Both parties are registered long-term insurers and offer individual and group insurance products. The Commission and parties differed in their definition of the relevant market. While the parties identified two separate relevant
markets, viz. the provision of Individual Policies and the provision of Group Business, the Commission defined a broad market for
the provision of long-term insurance. The Commission based its definition on the fact that an insurer, which is issued with a license
to render long-term insurance, has a choice to either provide group cover and/or individual cover. Therefore, according to the Commission,
from a supply side substitution point of view, an insurer, which renders group cover, can render individual cover and visa versa.
Evaluating the merger
For these purposes, it is not necessary to make a definitive finding on the relevant markets, as we are of the view that the merger
will not result in a substantial lessening of competition. On the parties’ definition, the transaction raises no competition
concerns due to the difference in business focus of the parties. With regard to Individual policies, Liberty focuses inter alia on writing new policies (selling new business), while the Capital Alliance business model is based on acquiring and managing existing
“books” of individual policies. Furthermore, to the extent that it has a sales focus, Capital Alliance is focused on
the lower to middle income segments for Individual policies. Liberty on the other hand is focused on the middle to upper income segments. According to the parties therefore, they are not strictly speaking, direct competitors in the Individual policy market.
With respect to Group policies, Liberty focuses on “packaged” solutions, which include fund administration, investment
and risk underwriting, as well as investment only policies. Capital Alliance, however, focuses mainly on “risk only”
business i.e. in respect of risk underwriting. Therefore, for Group policies the parties are also focused on different segments of the markets.
Even if one accepts the Commission’s definition of the relevant market, the transaction does not raise any serious concerns.
The following tables, provided to us by the parties, contain the market shares of the merging parties and their subsidiaries, for the long-term insurance market based on net premiums, value of assets and value of liabilities. The relevant subsidiaries of the merging parties are Rentmeester, Saambou Life and Investec Employee Benefits.
Market shares based on net premiums
| Insurer |
Market Share
2002 |
Market Share
2003 |
| Rentmeester |
0,14% |
0% |
| Capital Alliance |
1,23% |
2,89% |
| Saambou Life |
0,21% |
0% |
| Liberty Group |
8,12% |
9,95% |
| Investec Employee Benefits |
2.95% |
1,99% |
| Old Mutual |
19,09% |
17,80% |
| Sanlam |
12,86% |
12,09% |
| Momentum Group |
9,12% |
9,30% |
| Investment Solutions |
7.01% |
9,06% |
| Investec |
13,71% |
7,82% |
| Others |
25.56% |
29,10% |
| TOTAL |
100% |
100% |
|
Accordingly, the estimated post-merger market share of the merged entity, based on net premiums received, will be 14,83%.
Market shares based on value of assets
| Insurer |
Market Share
2002 |
Market Share
2003 |
| Rentmeester |
0,04% |
0% |
| Capital Alliance |
2,30% |
2,16% |
| Saambou Life |
0,12% |
0,05% |
| Liberty Group |
10,09% |
10,68% |
| Investec Employee Benefits |
3,55% |
2,59% |
| Old Mutual |
30,23% |
30,06% |
| Sanlam |
18,52% |
18,91% |
| Momentum Group |
10,92% |
11,06% |
| Investment Solutions |
5,52% |
5,17% |
| Others |
18,71% |
18,78% |
| TOTAL |
100% |
100% |
|
The estimated post-merger market share of the merged entity, based on value of assets, will be 15,48%.
Market shares based on value of liabilities
| Insurer |
Market Share
2002 |
Market Share
2003 |
| Rentmeester |
0,04% |
0% |
| Capital Alliance |
2,36% |
2,2% |
| Saambou Life |
0,09% |
0,05% |
| Liberty Group |
9,91% |
10,66% |
| Investec Employee Benefits |
3.61% |
2,4% |
| Old Mutual |
28,91% |
29,44% |
| Sanlam |
17,96% |
18,4% |
| Momentum Group |
12,03% |
11,37% |
| Investment Solutions |
6,06% |
5,71% |
| Others |
19,03% |
19,77% |
| TOTAL |
100% |
100% |
|
Accordingly the estimated post-merger market share of the merged entity, based on value of liabilities, will be 15,31%.
Therefore, even on the Commission’s broad definition of the relevant market, the increment in market share is not significant
to raise any serious competition concerns.
Public Interest
The Tribunal was concerned that the parties had not properly notified their employees of the effect of the merger on the employment.
While the parties had furnished the Commission with a “worst case scenario” with regard to retrenchments, the Tribunal
was of the view that employees had not been sufficiently informed of the potential impact of the transaction. During a hearing held
on 10 March 2005, the parties were ordered to inform their employees, in writing, of the potential worst-case scenario. The parties
were to also inform the employees that they should forward any concerns directly to the Tribunal.
The Tribunal received correspondence from some employees and during a second hearing held on 17 March 2005, the parties were asked
to give an undertaking that they would address the employee concerns that were sent to the Tribunal. The parties furnished the Tribunal
with said undertaking before the merger order was issued.
The transaction is accordingly approved unconditionally.
22 April 2005
N Manoim
Date
Concurring: Y Carrim and L Reyburn
For the merging parties: I Gaigher (Jowell Glyn & Marais) and D Rudman (Werksmans)
For the Commission:
R Mohlala and E Mtantato (Mergers and Acquisitions)
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