SpareBank 1 SMN

Finanstilsynet (FSA) has approved the merger between SpareBank 1 Skadeforsikring AS and DNB Forsikring AS. Updated calculations.

The planned merger between the two non-life insurance companies SpareBank 1 Skadeforsikring AS and DNB Forsikring AS has now been approved by Finanstilsynet (the Financial Supervisory Authority of Norway). The merger will come into force with effect from 1 January 2019.  The name of the merged company will be Fremtind Forsikring AS.

As part of the transaction, the plan is to demerge the individual personal risk insurance products from SpareBank 1 Forsikring AS (the life insurance company) and DNB Livsforsikring AS, as well as the company-paid personal risk insurance products from SpareBank 1 Forsikring AS, and transfer them to the new company. This part of the transaction is scheduled for completion during the first quarter of 2019.

Reference is made to the statement to Oslo Børs on 24 September 2018, describing the accounting and capital adequacy consequences for SpareBank 1 SMN in connection with the agreed insurance transaction. The demerger of the personal risk products is not scheduled until after the merger has been completed. This means that there will be changes in the figures communicated in the said statement.

The merger agreement assumes a conversion ratio of 80 per cent for SpareBank 1 Gruppen and 20 per cent for DNB. This conversion ratio is based on the negotiated market value of the two non-life insurance companies, including the value of the personal risk products in the planned demerger. DNB ASA will increase its ownership interest in the company to 35 per cent. In addition, DNB has secured an option to acquire an ownership interest of up to 40 per cent.

In the transaction, the new non-life insurance company was valued at NOK 19.75 billion, including the value of the personal risk products. Without the personal risk products, Fremtind is valued at NOK 13.5 billion, which is the same value that was originally assumed in the transaction.

Based on figures as at 31 December 2017 and pro forma consolidated financial statements, the merger and DNB's acquisition from 20 to 35 per cent ownership interest will in aggregate result in an increased equity capital for SpareBank 1 Gruppen of approximately NOK 4.7 billion at Group level.  The majority's (i.e.the SpareBank 1 banks and the Norwegian Confederation of Trade Unions) share of this increase is approx. NOK 2.5 billion. SpareBank 1 SMN's share of the increase (19,5 per cent) amounts to approximately NOK 488 million and will be recognised in the income statement or entered directly against equity in the Group accounts. The Group's common equity Tier 1 (CET1) capital ratio will, however, remain virtually unchanged. The latter is due to the fact that the increased book value of the ownership interest in SpareBank 1 Gruppen AS results in a larger deduction from the CET1 ratio and increases risk weighted assets. Overall, this virtually neutralises the effect of the increase in book assets.

SpareBank 1 Gruppen AS (the parent company) will, before the effect of a potential transfer of the personal risk products is taken into account, receive a tax-free capital gain of approximately NOK 1.71 billion, as a result of the sale of shares to DNB ASA. SpareBank 1 Gruppen AS will have a corresponding increase in its basis for dividend payment. SpareBank 1 SMN's share of a potential dividend of NOK 1.71 billion (19,5 per cent) constitutes NOK 334 million. The dividend will reduce the book value of the Group's investment in SpareBank 1 Gruppen, thereby also reducing both the deduction from CET1 capital and the size of RWA in the calculation of the capital ratio (ref. preceding paragraph). The Group's capital ratio will accordingly rise. Based on the Group's accounting figures as at 30 September 2018, this would entail an increase in the CET1 ratio of an estimated 0,3 percentage points. Any dividend from SpareBank 1 Gruppen AS will be conditional on the capital situation and decisions by the company's governing bodies and cannot be implemented until the second quarter of 2019 at the earliest.

Trondheim 21 of December 2018

Contact SpareBank 1 SMN: 

Kjell Fordal, CFO, [phone]

This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)

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Source: SpareBank 1 SMN via Globenewswire