TrygVesta acquires Moderna Försäkringar Sak's (Moderna) non-life insurance
activities for DKK 427m in transaction goodwill and a total transaction amount
of SEK 1,256m (DKK 810m) from Moderna Finance AB (seller), which is a part of
the Icelandic group Milestone. Moderna is a Swedish non-life insurance company
with activities within all product lines for private insurance and a broad
portfolio of commercial insurance. The acquisition will strengthen TrygVesta's
Swedish market position and distribution power significantly, improve earnings
and increase the estimated market share from 0.5% to approximately 2.5%.
Highlights of the transaction:
• TrygVesta acquires Moderna's non-life activities for DKK 427m in transaction
goodwill and a total transaction amount of SEK 1,256m (DKK 810m).
• The acquisition will increase earnings per share by approximately 5% in 2010
and onwards
• The transaction is expected to close during first half 2009
• The transaction is conditioned upon usual regulatory approvals
• Moderna's loans to the parent company and other group entities will be
redeemed and fully paid back in connection with the transaction. After
the transaction TrygVesta has no relation to the selling party
• The acquisition do not include Icelandic Sjova, the run-off company
Assuransinvest as well as bank and life-insurance activities in the
Moderna Group
• The activities included in the transaction and using Moderna's accounting
principles have shareholders' equity of SEK 616m, gross premium income
in 2008 of SEK 1,190m, an insurance technical result of SEK 179m and
net income of SEK -18m in 2008.
Strategic rationale - the acquisition strengthens TrygVesta's position in Sweden
The acquisition of Moderna complements and strengthens TrygVesta's position and
distribution power in the Swedish market.
TrygVesta's strategy is to be a Nordic insurance group. In 2001 the Finnish
insurance activities were launched and in 2006 TrygVesta launched insurance
services for private customers into the Swedish market and today TrygVesta is
present in Denmark, Norway, Finland and Sweden. Since launch, the Swedish
insurance activities have grown the portfolio to approximately SEK 380m,
equalling a market share of 0.5%. The ambition is to achieve a market share of
8% of the Swedish private insurance market by 2012. In September 2008,
TrygVesta launched insurance services for corporate customers in Sweden via
insurance brokers. So far, the rapid expansion has been achieved predominantly
through only two distribution channels; own call centre and Nordea
bancassurance. Nordea online bank and insurance brokers have so far only
contributed marginally to the growth.
The acquisition of Moderna will expand and strengthen TrygVesta's distribution
network in Sweden markedly towards the private market as more call centres,
affinity groups, partnerships, car dealer channel, own sales force as well as
an online solution for all Swedish customers are added to the distribution
platform.
In addition, the acquisition of Moderna will improve TrygVesta's expansion in
the Swedish market for insurance services for commercial and larger corporate
customers as well as TrygVesta will get a number of new competencies and
specialty know-how.
In total the acquisition will bolster TrygVesta's market power and growth
opportunities significantly in the Swedish market.
Distribution channels Before Moderna Including Moderna
Call centre X x
Bancassurance X x
Nordea online bank X x
Insurance brokers X x
Customer centre x
E-business/self-service x
Affinity groups x
Car channel x
Synergies
The acquisition of Moderna provides TrygVesta with increased market power and
growth opportunities. In addition there are a number of synergies coming from
merging of reinsurance, liquidity management, investment management, taxes and
capital. Also, as the integration progresses, there is an opportunity for
significant synergies in the back-office functions, which will gradually
materialise through fewer investments compared with current expansion plans for
TrygVesta in Sweden.
The total synergies are expected to be SEK 50m per year.
Capital
TrygVesta has sufficient capital to fund the acquisition, but has decided to
issue hybrid capital. TryghedsGruppen, who owns 60% of TrygVesta, and TrygVesta
have agreed that TryghedsGruppen buys hybrid capital for EUR 65m. The overall
terms are an interest rate of euribor plus 500 basis points (currently
equivalent to a coupon of 6.8 %), a 23 year maturity and an option for early
redemption after 3 years. The final terms of the hybrid capital will be
finalized upon closure of the transaction. TryghedsGruppen has deep
understanding and knowledge of TrygVesta and the terms reflect this. The
remainder of the capital need for the transaction comes from TrygVesta's own
funds.
After the transaction TrygVesta still has a strong capital base.
Before the acquisition of Moderna, TrygVesta had hybrid capital of DKK 1.1bn
and after the transaction this will increase to DKK 1.6bn, which equals 16% of
TrygVesta's total capital.
TrygVesta's capital requirement will increase with approximately DKK 685m when
the transaction settles and according to TrygVesta's capital model and
inclusive a 5% buffer, the conditions for the “A-“ rating with Standard &
Poor's is maintained.
Impact of TrygVesta's financial results
In the section ”About Moderna” the historical performance and size of the
acquired activities are shown. The transaction will be consolidated as of
closure of the deal and consequently be pro-rata impacting the 2009 accounts
for TrygVesta. Moderna will be reported as part of TrygVesta in Sweden and the
management will be part of TrygVesta's Nordic organisation.
TrygVesta in Sweden in 2008 had gross premium income of DKK 221m and a
technical result of DKK -90m. The Swedish activities are growing rapidly and
invest in increased market position, and consequently the costs of new sales
are significant and the main reason for the losses in the Swedish activities.
The combination of TrygVesta in Sweden and Moderna will increase TrygVesta's
Swedish activities to an estimated annual gross premium income of approximately
SEK 1.5bn and an estimated technical result of SEK 75m.
The funding costs related to the acquisition are expected to be fully covered
by the current earnings of the acquired assets and in addition comes growth and
cost synergies. The impact on TrygVesta's 2009 results will be slightly
positive assuming no synergy benefits, however, from 2010 and onwards earnings
are expected to increase by 5% due to the acquisition including synergies.
About Moderna
Moderna, headquartered in Stockholm, dates back to 1916, when the Atlantica
insurance company was established. Moderna has 250 employees.
Moderna is a healthy and well managed insurance company with a good and
innovative management team, which will continue as management team. Moderna
offers a broad and well diversified portfolio of usual insurance services for
cars, house and content, accidents, commercial and products. The insurances
are distributed through own call centres, own sales force, insurance brokers,
affinity groups as well as a very user friendly internet self-service solution.
In addition, Moderna focuses on niche products and segments with tailored
products and specialised sales force and partners and has achieved significant
market positions in segments for leisure boats/yachts, motorcycles and classic
cars.
In line with TrygVesta, Moderna has focus on peace of mind for their customers
and in that respect offers a broad range of advisory service of how to avoid
accidents and burglary etc.
Financial key figures for the activities TrygVesta acquires
The assets TrygVesta acquires and which are estimated to have a 2008 estimated
gross premium income of SEK 1,190m includes the following lines of businesses:
22% motor insurance, 22% commercial insurance, 21% product insurance, 18%
private insurance and 17% leisure boat and yacht insurance.
Key financial figures 1)
In SEKm 2006 2007 2008
Gross premium income 830 980 1,190
Insurance technical result 152 152 179
Investment result, gross 192 27 -142
Pre-tax result 282 91 -34
Net income 203 90 -18
Combined ratio 89.1 93.8 91.1
Cost ratio 24.0 25.1 24.0
Claims ratio 57.3 62.8 63.2
Shareholders' equity 885 791 616
Insurance provisions 1,144 1,517 1,776
1)Proforma and not audited figures. Based on Moderna accounting principles.
Moderna do not use the same discounting principles as TrygVesta
For additional information about Moderna, please consult the company's homepage
at www.modernaforsakringar.se
Time schedule for closure of the transaction
The closure of the acquisition of Moderna is expected before the end of first
half 2009 and is conditional upon usual regulatory approvals.
Conference call
TrygVesta invites equity analyst and investors to participate in a conference
call today, 3 March 2009 from 09.30 to 10.30 CET (08.30 to 09.30 London time).
The conference call will be conducted in English and the related presentation
material is available on www.trygvesta.com. The conference call is hosted by
CEO Stine Bosse, CFO Morten Hübbe and Investor Relations Director Ole Søeberg.
At the conference call, the transaction will be presented and afterwards there
will be opportunity to ask questions.
To participate in the conference call, please dial 70 26 50 40 from Denmark and
+44 208 817 9301 from outside Denmark 5-10 minutes prior to the call starts.
Additional information:
For further information please visit www.trygvesta.com or contact Investor
Relations.
CEO
Stine Bosse. Phone +45 44 20 30 40
CFO
Morten Hübbe. Phone +45 44 20 30 20
Investor Relations Director
Ole Søeberg. Phone +45 44 20 45 20 or e-mail ole.soeberg@tryg.dk
Communications Director
Troels Rasmussen. Phone +45 44 20 30 70 or e-mail troels.rasmussen@tryg.dk
TrygVesta is the leading Nordic provider of “peace of mind” solutions with
property & casualty insurance operations in Denmark, Norway, Finland and
Sweden. TrygVesta is listed on OMX Nordic Exchange Copenhagen and 60% of the
shares are held by TryghedsGruppen smba.
