SpareBank 1 SR-Bank ASA (SRBANK); 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 24.9.2018, describing the accounting and capital adequacy consequences for SpareBank 1 SR-Bank 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 percent 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 percent. In addition, DNB has secured an option to acquire an ownership interest of up to 40 percent.

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 percent 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 SR-Bank’s share of the increase (19,5 percent) 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 SR-Bank*s share of a potential dividend of NOK 1.71 billion (19,5 percent) constitutes NOK 334 million. The dividend will reduce the book value of the Group's investment in SpareBank 1 Gruppen, thereby also reducing the deduction from CET1 capital 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.

Stavanger, 21 December 2018

For further information;
Inge Reinertsen, CFO, telephone + 47 909 95 033
Stian Helgøy, IR manager, telephone + 47 906 52 173
Thor-Christian Haugland, CCO, telephone + 47 480 31633