AUB Group Limited (AUB) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the AUB Group FY '26 Results Conference Call. [Operator Instructions] There will be a presentation followed by a question-and-answer session. I would now like to hand the conference over to Mr. Mike Emmett, CEO and Managing Director. Please go ahead

[Audio Gap] through AUB Group's results for the year ended 30 June '26 and our outlook for FY '27. Before I start, I want to recognize our dear friend and colleague, Tim Wedlock, whose sudden and tragic passing has deeply saddened us. Tim was a highly valued member of the Oz Brokers Family, and we're absolutely heartbroken. Our love and wishes go out to his family and to the AEI team he led with patience, wisdom and passion over many years. . FY '26 was another strong year for AUB. We delivered double-digit underlying profit growth, expanded margins, completed the acquisition of Prestige, and further strengthen the AUB platform for its next phase of growth. At the same time, FY '26 was unquestionably a year of challenging market conditions. Geopolitical disruption affected trade and business confidence in some markets. And together with policy uncertainty in the United States and foreign exchange movements, these conditions increased the period-to-period variability, particularly of the International division's revenue. In parallel, lower interest rates created an income headwind across most divisions. Insurance premium rates also remain subdued with rates declining in some classes. While we are pleased that many clients are benefiting from limited or no premium increases, competitive conditions have softened across several classes, and we encourage our insurer partners to maintain sustainable pricing and underwriting discipline, particularly in New Zealand and parts of the United Kingdom. Against that backdrop, there are 3 messages I would like you to take from today. First, AUB Group comprises a resilient portfolio with a strong earnings track record. Our businesses continue to grow and generate operating leverage across uncertain economic and premium rate environments. We have delivered a 16% compound annual growth rate in underlying EPS since FY '19 and see strong earnings growth continuing. Second, our selective approach to portfolio management and acquisitions is improving both the scale and quality of the group. We continue to assess a range of selective M&A opportunities against clear strategic and financial return hurdles. And third, we have multiple earnings drivers across the group, and we reaffirm our medium-term margin targets. Slide 2. Before turning to the year's performance, I want to briefly frame what AUB has become. AUB is now a global insurance distribution platform operating across 17 countries with approximately 7,000 insurance professionals in about 640 locations. The group supports more than $11 billion of gross written premium, approximately 1.6 million clients and 2.5 million policies. The point I'm making is not simply about scale. Our differentiation comes from combining the entrepreneurial leadership and local market expertise of our individual businesses with the capital, capability, insurer relationships and technology of the broader group. These businesses are led by management teams who are also shareholders. And this owner driver model remains central to how we create value. We are also increasingly diversified across retail and wholesale broking, agencies and MGAs, insurtech businesses and claims and loss adjustment services. These make AUB stronger and give our portfolio more ways to serve clients and partners. Slide 3 shows AUB's transformation from FY '19 to FY '26. The transformation has been deliberate and cumulative. Since FY '19, revenue has grown from approximately $540 million to now almost $1.6 billion, while the underlying net profit after tax has increased from $47 million to approximately $225 million. The model has delivered sustained growth in returns. Underlying net profit after tax has grown at a compound annual growth rate of 25.1%, while the group EBIT margin has expanded by 920 basis points to 36.1%. Importantly, these improvements have also translated into shareholder value with underlying EPS and dividends per share both growing strongly over the same period. Moving to Slide 4. The margin expansion has been an important contributor to earnings growth, and it reflects the strength of the operating model we have created. Across the group, principal drivers have been organic growth, operating leverage and cost discipline, portfolio optimization and accretive acquisition. We have benefited particularly from portfolio consolidation and from greater agency scale, which has enabled us to capture more of the insurance value chain as we have expanded our portfolio. The segment chart on the slide demonstrates both the progress already delivered and the remaining potential. Our focus in FY '27 is, therefore, very specific to continue the established portfolio playbook, close the segment level gaps and use technology, data and automation to lift productivity. We view the medium-term targets as achievable through execution rather than by relying on a material change in market conditions. Slide 6. Turning now to the FY '26 performance overview. Underlying net profit after tax increased by 12.2% to $224.6 million, and the group EBIT margin expanded by 140 basis points to 36.1%. This was supported by particularly strong contributions from the International division and BizCover and another resilient year of profit growth in Australian Broking. International underlying profit before tax grew by 19.6% with a 410 basis point improvement in margin. BizCover and Australian Broking delivered profit before tax growth of 19.9% and 10%, respectively. New Zealand underperformed. Market conditions were difficult and execution was not at the standard we expect. And during the year, we initiated a reset of the business and business performance has stabilized over the past few months. We also completed the acquisition of Prestige in March, materially strengthening our U.K. retail position. For FY '27, we are guiding to underlying net profit after tax in the range of $245 million to $265 million, representing growth of 9.1% to 18% over FY '26. We'll discuss the guidance and its assumptions in more detail later. Slide 7, the FY '26 financial highlights. Revenue grew 6.4% to approximately $1.6 billion. This, together with a 140 basis point increase in EBIT margin drove a 12.2% increase in underlying net profit after tax. The underlying EPS increased by 7% to $1.8369. The reason EPS growth was lower than the underlying NPAT growth was because of the additional shares issued to fund the Prestige acquisition, which were on issue for the final quarter of the year. The Board has determined a final dividend of $0.71 per share, taking the full year dividend to $0.98, up 7.7% on the prior year, which is consistent with our long-term payout range. Slide 8. This bridge highlights the quality of the profit growth during FY '26. Organic growth contributed $21.6 million, which is 10.8% on prior year, with acquisitions adding a further $17.3 million or 8.6%. These contributions more than offset a $14.5 million or 7.2% headwind from foreign exchange and from increased funding costs. The existing portfolio continues to deliver strong growth, while selective acquisitions added a further layer of earnings growth. Turning now to the performance of the operating divisions. Slide 10. The portfolio was broadly strong. Australian Broking, BizCover, Agencies and International all delivered profit growth, while New Zealand was the exception. As a reminder, this slide presents a 100% view of the portfolio. That is all businesses, including associates are shown as though they were 100% owned. At the operating business level, revenue increased by 6.4%, EBIT increased by 10.8% and profit before tax attributable to AUB shareholders increased by 12.1%. The breadth of this contribution is important. The result was not reliant on a single division or transaction. This table also shows the margin progression. International improved by 410 basis points, BizCover by 200 basis points and Australian Broking by 30 basis points. Agencies declined 50 basis points because of the Strata revenue challenges, but increased by 80 basis points when Strata is excluded. And you will note on the left side of the page that we are showing a graphic aggregation of our retail broking businesses and operations in Australia and New Zealand. And this foreshadows our proposed Australia, New Zealand retail reporting segment for FY '27. This proposed structure better reflects how we manage the business and the changing scale of profit contributions across the AUB portfolio. Slide 11. Australian Broking delivered revenue of $647.8 million, up 6% and EBIT of $246.7 million, up 6.8%. Broking commission and fee income grew by 7.8% during the year, while the average commission and fee income per customer grew by 6.5% -- the core message is that revenue has continued to grow faster than expenses in Australian Broking. From FY '19 to FY '26, revenue increased at an 8% compound annual growth rate compared with 5.7% for expenses. This operating leverage lifted EBIT margin to 38.1% despite a headwind from lower interest income. We remain confident in the 40% medium-term margin target. The broking portfolio was also actively managed during the year with 3 bolt-ons, 12 equity step-ups, merger, 1 step down and restructure. And this is the repeatable work that supports both earnings quality and margin progression, and we have further actions planned for FY '27 and beyond. I'd like to thank Mark White, who recently retired after more than 10 years representing AUB Group interests on a number of Austbrokers portfolio boards. I would also like to welcome Eric Harris, who has taken over this role. Eric is very well known in Australian broking circles and has made a seamless transition since joining. Slide 12. BizCover produced another excellent result. Revenue increased 14%, EBIT grew 19% and the EBIT margin expanded by 200 basis points to 47.8%. The Australian business remains the primary earnings engine with EBIT increasing 18.5% in FY '26. At the same time, the non-Australian businesses are scaling with margin improving from 8.5% in FY '24 to 20.1% in FY '26. Active clients grew by 13.7% to 308,000 and customer advocacy remains very strong with an NPS of plus 73. The direct channel gained momentum in the second half and the new MYOB referral partnership provides another attractive distribution avenue. BizCover is at the forefront of insurance technology, including the practical deployment of AI. In March, BizCover launched the first business insurance app globally and the first insurance app of any kind in Australia to provide SME insurance quoting functionality within ChatGPT. Since launch, ChatGPT has also begun to emerge as a new source of business inquiries. And while it remains early, the evidence supports 2 initial observations. Firstly, AI appears to be actually expanding the addressable market by prompting some previously uninsured small businesses to recognize their need for cover. And secondly, AI-assisted research is increasing customer confidence in using digital intermediaries such as BizCover, including customers who previously approached insurers directly. We continue to monitor lead quality, conversion and channel overlap as volumes develop, noting that we are not observing any cannibalization of AUB's existing broker channels, rather that we are seeing the capture of business from other nontraditional digital search engines or comparison channels. BizCover is also demonstrating practical benefits from AI and automation in other areas. The focus is on faster delivery, consistent code quality and greater delivery capacity from the existing team. AUB Group is benefiting from BizCover as a hub for insurtech innovation, creating a pipeline of capabilities and solutions that can be leveraged more broadly. This, together with the Covernet team in Belfast has accelerated AUB's ability to leverage AI tools and thinking. Slide 13. New Zealand was the one area of underperformance for the group. Local currency share of profit increased by 2.7%, while reported Aussie dollar profit before tax declined by 3.9% due to foreign exchange weakening. Revenue was broadly stable and the EBIT margin reduced by 130 basis points to 33.1%. Broking commission and fee income increased by 2.7%, while the average commission and fee income per client actually reduced by 2.9%, reflecting very competitive market conditions. This result did not meet our expectations, but the reset initiated during FY '26 has stabilized recent performance and the FY '27 improvement plan is underway. Our priorities for FY '27 are to restructure the NZ brokers network with closer alignment to Australia to better leverage our scale in New Zealand to improve cost control and to accelerate portfolio optimization. During the year, we completed 9 bolt-ons and 1 equity step-up, and each of these will provide a base for renewed growth for the business in New Zealand. The 42% medium-term margin target highlights the size of the opportunity, but our immediate focus is on restoring operating momentum and consistent delivery. Slide 14. Agency's profit before tax increased by 8.4% and the EBIT increased by 7.8% to $105.2 million. The EBIT margin was 43.7%, down 50 basis points. However, the margin actually increased by 80 basis points to 46.5% if strata agencies are excluded. Revenue in Strata actually reduced during the year. Despite this, because of very strong year of profit commission income, we were able to offset this reduction in income. The broader Agencies portfolio performed strongly, supported by organic growth and increased ownership positions in 360 and Pacific Indemnity. I'd like to acknowledge and thank Andrew is, who recently retired from AUB after more than 10 years leading our insurer portfolio of agencies and more recently establishing the new AUB Agencies portfolio. Dennis Morrissey, Founder 360, has been appointed as CEO to lead the next phase of growth for AUB agencies. We are now working through a range of changes to simplify and optimize the portfolio. Slide 15. International delivered the strongest divisional profit growth. Revenue increased by 6.2%, EBIT increased by 24.5% and the EBIT margin expanded by 410 basis points to 27.6%, benefiting from elevated war rates and momentum from recent acquisitions, partly offset by adverse foreign exchange movements. Recent investments are building momentum. Prestige has materially expanded our U.K. retail footprint, while Renaissance gives us a foothold in the rapidly expanding economy of Turkey and enhances Tysers' access to Lloyd's placement flows. Together with the continued scaling of our start-up businesses, these investments are broadening the group's growth opportunities. The 32% medium-term margin target provides clear further growth potential as we integrate and leverage these businesses. I'll now hand over to Nick.

Thank you, Mike. Slide 17 sets out our group funding position on the 30th of June 2026. AUB retains a strong and flexible balance sheet with available cash and undrawn debt of $330.5 million and leverage of 2.3x. Leverage reduced from 2.49x at the half, primarily reflecting higher EBITDA following the pro forma inclusion of Prestige, which was largely funded with equity. Compared with FY '25, leverage increased from 1.97x due to higher net debt, mainly from funding the increased ownership in Pacific Indemnity and AUB 360, the residual debt needed to fund the Prestige acquisition and the final Pacific Indemnity earn-out. During the second half, we refinanced our syndicated facility with total commitments of approximately $1.1 billion and maturities reset to 3, 4 and 5 years. The refinancing was well supported, oversubscribed by 1.5x and delivered a 27 basis point reduction in credit margin. The $200 million facility maturing in 4.7 years is the bilateral agreement with Macquarie, which was committed at the time of the Prestige acquisition. The right-hand side of the slide shows interest-earning assets and interest-bearing debt on a look-through ownership basis. While the totals are broadly aligned, the key exposure is the currency mismatch. At 30 June 2026, around $210 million of interest-earning assets were in U.S. dollars with no U.S. dollar-denominated debt. These U.S. dollar assets are hedged through to July 2027 via cross-currency swaps that receive BBSW and pay SOFR plus 0.61%. Slide 18 sets out FX sensitivity on the expected FY '27 currency mix, which includes the full year impact of Prestige, which is predominantly a GBP business. Our key exposure remains the unhedged U.S. dollar brokerage from the international business. GBP is broadly neutral after allowing for our U.S. dollar to GBP hedging program. Post Prestige, this program would typically hedge around USD 50 million to USD 80 million over the next 12 months and USD 25 million to USD 40 million over the following 12 months. FY '27 guidance incorporates our stated foreign exchange outlook assumptions and the current hedge positions shown on this slide. Approximately USD 75 million of brokerage income remains unhedged with each 1% movement in the AUD to USD exchange rate affecting midpoint UNPAT by approximately 0.3%. As existing hedges mature, the replacement hedges will reflect the prevailing market rates. Slide 19 shows underlying earnings per share increased 7% in FY '26, while the full year dividend increased 7.7% to $0.98. I'll now hand back to Mike to cover our FY '27 priorities, AI strategy and outlook.

Thanks, Nick. Slide 21. Our priorities for FY '27 are focused and practical. The first is to integrate U.K. retail and unlock the benefits of scale while continuing to expand Tysers wholesale and specialty capabilities. The second is to improve the portfolio. This means scaling and strengthening the agencies business across 360, Sura and Pacific Indemnity and taking decisive action in New Zealand and across the broader Australian portfolio to enhance earnings quality and margins. The third priority is disciplined capital deployment and continued investment in capability. We will remain selective on M&A, apply clear return hurdles and continue strengthening our technology, data and operational capability across the group. These priorities are deliberately consistent with the playbook that has driven AUB's performance over the past 7 years to empower strong local entrepreneurial leaders, actively manage the portfolio and to use collective scale to improve outcomes. Slide 22, our AI strategy. We are firmly of the view AUB is an AI beneficiary, and we have now moved well into deployment of multiple initiatives to improve our productivity, efficiency and value to customers. We have an enterprise AI platform and emerging data foundation, clear governance and a scalable delivery model built around Covernet and BizCover. We are focused on citizen development and partnering with specialist partners. The adoption is already meaningful, 92% of active Copilot utilization, 43 active AI agents, more than 40 solutions in the pipeline and 710 hours of capacity released in the last 30 days alone. These are indicators of momentum rather than an end outcome. We are now embedding AI into broking, underwriting, claims and operational workflows to reduce administration, create more capacity for client-facing work, improve decision-making and to deliver more consistent client outcomes. Over time, we expect this to support growth, margin improvement and differentiated insurance capabilities. Slide 23. For financial year '27, we expect underlying net profit after tax in the range of $245 million to $265 million. The midpoint of $255 million represents growth of 13.5% with the range representing growth of 9.1% to 18%. The bridge on this slide shows the components. Organic growth is expected to contribute between $15.2 million and $33.2 million, with acquisition growth expected to contribute $17.5 million to $19.5 million. These growth rates are partly offset by approximately $12.3 million of anticipated foreign exchange headwinds and increased funding costs. This guidance includes completed and sufficiently certain acquisitions and excludes any contribution from future unannounced transactions. At the midpoint, the expected first half and second half earnings split is 41% and 59%, broadly in line with our historical seasonality. The underlying EPS guidance is $1.8754 to $0.0285 per share. The difference between underlying NPAT and EPS growth reflects the full year impact of the shares issued for the Prestige acquisition. Excluding this equity funding effect, the EPS range will be $20035 to $2.21671 per share. We have set out the principal currency, interest rate and cash rate assumptions on the slide. The NPAT guidance range of $20 million is intended to reflect an appropriate variability in organic growth and market conditions for a group of our scale while preserving our commitment to consistent execution. In closing, financial year '26 demonstrated the strength of the AUB model. We delivered strong organic and acquisition growth. We expanded margins, increased shareholder returns and further strengthened the global platform. We enter FY '27 with clear execution priorities, a strong balance sheet and meaningful earnings and margin growth potential. Nick and I are now happy to take your questions.

[Operator Instructions] Your first question comes from Tim Lawson with Macquarie.

Just picking up on a couple of last comments you made there in terms of the sort of reset from AI and then the reset of new divisions. Can you just talk about the medium-term margin targets and the potential timing, so the potential to see those upgraded and brought forward?

Thanks, Tim. Well, firstly, I think the -- in terms of the margin targets, so the first point is we're confident in the margin targets as stated. Second thing is as part of our new reporting grouping for the Australia and New Zealand retail business, One of the things we'll be doing is working through what our estimate is of that margin target for the aggregated business based on some assumptions around the medium term. As a reminder, we've always said whenever we upgrade or change these, it represents our 3- to 5-year view of what can be achieved in that time frame. They're not terminal margin targets. They are what we think are achievable within that time horizon. So what we'll do possibly at the AGM, but more likely certainly for the February half year will be to revise where we think appropriate the margin targets, but specifically clarify what the margin target will be for the new reporting aggregation.

Just to clarify, with that sort of AI commentary you're making, are you telling us that there's scope that they could be increased, that you're quite positive on that AI benefit in the business?

Yes, absolutely.

The next question comes from Siddharth Parameswaran with JPMorgan.

Maybe a couple. The first one, just on your guidance for UNPAT for FY '27. I was hoping you could just give us some as to what you're expecting the contributions to be by -- in Australia versus international. I know you gave us some high-level comments around funding costs and FX headwinds. But just directionally, you can just flag -- previously, you've been explaining that you thought we could still have pretty strong revenue growth in the Australian market with -- even with the soft cycle. But there's a few things you flagged that were uncertain in your guidance around, I think, just the war and other things. So I was just hoping you could tell us international versus Australian broking versus agency directionally, how you're seeing things in terms of margins and revenues?

So I mean, if we just do a quick trundle through. So the assumption is that BizCover will continue the momentum that has demonstrated for several years. Agencies, actually, we think agencies have performed really well ex Strata. So Strata is a market phenomenon, so I'll talk about that separately. So the other 2 agencies, we think have performed really well, remembering that premium rates impact agencies more than they impact broking businesses. And so those 2 groups of agencies performed really well. We're winning market share. We're winning new business and our sort of focus on underlying profit for our insurer partners has paid dividends as well. On the Strata side, we foreshadowed this, in fact, in August last year and at the half year. The market is incredibly competitive. Candidly, we don't understand the logic behind why the market is so competitive. Premium rates have been dropping. despite the fact that there is no view -- we don't see any underlying reason why premium rates should be dropping. And so our main competitors are able to -- are willing to write business at significantly lower premium rates than we are comfortable to do. And obviously, these are decisions we take in partnership with our insurer partners, and they'll be taking them in partnership with theirs. So Strata has continued the trend that we foreshadowed in February, which is unfortunately, unless we drop rates, our retention rates, which we're not willing to do, our retention rates are dropping because we are losing business to competitors who are competing at much lower premium rates. structurally, that has to be time boxed because insurers can't afford. There's nothing in the market that says the cost of repairs and remediation for -- or loss ratios for Strata are decreasing, right? They match residential loss ratio. So it doesn't make sense the rate trend. So ex that, we see agencies as continuing to grow and expand. I referenced when I spoke about agencies that we do see some cost and margin improvement opportunities out of some of the consolidation activities, which we started in agencies during FY '27, but that we've been very successfully doing in the broader broking business for the last few years. In terms of Australian broking and New Zealand broking, think I probably gave as much color. I think it's more of the same. So it's more consolidations in the 2 markets. We do see signs that the market is strengthening. The market conditions are strengthening in New Zealand. We have taken the opportunity over the last 12 months to invest and expand our broking footprint in New Zealand. And so we believe we'll be strong beneficiaries of that market strengthening. And then in international, it's really on the retail piece, it is about executing on our plans around the consolidation and integration of the U.K. retail piece, while in parallel on international wholesale, it is about -- I guess part of it is linked to some pieces of the sort of geopolitical uncertainty dialing back slightly so that trade in some of those affected areas can continue. But broadly, those are the key levers.

Sorry. So just on international, ex the acquisition, am I to read that you're expecting growth? I just wasn't clear exactly whether we're expecting margin expansion or not ex the Prestige, I presume low is the margin, but just I wasn't 100% clear on things.

So if you took full year, so we think that there's some artificial inflation in the margin in the international business. We think -- we actually believe it's running at about a 25% margin. So we do see revenue growth, and we do see the opportunity for some expansion of margin. The exact timing of that first half versus second half is a bit unclear. So it may still look lumpy. But I think that's more related to the timing of revenue flows in the first half than anything else.

Okay. Just my second question is just around the strategic priorities. And I think you've got a slide there. I think it's Slide 47. Let me just have a look at it. There was a slide you had there about change in your strategic priorities from sorry, it's 45% versus where you were a year ago. And it seems like M&A has reduced in terms of focus and there's much more of a focus on consolidation and specialization. And like a lot of the other areas, it seems like there's been a down weighting in terms of the expected improvements from commercial arrangements, fees, et cetera. So I was hoping you could just firstly flesh out what you mean by specialization leading to improvement. Is that a long-dated thing? Presumably, that takes a while to come through. Just comments on just the downweighting on M&A and some of the other levers?

I think, firstly, I'd say the way to read this slide is about a statement of progress, right? So for example, commercial arrangements. So in Tysers, for example, a year ago, we had one commercial arrangement with one insurer partner. Let's imagine that the majority of the business is placed with -- pick a number, 20 insurers. Obviously, we had 1 commercial arrangement. We now have 7 with imminently another 3 that will be entered into. And so the opportunity size has reduced simply by virtue of the fact that we now have 10 in the bag rather than 1. So I think that's the first thing you should read it is this is not necessarily a comment on the size of the total price. but more a comment on the progress we've made towards getting to achieving that. So that's the first comment I'd make. The second comment is your question about M&A. So there are 2 observations I make about M&A. The first one is we don't buy things just because we're trying to be an aggressive acquirer. I've used the analogy of a jigsaw puzzle before. We intentionally target certain types of assets. Agency is the perfect example. We bought 360 because we wanted to strengthen general commercial. We bought Pacific Indemnity because we wanted to strengthen financial lines. We bought SUU because we wanted to strengthen strata. In U.K. retail, we bought Prestige because we wanted to strengthen U.K. retail. We bought Movo and Momentum or invested in them because we wanted to have access to replicate our insurance adviser net network in Australia, in the U.K. and have access to the appointed representative share of the market. We invested in BizCover because we wanted access to an insurtech with access to the micro SME space in the market. So all of our M&A has not been about trying to spend a certain amount of money or discrete isolated decisions. It's a strategic overlay about what we're trying to complete. The fact is we've made fantastic progress in completing that jigsaw puzzle. But obviously, that also needs to be in the context of unlocking all of the value that we can see. And so I almost see this as a series of phased approaches where you unlock the first round is about ensuring that an acquisition is stabilized, you're getting the return you expected from it in isolation. The next step then is unlocking some of the synergy benefits you get from particularly consolidation and creating almost these centers of excellence. The third piece is then iterating how you can further consolidate and strengthening the way in which the business flows go through those businesses across the different parts of our network and our group. So I think this is more a function of -- actually, we've made -- we've completed a lot of the jigsaw puzzle. That doesn't mean there aren't opportunities for us to still make bolt-on acquisitions, et cetera. But the reality is a lot of the core capabilities that we needed to invest in, we have invested in now, and that's about unlocking more of the value from those. There's also a simple function, which is we are very focused on ensuring that investments we make, we make with an eye on the return we can generate. And so we are cautious about capital capacity and the deployment of that capital and the best ways to generate returns from that. And so we have seen that as we've matured and expanded our portfolio, the better return now is about leveraging those investments to optimize the return for shareholders.

Your next question comes from Blake Dowsett with Jarden Group.

I just got a couple on Prestige, if you don't mind. I'm just curious to get your initial read, I see you got the keys in March. Just your initial read on how that business has run relative to your expectations and maybe a comment on the $10 million or more in synergies that you talked to back in February. Is that implied in your FY '27 guidance?

Not all of it is implied in the FY '27 guidance, Black. So I think 3 observations that might sound slightly contradictory. So the first observation is very pleased with the acquisition, excellent business, excellent growth potential, excellent management team. So very happy with that. Firstly. Secondly, the market environment for sort of SME and sort of the smaller end of broking in the U.K. has been really challenging, very competitive. Some of the competitors, and this is not news because there have been some broker-type reports about some of our big competitors there have been struggling because of capital and funding challenges and have been very, very aggressive at trying to, dare I say, buy business. So it has been a challenging market environment. So we've focused on ensuring that the business strength and capacity and capability is preserved and focused. And we've put in place -- I guess, we've tried to make sure that we integrate the business, but don't negate the benefits of the independence and the entrepreneurial capability that they have. In terms of unlocking the synergy benefits, I mean, the key first step is about transitioning the -- historic Tysers retail branches into Prestige. There's an element where we require legal compliance and regulatory changes, including approvals from the regulator. And so there's always a lead time on that. So we're in that phase now. So we have been, I think, had a balanced view of how much of the synergy to include in FY '27 versus what flows through to FY '28. So very confident about the synergy quantum in terms of -- on a run rate basis, in terms of timing, only a portion of that finds its way into our estimate for FY '27.

Got it. I appreciate that. Just a second question on agencies. Just noting historically and back in 1H, for example, you told us margin ex profit commission. Is there any way you can give us that number for FY '26, just helps us understand the underlying business.

Blake, I have to come back to you with that. I think the reality is Strata sort of clouds the view. So we can give you that. We'll probably defer -- yes, I think we'll have to come back to you with that.

Your next question comes from Andrei Stadnik with RBC.

Can I ask just my first question, a little bit around what you've seen in Tysers and the Lloyd's market. We're hearing that marine insurance reinsurance demand is rather strong at the moment. So what are you seeing in terms of conditions there for Tysers and their marine franchise?

Yes, Andrei. So thank you for the questions. I mean the reality is there's incredibly strong pent-up demand with a lot of potential in marine. So it's very hard to estimate. And so there's a judgment call. So as a reminder, the way it works is you'll have insurance on the ship, including both on the whole as well as on the cargo. But if the ship doesn't sail or isn't filled with cargo, then even though you've placed the insurance for it, the actual premium is quite low. But then there's significant value -- premium volatility according to what it's carrying and where it's sailing. And so ironically, you have the premium -- you sort of -- you are the broker for the ship. And if it's a ship that then carries cargo, let's imagine it's oil at the moment and it's through the Strait of Hormuz and it's able to sail, filled with cargo, then there's a massive pay day for the insurer and for the broker, right? Obviously, if the ship doesn't sail, and it's sitting outside the straight of Horus and can't get loaded with oil, then there's very little income for us. So I don't want to overstate the Middle East piece, but the fact is that is where a significant chunk of oil shipment come from, and that's where a significant portion of the world shipping is deployed. So the uncertainty is not will the income flow to us. The uncertainty is when and how much. And I know that sounds crazy, but it's because you don't know when and how much. And so that's part of the slight uncertainty. The second piece is we do a lot of construction and engineering projects. in terms of the insurance and placing the insurance. And historically, Dubai has been a center of significant construction activity. At the moment, there's little to no construction activity going on in Dubai. And so again, that's a pent-up demand. Our clients haven't changed. Their needs haven't changed. And in fact, if anything, there's going to be an increased level of activity in Dubai. The question is when and how much of that will flow, how quickly. So the optimist in me says, if I look out over the next 3 or 4 years, there's a massive pent-up revenue opportunity for us. And it's stronger than just opportunity. But if you said to me how much of that will flow through in the next 3 months, I haven't got a clue. And so I think that's the level of opportunity versus uncertainty that we have at the moment. But you're right, marine war rates are at the highest that I think they've ever been. We are significantly well represented in that area. Our teams are incredibly respected and capable, and it's a significant upside for us, but quantifying that and estimating that is incredibly difficult, in fact, none impossible.

And look, for my second question, there's something closer to home, right. So in broking, it looks like the fee and commission revenue line went up just under 8% year-on-year. But the premium pool went up maybe 5.5% roughly to $3.8 billion. So we successful in optimizing some of the fee and commission levels? And how do you view that going forward?

Yes. So part of it is about slightly a mix. So actually, interestingly, previously, I've spoken about the bookends where we've been very successful at winning new client -- new large clients where predominantly it's fee-based income rather than commission. And so the premium would go up disproportionately to the revenue. And we've also won a lot of new clients on the small end, the micro SME largely through BizCover and ExpressCover. Ironically, in FY '26, we actually lost -- so more of our client losses stroke, the mix shifted where we actually had a net shrinking of business in the large corporate side, which means that proportionately, premium went -- where the premium might have gone down from losing those clients, our revenue proportionately went down. So it's not a fundamental piece where we actually -- I'd love to say we're earning more per dollar of premium. It's a mix shift where we've lost some of our revenue -- sorry, some of our fee-earning clients where they had big premium levels, but not commission rates.