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Suncorp has confirmed that it has entered into an agreement for the sale of its Australian wealth business, Suncorp Portfolio Services Ltd (SPSL), to LGIAsuper.
The agreement, which is dependent on regulatory approvals, is for a total consideration of $45 million (subject to standard completion adjustments). This includes a fixed amount of $26.6 million, plus regulatory capital.
Suncorp has said that it will enter into an agreement with LGIAsuper to distribute Suncorp superannuation products to Suncorp customers for 18 months after completion of the sale.
The new owner has also agreed to offer roles to approximately 130 employees currently employed by Suncorp Group who work directly (or indirectly) within the wealth business.
It is expected that Suncorp’s wealth business, which is estimated to have approximately $6.4 billion in funds under administration and around 137,000 members (as at 31 December 2020), will be merged with another Queensland-based fund, Energy Super, as part of a separate deal that LGIAsuper is progressing towards.
If that deal is approved, the combined Suncorp/Energy Super business will have around $28 billion in funds under administration and approximately 250,000 members.
The expected completion date for the transaction is the second half of the 2021-22 financial year, 12 months after LGIAsuper’s planned merger with Energy Super on 1 July 2021.
The move by Suncorp to exit the wealth business follows a strategic review of the group’s wealth position, which commenced in February 2020, and continues the “simplification” of the Suncorp Group portfolio and a renewed focus on home lending.
According to Suncorp Group CEO Steve Johnston, the sale was a “good outcome” for Suncorp’s 137,000 superannuation members.
“When I was appointed CEO, I said I wanted to align everyone at Suncorp around improving the way we deliver for our insurance and banking customers,” he said.
“This approach is already delivering results, and the wealth sale will allow the bank team to focus exclusively on the priorities we outlined at the interim result in February.”
Clive van Horen, the CEO of Suncorp’s banking and wealth divisions, commented: “After extensive engagement with a number of potential acquirers, we believe that LGIAsuper is best placed to deliver sustainable member outcomes.
“The values and purpose of LGIAsuper, which is also headquartered in Queensland, align closely with those of Suncorp. This transaction will also enable the combined business to take advantage of size and scale benefits.”
LGIAsuper CEO Kate Farrar suggested that the Suncorp acquisition would ultimately provide “significant advantages” to both current and future members of LGIAsuper, Energy Super and Suncorp’s superannuation business.
“This acquisition, combined with the Energy Super merger, will achieve an ideal, sustainable fund size, while maintaining our status as a boutique and personal superannuation provider,” Ms Farrar said.
“With the superannuation industry consolidating rapidly, we want to see our Queensland-based funds thrive in an increasingly complex and competitive national market, and the best way to do that is together.”
Ms Farrar added that LGIAsuper planned to keep the Suncorp fund operating as a standalone entity under the Suncorp brand initially, with its own trustee board, management and team.
“Suncorp’s superannuation members will not see any short-term changes to their fund or the team members who support them,” she said.
“In the medium term, we plan to mutualise and put the ownership of the fund in the hands of all members.”
Banks continue to move out of wealth
Suncorp’s wealth exit follows on from similar moves made by other banks, as they “simplify” their offerings to focus on core banking and lending services.
For example, Westpac sold its financial advice business in 2019, its insurance business last year and its LMI business last month as it moved to simplify its structure. The major bank also recently merged its consumer and business divisions as part of its simplification strategy.
Similarly, NAB recently offloaded its wealth business, MLC Wealth, in a $1-billion sale to IOOF, while CBA sold a 55 per cent interest in its superannuation and investment business Colonial First State (CFS) to global investment firm KKR last year, and ANZ offloaded its life insurance business, OnePath Life, to Zurich Financial Services Australia (Zurich) in 2019.
Many lenders announced plans to move out of wealth, super and insurance offerings following the banking royal commission and its resulting court cases, which saw many wealth businesses lose profitability and increase risk.
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