Australian Unity boosts investment bonds with IOOF friendly society buy

Insignia Financial is selling friendly society IOOF and its $1.1bn investment bonds business to Australian Unity, in a deal worth up to $40m.

Australian Unity plans to further grow its $4bn investment bond business after buying friendly society IOOF in a $40m deal.

Australian Unity will acquire all the shares in the IOOF Ltd friendly society and its $1.1bn investment bond business from Insignia Financial, the wealth manager previously known as IOOF Holdings.

Esther Kerr, CEO of wealth and capital markets at Australian Unity, said the wealth manager was committed to growing and investing in the investment bond sector over the long term.

She said Australian Unity wanted to grow its investment bonds business beyond the people who already knew about the managed investment, having added a direct-to-customer option in recent years.

“Increasingly the industry is doing a better job of making them digestible and understandable to your average person, and that means that they have a lot of growth potential, especially if they don’t have to be sold via financial advice networks but they can be increasingly made available to anyone who wants to fill out an online application form.”

The deal will again make Australian Unity – the parent company of Lifeplan Australia Friendly Society – the largest friendly society in Australia.

About 18,000 IOOF policyholders will move to Australian Unity, which is already a leading player in investment bonds with more than 180,000 customers and $3.2bn in funds under management.

Investment bonds are long-term investments that carry tax advantages if they are held for at least 10 years, but the funds can be withdrawn earlier.

“People use investment bonds to prepare for a variety of key life events, such as education, housing, health and aged care, and estate planning,” Ms Kerr said.

The acquisition was part of Australian Unity’s strategy of actively seeking mutual merger and acquisition opportunities, she added.

The purchase price is $36m with an additional contingent of up to $4m payable 12 months after completion, subject to the transition of IOOF clients and funds under management to Australian Unity.

Insignia Financial, headed by CEO Renato Mota, is one of Australia’s largest retail super funds.

It doubled the size of the IOOF business with the $1.4bn acquisition of NAB’s MLC Wealth in 2021. The wealth giant will use the proceeds from the sale to reduce net debt.

“The investment bond business is considered adjacent to Insignia Financial’s core strategic priorities and the sale will provide improved business focus and clarity,” the company said.

The deal is subject to regulator approval.