COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 84/LM/Nov02
In the large merger between:
Old Mutual South Africa Limited
and
BoE Life Assurance Company Limited
Reasons for Decision
________________________________________________________________
APPROVAL
On 19 December 2002 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Old Mutual South Africa Limited and
BoE Life Assurance Company Limited in terms of section 16(2)(a). The reasons
for the approval of the merger appear below.
The Parties
1. The acquiring
firm is Old Mutual South Africa Limited (“OMSA”), the
holding company for all Old Mutual Plc’s South African
operations, excluding asset management. 1 It is controlled by
Old Mutual Plc. Its subsidiaries include Old Mutual Life
Assurance Company (South Africa) Limited (“OMLACSA”)
and a 18% shareholding in Nedcor Limited (“Nedcor”) as
well as an indirect shareholding of 33% via OMLACSA.
2. The target firm is BoE Life Assurance Company Limited (“BoEL”). It is
controlled by BoE and ultimately controlled by Nedcor.
1 According to the parties, OM’s shareholding structure comprises principally historically disadvantaged
persons in pursuance of SA Mutual Life Assurance Society’s demutualisation in 1999.
The Merger Transaction
3. The transaction comprises a restructuring of the Nedcor group pursuant to
its acquisition of BoE. This will be achieved through the formation of a joint
venture vehicle in the credit protection assurance business, initially to
operate as “BoE Life” 2. Nedcor will focus and channel all credit life
activities within the Nedcor group to this joint venture. OMSA is acquiring
2 This is defined in the MOU as any life risk product which is ceded to or owned by the debt originator as
security against the client’s debt and which is not distributed through financial planners and does not
require financial advice.
OLD MUTUAL PLC
100%
OMSA
18%100%
OMLACSA NEDCOR33%
100%
BoE
100%
BoE LIFE ASSURANCE
a 50% interest in BoEL. Nedcor will retain the other 50% in the company.
Accordingly, postmerger Nedcor and OMSA will jointly control BoEL,
although Nedcor will retain operational control of BOEL
Rationale for the Transaction
4. There is a duplication of capability as far as life assurance is concerned,
pursuant to Nedcor’s acquisition of BoE. This is a restructuring, occurring
within the same group of companies, since Old Mutual ultimately controls
Nedcor. Effectively, Nedcor is selling 50% of its stake in a subsidiary to
another division within the Old Mutual group, obviously because of the
synergy in their operations. BoE life is reverting to focus on its core
competency, credit life assurance. BoE will therefore discontinue its non
credit life (general life assurance) products and focus on selling credit life
products to customers of Nedcor and its subsidiaries.
The Relevant Market
5. Both BoEL and OMLACSA are registered longterm insurers. Both
companies provide life assurance in one form or another. There is a
general market for life assurance. It is possible to also consider that credit
life assurance is a separate relevant market from the rest of general life
assurance. We do not need to decide which is correct but we will for this
reason examine the effect of this merger firstly on the assumption that
there is a relevant market for general life assurance, and then a separate
relevant market for credit life assurance.
General Life Assurance
Within this market, the Commission could further segment this market into
individual and group life assurance, although the segmentation has no
significant result. The Commission limited its analysis to individual life
assurance products, since, it maintains, OMLASA’s participation in group
life assurance is extremely limited. The combined market share in respect
life assurance is extremely limited. The combined market share in respect
of general life assurance is 27.5%. 3 The premerger HHI is 1901.50, with
a postmerger HHI of 1928.50, therefore the change in concentration is a
mere 27. The combined market share in respect of individual life
assurance is apparently approximately 29.6%.
Credit Life Assurance
This is a subset of the total life assurance market. It refers to the provision
3 According to the latest Annual Financial Statements of the relevant companies.
of life assurance by banks or other finance providers to customers.
Specific amounts are insured for a specific term. There are six types of
credit life assurance products, including, but not limited to mortgage
protection, personal and retail loans and installment sale and lease
finance. Though they are sold to cover different categories of loans, not all
these loans, however, have credit life policies attached. Credit life
assurance is designed to ensure the credit grantor against various
contingencies, i.e. life (death) cover, disability cover and critical illness
cover. The combined market share in respect of credit life assurance is
approximately 6.7% (BoE Life only adding 0.7%). The parties state that
the bigger competitors in this sector are ABSA Life and Charter Life, with
Hollard Insurance Company Limited, Regent Life Assurance Company
Limited and Pinnafrica Life Limited following. The parties estimated
BoEL’s ranking somewhere around sixth position. Precise market share
information was apparently unavailable on account of same either being
not separately disclosed or subject to confidentiality.
Geographic market
6. The market is national since both firms provide these products across the
country.
Impact on competition
7. Post this transaction, BoEL will focus on credit life products and
OMLACSA on general life assurance products. The main object of the JV
will be to sell credit protection assurance products to customers and
clients of Nedcor and its subsidiaries.
8. However, there is provision in the MOU that “the JV will require consent by
the Board of Directors to sell credit protection products to parties other
than customers and clients of Nedcor and its subsidiaries.” The Tribunal
was concerned that this could raise the possibility of foreclosure of other
was concerned that this could raise the possibility of foreclosure of other
firms competing in credit and general life from the Nedcor client base.
However there is a panel of insurers in respect of all categories of credit
life assurance comprising competing firms such as Hollard Insurance
Company Limited, Regent Life Assurance Company Limited and
Pinnafrica Life Limited. Furthermore section 44 of the Long Term
Insurance Act mandates freedom of choice of a particular insurer.
Therefore, Nedcor customers will have a choice to buy life assurance from
any provider other than BoE.
Public Interest
9. The number of likely retrenchments as a result of the merger are
estimated at 25 employees and these are limited to skilled and semi
skilled employees.
Conclusion
This is an internal restructuring and there is no significant competitive change
from the status quo. In any event, there is a very insignificant accretion of market
share in each case. We conclude that the merger will not lead to a substantial
lessening of competition. There are no public interest concerns which would alter
this conclusion for the reasons stated above. The merger is therefore approved
unconditionally.
_____________ 4 February 2003
N. Manoim Date
Concurring: D.Lewis, M. Holden
For the merging parties: Edward Nathan Friedland Attorneys
For the Commission: K. Ramathula, N. Barnabas, Competition
Commission