AUB : FY17 Results Announcement

28th August 2017

The Manager

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

20 Bridge Street

Sydney NSW 2000

FOR RELEASE TO THE MARKET

Dear Sir / Madam,

Re: Market announcement on results for the year ended 30th June 2017

Please find attached for immediate release AUB Group Limited's Market Announcement in relation to the results for the year ended 30th June 2017.

Yours faithfully,

Justin Coss

Company Secretary

For further information, contact Justin Coss Tel: [phone]

[e-mail]

ASX release

28th August 2017

AUB Group's focused approach delivers strong organic growth Summary:

• 7.5% increase in Adjusted NPAT1 to $40.4 million (FY16: $37.6 million), with growth across all operating units. Adjusted earnings per share increased 6.2% to 63.2 cents.

• Organic growth is the key driver of business performance.

• Underlying EBITA2 up 9.9% on prior year.

• Final fully franked dividend of 29.5 cents per share, bringing the total declared dividends for 2017 to 42.0 cents per share, up 2.0 cents per share on prior year.

• Reported Net Profit After Tax of $33.0 million (FY16: $42.0 million), a decrease on prior comparable period due to non-recurring profits on sale of investments earned in FY16, and other non-cash accounting adjustments relating to mergers and acquisitions.

AUB Group Limited (ASX:AUB) has reported a 7.5% increase in Adjusted Net Profit After Tax (Adjusted NPAT1), to $40.4 million (FY16: $37.6 million), with a good performance from all business areas. On an Adjusted basis, earnings per share has increased to 63.2 cents per share, up 6.2% over the prior comparable period.

Due to profits on sale of investments in FY16, which were non-recurring, reduced fair value adjustments and contingent consideration adjustments relating to mergers and acquisitions, AUB Group's consolidated Net Profit After Tax (Reported NPAT) decreased to $33.0 million in FY17 (FY16: $42.0 million).

AUB Group CEO and Managing Director Mark Searles said: "AUB Group's strong results reflect the ongoing benefits of the disciplined implementation of the Group's strategy together with strict adherence to our partnership and operating models. Despite a flat market, organic growth was the key driver of business performance, which further highlights our strategic execution - importantly growth was not a result of premium rate increases. Nevertheless, evidence of rate increases in the last quarter leads us to believe that the return to a more stable premium rate environment will further support the Group's financial performance going forward."

The company has declared a final dividend of 29.5 cents per share fully franked, bringing the dividend for FY17 to a total of

1. cents per share (FY16: 40.0 cps).

   Highlights of the FY17 results by operating area include:

   Australian Broking (Austbrokers):

   • 3.6% increase in profit contribution from Australian Insurance Broking over the period on a like for like basis3. Australian Broking contributed $49.2 million (FY16: $47.9 million) to the Group, in a market where insurance premiums were flat over the year with evidence of premium rate increases occurring in the last quarter. Organic growth of clients and policies were the key drivers of growth and margins have slightly improved.

   • Acquisitions continue with AUB Group acquiring 50% of Lea Insurance Brokers on 1 May 2017 and our broking partners completing a number of smaller acquisitions and mergers.

   • 4.6% growth in the Hunter Premium Funding loan book demonstrates the strength of the joint venture relationship with Hunter.

1 NPAT excluding adjustments to carrying values of associates, profit on sale and deconsolidation of controlled entities, contingent consideration adjustments, impairment charge and amortisation of intangibles. Performance measure used by management to assess underlying business performance.

2 Underlying EBITA represents an aggregate of 100% of all business partners' revenue and expenses before deducting non controlling interests and after AUB corporate costs.

3 Excluding operating profits arising from directly acquired or divested businesses from both periods.

• Launch of the Austbrokers Life Solutions product in partnership with Suncorp Life complements the current full advice life offerings, as we continue to execute our strategy of Total Risk Solutions for clients.

  New Zealand

• $2.6 million increase in profit contribution from New Zealand to $5.5 million (FY16: $2.9 million), reflecting strong organic growth and the contribution from the acquisition of Runacres & Associates Ltd in January 2016 and acquisitions by our associate BWRS.

• Organic growth has been delivered from growth in new clients, life income and premium funding income, while the premium rate environment continues to be muted, with early signs of stabilisation.

• The strength of NZbrokers in the market has been further enhanced with four new members joining the network which now manages in excess of $550 million GWP making it the largest broking management group in NZ.

• Since inception 3 years ago, AUB Group NZ is now the third largest Insurance Broking entity in NZ by GWP.

  Risk Services

• 5% increase in profit contribution from Risk Services to $7.5 million, with contribution from acquisitions by existing equity partner businesses, and the addition of ancillary services.

• Double digit revenue growth continued in FY17, as businesses expanded geographically and into new services. The investment in resources to support new services ahead of revenues offset organic profit growth in FY17. However margins improved slightly in the second half, as revenues came on line.

• The completion of the national footprint of our 55% owned rehabilitation specialist, Altius Group Pty Ltd with the acquisition of PeopleSense Pty Ltd, a leading Western Australian licensed provider, has performed strongly.

  Underwriting Agencies (SURA)

• 21% increase in profit contribution from Underwriting Agencies, driven by increased policy count up 12.7%. Premium rates on renewal have been largely flat across the portfolio, with reductions experienced in the first half largely recovered in the second half. Underwriting Agencies contributed $12.5 million (FY16: $10.3 million) to the Group, despite the divestment of an agency in the prior period. EBIT margins improved to 35% (up from 29%).

• Portfolio rationalisation continues within the Agency business, and this will lead to decreased reliance on profit commissions going forward and continued strong operating margins.

• The business acquired 50% of Fleetsure Pty Ltd, a specialist fleet transport agency. Two new agencies have now been launched to market which are expected to break even in FY18.

• Following a global review of potential providers, implementation of a new underwriting system has commenced and will roll-out over the next three years, replacing the three systems currently utilised and delivering operational efficiencies and improved governance in future years.

  Group Services and Corporate Costs

   In recognition of the expansion of the AUB Group, beyond its traditional heritage of Australian Broking, leaders have been appointed to each market facing segment (Australian Broking, New Zealand, Underwriting Agencies, Placements/Wholesale Broking and Risk Services), to drive performance.

• AUB Group remains focused on managing the group cost to income ratio, which improved to 20.6%4. Costs increased due to higher staff incentives based on strong business performance, increased lease costs, investment in establishing a direct life offer, increased cyber insurance and one off technology costs.

  Capital management

• Net assets at 30 June are $371.7 million (FY16: $351.2 million), up predominantly due to the recognition of non controlling interests on reduction of equity ownership in partner businesses and on new acquisitions.

• Gearing is stable at 20.4% (FY16: 20.2%). The parent entity has cash and undrawn committed facilities of $20.2 million at 30 June 2017. We are currently re-tendering the Group's lending facility to support future growth, with a new facility expected to be in place in the first half of FY18.

Dividends

The Board has declared a fully franked final dividend of 29.5 cents per share, bringing the total dividends declared for the year to 42.0 cents, up 5% on FY16. This dividend is payable on 31st October 2017 to shareholders on the record date of 10th October 2017. Dividend Reinvestment Plan (DRP) arrangements will continue to be suspended for the final dividend.

4 Calculated as AUB corporate costs (excluding acquisition and finance costs) normalised for STI at target as a percentage of net income before corporate costs and tax.

Outlook

• There was evidence of single digit percentage premium rate increases in Australia the last quarter of FY17 and an expectation that insurers will continue to execute premium rate increases at a similar level into FY18. New Zealand remains competitive, with early signs of stabilisation. Any sustained increases in the premium rate environment in Australia and New Zealand in FY18 are dependent on actions by insurers and indications are that insurers will be executing premium rate increase strategies that will have a positive effect on income.

• Drivers of revenue in Risk Services remain positive outside of the NSW market. The industry changes caused by iCare's rationalization of Managing Agents is seen to be positive for the longer-term however, there is significant industry change to occur in NSW over the next 12 months and this may impact case volumes in some of our businesses. Our expectations for FY18 are moderated to focus on business retention, rather than growth in NSW. Opportunities outside NSW and in ancillary risk services continue, unaffected by these changes.

• As demonstrated in FY17, the Group expects continued organic growth as a result of ongoing disciplined execution of our strategy, supplemented by relevant acquisition and start-up investment opportunities in Australia and New Zealand.

• In the context of low single digit premium rate increases in Australia, and to a lesser extent in New Zealand, the Group expects Adjusted NPAT in FY18 in the range of 5 to 10% growth over FY17.

Webcast

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

Direct DDI(s) for Teleconference:	Australia Access:	1800 268 560
New Zealand: International:	0800 466 125 [phone]
Teleconference Participant Pin Code:	341712#

Webcast Audience Link:

http://event.onlineseminarsolutions.com/wcc/r/1437176-1/E1AA8664D7F40AD55E1D434469846E06

M. P. L. Searles

CEO & Managing Director

For further information, contact Mark Searles Tel [phone]

Jodie Blackledge Tel [phone]

- Ends -

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