The Australian Prudential Regulation Authority (APRA) today welcomed the announcement of the proposed purchase by Melbourne-based financial institution group, IOOF, of AM Corporations superannuation and insurance business.  The purchase includes all superannuation funds under the trusteeship of Approved Trustee, LifeTrack Management Limited (LifeTrack), which currently manages around $2.8 billion of superannuation on behalf of 180,000 corporate and personal investors.

Formal documentation in relation to the sale is expected to be signed within the next few days.  Successful completion of the sale is contingent on further due diligence by the buyer and certain conditions being met by the vendor.

APRAs General Manager, Mr Wayne Byres, said that the successful completion of the sale to IOOF, which currently has funds under management and administration of some $6 billion, would ensure the benefits of greater resources and a new and independent approved trustee for existing LifeTrack members.

The proposed sale is consistent with APRAs goal of enhancing the long-term safety and certainty of trustee managed superannuation assets.

APRA placed LifeTrack under close supervision in late 2001 when it became concerned about the heavy exposure to traded life insurance policies within the LifeTrack superannuation funds.  At the time, APRA intervened to prevent LifeTrack from purchasing any further life policies.

APRA is of the view that investment portfolios with a heavy concentration of relatively illiquid assets, like traded life policies, can be inappropriate within the regulated superannuation system and may press against the limits of the prudent person test imposed on trustees by the Superannuation Industry (Supervision) Act 1993 (the SIS Act).

In May 2002, the regulator commissioned a formal investigation by Mr Joseph Catanzariti, a partner at law firm Clayton Utz, into the historical origins of the AM Pooled Superannuation Trusts investment concentration in traded life policies.  An investigation report was delivered in late January 2003 and APRA is currently assessing its findings.

Mr Byres said that the contents of the report were relevant to past matters and would have no implications for the business under IOOFs stewardship going forward.

In October 2002, AM Corporation (the ultimate parent of LifeTrack) provided an Enforceable Undertaking to APRA to reassess its long-term strategy, including the option of a sale to a larger fund manager.  The AM group subsequently appointed investment house Gresham Partners to assist in this process, the outcome of which is the proposed sale to IOOF.  

APRA has closely monitored the strategic review and sales process and is pleased with the outcome, Mr Byres said.

LifeTrack and other Approved Trustees are licensed by APRA to manage retail superannuation under the SIS Act.