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Latitude Group (Latitude) has entered into an agreement to sell its insurance arm Latitude Insurance Holdings (Hallmark) to the St Andrew Insurance Group (St Andrews) for $20.3 million.
The sale will allow Latitude to “release approximately $90 million into its core business”, simplify its business model, reduce costs and streamline technology and optimise shareholder returns.
While completion of the transaction is subject to regulatory approval from APRA and RBNZ, it is expected to complete in late 2022 or early 2023.
The group is expected to record a post-tax loss of approximately $30 million on the sale, including goodwill and other intangible asset write downs.
The sale comes a few months after Latitude broke off its $250 million deal of Humm’s buy now pay later (BNPL) consumer finance business.
The deal would have paid a total consideration of 150 million Latitude shares and $35 million cash in exchange for hummgroup’s BNPL, instalment and credit card operations, but it was dropped in June with both lenders citing the “current major disruption in the financial market” as the catalyst for this cancellation.
The decision came one day after Humm published its trading update for the financial year, which saw its cash net profit after tax plummeted 61 per cent over the fiscal year-to-date to May.
Commenting on the group’s latest move to sell off Hallmark, Latitude’s managing director and chief executive, Ahmed Fahour, said the move will allow Latitude to “focus entirely” on its core businesses, instalments (Pay) and consumer lending (Money) while simplifying its operations.
“Importantly, it ensures Hallmark customers will be managed by a dedicated insurance business which will meet continuing obligations to policyholders,” Mr Fahour said.
Meanwhile St Andrew’s CEO Matthew Way said the insurer was “attracted” to Hallmark because of its “strong business” and talented team.
Mr Way said the move will help build scale and further expand the group’s footprint across Australia.
“Apart from ensuring a seamless transition for Hallmark employees, our number one priority will be to ensure we continue to provide the same high level of service to both Hallmark and St Andrew’s customers,” Mr Way said.
Hallmark made an immaterial contribution to Latitude’s cash NPAT profit in 1H 2022, after being largely closed to new business during the COVID period of the financial year 2020 and FY21.
[Related: Latitude Humm call of HCF acquisition]