More than a year after entering a definitive agreement to sell its St Andrew’s Insurance subsidiary, Bank of Queensland has finally secured regulatory approval for the deal.
St Andrew’s will be formally excised from the BoQ group on Thursday when Sydney private equity firm Farmcove takes control of the business.
BoQ confirmed in an ASX filing on Tuesday that Farmcove would pay A$23 million for the asset, which is materially lower than the carrying value on the bank’s balance sheet.
This means BoQ is expected to wear an after tax loss on the sale of around $26 million.
“Due to the timing of completion, this statutory loss will be recognised in BoQ’s 2022 first half financial results,” the bank told the ASX.
“St Andrew’s had an immaterial impact on BoQ’s financial results in FY2021.”
Completion of the transaction will draw the curtain on one of the most tortuous campaigns to offload a financial services asset in the local market.
BoQ expected to hive off the business to Freedom Insurance Group in 2018 but that deal fell apart after the acquirer encountered financial problems.
The bank, desperate to sell the business, had to wait until last October before it could identify a prospective new owner.
A measure of the bank’s eagerness to offload St Andrew’s was revealed in the terms of the deal that included BoQ agreeing to provide vendor finance to help fund Farmcove’s buyout.
One of the core business lines within St Andrew’s has been the underwriting of now discredited consumer credit insurance policies.
St Andrews was acquired by BoQ in March 2010.
BoQ’s managing director at the time, David Liddy, lauded the purchase principally on the basis of the credit protection products it sold.
“The majority of St Andrew’s premiums are in credit protection products, addressing a significant customer need that has been growing in light of the GFC and which is aligned to BOQ’s housing and SME target segments,” Liddy said in a press release in 2010.
“We believe the benefits of moving St Andrew’s Insurance across to BOQ ownership are significant not just for BOQ, but for the Australian banking industry, insurance industry, the staff of St Andrew’s Insurance, and Australian consumers in general.“
Since 2010 BoQ has been forced by ASIC to remediate customers in relation to consumer credit policies issued by St Andrew’s.
Moreover, a disclosure in the bank’s latest annual report included the following contingent liability concerning the sale of St Andrew’s.
“As part of the St Andrew’s sale agreement, BOQ will provide a capped indemnity of $8.5 million to the buyer, Farmcove Investment Holdings, for certain pre-completion matters.”