Scandinavian insurer Tryg has agreed to acquire Danish P&C insurer Alka Forsikring (Alka) for a total consideration of about $1.3 billion, in a move that brings its Danish market share up to 22%.
The deal values the operations of Alka, the 8th largest Danish P&C insurance business, at about $908 million and is expected to close during H1 2018, following regulatory approval.
Alka will add an estimated market share in Danish private lines of 6%, it boasts a diversified portfolio of P&C insurance products, with around 380,000 customers and about $398 million gross premiums.
Group CEO, Morten Hübbe, said in a statement; “we are very satisfied with the acquisition of Alka which will strengthen our position in Denmark. Alka has delivered a combination of strong financial results and high growth, driven by excellent customer satisfaction.
“Alka is at the forefront of digital distribution and making it simpler to be a customer. We look forward to further developing the already strong cooperation between Alka and the unions, building on Tryg’s experience cooperating with unions.
“We also look forward to the Alka customers benefitting from TryghedsGruppen’s member bonus, which has been 8% per annum in the last two years. We see attractive mutual merger benefits arising from the transaction.”
Alka’s combined ratio profile averaged an attractive 84 in the last five years and policy numbers of Alka – which is owned by Danish unions and affiliated companies – have been growing at a CAGR of 5% over the past five years, resulting in consistent increases in market share over this period.
Tryg plans to build on Alka’s successful partnerships with unions, which offer significant opportunities for expansion.
The Scandinavian insurer Tryg said it expects merger benefits of about $48 million to be delivered by 2021.
Tryg will finance the transaction by issuing up to 10% of current shares outstanding in an equity placing through an accelerated bookbuilding and a Tier 1 issue of about $79 million.
TryghedsGruppen will subscribe for 60% of the placing at the bookbuild price – furthermore, TryghedsGruppen has committed to underwrite all shares at $23 per share.
The extraordinary dividend of $159 million announced at Tryg’s CMD will not be affected, and the insurer foresees significant long-term potential to increase ordinary dividends.
Tryg said as a result of the merger it will benefit from applying the market leading commercial practices of Alka across a range of areas, such as in online distribution and data analytics, while Alka will benefit from Tryg’s advanced capabilities in areas such as claims procurement and innovation in products and services.