NATIONAL AUSTRALIA BANK SALE OF MLC

9 September 2020

On Monday 31st August the National Australia Bank (NAB) publicly announced MLC is being sold to IOOF. This separation of NAB and MLC has been planned for a long time and a number of options were considered, including listing MLC on the Australian Stock Exchange (ASX) as an independent company, selling to a private equity firm, or (as was eventually decided) selling to an existing financial services company.

History. Both MLC and IOOF both originate from very old Australian institutions. MLC (Mutual Life & Citizens Assurance Company Ltd) traces its origins back to 1886 as an insurance company. In 2000 NAB brought the business from Lend Lease, which at the time was one of the biggest mergers in Australian history. The insurance arm of MLC was then sold to Nippon Life Japan in 2016 and NAB have owned the remainder of MLC since.

IOOF (Independent Order of Odd Fellows) was originally a fraternal organisation that shared many similarities with the Freemasons, and the financial services part of the organisation originated in Melbourne in 1846 as a friendly society. IOOF was listed on the ASX in 2003 and has since quickly grown through acquisition.

Both of these companies were originally founded when Australia was a new colony, and people were lucky to live past their late 30s, and often died before 55. In those days there was little in the form of government funded welfare services, so these companies played an important role in providing security for those left behind.

Reason for sale. In the aftermath of the Hayne royal commission, Commonwealth Bank, Westpac, National Australia Bank and ANZ have all announced, to varying extents, their withdrawal from providing financial advice and investment management. They point to rising regulatory costs and dwindling profit margins.

We also know a number of unacceptable practices were exposed during the royal commission across the industry, which happened during period of bank ownership. These included charging clients for no service and continuing to charge clients who had passed away, and as a result the banks have all put aside hundreds of millions in remediation costs. This has further motivated the banks to move away from financial advice.

What it means for you.  While it was known NAB were planning to sell MLC, IOOF didn’t emerge as a likely candidate until just before the announcement. We feel IOOF will be a good fit, and result in clients being well supported into the future as part of a strong financial services company.

We do not expect a lot of changes for you as our clients. Our business will remain where it is, and our name will not change. Your funds are not ‘owned’ by MLC, rather they are managed by MLC, meaning this change will not affect your investments.

Many of you already have indirect ownership of MLC and IOOF, as NAB (the current owner of MLC) and IOOF are both listed on the Australian Stock Exchange and many investments include these companies.

Please let us know if you have any queries about the sale of MLC. We are getting more detail every day and will keep you informed of the developments.

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