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Frozen Guardian Trust fund stings ex-owner Suncorp for $4.9M

Friday 18th July 2014

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Australian insurer Suncorp Group forked out an indemnity payment to New Zealand Guardian Trust more than three years after selling its former subsidiary at a $40 million loss.

The $4.9 million payment on April 29 of this year covered the loss incurred by the Guardian CashPlus Mortgage Unit Fund in the final partial capital repayment from the Guardian Mortgage Fund, which was frozen in 2008 as the global financial crisis took hold, under an indemnity provision, Guardian Trust said in notes to its latest financial statements. At the time of the freeze, the CashPlus Fund was 35 percent invested in the mortgage fund, which suspended withdrawals of some $249 million in funds to some 3,700 investors. Guardian Trust guaranteed certain interest and principal losses relating to the fund, and was in turn indemnified by a unit of Suncorp. the statements show.

Guardian Trust completed the mortgage fund repayments three weeks after switching to its third owner since Suncorp sold the business in 2011. The trustee was sold to Complectus, a unit of Perpetual Trust-related Bath Street Capital and two funds managed by Milford Asset Management, on April 7 for $68.5 million. Suncorp sold it for A$42 million to The Trust Co, which was itself taken over last year by ASX-listed fund manager Perpetual Ltd.

The financial statements show Perpetual pulled out a $4.4 million dividend from Guardian Trust three days before the sale to Complectus, with dividends of $2.8 million and $3 million for the 2014 and 2013 financial years paid to previous owner Trust Co.

The trustee company reported profit of $4.9 million in the 12 months ended Feb. 28 from $3.6 million a year earlier, on a 5.4 percent increase in revenue to $37.4 million. Net operating cash flow rose to $5.9 million from $3.4 million in the 2013 year, leaving Guardian Trust with $7 million  in cash and equivalents as at Feb. 28, and before the post-balance date dividend payment to Perpetual.

As at Feb. 28, Guardian Trust had $2.47 billion of assets under administration and $90.49 billion of securities supervised. The seven group investment funds it manages had a total value of $166 million at the Feb. 28 balance date.

BusinessDesk.co.nz

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