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Sampo Oyj Sampo Group's Recommended Cash Acquisition Of A Majority Stake In Hastings Group Holdings Plc

05/08/2020 7:44am

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TIDMSAMPO 
 
 
   SAMPO PLC                     INSIDE INFORMATION                   5 
August 2020 at 9:14 am 
 
   NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, 
INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A 
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION. 
 
   THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. 
 
   Sampo Group's recommended cash acquisition of a majority stake in 
Hastings Group Holdings Plc 
 
   Following the announcement of Sampo and Rand Merchant Investment 
Holdings Limited's (RMI) potential interest in UK Property & Casualty 
(P&C) insurance company Hastings Group Holdings Plc (Hastings), Sampo 
and RMI have today announced a recommended cash offer to acquire all 
issued and to be issued shares in Hastings not currently owned or 
controlled by Sampo and RMI. 
 
   The offer price is GBp 250 for each Hastings share, valuing Hastings' 
entire issued and to be issued share capital at approximately GBP 1.66 
billion or approximately EUR 1.84 billion. 
 
   The offer price represents a premium of approximately 37.5 per cent to 
the volume-weighted average price of GBp 182 per Hastings Share for the 
three-month period ended 28 July 2020 (being the last Business Day 
before Hastings announced it had received an approach that may or may 
not lead to an offer). 
 
   Sampo and RMI have entered into a newly-formed jointly owned company for 
the purposes of acquiring Hastings. Following completion of the offer, 
Sampo and RMI will own and control 70 per cent and 30 per cent of the 
shares and votes in the jointly owned company, respectively. RMI is a 
South African financial services investment holding company that is a 
29.7 per cent shareholder in Hastings having acquired the stake in 2017 
for GBp 248 per share. 
 
   The size of Sampo's investment, based on its 70 per cent stake, would be 
GBP 1.16 billion or EUR 1.29 billion valued at the offer price. 
 
   Sampo expects to fund its part of the acquisition with approximately EUR 
1 billion of newly issued hybrid Tier 2 capital with the residual coming 
from existing cash resources. 
 
 
 
   Strategic rationale for acquisition 
 
   Sampo has a strategic ambition to expand further into non-life insurance, 
a segment where it has extensive experience and expertise. As part of 
this strategy, and in the context of its leading market positions in the 
Nordic markets, Sampo has been considering a geographic expansion beyond 
its current footprint.  Sampo believes that the UK, as one of the 
largest retail P&C markets in Europe, offers an attractive scale 
opportunity. 
 
   In this context, the acquisition of Hastings represents an attractive 
opportunity for Sampo to advance its strategy and accelerate its 
repositioning towards retail P&C insurance. Hastings is a leading motor 
insurer in the UK and has recently been diversifying into other non-life 
insurance products including home insurance. Both motor and home 
insurance represent large markets in the UK with growth potential for 
the Hastings business. 
 
   The acquisition of Hastings provides an attractively positioned platform 
in one of the most digitally advanced markets globally. The UK is 
characterized by its high levels of digital distribution and Hastings is 
one of the leading distributors of motor insurance policies in this 
market. Sampo believes that, under its ownership together with that of 
RMI, Hastings will be able to further develop its agile and digital 
business model to create long-term value. 
 
   RMI has a similar investment philosophy to Sampo, with a long-term 
horizon and a focus on building enduring value over many and differing 
market cycles. Given the significant retail P&C insurance experience and 
expertise of Sampo, through its subsidiaries If P&C Insurance and 
Topdanmark, and RMI, through its ownership of OUTsurance and existing 
shareholding in Hastings, the intention is to combine this knowledge to 
drive the strategic direction of Hastings. RMI brings institutional 
knowledge in Hastings and the UK P&C market to the jointly owned 
company. 
 
   Sampo and RMI intend for Hastings to continue to be operated on a 
standalone but unlisted basis. Sampo believes that a private partnership 
with RMI provides an optimal structure for Hastings to fulfil its 
potential and build long-term value for its stakeholders. As a private 
company, Sampo believes Hastings will benefit from a more long-term 
approach to decision making. 
 
   Sampo and RMI believe with their experience and under private ownership 
there are a number of areas of Hastings' operations that can be improved, 
including claims handling sophistication, expansion into home insurance, 
customer retention and reinsurance strategy. 
 
 
 
   Financial impact of an acquisition on Sampo Group 
 
   The Sampo Board expects the acquisition of Hastings to be accretive to 
earnings per share and RoE from the first full year following 
completion. Sampo estimates the transaction will have a positive impact 
on earnings per share in the mid-single digits (%). Meanwhile, it is 
expected that Sampo's solvency position will remain robust at 
approximately 175 per cent (post planned issuance of approximately EUR 1 
billion of hybrid Tier 2 capital to part finance the transaction). 
 
   Sampo does not believe that the transaction will lead to a change in the 
Group's credit ratings subject to the planned financing structure. The 
Sampo Board do not expect the acquisition to impact the Sampo's dividend 
policy in the short-term but is expected to enhance the dividend 
potential in the long-term. 
 
   General information about Hastings 
 
   Founded in 1996, Hastings is one of the leading property and casualty 
insurance (P&C) providers to the UK market, with approximately 3 million 
live customer policies and employing over 3,500 colleagues at sites in 
Bexhill, Leicester, Gibraltar and London. Hastings provides 
straightforward products and services to UK car, bike, van and home 
insurance customers with around 90 per cent of policies directly 
underwritten by Hastings' Gibraltar-based underwriting business, 
Advantage Insurance Company Limited (Advantage). 
 
   Hastings operates as an insurance provider with two separate businesses. 
Hastings' retail business, Hastings Insurance Services Limited, is 
responsible for product design, pricing, fraud management, distribution 
and management of the underlying customer relationships. Hastings' 
underwriting business, Advantage Insurance Company Limited, undertakes 
risk selection, underlying technical pricing, reserving and claims 
handling. 
 
   For the six months ending 30 June 2020, Hastings reported gross written 
premiums of GBP 515 million, with underlying average premiums up 3 per 
cent. Hastings reported underlying profit after taxes of GBP 56 million. 
 
 
   For the year ending 31 December 2019, Hastings reported gross written 
premiums of GBP 962 million, with underlying average premiums up 5 per 
cent on the same period in 2018. Hastings reported underlying profit 
after taxes of GBP 72 million. 
 
 
 
 
 
   Hastings Key Financials 
 
 
 
 
GBP million unless otherwise 
 stated                            2015  2016  2017  2018  2019  H1 20 
Gross written premiums              615   769   931   958   962    515 
Net revenue                         481   597   716   756   741    393 
Adjusted operating profit           126   152   184   191   110     78 
Underlying profit after taxes        76   115   145   149    72     56 
EPS (GBp)                           0.5  11.9  19.2  19.8  10.6    8.4 
Loss ratio (%)                     75.4  77.7  73.0  75.0  82.6   75.6 
Expense ratio (%)                  15.9  13.6  14.0  14.4  15.5   16.6 
Combined ratio (%)                 91.3  91.3  87.0  89.4  98.0   92.2 
Advantage Solvency II ratio 
 (%) (post dividend)                156   140   167   161   151    151 
Live customer policies (million)   2.04  2.35  2.64  2.71  2.85   2.96 
 
 
 
   General information about RMI and the shareholders agreement 
 
   RMI is a South African financial services investment holding company 
founded in 1977 and listed on the Johannesburg Stock Exchange with a 
market capitalization of ZAR 48.4 billion or EUR 2.4 billion on 4 August 
2020. 
 
   RMI aims to be a value-adding, active enabler of leadership and 
innovation in financial services and currently holds an investment 
portfolio including its existing investment in Hastings and investments 
in some of South Africa's premier insurance brands and in 
next-generation financial services and asset management companies. RMI 
has been the largest shareholder in Hastings since 2017. 
 
   Sampo and RMI have entered into a long-term partnership in relation to 
Hastings. The governance of the jointly owned company reflects the 
relative shareholdings of Sampo and RMI, recognizing Sampo's controlling 
position, but protecting RMI's interest with customary minority 
protections. The shareholder agreement includes customary exit 
arrangements for agreements of this type. 
 
   Hastings Board recommendation and transaction structure 
 
   The independent directors of Hastings intend to recommend unanimously 
that Hastings' shareholders approve the offer and have entered into 
irrevocable undertakings to do so in an amount of 0.33 per cent of 
Hastings' issued share capital. 
 
   It is intended that the offer will be implemented by way of a 
court-sanctioned scheme of arrangement under English law. The scheme 
document is expected to be posted to Hastings' shareholders within 28 
days after the 2.7 announcement and Hastings' shareholder meetings to 
approve the scheme will take place no earlier than 21 days after posting 
of the scheme document. It is expected that Hastings' shareholder 
meeting to approve the scheme will take place before the end of 
September 2020. Sampo and RMI expect all other conditions and regulatory 
approvals to be satisfied, and the scheme to become effective, by 
year-end. 
 
   More information on the offer at 
https://www.globenewswire.com/Tracker?data=B8Ut-apu4W5UCkiKO3vCuYqD7F9mhJ3vp_L3EqS387T6rMFAnI_uQ10MAhgsQhJu9TBsD3YomYEbxxlJnmnD0MGQ1BGZjlWzq2bDbXhvTQ8= 
www.sampo.com/offer and 
https://www.globenewswire.com/Tracker?data=B8Ut-apu4W5UCkiKO3vCudGWEpIVJM5hl9xDg0vUSW-aTKiQhhcMV95C5edtq-POg7w9zQ2K_-DXESvnkqfnUc7tUXEmbNJ9byeZoVQZrkg= 
www.hastingsplc.com. 
 
   Advisors 
 
   J.P. Morgan Securities Plc is acting as Financial Adviser to Sampo and 
RMI in connection with the offer. 
 
   Allen & Overy LLP is acting as legal adviser to Sampo and RMI in 
connection with the offer. 
 
   J.P. Morgan Securities Plc and Nordea Bank Abp will serve as joint lead 
managers for Sampo's hybrid T2 bond issue. 
 
   SAMPO PLC 
 
   Investor Relations and Group Communications 
 
   Further information: 
 
   Ricard Wennerklint 
 
   Chief of Strategy 
 
   Tel: +46 8 792 8022 
 
   Jarmo Salonen 
 
   Head of Investor Relations and Group Communications 
 
   Tel: +358 10 516 0030 
 
   Maria Silander 
 
   Communications Manager, Media Relations 
 
   Tel: +358 10 516 0031 
 
 
 
 
 
   J.P. Morgan Securities plc, which conducts its UK investment banking 
business as J.P. Morgan Cazenove (J.P. Morgan Cazenove), is authorised 
in the UK by the Prudential Regulation Authority and regulated in the UK 
by the Prudential Regulation Authority and the FCA. J.P. Morgan Cazenove 
is acting as financial adviser exclusively for Sampo and RMI and no one 
else in connection with the matters set out in this announcement and 
will not regard any other person as its client in relation to the 
matters in this announcement and will not be responsible to anyone other 
than Sampo and RMI for providing the protections afforded to clients of 
J.P. Morgan Cazenove, or for providing advice in relation to any matter 
referred to herein. 
 
   Distribution: 
 
   Nasdaq Helsinki 
 
   London Stock Exchange 
 
   The principal media 
 
   Financial Supervisory Authority 
 
   https://www.globenewswire.com/Tracker?data=B8Ut-apu4W5UCkiKO3vCuUuE_cqj-yUczXvY-WbUaY-XEF9sGFNOoliZFBDjOJdGJU3HUdBPL9mJ2AFPiDRyIw== 
www.sampo.com 
 
 
 
 

(END) Dow Jones Newswires

August 05, 2020 02:29 ET (06:29 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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