The Commerce Commission has cleared Insurance Australia Group to buy Wesfarmer's Lumley General Insurance unit, giving New Zealand's biggest general insurer a boost to market share.
The local regulator approved the A$1.845 billion deal, which will add Wesfarmers' WFI and Lumley Insurance brands to IAG stable which includes NZI, AMI and State, after twice pushing out its deadline to make a decision. The commission was satisfied the deal won't substantially lessen competition for personal and commercial insurance products.
"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," chairman Mark Berry said in a statement. "In this case the commission is satisfied competition remains."
The deal has already been approved by the Australian Consumer and Competition Commission and New Zealand's Overseas Investment Office, and still needs sign-off from the Reserve Bank and two other Australian regulators.
The application was opposed by a variety of organisations including rival insurer Suncorp, the Insurance Brokers Association New Zealand, Multisure Risk Managers, the Motor Trade Association, Bus and Coach Association, the Rental Vehicle Association, and the Collision Repairs Association. In February, Tower chairman Michael Stiassny told shareholders there was a "significant risk" from the proposed level of market dominance.
The Commerce Commission today said Lumley's larger presence in commercial insurance still faces competition from the likes of Suncorp-owned Vero, QBE, Zurich, Allianz, AIG and ACE, and that it will still have to compete on price and quality.
ASX-listed shares in IAG slipped 0.3 percent to A$5.79 yesterday, and have declined 0.5 percent this year.