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NERA Economic Consulting is pleased to have advised Bupa, the UK’s leading health insurer, on the competition economics aspects of its acquisition of CS Healthcare (CSH).

CSH is a Friendly Society with over 18,000 members. It was originally established in 1929 to provide health insurance cover for members of the UK Civil Service. Changes in the private medical insurance market over the past two decades had increased the costs faced by insurers, translating into higher premiums for members. The merger with Bupa would ensure continuation of cover and affordable premiums for CSH members over the long term.

Both merging parties provide personal private medical insurance (PMI) to customers in the UK. This competitive overlap meant that the UK Competition and Markets Authority (CMA) reviewed the acquisition, with the case attracting further interest because it increased the size of a market leader.

NERA supported Bupa and its external legal advisors at Pinsent Masons on the transaction’s notification to the CMA and the Jersey Competition Regulatory Authority (JCRA).

NERA’s economic advice covered issues related to market definition, customer behaviour, and competitive dynamics such as the assessment of closeness of competition and barriers to entry and expansion. This involved analysing market share movements and customer switching data.

On 24 September 2020, the CMA cleared the acquisition at Phase 1, with the JCRA having made a similar clearance decision earlier that month.

The CMA was persuaded by the evidence that the parties do not compete closely with each other, as they rely on different customer acquisition channels and focus on different customer bases, and that the merged entity would face enough constraint from alternative suppliers. Taken together, these constraints are enough to ensure that the merger does not give rise to a realistic prospect of a substantial lessening of competition (SLC) in the supply of personal PMI in the UK.

The final steps of the acquisition were completed by 1 January 2021.

For more details, please find the full text of the CMA’s clearance decision here.