Insr : Trading update
Oslo, December 16th, 2020
Insr Insurance Group ASA updates on its insurance wind-down process and financial outlook.
As previously communicated, Insr is in the process of exiting the insurance business, which has been the company’s main activity. The difficult decision to start this process was initiated by a letter from the Norwegian Financial Services Authorities (NFSA) on June 26th this year, in which the NFSA warned Insr that its insurance license would be revoked if actions were not taken and gave a short deadline for the company to act. Over the summer, Insr secured Storebrand as a buyer for its portfolio of standard insurance in Norway, and this agreement was approved by an extraordinary general meeting on October 5th. Storebrand, as planned, from December 1st successfully renew Insr’s customers. Storebrand has also employed 40 of Insr’s competent staff.
Negotiations to find new risk carriers for the specialty insurance in Norway as well as historical portfolios in Norway and Denmark have been running through the autumn. A transaction for most of the specialty insurance in Norway is now signed. The terms achievable were unfortunately around NOK 10 mn below the company’s expectations, partly due to the covid-19 situation, as this portfolio is exposed to unemployment and sickness leave risk.
Substantial due diligence is required for a party taking over the risk for historic portfolios. The negotiations for both Danish and Norwegian legacy portfolios are still ongoing and are planned to be signed in 2021.
Agreements with most Norwegian distribution partners are now signed. Had Insr’s license been revoked, Insr would have had no obligations under most of the agent contracts. A portfolio sale, however, requires reaching settlements to cancel most distribution contracts. The expected total compensation of around NOK 15 mn will be accounted for this quarter.
The company has over the past few months reached a better understanding of the financial implications of winding down its insurance activity. The income assumptions appear to have been slightly too conservative as initial customer response to the transfer to Storebrand is positive. However, the cost assumptions were too optimistic. An updated financial forecast, still carrying substantial uncertainty, implies that the Tier 1 loan will almost certainly be completely written off, supporting equity with NOK 75 mn in 2021. Despite this, the estimated final value to shareholders, given the information currently available, is reduced to around NOK 25 mn. The solvency position at the end of 2020 is expected to improve to a comfortable margin above the 100% requirement. The ratio is forecast to slide downwards over the following quarters and actions must be taken to ensure that the company does not breach solvency requirements towards the end of 2021.
The range of outcomes is large, and the Board and Administration will turn every stone to ensure higher investor value and a solvent exit from insurance.
Given the high uncertainty of several elements of the forecast, primarily reinsurance terms and data transfer costs, the updated outlook carries a risk of unwanted outcomes, including public administration, negative equity and the Tier 2 loan not being fully repaid. The company will work hard to avoid these scenarios.
For further information, please contact:
Anne B. Knudtzon, SVP Business Controlling & Investor Relations
T: +47 926 10 606
E: anne.b.knudtzon@insr.io
Insr Insurance Group ASA was established in 2009 and is an independent insurance group listed on the Oslo Stock Exchange, with headquarters in Oslo. The Company’s main focus is on the market for property and casualty insurance for the retail and small enterprise segments in Norway. Insr distributes its products mainly through partners and insurance agents. Insr is regulated by the Norwegian FSA (Finanstilsynet) and has a license for all groups of non-life insurance, except for credit and guarantee insurance.