Zurich’s bid for Wesfarmers’ insurance assets does not include the broking side of the business, insuranceNEWS.com.au understands.

Speculation last week that the Swiss global insurer would buy the entire diversified Wesfarmers Insurance business has been dismissed, with insuranceNEWS.com.au reporting exclusively last week that the acquisition target is most likely general insurance subsidiary Lumley.

The Australian Financial Review, which is being used to leak some information to the market, reported last week that Zurich is doing due diligence on Wesfarmers Insurance.

It says talks to buy the business are at an advanced stage, with Macquarie Capital and Gresham Advisory Partners working for Wesfarmers and Goldman Sachs for Zurich.

The articles have not mentioned Lumley and continue to assert the entire division is on the block. They do not mention the highly diversified nature of Wesfarmers Insurance, which includes WFI, Coles’ insurance operations, major broker OAMPS and New Zealand broker Crombie Lockwood, among others.

Sitting sixth in the market, Lumley is regarded as an ideal fit for fifth-placed Zurich. 

Wesfarmers bought Lumley in 2003 for $320 million, and Zurich is seen as being unlikely to pay over the odds for it today. Nor is it likely to buy assets that are not core to its business.

However, Wesfarmers would be unlikely to want to keep the broking assets in the medium term.

Informed sources say the leaks to the Financial Review are most likely intended to fuel market interest in a separate arrangement to put Wesfarmers’ insurance distribution business – OAMPS and Crombie Lockwood, plus some UK brokerages – on the market.

“It’s a sellers’ market at present,” one source said. “There would be strong competition among some leading brands for a shot at buying OAMPS, and the Crombie Lockwood arm is an exceptional business.

“But the speculation over a $2-3 billion deal is hard to believe.”

The sources say the mid-market OAMPS business would likely attract a number of bidders, including a cashed-up Steadfast and its broking group rival Austbrokers. Others mentioned as likely participants in any assets action are global brokers Arthur J Gallagher, Marsh and Aon.

The speculation comes a few days before Zurich’s new Global CEO General Insurance Mike Kerner visits Sydney. It is understood he will not conduct media interviews while he is here.

insuranceNEWS.com.au is aware insurers were approached informally in 2011 to ascertain their interest in acquiring Lumley.

But in August Wesfarmers Insurance MD Anthony Gianotti told insuranceNEWS.com.au Wesfarmers had no plans to sell any parts of the insurance business.

Mr Gianotti joined Wesfarmers in 2004, and was promoted to MD of the insurance arm in July – eight months after Rob Scott had left to become Coles Finance Director. Instead of reporting to Group CEO Richard Goyder, he reports to Finance Director Terry Bowen.

Some observers have speculated that the length of time taken to decide on a new MD could have been caused by the group examining whether the insurance business presents enough potential for growth.

Spokesmen for Zurich and Wesfarmers say they do not comment on media speculation.