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13 March 2014
New Zealand’s Commerce Commission has granted IAG approval to acquire AMI Insurance, minus the Christchurch-based insurer’s earthquake claims.
Commission Chairman, Mark Berry, says the competition regulator is satisfied that the acquisition is not likely to substantially lessen competition in the house, contents, and motor vehicle insurance markets.
IAG NZ CEO Jacki Johnson says AMI writes about $NZ360 million ($280 million) of annual premium and will increase IAG’s NZ premium base by nearly 30%.
IAG owns State Insurance and NZI in New Zealand. Combining AMI’s business is expected to generate at least $NZ30 million ($23 million) a year in synergies within two years.
Ms Johnson says the acquisition reflects IAG’s positive long-term outlook for the New Zealand insurance market.
“New Zealand is regarded as a home market for IAG, and we are confident that it will continue to offer attractive returns into the future.”
AMI controls about a third of the Canterbury residential market and its concentration in the region meant it suffered significant losses in the Christchurch earthquakes and had to seek a government bailout last year.
IAG is buying the company, which has 500,000 policyholders, for $NZ380 million ($295 million), but existing and future Canterbury earthquake liabilities will be taken over by the Government.
The Commerce Commission will publish its reasons for the decision later but says there will be “sufficient competition from existing participants in the relevant markets to constrain the merged entity from exercising any market power”.
“The commission is also satisfied that the proposed acquisition will not be likely to substantially lessen competition in the markets for windscreen repair/replacement and collision repair services.”
The acquisition is still awaiting approval from the Reserve Bank of New Zealand.
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