Insurance Australia Group (IAG) has today been granted clearance to acquire Lumley General Insurance (NZ) Ltd.
The proposed acquisition forms part of a wider acquisition by IAG’s parent, Insurance Australia Group Ltd, of the Australian and New Zealand underwriting businesses of Wesfarmers Ltd, Lumley’s parent.
The New Zealand Commerce Commission (NZCC) released its decision to grant approval today after delaying it three times.
In a statement released this morning it said it was satisfied 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.
“Lumley has a small presence in personal home, contents and motor vehicle insurance, where three main insurance providers (IAG, Vero, Tower) will continue to operate in New Zealand in addition to a number of other companies providing general insurance products.
“While Lumley’s presence is larger in commercial insurance, as with personal insurance, a number of providers will continue to operate in New Zealand including Vero, QBE, Zurich, Allianz, AIG, ACE and others.”
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,” he said.
“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 Dr Berry.
IAG managing director and CEO Mike Milkins said the decision was a significant step towards IAG completing the acquiaition of Wesfarners' insurance underwriting business.
Wesfarmers MD Richard Goyder said he was pleased that another key transaction milestone had been achieved.
"Wesfarmers welcomes the NZCC’s announcement regarding Insurance Australia Group’s acquisition of our New Zealand underwriting operations,” Goyder said. “The NZCC’s announcement is an important step in completing the sale, which we believe is in the best interests of our shareholders while offering the customers of our underwriting businesses the opportunity to become part of an established leading insurance organisation."
The submission is still subject to approval by the Reserve Bank of New Zealand. The Overseas Investment office gave its consent in March.
In Australia, approvals are pending from the Austrlian Prudentual Regulation Authority and the Federal Treasurer.
A public version of the written reasons for the decision is due to be available later this morning on the Commission’s website.
