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SEVERAL HUNDRED MILLION DOLLARS filled the gulf between IAG’s bid for the Wesfarmers Insurance underwriting assets and the bids of the also-rans. But the Sydney-based insurer had plenty of strategic reasons for forking out more than any other insurer bidding for Lumley and WFI. On December 16 IAG signed on to purchase the insurance underwriting businesses of Western Australian industrial conglomerate Wesfarmers for $1.845 billion, saying the deal will strengthen its Australian and New Zealand businesses. No one is arguing about that. But the conjecture around the deal’s impact on insurance industry competition and even the convoluted process by which it came about is likely to be a major topic for discussion for some time yet. The acquisition brings Wesfarmers’ intermediary-focused Lumley and WFI direct brands into the IAG stable, as well as a 10-year distribution agreement for the insurance operations of supermarket giant Coles. While Wesfarmers’ broking businesses – OAMPS in Australia and the UK and Crombie Lockwood in New Zealand – are to be retained, market scuttlebutt as this edition went to press suggests at least one major international broker is checking out the OAMPS operation as a possible acquisition. The sale of the Wesfarmers Insurance underwriting businesses has taken some intriguing twists and turns over the past few years. The sale to IAG effectively dismantles the fifth-largest insurer in Australia (and third-largest in New Zealand). The acquisition places IAG as the undisputed king at the top of the insurance industry heap, well clear of Suncorp on both sides of the Tasman. Wesfarmers was very keen on the potential of insurance to boost its profit profile when it bought Lumley in 2003 for a mere $320 million, and as recently as 2010 Managing Director Richard Goyder was hailing insurance as “a really good business to be in”. Some disappointing results and finally the catastrophes of 2011 seem to have tempered the Wesfarmers board’s enthusiasm for insurance somewhat, with Lumley at that time reportedly being discreetly offered to selected insurers who might have been interested. But the first solid indications of a coninsuranceNEWS
February/March 2014
“The sale to IAG effectively dismantles the fifth-largest insurer in Australia (and the third-largest in New Zealand).”
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