The Australian Competition and Consumer Commission (ACCC) on Thursday (12 June) said it will not oppose Allianz Australia Insurance Limited’s planned acquisition of the Royal Automobile Association of South Australia’s personal insurance business (RAA).
Last year, Allianz signed a A$642M (US$417.2M) agreement with the RAA to acquire its general insurance business, one of three similar deals announced in the last six months, in which a major insurer proposed to acquire a motor club’s insurance arm.
The ACCC said it carefully considered the competitive landscape, the strength of other insurers in the state, as well as the likely impact on insurance prices, coverage, and service offerings.
ACCC Commissioner Dr Philip Williams stated that the regulator found that other supplier will continue to compete with a merged Allianz and RAAI after the deal, making the transaction unlikely to “substantially lessen competition”.
“As well as being the two largest insurers in Australia, Suncorp and IAG also have a significant presence in South Australia,” Williams said. “As such, both are likely to compete effectively against Allianz in South Australia even after it has purchased RAA.”
“Mid-tier insurers Auto & General (Budget Direct) and Youi are also growing their market share nationally and will continue to compete on price in South Australia,” Williams added.
The ACCC noted that another key factor is the mounting pressures on the insurance industry—particularly the rise in extreme weather events and increased reinsurance and regulatory costs—which are affecting RAAI. The commission concluded that these challenges are likely to make RAAI less competitive than in previous years.
The regulator says it also considered the impact of the proposed deal on smash repair, windscreen repair and replacement, and building repair services in South Australia, concluding the deal is unlikely to lessen competition in these markets, as Allianz is unlikely to have the ability to “diminish prices or supply terms” after the acquisition, given its position relative to other insurers.
Motor club deals
This decision comes after the ACCC last month greenlit IAG’s acquisition of a 90% share in Queensland’s RACQ Insurance.
The regulator had begun informal reviews of both the IAG-RACQ and Allianz-RAA transactions in January, but—amid opposition from the likes of the Motor Trades Association—the regulator announced in April it would delay its findings, citing the need for more time following the receipt of further information from the involved parties.
Having now provided approval for two motor club deals, the ACCC says it will now turn its attention to reviewing IAG’s proposed acquisition of RAC Insurance, a deal announced last month.
However the commission also pointed out its decision on Allianz and RAAI should not be seen as a guide to the outcome of the IAG, RAC deal “The competitive dynamics and issues in each transaction are unique and the ACCC is considering each transaction individually,” the regulator said.
