IAG's Lumley takeover gets final regulatory approval
Insurance Australia Group has been given the final regulator's tick to buy Wesfarmers' Lumley general insurance unit, adding to the dominance of New Zealand's biggest general insurer.
Australia's acting assistant treasurer has approved the transaction, the last sign off needed for Wesfarmers to sell its insurance businesses for A$1.8 billion to IAG, adding the WFI and Lumley Insurance brands to an existing IAG stable which includes NZI, AMI and State.
The sale was subject to a number of conditions precedent including approvals from the Australian Prudential Regulation Authority, Australian Competition and Consumer Commission, Reserve Bank of New Zealand, New Zealand Commerce Commission, and New Zealand Overseas Investment Office.
Earlier this month New Zealand's Reserve Bank it was satisfied Lumley will continue to meet licensing criteria under IAG ownership and in May, the Commerce Commission approved the deal saying it was satisfied the transaction wouldn't substantially lessen competition for personal and commercial insurance products.
The application was opposed by 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.
Meanwhile, Wesfarmers has also been given the green light by regulators 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 its exit from the insurance industry.
Wesfarmers said 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.
ASX-listed shares in IAG were A$5.88 before the Australian market opened, and have increased 1 percent this year.