss allowance at an amount equal to lifetime expected credit losses.
For amounts due from customers of broking/ agency operations and amounts due from clients in respect of premium funding
operations, an allowance is made for anticipated lapses and cancellations based upon historical information, adjusted for
forward-looking information.
ECL allowance included in trade and other receivables (current) above using the 12 month simplified approach as follows:
The provision for lapses 5.0% (2021: 5.0%) provides an amount for expected cancellations and loss of commissions and fees
(amounts due from broking/agency operations, debtors) based on Group wide historic data. Australian Agencies provision at
50% for debtors over 90 days, and 100% for debtors over 120 days in line with their binding arrangements to generally cancel
policies past due by 90 days.
The prior year increase in ECL is mainly attributable to COVID-19. The actual lapses were lower than expected and largely in line
with previous years. The Group’s resilience is due to (1) diversification across industry and risk lines, (2) low exposure to retail
and (3) generally a regulatory requirement for customers to maintain insurance. Factors described in Note 2.1(d) continue to
heighten the risk of default in certain industry sectors and customer segments.
Commercial loans to controlled entities and associates are secured over the shares of the non AUB Group shareholders of the
lendee company. Other related party loans are generally provided for purchase of shares in a controlled entity or associate
to a related party, where the shares acquired forms collateral in the loan deed. All other loans and receivables, including
intercompany and short term loans to controlled entities and associates are unsecured. The valuation of shares held as security
exceed the total loans receivable for the years ended 30 June 2022 and 30 June 2021.
Opening balance 1 July
ECL from acquisition of a controlled entity
ECL derecognised on deconsolidation of a controlled entity
Movements during the year
Total Expected Credit Loss
30-Jun-22
$’000
30-Jun-21
$’000
2,792
103
–
(2,579)
316
2,840
1
(88)
39
2,792
The Group recognises under AASB 15 a deferred component of Revenue representing the significant risk of reversal on issued
policies. This is within the Group’s Deferred Revenue balance within the SOFP. In addition to requirements under AASB 15,
forward looking elements under ECL provisioning is required. This is presented in the table above, along with ECL provisioning
on assets not impacted by AASB 15. As such changes in forward looking elements of ECL provisioning have an impact on the
table above.
102
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
12
INTANGIBLE ASSETS AND GOODWILL
Capitalised project costs
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets where the following criteria are met:
i.
ii.
iii.
iv.
v.
it is technically feasible to complete the software so that it will be available for use;
management intends to complete the software and use or sell it;
there is an ability to use or sell the software;
it can be demonstrated how the software will generate probable future economic benefits; and
adequate technical, financial and other resources to complete the development and to use or sell the software are available,
and the expenditure attributable to the software during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software including eligible employee costs and an appropriate
portion of relevant overheads.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for
use.
Research expenditure and development expenditure that do not meet the criteria above are recognised as an expense as
incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Assessments are made on a project by project basis on the expected life of the intangible with a maximum useful life of 5 years
adopted by the Group.
Costs associated with maintaining software programs and Software-as-a-Service (SaaS) are recognised as an expense as
incurred. For the Group’s policy on SaaS arrangements refer to Note 24.
Goodwill
Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s
interest in the fair value of the identifiable net assets acquired at the date of acquisition. Following initial recognition, goodwill is
measured at cost less any accumulated impairment losses and is not amortised.
As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the
combination’s synergies.
Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying
value may be impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which
the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment
loss is recognised.
Where goodwill forms part of a cash-generating unit and part of the operation of that unit is disposed, the goodwill associated
with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal
of the operation. Impairment losses recognised for goodwill are not subsequently reversed.
Intangible assets - Insurance Broking Register
Identifiable intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an
intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment costs. Internally
generated intangible assets are not capitalised and expenditure is charged against profits in the year in which the expenditure is
incurred.
The useful lives of these intangible assets are assessed to be finite. Intangible assets with finite lives are amortised over the
useful life, currently estimated to be 10 years (2021: 10 years) for broking portfolios/client relationships and financial services
businesses (life risk), and assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The amortisation period and the amortisation method for an identifiable intangible asset with a finite useful life is reviewed at
least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a
change in accounting estimate. The amortisation expense on identifiable intangible assets with finite lives is recognised in the
expense category of the Consolidated Statement of Comprehensive Income consistent with the function of the intangible asset.
Gains or losses arising from derecognition of an identifiable intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in the Consolidated Statement of Comprehensive
Income when the asset is derecognised.
103
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
12
INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Cost
Balance at the beginning of the year
2,240
416,241
107,709
526,190
Year ended 30 June 2022
Capitalised
project costs
$’000
Goodwill
$’000
Insurance
broking
registers
$’000
Total
$’000
Net addition/(disposals) not related to consolidation/
(deconsolidation)
Acquisition of controlled entities
Deconsolidation of controlled entities
Translation of foreign exchange rate movements
Total Intangibles at cost
Amortisation
Balance at the beginning of the year
(Disposals) not related to deconsolidation
Acquisition of controlled entities
Deconsolidation of controlled entities
Amortisation during the year
Impairments/write-off during the year
Translation of foreign exchange rate movements
Total Accumulated amortisation
Summary
Net carrying amount at beginning of year
Net carrying amount at end of year
702
2,686
–
(90)
(1,723)
161,627
(5,320)
(2,539)
1,977
15,801
(1,139)
(1,267)
956
180,114
(6,459)
(3,896)
5,538
568,286
123,081
696,905
1,696
(137)
–
–
675
–
65
2,299
544
3,239
–
–
–
–
–
8,439
–
8,439
54,817
–
–
–
9,341
–
(501)
63,657
56,513
(137)
–
–
10,016
8,439
(436)
74,395
416,241
559,847
52,892
59,424
469,677
622,510
Year ended 30 June 2021
Capitalised
project costs
$’000
Goodwill
$’000
Insurance
broking
registers
$’000
Total
$’000
Cost
Balance at the beginning of the year
1,867
329,421
98,455
429,743
Net addition/(disposals) not related to consolidation/
(deconsolidation)
Acquisition of controlled entities
Deconsolidation of controlled entities
Translation of foreign exchange rate movements & Other
Total Intangibles at cost
Amortisation
Balance at the beginning of the year
(Disposals) not related to deconsolidation
Acquisition of controlled entities
Deconsolidation of controlled entities
Amortisation during the year
Impairments/write-off during the year
Translation of foreign exchange rate movements
380
–
–
(7)
–
129,786
(39,573)
(393)
–
9,451
–
(197)
380
139,237
(39,573)
(597)
2,240
419,241
107,709
529,190
1,420
–
–
–
281
–
(5)
–
–
–
–
–
3,000
–
45,327
46,747
–
–
–
9,530
–
(40)
–
–
–
9,811
3,000
(45)
Total Accumulated amortisation
1,696
3,000
54,817
59,513
Summary
Net carrying amount at beginning of year
Net carrying amount at end of year
447
544
329,421
416,241
53,128
52,892
382,996
469,677
104
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
12
INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Intangible assets are attributable to the following controlled entities:
i) Goodwill
Austagencies Pty Ltd and its controlled entities
Insurance Advisernet Unit Trust & Insurance Advisernet New
Zealand Unit Trust
AUB Group NZ Limited and its controlled entities
Adroit Holdings Pty Ltd and its controlled entities
Austbrokers Corporate Pty Ltd and its controlled entities
Experien Insurance Brokers Pty Ltd
Other controlled entities
Total Goodwill
ii) Insurance Broking Registers
AUB Group NZ Limited and its controlled entities
Adroit Holdings Pty Ltd and its controlled entities
Experien Insurance Brokers Pty Ltd
Other controlled entities
Total Insurance Broking Register
13
IMPAIRMENT
Remaining amortisation period
(years)
2022
2021
6.5
6.0
8
7.5
7.0
9
2022
$’000
2021
$’000
162,033
157,308
103,812
82,692
38,272
17,545
18,596
136,897
559,847
–
85,661
39,864
17,545
18,596
97,267
416,241
2022
$’000
2021
$’000
26,832
7,203
5,648
19,741
59,424
26,136
8,913
6,347
11,496
52,892
Impairment of non-financial assets other than Investment in Associates, Intangibles and Goodwill
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable
amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for
an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets
or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is
tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-
generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down
to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating
to continuing operations are recognised in those expense categories consistent with the function of the impaired asset.
If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if
there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss
was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at
revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge
is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis
over its remaining useful life.
No such indicators were noted in the current or prior year and subsequently no impairments recorded.
105
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
13
IMPAIRMENT (CONTINUED)
Investments in Associates, Intangibles and Goodwill
The Group assesses the impairment of investments in Associates, Intangibles, and Goodwill as a significant judgement and
material to the financial statements.
The recoverable amount of the intangible assets and goodwill is determined based on the higher of the estimate of fair value
of the cash generating unit (CGU) to which they relate less costs to sell and its value in use. In determining fair value, each
controlled entity or associate is considered a separate CGU or grouped into a single CGU for impairment testing where cash
inflows are interdependent and have similar characteristics.
The CGU represent the lowest level within the Group at which the goodwill is monitored for internal management purposes.
Australian Broking entities, New Zealand entities and Support Services entities are viewed as separate CGUs at the entity level
for impairment purposes, whilst the Australian Agency businesses have each been aggregated into a single CGU.
To conduct impairment testing, the Group compares the carrying value with the recoverable amount of each CGU.
The recoverable amount is based on the higher of:
– Fair value - based on maintainable earnings; or
– Value in use - based on a discounted cash flow model.
The Group conducts testing over multiple phases, throughout the year and with several layers of review:
1.
Half year impairment review: Review of all cash generating unit (CGU) at 31 December for indicators of review including
qualitative questionnaires to each Group representative which has oversight of the respective CGU.
2. Annual Impairment testing:
– Phase I – Targeting: Fair value measurement of all CGUs and compared to carrying value as at 31 March to determine
if any entities show a potential impairment or low headroom. Testing is conducted irrespective of any indicators of
impairment (or lack thereof). EBITs are averaged over 3 years to consider the impact of timing differences, however
stress testing is conducted using (1) a 5% declined in EBIT, (2) stressed multiples, and (3) a single year EBIT.
– Phase II – Screening: Update of prior year Discounted Cash Flow (DCF) models where an entity continues to rely on a
value in use model to support its carrying value and current year results meet or exceed prior year projections.
– Phase III – Detailed Review: Review of entities identified in Phase I and II as having potential impairment issues including
creation of new DCFs, supporting normalisations or plans to rectify profitability concerns.
– Phase IV – Year End Refresh: Review of following year budgets, and current year actuals to ensure no significant
changes to the reporting date at 30 June compared to the interim testing date 31 March. Low head room entities are
revisited to mitigate the risk of an undetected impairments.
Watchlist Monitoring: Entities with low headroom are monitored at Board Audit & Risk Committee (BARC) level and
specifically considered during half year and year end testing given sensitivity to impairment.
Governance: Impairment testing is conducted by the Group financial control team in conjunction with the mergers &
acquisitions team, and reviewed at 3 levels (1) Head of Financial Control & Head of Technical Accounting & Tax, (2) Chief
Financial Officer, and (3) BARC.
The Group maintains a policy to seek independent advice on multiples every 3 years from an appropriate valuations firm.
The Group sought independent advice in 2022 to determine the appropriate earnings before interest and tax (EBIT) multiple
used to determine fair value.
The extensive impairment testing and monitoring exceeds requirements under accounting standards and reflects the
materiality of the balances to the Group and the low risk appetite of management and the BARC.
3.
4.
106
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
13
IMPAIRMENT (CONTINUED)
Fair Value
Key assumptions for the fair value methodology are as follows:
Fair value is based on estimates of maintainable earnings. The appropriate pre tax maintainable
earnings for each CGU is multiplied by a multiple from within the range, depending on the type of
business carried out by the CGU.
The risk free rate (before risk margin).
2022
2021
8-15 times 7 - 9.75 times
2.8-3.1%
1%
Multiples have been determined after factoring in the following assumed sustainable long term
profit growth.
up to 2%
up to 2%
Value in use
Where the Value In Use methodology produces a higher valuation than Fair Value Less Costs of Disposal (FVLCD), this valuation
is used for the Recoverable Amount. This measurement takes into account the expected Discounted Cash Flows (DCF) for
the next 5 -15 years based on the forecast profitability. The valuation takes into account the weighted average cost of capital
(WACC) for those CGUs and also looks at the expected long term growth rate with a terminal value calculation at the end of
5 years. This methodology will result in a better estimate valuation for entities where historic performance may not factor in the
medium and long term expected growth from this business.
During the current year, two CGU’s (2021: three CGU’s) were valued using the value in use methodology. All other CGUs were
supportable using the fair value methodology. For two of the CGUs it was determined that an EBIT multiple was not appropriate
in measuring the recoverable amount for the Group in relation to the entities. The fair value measurements were categorised as
level 3 fair value based on the lack of observable inputs in the valuation technique used (see Note 16).
Key assumptions for the value in use methodology are as follows:
Post tax discount rates (WACC).
Short term revenue growth rate - used in discount cash flow assumptions (1-5 years).
Long term revenue growth rate.
2022
2021
6.5%-10.9%
6.5%-15.0%
2.5%-5.7%
2.5%-19.0%
1.5%-2.0%
1.5%-2.0%
Low headroom
Entities are considered to have low headroom if headroom is less than $500k or 5% of total carrying value (whichever is lower)
or show impairment using any of the following (1) Stressed multiple (2) 5% reduction in EBIT or (3) single current year profit (to
ensure 3 year average does not hide a decline in profitability).
No reasonably possible change in key assumptions would result in the recoverable amount of a CGU that is material to the
Group’s total intangible assets, goodwill and investment in associates, being significantly less than the carrying value included in
the accounts.
When making an acquisition, the Group may pay a deposit and defer a component of the purchase price to be determined
based on future financial results. Estimates of the final acquisition cost are made and recognised in the financial statements.
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 actual payments are made. This adjustment can be a loss (if increased) or a profit (if reduced). Where an
estimate is reduced an offsetting adjustment (impairment) is generally made to the carrying value.
During the current year, due to current market conditions further adjustments to contingent considerations in respect of current
and prior year acquisitions resulted in a net reduction (previous year increase) to the estimates previously recognised by the
Consolidated Group of $0.41m (2021: $0.42m). Where the revised contingent consideration estimates were below the original
estimated contingent consideration payments, a corresponding and offsetting impairment charge may be recognised. The
reduction in contingent consideration lead to an impairment of $nil (2021: $nil).
107
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
13
IMPAIRMENT (CONTINUED)
Impairment - current year
Phase I -Targeting Phase 2 -
Screening
Phase 3 -
Detailed review
Phase 4 -Low
Head Room
No impairment
Impairment
All other entities
2 Entities
2 Entities
1 Entity
1 cash generating unit within the New Zealand Broking segment was assessed to be impaired during the current year by
$8.44m. The primary driver for the impairment was due to the loss of key brokers and in turn expected lower client retention.
Two CGUs remain on the watchlist due to low headroom. No CGUs were added to the watchlist.
Impairment - previous year
Phase I -Targeting Phase 2 -
Screening
Phase 3 -
Detailed review
Phase 4 -Low
Head Room
No impairment
Impairment
All other entities
1 Entity
1 Entity
1 Entity
3 Entities
1 Entity
1 entity within the New Zealand Broking segment was assessed to be impaired during the current year by $3.00m. The primary
driver for the impairment was due to loss of a key broker and some clients resulting in lower profitability. Four CGUs remain on
the watchlist due to low headroom of which 3 were acquired in the past 3 years (on initial acquisition fair value transactions have
nil headroom). No CGUs were added to the watchlist.
14 TRADE AND OTHER PAYABLES
Liabilities for trade creditors and other amounts are carried at amortised cost which is the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the entity. Payables to related parties are carried at
the principal amount. Interest, when charged, is recognised as an expense on an accrual basis. Payables are normally settled
on 90 day terms.
The Group recognises amounts due to insurers for premiums collected but yet to be transferred to the insurer.
Financial liability and reserve
AUB Group Limited entered into agreements with various shareholders of related entities and associates, granting options to
put shares held by those shareholders to AUB Group Limited at market values current at the date of exercise of that option.
The earliest the put option can be exercised is 5 years from the date of AUB acquiring its initial shareholding in those entities.
The Group recognises put options financial liability initially at present value of the value the Group could be required to pay
on the future exercise by holders of the put options. Refer to Note 2.1d for further information on measurement and critical
assumptions and for Put Option liability movement during the current period, refer to the SOCIE.
After initial recognition, put options financial liability is subsequently measured at amortised cost using the effective interest
method. The Group re-estimates put options financial liability at the reporting date using the same model applied during
the initial measurement, however the discount rate is not reset as the liability is held at amortised cost. The adjustment is
recognised through the Consolidated Statement Comprehensive Income as income or expense. Movements in the put option
liability are ultimately transferred to the Put Option Reserve.
Whilst this obligation will only be payable in the event that non-controlling shareholders put their remaining shares to the Group,
a liability has been recognised in relation to the put option. The financial liability will be derecognised when the put option expires
unexercised or an entity is disposed with the corresponding movement being reflected in the Put Option Reserve. At balance
date there has been no indication from the non-controlling shareholders that they wish to exit their respective businesses and
put their shares to the Group.
AUB also recognises a financial liability in relation to units held by non-AUB parties for unit trusts consolidated by the Group.
These liabilities are initially measured at fair value and subsequently measured at amortised cost.
108
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
14 TRADE AND OTHER PAYABLES (CONTINUED)
During the current period
During the current period $50.2m of additional financial liability was recognised as part of the IAA and IAH acquisition, refer to
Note 7 for further details.
During the prior period
On 1 August 2020, the Group acquired 73.15% of Experien Insurance Services Pty Ltd, which included issuance of put option
rights to the minority shareholder (see Note 7(a) for further details). This resulted in recognition of a $6.85m put option liability
and related reserve on initial acquisition. Interest unwind of $0.22m was recognised during the period, resulting in a liability at
balance date of $7.06m.
As at 30 June 2022 Consolidated
Trade payables and accruals
Amount payable on broking/agency operations
Financial Liability at amortised cost
Contingent or deferred consideration payables
Related party payables
Other payables
Total trade and other payables
42,100
354,176
9,624
8,352
1,130
10,243
425,625
–
–
–
–
–
–
–
Due not later
than 6 months
$’000
6 months to
no later than
1 year
$’000
Later than 1
year and not
later than 5
years
$’000
Later than
5 years/No
maturity
$’000
–
–
50,239
–
–
–
Total
$’000
42,100
354,176
68,024
17,576
1,130
10,246
–
–
8,161
9,224
–
3
17,388
50,239
493,252
As at 30 June 2021 Consolidated
Due not later
than 6 months
$’000
6 months to
no later than
1 year
$’000
Later than 1
year and not
later than 5
years
$’000
Later than
5 years/No
maturity
$’000
Trade payables and accruals
Amount payable on broking/agency oper-ations
Financial Liability at amortised cost
Contingent or deferred consideration paya-bles
Related party payables
Other payables
28,027
195,774
–
3,722
1,630
12,316
–
–
–
1,435
–
–
–
–
7,057
3,449
24
–
Total trade and other payables
241,469
1,435
10,530
Included in trade and other payable are the following deferred and contingent consideration payables:
Balance at the beginning of the period
Contingent and deferred consideration on current year acquisitions (at net present value)
Payments made in respect of previously recognised contingent consideration
Adjustments to contingent consideration (including foreign currency movements)
Balance at the end of the period
–
–
–
–
–
–
–
2022
$’000
8,606
14,529
(5,179)
(380)
17,576
Total
$’000
28,027
195,774
7,057
8,606
1,654
12,316
253,434
2021
$’000
3,395
11,095
(5,321)
(563)
8,606
Reasonably possible changes in assumptions will change these deferred payments as follows:
– If the full year 2022 operating profit declines by 10% compared to the current forecast, a reduction of $1.50m (2021: $NIL) in
the deferred consideration would result.
– If the full year 2022 operating profit increases by 10% compared to the current forecast, an increase of $1.50m (2021: $NIL)
in the deferred consideration would result.
109
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
INTEREST BEARING LOANS AND BORROWINGS
15
Interest-bearing liabilities are initially recognised at fair value of the consideration received, net of any directly attributable
transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost.
Gains and losses are recognised in profit or loss when the liabilities are derecognised. Borrowing costs are amortised over the
term of the loans.
Current
Secured bank loan
Other
Total interest bearing loans and borrowings (current)
Non-current
Secured bank loan
Other
Total interest bearing loans and borrowings (non-current)
AUB Group Limited syndicated finance facility (see below)
St George Bank
Hunter Premium Funding
Australia and New Zealand Banking Group
Macquarie Bank
Commonwealth Bank
National Australia Bank
Total secured bank loans
2022
$’000
2021
$’000
8,388
553
8,941
10,508
966
11,474
38,630
200,345
231
464
38,861
200,809
–
181,880
16,170
14,790
9,250
3,690
2,518
600
1,013
17,091
–
9,252
211
1,406
47,018
210,853
Group Borrowing facilities as at 30 June 2022
During the year proceeds from the capital raise were used to settle all existing Group syndicated debt which was extinguished.
AUB Group has obtained a binding commitment to enter into a Syndicated Debt Facility with Goldman Sachs totalling $675m
subject to the completion of Tysers. Refer to Note 20 for further information.
During the current and prior periods, there were no defaults or breaches of terms and conditions of any of these facilities.
Facility
provider
Type of
Borrowing
AUB Group Limited
Australia and
New Zealand
Banking Group
Bank
Guarantees
Total
Facility
$’000
Undrawn
Amount
$’000
Amount
Utilised
$’000
Borrowing
Amount
$’000
Current
$’000
Non
Current
$’000
Expiry Date
Interest
Rate
%
Variable/
Fixed
(Var/Fix)
23,179
–
23,179
–
–
–
N/A
N/A
N/A
Facilities arranged by other controlled entities
St George Bank
Loan facility
16,888
719
16,170
–
2,468
13,702
Between
18/10/2022 &
19/03/2023
4 - 4.2
Var
Hunter Premium
Funding
Loan Facility
18,694
3,904
14,790
Macquarie Bank
Loan facility
4,140
449
3,691
Australia and
New Zealand
Bank
Commonwealth
Bank
National
Australia Bank
Total Borrowing
Facilities
Loan Facility
14,896
5,646
9,250
Loan facility
2,706
188
2,518
Loan facility
2,000
1,400
600
82,502
12,305
70,197
–
–
–
–
–
–
2,669
12,121
1/2/2023
1 - 2
Fixed
Between
01/05/2024 &
133
3,558
30/04/2027 3.75 - 5.2
Var and
Fixed
–
9,250
31/07/2026
2,518
600
–
–
8,388
38,630
30/11/2022
2
6
Fixed
Fixed
Var
110
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
15
INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Group Borrowing facilities as at 30 June 2021
Facility
provider
Type of
Borrowing
AUB Group Limited
Total
Facility
$’000
Undrawn
Amount
$’000
Amount
Utilised
$’000
Borrowing
Amount
$’000
Current
$’000
Non
Current
$’000
Expiry Date(s)
Interest
Rate
%
Variable/
Fixed
(Var/Fix)
Syndicated
finance facility
Total Syndicated
facility
Loan Facility
208,128
68,120
140,007
140,007
Loan facility
41,873
–
41,873
41,873
250,001
68,120
181,880
181,880
Credit Cards
450
450
–
Australia and
New Zealand
Banking Group
Bank
Guarantees
4,000
585
3,415
–
–
Facilities arranged by other controlled entities
–
–
–
–
–
140,007
6/12/2022
41,873
6/12/2022
1.85
2.01
181,880
–
–
6/12/2022
17.45
6/12/2022
1.70
Hunter Premium
Funding
Loan facility
18,692
1,601
17,091
17,091
2,307
14,784
Macquarie Bank
Loan facility
9,612
360
9,252
9,252
7,485
1,767
Between
01/11/2025 &
27/01/2035
On Demand to
30/06/2033
2.46 -
3.63
3.80 -
5.65
St George Bank
Loan Facility
–
–
–
–
–
–
–
–
Var
Var
Var
Var
Var
Var
–
Finance facilities
with other banks Loan facility
Total Borrowing
Facilities
5,579
2,949
2,630
2,630
716
1,914
Between
31/03/2022 &
17/03/2026
2.32 -
4.44
Var and
Fixed
288,334
74,065
214,268
210,853
10,508
200,345
16 FINANCIAL INSTRUMENTS
Financial risk management objectives and policies
The Group’s principal financial instruments comprise receivables, loans, cash and short-term deposits, payables, lease liabilities,
overdrafts, interest bearing loans and borrowings and bank overdrafts.
The Group manages its exposure to key financial risks, including interest rate and foreign currency risk in accordance with the
Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets
whilst protecting future financial security.
As outlined in Note 20, AUB Group has entered into a binding agreement to purchase Tysers. As part of the transaction, AUB
must deliver GBP 400m upfront in cash on completion. To protect against the potential FX risk AUB entered into a forward
contract to fix the rate at which GBP of 350m could be purchased by the Group. AUB has designated the instrument under hedge
accounting, and has been assessed as being highly effective.
The Board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for
identification and control of financial risks rests with the Board Audit and Risk Management Committee, supported by a
Management Committee, under the authority of the Board. The Board reviews and agrees policies for managing each of the
risks identified below.
111
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
16 FINANCIAL INSTRUMENTS (CONTINUED)
Risk exposures and Responses
a. Credit Risk
Refer to Note 10 Cash and Cash Equivalents and Note 11 Trade and Other Receivables.
b. Liquidity Risk
The Company’s objective is to maintain adequate cash to ensure continuity of funding and flexibility in its day-to-day operations.
The Company reviews its cash flows weekly and models expected cash flows for the following 12 to 24 months (updated
monthly) to ensure that any stress on liquidity is detected, monitored and managed, before risks arise.
To monitor existing financial assets and liabilities as well as enable an effective controlling of future risks, the Group has
established comprehensive risk reporting that reflects expectations of management of expected settlement of financial assets
and liabilities.
The Group’s main borrowing facilities were provided by a syndicated facility comprising ANZ Bank Ltd and Macquarie Bank
Limited, although some controlled entities have arranged borrowing facilities with other banks. During the year proceeds from
the capital raise were used to settle all existing Group syndicated debt which was extinguished.
AUB Group has obtained a binding commitment to enter into a Syndicated Debt Facility with Goldman Sachs totalling $675m
subject to the completion of Tysers. Refer to Note 20 for further information.
The Company considers the maturity of its financial assets and projected cash flows from operations to monitor liquidity risk.
Liquidity risk arises in the event that the financial assets/liabilities are not able to be realised/settled for the amounts disclosed
in the accounts on a timely basis.
The table below reflects all contractually fixed pay-outs and receivables for settlement, repayments and interest resulting from
recognised financial assets and liabilities. Cash flows for financial assets and liabilities without a fixed amount or timing are
based on the conditions existing at 30 June 2022 with comparatives based on conditions existing at 30 June 2021.
Financial Assets
Due not later than 6 months
6 months to not later than one year
Later than one year and not later than five years
Later than five years
Total financial assets
Financial Liabilities
Due not later than 6 months
6 months to not later than one year
Later than one year and not later than five years
Later than five years
Total financial liabilities
2022
$’000
2021
$’000
710,709
344,750
2,317
5,346
4,607
2,750
3,572
–
722,979
351,072
(439,381)
(254,682)
(13,756)
(75,001)
(50,239)
(14,648)
(222,056)
(7,363)
(578,377)
(498,749)
The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows. Lease
liabilities, trade payables and other financial liabilities mainly originate from the financing of assets used in the Group’s ongoing
operations such as plant and equipment and investments in working capital, e.g. trade receivables and deferred payments on
broker acquisitions.
The table summarises the maturity profile of the Group’s financial assets and financial liabilities based on contractual
undiscounted payments
112
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
16 FINANCIAL INSTRUMENTS (CONTINUED)
c. Fair Values of recognised assets and liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes places either
– in the principal market for the asset or liability; or
– in the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or lability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that the market participants act in their economic best interests.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure the fair value, maximising the use of relevant observable inputs and minimising the unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as
a whole:
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable.
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The Company’s put option liabilities and contingent considerations made in relation to acquisitions of controlled entities and
associates are categorised as level 3. These are valued based on the inputs in the valuation used on new acquisitions during
the reporting period, refer to Note 2.1(d), Note 7(a) and Note 14 for measurement techniques & critical assumptions, new
transactions, and movements during the year respectively.
All other assets and liabilities measured at fair value are categorised as level 2 under the three level hierarchy reflecting the
availability of observable market inputs when estimating the fair value.
Management has assessed that the fair value of cash and short-term deposits, trade receivables, trade payables, bank
overdrafts and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these
instruments.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
– The fair value of loans and other financial assets has been calculated using market interest rates.
– Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Group based on parameters such as
interest rates and individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account
for the expected losses of these receivables. Market values have been used to determine the fair value of securities.
– Fair values of the Group’s interest-bearing borrowings and loans are determined by using the DCF method using discount
rate that reflects the issuer’s borrowing rate as at the end of the reporting period.
– The fair value of unquoted instruments, loans from banks and other financial liabilities (including put option liability),
obligations under leases, as well as other non-current financial liabilities is estimated by discounting future cash flows using
rates currently available for debt on similar terms, credit risk and remaining maturities.
– The fair value of the non-current deferred contingent consideration payments may change as a result of changes in the
projected future financial performance of the acquired assets and liabilities. Refer to Note 14 for further information.
The carrying value of most of the Group’s Financial Assets and Financial liabilities approximate their fair value due to their short
term nature. There were no material differences between the book value and the fair value of the Group’s financial assets and
liabilities.
113
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
16 FINANCIAL INSTRUMENTS (CONTINUED)
d. Market Risk
Interest rate risk
The Group’s exposure to interest rate movements relates to cash and cash equivalents held by the Group and the Group’s
long-term debt obligations. To manage interest rate risk, interest rates on borrowings are fixed for a period depending on
market conditions. This risk is minimal as the Group holds cash received from policyholders to pay insurers in excess of the
amount of borrowings and therefore the group has a hedge against interest rate rises. Loans generally have interest rate
resets every six months. In the event of interest rate rises, a net increase in interest revenue will occur due to cash and cash
equivalents exceeding borrowings.
The main risk to the Group is in relation to interest rate reductions which will decrease the net income earned on cash and
cash equivalents held. The cash held to pay insurers must be held in prescribed investments (Australian bank accounts or
deposits) and as such will be subject to market interest rate fluctuations. The Group has at balance date, the following mix
of financial assets and liabilities exposed to Australian variable interest rate risk.
Financial Assets
Cash and cash equivalents (including trust account balance)
Loans and advances - related entities
Other financial assets
Total financial assets
Financial Liabilities
Loans and other borrowings
Net exposure to interest rate movements
2022
$’000
2021
$’000
592,460
281,820
14,973
11,082
4,507
51
618,515
286,378
(56,934)
561,581
(213,937)
72,441
The Group’s long term policy is to maintain a component of long term borrowings at fixed interest rates, which are carried at
amortised cost and it is acknowledged that exposure to fluctuations in fair value is a by-product of the Group’s policy. Due to the
current low interest rate environment, the Group has determined that variable interest rates will result in a better overall interest
rate risk than fixing for extended periods. All borrowings are based on variable interest rates. See Note 15 for full details of terms
and conditions.
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of
existing positions, alternative financing and the term for fixing interest rates.
The following sensitivity analysis is based on the interest rate exposures in existence at year end. The sensitivity for the prior
year has been prepared on an equivalent basis. At year end, had interest rates moved as illustrated in the table below, with all
other variables held constant, post-tax profits and equity would have been affected as follows:
Judgements of reasonably possible movements
+0.50% (50 basis points) (2021 +0.50% (50 basis points))
-0.50% (50 basis points) (2021 -0.50% (50 basis points))
Post tax profits
Higher/ (lower)
Impacts directly to equity
Higher/ (lower)
2022
$’000
2,808
(2,808)
2021
$’000
362
783
2022
$’000
2,808
(2,808)
2021
$’000
362
783
The net increase in profits in respect of interest rate rises is due to the interest bearing assets being greater than borrowings.
The net increase in profits in respect of interest rate decreases is due to interest bearing assets decreases being capped (cannot
go below 0.00% interest rate), whilst interest bearing liabilities decreasing by the full 0.5% (sensitivity interest rate remains above
0.00%) in the analysis.
Equity securities price risk
Equity securities price risk arises from investments in equity securities. The Group does not invest in listed equity securities or
derivatives.
At year end, the Group had no material exposure to equities other than to shares in associated entities and controlled entities
and therefore has no exposure to price risk that has not already been reflected in the financial statements. The Group tests for
impairment annually and reviews all investments at least half yearly. The methodology for testing for impairment and results is
shown in Note 13.
114
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
16 FINANCIAL INSTRUMENTS (CONTINUED)
d. Market Risk (continued)
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign
currency rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating
activities (when revenue or expenses is denominated in a foreign currency) and the Group’s investment in overseas controlled entities.
The majority of the foreign exchange rate exposure relates to the investment in New Zealand operations, although some controlled
entities raise client invoices in foreign currency denominations.
The Group does not hedge its exposure in foreign currencies through derivatives however the Group’s syndicate facility arrangement
includes a component of borrowing in New Zealand Dollars utilised by the Group’s New Zealand arm which reduces the net assets the
Group exposed to foreign currency.
At year end, had foreign exchange rates moved as illustrated in the table below, with all other variables held constant, post-tax profits
and equity would have been affected as follows:
Judgements of reasonably possible movements
-NZ $0.10 (ten cents) (2021 -NZ $0.10 (10 cents))
+NZ $0.10 (ten cents) (2021 +NZ $0.10 (10 cents))
Post tax profits
Higher/ (lower)
Impacts directly to equity
Higher/ (lower)
2022
$’000
–
–
2021
$’000
–
–
2022
$’000
(11,792)
11,742
2021
$’000
(1,933)
1,933
As outlined in Note 20, AUB Group has entered into a binding agreement to purchase Tysers. As part of the transaction, AUB
must deliver GBP 400m in cash on completion. To protect against the potential FX risk, AUB entered into a forward contract
to fix the rate at which GBP of 350m could be purchased by the Group. AUB has designated the instrument under hedge
accounting, and has been assessed as being highly effective. At year end, had foreign exchange rates moved as illustrated
in the table below, with all other variables held constant, post-tax profits and equity would have been affected as follows:
Judgements of reasonably possible movements
-GBP 0.05 (five cents)
+GBP 0.05 (five cents)
e. Capital Management
Post tax profits
Higher/ (lower)
Impacts directly to equity
Higher/ (lower)
2022
$’000
–
–
2021
$’000
–
–
2022
$’000
60,185
(50,396)
2021
$’000
–
–
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns to shareholders and benefits for other stakeholders and to maintain an optimum capital structure.
In order to maintain or adjust the capital structure or in response to changes in economic conditions and the requirements of the financial
covenants, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt if required.
The Group monitors capital using the gearing ratio. The gearing ratio is calculated as contingent considerations payable plus total
borrowings of controlled entities and our share of total borrowings of associates divided by total equity, total borrowings of controlled
entities and our share of total borrowings of associates and contingent consideration payable.
The gearing ratios at 30 June were as follows:
Debt to equity ratio
Interest bearing loans and borrowings- controlled entities
Interest bearing loans, borrowings & contingent consideration payable - associates (AUB Group
share)
Contingent consideration payable
Total debt
Total equity
Total equity and debt
Gearing Ratio - total debt/(total equity and debt)
2022
$’000/%
2021
$’000/%
47,802
212,283
21,671
17,576
87,049
999,677
1,084,72
8.03%
17,543
8,606
238,432
598,287
836,719
28.50%
AUB has entered into a binding commitment letter with Goldman Sachs to obtain a syndicated debt facility of $650m. The
facility will be executed just before completion of the Tysers acquisition. The facility is fully underwritten by Goldman Sachs.
f. Put Option
AUB Group Limited has entered into agreements with various financiers and shareholders of related entities and associates,
granting options to put shares held in related companies or associates to AUB Group Limited, refer Note 20.
Other than shown on Note 14, at balance date no liability has arisen in relation to these arrangements.
115
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
17
ISSUED CAPITAL
Issued Capital opening balance
Issued Capital under dividend reinvestment plan
Issue of shares*
Issued Capital closing balance
Number of Shares on Issue (ordinary shares fully paid)
Movements in number of shares on issue
Beginning of the financial year
Number of shares issued during period - dividend reinvestment plan
Issue of shares*
Number of shares issued during period - options exercised on 1 March 2021
Number of shares issued during period - options exercised on 11 November 2021
Total Shares on Issue
Weighted average number of shares on issue at end of the year
2022
$’000
2021
$’000
266,659
258,947
–
341,861
2,108
5,604
608,520
266,659
Shares No.
Shares No.
92,409,126
74,403,507
74,403,507
73,818,757
–
17,950,069
–
55,550
138,835
428,566
17,349
–
92,409,126
74,403,507
76,545,637
74,265,626
*
On 9 May 2022 AUB announced a $350m fully underwritten capital raise as a partial funding mechanism of the Tysers acquisition (refer to Note 20 for further
information). 17,950,069 ordinary shares were issued at $19.50 (including a 10.6% discount to the Theoretical Ex-Rights Rights (TERP)) in a 1 for 5.2 pro-rated
accelerated non-renounceable entitlement offer. Both the institutional and retail components of the capital raise were completed by 1 June 2022. $7.92m of
capital raising costs have been directly charged to equity.
Ordinary shares have the right to receive dividends and, in the event of winding up the company, to participate in the proceeds
from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary share capital is recognised at the fair value of the consideration received by the company, net of issue costs.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.
18 SHARE-BASED PAYMENT PLANS
The Group provides benefits to employees (including executive directors) of the Group in the form of share-based payments,
whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
An Employee Performance Share Rights Plan is in place which provides benefits to executive directors and senior executives
through the issue of both Performance Share Rights (PSRs) and Share Appreciation Rights (SARs). The performance hurdles
relating to PSRs (previously referred to as Performance options) issued in previous periods remain unchanged.
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments
at the date at which they are granted. Details of the methodology to value of PSRs is included below.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price
of the shares of AUB Group Limited (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled
to the award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent
to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately
vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is
included in the determination of fair value at grant date. The Consolidated Statement of Comprehensive Income charge or credit
for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. It is included
in Note 4(d) Expenses.
The Share Based Payment reserve is used to record the value of equity benefits provided to employees and directors as part of
their remuneration.
116
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
18 SHARE-BASED PAYMENT PLANS (CONTINUED)
For PSRs vesting based on earnings per share hurdles, no expense is recognised for awards that do not ultimately vest, except for
awards that are cancelled or where vesting is only conditional upon a market condition.
For PSRs issued based on Total Shareholder Return (TSR) hurdles, an expense is recognised irrespective of the Group meeting
market expectations.
In the event PSRs are cancelled, or cancelled and reissued, the unexpensed cost for these is brought forward and recognised
immediately in addition to the expense for any reissued/new PSRs.
If the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee as measured, at the date of modification.
The dilutive effect, if any, of outstanding PSRs is reflected as additional share dilution in the computation of earnings per share
(see Note 6).
The number of options outstanding is represented by:
Financial
year Grants
issued
As at
30 June
2020
lapsed
during FY21
exercised
during FY21
Granted
during FY21
As at
30 June
2021
lapsed
during FY22
exercised
during FY22
Granted
during
FY22*
As at
30 June
2022
Grant date
Earliest
exercise
date
Valuation
$
2017
2018
2019
2020
2020
2021
2022
26,081
(17,473)
(8,608)
42,327
(8,741)
32,914
101,219
200,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32,914
101,219
200,000
125,688
125,688
–
–
–
–
–
33,586
(6,077)
(27,509)
–
–
–
–
–
– 23–Nov–15 24–Jan–20
– 07–Apr–16 23–Nov–20
4,873 08–Dec–16 31–Oct–21
101,219 24–Jan–17 31–Aug–22
200,000 23–Nov–17 31–Aug–24
38,748
164,436 31–Oct–18 31–Aug–23
144,879
144,879 13–Nov–21 31–Aug–24
8.99
11.83
10.72
9.37
8.91
11.27
18.02
–
–
–
–
–
(28,041)
–
–
–
–
402,541
(26,214)
(8,608)
125,688
493,407
(6,077)
(55,550)
183,627
615,407
Share Appreciation Rights (SARS’s)
2022
–
–
–
–
–
–
–
1,016,776
1,016,776
11-Nov-21
31-Aug-26
3.79
*
38,748 PSRs granted in relation to FY21 (incorrectly not issued in November 20) to other senior executives with similar hurdles as PSRs granted in the
previous year.
The weighted average exercise price for all PSRs exercised in FY22 and FY21 was $NIL.
The fair value per SAR at grant is calculated at $3.79 using the Black-Scholes formula.
All PSRs lapsed during FY21 and FY22 were due to vesting conditions not being met.
The weighted average remaining contractual life for the PSRs outstanding at 30 June 2022 is 6.32 years (30 June 2021:
6.06 years).
Vesting conditions for PSRs
The following option exercise conditions apply to all PSRs issued.
60% of PSRs issued are subject to either the compound annual growth rate (CAGR) or average annual growth rate (AAGR)hurdle
set out in Part (b) below (EPS PSRs). 40% of PSRs issued are subject to the total shareholder return hurdle set out in Part (e) and
(f) below (TSR PSRs)
Subject to satisfaction of the performance based conditions referred to in paragraphs (a), (b) and (c) below, the EPS PSRs will
vest 3 years after the date of grant;
117
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
18 SHARE-BASED PAYMENT PLANS (CONTINUED)
(a) Earnings Per Share Growth hurdles are as follows:
Issued before 1 July 2019
Issued in FY20
Issued in FY21 and FY22
CAGR EPS outcomes EPS vesting outcomes AAGR EPS outcomes EPS vesting outcomes AAGR EPS outcomes EPS vesting outcomes
less than 4%
4%
4-7%
7%
7-10%
10% or more
NIL
25%
25%- 50%
less than 5%
5%
5%-7%
NIL
50%
50% - 100%
less than 5%
5%
5%-10%
50%
7% or more
100%
10% or more
NIL
50%
50%- 100%
100%
50%-100%
100%
(b) For all PSRs issued before 1 July 2019, if all of the PSRs do not become exercisable on the First Test Date and the Second
Test Date Compound Growth is higher than the First Test Compound Growth then an additional number of PSRs will
become exercisable as is equal to the difference between the number of PSRs which became exercisable under paragraph
(b) and the number of PSRs which would have become exercisable if paragraph (b) applied on the basis of the Second Test
Compound Growth (rather than the First Test Compound Growth);
For PSRs issued after 1 July 2019, there is no retest if PSRs do not vest after 3 years performance hurdle period and any
unvested PSRs will lapse.
(c) Performance Period - 200,000 CEO 5 year PSRs – The performance hurdles for the 5 year PSRs are the same as the 3 year
PSRs except the vesting period is 5 years. One third of the PSRs will be tested over a 3 year performance period (three year
test date). To the extent that any PSRs satisfy the performance hurdles at this point, they will remain on foot and will vest
and become exercisable following the end of the 5year performance period, subject to the CEO’s continued employment with
the Company (subject to the cessation of employment provisions included in his contract); and
The remaining two thirds of the PSRs, and any PSRs that did not satisfy the performance hurdles at the 3 year test date, will
be tested over the full 5 year performance period.
(d) For the purposes of calculating the CAGR or AAGR, an underlying form of earnings per share will be utilised (Underlying
EPS) being, in respect of any financial year, the consolidated net profit after tax of the Company for that year excluding fair
value adjustments to the carrying values of associates, profit on sale of entities and assets or deconsolidation of controlled
entities, contingent consideration adjustments, impairment charges and amortisation of intangibles (Underlying NPAT)
divided by the weighted average number of shares on issue during the financial year. Other adjustments to the Underlying
NPAT calculation may be made in limited circumstances where the Board considers it to be appropriate.
Subject to satisfaction of the performance based conditions referred to in paragraphs (f) below, the TSR Options will vest
3 years (5 years for item (d) above) after the date of grant;
(e) TSR hurdles are as follows:
Hurdles for TSRs issued after 1 July 2019
Less than 50th percentile of the Comparator Group, 0% of the Options will become exercisable.
50th percentile of the Comparator Group, 50% of the Options will become exercisable.
Between 50th percentile and 75th percentile of the comparator Group, straight line satisfaction of the performance hurdle
between 50% and 100% of the options will become exercisable.
75th percentile of the Comparator Group or higher, 100% of the Options will become exercisable.
TSR Options will be measured by comparing the TSR of the Company with the TSRs of the constituents of the S&P/ASX Small
Ordinaries Industrials Index (AXSID) (Comparator Group) as adjusted by the Board, as at the beginning of each financial year.
This may include, but is not limited to, removing entities in a particular sector or entities affected by takeovers, mergers or
de-mergers
There are no outstanding PSRs issued before 1 July 2019. All pre 1 July 2019 PSR’s have either vested in previous years or have
lapsed.
118
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
18 SHARE-BASED PAYMENT PLANS (CONTINUED)
Share Appreciation Rights (SARs)
The SARs have five-year performance period which is intentionally longer than the 3 year performance period for other
performance options granted under the LTI Plan. Additionally there is a further post exercise holding lock of two years which is
designed to act as an additional mechanism with executives having additional AUB Group equity ownership.
SARs will be tested against a CAGR of the EPS of the Company during the five-year performance period covering 1 July 21 to
30 June 2026.
Vested SARs
Vesting will require stretch performance exceeding regular LTI plan maximum, as well as peer LTI maximum, together with
5 years of ongoing employment from 1 July 2021.
The Board, at its discretion, may determine to make an equivalent value cash payment in lieu of an allocation of Shares. The
vesting date, conversion price and the portion of SARs to vest and convert may be changed at the Board’s discretion.
Shares allocated on the vesting and conversion of SARs are subject to the terms of AUB Group’s Share Trading Policy and carry
full dividend and voting rights upon allocation.
SARs will automatically vest and convert into Shares if the vesting conditions have been satisfied, expected to be on or around
31 August 2026. Vested SARs will be converted to shares in AUB Group Limited based on the formula below.
There is no conversion price or exercise price payable for the conversion of any vested SARs.
Vesting is conditional on meeting performance targets in line with table below
Achieving a CAGR of Underlying EPS of
Vesting outcomes of SARS
Less than 12%
0%
Greater than 12% but less than 14%
Pro rata straight line vesting between 25% and 100%
14% or more
100%
If the vesting conditions are satisfied, the SARs will convert into that number of Shares based on the following formula:
Number of vested SARs x
(Conversion Price-Initial VWAP)
(Conversion Price)
Where:
– Number of vested SARs means the number of SARs that vested after the EPS calculation has been undertaken at the end of
the 5 year performance period.
– Conversion Price means the VWAP of the Shares traded on the ASX over the 60 trading days prior to 30 June 2026.
– Initial VWAP means $20.33, being the VWAP of the Shares traded on the ASX over the 60 trading days prior to 1 July 2021
(the first day of the Performance Period).
– The base underlying EPS at 30 June 2021 was 87.93 cents per share.
119
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
19. PARENT ENTITY INFORMATION
The parent company’s summary financials are presented below:
ASSETS
Cash and cash equivalents
Current Assets
Non-current Assets
Total Assets
LIABILITIES
Current Liabilities
Non-current Liabilities - Interest bearing loans and borrowings
Total Liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL SHAREHOLDERS EQUITY
Profit for the year before income tax
Income tax (expense)/credit
Net profit after tax for the year
Other comprehensive (expense)/income after income tax for the year
Total comprehensive income after tax for the year
Other information
2022
$’000
2021
$’000
176,673
20,889
131,632
100,315
436,961
444,367
745,266
565,571
9,054
15,159
–
181,880
9,054
197,039
736,212
368,532
608,520
266,659
12,641
115,051
10,139
91,734
736,212
368,532
62,010
2,985
64,995
(140)
92,160
(4,346)
87,814
–
64,855
87,814
Guarantees entered into by the parent entity in relation to the debts of its controlled entities or
associates:
AUB Group Limited has guaranteed loan facilities provided to controlled entities and associates in
proportion to its shareholding
–
6,445
AUB Group Ltd has guaranteed lease facilities provided to associates in proportion to its
shareholding
Total Guarantees
16,745
16,745
3,556
10,001
Contingent liabilities
AUB Group Limited has provided indemnities to other shareholders of related entities and associates in relation to guarantees
given by those shareholders, to financiers of or lessors to entities in which AUB Group Limited has an equity interest. We
have assessed the impact of COVID-19 on our associates’ and controlled entities’ liquidity positions and noted no significant
deterioration. At balance date no liability has arisen in relation to these indemnities.
AUB Group Limited has entered into agreements with various financiers and shareholders of related entities and associates,
granting options to put shares held in related companies or associates to AUB Group Limited.
AUB has also entered into a binding agreement to purchase 100% of Tysers for GBP 500m. Refer Note 20 for further detail.
120
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
20 COMMITMENTS AND CONTINGENCIES
The Group’s commitments and contingencies are presented below:
Commitments - Group excluding AASB 16 Lease Liabilities
- Not later than one year*
- Later than one year and not later than five years
- Later than five years
Commitments - Associate excluding AASB 16 Lease Liabilities
- Not later than one year
- Later than one year and not later than five years
- Later than five years
Contingent liabilities
Estimates of the maximum amounts of contingent liabilities that may become payable:
AUB Group Limited has guaranteed loan facilities provided to associates in proportion
to its shareholding.
AUB Group Limited has guaranteed lease facilities provided to associates in proportion
to its shareholding.
Contingent liabilities on committed transactions**
2022
$’000
2021
$’000
706,608
204
–
706,812
68
116
–
184
1,134
222
–
1,356
251
138
–
389
3,598
5,184
234
196,553
200,385
132
–
5,316
*
AUB has entered into a binding agreement to purchase 100% of Tysers for GBP500m (GBP100m to be settled in AUB shares). The acquisition will complete
subject to some customary conditions and regulatory approvals.
AUB will fund the acquisition through its recent capital raise of $350m (Refer to Note 17), private placement with the vendors of $176m in AUB issued shares
(escrowed until 24 months post completion) and committed Syndicated Debt facility of $675m with an accordion facility to fund the potential deferred
consideration. The upfront cash component of the purchase price and certain costs associated with the syndicated debt raising are payable on completion
and are included within the table above.
** The Tysers acquisition described above includes certain transaction costs contingent on completion of the deal, as well as a contingent payment of GBP100m
subject to Tysers meeting revenue growth hurdles within 24 months of completion.
121
AUB GROUP ANNUAL REPORT 2022
Consolidated
2022
$
2021
$
1,395,804
1,118,612
156,072
145,761
58,000
–
1,609,876
1,264,373
–
–
158,271
184,393
38,000
–
196,271
184,393
1,806,147
1,448,766
280,645
237,561
20,716
49,382
–
–
301,361
286,943
–
26,669
3,030
29,699
–
20,985
–
20,985
331,060
307,928
2,137,331
1,756,694
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
21 AUDITORS’ REMUNERATION
The Group’s payments to audit firms are presented below:
Amounts received or due to Ernst & Young (Australia and NZ) for:
Audit of the financial statements of Group and its Controlled entities
Other statutory assurance services
Other assurance related services
Total audit services
Non-audit services
Taxation advice
Taxation compliance services
Consulting services
Total non-audit services
Total services provided by Ernst & Young
Amounts received or due to non Ernst & Young audit firms for:
Audit and review of financial statements
Other statutory assurance services
Other assurance related services
Total audit services
Non-audit services
Taxation advice
Taxation compliance services
Other consulting services
Total non-audit services
Total services provided by other auditors
Total Auditors' remuneration
122
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
22 RELATED PARTY DISCLOSURES
a)
Details of Key Management Personnel (KMP)
The directors of the company in office throughout the year and until the date of signing this report are:
D. C. Clarke
Chairman (non-executive)
R. J. Carless
Director (non-executive) (retired 31 August 2021)
P. G. Harmer
Director (non-executive) (appointed 22 July 2021)
P. A. Lahiff
Director (non-executive)
R. J. Low
Director (non-executive)
C. L. Rogers
Director (non-executive)
The following persons were the executives with the greatest authority for the planning, directing and controlling the activities of
the consolidated entity during the financial year:
M.P.C. Emmett
Director and Chief Executive Officer
M. Shanahan
Chief Financial Officer
b)
There are no loans outstanding owing by KMP at 30 June 2022 (2021: NIL)
c)
Compensation of KMP’s by Category
Salary, fees and short-term incentives
Post employment benefits
Other long-term benefits
Termination benefits
Share-based Payments
Total
2022
$
2021
$
3,753,969
3,203,531
112,112
112,305
–
–
–
–
1,718,365
948,563
5,584,446
4,264,399
d)
STI amounts included above relate to the accrued provision in respect of the current year’s performance that will be
paid during the following financial year. The 2022 amounts have been approved by the Remuneration Committee.
e)
The following related party transactions occurred during the year:
i)
Transactions with related parties in parent, controlled entities and associates
1. Entities within the Consolidated Group charge associates management fees for expenses incurred and services
rendered. Refer to Note 4.
2. Entities within the Consolidated Group provide funds to other related entities within the Group. These funds are
interest bearing, excluding small working capital advances, and are repayable on demand. See Note 11 for amounts
receivable from related parties and Note 14 for payables to related parties.
These transactions are at normal commercial terms and conditions.
123
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
22 RELATED PARTY DISCLOSURES (CONTINUED)
Entities within the Consolidated Group have advanced funds to other related parties
Associates
Related persons/Companies – Trust distribution
Related persons/Companies – Shareholder Loan
ii)
Transactions with other related parties
Other payables - related parties
Associates
Related persons/Companies – Trust distribution
Related persons/Companies – Shareholder Loan
2022
$
2021
$
11,682,895
904,913
1,817,877
1,472,274
1,671,227
1,930,977
2022
$
2021
$
1,129,651
8,115,125
–
862,244
791,482
–
Entities within the Consolidated Group provide Shareholder loans to enable key employees to buy into the business (as part
of the Group’s strategy to retain key employees). These loans are payable back within 5 years, are fully securitised on the shares
of the company, and mechanisms for repayments include garnishing rights over associated dividends.
These transactions are at normal commercial terms and conditions.
A member of the Group Executive, K. McIvor, has a 10.7% (2021 10.7%) interest in the voting shares of a controlled entity,
AUB Group NZ Limited.
Transactions with directors and director-related entities.
iii)
Entities within the Consolidated Group receive fees for arranging insurance cover for directors and /or director related entities.
These transactions are at normal commercial terms and conditions.
Other than disclosed above and in Notes 22(b) and 22(c), there were no other transactions with director or director related
entities.
23 SUBSEQUENT EVENTS
AUB has entered into a binding agreement to purchase 100% of Tysers for GBP 500m, with a potential further contingent
consideration of GBP 100m subject to meeting revenue growth hurdles.
The acquisition will complete subject to some customary conditions and regulatory approvals.
AUB will fund the acquisition through its recent capital raise of $350m, a private placement with the vendors of $176m in AUB
issued shares (escrowed until 24 months post completion) and committed Syndicated Debt facility of $675m with an accordion
feature to fund the potential deferred consideration.
Effective 1 July 2022, Austbrokers Corporate Pty Ltd (AUC), a controlled entity of the Group acquired 100% of SRS Broking Pty
Ltd. AUC partially funded the acquisition by issuing shares, resulting in AUB diluting its ownership in AUC by 20% to 80%.
Effective 1 July 2022, AUB acquired an additional 10.7% of AUB Group NZ Limited, increasing it’s shareholding to 100%.
On 29 July 2022, the Group disposed of its 50% investment in SRG Group Pty Ltd.
On 24 August 2021, the Directors of AUB Group Limited declared a final dividend on ordinary shares in respect of the 2022
financial year. The total amount of the dividend is $35.1m which represents a fully franked dividend of 38.0 cents per share.
The dividend has not been provided for in the 30 June 2022 financial statements.
124
AUB GROUP ANNUAL REPORT 2022
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
24 OTHER POLICIES
Other Policies
For the basis of preparation, significant accounting policies, and changes to accounting refer to Note 2.
For accounting policies on material balances refer to notes above.
Current versus non-current classification
The Group presents assets and liabilities in the Consolidated Statement of Financial Position based on current and non-current
classification.
An asset is current when it is:
– expected to be realised, or intended to be sold, or consumed in the normal operating cycle;
– expected to be realised within twelve months after the reporting period;
– held primarily for the purpose of trading; or
– cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after
the reporting period.
An liability is current when:
– it is expected to be settled in the normal operating cycle;
– it is held primarily for the purpose of trading;
– it is due to be settled within twelve months after the reporting period; or
– there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Group classifies all other assets and liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Deferred revenue from contracts with customers
Revenue from broking and agency activities are partially (1%, 2021: 1%) deferred for premium settlement and claims handling
services (1.5%, 2021: 1.5%) and cancellations (5%, 2021: 5%). The amount of deferral is based on historic data (on time and cost
such activities) adjusted for any forward looking anticipated changes, and margin on service of a standalone service (based on
available external data). The revenue is recognised over time, generally 90 days for premium settlement, and within 12 months
for claims handling.
Dividends Received
The Group recognises Dividends received within the Consolidated Statement of Cash Flows as cash from operating activities.
The Group’s strategy involves investing into other businesses (see Note 7). Cash flows from the Group’s investment in
associates is derived in the form of dividends received. As the Group intends to hold such businesses for the long term,
dividends from associates represents operating cash flows from the Group’s equity investments. The parent actively monitors
dividend payout ratios compared to net profits generated by each business in which the parent has a direct investment.
Employee benefits
Liabilities for employee entitlements to annual leave and other current entitlements are accrued at amounts calculated on the
basis of current wage and salary rates, including package costs and on-costs. Liabilities for non-accumulating sick leave are
recognised when the leave is taken and are measured at the rate paid or payable.
Liabilities for employee entitlements to long service leave, which are not expected to be settled within twelve months after
balance date, are accrued at the present value of the future amounts to be made in respect of services provided by employees
up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary
level, experience of employee departures and periods of service. The discount factor applied to all such future payments is
determined using the corporate bond rates attaching as at the reporting date, with terms to maturity that match, as closely as
possible, the estimated future cash outflows.
Any contributions made to the accumulated superannuation funds by entities within the Group are charged against profits when
due.
125
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
24 OTHER POLICIES (CONTINUED)
Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of the entities at exchange rates
at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are
retranslated to the functional currencies at the exchange rate at that date. The foreign currency gain or loss on monetary items
is the difference between amortised cost in the functional currency at the beginning of the year adjusted for payments during
the year and the amortised cost in foreign currency translated at the exchange rate at the end of the year.
The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the reporting date.
The income and expenses of foreign operations are translated to Australian dollars at exchange rates on the dates of the
transactions. Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency
translation reserve, in equity. If the foreign operation is not a wholly owned controlled entity then the relevant proportion of the
translation difference is allocated to non-controlling interests.
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income and
accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment
is disposed of.
Leases
The Group has entered into leases for premises, car parking and fixed assets for varying periods of up to seven years. The lease
contracts are recognised on the balance sheet at commencement of the lease, with the exception of short-term leases not
exceeding 12 months and leases of low-value assets. The Group applied practical expedients and the exemptions to short-term
leases and low-value underlying assets available in the accounting standard.
Pursuant to some of its lease agreements, the Group has the option to renew the lease for a period of up to ten years. The Group
has no restrictions placed upon the lessee by entering into these leases. The Group applies judgement and considers all relevant
factors in assessing whether it is reasonably certain to exercise an option. This assessment is performed periodically, and when
the Group is reasonably certain to exercise an option to extend the duration of a lease, that option is then taken into account in
calculating or recalculating the right-of-use asset and lease liability.
Where the Group sub leases a premises, it derecognises the Right of Use asset and immediately recognising a Lease Net
Investment asset representing the net present value of all future net cash flows expected from the sub lease. Any gain or loss is
charged against profit and loss.
Make Good Provision
Current lease durations range from less than 1 year to 10 years. Make good payments will only be made at the end of the lease.
A provision has been made for the present value of anticipated costs of future restoration of leased premises. The provision
includes future cost estimates associated with dismantling existing fit outs, repainting of premises and carpet replacement
where necessary.
The calculation of this provision requires assumptions such as future labour costs. These uncertainties may result in future
expenditure differing from the amounts currently provided. The provision recognised for each premises is periodically reviewed
and updated based on the facts and circumstances available at the time. Changes to the estimates of future costs are
recognised in the Consolidated Statement of Financial Position by adjusting both the expense or asset and the provision.
Non-controlling Interests
This is measured at their proportionate share of the identifiable net assets and proportion of goodwill.
126
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
24 OTHER POLICIES (CONTINUED)
Other taxes
Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except:
– when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the
GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
– receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in
the Consolidated Statement of Financial Position.
Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
Property, plant and equipment
Property, plant and equipment, is stated at cost less depreciation and any impairment in value.
Depreciation is calculated on a straight-line over the estimated useful life of the asset as follows:
Motor vehicles: 5 to 8 years;
Plant and equipment: 5 to 10 years.
Impairment
The carrying value of property, plant and equipment is reviewed for impairment at each reporting date, with recoverable amount
being estimated when events or changes in circumstances indicate the carrying value may be impaired.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash
generating unit to which the asset belongs. If any such indication exists and where the carrying value exceeds the estimated
recoverable amount, the asset or cash generating unit is written down to their recoverable amount.
Derecognition and disposal
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are
expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.
Provisions and employee benefits
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at
a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to
the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
127
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
24 OTHER POLICIES (CONTINUED)
Software-as-a-Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software
over the contract period. As such the Group does not receive a software intangible asset at the contract commencement date.
A right to receive future access to the supplier’s software does not, at the contract commencement date, give the customer the
power to obtain the future economic benefits flowing from the software itself and to restrict others’ access to those benefits.
The following outlines the accounting treatment of costs incurred in relation to SaaS arrangements:
– Recognise as an operating expense over the term of the service contract:
– Fee for use of application software;
– Support and maintenance services;
– Program/Project management;
– Integration; and
– Customisation costs.
– Recognise as an operating expense as the service is received (as considered distinct services):
– Configuration costs
– Data conversion and migration costs
– Testing costs; and
– Training costs.
Other Reserves
Other Reserves include cash flow hedge reserve and fair value reserve of financial assets at fair value through Other
Comprehensive Income.
The Group uses derivative financial instruments to hedge its risks associated with foreign currency rate fluctuations. The
effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income in the cash flow
hedge reserve. To the extent that the hedge is ineffective, changes in fair value are recognised in profit or loss. Amounts taken
to other comprehensive income are transferred out of other comprehensive income and reclassified to profit or loss when the
hedged cash flows affect profit or loss. Hedge accounting is discontinued prospectively when a hedging instrument expires,
or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting.
The fair value reserve of financial assets at fair value through Other Comprehensive Income is used to record remeasurements
of equity investments held at fair value through other comprehensive income. When an investment is sold or disposed of, the
related balance in the reserve is transferred to a separate component of equity.
25.1 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The accounting policies and methods of computation are the same as those adopted in prior years except for new and amended
accounting standards which came into effect on 1 July 2021.
The 30 June 2022 financial statements, and respective notes to the financial statements have been prepared in accordance with
the new and amended accounting standards. The accounting policies in the notes below have also been updated to reflect the
new and amended accounting standards in effect during the year.
The Group has applied the following standards and amendments for the first time for the annual reporting period commencing
1 July 2021:
– AASB 2020-8 Amendments to AASs – Interest Rate benchmark Reform – Phase 2;
– AASB 2021-3 Amendments to AASs – COVID-19-Related Rent Concessions beyond 30 June 2021;
– AASB 2020-5 Amendments to AASs – Insurance Contracts; and
– AASB 2020-3 Amendments to AASB 9 – Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities (Part of
Annual Improvements 2018–2020 Cycle).
The amendments listed above did not have any material impact on the amounts recognised in prior periods and are not
expected to significantly affect the current or future periods.
128
AUB GROUP ANNUAL REPORT 2022 NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2022
25.2 STANDARDS ISSUED BUT NOT YET EFFECTIVE
There are a number of new accounting standards and amendments issued, but not yet effective, none of which have been
early adopted by the Group in this Financial Report. The new standards and amendments (noted below), when applied in future
periods, are not expected to have a material impact on the financial position of the Group.
– AASB 2014-10 Amendments to AASs – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture;
– AASB 17 Insurance Contracts;
– AASB 2020-3 Amendments to AASB 3 – Reference to the Conceptual Framework;
– AASB 2020-1 Amendments to AASs – Classification of Liabilities as Current or Non-current;
– AASB 2020-3 Amendments to AASB 116 – Property, Plant and Equipment: Proceeds before Intended Use;
– AASB 2020-3 Amendment to AASB 141 – Taxation in Fair Value Measurements (Part of Annual Improvements
2018–2020 Cycle);
– AASB 2020-3 Amendments to AASB 137 – Onerous Contracts — Cost of Fulfilling a Contract;
– AASB 2021-5 Amendments to AASs – Deferred Tax related to Assets and Liabilities arising from a Single Transaction; and
– AASB 2021-2 Amendments to AASB 108 – Definition of Accounting Estimates.
129
AUB GROUP ANNUAL REPORT 2022 DIRECTORS’ DECLARATION
YEAR ENDED 30 JUNE 2022
In accordance with a resolution of the directors of AUB Group Limited, we state that:
In the opinion of the directors:
a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001 (Cth),
including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the
year ended on that date;
ii. complying with Australian Accounting Standard (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2.1; and
c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with
section 295A of the Corporations Act 2001 (Cth) for the financial year 30 June 2022.
On behalf of the Board
D.C. Clarke
Chair
M. P. C. Emmett
Chief Executive Officer and Managing Director
Sydney, 24 August 2022
Sydney, 24 August 2022
130
AUB GROUP ANNUAL REPORT 2022
INDEPENDENT AUDITOR’S REPORT
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent Auditor's Report to the Members of AUB Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of AUB Group Limited (the Company) and its subsidiaries (collectively the Group), which
comprises the consolidated statement of financial position as at 30 June 2022, consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes
to the financial statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a)
Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated
financial performance for the year ended on that date; and
b)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent
of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description
of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
131
AUB GROUP ANNUAL REPORT 2022
INDEPENDENT AUDITOR’S REPORT
IImmppaaiirrmmeenntt aasssseessssmmeenntt ooff ggooooddwwiillll,, iinnssuurraannccee bbrrookkiinngg rreeggiisstteerrss aanndd iinnvveessttmmeenntt iinn aassssoocciiaatteess
Financial report reference: Notes 2, 7, 8, 12 and 13
WWhhyy ssiiggnniiffiiccaanntt
At 30 June 2022, the Group’s statement of financial
position includes goodwill, insurance broking registers
and investment in associates totalling
$869 million, representing 53% of total assets. The Group
recognised an additional $160 million of goodwill and
$18 million of insurance broking registers arising from
business acquisitions during the year.
In assessing the recoverability of goodwill, insurance
broking registers and investment in associates, the Group
performs an annual impairment assessment, or more
frequently, if impairment indicators are present.
This was a key audit matter as the determination of
whether or not goodwill, insurance broker registers and
investment in associates are impaired, involves complex
and significant judgments by the Group about the future
results of relevant parts of the business.
As disclosed within Note 13 to the financial statements,
the Group’s impairment assessment involves significant
judgments and estimates including:
Determination of Cash Generating Units (‘CGUs’)
Applicable Revenue and Earnings Before Interest
and Tax (EBIT) multiples
Discount rates, terminal growth rates as well as
revenue and expense assumptions within
Discounted Cashflow (DCF) models, where
required.
Stress testing of key assumptions.
The Group has more than 50 individual CGUs that operate in
a number of industries within the insurance broking and
underwriting sector in Australia and New Zealand as well as
the provision of support services. Economic and entity
specific factors are incorporated into the EBIT multiples or
DCFs used in the impairment assessments.
HHooww oouurr aauuddiitt aaddddrreesssseedd tthhee kkeeyy aauuddiitt mmaatttteerr
Our audit procedures included the following:
We assessed the CGUs and confirmed their use in the
impairment model, based on our understanding of the
nature of the Group’s business and management’s
internal reporting.
We assessed the determination of the initial recognition
of goodwill and intangible assets arising from business
combinations during the year.
We evaluated the Group’s process regarding impairment
assessments of goodwill, insurance broking registers and
investment in associates and the determination of any
asset impairment outcomes.
We evaluated the competence, capabilities and
objectivity of management’s expert who advised
management on EBIT multiples across the Group’s
operating segments, geographical regions, and CGUs.
We involved EY valuation specialists to assist in assessing
the appropriateness of the impairment models including
key inputs into the models such as the applicable EBIT
multiples and discount rates used in the current year
impairment calculations.
We tested the mathematical accuracy of the impairment
models and agreed relevant data back to management’s
forecasts, audited year end results and other supporting
documentation.
We assessed the reasonableness of the estimated useful
life attributed to identifiable insurance broking register
intangible assets.
We assessed the Group’s sensitivity analysis and
evaluated whether any reasonably foreseeable change in
assumptions could lead to an impairment.
We assessed the adequacy of the disclosures associated
with the impairment assessment in Note 13 to the
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
132
AUB GROUP ANNUAL REPORT 2022
INDEPENDENT AUDITOR’S REPORT
DDeecceennttrraalliisseedd ooppeerraattiioonnss
Financial report reference: Notes 2.1, 8 and 9
WWhhyy ssiiggnniiffiiccaanntt
The Group comprises more than 80 subsidiaries and
associates (‘components’) with operations in Australia and
New Zealand.
This was a key audit matter as the individual components
are wide ranging in size with each business operation
having different customer profiles and products. The
decentralised and varied nature of these operations
require significant oversight by the Group to monitor the
activities, review component financial reporting and
undertake the Group consolidation procedures.
The financial reports of a large number of controlled
entities and associates are audited by component auditors
other than EY and therefore the assessment of the
adequacy of the procedures performed by other auditors
was significant to the audit.
HHooww oouurr aauuddiitt aaddddrreesssseedd tthhee kkeeyy aauuddiitt mmaatttteerr
Our audit procedures included the following:
We assessed the effectiveness of relevant controls over
the Group’s decentralised structure, including monitoring
controls at the Group, segment and individual component
level which are focused on key performance metrics and
risk reporting.
We planned and scoped our audit by size and risk across
all components of the Group to determine the extent of
audit work to be undertaken for each component.
Instructions were sent to all component auditors
including specific instructions asking them to consider
those risks assessed as significant to the Group.
We received audit clearance and supporting
documentation from all EY and Non-EY audited
components. For components we identified as significant
entities and a rotational sample of smaller components,
we liaised directly with the component audit teams to
evaluate the adequacy of the auditor’s work, through
review of:
underlying audit work;
the scoping of key audit areas;
planning and execution of audit procedures,
significant areas of estimation and judgment; and
audit findings.
We analysed the financial information of all components.
Procedures included discussions with Group
management about the components’ financial
performance, and an assessment as to whether there was
any matters arising that required explanation or
additional procedures.
Information other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the information included in the Group’s
2022 Annual Report but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of
assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
133
AUB GROUP ANNUAL REPORT 2022
INDEPENDENT AUDITOR’S REPORT
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance
of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the
financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
134
AUB GROUP ANNUAL REPORT 2022
INDEPENDENT AUDITOR’S REPORT
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 24 to 48 of the Directors’ Report for the year ended 30 June 2022.
In our opinion, the Remuneration Report of the AUB Group Limited for the year ended 30 June 2022, complies with section
300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based
on our audit conducted in accordance with Australian Auditing Standards.
Ernst & Young
Ernst & Young
Michael Wright
Partner
Sydney
24 August 2022
Stacey Hooper
Partner
Sydney
24 August 2022
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
135
AUB GROUP ANNUAL REPORT 2022
ASX ADDITIONAL INFORMATION
YEAR ENDED 30 JUNE 2022
Additional information required by the ASX and not shown elsewhere in this report is as follows. The information is current as at
29 July 2022.
A. DISTRIBUTION OF EQUITY SECURITIES
Ordinary share capital
– 92,409,126 fully paid ordinary shares are held by 2,878 individual shareholders. All issued shares carry one vote per share
and carry the rights to dividends.
Performance Share Rights (PSRs)
– 615,407 PSRs are held by 8 individual holders. PSRs do not carry a right to vote.
Share Appreciation Rights (SARs)
– 1,016,776 SARs are held by 3 individual holders. SARs do not carry a right to vote.
There is no current on-market buy-back.
The number of security holders, by size of holding, in each class are:
Range of shareholding
100,001 and over
10,001 – 100,000
5,001 – 10,000
1,001 – 5,000
1 – 1,000
Number of
shareholders
Fully paid
ordinary
shares
Fully paid
ordinary
shares (%)
23
85,171,701
92%
131
3,587,308
159
1,160,328
811
1,928,680
1,754
561,109
4%
1%
2%
1%
2,878
92,409,126
100%
Holding less than a marketable parcel
194
The number of PSRs and SARs holders, by size of holding, in each class are:
Range of holding
100,001 and over
10,001 – 100,000
5,001 – 10,000
1,001 – 5,000
1 – 1,000
Holders of
PSRs
Number of
PSRs
% of PSRs
Holders of
SARs
Number of
SARs
% of SARs
1
3
1
–
3
8
408,101
197,909
7,692
–
1,705
615,407
66%
32%
1%
1%
100%
3
–
–
–
–
3
1,016,776
100%
–
–
–
–
–
–
–
–
1,016,776
100%
B. SUBSTANTIAL SHAREHOLDERS
The following organisations have disclosed a substantial shareholding notice to ASX.
Challenger Limited
Greencape Capital Pty Limited
Norges Bank
The Capital Group Companies, Inc
136
Date of Notice
Number
10 March 2022
5,903,204
14 March 2022
5,628,039
7 July2022
4,857,453
27 April 2022
3,726,876
Fully Paid
Percentage
7.93%
7.56%
5.26%
5.01%
AUB GROUP ANNUAL REPORT 2022
ASX ADDITIONAL INFORMATION
YEAR ENDED 30 JUNE 2022
C. TWENTY LARGEST HOLDERS OF ORDINARY SHARES
Ordinary shareholders
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
WASHINGTON H SOUL PATTINSON & COMPANY LIMITED
MASFEN SECURITIES LIMITED
MIRRABOOKA INVESTMENTS LIMITED
NEWECONOMY COM AU NOMINEES PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
MRS GAELEEN ENID ROUVRAY
DCRM PTY LTD
GOTTLIEB PTY LTD
BOND STREET CUSTODIANS LIMITED
INVIA CUSTODIAN PTY LIMITED
MARKEY INVESTMENTS PTY LTD
MR STEPHEN SPENCE ROUVRAY
PACIFIC CUSTODIANS PTY LIMITED
MR GENNARO BITTI & MRS GWEN BITTI
Number
Fully paid
Percentage
29,278,132
31.68%
23,004,649
24.89%
15,785,687
17.08%
5,271,205
5,227,737
2,378,330
1,535,643
567,174
541,920
393,748
310,070
236,723
210,669
210,669
199,704
196,428
148,709
147,805
116,120
110,033
5.70%
5.66%
2.57%
1.66%
0.61%
0.59%
0.43%
0.34%
0.26%
0.23%
0.23%
0.22%
0.21%
0.16%
0.16%
0.13%
0.12%
85,871,155
92.93%
137
AUB GROUP ANNUAL REPORT 2022 DIVIDEND DETAILS
YEAR ENDED 30 JUNE 2022
DIVIDEND DETAILS
Dividend
Interim
Final
Amount
Franking
Ex Date
Record Date
Payment Date
17.0c Fully Franked
1/03/2022
2/03/2022
4/04/2022
38.0c Fully Franked
7/09/2022
8/09/2022
7/10/2022
138
AUB GROUP ANNUAL REPORT 2022 CORPORATE INFORMATION
This annual report covers the consolidated entity comprising AUB Group Limited and its subsidiaries. The Group’s functional
and presentation currency is AUD($).
A description of the Group’s operations and of its principal activities is included in the operating and financial review in the
Directors’ report on pages 12-14.
DIRECTORS
D. C. Clarke (Chair)
M. P. C. Emmett (Chief Executive Officer and Managing Director)
P. G. Harmer
P. A. Lahiff
R. J. Low
C. L. Rogers
COMPANY SECRETARIES
R. H. Bell
E. M. McGregor
ANNUAL GENERAL MEETING
The Annual General Meeting of AUB Group Limited will be held on Thursday 3rd of November 2022 at 10.00am.
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
AUB Group Limited
Level 14, 141 Walker Street
North Sydney NSW 2060
P: + 61 2 9935 2222
W: www.aubgroup.com.au
ACN: 000 000 715
SHARE REGISTRY
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
P: 1800 194 270
W: www.linkmarketservices.com.au
AUB Group Limited shares are listed on the Australian Securities Exchange (ASX: AUB)
AUDITOR
Ernst & Young
200 George Street
Sydney NSW 2000
139
AUB GROUP ANNUAL REPORT 2022 www.aubgroup.com.au