The New Zealand Commerce Commission has approved a proposal by the IAG (NZ) Holdings to acquire Lumley General Insurance (NZ) from Wesfarmers.
In December 2013, IAG reached an agreement to purchase Wesfarmers’ Australian and New Zealand underwriting operations for $1.85bn, which was subject to regulatory approvals in both countries.
The acquisition includes Wesfarmers’ underwriting companies that are trading under the WFI and Lumley Insurance brands, along with a ten-year distribution agreement with Coles.
Expected to fortify IAG’s position in Australia and New Zealand, the acquisition is still subject to approvals from the Reserve Bank of New Zealand, the Australian Prudential Regulation Authority and the Australian Treasurer.
Earlier, the Australian Competition and Consumer Commission had announced that it will not thwart IAG’s takeover of the Australian underwriting operations of Wesfarmers’ insurance division.
The New Zealand corporate regulator said that it is satisfied that the proposed acquisition will not have, or would not be likely to have, the effect of substantially lessening competition, for personal and commercial insurance products.
Commerce Commission chairman Dr Mark Berry says IAG will still need to compete with other insurers on price and quality.
"By their nature all mergers create a larger company with a greater market share. However, that does not mean that a substantial lessening of competition in the market naturally follows. In this case the Commission is satisfied competition remains."
"We have considered submissions from a number of interested parties and we are confident that IAG’s purchase of Lumley will not materially change the provision of services or the ability of customers to shop around as other companies will be able to expand to replace Lumley’s position," said Berry added.
The Commerce Commission noted that Lumley’s larger presence in commercial insurance still faces competition from firms such as Vero, QBE, Zurich, Allianz, AIG and ACE.
—————————————————————————————————————————————————————————————Image: NZ Commerce Commission approves IAG’s acquisition of Wesfarmers insurance business. Photo: courtesy of adamr/ FreeDigitalPhotos.net.