NIB’s AU$95 million acquisition of World Nomads Group reflects further concentration within the insurance market

New Zealand’s second largest health insurer, NIB, is flexing its muscles by acquiring one of Australia’s leading travel insurance providers.

NIB has today announced to the Australian Stock Exchange, it’ll acquire 100% of World Nomads Group (WNG) for AU$95 million on an enterprise value basis.

It expects the transfer to be completed by the end of August.

WNG is Australia’s third largest travel insurer that also has a small market share in New Zealand and a growing foothold in the UK, US and Canada. The Australian market accounts for 72% of its gross written premiums.

It generated gross written profits of around AU$117 million in the year to June.

NIB competes with Southern Cross Health Society in the health insurance market in New Zealand. It was launched in New Zealand in October 2013, after it acquired Tower Medical Insurance Limited at the end of 2012. In April it launched its first travel insurance product here, in partnership with WNG.

While NIB already distributes its own branded travel insurance product “white labelled” by WNG, its managing director Mark Fitzgibbon says, ownership creates a business case for escalating the effort.

“The combination of our two businesses makes it much easier for us to cross-sell to customers in both health and travel insurance.”

NIB intends to fund the transaction with its surplus capital, as well as debt.

Fitzgibbon says the acquisition aligns with company’s philosophy of making “relatively modest investments to expand its offering of complementary products in markets with attractive growth prospects”.

He says, “WNG is an excellent business with significant expertise, experience and capabilities in the fast growing and fast moving travel insurance market.

“It has a portfolio of high quality brands including World Nomads, Travel Insurance Direct, SureSave, as well as an extensive range of domestic and international partners such as Lonely Planet.

“Its focus on direct-to-customer distribution gives it the flexibility to adapt to evolving market conditions.”

NIB points to analysis done by Finaccord, which found the Australian travel insurance industry grew at a rate of around 9% between 2008 and 2012, and is expected to keep growing to 2016.

Fitzgibbon says, “The investment they’ve [WNG] made in technology and digital strategy is outstanding and gives us a lot of confidence in our ability to develop the market and win share.”

“Similar to the Australian private health insurance market, the two largest industry incumbents account for more than half the total market in Australian travel insurance”, NIB says.