This is the going rate for insurance brokerages focused on...

This is the going rate for insurance brokerages focused on retail/SME clients in my view. The brokerages that target corporate clients are probably more realistically around the 10x mark, plus earn-out provisions.

The Canberra issue is little reported and 'negligible' relevant to Austbrokers overall financials but the rumour is that the issue was systemic and over a very long period of time, which I suspect will make this costly to rectify. I can't, however, see where/how AUB acquired its interest in this operation.

As for the PE of AUB. I think overall this operation is undervalued by the market. Especially when you consider their peers PE (AJG: 23, SDF: 35).

With the insurance market hardening rapidly, override and broker income should both increase over the next few years. Acquisitions in this time will come at a premium and I suspect above current 7 - 10x ranges. There is also a lack of new entrants to the market at present with significant M&A activity over the past several years. If the strategy is to continue growing through acquisitions of major shareholdings in mum and dad brokerages, AUB will have their teeth cut out scrapping against AJG the like for the opportunity. AJG are targeting anything that moves.

I think AUB is changing its stripes slowly too, with more emphasis focused on succession planning and employee ownership after buying out business principals, more so than they have in the past. This is one of the historical issues with the AUB model in my view. Whilst it works well when you take a 49% ownership stake and the principals remain for several years, there is little incentive for staff to buy into the remaining business when there is no opportunity to realise the true value of that equity through a sale (i.e. blocked by AUB or they're unwilling to take 100% ownership). Only one business that AUB has actually divested in its history, as far as I know.

Just my 2 cents. DYOR.