Connective AFG Merger Broker FAQ’s

August 12th, 2019

1. Why are Connective and AFG merging?

• The prospect of complementing our existing business with the AFG’s business is compelling. The merged businesses will be able to combine the DNA of a collective 40 years operating in the broking industry.
• We have the opportunity of taking the best aspects of both businesses to build an even stronger combined business.
• The merged group will be able to leverage greater geographical portfolio diversification to further enhance choice and competition for Australian mortgage customers.
• It’s a good outcome for brokers and customers.

2. Who are AFG? What do they do? How big are they?

• AFG are an Australian mortgage aggregator with 25 years in the industry – they were one of the first aggregators, and are listed on the Australian Stock Exchange (ASX code “AFG”).
• AFG offers similar aggregation services to Connective across residential and commercial and under its own range of white-label products, Australian Finance Group Loans (AFGHL). In addition, AFG offers business finance, insurance products, and AFG securitised products throughout Australia.
• AFG has five Australian office locations (including Perth HQ) with over 200 employees and 2,975 brokers.
• To give you a sense of their size, AFG originated total settlements of $34 billion in FY19 (v Connective’s $42.5bn).

3. As a Connective broker, will there be changes to my fee plan – in particular, will I now be charged a share of upfront and trail?

• No, we intend to continue to run the two business separately, each continuing to serve our respective brokers in value and service proposition.
• Both AFG and Connective have gained market share based on their respective value propositions to their mortgage broker customers.
• We are not going to try and force a one size fits all model as we recognise each model has its own appeal.

4. Is Connective in financial difficulty (and therefore merging with another business)?

• Not at all. We have had a great start to the year and foresee continued upside – we have always been profitable – CY 2018 was our most profitable year to date.
• With 3,600+ brokers, we are the largest wholesale aggregator in Australia. Connective generated FY19 revenue of $63 million and our brokers originated total settlements of $43.5 billion in FY19.
• Both businesses are well placed. The merger will make both businesses stronger.

5. When will the merger take place?

• There are a number of legal, regulatory and other conditions required so at this stage we do not anticipate the merger completing until next calendar year. We will keep all stakeholders informed regarding the merger process as we move through the steps involved.

6. Why does this need approval from the Australian Competition & Consumer Commission (ACCC)?

• Both Connective and AFG offer mortgage aggregation services.  The ACCC is the competition regulator and it looks at any transaction in where significant players are proposing to merge.

7. Will Connective be changing our IT systems – can I still use Mercury?

• It is intended to continue to run the two business separately, each continuing to serve their respective brokers in value and service proposition.
• Mercury will remain our software platform, and we will continue to invest in it and expand its capabilities – there is a new and heavily updated version of Mercury under development, and this will continue.

8. Is there going to be less opportunity for lenders to get onto the AFG or Connective panel in future? Will you drop lenders who are only on one of the panels?

• Our expectation is that the Connective and AFG panels will have more lenders as a result of this merger, not less.
• Connective brokers will also have access to AFG originated products.

9. What changes are taking place across the business?

• In the immediate term, nothing will change. There is still some time to go before the deal completes.
• It is intended to continue to run the two business separately, each continuing to serve their respective brokers in value and service proposition.

10. What functions will be centralised going forward?

• As the transaction is subject to a number of conditions, the merger process is likely to take some time. It is premature to be outlining structural changes.

11. Will Connective change the way they work with their brokers?

• It is intended to continue to run the two business separately, each continuing to serve their respective brokers in value and service proposition.

12. Will Connective and AFG standardise practices across the two businesses?

• It is intended to continue to run the two business separately, each continuing to serve their respective brokers in value and service proposition.

13. When will we find out more?

• You will receive details of the merger via email today (12^th August) and will have the opportunity to participate in a webinar to be held on Thursday 15^th Details to follow.
• We are committing to keeping you updated as we progress through the merger process.
• We will use direct emails and webinars to provide regular updates.

14. Do you have a timeline of when things will happen?

• It will take some time, there are a number of conditions (legal, regulatory and other approvals) attached to the deal.
• We don’t anticipate the merger completing before next year but we will be keep you informed through each phase.

15. What support is available to me during this period of change?

• We are committed to keep all members updated as we work through the merger process.
• We don’t anticipate the merger completing before next year but we will be keep you informed through each phase.
• If you have any questions, ask your BSM, State Manager or reach out to a member of the Connective Executive Team.