CELEX: 32017M8617
Language: en
Date: 2017-10-18 00:00:00
Title: Commission Decision of 18/10/2017 declaring a concentration to be compatible with the common market (Case No COMP/M.8617 - ALLIANZ / LV GENERAL INSURANCE BUSINESSES) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 18.10.2017
                                                                 C(2017) 7116 final
In the published version of this decision, some
information has been omitted pursuant to Article
17(2) of Council Regulation (EC) No 139/2004
                                                                       PUBLIC VERSION
concerning non-disclosure of business secrets and
other confidential information. The omissions are
shown thus […]. Where possible the information
omitted has been replaced by ranges of figures or a              To the notifying party:
general description.
Subject:             Case M.8617 - Allianz / LV general insurance businesses
                     Commission decision pursuant to Article 6(1)(b) of Council
                     Regulation No 139/20041 and Article 57 of the Agreement on the
                     European Economic Area2
Dear Sir or Madam,
1.         On 13 September 2017, the European Commission received notification of a
           proposed concentration pursuant to Article 4 of the Merger Regulation by which
           Allianz SE ("Allianz" or "the Notifying Party") (through its affiliate Allianz
           Holdings plc) acquires within the meaning of Article 3(1)(b) of the Merger
           Regulation sole control of the UK general non-life insurance businesses ("the
           Target") of Liverpool Victoria Friendly Society Limited ("LV") by way of
           purchase of shares.3 (Allianz and the Target are designated hereinafter as the
           "Parties").
1.        THE PARTIES
  (1)       Allianz is a global financial services provider headquartered in Munich and
            listed on the Frankfurt Stock Exchange, providing financial services
            predominantly in the field of life and non-life insurance and asset management.
1     OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on
      the Functioning of the European Union ('TFEU') has introduced certain changes, such as the
      replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of
      the TFEU will be used throughout this decision.
2     OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
3     Publication in the Official Journal of the European Union No C 312, 20.09.2017, p. 8.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---   (2)    The Target is the UK non-life (i.e. motor, property, liability, travel and pet)
         general insurance and legal services businesses of LV, a UK mutual society
         providing a range of life and non-life insurance products.
2.      THE CONCENTRATION
  (3)    Allianz's acquisition of sole control over the Target (the "Transaction") is laid
         out in two agreements, i.e. an Agreement for the Sale and Purchase of Shares in
         the Target ("SPA") and a Shareholders' Agreement ("SHA"), both signed on
         4 August 2017.
  (4)    The Transaction is to be implemented through a series of inter-conditional steps,
         which will ultimately lead to Allianz acquiring sole control over the Target.
  (5)    The notified operation therefore constitutes a concentration within the meaning
         of Article 3(1)(b) of the Merger Regulation.
3.      EU DIMENSION
  (6)    The undertakings concerned have a combined aggregate world-wide turnover of
         more than EUR 5 000 million4. Each of them has an EU-wide turnover in excess
         of EUR 250 million, but they do not achieve more than two-thirds of their
         aggregate EU-wide turnover within one and the same Member State. The
         notified operation therefore has an EU dimension.
4.      COMPETITIVE ASSESSMENT
  (7)    The Transaction leads to limited horizontal overlaps and vertical links in relation
         to the provision and distribution of non-life insurance and reinsurance in the
         UK.5 Only one horizontally affected market (the potential market for the
         provision of pet insurance in the UK) and, potentially, two vertically affected
         markets (the provision of pet insurance in the UK in connection with (i) the
         distribution of non-life insurance (ii) the provision of reinsurance) arise as a
         result of the Transaction. Only these three markets will be discussed in Sections
         4 and 5 below.
4.1.    Relevant product markets
  (8)    In previous cases relating to the insurance sector, the Commission has
         distinguished the market for the provision of insurance into three broad product
4   Turnover calculated in accordance with Article 5 of the Merger Regulation.
5   The Target is only active in the UK.
                                                        2
 ---pagebreak---           categories: life insurance, non-life insurance and reinsurance.6 The Commission
          has also considered a separate market for insurance distribution.7
4.1.1. Non-life insurance (and in particular pet insurance)
4.1.1.1. Product market definition
  (9)     Within the market for non-life insurance, the Commission has considered in
          previous cases that, from a demand side perspective, the market could be further
          segmented based on the type of risk covered. On this basis, the Commission has
          previously considered a possible distinction between: (i) motor vehicle,
          (ii) property, (iii) credit and suretyship, (iv) liability, (v) accident and sickness,
          (vi) marine, aviation and transport ("MAT") and (vii) and travel insurance.8 The
          Commission has also previously observed that, since the conditions for
          insurance of certain types of risks are quite similar and most large non-life
          insurers are active in several types of risk coverage, there can be a degree of
          supply-side substitution between different types of non-life insurance products.9
          Ultimately, the Commission left the precise market definition open.
  (10)    The Commission has not previously considered a market as narrow as the
          provision of pet insurance. The Notifying Party explains such a market, should
          it exist, would comprise cover against the costs of medical treatment required
          for pets and liability in the event of the policy-holder’s pet causing harm to a
          third party. In view of these characteristics, and of their similarities with other
          types of personal liability insurance, the Commission considers that the market
          for the provision of pet insurance, should it exist, may also be considered part of
          a broader product segment covering more types of risks within the non-life
          insurance segment.
  (11)    However, for the purpose of the present decision, the exact product market
          definition in relation to non-life insurance (or its subsegments, including the
          narrow hypothetical market for pet insurance) can be left open as the
          Transaction does not raise serious doubts as to its compatibility with the internal
          market under the narrowest plausible market definition giving rise to the largest
          overlap between the Parties.
4.1.1.2. Geographic market definition
  (12)    In past decisions, the Commission has considered that non-life insurance
          markets are likely to be national in scope, with a few exceptions, such as large
6   Case COMP/M.6957 - IF P&C/ TopDanmark; Case COMP/M.6217 Baloise Holding/Nateus/Nateus
    Life; Case COMP/M.6053 CVC/Apollo/Brit Insurance; and Case COMP/M.4284 AXA/Winterthur.
7   Case COMP/M.6957 - IF P&C/ TopDanmark; Case COMP/M.6053 CVC/Apollo/Brit Insurance; Case
    COMP/M.4284 AXA/Winterthur; and Case COMP/M.3395 Sampo/If Skadeförsäkring.
8   Case COMP/M.4284 AXA/Winterthur; Case COMP/M.4701 Generali/PPF Insurance Business.
9   Case COMP/M.6957 - IF P&C/ TopDanmark; Case COMP/M.6053 CVC/Apollo/Brit Insurance; and
    Case COMP/M.4284 AXA/Winterthur.
                                                   3
 ---pagebreak---           commercial risks, for which the geographic scope is likely to be wider than
          national.10 Ultimately, the Commission left the precise market definition open.
  (13)    The Notifying Party does not propose any alternative geographic market
          definition.
  (14)    In any event, for the purpose of the present decision, the exact geographic
          market definition can be left open as the Transaction does not raise serious
          doubts under any plausible market definition.
4.1.2. Reinsurance
4.1.2.1. Product market definition
  (15)    Reinsurance consists in providing insurance cover to another insurer for some or
          all of the liabilities assumed under its insurance policies, in order to transfer risk
          from the insurer to the reinsurer.11
  (16)    In its past decisional practice, the Commission has considered a separate market
          for reinsurance (distinguished from the markets for the provision of life and
          non-life insurance), but has left the question as to whether the reinsurance
          market should be further segmented between life and non-life reinsurance
          open.12
  (17)    The Notifying Party does not propose any alternative product market definition.
  (18)    In any event, for the purpose of the present decision, the exact product market
          definition for reinsurance, in particular whether there can be a market for
          reinsurance or pet insurance, or a broader market including at least reinsurance
          of personal liability insurance can be left open as the Transaction does not raise
          serious doubts under the narrowest plausible market definition giving rise to the
          largest overlap between the Parties.
4.1.2.2. Geographic market definition
  (19)    The Commission has previously considered the market for reinsurance to be
          global in scope, due to the need to pool risks on a worldwide basis.13
  (20)    The Notifying Party does not propose any alternative geographic market
          definition.
10  Case COMP/M.4284 AXA/Winterthur; Case COMP/M.5010 Berkshire Hathaway / Munich RE /
    GAUM.
11  Case COMP/M.6521 - Talanx International /Meiji Yasuda Life InsuranceE / Warta.
12  Case COMP/M.5925 MetLife / Alico / Delam; Case COMP/M.5083, Groupama / OTP Garancia; Case
    COMP/M.6053 CVC / Apollo / Brit Insurance.
13  Case COMP/M.5925 MetLife / Alico / Delam; Case COMP/M.5083, Groupama / OTP Garancia; Case
    COMP/M.4059 Swiss Re / GE Insurance Solutions; Case COMP/M.6053 CVC / Apollo / Brit
    Insurance.
                                                    4
 ---pagebreak---   (21)   The Commission considers that there are no elements that would point to a
         different geographic scope than worldwide, in line with its findings in previous
         decisions.
4.1.3. Insurance distribution
4.1.3.1. Product market definition
  (22)   In previous cases, the Commission has considered the existence of a
         downstream market for insurance distribution.14 The Commission has previously
         analysed whether the market for insurance distribution comprises only outward
         distribution channels or whether it should also be considered to include the sales
         force and office networks of the insurer (i.e. direct sales). This question was
         ultimately left open.15 The Commission has also considered whether a
         distinction could be made between the market for the distribution of life and
         non-life insurance products,16 but ultimately left the market definition open in
         this respect.
  (23)   The Notifying Party does not propose an alternative product market definition.
  (24)   In any event, the for the purpose of the present decision, the exact product
         market definition for insurance distribution can be left open as the Transaction
         does not raise serious doubts under any plausible market definition.
4.1.3.2. Geographic market definition
  (25)   The Commission has previously recognised the national nature of insurance
         distribution channels. 17 It however ultimately left the exact definition open with
         respect to the question in particular as to whether the relevant geographic market
         could be wider than national.
  (26)   The Notifying Party does not propose any alternative geographic market
         definition.
  (27)   In any event, the for the purpose of the present decision, the exact geographic
         market definition (national or wider) for insurance distribution can be left open
         as the Transaction does not raise serious doubts under any alternative market
         definition.
14  See COMP/M.4284 AXA/Winterthur, COMP/M.6957 IF P&C/Topdanmark.
15  See COMP/M.6957 IF P&C/Topdanmark, COMP/M.6053 CVC/Apollo/Brit Insurance.
16  See COMP/M.6957 - IF P&C / TOPDANMARK.
17  See COMP/M.6957 IF P&C/Topdanmark, COMP/M.6053 CVC/Apollo/Brit Insurance.
                                                  5
 ---pagebreak--- 4.2.    Competitive assessment
4.2.1. Horizontal assessment
  (28)   Based on the considerations on market definition above, under the narrowest
         plausible market definition, the Transaction gives rise to only one horizontally
         affected market, namely the hypothetical market for the provision of pet
         insurance in the UK. Under any other plausible market definition, no affected
         markets would arise.
  Notifying Party's view
  (29)   The Notifying Party claims that, in a possible market for the provision of pet
         insurance in the UK, the Transaction does not raise competition concerns, as the
         Parties' combined share is nearly identical to Allianz's market share pre-
         Transaction given that the Target only represents a de minimis part of the UK
         pet insurance market. As a result, according to the Notifying Party, the
         Transaction will not bring about any meaningful change to the structure of the
         pet insurance market pre-Transaction.
  Commission's assessment
  (30)   In a potential market confined to the provision of pet insurance in the UK, the
         combined market share of the Parties reaches [40-50]%, with an increment
         brought by the Target of [0-5]%.
  (31)   The Commission considers that, although the Parties' combined market shares
         are significant; the increment brought by the Target is negligible. Hence, the
         Parties' combined market position will be determined for its near entirety by
         Allianz's position in the market pre-Transaction ([40-50]%). In this respect, the
         Commission agrees with the Notifying Party's claim that the Transaction will
         not bring any significant change to the current structure of the market. This is
         further demonstrated by the HHI delta brought about by the Transaction, which
         only amounts to 29, well below the 150 threshold.18
  (32)   Furthermore, post-Transaction Allianz will continue to face virtually unchanged
         competition in the UK pet insurance market, notably from RSA
         Insurance ([30-40]%) as well as from Direct Line Group ([5-10]%) and E&L
         Insurance ([0-5]%).
  (33)   Based on the above considerations, the Commission concludes that the
         Transaction does not raise serious doubts as to its compatibility with the internal
         market in relation a possible market for pet insurance in the UK.
18  Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings (the "Horizontal Merger Guidelines"), paragraph 20.
                                                      6
 ---pagebreak--- 4.2.2. Vertical relationships
  (34)    The Transaction also leads to two potential vertically affected markets, namely:
        (a)      the provision of pet insurance in the UK (upstream) and the distribution of
                 non-life insurance in the UK (downstream)
        (b)      the provision of reinsurance (upstream) and the provision of pet insurance
                 in the UK (downstream).
  (35)    In this respect, the Notifying Party argues that, for the purpose of assessing the
          vertical links between the Parties’ insurance activities and Allianz’s activities as
          a reinsurer and distributor, it is excessively narrow to confine the relevant
          insurance market to the supply of pet insurance, given that the activities of
          reinsurers and insurance distributors (brokers) are not generally limited to pet
          insurance only, but comprise a much wider portfolio of products. In this
          respect, the Notifying Party claims that, to assess the vertical links, it would be
          more appropriate to consider the general UK non-life insurance market or, on at
          a narrower level, the UK market comprising insurance cover for personal
          financial loss, which includes personal liability insurance as well as pet
          insurance. Under any such alternative market definition, no vertically affected
          markets would arise.
  (36)    The Commission considers that the approach suggested by the Notifying Party
          could be plausible in this case. However, it does not consider it necessary to
          reach a conclusion on this point, as no competition concerns will arise as a result
          of the Transaction even if a particularly narrow market for the provision of pet
          insurance in the UK is considered for the purposes of assessing the relevant
          vertical links.
4.2.2.1. Vertical link between the provision of pet insurance in the UK and the
        distribution of non- life insurance in the UK
Notifying Party's view
  (37)    As explained above, both Parties are active on the upstream market for the
          provision of pet insurance in the UK (Allianz has a [40-50]% market share while
          the Target has a [0-5]% market share). Both Parties are also active on the market
          for the distribution of non-life insurance in the UK (Allianz has a market share
          of [0-5]% and the Target has a market share of [0-5]%).
  (38)    The Notifying Party argues that there is no possibility of the competitive
          position of any distributor of non-life insurance being harmed in a scenario
          where the distribution of the Target’s pet insurance is diverted to Allianz’s own
          distributors following the implementation of the Transaction. The Notifying
          Party explains that this would not represent a material loss of business to any
          current distributor of LV pet insurance19, given that [details on Target's
          activities].
19  Only Allianz (and not the Target) is engaged in the provision of “outward-only” insurance distribution,
    through its owned brokers, Home & Legacy and ABSL.
                                                         7
 ---pagebreak---   Commission's assessment
  (39)    The Commission considers that post-Transaction, Allianz would not have the
          ability to foreclose its downstream or upstream rivals.
  (40)    Indeed, as regards potential input foreclosure (i.e. the merged entity's pet
          insurance arm restricting access to its products for its competitors on the
          downstream distribution market post-merger), the Commission notes that pet
          insurance appears to be included in distribution agreements together with other
          non-life insurance products (these would include, e.g. insurance for property,
          marine, aviation and transport, motor vehicle, liability, travel etc.).20 Therefore
          pet insurance could not be seen as a key input for the merged entity's
          competitors on the market for the distribution of non-life insurance. In addition,
          the increment brought about by the Target is very small (less than [0-5]%), both
          on the market for pet insurance and on the market for the distribution of non-life
          insurance. Therefore there are no competitive concerns related to input
          foreclosure issues.
  (41)    Concerning possible customer foreclosure (i.e. the merged entity's non-life
          insurance distribution arm only distributing its own pet insurance products, in
          order to deprive other pet insurance providers of sufficient distribution
          capability), the Commission notes the very limited market presence of the
          Parties on the market for the distribution of non-life insurance and the presence
          of larger distributors. Thus in this case there would be sufficient alternative
          distributors for competing pet insurance providers to turn to. Therefore there are
          no competitive concerns related to customer foreclosure issues.
4.2.2.2. Vertical link between the provision of reinsurance and the provision of pet
        insurance
Notifying Party's view
  (42)    The Notifying Party submits that no competition concerns will arise from the
          vertical relationship between Parties’ activities on the markets for the provision
          of pet insurance in the UK and reinsurance for the following reasons.
  (43)    First, according to the Notifying Party, only Allianz (and not the Target) is
          active in the provision of reinsurance, [details on Allianz's activities] and that
          therefore any competitive effects arising from the link between Allianz’s
          activities as a reinsurer and the Parties’ combined activities in the downstream
          market for the provision of pet insurance will not be affected by the Transaction.
          In this regard, the Notifying Party also notes that (i) the vertical relationship
          between Allianz’s reinsurance activities and its activities as a pet insurer already
          exists pre-Transaction and that (ii) the very small increment brought by the
          Target to Allianz's existing share in the market for the provision of pet insurance
          will not have any practical impact on this pre-existing relationship.
  (44)    Furthermore, the Notifying Party submits that there is no prospect of the
          competitive position of any operator on the global reinsurance market being
20  In addition, there appear to be no specialised brokers for pet insurance.
                                                          8
 ---pagebreak---           harmed in a hypothetical scenario where the provision of reinsurance for the
          Target’s limited pet insurance portfolio is diverted to Allianz’s own reinsurance
          business following the implementation of the Transaction. Moreover, the
          Notifying Party notes that this would not represent a loss of business to any
          current provider of reinsurance to LV, given that [details on Target's activities].
  Commission's assessment
  (45)    First, the Commission considers, in agreement with the Notifying Party's claim,
          that this vertical link is pre-existing as Allianz is active both upstream in the
          market for reinsurance with a share of [0-5]% and downstream in the market for
          the provision of pet insurance in the UK ([40-50]%), while the Target is only
          active downstream ([0-5]%). As such, the Transaction does not bring about any
          change in the structure of the market, other than a negligible increment in the
          downstream market for the provision of pet insurance in the UK.
  (46)    Furthermore, the Commission considers that post-Transaction, Allianz would
          not have the ability to foreclose its downstream or upstream rivals.
  (47)    Indeed, as regards potential input foreclosure (i.e. the merged entity only
          reinsuring its own pet insurance products), the Commission notes that Allianz's
          current very limited market share in reinsurance would make it difficult for it to
          foreclose its competitors on the pet insurance market. In addition, the
          Commission notes the presence of much larger competitors than Allianz on the
          global reinsurance market to which Allianz's rivals in the downstream market
          for pet insurance could turn to. Finally the Commission notes that [details on
          Target's activities] which is an indication that reinsurance may not be an
          important service for pet insurance providers.
  (48)    As for customer foreclosure (i.e. the merged entity's pet insurance arm only
          using Allianz's reinsurance services), the Commission notes that reinsurance
          involves the pooling of a very wide range of risks on a worldwide basis.21
          Therefore there are sufficient alternative insurers for the reinsurance companies
          to supply. Therefore under this scenario the merged entity would not restrict the
          access of its competitors' in the reinsurance market to a significant customer
          base.
  (49)    Therefore there are no competitive concerns related to input foreclosure nor
          customer foreclosure issues.
          Conclusion
  (50)    In view of the above and of all the evidence available to the Commission, the
          Commission considers that the Transaction does not raise serious doubts as to its
          compatibility with the internal market with respect to the vertical link between
          (i) the provision of pet insurance in the UK and the distribution of non-life
          insurance in the UK and (ii) the provision of reinsurance and the provision of
          pet insurance in the UK.
21  Furthermore, reinsurers do not appear to specialise in pet insurance.
                                                         9
 ---pagebreak--- 5.    CONCLUSION
 (51)  For the above reasons, the European Commission has decided not to oppose the
       notified operation and to declare it compatible with the internal market and with
       the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of
       the Merger Regulation and Article 57 of the EEA Agreement.
                                                    For the Commission
                                                    (signed)
                                                    Julian KING
                                                    Member of the Commission
                                              10