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Insurance Australia Group (ASX:IAG) has dropped in line with the financials sector – the worst performing basket of stocks on the market in morning trades – even as it responded to ACCC concerns around its proposed A$1.2B buyout of RAC WA’s insurance underwriting business.
Shares were down -1.25% to A$8.29/sh a/a 11.40am AEDT per CBOE live market data.
Late last year, the ACCC formally opposed IAG’s buyout of RAC Insurance (RACI) in WA on the grounds it would lessen competition, unfairly benefitting IAG.
By the regulator’s calculations, the move would give IAG up to 65% of the market share of WA motor vehicle insurance market and up to 60% of home and contents insurance.
Ten months on, IAG on Wednesday issued a public benefits application with the ACCC in a bid to lessen concerns held by the competition watchdog.
IAG has since issued a number of commitments, first and foremost selling renewal rights for existing NRMA insurance home and motor policies in WA to another insurer for an as of yet undisclosed amount.
IAG also committed to ‘address the availability’ of RAC home insurance products in far northern WA where there is “limited insurance availability” and to sink A$20M into community resilience-building initiatives in WA into 2036.
The company itself also encouraged ACCC to hit IAG with stronger breach protocols if it falls foul of product pricing and competitiveness where relating to its proposed buyout of RACI in WA.
“IAG stated the alliance will deliver substantial public benefits to Western Australia by providing broader claims handling expertise, major natural peril event response capacity, leading technology, and access to global reinsurance and capital markets,” IAG wrote on Wednesday.
Whether the commitments in IAG’s release on Wednesday informed investor decisions more than the general slump in the financial services sector on Wednesday is on the whole hard to determine, but the fairly minor drop of -1.5% in the share price suggests no dramatic response.
(As at 11.45am AEDT, some $5.6M worth of shares had traded hands, well below the 4wavg.)
In light of our commitment to RAC and its members, and in response to the ACCC’s competition decision, we are offering to transfer renewal rights for our active NRMA Insurance home and motor insurance policies in Western Australia to another insurer.
[Our] commitments will also secure more benefits for Western Australians. This includes making RAC home insurance available in parts of the North West where insurance can be difficult to access today.
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