Tryg acquires Alka Forsikring for $1.3bn

Danish non-life insurer Tryg has agreed to acquire Danish property/casualty insurer Alka Forsikring for a total consideration of DKK 8.2 billion ($1.3 billion).

Excluding Alka’s excess capital, the valuation of the Alka operations amounts to DKK 5.7 billion, according to the press release. Tryg has identified merger benefits in the combined entity of DKK 300 million, to be delivered by 2021. Alka’s technical result for the last 12 months (to Sept 2017) was DKK 325 million.

Tryg will finance the transaction by issuing up to 10 percent of current shares outstanding in an equity placing through an accelerated bookbuilding and a Tier 1 issue of DKK 500 million. The extraordinary dividend of DKK 1 billion announced earlier will not be affected.

Tryg’s earnings are to be enhanced in 2019, the first full year following the acquisition, with high single-digit earnings accretion by 2021. The transaction is expected to close during the first half of 2018, following a period of regulatory approval.

“We are very satisfied with the acquisition of Alka which will strengthen our position in Denmark,” said Tryg CEO Morten Hübbe.

“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,” Hübbe added.

The acquisition of Alka strengthens Tryg’s position and distribution presence in the Danish private market, growing its market share to 22 percent, with Alka adding an estimated market share in private lines of 6 percent.

Alka adds capabilities in the online channel, having developed a significant track record in distributing online, resulting in 36 percent of premiums sold via the digital channel, according to the press release. Furthermore, the awareness of the Alka brand is very high, suggesting a potential to continue to expand the business into the future.

Tryg expects to build upon Alka’s successful partnerships with unions, thereby offering significant opportunities to expand the business, the company said. It also highlighted Alka’s data analytics expertise, noting that the combined entity will apply best practices in data analytics to pricing, lead generation and fraud detection.

The deal is expected to close before the end of the first half of 2018 and is conditional upon standard regulatory approvals.

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