Integration and simplification delivering benefits against volatile market backdrop

Insignia Financial (ASX: IFL) today announced net profit after tax for the half year ended 31 December 2022 (1H23) of $45.1 million, including discontinued operations, reflecting an increase of 67.1% on the prior corresponding period. Underlying net profit after tax in 1H23 was $94.4 million, on a continuing basis, a decrease of 17.1% on 1H22.

Commenting on the half year performance, Insignia Financial Chief Executive Officer, Renato Mota said, “It’s pleasing to see us continue to make strong progress in executing on our strategic priorities, simplifying the business, and delivering improved client outcomes. Against a backdrop of market volatility driven by economic uncertainty, it’s important we continue to realise our strategic opportunities.”

Overview

• Net profit after tax (NPAT) was $45.1 million, including discontinued operations, up 67.1% on the prior corresponding period (pcp)¹, primarily driven by the gain on sale of the Australian Executor Trustees Limited (AET).
• Expenses reduced 7.3% driven by synergies, partly offsetting net revenue decline of $67.5 million or 8.9%, mainly impacted by market movements.
• Underlying net profit after tax (UNPAT) of $94.4 million, excluding discontinued operations, down 17.1% on pcp.
• Funds under management and administration (FUMA), impacted by negative market performance, decreased by $5.5 billion (-1.9%) to $285.1 billion in the 6 months to 31 December 2022.
• Net flows improved by $0.9 billion in Platforms, and by $0.3 billion in Asset Management² on pcp.
• Integration ahead of schedule, synergy run-rate target achieved, and ANZ separation completed.
• Completion of AET sale, and reset of JANA Investment Advisers (JANA) commercial relationship including divestment of remaining stake, aligned to simplification strategy.
• Interim dividend of 10.5 cents per share representing a 70% payout ratio.

Flows

Commenting on flows, Mr Mota said, “1H23 saw a $0.9 billion improvement in Platform net flows on the prior corresponding period. Notably, we saw significant improvement in net flows across the Pensions & Investments (P&I) and MLC platforms, particularly in the Workplace channels, recognising new business wins as a main driver. Our ongoing success in winning and retaining employer clients highlights the attractiveness and competitiveness of our contemporary offerings.

“Within Asset Management, excluding JANA, net flows for the half were $0.1 billion net inflow compared to $0.2 billion net outflow in the prior corresponding period. The improvement in net flows was underpinned by continued strong retail multi-asset flows.”

Integration and simplification

During the half, Insignia Financial’s commitment to achieve $218 million of run-rate synergies was achieved. Mr Mota added, “We continue to progress our integration and simplification priorities, delivering ahead of a three-year timeline and accelerating synergy benefits alongside prudent cost control. Our ongoing commitment to simplification and improved focus across the business has been demonstrated through various milestones.

“In October last year, the successful separation of the P&I business from ANZ was a significant achievement in our separation and simplification program. It was a momentous occasion for Insignia Financial and the industry – being the first time an organisation has completed the separation of a superannuation business from a big four bank in Australia. 

“Aligned to our ongoing focus on simplification, we divested our remaining stake in JANA and announced the resetting of our commercial relationship at the beginning of the calendar year. JANA continues to be a valued partner and we look forward to working closely with them to deliver superior investment outcomes for our clients.”

Outlook

Mr Mota commented, “We have begun the second half of the financial year with strong progress and positive momentum across the business through disciplined execution of our strategic initiatives.

“As the industry continues to be impacted by the uncertainty of macroeconomic and geopolitical conditions, Insignia Financial’s scale, diversification and strategic focus makes us well placed to deliver sustainable outcomes for clients, members, and shareholders.

“Our diversified business model is supported by positive long-term industry trends, providing growth opportunities as we continue to deliver on our ultimate ambition to improve the financial wellbeing of all Australians.”

Read a copy of the full ASX announcement

1 Prior corresponding period (pcp) refers to 1H22
2 Asset Management net flows ex-JANA