AUB Group
Financials, Insurance
AUB Group Limited (AUB) is an ASX200 listed group comprising insurance brokers and underwriting agencies operating in 579 locations. The Company operates through five business segments.
Website: www.aubgroup.com.au
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Over the past 5 years, ASX:AUB has delivered strong growth, expanding its Underlying Net Profit After Tax (UNPAT) by roughly (200.2) million in FY25, up 17.1% year-on-year. This was driven by a (1.2) billion revenue surge and international expansion.
5-Year Financial Summary:
- Profit & Revenue: AUB has grown earnings significantly, achieving an average annual earnings growth of 24.5% over the past 5 years. In its FY25 financial results, the company reported revenue growth over 12% and lifted its Underlying Net Profit. [1]
- Return on Equity (ROE): The Return on Equity stands around 12.5%. While deemed a "high past performing company" overall, its ROE is slightly below the broader insurance industry average (15.4%). [1]
- Debt & Leverage: Net debt to equity is approximately 47.8%, which is considered somewhat high, but interest payments on debt are well covered by earnings. The leverage ratio is a manageable 1.97x, with $375 million in accessible cash and undrawn debt facilities. [1, 2]
These are the D/E ratios for the last 5 years:
2026- 0.65
2025- 0.46
2024- 0.41
2023- 0.44
2022- 0.08
Looks like a dividend aristocrat !
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ROIC Vs WACC
For AUB Group Limited, the current Return on Invested Capital (ROIC) sits at 9.40%, while the Weighted Average Cost of Capital (WACC) is estimated at 6.59% to 7.0%, resulting in a positive economic spread. Complete year-by-year 10-year historical tables tracking exact annual ROIC versus WACC trajectories are not centrally published as a consolidated public dataset for this specific ASX ticker. [1, 2, 3]
Capital Efficiency and Value Creation
- ROIC Performance: Recent trailing metrics indicate an ROIC of approximately 9.40%, tracking above historical hurdle thresholds (AUB's corporate performance rights historically target an average ROIC equal to or exceeding 11% over 3-year measurement blocks). [1, 2]
- Cost of Capital: Blended WACC runs lower, roughly between 6.59% and 7.0%, reflecting a moderate cost of equity and conservative leverage profile. [1, 2]
- Spread Analysis: Because ROIC (9.40%) generally exceeds WACC (~6.6%–7.0%), operations generate positive economic value and accretive returns for shareholders over the medium term.
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ARG vs AUB - BUFFET style sept 2026
Comparing Argo Investments (ASX:ARG) and AUB Group (ASX:AUB) through a Warren Buffett-style value lens reveals a choice between two completely different business designs: a highly diversified, ultra-low-cost capital allocator (ARG) and a compounding operating business with a strong economic moat (AUB). [1, 2]
AUB Group has drastically outperformed Argo on a 10-year total return basis, functioning as an efficient earnings compounder, whereas Argo behaves like a steady, low-growth utility primarily designed to deliver consistent, fully franked dividend income. [1, 2]
Price comparison chart
28 Sept 2026 10:00 am - 4:10 pm
| Asset Name | Asset Price | Price Delta | Percent Delta |
|---|---|---|---|
Argo Investments Ltd | $9.13 | -$0.080 | |
AUB Group Ltd | $26.91 | +$0.13 |
The Metric Comparison Tracker
The data highlights the structural differences between these two financial sector giants:
| Metric | Argo Investments (ASX:ARG) | AUB Group (ASX:AUB) | Buffett Style Commentary |
|---|---|---|---|
| Business Type | Listed Investment Company (LIC) | Insurance Broker Network/Roll-up | Buffett loves insurance float; AUB operates closer to Berkshire’s core competency. |
| 10-Year Growth (TSR) | ~9.5% p.a. | ~19.2% to 27.5% p.a. | AUB behaves like a true growth compounder; ARG mirrors the broader index tracking. |
| Trailing P/E Ratio | 26.6x | 34.4x | Neither is cheap; AUB commands a premium due to high organic and acquisition growth. |
| Dividend Yield | ~4.2% (Fully Franked) | ~3.6% (Fully Franked) | ARG wins on upfront yield, but pays out more than its annual earnings. |
| 10-Year Dividend CAGR | ~2.7% p.a. | ~9.5% to 10.0% p.a. | AUB exhibits high-quality dividend growth; ARG barely beats baseline inflation. |
Buffett-Style Breakdown
1. Economic Moat & Capital Allocation
- AUB Group (High Moat Compounded): AUB operates an equity-broker model across Australia and internationally. Insurance broking builds deep client relationships, generating high retention rates. This dynamic creates a powerful economic moat. AUB uses a "roll-up" strategy, acquiring smaller brokers and optimizing their systems. Buffett would highly appreciate this organic operating leverage and active capital deployment. [1, 2]
- Argo Investments (Passive Steward): ARG has invested in blue-chip Australian equities since 1946. Its structural moat is its ultra-low Internal Management Expense Ratio (MER) of 0.14%. It features no debt and zero performance fees. However, it is an investment vehicle rather than a dynamic business compounder. [1, 2]
2. Growth and Retained Earnings Efficiency
- AUB retains earnings effectively to acquire high-ROE assets, resulting in explosive earnings-per-share (EPS) trajectories over the decade. [1, 2]
- ARG distributes nearly all received dividend income directly to shareholders. This practice restricts long-term internal capital compounding. [1]
3. Dividend Analysis: Yield vs. Compounding
- ARG represents the typical "income now" pick. It has paid uninterrupted dividends for 80 years. Starting in 2027, it transitions to a structured quarterly payout model. However, a 2.7% dividend growth rate means its real purchasing power grows slowly.
4. Valuation & Margin of Safety
- AUB's P/E of 34.4x sits noticeably above its historical 10-year median (~23.9x). Buffett demands a margin of safety. Paying a steep multi-multiple premium leaves little room for error if insurance premium growth slows down.
- ARG's P/E of 26.6x is tied directly to the earnings multiples of the underlying top-20 ASX stocks it owns. Because it is a LIC, it frequently trades at a slight premium or discount to its real Net Tangible Assets (NTA)
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Buffett analysis
AUB Group Limited (ASX: AUB) demonstrates a consistent, mid-to-high single-digit to low double-digit Return on Equity (ROE) trailing between 6.3% and 11.3% over the last few years. [1]
In FY2026, its accounting ROE landed at 9.6% (with normalized metrics trending slightly higher around 12.4%). [1, 2]
When evaluated against Warren Buffett's strict capital allocation tenets, AUB functions as an aggressive consolidator that delivers strong organic cash flows but diverges significantly from standard Buffett style due to its heavy reliance on share dilution and balance sheet leverage to fund its expansion.
📊 Historical ROE Trends
AUB Group operates an equity-slice model across its extensive insurance-broking and underwriting-agency network. This structural asset-light approach ensures reliable cash generation, though its multi-year ROE trend highlights the dilutive impacts of massive acquisitions (like the UK-based Tysers). [1, 2, 3]
| Metric | FY2026 | FY2025 | FY2024 | FY2023 |
|---|---|---|---|---|
| Statutory ROE | 9.6% | 9.2% | 9.5% | 11.3% |
| Shareholders' Equity | AU$1.88B | AU$1.69B | AU$1.51B | — |
| Net Income (Statutory) | AU$96.0M | AU$180.1M | AU$137.1M | — |
- The Accounting vs. Underlying Spread: While statutory ROE remains anchored below 10%, underlying trailing metrics sit near 12.4%. The compression in statutory profit for FY26 (down 47% to AU$96M) stems mostly from heavy non-cash amortization charges and acquisition adjustments rather than structural decay. [1, 2, 3]
🏛️ Capital Allocation vs. Buffett Benchmarks
1. The Retained Earnings Test (The $1 Rule)
- Buffett Benchmark: Every dollar of retained earnings must create at least one dollar of market value over time. [1]
- AUB’s Score: Passing. Despite a volatile FY26 share performance, AUB's long-term capital growth and underlying compounding have successfully tracked the multi-year upcycle in commercial insurance premiums. Management is targeting a 30%+ margin threshold by executing bolt-on acquisitions that build intrinsic value. [1, 2, 3, 4]
2. Shareholder Dilution & Organic Compounding
- Buffett Benchmark: Corporate "empire-building" via constant share issuance is strongly discouraged; outstanding shares should ideally flatline or decrease through buybacks. [1]
- AUB’s Score: Failing (Buffett Style). Over recent fiscal periods, AUB expanded its outstanding share count by 6.97%. To fund its aggressive inorganic roadmap, it frequently relies on equity capital raises, meaning legacy shareholders suffer continuous dilution unless the target's synergy perfectly offsets the share expansion. [1]
3. Reliance on Balance Sheet Debt
- Buffett Benchmark: High capital efficiency should be driven by competitive advantages (moats), not by layering financial leverage onto the balance sheet.
- AUB’s Score: Failing (Buffett Style). AUB carries structural leverage to bankroll its M&A playbook. Long-term debt reached AU$1.17B in FY26 (up from AU$704.4M in FY24), leading to a Net Debt/EBITDA ratio of ~2.38x. This debt profile adds balance sheet vulnerabilities that Buffett historically avoids. [1, 2, 3]
4. Dividend Payout Structure
- Buffett Benchmark: Retain 100% of earnings if they can be deployed at high returns; otherwise, return them uniformly via buybacks or distributions.
🧠 Strategic Takeaway
AUB Group is a high-performing roll-up platform rather than a traditional Buffett compounder. It capitalizes on structural tailwinds within the insurance sector and boasts deep cash-flow conversion. However, the use of debt and equity dilution to drive scale represents a higher-risk execution framework than the self-funding, asset-heavy moats Buffett prefers. [1, 2, 3]
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