The Investment Thesis for AUB Group: AUB's EPS performance...

The Investment Thesis for AUB Group:

AUB's EPS performance during various stages in the premium rate cycle:

Downturns: +1% to +5%
Flat periods: +6% to 12%
Cyclical Upswings: +13% to 18%

And for every 7 or so years that corresponds to the typical premium rate cycle, there'll be 2 "down" years, 3 "flat" years and 2 "up" years.

So, if you derive a weighted average growth rate across a full cycle (i.e., 2 years @ 1% to 5%pa growth, 3 years @ 6% to 12%pa, and 2 years at 13% to 18%pa), you get average long-term EPS growth of ~10%pa.

Which means that, provided one doesn't pay a silly valuation multiple for AUB (anything around the current 10.5x -11.5x EV/EBITDA multiple is eminently sensible, I believe, for this sort of robust business and reliable earner which is very well-managed by prudent and conservative managers), one can expect to enjoy a total shareholder return of around 14%pa, made up of ~10%pa of capital appreciation plus 4% in dividends.

And a TSR 14% pa is probably a good 40% or 50% higher than long-term investment returns from the broader market. Especially considering the starting point of the market's current elevated valuation levels.

And that's about all there is to the investment case for AUB.