Wesfarmers sells broking and premium funding businesses

Wesfarmers sells broking and premium funding businesses | Insurance Business

Wesfarmers sells broking and premium funding businesses
Wesfarmers has agreed to sell the insurance broking and premium funding operations of its insurance division to subsidiaries of Arthur J Gallagher & Co for $1,010 million. In addition to the purchase price, Wesfarmers will receive a distribution of approximately $150 million to repay funding of the premium funding operations.

On successful completion of the transaction, Wesfarmers expects to record a pre-tax profit on sale of approximately $310 million to $335 million.

Wesfarmers’ insurance broking businesses comprise Crombie Lockwood in New Zealand, OAMPS Insurance Brokers in Australia and OAMPS UK. The premium funding operations in Australia and New Zealand comprise Lumley Finance and Monument Premium Funding.

Arthur J Gallagher, which only this week announced it was buying NZ firm Mike Henry Insurance Brokers, is one of the largest risk management and insurance broking companies in the world.

Headquartered in Illinois, USA it employs over 16,000 insurance professionals in 25 countries.

When Insurance Business contacted Crombie Lockwood, a spokesman said he could not elaborate and re-directed all enquiries back to Wesfarmers pointing out that the sale ‘was not completed yet.’

However, in a press release from Arthur J Gallagher, Steve Lockwood, who is executive chairman of the Wesfarmers insurance brokerage operations and chair of Crombie Lockwood, was quoted as saying: “This is genuinely exciting for our people and clients to join with an organization that is likeminded in culture and client focus. Our combined operations and scale will be a great benefit to our clients.”

Lockwood will lead Gallagher’s property/casualty insurance brokerage operations in Australasia and will report directly to Tom Gallagher, head of Gallagher’s international operations, the statement said.

AJG chairman, president and CEO, J Patrick Gallagher Jr, said the combined operations would become one of the largest insurance brokers in Australia and New Zealand.

"Their focus on middle-market clients aligns well with our global client base and will provide us opportunities to bring our full range of services to their existing clients and prospects. We are proud that this outstanding team of professionals will be joining the Gallagher family."

The sale is subject to a number of conditions precedent including obtaining approvals from the Overseas Investment Office in New Zealand, Foreign Investment Review Board in Australia, and the Financial Conduct Authority in the UK. Achieving satisfaction of the conditions precedent is expected to take several months.

The decision to sell the insurance broking and premium funding operations follows the agreement announced on 16 December 2013 to sell the Australian and New Zealand underwriting businesses of Wesfarmers’ Insurance division to Insurance Australia Group (IAG).
 
While this sale continues to remain subject to regulatory approvals, the Australian Competition and Consumer Commission has confirmed in April that it would not oppose Insurance Australia Group’s proposed acquisition of the Australian underwriting operations.
 
On the assumption of all regulatory approvals being received, the sale transactions to IAG and AJG collectively constitute the entire business operations of Wesfarmers Insurance division.

In aggregate the two transactions are expected to provide to Wesfarmers pre-tax proceeds of approximately $3 billion and result in a pre-tax profit of approximately $1,010 million to $1,085 million.

Wesfarmers Managing Director Richard Goyder said the OAMPS broking businesses have been part of the Wesfarmers Group since 2006, Crombie Lockwood and Monument Premium Funding since 2007 and Lumley Finance since 2003.
 
“We believe this sale agreement with Arthur J. Gallagher & Co. is in the best interests of our shareholders while offering the customers and employees of our insurance broking and premium funding businesses the opportunity to join a leading global insurance broking company with ambitions to expand in Australia and New Zealand,” Mr Goyder said.

Mr Goyder said that the agreements to sell the insurance underwriting operations and the broking and premium funding businesses were consistent with the company’s focus on disciplined portfolio management having regard to the long-term interests of shareholders.
 
“I thank all teams in the insurance division for their outstanding efforts in growing and improving their businesses under Wesfarmers ownership and, most recently, for their continuing focus and dedication during the processes involved with transition to new ownership,” he said. 


*All dollar figures are Australian.

Read more about Arthur J Gallagher here.

Read our earlier story on Wesfarmers here.