Insignia shares soar on upgraded guidance, remediation
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The news: Shares in Insignia Financial jumped in early trading after the wealth manager upgraded its full-year profit guidance on the back of strong revenue growth and higher funds under management.
The numbers: Insignia now expects underlying profits after tax for FY24 to be in the range of $212 million to $218 million, and said it would exceed the net revenue and earnings margin guidance provided in February.
It is also on track to hit the upper end of the $60 million to $70 million range, plus a further $20 million to $25 million reduction in net operating costs compared to last year.
Insignia shares were up nearly 8% at $2.56 on the ASX in early trading.
The context: The improvement in profits comes despite Insignia adding $188 million to existing provisions to address a blowout in remediation costs for legacy issues related to poor financial advice and product compliance issues.
This included a $10.7 million fine paid to Australian Prudential Regulatory Authority (APRA), which accepted a court enforceable undertaking (CEU) from Insignia's OnePath Custodians (OPC) pledging to rectify compliance deficiencies and compensate members. APRA allege OPC failed to invest members’ default superannuation contributions in MySuper products.
CEO Scott Hartley said he expects this to be the company’s final provision increase related to the legacy advice remediation program. He noted the remediation funding announced today “will not require a capital raise from shareholders”.
Insignia announced it has also separated its Rhombus Advisory business, but will retain a 37% equity stake.
What they said: APRA deputy chair Margaret Cole said: “This action shows that APRA is willing to take strong enforcement action where it is warranted. These MySuper changes came into effect 10 years ago".
"Our patience for entities who are still struggling with foundational issues, with the potential for serious impact to members, has run out."
The sources: ASX announcement, APRA media release
