Suncorp offloads wealth business to LGIAsuper for $45m

Suncorp says the $45m sale of its wealth arm to LGIAsuper is a ‘good outcome’ for super savers, as it focuses on its core businesses.

Suncorp’s sale of its wealth business follows a strategic review. Picture: Richard Gosling

Suncorp is offloading its Australian wealth business to Queensland-based super fund LGIAsuper for an estimated $45m, as it looks to focus on its core insurance and banking businesses.

The sale follows a strategic review, begun in February 2020, which considered a range of options and the potential impact on superannuation members.

The move follows ongoing speculation surrounding the future of Suncorp’s banking division, with some shareholders pushing for it a sale or separation of the business.

Suncorp Banking and Wealth CEO Clive van Horen said the wealth sale was about focusing on the core banking business.

“We’ve said many times in the group that insurance and banking are core. And my personal focus as the CEO of the bank and wealth business will be much more on the banking business now.

“It is core to restoring growth in our lending business which, fortunately, is going well, and growing digital growing as well as everyday banking franchises. Absolutely, (this sale) is about enabling more focus on our core,” he told The Australian.

“We’re very focused on executing an organic strategy with it and getting some good results. This transaction will certainly help with that,” he added.

Only a small cohort of shareholders were in favour of separating out the banking business, Mr van Horen said of the ongoing speculation.

“The bulk of our shareholders, the feedback we get is they like the fact that the bank is in the group, and they see the benefits. Credit rating benefits are a big part of the group and having the scale of the group behind it.”

Group CEO Steve Johnston said the sale of the wealth division was a “good outcome” for Suncorp’s superannuation members and would continue the simplification of the Suncorp Group portfolio.

The Suncorp portfolio services wealth business had $6.4bn in funds under administration and around 137,000 members at December 31, Suncorp said.

Its MultiManager Growth Fund was the best performing balanced super investment fund for 2020.

“After extensive engagement with a number of potential acquirers, we believe that LGIAsuper is best placed to deliver sustainable member outcomes,” Mr van Horen said.

“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 is also moving towards a merger with another Queensland-based fund, Energy Super.

Together with Suncorp’s wealth business, the combined business will have around $28 billion in funds under administration and approximately 250,000 members.

The sale figure of $45 million includes a fixed amount of $26.6 million, plus regulatory capital.

The transaction is expected to be completed in fiscal 2022, subject to regulatory approvals.

The regulator had been “directionally supportive” of the wealth transaction, Mr van Horen said.

“There are commercial reasons why scale is an important factor. You can then drive cost down and when you drive cost down your members obviously pay less for the administration and management of the fund.

That’s the primary reason why regulators are in favour of more scale, and we can see that ourselves. We’ve been very proactive getting on the front foot (with the sale),” he said.

After separation and transaction costs, the impact of the transaction on group profit is expected to be broadly neutral, Suncorp said.

Following completion of the sale, it will enter into an agreement with LGIAsuper to distribute Suncorp superannuation products to its customers for 18 months.

LGIAsuper has agreed to offer roles to approximately 130 employees currently employed by Suncorp who work in the wealth business.