Hafnia is the second-largest insurer in Denmark, with a 12 per cent share of direct general business and 8 per cent of life business, worth pounds 280m and pounds 150m respectively in 1991. The purchase does not include the UK subsidiaries of Hafnia. Sun Alliance said yesterday that Hafnia's results for 1992 have not been finalised but were expected to show a substantial loss.
According to Scott Nelson, Sun Alliance's general manager, the acquisition marked a move to look for logical acquisitions in Europe. The deal would take Sun Alliance's European business up to 22-23 per cent of its worldwide business compared with 16-17 per cent before the purchase.
The group said yesterday that the acquisition 'will generate increased profits for the group from the Hafnia business and from the economies and synergy available from combining the operations.'
Sun Alliance is buying Hafnia through its Danish subsidiary, Codan, with the purchase price to be met from Codan's existing cash reserves. Codan said that by combining its financial operations with Hafnia it would become Denmark's biggest general insurer and the country's third-biggest life insurer.
The purchase marks the conclusion of a drama for Hafnia. Last August it suspended payments to creditors and transferred assets, but not debts of around pounds 666m, to a new holdings company, Hafnia Holding af 1992. The new Hafnia began a programme of rationalisation, including the sale of subsidiaries and staff reductions of 25 per cent.
But heavy losses continued, accelerated by its 33.5 per cent stake in its rival insurer, Baltica Holding, whose share price tumbled to about Dkr57 last week from Dkr700 last year. Last week, Hafnia was failing to meet legal solvency requirements and was under intense pressure to find a buyer after placing itself for sale on the open market last autumn.
Sun Alliance stressed yesterday that the solvency requirement from the additional premium would be met from Codan's surplus assets, but would give rise to a small reduction in the group's headline solvency margin.
Guardian Royal Exchange will enter the health insurance market with the purchase of the healthcare and personal lines insurance business of the UK-based Orion Insurance from Nationale-Nederlanden, the insurance arm of the International Nederlanden Group, for pounds 8m.
GRE plans to retain the identities of Orion Healthcare and Orion Personal Lines as separate companies.Reuse content