Thank you for standing by. Welcome to the AUB Group acquisition of Pacific Indemnity and Equity Raising conference call. All participants are in a listen-only mode. There will be a presentation, followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Mike Emmett, CEO and Managing Director. Please go ahead.
Thank you very much. Good morning, and thank you for joining us today. We're pleased to announce that AUB has entered into an agreement to acquire a 70% equity stake in Pacific Indemnity Underwriting Solutions. Before we dive into the details, let me highlight 3 key points. Firstly, the acquisition is firmly in line with our strategy to build scale in agencies and in financial lines products in particular. We know the team at Pacific Indemnity very well. They're based in Australia, and we've had aspirations to invest in Pacific Indemnity for some time. Secondly, we're buying a high-quality business on good financial terms. Pacific Indemnity has solid revenue growth rates and margins at or above our own agency target margin.
It's well supported by carriers, and with today's placement, the purchase is EPS neutral before synergies and before we deploy the remaining capital from today's AUD 200 million equity capital raise. Finally, AUB continues to trade well. We expect financial year 2024 results to be at the top end of the guidance range previously communicated. We have a clear strategy and are executing well. All divisions are performing strongly, and we have multiple growth drivers with organic momentum and a very attractive pipeline of further acquisition opportunities. Now, let me give you more detail. I refer you to slide 9 of the presentation pack released earlier today. Pacific Indemnity is a leading Australian-based underwriting agency, specializing in professional indemnity, directors and officers' liability, and general liability insurance products. The business has achieved strong historic growth and operates at a margin at or above our own agency margin.
Pacific Indemnity is led by an experienced management and underwriting team that are highly regarded in the industry and well connected with the Austbrokers membership. In financial year 2023, Pacific Indemnity delivered gross written premium of AUD 177 million, and earnings before interest and tax of AUD 15 million. The acquisition is highly complementary for AUB, continuing AUB's strategy to invest in underwriting agencies and to build out a portfolio of agencies offering risk products relevant to AUB's clients and their insurance needs. The build-out of our agency division has been very successful. However, as we have highlighted previously, we lack sufficient scale in financial lines, specifically in areas such as professional indemnity and directors and officers, both of which are strengthened by this investment in Pacific Indemnity.
The acquisition values Pacific Indemnity at an enterprise value of AUD 192 million, representing a 13x FY 2023 EBIT multiple. The upfront consideration for AUB Group's 70% stake is for AUD 105 million to be paid on completion, with the balance payable 18 months after completion on a sliding scale, subject to FY 2025 performance. AUB has estimated the deferred contingent consideration likely to be in the order of AUD 35 million. This structure aligns the interests of AUB and the Pacific Indemnity management team, who will remain with the business and continue to own a 30% stake. The acquisition is expected to complete on July 1st, 2024. AUB is delivering against its strategy with continuing strong performance across all divisions.
As announced on the seventh of May, 2024, AUB is forecasting our financial year 2024 underlying net profit after tax to be towards the top end of the outlook range of AUD 161 million-AUD 171 million, previously announced to the market on the twentieth of February, 2024. AUB has a track record of executing on strategically aligned acquisitions and a robust acquisition pipeline for financial year 2025 and beyond. We continue to assess opportunities to add scale and capabilities to the group on an ongoing basis. AUB is undertaking a AUD 200 million equity raising to fund the upfront consideration for the acquisition of Pacific Indemnity that is payable on completion of the acquisition, and to provide balance sheet flexibility to support AUB's ability to capitalize on its continued attractive and value-accretive M&A pipeline.
Following the equity raising and completion of the acquisition of Pacific Indemnity, AUB expects its net leverage ratio to be under 1.75 times, with cash and undrawn debt of AUD 400 million. The acquisition and equity raising are expected to be EPS neutral pre-synergies. We do see synergy opportunities, both with our retail brokers and with advisors. AUB expects EPS accretion once the balance of the equity raising is deployed on its FY 2025 M&A pipeline. Now moving to Slide 11. This slide summarizes the progress in building out our agency portfolio, and particularly, the early achievement by the end of calendar year 2023, of our stated target to exceed AUD 1 billion in GWP through our agencies.
A key pillar of this growth has been the acquisition of agencies such as 360 Underwriting, Strata Unit Underwriters, and now Pacific Indemnity, that form the cornerstone of our growth in the areas of general commercial, strata, and specialty, respectively. On slide 12, we provide an overview about Pacific Indemnity. Pacific Indemnity was established in 2015 and operates broad professional indemnity binders with Lloyd's syndicates as well as with local insurance carriers. It also offers directors and officers and general liability products. As shown on the donut chart, they offer these products to a diversified client base across multiple industries.
As shown on the right-hand side of the slide, Pacific Indemnity will form part of the specialty agencies portfolio and will continue to operate under the Pacific Indemnity brand, led by the same very experienced senior management team, who have a strong track record in writing quality risks in the Australian market. We anticipate additional revenue growth for Pacific Indemnity as a result of mutual benefits between AUB and Pacific Indemnity, and the opportunity to expand Pacific Indemnity's offering to Aust brokers, and to leverage AUB's distribution and operating scale. Slide 14 shows the pleasing historic growth of AUB Group underlying net profit after tax and underlying EPS.
In addition, on the right-hand side of the graph, we highlight the steady strengthening of the outlook for financial year 2024 underlying NPAT, including, most recently, that we now expect the underlying NPAT towards the top end of the previously communicated range of AUD 161 million-AUD 171 million. Moving on to slide 16. The left-hand chart on this slide indicates the annual contribution to growth in underlying NPAT since FY 2020, split between organic growth and the contribution from acquisitions. We are proud of the strong underlying organic growth AUB Group continues to deliver. However, it is also important to emphasize the contribution from acquisitions over this period. The right-hand chart sets out the annual investment in acquisitions, excluding taxes, and shows the investment in Pacific Indemnity.
As the Pacific Indemnity investment will be made on 1 July, this will more accurately be shown in future periods as part of financial year 2025. However, we chose to keep it simple for today's purposes. Slide 17 shows the key use of proceeds from the equity raising announced today. AUD 105 million of the raise will be used to fund the upfront consideration for Pacific Indemnity, while the balance of AUD 95 million will support the continued execution of AUB's accretive and strategic M&A pipeline and fund the cost of the equity raising. By the end of June 2024, pro forma for the equity raise and Pacific Indemnity investment, AUB Group will have access to circa AUD 400 million in cash and undrawn debt, and the leverage ratio will be below 1.75x.
On Slide 18, we provide an overview of the equity raise. I'd like to reinforce several key points. The raise is for AUD 200 million. The offer price of AUD 27.50 is at a 6.7% discount to last close and a 9.3% discount to the five-day VWAP. 7.3 million shares are to be issued, representing roughly 6.7% of AUB's existing placement capacity. New shares will rank equally with existing AUB shares from the date of issue. AUB will consider making an offer to eligible shareholders under a share purchase plan. Further details will be provided to the market, should AUB decide to make such an offer. However, the share purchase plan, if made, would be for no more than AUD 25 million worth of new AUB shares.
I'd like to now hand over to the moderator for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Kieran Chidgey with Jarden. Please go ahead.
Morning, guys.
Hi, Kieran.
A couple of questions, if I can. Hi, Mike. Maybe just starting with, so the multiple you pay here, it's towards the high end of what we've seen you pay historically for acquisitions, and also, you know, I'd note Financial Lines are at a point in the cycle where globally we're seeing rates start to soften.
And the EBIT margins in this business look, you know, as you've stated, pretty solid already above your, your own agency business on average. So it's not clear, I guess, in terms of what. Why sort of pay such a full multiple at this point in the cycle? So just keen to get your views on sort of what, what the growth drivers here have been more recently and how you see them playing forward.
Yeah. So three things, Kieran. One is, I think if we bought it two years ago, I think your question about rates would have been a very valid one. I think the fact is that the rates in Financial Lines have softened significantly over the last 12 months. And we now believe that they represent a stable, you know, if you like, almost the normalized view of what the run rate will be. Secondly, it's a multiple on FY 2023. I'd emphasize that, you know, some of the acquisitions that have happened in the market for agencies over the last year or two have been multiples where some of the growth has been paid for as well. So, you know, a significant portion of this is based on the FY 2023 growth, sorry, profit.
And the third one is a comment I've made previously, which is, you know, effectively, we value agencies based on three things, and then we value M&A generally on a key extra piece. The first is the nature of the binder terms, particularly two things, commission rates and the capacity. And so, and the third one is really around the length of commitment around the binder. And so, you know, that fundamentally drives the future profitability and growth potential of an agency. And so we're obviously comfortable paying nearer the top or above our normal range, if we believe that there is long-term growth prospects and, you know, a significant opportunity premised on the quality and tenure of the binder arrangement. So that's the first, key point. Second is, we obviously anticipate a number of, synergy opportunities.
I think there are three obvious ones. The first is our Australian broking group place these types of products across a number of agencies and insurers, and so we obviously anticipate, as we have seen with the rest of our agencies, that our brokers place an increasing amount of business into agencies that become part of the family. And so we've seen disproportionate growth of our agency placement into agencies versus business they place elsewhere. So, that's one. The second is, while the lion's share of the capacity that Pacific Indemnity has access to is an Australian domestic binder, they have a number of London binders as well, which are not placed through Tysers.
And so obviously, over time, as those arrangements might, you know, there's opportunity to migrate those, we'd be looking at the appropriate action to take, but nonetheless, that's a synergy opportunity. And the third one is, I've spoken many times about the key component of scale in agencies. So the fact is, larger agencies make higher margins than smaller agencies, partly because of the income leverage that they have, but also just structurally, the fixed cost element is quite significant in an agency. And so what this gives us is the opportunity to leverage their scale together with our existing specialty agencies, which, in many cases, are subscale, to be able to improve the margin across their full portfolio. And so if you take all of that into account, and the fact that largely we anticipate strong growth, that we're not...
That we'll benefit, you know, 70% from, we're not really paying away for that synergy growth. We believe that the multiple is a fair reflection and that we're, you know, comfortable that in the short to medium term, the effect of multiple will normalize back to our roughly 7.5x-9.5x.
Okay, thank you. And sort of a related second question, which you partly touched on, but you did mention sort of the rates you believe have stabilized now over the last 12 months. But just wondering if you can give us an indication for how different the 2024 earnings for this business is likely to look, given we're very late in the year. And, you know, you've talked about, obviously, EPS neutrality on a 2024 pro forma basis. You know, how should we be thinking about Pacific Indemnity's 2024 earnings relative to the 2023 numbers you provided?
Well, I think it would probably be no surprise to you that we would have looked at post FY 2023 performance to assess whether we're paying a fair price or not. So I think it's safe to say that performance will be stronger rather than weaker in FY 2024 based on the FY 2023 numbers we've used for valuation.
Okay. And double-digit growth, Mike, or we're talking pretty moderate growth over the last 12 months?
Kieran, no, no comment. It's not appropriate. We only own the business from 1 July. I'll tell you about the FY 2025 growth rate.
All right. I'll, I'll leave it there. I'll hop back in the queue. Thank you.
Thanks.
Your next question comes from Julian Braganza with Goldman Sachs. Please go ahead.
Good morning, guys. Just just following on from from Kieran's question there. In terms of just the completion just of the first consideration payment and just the EPS neutrality comment, that seems to imply, I think... I just want to be clear that I've got the numbers correct, if it's AUB share or the group, but it seems to imply AUD 19 million of EBIT into FY 2025. So I just want to be clear if that's correct, and then just any comments on the growth into 2024 and 2025, given that data point?
I won't comment specifically on the number, Julian. What I will say is that the EPS neutrality comment is around it really opens the question around, you know, if we were raising purely for the AUD 105 million, then it would be accretive. However, we sized the raise around EPS neutrality. So it's really around the question of what will the 95 be used for? The assumption for our EPS neutral comment is that it will simply be used, it will remain in the form of cash and cash or debt or, you know, a debt reduction piece. Clearly, if that's deployed into other M&A, that is accretive. And so if you look at it in isolation, it's accretive. However, we've sized the raise based on an EPS neutral piece.
Rather than, I think, trying to presuppose what that looks like for an FY 2025 EBIT number, I think you should, you know, just work off those premises.
Okay, sure. But, but if I use that AUD 35 million deferred consideration and the formula you've provided, is that, is that, that AUD 19 million bucks that you back-solved for FY 2025 EBIT, is that the group number, or is that AUB share?
The AUD 15 million that we've provided is the 100% number.
Right. Okay, I understand. Okay, and then just in terms of—just a couple of other follow-up questions. Just in terms of M&A spend, going forward, obviously that's increased a fair bit. Just wanted to understand how we should be thinking about that into years going ahead, just underlying the M&A spend.
Well, you say it's increased, I mean, I think for two years, so for FY 2023 and 2024, it's pretty much been a, I'd call it a new normal. So if you, if you left out BizCover, then if you look, you'd have FY 2021 and 2022 at a certain run rate level. As the group has grown significantly, we've established a new run rate level for 2023 and 2024. What looks like a spike, I referenced it earlier, is because we're showing Pacific Indemnity as part of 2024, it really is actually part of 2025. It's just the rest of the number for 2025 we don't know. So, so, you know, you can't take 2023- 2024, including Pacific Indemnity, and then draw conclusions from that. It really depends on how much we spend in 2025 that's additive to the Pacific Indemnity.
Okay, great. Thanks for that. And just one last question. Is there any debt in this business as well, just to be clear?
No.
No. Okay.
Uh, we-
Thank you.
As a general principle, we make all of our investments debt-free.
The next question comes from Andrei Stadnik with Morgan Stanley. Please go ahead.
Hi, Andrei.
Morning, morning. Morning. So I wanna ask my first question just around your makeup of your agency division going forward. Do you see any large, you know, gaps remaining in your agency business going forward? Or are you broadly happy now in terms of having all the right components in the mix there?
Well, I'll answer... I mean, I think in terms of strategic capability gaps, then I would say little. I think they're more complemented by bolt-ons. We still, you know, don't have enough scale in cyber, et cetera. But having said that, you know, our strategy has been to make, let's call it a, you know, a key acquisition for each of the agency, sub, sub-units or sub-divisions, right? So we bought 360 to become our primary agency around general commercial, and when we bought 360, they had 10 agencies. It's now 20. And so some of those have been bolt-on acquisitions, and most of them have been new agencies that we've, you know, seeded and grown. In strata, we acquired SUU, and that's become, if you like, our, you know, scale component of our strata piece.
And our Pacific Indemnity gives us scale around the financial lines, particularly D&O and, professional indemnity. And so, in a way, I guess, while we've had bolt-on acquisitions in the others, I think you, you could think of it the same way, which is we make one, let's call it an iconic acquisition, and then we build around it to complement and leverage that, that acquisition. But it doesn't mean that there won't be any future acquisitions in Australian agencies either, nor does it mean the job is done in terms of, you know, margin, margin expansion, et cetera. But this, this is an important acquisition for us in terms of that specialty area.
Thank you. And, my, kind of, my second question, can I ask around, what are you seeing in terms of pricing in financial lines? Because it has been soft, but, you know, we have been getting feedback that, you know, some of the brokers, insurers are thinking it could be turning. So what are you seeing in terms of pricing in, in financial lines in Australia and also, maybe more globally?
Yeah. So, well, that links to the answer I gave earlier, so to Kieran, which is around... You know, I think a year ago, people were talking about prices, you know, rates coming off. I think the fact is we didn't invest in this business or a similar business two years ago. We invested in it now, and that's precisely because, you know, we believe that, you know, the rates have largely normalized, and we believe that the downside risk is much smaller than the upside opportunity we have. So in a way, the timing is precisely to cater for, you know... And that's why we didn't buy something three years ago, to get a sort of a sugar hit.
Thank you. A very quick third one. Who's actually doing the selling here? So, like is it, is it management and staff that have sold in 70% stake to you?
Yes, it's predominantly management. There are some external, or there are some non-management, but involved in the industry, shareholders, but by far the largest shareholding group is management, and everyone has sold down proportionally.
Thank you.
The next question comes from Jason Palmer with Taylor Collison. Please go ahead.
Yeah, thanks. Good morning. Just in terms of the GWP of Pacific Indemnity, how much of that, Mike, is, I mean, only a small amount out of Lloyd's syndicates, how much of that is currently placed with Lloyd's syndicates?
Jason, I'll have to come back, but, you know, it's roughly 80% that's placed into domestic insurers.
Okay, thanks. And, I guess everyone's trying to back solve this AUD 19 million, which, we've a way to go at, and, and you can get it multiple different ways, but the multiple you just gave out then, of 7.5x-9.5x implies sort of, at the midpoint, AUD 23 million of EBITDA on a 100% basis. Could you maybe unpack how you get from 19 to that 23 million through those, those synergies, and if any of those synergies that you've called out are included in the bridge from the actual number to the 19, we're all back solving for 2025, please?
Well, I think the key thing, Jason, is around, you know, is it a fair price to pay using a 13x multiple of FY 2023? Because obviously, let's say they got, you know, 10% growth in, in 2024, then, you know, using the 2024 number, you know, you know, relatively recently, you know, there were other agency transactions in the market where effectively, you know, there was a, a lower multiple, but it was also applied to all growth in 2024 and 2025, right? So we're not paying away. In effect, there's an earn out style structure to protect us on the, you know, the, the downside. So I think the first question is: Is 13x FY 2023 historic, you know, a high multiple for a business like this? The second question is, you know, are there credible synergy benefits?
I think as, as regards the specific numbers, the reason we haven't called out the specific synergy numbers is because we think the fundamentals stand on their own, and we are confident that the growth in the business, together with incremental cost and revenue synergies, more than justify, the, you know, the, the future potential for it. But we're still very comfortable having paid 13x FY 2023. So frankly, even if there weren't synergies, we would still be very comfortable with what we've bought and the price we've paid for it.
Yeah. Just the last one. You talked about the nature of the buyer terms. Like, I think you said you look at commission rates, and you look at capacity to grow the business. And you said that the margins this business is doing is because it's got better scale than some of your other agencies. But the earnings of this business relative to its GWP is much higher than the group. I think it's 8.4% or 8.5% versus 5.9% for the other agency businesses pre this acquisition on an FY 2023 basis.
So is there anything unique in terms of the commission structures or the profit shares this business has seen, to the extent that it might prohibit you from wanting to maybe move some of your binders to other Lloyd's, sorry, through Tysers at some point?
So short answer, no. I mean, the interesting thing for us is... So if we put Pacific Indemnity to one side, as a general observation, our portfolio of agencies, so if we said we had 50 agencies, some of them actually lose money, and some make a very high margin, higher, you know, than Pacific Indemnity. And so we have this portfolio with different agencies in different stages of maturity and scale. The fact is, I come back to my old adage around, you know, the agencies that you want to own are large, scalable agencies where they have grown to a certain scale, because the margin, you know, any revenue top line flows, normally flows straight through to the bottom line.
So what we did with, SUU in particular, but 360 as well, was we bought scale agencies that then allowed us to benefit from a significant margin and expansion because we were able to roll low-performing or poor-performing agencies into them, or in some cases, very good agencies that just weren't at the scale where they, you know, they could leverage the, that to drive margin expansion. And so we've got exactly that in specialty. And so the combination of Tysers together with the scale from Pacific Indemnity gives us the opportunity to expand and grow top line, but in a way that doesn't dilute our margin.
Yeah. Thanks for that . So I had one more, if I could. I just want to understand what the secret sauce of this agency business has been, to be able to grow through the softening rate cycle, and why you're so bullish on it being able to grow in its own right outside of the synergies you don't really want to quantify. And that's my absolute last question. Thanks.
Well, I think, I think lots of agencies, I think the reality is, there's a combination of when you get to a certain scale and reputation and credibility, then you have, you know, pricing influence, you have low-cost distribution because of the reputation and the, and the awareness. And so what we have the opportunity to do then is look at ways in which we can better leverage our own distribution scale to, you know, redirect more business into Pacific Indemnity... and that will flow through to an, you know, an enhanced margin. So I guess there's a piece around scale and maturity of a business, and then there's a piece around brand and reputation. You know, I'm not saying it's just because we're investing in them.
The fact is, I think if you spoke to an average broker in the market, and you said to them, "Who are the best Professional Indemnity underwriters in the market?" They would say Pacific Indemnity. And in fact, a number of Pacific, because of their capacity from the binder, there are a number of brokers that they actually don't and can't service. And so they've adopted a stance where they will only focus on certain broker partners because they want to ensure that they service them appropriately. And the fact is, obviously, if we can expand capacity, we'll be able to expand top line with little margin dilution.
Thank you very much.
All good. Thanks, Jason.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll just pause momentarily for any question, further questions to enter the queue. The next question comes from Scott Hudson with MST. Please go ahead.
Yeah, morning, gentlemen. How you doing?
Morning, Scott.
One last, last, last question. I guess, in terms of your longer-term agency margin target of 45%, I guess you're now at the billion-dollar capacity that you've talked about in terms of when you get there. I mean, what, what sort of timeframe are we thinking about in terms of when you'll hit your, your 45% margin target?
Yeah, good, good question, Scott. So just a little bit of color on that. So firstly, as a reminder, so the 45% was really 40% underlying, plus whatever profit commission we earn. And that's predicated on the assumption that we theoretically can own between 0% and 10% from a margin point of view from profit commission. So therefore, our minimum profit, you know, EBIT margin in a terrible year from a profit commission point of view would be 40%, and the best year ever would be 50%. Now, in reality, we've never had a worst year ever, and we've never had a best year ever, so the range is likely to be 43%-47%. And so what we anticipate is the underlying margin at 40%, which then fluctuates. Some years it'll be 43%, 47%, 46%, 44%, 47%, et cetera.
And I know that doesn't sound like steady state, but that's effectively steady state. So our focus is on underlying margin of 40+ excluding profit commission. So the fact is it's very hard to... So the levers we're applying are, firstly, how do we accelerate growth in agencies at the top line? And then how do we ensure that we are consolidating the middle and back office costs to be able to improve the margin? We're in a really enviable, exciting position where our agencies are growing like there's no tomorrow. And so the dilemma we've got is: How do you keep the check and balance about prioritizing revenue over margin, and what balancing act do you have there? So I think the short answer is, we can absolutely observe and are confident about the 40%+ margin.
The question around timing is really around how rapidly we see this top-line revenue expansion opportunity will continue. Because, of course, the real... When you're winning new business, the lifetime value of that business, because of the high conversion rate or retention rate, is massive. And so winning new business is very valuable to us. And so short answer is, it's actually in our control. The margin piece is in our control. The revenue growth is a bit out of our control, and so we'll prioritize the latter over the former, while we feel confident that the revenue growth is there to be had.
That's understood. Thank you. And then I guess just in terms of longer term growth with Pacific Indemnity, we've obviously, I guess, you highlighted the sort of doubling in the number of agencies that under the AUB Group umbrella. Do you anticipate that Pacific Indemnity will be the vehicle to drive significant growth in those professional lines?
Yes.
And then I guess in terms of the holes outside of cyber, where would you be looking to add capabilities?
Good, good question. I mean, I think we... You know, so if you look at our agencies portfolio in the, you know, let's, let's call it the short term, so the next couple of years, I think we have a very strong portfolio now in Australia. We probably have pockets, so it's really genuine bolt-ons. I think cyber is the obvious one, if there were a product to call out, but we've got pockets of gap or new agencies that are still very nascent. We are woefully under scale in New Zealand. And so it's just quite difficult to find profitable agencies in New Zealand that are available for reasonable, you know, prices, to be frank. And so that may well be an unrequited ambition from our point of view for some time.
Then obviously, the next wave will be at the point at which we get some scale in retail in the U.K. The missed opportunity there is obviously some retail agencies, you know, almost akin to our general commercial business, but that feels like a few, you know, a couple of years away. So if you said we're going to deploy capital in agencies, it's going to be not in any particular order, it's going to be, let's do something around cyber. If some opportunities come up in New Zealand, some, you know, startup agencies, in particular areas in general commercial, in particular, a commercial strata product, which we don't currently have, and then, you know, potentially, retail-focused agencies in the U.K., ultimately.
That feels like a roadmap of where we'd be investing in agencies over the next 3-4 years.
How many of those would Tysers facilitate in terms of?
Well, Tysers is really, you know, they, they'll facilitate... That's a good question. Quite a hard one to answer. I think where we've seen the real assistance in the, in Australia has been around the specialty agencies. And, but that's really been because those are the ones that are a differentiator. It's perfectly plausible for Tysers to place a large, I don't know, Accident and Health, you know, even like a travel product or something. It's just that that's not something that we have much distribution in, so we don't see significant opportunity there. But, you know, over time, Tysers can certainly assist across the, the spectrum of risk products from general all the way through to specialty. But for now, we're working backwards from where we see the, the real differentiated opportunity for us.
Thanks. And then last one, just in terms of the, I guess, deferred consideration with Tysers, is that due through the course of FY 2025?
It's actually due at the end of January 2025.
That's GBP 100 million. Is that correct?
Well, it's up to GBP 100 million. I think probably worth emphasizing, I think the components of that relate to Tysers revenue, and we, and we communicated that scale, you know, the range around Tysers revenue. The second thing is it also included some other adjustments, so for example, an element of adjustment in the event that the U.S. Department of Justice settlement was above an escrowed amount from our purchase price, then there would be an additional adjustment to the earn-out payment, in our favor, obviously. But there are also pieces around changes in some assumptions in, you know, regulatory capital requirements at the time of the acquisition versus now.
So there are a bunch of adjustments and normalizations that play a role, and so we start assessing and measuring it from, you know, the second quarter of FY 2025, effectively. It's sort of a bit of a rolling measurement process in the lead up to December.
Okay. I guess that 1.75 leverage ratio is prior to any, prior to the deferred consideration for Tysers then?
Correct. Yeah. Yeah.
Good. Thanks, Jimmy.
No problem. Thanks, Scott.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll just pause for any last questions to come through. There are no further questions at this time, and I'll hand it back to Mr. Emmett for closing comments.
Thanks very much. So, thanks, everybody. Firstly, in closing, I'm very pleased to welcome Jun, Ed, and the Pacific Indemnity team to the AUB family. The AUB Group's continuing to make strong progress, delivering enhanced benefits to our clients, our broking and agency teams, and our shareholders. The performance and progress of the group continues to demonstrate we have a strong strategy, and we're executing well against it. Thank you, and I look forward to your questions during the course of the day. I hope you have a lovely day.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.