IAG's A$1.85b deal to buy Wesfarmers' operations needs approval

Wesfarmers at Kerrs Road, Wiri, Auckland.

Insurance Australia Group has agreed to buy the New Zealand and Australian underwriting businesses of Wesfarmers for A$1.85 billion, to bolster its position in the two markets.

Details of the transaction which emerged yesterday said clearance from the Commerce Commission here and the Australian Competition and Consumer Commission was needed for the deal.

Jacki Johnson, Insurance Australia Group's New Zealand chief executive, said Wesfarmers' Lumley operations would be brought together with IAG's NZI business, securing its position as the leading provider of insurance through the broker network.

An Insurance Australia Group spokesman in Auckland said only part of the Lumley business here was in the deal.

"Effectively it is Wesfarmers that is selling its underwriting businesses, which include Lumley General Insurance in New Zealand. It's not selling its entire insurance operations which include a broking business - which complicates the description a little," he said.

"IAG is the purchaser and parent also of NZI which is its current intermediated business.

"The intermediated business will expand as a result so that the combined intermediated business of IAG in New Zealand will amount to a little over 40 per cent of the total intermediated market. NZI's share on its own is currently around 28 per cent," the spokesman said.

Johnson said Lumley in New Zealand had strengths that would complement NZI, such as its expertise in the commercial motor vehicle and professional indemnity insurance segments.

"This is an exciting opportunity that will see the combined business have greater capability to meet the needs of customers and partners and provide them with broader product and service offerings."

She said Lumley here offered commercial insurance products through brokers and personal insurance through a partnership with Westpac.

The Lumley/NZI deal was part of a wider acquisition by IAG of the insurance underwriting companies of ASX-listed diversified company Wesfarmers, trading under the WFI and Lumley Insurance brands, for A$1.845 billion, Johnson said.

The deal is due to be completed in the second quarter of next year.

- additional reporting: BusinessDesk