EU – Baltic States, Financial Services, Insurance, Lithuania, Mergers and take-overs

The Group’s market share in the Baltics will increase from approximately 7% to approximately 13%. The market share in Lithuania will increase from approximately 7% to approximately 21%.

PZU Lietuva offers general insurance products primarily within the motor, property and personal lines in Lithuania. The company also has operations in Estonia and Latvia, but these will be separated out before final closing and they are not part of the transaction.

Gross premiums written for the acquired business in Lithuania were approximately EUR 50 million in 2014. Around 40% came from the private market and around 60% from the commercial market. The products are distributed through brokers, agents, banks and via the internet, as well as by direct distribution through the company’s own offices.

“PZU Lietuva fits well with our business in the Baltics, and gives us critical mass in a market where we expect solid growth”, says CEO Helge Leiro Baastad.

Gjensidige sees a potential for growth and enhanced profitability in the Baltics. The Group has therefore decided to increase its involvement in this market going forward by increasing investments in its current operations and through this acquisition. The acquisition will make Gjensidige one of the biggest general insurance companies in the Baltic market. The company will thereby play a more central role in the Baltic general insurance market as it develops and matures.

“We believe that the structural changes that have taken place in the Baltic market in the last year will contribute to a necessary shift towards a more rational and profitable industry”, says Baastad.

As part of Gjensidige’s increased focus on the Baltics, the business will be organised under the Technology and Development business area, focusing on implementing Group processes, sharing best practice and further improving infrastructure.

“The acquisition of PZU Lietuva gives us possibilities for synergies in the whole of our business in the Baltics, among other things by coordinating IT-systems, claims handling, distribution networks, reinsurance and support functions”, says Executive Vice President for Technology and Development, Kaare Østgaard.

“We will at the same time make significant investments in these areas. Together with integration costs, this will contribute to a weaker profitability in the Baltics in the short term. Over time however, these measures will result in better profitability. The synergy potential that has been identified is expected to be realised with full effect as from 2018”, Østgaard adds.

According to the agreement with the seller, the final closing is expected to take place at the beginning of the third quarter 2015, contingent upon approval from the relevant authorities. Integration of the two entities is expected to begin immediately thereafter to ensure that synergies can be realised as soon as possible.

Isolated, the transaction is expected to affect the strategic capital buffer by approximately NOK 500 million.