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Capital Alliance Life Limited and Investec Employees Benefit Limited (93/LM/SEP07) [2007] ZACT 77 (25 October 2007)
.RTF of original document
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 93/LM/SEP07
In the matter between:
CAPITAL ALLIANCE LIFE LIMITED
Primary Acquiring Firm
and
INVESTEC EMPLOYEES BENEFIT LIMITED Primary Target Firm
_______________________________________________________________
Panel
:
DH Lewis (Presiding
Member), N Manoim (Tribunal
Member), and Y Carrim (Tribunal Member)
Heard on
:
23 October 2007
Order issued on:
23 October 2007
Reasons issued on:
25 October 2007
REASONS FOR DECISION
APPROVAL
[1]
The Competition Tribunal issued a Merger Clearance Certificate on 23 October 2007, approving without
conditions the proposed merger between Capital Alliance Life Limited and Investec Employees Benefit Limited.
DESCRIPTION OF THE TRANSACTION
[2]
The primary acquiring firms are Capital Alliance Life Limited (“CAL”), Liberty Group
Limited (“Liberty”) and Standard Bank Group Limited (“Standard Bank”), and Investec Employee Benefits limited (“IEB”) is the primary target firm.
[3]
IEB is a very small insurer and is currently reinsured with CAL, a bigger insurer. In terms of the proposed transaction, CAL will acquire certain of the existing life insurance policies underwritten by IEB.
[4]
According to the merging parties the existing reinsurance arrangement is no longer optimal. The
acquisition will reduce the administrative and financial burden of the existing arrangement by allowing CAL to obtain control and
unfettered discretion to deal with the policies of IEB.
THE RELEVANT MARKET
[5]
It is common cause between the merging parties and the Commission that the relevant product market
is long term insurance, and the relevant geographic market is national.
[6]
Long term insurance comprises of the underwriting of risks, administration of insurance policies
and investment management of premiums received from policy holders. The merging parties in their competitive report indicate that
this transaction does not affect the investment management function in respect of IEB because the investment asset underlying the
policies implicated in this transaction had already been previously transferred to CAL as reinsurance premium.
COMPETITION EVALUATION
[7]
Pre-merger CAL has a market share of 15% calculated on the basis of total policy liability, and 16% calculated on the basis of total net premium.
IEB has less than 1% market share calculated on either basis. Post merger the merged entity will have a market share of 16% based on policy liabilities and 17% based on the total net premiums
in the relevant market. The market share accretion as a result of the merger is clearly very low. In addition, the merged entity
will continue to face effective competition from large players such as Old Mutual, Sanlam and Momentum.
CONCLUSION
[8]
Given the above, we are satisfied that the proposed transaction is unlikely to result in a substantial
lessening or prevention of competition in the long term insurance industry, and no public interest issues arise. We accordingly approve
the proposed transaction unconditionally.
_______________
Y Carrim
Tribunal Member
D Lewis and N Manoim concur in the judgment of Y Carrim
Tribunal Researcher: L Xaba
For the merging parties
: Werksmans
For the Commission
: L Khumalo
(Mergers and Acquisitions)
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