STOCKHOLM, Sweden, June 19, 2002 (PRIMEZONE) -- Nordea and Tryg i Danmark smba (Tryg i Danmark) have signed a Letter of Intent regarding the sale by Nordea of 100% of its General Insurance business (Tryg) to Tryg i Danmark, for a price equal to EUR 760m in cash. Nordea is also entitled to additional deferred contingent consideration up to a maximum of EUR 90m if either Tryg combines with another business and/or Tryg achieves certain performance targets. Contingent consideration is payable in relation to the period up to 31 December 2004.
As part of the transaction Nordea and Tryg will enter into a strategic partnership agreement which includes a continuation of the existing bancassurance distribution agreement and asset management agreement. This agreement will enable cross distribution of services through the two parties' distribution networks.
Commenting on the sale,
Thorleif Krarup, Group CEO of Nordea, said: "The sale of Tryg to Tryg i Danmark represents a good solution for Nordea, and follows a review of strategic alternatives for the General Insurance business announced last October. The sale enhances both Nordea's focus on its core banking and asset accumulation franchises, and provides attractive financial benefits with enhanced profitability for Nordea. We look forward to continuing and strengthening the successful bancassurance relationship with Tryg as we believe that our customers increasingly will demand a full range of financial solutions."
Mogens Jacobsen, Chairman of Tryg i Danmark, said: "Tryg i Danmark is pleased that through this transaction it will gain 100% ownership of a leading Nordic general insurance group and looks forward to supporting its further development in cooperation with Nordea, which remains a key strategic and operational partner. Tryg i Danmark has had a successful historical involvement with Tryg and believes that independence gives us the opportunity to participate in further Nordic general insurance consolidation."
Hugo Andersen, CEO of Tryg, said: "The sale of Tryg to Tryg i Danmark represents an important step in the ongoing development of Tryg. The clarification of Tryg's ownership will bring benefits from a greater focus on developing the business and enhance the focus on our core business."
Key transaction highlights
The transaction brings attractive benefits to Nordea and Tryg i Danmark:
Nordea Tryg i Danmark
- Enhances focus on core banking - Ownership of a leading and asset accumulation franchises independent Nordic general - Enhances earnings stability insurance group - number 2 by - Releases approximately EUR total premiums 600m in economic capital, and - Exclusive access to the increases capacity to buy back own largest Nordic banking group and shares distribution network - Continues to provide a full - Opportunity to participate range of financial solutions to its in future Nordic consolidation customers - Opportunity to gain from - Maintains asset management recent business initiatives, contract with and bancassurance multi-channel capability and link to the second largest Nordic increased organisational focus general insurance group on general insurance business
Future operational relationship between Nordea and Tryg
Nordea and Tryg will enter into a strategic partnership and business cooperation agreement. This agreement will allow Tryg to continue to provide a full range of general insurance services to Nordea's customers across the Nordic and Baltic Sea region, and allow Nordea to provide life insurance and pension services through the Tryg distribution network. Nordea will retain the asset management contract for management of Tryg's investment portfolio equal to EUR 2.7bn as at 31 March 2002.
Tryg will retain the Tryg and Vesta brands. The existing Nordea-branded general insurance operations will be rebranded over a transition period. Tryg life insurance operations in Denmark and Vesta life insurance in Norway are in the process of adopting the Nordea name and are being integrated with Nordea's life insurance operations. All existing customer servicing arrangements will remain unchanged.
Nordea will receive commissions from Tryg from the sale of general insurance services through its distribution network and Tryg will receive commissions from Nordea on the sale of life insurance and pension services through the Tryg distribution network. Such commissions will be based on market terms.
Transaction terms and conditions
The transaction is subject to, inter alia, signing of a Share Purchase Agreement and receipt of required regulatory and competition authority approvals. The Share Purchase Agreement is expected to be signed shortly, and the transaction is expected to be completed by the end of the third quarter 2002. The final transaction price is subject to a euro-for-euro adjustment based upon the net asset value of Tryg as at 30 June 2002 as compared to the net asset value of Tryg as at 31 March 2002. Nordea expects a moderate negative adjustment to the final price based on operating performance and weak investment returns in Tryg to date in the second quarter.
Tryg i Danmark will assume full control of Tryg once regulatory approvals are received. Tryg i Danmark will assume economic responsibility for Tryg from 1 July 2002 and will be entitled to the earnings of Tryg from this date.
Additional deferred contingent consideration of up to a maximum EUR 90m is payable by Tryg i Danmark to Nordea if Tryg combines with another business and/or Tryg achieves certain performance targets. Contingent consideration is payable in relation to the period up to and including the year ending 31 December 2004.
Financial advisers
Nordea is being advised by Credit Suisse First Boston. Tryg i Danmark is being advised by Fox-Pitt, Kelton.
IMPACT OF TRANSACTION ON NORDEA
The sale of General Insurance follows the previously announced review of strategic alternatives for Nordea's General Insurance business and represents an important strategic step for Nordea. The sale is consistent with Nordea's strategy to focus upon its core banking and life insurance and asset management operations, whilst continuing to provide a full range of services to customers and leverage its customer base and distribution network. The transaction is also expected to enhance Nordea's earnings stability and is positive for Nordea's earnings, returns and capital position.
Nordea share buyback
The sale enhances both Nordea's earnings stability and the capacity to buy back own shares. The Board of Directors of Nordea received authority at the company's Annual General Meeting of 24 April 2002 to buy back shares in the company up to a total holding of 10% of its outstanding share capital. Nordea's intentions with regard to buying back shares are the subject of a separate press release.
Sale price
As at 31 March 2002 General Insurance had pro-forma shareholders' equity of EUR 660m. The sale price therefore represents a premium to pro-forma shareholders' equity as at 31 March 2002 of EUR 100m. The deferred contingent consideration of up to a maximum of EUR 90m is in addition to the base sale price and provides future potential value upside for Nordea. If this consideration is received by Nordea it will be recognised in the period in which it becomes payable.
The carrying book value of General Insurance in Nordea's accounts is approximately EUR 800m after the allocation of goodwill associated with previous General Insurance acquisitions, the costs involved in splitting and re-organising Tryg from Nordea and transaction costs. Accordingly, Nordea will record a book loss on sale of General Insurance of approximately EUR 40m. The elimination of goodwill associated with previous General Insurance acquisitions will reduce the Nordea goodwill amortisation charge by approximately EUR 4m in 2002 and by approximately EUR 8m per annum from 2003.
Nordea has received an opinion from its financial advisers, Credit Suisse First Boston, stating that, subject to the terms contained in that opinion, the consideration to be received by Nordea is fair from a financial point of view.
Impact on EPS and capital ratios
The sale releases a total of approximately EUR 760m of total regulatory capital, increasing Nordea's total capital ratio by approximately 0.5% point based upon Nordea's regulatory capital adequacy position as at 31 March 2002, and releases approximately EUR 600m of economic capital (based upon Nordea's internal economic capital model). The sale is also expected to be positive for Nordea's economic profit.
Based on the assumption that 100% of the sale proceeds are used by Nordea to buy back shares, the sale is expected to be earnings per share accretive.
Nordea analyst conference call:
A conference call with Nordea's Group CFO Arne Liljedahl and Head of Investor Relations Sigurd Carlsen has been arranged for 11:00 am, CET, today 19 June 2002. Please dial +44 (0)20 8401 1043, password Nordea, 10 minutes in advance. For a replay please dial +44 (0)20 8288 4459 access code 648342 A slide presentation is available on the Internet
IMPACT OF TRANSACTION ON TRYG I DANMARK
Sale of Nordea shares
In order to fund the acquisition of Tryg and support its future growth Tryg i Danmark will sell part of its shareholding in Nordea, by way of an accelerated bookbuilding exercise over the next several days. Carnegie and Credit Suisse First Boston have been appointed joint book runners, with Fox-Pitt, Kelton and Nordea Securities as joint lead managers.
Board of Tryg
Tryg i Danmark intends to elect a new board of directors for Tryg following completion which will comprise, inter alia, Mikael Olufsen, Chairman and Per Skov, Deputy Chairman. Hugo Andersen, the current Tryg Group Chief Executive Officer will continue in this role.
INFORMATION ON PARTIES TO TRANSACTION
Information on Tryg
Tryg is the second largest Nordic general insurance group as measured by total premiums. Tryg comprises four main subsidiaries: Tryg (Denmark), Vesta (Norway), TBi (UK and Denmark) and Nordea Ubezpieczenia (Poland). Tryg also has operations in Estonia (Nordea Kindlustus) and a fast growing Finnish business. Tryg has some 1.4 million retail customers and 250,000 corporate customers.
For the year ended 31 December 2001, Tryg had gross earned premiums of EUR 1,845m, net earned premiums of EUR 1,520m, and a net loss after taxation of EUR 6m. As at 31 March 2002, Tryg had total assets of EUR 3,637m, total technical reserves of EUR 2,714m (of which EUR 161m where equalisation reserves) and pro-forma shareholders' equity of EUR 660m.
Information on Tryg i Danmark
Tryg i Danmark (formerly named Tryg-Baltica smba), is the former majority owner of Tryg prior to the March 1999 merger of Tryg-Baltica with Unidanmark. Following that merger and subsequent restructurings Tryg i Danmark currently owns 185.6 m (6.2%) shares in Nordea. As at 31 December 2001 Tryg i Danmark had total assets of EUR 959m (Nordea shares accounted for at historical cost).
At the time of the Tryg-Baltica merger with Unidanmark, Tryg primarily consisted of a Danish general insurance and life business. Since then Tryg as part of Unidanmark acquired Vesta Forsikring in Norway in December 1999 and has expanded into emerging markets business in Poland and Estonia.
Tryg i Danmark is a benevolent institution. The members of the institution are certain of the Danish general and life insurance policyholders.
Information on Nordea
Nordea is the leading financial services group in the Nordic and Baltic Sea region and operates through four business areas: Retail Banking, Corporate and Institutional Banking, Asset Management & Life, and General Insurance. The Nordea Group has more than 10 million customers, 1,245 bank branches and 125 insurance service centres in 22 countries. The Nordea Group is a world leader in Internet banking, with 3 million e- customers. The Nordea share is listed in Stockholm, Helsinki and Copenhagen.
Further information Thorleif Krarup, Group CEO, Nordea +46 8 614 79 01 Mogens Jacobsen, Chairman, Tryg i Danmark +45 44 20 30 61 Erik Evren, Group Media Relations, Nordea +46 8 614 86 11 Sigurd Carlsen, Head of Investor Relations, Nordea +46 8 614 78 52
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