Wesfarmers exits insurance industry with sale of assets including NZ’s Crombie Lockwood
Wesfarmers has agreed to sell its broking and premium funding units for A$1 billion to Arthur J. Gallagher & Co, the New York stock exchange-listed insurer, completing the Australian company's exit from the insurance industry.
Wesfarmers will get a further A$150 million distribution to repay premium funding as part of the sale, which includes its Crombie Lockwood, Lumley Finance and Monument Premium Funding brands in New Zealand. The company expects to make a pretax profit of between A$310 million and A$335 million from the transaction, which is conditional on Australian, New Zealand and UK regulatory approvals.
Illinois-based AJG is also acquiring Wesfarmers' OAMPS Insurance Brokers in Australia, the country's largest insurance broker, and OAMPS UK.
The sale will complete Wesfarmers' divestment of its insurance division. It sold its Australian and New Zealand underwriting businesses, WFI and Lumley Insurance, last year for A$1.85 billion to Insurance Australia Group, which operates the State, NZI and AMI brands and is New Zealand's largest general insurer.
Last month, the IAG deal was approved by the Australia Competition and Consumer Commission and has New Zealand's Overseas Investment Office Approval, but is still awaiting approval from New Zealand's Commerce Commission, as well as the Reserve Bank of New Zealand and two other Australian regulators.
The Commerce Commission extended the deadline for its decision by a month to the end of April. In submissions to the commission, rival insurance groups have raised concerns about market dominance should the deal go ahead.
Wesfarmers said all up, it will have sold A$3 billion of insurance assets for a total pretax profit of between A$1.01 billion and A$1.09 billion. Its brokerage operations generated A$331.1 million in revenue in the year ended June 30, 2013, of which between 40 and 45 percent was derived from its New Zealand operations.
AJG operates in 26 countries and is one of the world's largest risk management and insurance broking companies.