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Norway's DNB, SpareBank 1 agree $2.4 billion insurance merger

Staff Writer | September 24, 2018
DNB and SpareBank 1 Gruppen entered into an agreement to merge their insurance operations, thus establishing one of Norway’s largest insurance companies.
Europe   DNB ASA will have a holding of 35 percent
The new insurance company will result from the merger of DNB Forsikring AS and SpareBank 1 Skadeforsikring AS. The merged company will have a virtually complete product portfolio within non-life insurance aimed at the personal and SME markets.

As part of the transaction, the individual personal risk insurances from DNB Livsforsikring AS and SpareBank 1 Forsikring AS (the life insurance company), as well as the company-paid personal risk insurances from SpareBank 1 Forsikring AS, will be transferred to the new company.

DNB ASA will have a holding of 35 percent and SpareBank 1 Gruppen AS one of 65 percent in the new company. In addition, DNB has secured an option to increase their holding to 40 percent.

The merger agreement assumes an exchange ratio of approximately 80 percent for SpareBank 1 Gruppen and approximately 20 percent for DNB. This exchange ratio is based on a negotiated market value of the two non-life insurance companies, including the value of the transferred personal risk products.

In the transaction, the new non-life insurance company is valued at NOK 19.75 billion, including the value of the personal risk products to be transferred from the respective life insurance companies to the new company. An equivalent value is assumed when DNB is to increase its holding from 20 to 35 percent.

The purchase price for 15 percent of the shares will thus be NOK 2.96 billion. The total volume of premiums on the personal risk products is approximately NOK 3 billion, generating a profit of about NOK 0.5 billion after tax. The pro-forma profit after tax for the new company for 2017 was approximately NOK 1.8 billion, out of which DNB’s operations amounted to NOK 300 million.

For DNB, this will, on completion of the transaction, mean a recorded gain of around NOK 3 billion in the group accounts, and a reduction of the common equity Tier 1 capital ratio (CET 1) for the Group of about 30 basis points.

The parties will soon establish an interim Board of Directors and appoint the head of the new company. The tentative merger date is 1 January 2019, subject to the approval of the authorities.