Heavyweights of insurance seek approval to join forces

WELLINGTON - Two of the country's largest insurance companies, New Zealand Insurance and State Insurance, have applied for monopolies clearance to merge.

The application to the Commerce Commission follows the announcement in February that their British owners, Norwich Union (State Insurance's parent) and CGU (parent of NZI), would merge.

With a combined premium income of $700 million, State and NZI will together have just under 40 per cent of the $1.8 billion insurance market in New Zealand.

This country's competition law prohibits business acquisitions that result in dominance being acquired or strengthened in any market.

Following the British merger announcement, State Insurance group chief executive Tim Sole said monopolies clearance problems were unlikely, despite the local companies' market shares, as the insurance market was highly competitive with many players.

The extent of competition in the market was highlighted this week by international ratings agency Standard & Poor's.

Releasing its latest review of the New Zealand insurance markets, it said: "Excess capacity, intense competition, inadequate premium rates and a high level of claims resulted in a very poor earnings performance."

CGU also operates in this country through CGU Insurance Australia, and Norwich Union through Norwich Union General Insurance.

The merger of the British groups creates the largest British general insurance group and one of the top five life insurers in Europe, worth around sterling 19 billion ($61 billion).

- NZPA