Freedom Insurance Group has made a key announcement – that it has reached an in-principle agreement to transfer its policy administration business to another company.
Freedom, which found itself in trouble during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, announced to the Australian Securities Exchange (ASX) today that it intends to exit Spectrum Wealth Management following the transfer of its administration business.
It said that following its exit of Spectrum it would have exited all of its operating businesses.
The ASX announcement said that proceeds of the transfer of the administration business would be used to pay creditors, wind down remaining operations and meet any final regulatory obligations.
It said following meeting these obligations the board intended to return any excess funds to shareholders.
The company said that, for confidentiality reasons, it was unable to disclose the identity of the service provider before it entered into the underlying agreements but that all customer policies continued to be underwritten by the current Australian Prudential Regulation Authority regulated insurers.
The ASX announcement said the Freedom board had continued to explore a range of alternatives that would allow it to maintain its administration business, including its rights to trail commissions.
“The long-term adverse impact on net trail commissions and administration income as a result of increased lapse rates considerably diminished the options available to Freedom,” the announcement said. “Based on the alternatives available, the Freedom board considers that the transition and associated payment is in the best interests of shareholders.”