COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: LM082Sep21
In the matter between:
Old Mutual Insure Ltd Primary Acquiring Firm
And
ONE Financial Services Holdings (Pty) Ltd Primary Target Firm
E Daniels (Presiding Member)
I Valodia (Tribunal Member)
Panel:
T Vilakazi (Tribunal Member)
Heard on: 09 December 2021
Order Issued on: 09 December 2021
ORDER
Further to the recommendation of the Competition Commission in terms of section
14A(1)(b) of the Competition Act, 1998 (“the Act”) the Competition Tribunal orders that–
1. the merger between the abovementioned parties be approved in terms of section
16(2)(a) of the Act; and
2. a Merger Clearance Certificate be issued in terms of Competition Tribunal Rule
35(5)(a).
09 December 2021
Presiding Member
Mr Enver Daniels
Date
Concurring: Prof. Imraan Valodia and Dr. Thando Vilakazi
This form is prescribed by the Minister of Trade and Industry in terms of section 27 (2) of the Competition Act 1998 (Act No. 89 of 1998).
Merger Clearance Certificate
Date: _______________________________________
To:
You applied to the Competition Commission on
____________________ for merger approval in accordance with
Chapter 3 of the Competition Act.
Your merger was referred to the Competition Tribunal in terms of
section 14A of the Act, or was the subject of a Request for
Consideration by the Tribunal in terms of section 16(1) of the Act.
After reviewing all relevant information, and the recommendation or
decision of the Competition Commission, the Competition Tribunal
approves the merger in terms of section 16(2) of the Act, for the
reasons set out in the Reasons for Decision.
no conditions.
the conditions listed on the attached sheet.
The Competition Tribunal has the authority in terms of section 16(3)
of the Competition Act to revoke this approval if
a) it was granted on the basis of incorrect information for which a
party to the merger was responsible.
b) the approval was obtained by deceit.
c) a firm concerned has breached an obligation attached to this
approval.
The registrar, Competition Tribunal:
(Name and file number of merger:)
1
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM082SEP21
Old Mutual Insure Limited Primary Acquiring Firm
And
ONE Financial Services Holdings Proprietary LimitedPrimary Target Firm
Heard on: 09 December 2021
Order Issued on: 09 December 2021
REASONS FOR DECISION
[1] On 9 December 2021, the Competition Tribunal unconditionally approved a large
merger whereby Old Mutual Insure Limited (“OMI”) intends to acquire sole
control over ONE Financial Services Holdings Proprietary Limited (“ONE”).
[2] The acquiring firm OMI, is a public company incorporated in accordance with the
company laws of the Republic of South Africa. OMI is ultimately controlled1 by
Old Mutual Limited, a JSE2 listed entity which is not controlled by any firm/s (OMI
and all firms controlled by Old Mutual will collectively be referred to as the “Old
Mutual Group”).3 OMI’s relevant subsidiaries include: Elite Risk Acceptance (Pty)
Ltd; Merx Underwriting Managers (Pty) Ltd; and Mutual & Federal Risk Financing
Ltd (“MFRF”).
[3] ONE is a private company incorporated in accordance with the company laws of
the Republic of South Africa. Pre-merger, ONE is majority held4 by One Suit
Investment Holdings Proprietary Limited and also held5 by SWJ van Rensburg.
ONE and its subsidiaries6 will collectively be referred to as the “ONE Group”.
[4] The Old Mutual Group is a diversified African financial services group that offers
a broad spectrum of financial solutions to retail and corporate customers across
key markets. OMI is a licensed non-life or short-term insurer providing non-life
1 OMI is a wholly owned subsidiary of Mutual & Federal Investments Proprietary Limited,
which is in turn a wholly owned subsidiary of Old Mutual Emerging Markets Proprietary Limited
(Old Mutual Emerging Markets), which is in turn wholly owned by Old Mutual Group Holdings
(SA) Proprietary Limited, which is ultimately controlled by Old Mutual Limited.
2 Johannesburg Stock Exchange.
2 Johannesburg Stock Exchange.
3 The top five shareholders of Old Mutual are: Public Investment Corporation (as to 15.13%);
Allan Gray (as to 11.73%); Prudential Portfolio Managers (as to 5.05%); BlackRock
Investment Mgt – Index (as to 4.06%); and Vanguard Group (as to 3.59%) (Competition
Commission Large Merger Report LM082Sep21, p14).
4 As to 95%.
5 As to 5%.
6 ONE controls the following firms: One Financial Services Holdings Proprietary Limited; One
Web Systems Proprietary Limited; One Insurance Underwriting Managers Proprietary Limited;
One Strategic Investments Proprietary Limited; Stilus Proprietary Limited; Truck Assist SA
Proprietary Limited; Premier Claim Services Proprietary Limited; Watch Prop Proprietary
Limited; North Point Estate Management Services Proprietary Limited; One Assist Services
Proprietary Limited; Permanent Trust (Management) Proprietary Limited; General and
Professional Liability Acceptances Proprietary Limited; and One Automotive Proprietary
Limited.
2
insurance services to personal, commercial and corporate clients in South Africa,
Botswana, Namibia, Nigeria and Zimbabwe. OMI's business is structured into
the business units: OMI Retail, OMI Specialty Insurance and iWYZE. Through
other subsidiaries, OMI also offers a broad range of domestic and export trade
credit insurance, insurance administration services, underwriting claims and
claims recovery functions, as well as personalised and tailored short-term
insurance solutions.
[5] The ONE Group was first established as a motor underwriting management
agency, specialising in transport insurance. The Group has since expanded its
offering and now provides a wide range of niche and traditional insurance
solutions and services across most classes of business, primarily as an
underwriting management agency (“UMA”) for MFRF under a cell agreement.7
The ONE Group does not have its own short-term or non-life insurance licence
but operates this business in terms of the MFRF cell arrangement. The ONE
Group also has a cell arrangement and binder agreement in place with ABSA
and Santam.
SLPC Assessment
[6] When considering the merging parties’ activities, the Competition Commission
(“Commission”) found that the proposed transaction results in horizontal overlaps
in the provision of short-term or non-life insurance products as well as
reinsurance services. Relying on submissions by the merging parties and their
competitors in the short-term insurance market,8 the Commission estimated the
merging parties’ market shares in the following markets (segmented into
corporate/commercial clients and personal lines):
6.1. The national broad market for the provision of short-term insurance products;
6.2. The national narrow market for the provision of short-term property insurance
products;
6.3. The national narrow market for the provision of short-term transport
insurance products;
6.4. The national narrow market for the provision of short-term motor insurance
products;
6.4. The national narrow market for the provision of short-term motor insurance
products;
6.5. The national narrow market for the provision of short-term accident and
health insurance products;
6.6. The national market for the provision of short-term guarantee insurance
products;
6.7. The national market for the provision of short-term liability insurance
products;
6.8. The national market for the provision of short-term engineering insurance
products; and
6.9. The national market for the provision of short-term miscellaneous insurance
products.
[7] For the national broad market for the provision of short-term insurance products,
the Commission found that the merged entity will have an estimated market
share of 10.4% with an accretion of 1.1%.9 For the national narrow market for
the provision of short-term property insurance products, the Commission found
that the merged entity will have an estimated market share of 18% with an
7 A cell captive arrangement is where a company (participant) chooses to self-insure itself by
owning a class of shares (to form a cell) in a special purpose vehicle insurance company.
8 For this reason the Commission also says that these figures are likely to be overestimations.
9 In the narrow corporate segment, the respective figures were 31% and 4.7%. In the narrow
personal segment, the respective figures were 16.1% and 0.1%.
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accretion of 1.3%.10 For the national narrow market for the provision of short-
term transport insurance products, the Commission found that the merged entity
will have an estimated market share of 28% with an accretion of 7%.11 For the
national narrow market for the provision of short-term motor insurance products,
the Commission found that the merged entity will have an estimated market
share of 16% with an accretion of 3%.12 For the national narrow market for the
provision of short-term accidents and health insurance products, the
Commission found that the merged entity will have an estimated market share
of 7% with an accretion of 1%.13 For the national narrow market for the provision
of short-term guarantee insurance products, the Commission found that the
merged entity will have an estimated market share of 37% with an accretion of
1%.14 For the national narrow market for the provision of short-term liability
insurance products, the Commission found that the merged entity will have an
estimated market share of 11% with an accretion of 2%.15 For the national narrow
market for the provision of short-term engineering insurance products, the
Commission found that the merged entity will have an estimated market share
of 21% with an accretion of 2%.16 For the national narrow market for the provision
of short-term miscellaneous insurance products, the Commission found that the
merged entity will have an estimated market share of 42.2% with an accretion of
0.2%.17
[8] In all of the above markets the Commission concluded that, considering the
relatively low market share accretions and the competition the merged entity will
continue to face from a number of reputable players in the market;18 the
proposed transaction is unlikely to substantially prevent or lessen competition in
the abovementioned markets.
[9] The Commission took reference to information provided in the South African
Insurance Industry Survey 2020, conducted by KPMG, for information regarding
Insurance Industry Survey 2020, conducted by KPMG, for information regarding
the national market for the provision of reinsurance products. The Commission
came to the view that it is likely that the merging parties are small competitors in
this market because Munich Reinsurance Company of Africa Limited and
Hannover Reinsurance Group are said to continue to dominate the local life and
non-life reinsurance industries; and, prevalent in the market, there are
specialised reinsurance companies such as Africa Reinsurance, General
Reinsurance, Munich and Swiss Re, amongst others. As such, the Commission
was of the view that the proposed transaction is unlikely to substantially prevent
or lessen competition in the reinsurance market.
10 In the narrow corporate segment, the respective figures were 23% and 3%. In the narrow
personal segment, the respective figures were 19.1% and 0.1%.
11 In the narrow corporate segment, the respective figures were 35% and 9%. In the narrow
personal segment the respective figures were 1% and 1%.
12 In the narrow corporate segment the respective figures were 30% and 9%. In the narrow
personal segment the respective figures were less than 16% and 0.1%.
13 In the narrow corporate segment the respective figures were 26% and 5%. In the narrow
personal segment the respective figures were less than 1% and 1%.
14 In the narrow corporate segment the respective figures were 82% and 2.2%. The merged
parties are not active in the narrow personal segment.
15 In the narrow corporate segment the respective figures were 12% and 2%. In the narrow
personal segment, the merged entity will have an estimated market share of less than 1%
whereas the Old Mutual Group is not active in this segment.
16 In the narrow corporate segment the respective figures were 23% and 2%. The merged
parties are not active in the narrow personal segment.
17 In the narrow corporate segment the respective figures were 59.2% and 0.2%. In the narrow
17 In the narrow corporate segment the respective figures were 59.2% and 0.2%. In the narrow
personal segment, the merged entity will have an estimated market share of less than 0.03%
whereas the Old Mutual Group is not active in this segment.
18 Such as Santam, Hollard, Guardrisk, Discovery, Absa Insurance, Standard Insurance,
Lombard Insurance, King Price, MiWay, OUTsurance, amongst others.
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[10] The Commission identified vertical overlaps and assessed the potential for
foreclosure in the markets for cell arrangements; reinsurance arrangements; and
administration and 1Web.
[11] The Commission assessed the merged entity’s likely ability to foreclose
downstream rivals’ access cell captive arrangements. The Commission’s
investigation revealed that there are probably only four real competitors in the
cell captive insurance market – Guardrisk, Old Mutual Risk Finance, Hollard
Special Risks and Centriq. The Commission found that Guardrisk is the biggest
player in the cell captive market with an estimated market share of %;
whereas the next incumbent Centriq estimates that it has a market share of %
in the cell captive insurance market. The Commission also noted that almost all
insurance companies with a licence offer cell captive arrangements. Thus the
Commission found no input foreclosure concerns.
[12] Assessing the likelihood of customer foreclosure in the market for cell captive
arrangements, the Commission considered the ONE Group’s cell arrangement
and binder agreement with ABSA and Santam. The cell arrangement and binder
agreement with ABSA is in run-off and therefore no new policies are being issued
under this cell arrangement. It is in place in order to provide services and settle
claims in respect of existing policy holders. The binder agreement with Santam
is in terms of a cell arrangement previously in place with Santam; there is no
activity within the Santam cell as this business went into run-off 10 years ago.
The ONE Group merely issued a guarantee to compensate Santam for any
losses that may be reported in respect of the cell arrangement. Santam did not
raise any concerns with the proposed transaction. Considering the above, the
Commission was of the view that the proposed transaction is unlikely to
substantially result in customer foreclosure.
[13] The Commission assessed input foreclosure concerns in the market for
[13] The Commission assessed input foreclosure concerns in the market for
reinsurance arrangements. It had already concluded that the merging parties are
small players in this market. Indeed,
9 Given the international nature of this
market, the Commission was of the view that it is unlikely that the merged entity
will have the ability or incentive to engage in an input foreclosure strategy.
Further, the ONE Group customer, when contacted by the Commission, did not
raise any concerns with the proposed transaction.
[14] The Commission noted that in the broad market for short-term or non-life
insurance, the merging parties are not significant players; therefore it is unlikely
that they are significant consumers of reinsurance products. There are a number
of significant consumers such as Guardrisk and Santam. These large customers
tend to place their businesses in the international markets due to the lack of
capacity in the South African market. This was confirmed by which
indicated that In light of the above, the
Commission concluded that the proposed transaction is unlikely to result in any
customer foreclosure concerns in the reinsurance market.
[15] The Commission noted that the ONE Group’s use of an integrated cloud-based
technology system, 1Web, developed in-house, enables the integration of all
data, administration, and financial functions, providing instant and pro-active
underwriting management.
20 The Commission
19 Namely,
20 Namely,
small players in this market. Indeed,
underwriting management.
Special Risks and Centriq. The Commission found that Guardrisk is the biggest
5
engaged them both and both customers had no concerns with the proposed
transaction.
[16]
This customer also identified as companies
providing alternatives to 1Web: Cardinal 360, Websure, Genesis, Nimbus, Policy
Dock.
[17]
This customer identified Sigma, Cardinal, Quest,
and Synaptics as providing alternatives to 1Web.
[18] Considering a lack of concerns from 1Web’s current customers, the Commission
was of the view that the proposed transaction is unlikely to result in any
foreclosure concerns.
[19] The merging parties’ competitors 21 and customers22 did not raise concerns with
the proposed transaction. One competitor submitted that since Old Mutual is
already a minority shareholder in ONE this transaction does not remove a
competitor (as it already exclusively writes business under the OMI license as
an underwriting manager). The Financial Sector Conduct Authority and the
Prudential Authority also submitted that the proposed transaction was approved
by them on 29 July 2021, and they do not have concerns with the transaction.
[20] Taken as a whole, the Commission came to the conclusion that the proposed
transaction is unlikely to substantially prevent or lessen competition in any
relevant market.
Public Interest Assessment
[21] The merging parties submitted that “ the proposed transaction will not have any
effect on employment. In particular, there will be no retrenchments as a result of
the proposed transaction ”.23 The employees of the merging parties are not
represented by any trade unions. The employee representatives (Sungeetha
Sewpersad represents the employees of the Old Mutual Group and Petro
Johnson represents the employees of the ONE Group), both confirmed that their
respective companies’ employees were informed of the proposed transaction
and no concerns were raised. Considering the above, the Commission was of
the view that the proposed transaction is unlikely to have a negative effect on
employment.
the view that the proposed transaction is unlikely to have a negative effect on
employment.
[22] Regarding the advancement of the spread of ownership, the merging parties
submitted that the Old Mutual Group’s percentage ownership currently held by
historically disadvantaged persons (“HDPs”) by measure of voting rights in the
hands of black people is 35.41% (on a modified flow-through basis). The
economic interests in the hands of black people is 25.79% (on a modified flow -
21 Guardrisk, Hollard, Santam, OUTsurance, Centriq, and Compass
22 Hestony Transport, Western Insurance, Bidvest Insurance, and Mobility Insurance
23 Merging Parties ‘Form CC4(1)’ merger record, p7.
6
through basis). The ONE Group does not currently have any ownership held by
HDPs. The Commission came to the view that the proposed transaction will not
negatively affect the promotion of a greater spread of ownership, in particular for
HDPs and workers in firms in the market.
[23] We conclude that the proposed transaction is unlikely to substantially prevent or
lessen competition in any relevant market. Furthermore, there is no negative
effect on the public interest.
09 December 2021
Mr Enver Daniels Date
Prof Imraan Valodia and Dr Thando Vilakazi concurring
Tribunal Case Manager: Mpumelelo Tshabalala
For the Merging Parties: Andriza Liebenberg and Burton Phillips of
Webber Wentzel attorneys
For the Commission: Billy Mabatamela, Ratshidaho Maphwanya,
Tamara Paremoer