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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM127Oct22
In the matter between:
Old Mutual Insure Limited Primary Acquiring Firm
and
Genric Insurance Company Limited Primary Target Firms
Introduction
[1] On 24 November 2022, the Tribunal unconditionally approved the large merger in
which Old Mutual Insure Limited (“OMI”) intends to acquire all of the issued shares
in Genric Insurance Company Limited (“Genric”).
Primary acquiring firm
[2] The primary acquiring firm is OMI, private company incorporated in accordance
with the laws of South Africa. OMI is controlled by Mutual and Federal Investments
Proprietary Limited (“Mutual and Federal”), which in turn is ultimately controlled by
Old Mutual Limited (“OML”). OML is a public company and such it is not controlled
by any individual shareholder.1
1 The top 3 shareholders of OML are Public Investment Corporation (15.43%), Allan Gray
(11.23%), and Prudential Portfolio Managers (5.83%).
Panel : Y Carrim (Presiding Member)
: F Tregenna (Tribunal Member)
: A Ndoni (Tribunal Member)
Heard on : 24 November 2022
Order issued on : 24 November 2022
Reasons issued on : 30 November 2022
REASONS FOR DECISION
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[3] In South Africa, OMI controls the following firms: (i) Credit Guarantee Insurance
Corporation of Africa Limited; (ii) Elite Risk Acceptances Proprietary Limited; (iii)
Galilean Properties Proprietary Limited; (iv) Mutual and Federal Risk Financing
Limited; (v) ONE Financial Services Holdings Proprietary Limited (“OFSH”); and
(vi) Sintelum Proprietary Limited (“Sintelum”).
[4] OMI, OML and the firms controlled by the Old Mutual Group shall be referred to
as (“the Acquiring Group”).
[5] The Acquiring Group is a diversified African financial services group that offers a
broad spectrum of financial solutions to retail and corporate customers. OML
operates across various lines of business in the financial services industry,
including life and savings, property, asset management and banking and lending.
The Old Mutual Group is a licensed non-life insurer, providing non-life insurance
services to personal, commercial and corporate clients.
[6] OMI’s products cover a broad spectrum of non-life insurance solutions such as
property, transportation motor, accident and health, guarantee, liability,
engineering and miscellaneous insurance in South Africa.
Primary target firms
[7] The primary target firm is Genric and is not controlled by any individual
shareholder.2
[8] Genric controls a number of firms, including the following firms: Automotive VAP
Solutions Proprietary Limited; Drivewize Service and Maintenance Plans
Proprietary Limited (Drivewize); Delicieuse Deli Proprietary Limited (Delicieuse
Deli); GENRIC Africa Proprietary Limited (GENRIC Africa); and GENRIC Aviation
Underwriting Managers Proprietary Limited (GENRIC Aviation).
[9] Genric, all firms that it controls, and all the firms controlled by those firms shall be
referred to as the (“the Target Group”).
2 The shares in Genric are collectively owned by
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[10] The Target Group is a licensed non-life and specialist insurer. The Target Group’s
product portfolio includes appliance warranty, brick and mortar, car hire insurance,
gadget insurance and excess waiver insurance.
[11] The Target Group’s primary distribution channel is through a network of
approximately independent intermediaries in terms of which they create
awareness of the Target Group’s product range.
Competition Assessment
[12] The Commission considered the activities of the merging parties and found that
the proposed transaction results in both a horizontal overlap and a vertical overlap.
[13] The Commission assessed the activities of the merging parties in the following
national markets:
13.1. non-life property insurance products;
13.2. non-life transport insurance products;
13.3. non-life motor insurance products;
13.4. non-life accident and health insurance products;
13.5. non-life liability insurance products; and
13.6. non-life miscellaneous insurance products.
[14] In the broad market for non-life or short-term insurance, the Commission found
that the merging parties will have an approximated combined post-merger
market share, with the accretion of Santam is the largest player with a
market share of approximately 23%.3
[15] In the narrow markets for non-life insurance the Commission found that the
merging parties will have a combined post-merger market share of less than
in all relevant markets for non-life insurance products (as listed in paragraph 13
above).
3 Other players include Hollard Insurance (8.4%), Guardrisk (6.8%), OUTsurance (5.9%) and
Bryte Insurance (3.3%). Furthermore, the Commission found that there are about 90 insurance
companies active in the non-life insurance market.
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[16] With regards to the vertical overlap, the Commission assessed whether the
merger is likely to result in competitors of the Target Group being foreclosed from
accessing reinsurance from the Acquiring Group.
[17] Based on the above, the Commission did not find it necessary to assess potential
input foreclosure further.
[18] Finally, the Commission assessed whether the merger is likely to result in
competitors of the Acquiring Group (i.e., reinsurance providers) in the upstream
market, being denied access to the Target Group as a customer.
[19] The Commission’s interaction with reinsurance providers such as
established that post-merger, there
remain ample alternative primary insurance companies that the providers of
reinsurance services can offer their services to. Another reinsurance provider,
submitted that it provides reinsurance
services to at least nine South African customers (Insurance companies) across
multiple lines of business. It further submitted that it has no concerns with the
proposed transaction.
[20] The Commission was thus of the view that the proposed transaction is unlikely to
result in substantial customer foreclosure concerns.
[21] Given the above, the Commission found that the proposed transaction is unlikely
to substantially prevent or lessen competition in any relevant market. We concur
with this finding.
Public Interest
Effect on employment
[22] The merging parties provided an unequivocal statement that no job losses will
arise in South Africa as a result of the proposed transaction.
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[23]
[24] The merging parties submitted that the Pre-merger Retrenchments are entirely
unrelated to the proposed transaction and were affected in the ordinary course, in
order to, amongst other things, maximize efficiency and to be more competitive.
[25]
[26]
[27] Considering the above, the Commission was of the view that the Pre-Merger
Retrenchments are unlikely to have been as a result of the proposed merger.
Accordingly, the proposed transaction is unlikely to raise employment concerns.
Effect on the spread of ownership
[28] The merging parties indicated that OML has HDP shareholdings, and
OML and a voting interest using the modified flow through principle. The
Target Group does not have any shareholding by HDPs.
[29] In addition, the merging parties indicated that OML is in the process of improving
its B-BBEE credentials. In this regard, OML is in the process of implementing a
new B-BBEE Transaction (called Bula Tsela), as committed to in the Framework
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Agreement signed in 2018 with the Department of Trade, Industry & Competition
(“DTIC”), in terms of which it will increase its HDP shareholdings to over 30%. The
B-BBEE Transaction will include the following:
29.1. An approximate R2.8 billion B-BBEE Ownership transaction in OML
resulting in an approximate 4% increase in HDP shareholding in OML.
29.2. Creation of a broad-based community trust focusing on financial education
for small to medium entities (“SMEs”) and digital skills development.
29.3. Employee share ownership trusts (“ESOP Trusts”) will hold, in total,
approximately 1.60% of OML’s issued share capital for the benefit of
employees of the Old Mutual Group.
29.4. Black members of the public will subscribe for ordinary shares in a special
purpose vehicle (“RetailCo”), which, in turn, will hold approximately 1.29%
of OML’s issued share capital.
29.5. A Community trust will hold approximately 1.29% of OML’s issued share
capital, for the benefit of various qualifying black community beneficiaries.
29.6. OML and its subsidiaries will provide notional vendor funding to the ESOP
Trusts and to the Community Trust, and actual vendor funding to RetailCo,
to facilitate the B-BBEE Transaction.
29.7. As part of the B-BBEE Transaction an ESOP Trust will be created. The
merging parties have submitted said that the B-BBEE Transaction will be
fully implemented by December 2022.
[30] The proposed transaction raised no other public interest concerns.
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Conclusion
[31] Having considered the above, we conclude that the proposed transaction is
unlikely to substantially prevent or lessen competition in any relevant market.
Furthermore, the proposed transaction raises no public interest concerns.
30 November 2022
Ms Yasmin Carrim Date
Prof. Fiona Tregenna and Ms Andiswa Ndoni concurring
Tribunal Case Manager: Theodora Michaletos
For the Merging Parties: Xolani Nyali of Bowmans
For the Commission: Yolanda Okharedia and Themba Mahlangu