Insurance Australia Group Ltd (IAG) shares were down in early afternoon trade as the insurer prepares to challenge the ACCC’s move to block its proposed $1.35 billion acquisition of the Royal Automobile Club of Western Australia’s insurance business.
The competition regulator said it will oppose the deal after an investigation found it would likely result in “a substantial lessening of competition” in the supply of motor vehicle insurance and home and contents insurance in Western Australia. It said the transaction would leave IAG with an overall market share of about 55–65% in motor insurance and 50–60% in home and contents cover in the state.
In response, IAG said it intends to lodge an application with the ACCC for assessment of the alliance under the new mandatory merger control regime, which is due to take effect on January 2.
Chief executive Nick Hawkins insists the RAC transaction would “enhance” the RAC member experience and bolster resilience to industry challenges for the benefit of Western Australians. “As part of the alliance we have committed to staying local, investing in enhancements to the RAC member experience and continuing to deliver high quality and competitive insurance products and services,” he said.
Shares are currently trading at $7.74 down 1.28%.