Insurance Australia Group (IAG) has exited the financial planning arena, selling its Clearview business to MBF Australia for around $220 million plus an additional earn-out of up to $50 million over five years.
Under the earn-out, IAG will receive 75 per cent of any increase in the embedded value of the Clearview businesses, over and above a nine per cent per annum growth hurdle rate.
Clearview comprises financial planning, investment and superannuation businesses marketed under the Clearview brand as well as a life insurance business marketed under the NRMA Life brand. In future, the life insurance business will be marketed under the MBF brand.
IAG chief executive Michael Hawker says the sale of Clearview is consistent with the group’s stated strategy to concentrate on its core general insurance business.
In what many will see as an irony, the man who headed up IAG’s predecessor – NRMA Insurance – at the time of its diversification into financial planning, Eric Dodd, is now managing director of MBF and has been integral to the Clearview transaction.
Dodd says the acquisition of Clearview is consistent with MBF’s diversification strategy.
“We want to expand the concept of protection by helping our customers secure their financial wellbeing as well as assisting them to maintain their physical health,” he says.
Dodd says the Clearview businesses represent a natural addition to MBF’s private health insurance business.
Hawker says that while Clearview remains an attractive and well-targeted business, it now represents a comparatively small proportion of IAG’s overall revenue and profit.
Announcement of the transaction saw ratings agencyStandard & Poorsaffirm its A- rating for MBF stating that acquisition provides diversification away from MBF’s health insurance products.
“Although acquisitions generally present some implementation risk, the Clearview business is of a modest size and brings to the group, life insurance management and technical skills,” Standard & Poors credit analyst, Carolyn Rajaratnam says.
