Insignia chair’s legacy questions

ANALYSIS

As the board of Insignia Financial fields the not unexpected sweetened offer from Bain Capital it is its chairman, Allan Griffiths, who will be feeling most pressure to deliver the most appropriate response.

Why? Because Griffiths has been a non-executive director of Insignia over the decade which saw the company (previously IOOF) acquire MLC Wealth from National Australia Bank (NAB) and the ANZ Pensions and Investments business and who, at the same time, saw the company’s market share price decline from around $10 in 2014 to yesterday’s price of $4.12.

Griffiths has also been on the board of the company through its torrid navigation of the Royal Commission into the Banking, Financial Services and Superannuation Industry which preceded the 2019 exit of then chief executive, Chris Kelaher.

He was the chairman who then oversaw the appointment of Renato Mota as Kelaher’s successor and who announced Mota’s exit as chief executive in early 2024 to be replaced by current chief executive, Scott Hartley.

Griffiths’ significant legacy as chairman of IOOF/Insignia must therefore be regarded as the MLC Wealth and ANZ P&I investments and the later share price movements which have generated such interest from private equity players Bain Capital and  CC Capital Partners.

As noted by other commentators, while largely unknown in Australia, the New York-based CC Capital made a play to acquire MLC Wealth from NAB back in 2020 but was ultimately outbid by IOOF. The company clearly sees value in the Insignia business which has wrapped up MLC Wealth and ANZ P&I and has already generated efficiencies, not least in reducing its directly-owned financial planning footprint, and largely outsourcing its superannuation administrative functions.

At the time of IOOF’s bid for MLC Wealth in 2020, the company told investors that it represented a transformation acquisition which would create “Australia’s leading advice-led wealth manager wealth around $510 billion in Funds Under Management and Advice and 1,884 advisers”

It spoke of the transaction delivering “in excess of 20% EPS accretion” including $150 million of estimated pre-tax synergies, excluding transaction and integration costs”.

A lot has changed in five years and Insignia’s shareholders will be reflecting on where the company’s share price stood 10 years’ ago and where it stands today.

Bain and CC Capital Partners appear to share the recent Morningstar analysis that having suffered in the past, Insignia is currently undervalued and that its earnings outlook is more positive than in recent years.