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Australian on Saturday

M&A the only way ahead in insurance
The most surprising aspect of Suncorp's $7.9 billion bid is that it didn't come sooner, write Tim Boreham and Tim Blue

October 14, 2006
SUNCORP Metway's conditional merger approach to Promina may have been unsolicited, but hostile it was not.

It's one factor for the ACCC to consider. The more seminal one is whether the regulator adopts a national or state-based market definition.

Currently, IAG holds more than 40 per cent of its (home) NSW market in car insurance.

As a result, NSW and Queensland (where Suncorp has a natural bias) emerge as key regulatory stumbling blocks.

Fitzgerald notes the ACCC generally took a state-based approach to previous insurance mergers, notably IAG's purchase of CGU in 2002 and Suncorp's purchase of GIO from the AMP in 2003.

"If this turns out to be the case once more, we would expect the ACCC to oppose the deal," Fitzgerald says.

While there are arguments in both directions, ABN AMRO's analysts are more confident than not the ACCC will pass the deal.

The firm notes that in the case of the IAG-CGU merger, concentration thresholds were breached in some regions, but the regulator focused on aggregate shares across the national market.

Should the merger eventuate, the repercussions will be felt across the sector but it's not clear what the end results would be.

IAG could benefit from Suncorp-Promina's merger distractions or, conversely, be faced with a gorilla with an equal share of the national market.

Some observers think IAG is now more likely to be taken over, even though two mergers would raise serious regulatory barriers.

Suncorp itself might be raided in a pre-emptive strike by an institution such as Westpac.

Whatever the case, says KPMG's Terblanche, all insurers need to think long and hard about growing in a sector which, unlike its product proposition, offers little security and peace of mind. "I would expect boards of all insurers to ask some very hard questions about how they are going to respond in this changing landscape," he says.

<blockquote data-quote="bigdog" data-source="post: 81054" data-attributes="member: 4374">Australian on SaturdayM&amp;A the only way ahead in insuranceThe most surprising aspect of Suncorp&#039;s $7.9 billion bid is that it didn&#039;t come sooner, write Tim Boreham and Tim Blue&nbsp;October 14, 2006SUNCORP Metway&#039;s conditional merger approach to Promina may have been unsolicited, but hostile it was not.It&#039;s one factor for the ACCC to consider. The more seminal one is whether the regulator adopts a national or state-based market definition. Currently, IAG holds more than 40 per cent of its (home) NSW market in car insurance. As a result, NSW and Queensland (where Suncorp has a natural bias) emerge as key regulatory stumbling blocks. Fitzgerald notes the ACCC generally took a state-based approach to previous insurance mergers, notably IAG&#039;s purchase of CGU in 2002 and Suncorp&#039;s purchase of GIO from the AMP in 2003. &quot;If this turns out to be the case once more, we would expect the ACCC to oppose the deal,&quot; Fitzgerald says. While there are arguments in both directions, ABN AMRO&#039;s analysts are more confident than not the ACCC will pass the deal. The firm notes that in the case of the IAG-CGU merger, concentration thresholds were breached in some regions, but the regulator focused on aggregate shares across the national market. Should the merger eventuate, the repercussions will be felt across the sector but it&#039;s not clear what the end results would be. IAG could benefit from Suncorp-Promina&#039;s merger distractions or, conversely, be faced with a gorilla with an equal share of the national market. Some observers think IAG is now more likely to be taken over, even though two mergers would raise serious regulatory barriers. Suncorp itself might be raided in a pre-emptive strike by an institution such as Westpac. Whatever the case, says KPMG&#039;s Terblanche, all insurers need to think long and hard about growing in a sector which, unlike its product proposition, offers little security and peace of mind. &quot;I would expect boards of all insurers to ask some very hard questions about how they are going to respond in this changing landscape,&quot; he says.</blockquote>

[QUOTE="bigdog, post: 81054, member: 4374"] Australian on Saturday M&A the only way ahead in insurance The most surprising aspect of Suncorp's $7.9 billion bid is that it didn't come sooner, write Tim Boreham and Tim Blue October 14, 2006 SUNCORP Metway's conditional merger approach to Promina may have been unsolicited, but hostile it was not. It's one factor for the ACCC to consider. The more seminal one is whether the regulator adopts a national or state-based market definition. Currently, IAG holds more than 40 per cent of its (home) NSW market in car insurance. As a result, NSW and Queensland (where Suncorp has a natural bias) emerge as key regulatory stumbling blocks. Fitzgerald notes the ACCC generally took a state-based approach to previous insurance mergers, notably IAG's purchase of CGU in 2002 and Suncorp's purchase of GIO from the AMP in 2003. "If this turns out to be the case once more, we would expect the ACCC to oppose the deal," Fitzgerald says. While there are arguments in both directions, ABN AMRO's analysts are more confident than not the ACCC will pass the deal. The firm notes that in the case of the IAG-CGU merger, concentration thresholds were breached in some regions, but the regulator focused on aggregate shares across the national market. Should the merger eventuate, the repercussions will be felt across the sector but it's not clear what the end results would be. IAG could benefit from Suncorp-Promina's merger distractions or, conversely, be faced with a gorilla with an equal share of the national market. Some observers think IAG is now more likely to be taken over, even though two mergers would raise serious regulatory barriers. Suncorp itself might be raided in a pre-emptive strike by an institution such as Westpac. Whatever the case, says KPMG's Terblanche, all insurers need to think long and hard about growing in a sector which, unlike its product proposition, offers little security and peace of mind. "I would expect boards of all insurers to ask some very hard questions about how they are going to respond in this changing landscape," he says. [/QUOTE]

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