Merger to create the leading Nordic P&C insurermb.cision.com/Main/6558/9394993/108873.pdfMerger to...
Transcript of Merger to create the leading Nordic P&C insurermb.cision.com/Main/6558/9394993/108873.pdfMerger to...
1
Merger to create theleading Nordic P&C insurer
Press Conference, OsloFebruary, 22 1999
2
Table of Content
8Introduction and highlights
8Rationale
8The New Group
8Synergies
8Financials
8Conditions and timing
3
Highlights of the transaction
8 Skandia and Storebrand combine their P&C activities in order tocreate the leading Nordic P&C insurance company
8 Merger of equals
8 The New Group will have an estimated pro forma Nordic marketshare in P&C insurance of 19%
8 The transaction is expected to create annual synergy gains ofSEK 450 million within 3 years from completion date
4
Highlights of the transaction (cont)
8 Skandia will own 56% and Storebrand will own 44% of thecapital of New Group
8 Voting rights will be equally shared between Skandia andStorebrand
8 The New Group will be headquartered in Stockholm
8 Domicile decision solely based on commercial criteria
8 Private lines and Marine & Energy will be managed fromNorway, while industrial lines will be managed from Sweden
5
Highlights of the transaction (cont)
8 Åge Korsvold, President and CEO of Storebrand, will beChairman of the New Group
8 Other members of the steering committee include GreteFaremo, Idar Kreutzer, Johan Fr. Odfjell, Lars-EricPetersson and Ulf Spång
8 Bo Ingemarson, Senior Executive Vice President of Skandia,will be CEO of the New Group
8 Hans-Erik Andersson, Knut Francke and Gunn Ovesen willalso be part of the executive management group
6
Structure of the transaction
8 Storebrand’s P&C activities will be transferred to anoperating company domiciled in Sweden. Storebrand willreceive shares in the holding company of the New Group
8 Call centres, service centres and the sales force will betransferred to the New Group, while branch offices will beretained by Skandia and Storebrand
8 The intention is that all activities outside Sweden will beorganised as branches to maximise operating and capitalsynergies
7
Why Skandia and Storebrand ?
8 Skandia and Storebrand share the same view ondevelopments in the P&C insurance market
8 Both companies regard the P&C insurance market asattractive and see significant value creation potential in aNordic restructuring
8 The P&C activities of Skandia and Storebrand are similarin size
8 Strong brand names in home markets
8 Two strong management teams
8 Complementary skills
8 Common social and cultural features in the Nordic market
8
-
5,000
10,000
15,000
20,000
25,000
The
New
Gro
up
Ska
ndia
Sto
rebr
and
LF W
asa
Sam
po
Fol
ksam
Try
g-B
altic
a
Gje
nsid
ige
Try
gg-H
ansa
Poh
jola
Top
danm
ark
Cod
an
Alm
. Bra
nd
Tap
iola
Market position in the Nordic Region
Gross Premiums Written, SEKM
9
Key figures
Skandia Storebrand The New Group
Gross premium written (1), SEK bn. 13.6 9.3 22.9
Total assets (2), SEK bn. 32.3 18.5 50.8
Shareholders' equity (2), SEK bn. 6.4 4.5 10.9
No of customers (1,000) 3,000 1,000 4,000
No of employees (appr.) 3,300 2,600 5,900
(1) Last 12 months ending September 30, 1998(2) September 30, 1998
10
Rationale for the transaction
IndustryCharacteristics
Combinedopportunity
Result
8 Low growth
8 Overcapacity
8 Large performance gapsbetween best practice andindustry average
8 Economies of scale andscope
8 Industry wide consolidation
8 Streamline operations andcapital allocation
8 Transfer internal “bestpractice” e.g.:
- Call Center
- Underwriting
- Claims settlement
- Risk management
8 Attract or acquire other P&Ccompanies
8 Substantial cost savingsand revenue enhancement
8 Capital efficiency
8 Improved profitability
The New Group creates a strong Nordic platform for future growth
11
Vision & Objectives
8 Establish a financially strong but capital efficient structure as abasis for continued development of the business
8 Establish a P&C organisation with unparalleled scale and coreskills in the Nordic region
8 Establish a combined organisation capable of achievingsubstantial synergies
To create the leading P&C company in the Nordic region
12
Strategic overview
8 Complete range of P&C insurance products for individualsand companies
8 The leading P&C insurer in the Nordic region, eventuallywith a strong market position i each market
8 Re-engineer the existing distribution networks and createan organisation with superior distribution capability
8 Size provides increased strategic flexibility and enables theNew Group to lead in the restructuring of the Nordicinsurance sector
Product Offering
Geographic Focus
Distribution Strategy
Strategic position
13
Structure of the New Group
Denmark Branch
(existing)
“Newco” AB
“Newco”
Insurance AB
Storebrand Skandia44 % 56 %
Norway Branch
50 % 50 %
Capital Capital
VotesVotes
14
The Nordic P&C market
FinlandNorway
Sweden
Pohjola25%
Tapiola13%
Other19% Sampo
34%
F-Fennia9%
Tryg-Baltica21%
Codan13%
Alm.Brand9%
Skandia5%
Other38%
Topdanmark14%
Gjensidige29%
Samvirke8%
Other6%
Storebrand39%
Vesta18%
LF-Wasa27%
Skandia20%Trygg-Hansa
16%
Other19%
Folksam18%
Denmark
Total Gross Premiums: SEK 33.9 bn
Total Gross Premiums: SEK18.8 bn Total Gross Premiums: SEK19.1 bn
Total Gross Premiums: SEK30.6 bn
Market shares, 1997
The New Group will have a combined market share of 19%
15
The European P&C market
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
AllianzNo 1
AXANo 2
CGUNo 4
RSANo 6
Skandia/Storebrand
No 12
USD million, net premium written
16
Premiums by segment (1)
(1 ) Net premiums, 1997
Storebrand100% = SEK 7.8 bn
M&ECorporatemarket
Private
M&E
M&E
Private
Corporate
The New Group100% = SEK 18.9 bn
Skandia100% = SEK 11.1 bn
Private
Corporatemarket
58 %
8 %
34 %
42 %
4 %
54 %
48 %
6 %
46 %
17
Branding and distribution
8 Leveraging on strong existing brands and distribution capability
8 The New Group will inititate process to establish new brand. Co-branding with current brands following completion of thetransaction
8 Distribution channels which include:
qCall centresqSales and service centresqSales representativesqDistribution agreements with Skandia and StorebrandqInternet
8 Distribution alliances will be considered
Strengthened platform for efficient distribution
18
Sources of Value Creation
Synergies
Platform for growth
Stand-alone improvements
8Annual cost synergies of SEKM 450or 8 % of the combined cost base
8 Increased capital efficiency
8Significant opportunitiesfor skill transfers
8E.g. Denmark, Finland, Marine & Energy
19
Break-up of synergies
Total SEKM
Production and underwriting 110
Distribution 85
Administration 75
Claims handling 30
Support functions and other 150
Total annual synergies 450
20
Financial Strategy
8 The anticipated synergy gains, solid market position andfinancial strength create the foundation for sustainableearnings growth and high profitability
8 The New Group intends to operate with a solvency marginof 55%, and intends to pay out excess profits as dividend
8 The target cost ratio is 20 %
8 The target combined ratio over the cycle is 100 %
8 Target return over the cycle on solvency capital is risk freeinterest rate plus 6%-points
8 It is Skandia’s and Storebrand’s intention to float the NewGroup
21
Capitalisation and proforma financials
P&L Accounts Balance Sheet
Accounting principles and assumptions are explained in the press release
* 12 months period ending 30 September 1998
The New Group The New Group
(SEKM) 1997 1998 * (SEKM) 1997 1998 *
Gross premium written 22.278 22.922 Investments 45.692 46.595 Net premium written 19.070 19.814 Total assets 48.653 50.843
Shareholders' equity 10.456 10.910 Operating expenses 4.410 4.654 Technical result -362 62 Operating result 137 553
Key ratios:Claims ratio 87,0 % 84,0 %Cost ratio 23,2 % 24,1 %Combined ratio 110,2 % 108,1 %
22
Pro forma, financial information and capitalization
MSEK Skandia P&C Storebrand P&C The new Group
ResultTechnical resultAllocated investment income,non-technical
-207
282
269
209
62
491Operating resultBalance sheetTotal assetsInvestments-whereof NIGTechnical provisions, net
75
32 33130 3671 431
24 513
478
18 51215 958
013 989
553
50 84346 5951 431
38 502CapitalizationShareholders' equityShareholders' contribution NIGSolvency margin (%)
6 3871 43155%
4 5230
55%
10 9101 43155%
23
Conditions and timing
8 Confirmatory due-diligence to be completed byend of March
8 Regulatory approval and clearance fromcompetition authorities
8 Completion of Transaction