By Alex Tarrant
The Commerce Commission has asked insurer IAG for an extension of the time it has to review IAG's application to buy most of earthquake-hit competitor AMI.
The deadline for the decision has been extended from January 25 to February 29. The Commerce Commission published the date on its website Tuesday evening. Earlier, the insurer had told interest.co.nz it was set to formally allow the application, as this was expected general practice by the Commerce Commission, and given the holiday period.
A spokeswoman for the Commerce Commission told interest.co.nz it was seeking to extend the timeframe due to the size and nature of the application. The spokeswoman said this was usual practice for the Commission.
The NZ$380 million aquisition of AMI's non earthquake-related book would create a "near duopoly" in New Zealand's retail insurance market, according to Merrill Lynch analysts. See Gareth Vaughan's December 22 article, IAG 'taking out mutual competitor' AMI would create 'near duopoly', Merrill Lynch analysts say, meaning Commerce Commission could block deal. The government will take over AMI's earthquake-related assets, at an expected cost of NZ$120 million to the taxpayer.
Merrill Lynch pointed out an IAG-AMI hook up would give the new, expanded IAG 56% and 61% market share, respectively, in the home and contents and motor insurance markets. See more here in an IAG presentation to investors (page 7).
The Commerce Commission spokeswoman said the Commission was progressing the application from IAG as per its normal processes.
"The Commerce Act stipulates 10 working days for the Commission to make a decision on a clearance application unless an extension of time is agreed between the applicant and the Commission. We are currently seeking an extension of time and will be able to confirm an expected decision date once this has been agreed," the Commerce Commission spokeswoman said.
"Some clearance applications can be quite straightforward, but some, just by the nature of the businesses, or how big they are and how much there is to do, can require a bit more time than the statutory 10 working days deadline," she said.
The statutory 10 working days deadline did not include a lot of days through the holiday period, with a decision on IAG's December 20 application initially due on Janurary 25.
On Monday afternoon, IAG confirmed it had received the application, but had not yet formally responded to the Commission.
“We understand that this sort of notification is almost always necessary. It’s not surprising to us given the holiday period,” an IAG spokesman said.
IAG was comfortable with how the application was progressing and keen there was a thorough and robust process, he said.
(Updates with new date - alters second paragraph from saying Commission could not say how long extension would be for until formally accepted, to Commission announcing extention.)
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