Delta Lloyd announced the sale of its German business to Nomura Holdings. This is in line with Delta Lloyd's stated strategy to focus on its core markets, the Netherlands and Belgium, and follows Delta Lloyd's decision, announced on 4 March 2010, to place its German business in run-off and to cease writing new policies. On 4 August 2011, Delta Lloyd formally announced its intention to fully withdraw from the German market.
The transaction comprises the transfer of all the assets and liabilities of Delta Lloyd Lebensversicherung AG and the sale of all of Delta Lloyd Deutschland AG's shares in other German subsidiaries to Nomura. Those companies will continue to service all obligations to current policyholders and, to ensure a smooth transfer, will also take over all of Delta Lloyd's c. 200 German staff, including its current management. The German business will likely benefit from the security provided by Nomura's published stronger than peer average Tier one capital ratio of 16.2%.
The parties expect the transaction to close around mid 2012, subject to the receipt of all necessary regulatory approvals and other conditions.
The final transaction price is dependent on developments in the capital markets, related principally to interest rate and spread developments within the bond portfolio of the German activities, as well as the real estate portfolio.
The transaction is subject to a minimum price at closing. Delta Lloyd has the right to withdraw from the agreement if the minimum price is not achieved.
Based on that minimum price, and absent a significant drop in the value of the real estate portfolio, Delta Lloyd expects the transaction (including tax benefits) to result in a positive IFRS result of at least € 65 million and an increase of group IGD solvency by around 12% (as at 30 June 2011). Total (32,94 EUR, -0,08%) equity under IFRS of Delta Lloyd's German activities amounted to € 206 million as of 30 June 2011.
The entity was already up for sale for a while and Delta Lloyd reported revenues and profits, excluding Germany in order to have a "same-scope" reporting after the sale of Germany.
We maintain our Accumulate rating and € 20 target price.