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‘Important acquisition’: AUB to buy financial lines underwriting agency 

AUB will buy a 70% stake in Pacific Indemnity, an Australian underwriting agency specialising in financial lines products that had gross written premium of $177 million last financial year.

The listed intermediary group says the investment is “highly complementary” as it builds a portfolio of agencies.

AUB will pay $105 million upon completion of the deal – expected on July 1 – and the balance is payable 18 months later on a sliding scale subject to Pacific Indemnity’s 2024-25 performance.

Pacific Indemnity has an enterprise value of $192 million based on the financial terms of the acquisition.

AUB will raise $200 million via a fully underwritten institutional share placement to cover the upfront payment, with the remaining $95 million supporting its mergers and acquisition pipeline and the cost of the equity raising.

Pacific Indemnity was established in 2015 and has grown rapidly since, AUB says. It has operations across Australia specialising in professional indemnity, directors’ and officers’ liability, and general liability insurance products.

In professional indemnity, it has binders with Lloyd’s syndicates and local carriers.

“The acquisition is firmly in line with our strategy to build scale in agencies and in financial lines products in particular,” AUB CEO and MD Mike Emmett said in an investor call this morning.

He says AUB knows the Pacific Indemnity team, who are “well-connected” with members of its Austbrokers network.

“We’re buying a high-quality business on good financial terms,” Mr Emmett said, adding AUB has wanted to invest in the agency for some time. “The business has achieved strong historic growth … the acquisition also presents opportunities for mutual benefits across the business, through collaboration between Pacific Indemnity and the broader AUB Group.”

Mr Emmett says AUB has built up its agencies’ specialist offerings, such as through its acquisition of Strata Unit Underwriters from IAG in 2022. However, scale in financial lines has been lacking, especially in professional indemnity.

Pacific Indemnity will form part of the specialties agencies portfolio and will trade under its current name, led by the same management team who will retain a minority stake.

“This is an important acquisition for us in terms of that specialty area,” Mr Emmett said.

He says AUB remains on track to meet the top end of its 2023-24 forecast for an underlying net profit after tax of $161-$171 million.

“We have a clear strategy and are executing well. All divisions are performing strongly. We have multiple growth drivers, with organic momentum and a very attractive pipeline of further acquisition opportunities.”