Freedom drops 30pc as bosses walk and staff are cut in wake of royal commission
Freedom Insurance, savaged in the financial services royal commission for its direct telephone sales, has parted ways with its two most senior executives and announced big staff cuts.
The stock (ASX:FIG) dropped 30 per cent to an intraday low of 9.2c this morning after the results of a strategic review were announced yesterday at 5.10pm AEST. It closed at 9.7c.
Freedom (ASX:FIG) was criticised for selling accident and funeral insurance to an intellectually disabled man and has been undertaking a strategic review.
Freedom announced on Tuesday evening its chief executive Keith Cohen had “left the company and will cease as a director effective immediately”. He would be replaced by chief operating officer Craig Orton who joined in February.
Freedom’s chief financial officer Jenny Andrews would also depart.
Freedom said it would cut staff numbers from about 200 to 90.
The cuts would save $15 million annually, though redundancy and restructuring would cost $4.8 million.
The review — undertaken with Deloitte — considered the company’s future after finding its upfront commission revenue and distribution model would “not meet ASIC’s proposed new regulatory regime”.
Freedom has immediately suspended “new business sales of all direct insurance products” and restructured operations “to align the business and staffing with its reduced activities.
“The company will not generate up front commission revenue while its sales are suspended.”
Upfront commission revenue for the current year “will be lower than the prior year”, the group said.
Freedom in August reported a 14.3 per cent increase in full-year revenue to $61.3 million.
Profit was $13.2 million, down 6.5 per cent.
Additional reporting from Business Insider Australia