RNS Number:8878F
Norwich Union PLC
CGU PLC
21 February 2000
Part 3
MERGER OF CGU AND NORWICH UNION
Appendix II
Extracts from the Norwich Union
unaudited results for the year
ended 31 December 1999
1998 1999
# million # million
Net premiums written
Life
United Kingdom 3,702 2,749
France 272 244
Holland - -
Italy 10 11
Poland 12 -
Ireland 238 160
Other Europe 78 100
International 332 298
4,644 3,562
General
UK personal
- motor 897 634
- homeowners 615 360
- creditor 292 55
- health 177 154
- Other 23 7
UK commercial
- motor 214 182
- property 194 119
- liability - -
- London market - -
- other 22 26
2,434 1,537
Continental Europe 221 193
International 128 121
2,783 1,851
Operating earnings
before tax(1)
Life modified
statutory basis
- United Kingdom 521 486
- Continental Europe 77 67
- International 31 24
629 577
General
- United Kingdom 173 145
- Continental Europe 6 1
- International 16 15
195 161
Corporate and other activities (63) (22)
761 716
Actual dividend per share 14.0p 12.8p
Value added by life
new business(2,3)
- United Kingdom 98 72
- Continental Europe 44 27
- International 5 4
147 103
Operating earnings before tax
on an achieved
profits basis(3,4)
Life and General
- United Kingdom 628 676
- Continental Europe 104 93
- International 48 46
Corporate and other activities (63) (22)
717 793
Embedded value of life business
- United Kingdom 3,798 3,537
- Continental Europe 669 678
- International 275 200
4,742 4,415
Equity shareholders' funds(5) 6,039 5,713
Assets under management 71,904 63,916
Notes:
(1) On a modified statutory solvency basis
before amortisation of the value of
acquired in-force business, goodwill
amortisation and exceptional items
(2) Value added by life new business is shown after
deducting cost of capital of #25 million (1998: #19
million)
(3) The 1998 value added by life new business post
cost of capital and the operating earnings before
tax on an achieved profits basis will be restated
in the 1999 Report and Accounts to reflect
investment return and discount rate assumptions
consistent with those used for the 1999
figures. The restated figures for 1998 are
value added by new business #97 million and the
operating earnings before tax on an achieved
profits basis #670 million
(4) Incorporates non-life earnings together with life
operating earnings on an achieved profits basis
(5) Equity shareholders' funds including the embedded
value of life business
It is intended that the audited 1999 full year
results for Norwich Union will be announced on 2 March
2000.
Appendix III
Pro forma financial information
The pro forma combined financial information set out
below has been prepared, in accordance with the
notes below, to illustrate the effect on the profits
and net assets of CGU as if the Merger had occurred on
31 December 1999 (the year end of each of CGU and
Norwich Union). Because of its nature, the pro forma
information may not give a true picture of the
financial results and position of the combined group.
Combined
CGU Norwich Group
#million Union Other Pro
#million #million forma
#million
(Note 1) (Note2) (Note 3) (Note 4)
Long-term
savings new
business(5)
United Kingdom 2,826 2,595 - 5,421
Life
premiums
Continential 3,253 450 3,703
Europe life
premiums
International
Life premiums 245 270 - 515
Retail
investment 770 577 - 10,986
sales
_______ _______ _______ ______
7,094 3,892 - 10,986
======= ======= ======= ======
Premiums and
investment
sales
Life net
premiums 8,826 4,644 - 13,470
written
Retail
investment 770 577 - 1,347
sales
Health net
premiums
written 225 177 - 402
General net
premiums
written 8,621 2,606 - 11,227
_______ _______ _______ ______
18,442 8,004 - 26,446
======= ======= ======= ======
Operating
earnings (6)
Life modified
statutory
basis
United Kingdom 271 521 - 792
Continental
Europe 262 77 - 339
International 15 31 - 46
_______ _______ _______ ______
548 629 - 1,177
======= ======= ======= ======
General
(excluding
health)
United Kingdom 134 173 - 307
Continental
Europe 30 6 - 36
International 295 16 - 311
_______ _______ _______ ______
459 195 - 654
======= ======= ======= ======
Corporate and
other
activities (236) (82) - (318)
_______ _______ _______ ______
Total
operating
earnings 771 742 - 1,513
before
tax(6)
======= ======= ======= ======
Equity
shareholders
' funds(7) 9,367 6,005 101 15,473
Assets under
management 136,426 71,865 101 208,392
Notes:
(1)Based on CGU's preliminary announcement of its
unaudited results for the year ended 31 December
1999 and according to CGU's accounting policies
(2) Based on Norwich Union's unaudited 1999 full year
results adjusted to align its accounting policies with
those of CGU, as follows: (i) revaluation of general
business fixed income and debt securities from an
amortised cost to market value basis, which reduces
equity shareholders' funds by #20m; (ii) adjustments to
eliminate the capitalisation of certain fixed assets,
which reduces corporate operating earnings before tax
by #19m and equity shareholders' funds by #14m
(3)Adjustments reflect the alignment of embedded value
assumptions by both companies onto a common basis
(4)No account has been taken of the trading results of
CGU or of Norwich Union since 31 December 1999
(5)Total inflow of regular and single life premiums and
retail investment sales
(6)Stated on a modified statutory basis, before
amortisation of the value of acquired in-force
business, goodwill amortisation and exceptional
items
(7)Equity shareholders' funds including the
embedded value of life business. Financial
information in respect of CGU's US property and
casualty business for the year ended 31 December
1999, which is included in the table above, is
as follows: Premiums #2,621 million, operating
earnings before tax #178 million and equity
shareholders' funds #2,831 million (including an
inter-company loan of #683 million)
The financial information contained in these Appendices
I, II III and IV does not constitute statutory
accounts within the meaning of section 240 of the
Companies Act 1985 (the "Act"). Statutory consolidated
accounts of CGU and of Norwich Union for the
financial year ended 31 December 1999 have not been
delivered to the Registrar of Companies in England and
Wales pursuant to section 242 of the Act but will
be delivered following the annual general meeting of
each company. The
auditors to CGU and Norwich Union have not yet reported
on the respective accounts for that year and have not
made a report for the purposes of section 235(2)
of the Act for the financial year ended 31 December
1999.
Appendix IV
Combined group financial information on an achieved
profits
basis
Adjustments
CGU Norwich Other Combined
#millio Union #millio Group
#million #million
(Note1) (Note 2) (Note 3) Note 4)
Value added
by new
business
United 134 98 6 238
Kingdom
Continental
Europe 115 44 24 183
Internation 8 5 - 13
al
_____ ______ ______ ______
257 147 30 434
===== ====== ====== ======
Operating
earnings
before
goodwill
amortisation,
exceptional
items and
tax on an
achieved
profit
basis(5)
Life and
General
United 580 628 9 1,217
Kingdom
Continental
Europe 451 104 3 558
International 319 48 - 367
Corporate and
other
activities (236) (82) - (318)
_____ ____ _____ _____
1,114 698 12 1,824
===== ==== ===== =====
Embedded
value of
life
business
United 2,349 3,798 59 6,206
Kingdom
Continental
Europe 3,086 669 42 3797
International 240 275 - 515
______ _____ ____ ______
5,675 4,742 101 10,518
====== ===== ==== ======
Notes:
(1)Based on CGU's preliminary
announcement of its unaudited results for the year
ended 31 December 1999
(2)Based on Norwich Union's unaudited 1999 full year
results with an adjustment to eliminate the
capitalisation of certain fixed assets, which reduces
corporate operating earnings before tax by #19m
(3)Adjustments reflect (i) the alignment of embedded
value and achieved profits assumptions by both companies
onto a common basis, as set out below, (ii) the
restatement of CGU's value added by life new
business using assumptions at the end of the year
instead of at the beginning of the year, (iii) the
value of Norwich Union's inherited estate and (iv)
Norwich Union's operating earnings on an achieved
profits basis includes value added by life new
business adjusted to start of year assumptions
consistent with CGU's basis
(4) No account has been taken of the trading results of
CGU or of Norwich Union since 31 December 1999
(5) Incorporates non-life earnings together with
life operating earnings on an achieved profits basis
Principal economic assumptions for the combined
group (%)
UK France Netherlands Poland Poland
1999 1999 1999 Life Pensions
1999 1999
Risk discount
rate 7.8 8.7 8.3 19.8 17.1
Pre tax
investment
returns
Base
Government
fixed 5.2 5.5 5.5 12.5 12.5
interest
Ordinary
shares 7.7 7.5 8.4 12.5 12.5
Property 6.7 7.0 7.0 - -
Expense
Inflation 4.1 2.5 2.5 9.2 9.2
The common basis shown is that applicable at 31
December 1999 and has been used to adjust
published embedded values and value added by new
business.
Appendix V
Conditions to the implementation of the Scheme and
the Merger
The Merger will be conditional upon the
Scheme becoming unconditional and becoming
effective by not later than 30 September 2000
or such later date (if any) as Norwich Union and
CGU may agree and the Court may allow.
1. The Scheme will be conditional upon:
(a) the approval by a majority in number
representing three-fourths in value of
the holders of Norwich Union Shares
present and voting, either in person or
by proxy, at the Scheme Meeting;
(b) the special resolutions required to approve
and implement the Scheme being passed at the
Norwich Union Extraordinary General Meeting;
(c) any resolutions of CGU Shareholders
required in connection with the approval
of the Merger and the implementation of
the Scheme being passed at the CGU
Extraordinary General Meeting (but not, for
the avoidance of doubt, any resolution to
change the name of CGU to CGNU or to change
the articles of association of CGU);
(d) the admission of the New CGNU Shares to be
issued in connection with the Scheme
becoming effective in accordance with the
Listing Rules or (if CGU and Norwich Union
so determine and subject to the consent of
the Panel) the London Stock Exchange
agreeing to admit such shares to trading;
and
(e) the sanction (with or without modification)
of the Scheme and confirmation of the
reduction of capital involved by the Court,
an office copy of the Order of the Court
being delivered for registration to the
Registrar of Companies in England and Wales
and registration of the Order confirming the
reduction of capital involved in the Scheme
with the Registrar of Companies in England
and Wales.
2. CGU and Norwich Union have agreed that, subject
as stated in paragraph 3 below, the Merger will also
be conditionalupon, and, accordingly, the necessary
action to make the Scheme effective will not be
taken unless the following conditions are satisfied
or waived as referred to below prior to the Scheme
being sanctioned by the Court:
(a) the European Commission having issued a decision under
Article 6(1)(b) of the Council Regulation (EEC) 4064/89
("the Merger Regulation") (or being deemed to have done so
under Article 10(6) of the Merger Regulation) declaring the
Merger compatible with the common market without
requiring any amendments, assurances, conditions or
undertakings of CGU or Norwich Union that are not
reasonably satisfactory to CGU and Norwich Union and, in
the event that a request under Article 9(2) of the
Merger Regulation has been made by a Member State, the
European Commission not having decided to refer any aspect of
the Merger to a competent authority of a Member State in
accordance with Article 9(1) of the Merger Regulation within
the period set out in Article 10(1) of the Merger Regulation
or, in the event of such a reference to a competent
authority of a Member State, receipt in a form reasonably
satisfactory to CGU and Norwich Union of confirmation
from such competent authority that the Merger may proceed
without requiring any amendments, assurances, conditions or
undertakings of CGU and Norwich Union that are not
reasonably acceptable to CGU and Norwich Union;
(b)(i)the Insurance Directorate of the Financial
Services Authority indicating in terms and in a form
reasonably satisfactory to Norwich Union and CGU that it
has no objection to the proposed new controllers (within
the meaning of the Insurance Companies Act 1982) of the
relevant members of the Norwich Union Group or all
applicable waiting periods during which the Insurance
Directorate of the Financial Services Authority could object
to any such proposed new controllers having expired; and
(ii) without prejudice to sub-paragraph (i), all
authorisations, orders, grants, recognitions,
confirmations, consents, clearances, certificates,
licences, permissions and approvals necessary or
reasonably considered by CGU and Norwich Union to be
material in the context of the Merger for or in respect of
the Merger and the implementation of the Scheme having
been obtained, in terms and in a form reasonably
satisfactory to CGU and Norwich Union and, where the
withdrawal of any such authorisations, orders, grants,
recognitions, confirmations, consents, clearances,
certificates, licences, permissions and approvals would,
in the opinion of both of CGU and Norwich Union (acting
reasonably), have a material adverse effect on the CGNU
Group, these remaining in full force and effect, and no
intimation of an intention to revoke or not renew any of
these having been received, and all necessary
notifications and filings having been made and all
necessary waiting periods (including any extensions
thereof) under any applicable legislation or regulation of
any jurisdiction having expired or having been terminated
(as appropriate) and all necessary statutory and
regulatory obligations in connection with the Merger and
the implementation of the Scheme in any jurisdiction
having been complied with;
(c)no central bank, government or governmental, quasi-
governmental, supranational, statutory,
investigative or regulatory body or court or any
other similar person or body in any jurisdiction
having taken, instituted, implemented or threatened
any action, proceeding, suit, investigation or
enquiry, or enacted, made or proposed any statute,
regulation or order, or taken any other step that
would or might in the opinion of CGU and Norwich
Union (acting reasonably) in any respect be material
to the CGNU Group to:
(i) prevent the proposed divestiture by CGU of its
US property and casualty insurance operations;
or
(ii) require the divestiture by CGU or Norwich Union or
any of their respective subsidiaries of all or any
portion of their respective businesses, assets or
properties (other than the US property and casualty
insurance operations of CGU); or
(iii) (other than in relation to matters disclosed by
Norwich Union to CGU regarding the Norwich Union
Group or by CGU to Norwich Union regarding the CGU
Group in either case prior to 21 February 2000)
require any member of either the CGU Group or the
Norwich Union Group to make an offer to acquire any
shares or other securities in any member of either
group owned by any third party; or
(iv)(other than in relation to matters disclosed by
Norwich Union to CGU regarding the Norwich Union
Group or by CGU to Norwich Union regarding the CGU
Group in either case prior to 21 February 2000)
impose any limitation on the ability of any of them
to conduct their respective businesses or to own
their respective assets or properties; or
(v) make the Scheme or its implementation illegal,
void or unenforceable in or under the laws of
any jurisdiction;
(d) other than as disclosed by Norwich Union to CGU regarding
the Norwich Union Group or by CGU to Norwich Union regarding
the CGU Group in either case prior to 21
February 2000, there being no provision of any
arrangement, agreement, licence or other
instrument to which CGU or Norwich Union or
any of their respective subsidiaries or
companies in which any member of their
respective groups has a substantial interest
("associates") is a party or by or to which
CGU or Norwich Union or any of their
respective subsidiaries or associates may be
bound or is subject which would or might in
the opinion of CGU and Norwich Union (acting
reasonably) result, to an extent which is
material in the context of the CGNU Group, in:
(i)any moneys borrowed by CGU or Norwich Union
or any of their respective subsidiaries or
associates being repayable or capable of being
declared repayable prior to their stated
maturity; or
(ii)any such arrangement, agreement, licence or
instrumentbeing terminated or modified, or any
adverse effectarising thereunder; or
(iii)the interests of CGU or Norwich Union or any
oftheir respective subsidiaries or associates
in, or the business of CGU or Norwich Union or
any of their respective subsidiaries or
associates with, any person being terminated,
modified or affected,
in each case in consequence of the Merger or the Scheme;
(e) CGU not having discovered regarding Norwich
Union, and
Norwich Union not having discovered regarding CGU,
that:
(i) any adverse financial, business or other information in
relation to circumstances existing prior to 21 February 2000
and which is material in the context of the relevant group has
not been publicly disclosed by any member of the relevant group
or otherwise disclosed prior to such date (in the case of such
information regarding CGU) by CGU to Norwich Union and (in the
case of such information regarding Norwich Union) by Norwich
Union to CGU;
(ii)any financial, business or other information which has
been publicly disclosed at any time by any member of the
relevant group or otherwise disclosed prior to 21 February 2000
(in the case of such information regarding CGU) by CGU to
Norwich Union and (in the case of such information regarding
Norwich Union) by Norwich Union to CGU is misleading or
contains any misrepresentation of fact or omits to state a fact
necessary to make the information contained therein complete
and not misleading, and which in any such case is adverse and
material in the context of the relevant group; or
(iii)any member of the relevant group is subject to any liability
(contingent or otherwise) which has not been disclosed or
reflected in the last published audited consolidated accounts
of its group or publicly disclosed pursuant to the Listing
Rules or otherwise prior to 21 February 2000 or otherwise
disclosed prior to such date (in the case of a member of the
CGU Group) by CGU to Norwich Union and (in the case of a member
of the Norwich Union Group) by Norwich Union to CGU and which
is material in the context of the relevant group ;
(f) (i) unless publicly announced by CGU
pursuant to the Listing Rules or otherwise
prior to 21 February 2000 or otherwise disclosed by CGU to
Norwich Union prior to such date no litigation, arbitration
proceedings, prosecution or other legal proceedings to which
any member of the CGU Group is a party (whether as plaintiff
or defendant or otherwise), in each case which is material
and adverse in the context of the CGU Group, having
been instituted or threatened or remaining
outstanding; or
(ii) since 31 December 1998, being the date to which the
latest audited report and accounts of CGU were made up,
and unless publicly announced by CGU pursuant to the
Listing Rules, in the preliminary results for the CGU
Group for the year ended 31 December 1999 or otherwise
publicly announced by CGU prior to 21 February 2000 or
otherwise disclosed prior to such date by CGU to Norwich
Union, there having been no material adverse change in the
business, financial or trading position of the CGU Group;
or
(g) (i)unless publicly announced by Norwich Union
pursuant to the Listing Rules or otherwise
prior to 21 February 2000 or otherwise disclosed
by Norwich Union to CGU prior to such date, no
litigation, arbitration proceedings, prosecution or
other legal proceedings to which any member of
the Norwich Union Group is a party (whether as
plaintiff or defendant or otherwise), in each
case which is material and adverse in the
context of the Norwich Union Group, having been
instituted or threatened or remaining outstanding;
or
(ii)since 31 December 1998, being the date to which the
latest audited report and accounts of Norwich Union
were made up, and unless publicly announced by
Norwich Union pursuant to the Listing Rules or
otherwise prior to 21 February 2000 or otherwise
disclosed prior to such date by Norwich Union to
CGU, there having been no material adverse change
in the business, financial or trading position of
the Norwich Union Group;
(h) other than as publicly announced by CGU or Norwich
Unionpursuant to the Listing Rules or otherwise prior
to 21 February 2000 or as contemplated by the Scheme or
otherwise disclosed prior to such date by CGU to
Norwich Union regarding the CGU Group or by Norwich
Union to CGU regarding the Norwich Union Group, no
member of the CGU Group and no member of the Norwich
Union Group having, since 31 December 1998, being the
date to which the respective latest audited report and
accounts of both CGU and Norwich Union were made up:
(i) issued or authorised or proposed the issue of
additional shares of any class, or securities
convertible into, or rights, warrantsoroptions
to subscribe for or acquire, any such shares or
convertible securities (save as between CGU and
Norwich Union respectively and their respective
wholly-owned subsidiaries or for options granted,
and any shares in CGU or Norwich Union respectively
issued upon exercise of options granted prior to 21
February 2000, under or pursuant to the CGU share
schemes or Norwich Union Share Schemes or as
agreed between CGU and Norwich Union from time
to time) or redeemed, purchased or reduced any
part of its shares or other securities (or
agreed to do so) to an extent which (save in the
case of any such issue, authorisation, proposal,
redemption, purchase or reduction by CGU or Norwich
Union respectively) is material in the context of
the CGU Group or Norwich Union Group, as the case
may be; or
(ii)except for:
(a)transactions between one wholly-owned member
of the relevant group and another such member;
and
(b) (in the case of Norwich Union) the Scheme,
authorised or proposed or announcedits intention to
propose any merger or any change in its share or
loan capital or (other than in the ordinary course
of business)any acquisition or disposal of assets
or shares which is material in the context of
the CGU Group or Norwich Union Group, as the
case may be; or
(iii) (other than transactions between one
wholly-owned member of the relevant group and
another such member) entered into any contract,
transaction or commitment (whether in respect
of capital expenditure or otherwise) (or agreed
to do so) which is of a long term or unusual or
onerous nature or which involves or could
involve an obligation of a nature or magnitude
and which in any such case is material in the
context of the CGU Group or Norwich Union
Group, as the case may be; or
(iv)issued or proposed the issue of any
debentures or, save in the ordinary course of
business, incurred or increased (or agreed to
incur or increase)any indebtedness or
contingent liability of an aggregate amount
which might materially and adversely affect the
CGU Group or Norwich Union Group, as the case
may be; or
(v) (in the case of CGU or Norwich Union only and
other than as described in this announcement)
declared,made or paid, or proposed the declaration,
paying or making, of
any dividend, bonus or other distribution.
3. CGU and Norwich Union, acting together, may waive
all or any of the conditions contained in
paragraph 2(a) (b), (c) and (d). CGU reserves
the right to waive all or any of the conditions in
paragraph 2(e) and (h) above, so far as they
relate to Norwich Union, and in paragraph 2(g)
above, in whole or in part, and Norwich Union
reserves the right to waive all or any of the
conditions in paragraphs 2(e) and (h) above, so
far as they relate to CGU, and in paragraph 2(f)
above, in whole or in part, for the purposes of
the Merger and the Scheme.
4. Save with the consent of the Panel, the Merger
will lapse and the Scheme will not proceed if,
before the date of the Scheme Meeting, the
European Commission initiates proceedings
underArticle 6(1)(c) of the Merger Regulation
or makes a referral to a competent authority in
the UK under Article 9(1) of the Merger Regulation
and there is a subsequent reference to the
Competition Commission.
Appendix VI
Definitions
The following definitions apply throughout this announcement
unless the context requires otherwise:
"CGNU" CGU (proposed to be renamed CGNU plc on
completion of the Merger)
"CGNU Group" CGNU and it subsidiary undertakings
following the Merger becoming effective
"CGNU holders of CGNU Shares
Shareholders"
"CGNU Shares" ordinary shares of 25 pence each in the
capital of CGNU
"CGU" CGU plc
"CGU Extraordinary the meeting of CGU Shareholders to be
General Meeting" convened,
inter alia, to approve the
Merger
"CGU Group" CGU and its subsidiary undertakings prior
to the Merger becoming effective
"CGU Shareholders" holders of CGU Shares
"CGU Shares" ordinary shares of 25 pence in the capital
of CGU
"Code" the City Code on Takeovers and Mergers
"Court" the High Court of Justice in England and
Wales
"Directors" the Directors of CGU or of Norwich Union
or of CGNU, as the context requires
"Dresdner Kleinwort Benson Limited
Kleinwort Benson"
"Listing Rules" the listing rules of the London Stock
Exchange
"London Stock London Stock Exchange Limited
Exchange"
"Merged Group" CGNU and its subsidiary undertakings
following
the merger
"Merger" the proposed merger of Norwich Union and
CGU expected to be implemented by means of
the Scheme
"New CGNU Shares" CGNU Shares to be issued to Norwich Union
Shareholders under the Scheme
"Norwich Union" Norwich Union plc
"Norwich Union the meeting of Norwich Union Shareholders
Extraordinary to approve the Merger and the Scheme
General Meeting"
"Norwich Union Norwich Union and its subsidiary
Group" undertakings
"Norwich Union the Norwich Union Employee Share Trust,
Share Schemes" the Norwich Union Savings Related Share
Option Scheme, Norwich Union Life
Insurance Ireland Limited and Norwich
Union General Insurance (Ireland) Limited
Savings Related Share Option Scheme and
the Norwich Union Long Term Incentive Plan
"Norwich Union holders of Norwich Union Shares
Shareholders"
"Norwich Union ordinary shares of 10 pence each in the
Shares" capital of Norwich Union
"Panel" The Panel on Takeovers and Mergers
"Scheme" the proposed scheme of arrangement under
section 425 of the Companies Act 1985 to
effect the Merger, details of which will
be set out in the the formal Scheme
documentation
"Scheme Meeting" the meeting of Norwich Union Shareholders
convened by the order of the Court to
approve the Scheme
"subsidiary a subsidiary undertaking as that term is
undertaking" defined in section 258 of the Companies
Act 1985
"United Kingdom" the United Kingdom of Great Britain and
or "UK" Northern Ireland
"United States" or the United States of America, its
"US" territories and possessions, any state or
political sub-division of the United
States of America and the District of
Columbia
END
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