Nan Shan Life Insurance & AIG Taiwan

1279th Commissioners' Meeting (2016)

Case:

Run Chen Investment Holding Co., Ltd. filed a pre-merger notification regarding the intention to merge with AIG Taiwan

Keyword(s):

Life insurance, property insurance

Reference:

Fair Trade Commission Decision of May 11, 2016 (the 1279th Commissioners' Meeting)

Industry:

Non-life insurance (6520)

Relevant Law(s):

Article 10 and 13 of the Fair Trade Law

Summary:

1. Run Chen Investment Holding Co., Ltd. filed a pre-merger notification regarding the intention of its affiliate Nan Shan Life Insurance Co., Ltd. (hereinafter referred to as Nan Shan Life Insurance) to acquire all the shares of AIG Taiwan Insurance Co., Ltd. (hereinafter referred to as AIG Taiwan) and appoint representatives to serve on the board of directors of AIG Taiwan. The condition met the merger patterns described in the Subparagraphs 2 and 5 of Article 10(1) the Fair Trade Law. At the same time, the sales of Run Chen Investment Holdings, Nan Shan Life Insurance and AIG Taiwan all reached the filing threshold announced by the FTC whereas none of situations prescribed in Article 12 of the same law existed. Therefore, a pre-merger notification had to be filed.

2. Nan Shan Life Insurance and AIG Taiwan respectively engaged in life insurance and property insurance businesses. The concentration in either market was low. Nan Shan Life Insurance accounted for about 11.6% of the life insurance market while AIG Taiwan only took up around 2.4% of the property insurance market. Besides casualty insurance and health insurance, the two companies had no horizontal overlap or vertical relations. As for casualty and health insurance business in which the two companies overlapped, AIG Taiwan merely claimed 0.21% of the casualty insurance market (including the casualty insurance offered by property insurance and life insurance companies) and only 0.015% of the health insurance market (including the health insurance offered by property insurance and life insurance companies) in 2015.

3. The case involved a conglomerate merger and thus an analysis was performed mainly according to the competition effects of conglomerate mergers. However, the competition effect likely to be created in casualty and health insurance where both companies overlapped was also evaluated. As specified in insurance regulations, the same insurance company could not engage in both property and life insurance operations. Hence, the two companies had no potential competition relations in the life insurance, pension insurance, car insurance, fire insurance and liability insurance markets. Furthermore, Nan Shan Life Insurance and AIG Taiwan had no significant market power in the life insurance market and the property insurance market. Both companies therefore were not in a position to adopt tie-in or bundling sales or package deal strategies to attract potential customers or create market foreclosure. For this reason, the merger could not lead to any elimination of market competition. As for the areas where the two companies overlapped, Nan Shan Life Insurance would have no significant share increase in the casualty and health insurance markets after the merger while the company also had no incentive or the capacity to raise prices unilaterally. In other words, there would be no significant unilateral effect. Meanwhile, because no change would happen to the structure of the casualty and health insurance markets or the concentration therein, no significant coordinated effect would be created. Finally, after assessing potential market entry barriers and existing countervailing power and assuring the merger would not lead to substantial weakening of competition, the FTC concluded the overall benefits of the merger would outweigh the potential disadvantages from the competition restrictions thereof incurred and decided that Article 13(1) of the Fair Trade Law should be applied and thus the merger should not be prohibited.