After considering the matter yesterday, Kredittilsynet sent a letter to the Ministry of Finance, with a copy to the Finnish insurance company Sampo, stating that it does not find cause to recommend giving a licence to Sampo to acquire Storebrand's shares. Kredittilsynet attaches importance to the fact that Sampo has not been assured 90 per cent of the shares. Furthermore, Sampo does not fulfil specific requirements that would allow it to acquire less than the mandatory 90 per cent of shares laid down in Norwegian financial legislation.
The Finnish bank/insurance group Sampo, represented by its parent company Sampo OYJ, applied on 11 July 2001 for permission to acquire more than 50 per cent of Storebrand ASA's shares.
The application, which was forwarded by the company's Norwegian representative, the law firm Wikborg, Rein & Co, focuses on the legal foundation for permitting the acquisition. The reason for this is that Sampo OYJ so far appears unlikely to gain acceptance from shareholders representing 90 per cent of the share capital, and therefore cannot apply the provisions of the Companies Act to force the surrender of the remaining shares and thereby acquire 100 per cent of Storebrand ASA's shares.
As the applicant sees it, Sampo OYJ is entitled to the necessary permission under the Financial Institutions Act section 2-2 second paragraph subdivision 6, and does not need a licence to acquire Storebrand either under special legislation or under the Financial Institutions Act chapter 2a on financial groups. Moreover, the applicant argues that the ownership rules set forth in special legislation, particularly in the Act on Insurance Activity section 3-5 second paragraph, do not apply to this acquisition/trade. Section 3-5 establishes that where a Norwegian insurance company is a subsidiary of a foreign insurance company, and is not 100 per cent owned, the Norwegian company's remaining shares may only be owned by other financial institutions.
Kredittilsynet states that the ownership rules of Norway's financial legislation have been known for a long time. The authorities' restrictive practice has similarly ruled firm for a number of years, and has been considered by and given expression in the Storting. Norwegian and foreign players in the Norwegian financial market have for a long time respected the existing legislation and government practice.
Kredittilsynet states that Sampo must hold a licence pursuant to the Insurance Activity Act and that Storebrand ASA's ownership structure after the takeover must satisfy the ordinary requirements as to full ownership in finance companies, supplemented with the special ownership rules of the banking and insurance legislation. After a thorough review of the matter Kredittilsynet has determined that recommending that Sampo OYJ be given a licence to take over less than 90 per cent of Storebrand ASA's shares, which is primarily what Sampo OYJ is applying for, would not be in accordance with the conditions listed in existing Norwegian legislation.
The applicant has not made it probable that Sampo in the near future will acquire more than 90 per cent of the shares, and thereby be in a position to force a surrender of the remaining shares in order to satisfy the requirement of 100 per cent ownership by finance institutions in a group context. Kredittilsynet is therefore unable to recommend giving temporary dispensation to Sampo to own less than 90 per cent of Storebrand ASA's shares.
Kredittilsynet's assessments are based on a thorough review of the practice followed by Norwegian authorities when dealing with similar applications from Norwegian and foreign companies. Kredittilsynet emphasises that the present case would not have reached a different conclusion if Sampo had been a Norwegian company, and that, in the interest of equality and predictability for all players in the Norwegian financial market, consistent treatment of the existing rules is needed, as called for by the Storting.
Storebrand ASA is in a satisfactory financial position as an independent Norwegian insurance- and financial group. Hence there is no need in Storebrand ASA's situation for proposing changes in the regulations to enable other players to take over the group. Kredittilsynet has not considered whether the legislation in question should be amended on other grounds, but draws attention to the reports issued by the Bank Law Commission and the consultative statements that will be or have been made in that connection.
In view of the assessments made of the legislation, Kredittilsynet has not deemed it necessary to make an exhaustive assessment of all other aspects of the case. It is clear from the assessments concerning financial position that, based on the Sampo group's present status as a bank holding group, it would not, after taking over Storebrand, meet the Finnish minimum capital standards. Reckoned as an insurance group, the solvency requirements would be met after such a takeover. Under a new Bill in Finland, which is expected to become law at the turn of the year, Sampo can be expected to meet the minimum capital standards after a possible acquisition of Storebrand. A Sampo-Storebrand group, including the non-life insurance company If, would in all events be a complex financial group where thorough considerations would be needed to obtain a satisfactory picture of the total capital adequacy. If the legal obstacles are overcome, for example if Sampo at a later point received assurances of more than 90 per cent of Storebrand's shares, a thorough appraisal of the group's future financial strength would consequently be needed.
The holding company Sampo OYJ is currently not subject to statutory supervision by Finnish authorities. The holding company is, however, approved as the owner of the banking and insurance business that is licensed pursuant to Finnish provisions. The two Finnish supervisory authorities have established by agreement a supervisory arrangement for the group's overall operations. It is assumed that the new Finnish legislation will put the supervision of the group on a sounder legal basis. Kredittilsynet presumes that satisfactory supervision can be established for a Sampo-Storebrand group via a cooperation agreement with the Finnish supervisory authorities.
If Sampo achieves acceptance from more than 90 per cent of Storebrand ASA's shareholders, Kredittilsynet believes that a renewed and complete assessment of supervisory and capital adequacy factors will be required. This assessment will include a review of the changes announced in Finland as regards the organisation of financial supervision in general, and the rules governing capital adequacy requirements and supervision with financial conglomerates in particular.
Kredittilsynet has determined that an acquisition of Storebrand by Sampo's will not materially affect competition in the Norwegian insurance market. It could have a positive effect on competition in the banking and securities markets. The collaboration with Sampo will not significantly strengthen Storebrand's life insurance business in Norway. In the short and medium term it could have a favourable impact on Storebrand's capital management and international activity. The longer-term picture is uncertain in as much as the possibility of further structural changes in the Nordic and European context cannot be discounted.
Kredittilsynet has, as mentioned, come to the conclusion that Sampo OYJ must have a licence pursuant to the Insurance Activity Act section 3-6 second paragraph second sentence, and that, according to the information to hand, Storebrand ASA's ownership structure will not satisfy the Norwegian statutory requirements as to ownership of financial institutions, see the Insurance Activity Act section 2-2 first paragraph, cf. section 2-2 second paragraph subparagraph 6, cf. Insurance Activity Act section 3-5 second paragraph, since Sampo has not rendered it probable that it will achieve 100 per cent ownership of Storebrand ASA. Neither has the company rendered it probable that it will achieve a 90 per cent holding, which is a condition for enforcing the provisions of the Public Limited Companies Act concerning forced surrender of the remaining shares. Satisfying the ownership rules is a condition for obtaining a licence for the acquisition; see the Insurance Activity Act section 3-6 second paragraph second sentence.
Should Sampo achieve a sufficient holding with reference to the above, Kredittilsynet reserves, as mentioned, the possibility of giving final consideration to other matters of significance for the licence application.
Kredittilsynet gives accordingly the following recommendation to the Ministry of Finance:
Kredittilsynet recommends that the application from Sampo OYJ for permission to acquire more than 50 per cent of Storebrand ASA's shares to be turned down.
Contact persons:
Director General Bjørn Skogstad Aamo, tel.: + 47 22 93 99 29 / + 47 22 26 69 26
Chief Legal Adviser Marius Ryel, tel.: + 47 22 93 99 35 / + 47 22 50 78 77
Senior Adviser Anders Kvam, tel.: + 47 22 93 99 27
The letter to the Ministry of Finance (only in Norwegian) (doc)
