Commission, September 23, 2013, No M.6957

 Dear Sir/Madam,

Subject:  Case No COMP/M.6957 - IF P&C/ TOPDANMARK

Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/20041

(1)     On 19 August 2013, the European Commission received the notification of a concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004. The notification concerns the acquisition by the undertaking IF P&C Insurance Holding Ltd ("IF P&C"), hereinafter the Notifying Party, of de facto sole control within the meaning of Article 3(1)(b) of the Merger Regulation over Topdanmark A/S ("TopDK"), following an increase of its voting rights ("the Transaction"). IF P&C and TopDK are collectively referred to as the "Parties".2

1.           THE PARTIES

(2)     IF P&C is a wholly owned subsidiary of Sampo plc, listed on the NASDAQ OMX Helsinki. IF P&C provides insurance products and services in the field of property and casualty insurance (non-life insurance) in Sweden, Norway, Finland and Denmark, as well as in the Baltic countries and Russia. IF P&C has limited activities within the life insurance field. Sampo plc also controls Mandatum Life Group, a company active in the life insurance market in Finland and the Baltic countries which holds 21.2% of the shares in Nordea Bank AB.

(3)     TopDK is a public limited company listed on NASDAQ OMX Copenhagen, the parent of the Topdanmark Group and does not itself perform any independent activities. The Topdanmark Group provides insurance products and services within both non-life and life insurance exclusively in Denmark.

2.          THE OPERATION

(4)     IF P&C has since 2008 held a minority shareholding in TopDK, partly through its Finnish subsidiary IF P&C Insurance Company Ltd.3 As explained by the Notifying Party, on 16 May 2011 IF P&C increased its shareholding in TopDK from 14.74 % to 21.24% (including treasury shares), which resulted in an increase of its voting rights from 16.44 % to 22.75% (as per TopDK's Annual General Meeting ("GM") of 12 April 2011).

(5)     Even if the absolute number of shares held by IF P&C has not increased since then, TopDK has accelerated, over the course of 2011-2013, an on-going Share Buyback Programme it launched in 1998. Due to this programme and the ensuing cancellation of shares, IF P&C's shareholding and voting rights gradually increased over time. As per 18 June 2013, IF P&C's shareholding in TopDK increased to 25.18% (including treasury shares) and its voting rights to 26.51%.

(6)     In terms of the Consolidated Jurisdiction Notice, paragraph 59, "[a] minority shareholder may also be deemed to have sole control on a de facto basis. This is in particular the case where the shareholder is highly likely to achieve a majority at the shareholders' meetings, given the level of its shareholding and the evidence resulting from the presence of shareholders in the shareholders' meetings in previous years. Based on the past voting pattern, the Commission will carry out a prospective analysis and take into account foreseeable changes of the  shareholders' presence which might arise in future following the operation. The Commission will further analyse the position of other shareholders and assess their role."4

(7)     The Commission's analysis on the basis of IF P&C's shareholding, the historic voting pattern at shareholders' meetings and the position of other shareholders indicated that IF P&C is likely to have a stable majority of the votes at the shareholders' meeting.

(8)     As to past voting patterns, the Commission's analysis revealed that IF P&C already achieved a simple majority of the votes present at three recent GMs (namely, the Extraordinary GM of November 2010, the Annual GM of 19 April 2012 and the Annual GM of 17 April 2013).

(9)     The Commission's prospective analysis revealed that a shareholder with 26.51% of the voting rights would have achieved a simple majority at each of the seven most recent GMs.5 The conclusion would be the same if one of the methods proposed by IF Ρ & C, consisting in adjustments for the effect of the variance in its shareholdings on the number of voting shares attending each GM, is applied.

(10)    Moreover, TopDK's shareholder structure is quite dispersed with only IF P&C holding more than 5% of the shares. IF P&C is also the only industrial shareholder among TopDK's top 20 shareholders. Also, based on the evidence in the file, there are no indications of a possible community of interest - or other incentives - among the remaining shareholders for them to align their position so as to countervail IF P&C's voting rights.

(11)    Given that a simple majority at GMs allows IF P&C to adopt alone a number of important decisions, such as the appointment of the members of the Board of Directors, and indirectly to influence, namely by having the possibility to veto, other strategic decisions, such as budget, finances, business policies and the appointment of the Executive Board, the Commission concludes that IF P&C passively acquired de facto sole control over TopDK.

(12)    The operation thus constitutes a concentration within the meaning of Article  3(1)(b) of the Merger Regulation.

3.           EU DIMENSION

(13)    The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million6 (for IF P&C (Sampo Group): EUR 5 681 million,  for TopDK: EUR 1 614 million). Each of them has an EU-wide turnover in excess of EUR 250 million (for IF P&C (Sampo Group): […] million, for TopDK: EUR […] million) but they do not achieve more than two-thirds of their aggregate EU- wide turnover within one and the same Member State.

(14)    The notified operation therefore has an EU dimension, within the meaning of Article 1(2) of the Merger Regulation.

4.             MARKET DEFINITION

4.1.          Product market definition

(15)    In previous decisions relating to the insurance sector, the Commission has distinguished three broad categories of insurance products: life insurance, non-life insurance and reinsurance.7 It has also made a distinction between, on the one  hand, a product market for insurance provision (which is segmented into three markets as described above) and, on the other hand, a product market for insurance distribution.8

4.1.1.     Non-life insurance

(16)    In previous decisions,9 the Commission noted that, from a demand-side perspective, non-life insurance may at least in theory be divided into as many individual product markets as there are different kinds of risks covered, given that characteristics, premiums and purposes are distinct and that there is no substitutability from the consumer’s perspective between different risks insured.

(17)    However, the Commission has also recognised that from a supply-side perspective the conditions for insurance of different types of risk are quite similar and most large insurance companies are active in several types of risk. This suggests that different types of non-life insurance could be included in the same product market.10

(18)    The Commission has in the past generally considered a distinction between the following segments: (i) accident and sickness; (ii) motor vehicle; (iii) property; (iv) marine, aviation and transport ("MAT"); (v) liability; (vi) credit and suretyship; and (vii) travel.11

(19)    The Notifying Party agrees with the Commission's previous finding regarding the product market definition, and mentions that no narrower segmentation should be made.

(20)    In the case at hand the market investigation largely supported a segmentation of the market for the provision of non-life insurance products based on the type of risk covered.12

(21)    In any event, the exact product market definition for the provision of non-life insurance can be left open, as the Transaction does not raise any serious doubts as to its compatibility with the internal market under any plausible market definition.

4.1.2.       Insurance distribution

(22)    In its administrative practice,13 the Commission in the past concluded that a downstream market for insurance distribution involves the procurement of insurance cover for individual and corporate customers through different distribution channels, whether comprised of direct writers, tied agents or intermediaries such as banks and brokers.

(23)    The Commission has left open the question as to whether the market for insurance distribution comprises exclusively all outward (i.e. non-owned and third-party) insurance distribution channels (e.g. brokers and agents), or if the sales forces and office networks of insurance undertakings (constituting a direct means of sale to end-customers) should also fall within the market for insurance distribution.14

(24)    In addition, the Commission has also considered that a distinction could be made between the distribution of non-life and life insurance products due to differences  in the applicable regulatory regime and the fact that different providers are  involved in the distribution of life and non-life insurance products.15

(25)    The Notifying Party submits that the product market for insurance distribution should only comprise outward distribution channels and that it should not  be further subdivided between distribution of life and non-life insurance.

(26)    The market investigation has been to some extent inconclusive. From a supply-side perspective, the majority of insurance providers consider life and non-life insurance products as being distributed through different distribution channels.16  In particular, direct distribution is a common way to sell non-life insurance policies in Denmark, whereas life insurance products are distributed via intermediaries such as employers or banks.

(27)    From a demand-side perspective, the majority of customers explained that the distributors from which they purchase non-life insurance products also offer life insurance, even though they largely acknowledge the existence of material differences in the distribution of these two types of products.17

(28)    However, the market investigation largely confirmed that direct means of sale to end customers should be included in the market for the distribution of insurance products along with all other outward distribution channels such as agents, brokers and other intermediaries, such as banks.18

(29)    In any event, the exact product market definition for insurance distribution can be left open in this case, as the Transaction does not raise serious doubts as to its compatibility with the internal market under any plausible market definition.

4.2.   Geographic market definition

4.2.1.  Non-life insurance

(30)    With regard to the geographic scope of the market for the provision of non-life insurance and its various sub-segments, the Commission has generally considered these markets as national, with the exception of (i) large commercial risks, such as the insurance of aerospace risks, which is most likely to be at least EEA-wide in scope and, (ii) the MAT insurance market, which is likely to be wider than national for large/multinational corporate customers and large risk insurance respectively.19 However, the Commission ultimately left the exact scope of the geographic market open.

(31)    The Notifying Party agrees with the Commission's past findings with respect to the geographic scope of the market for the provision of non-life insurance and its various sub-segments.

(32)    The market investigation revealed that providers of non-life insurance products unanimously believe that competition takes place at national level,20 even if they acknowledge that, at least in principle, there would be no specific factors  preventing insurance companies located in other EU countries from selling insurance products to customers in Denmark.

(33)    However, customers’ views were less conclusive. Certain customers organise EEA- wide tenders to select their insurance provider, where insurance companies active internationally compete with Danish insurance companies. Some other customers stress that their risk profile requires an insurance capacity which only a provider with international presence would be able to offer.21 Finally, a portion of  customers suggests that the market for non-life insurance should be at least EEA wide due to the fact that certain business activities require coverage exceeding national borders, such as marine insurance for example.22

(34)    In any event, the exact geographic market definition for the provision of non-life insurance can be left open in this case, as the Transaction does not raise serious doubts as to its compatibility with the internal market under any market definition.

4.2.2.           Insurance distribution

(35)    In previous decisions,23 the Commission, while recognising the national nature of insurance distribution channels, left the exact definition open, in particular with  respect to the question as to whether the relevant geographic market is wider than national.

(36)    The Notifying Party agrees that the geographic scope of the market for insurance distribution is at least national.

(37)    In any event, the exact geographic market definition for insurance distribution can be left open in this case, as the Transaction does not raise serious doubts as to its compatibility with the internal market under any market definition.

5.                  COMPETITIVE ASSESSMENT

(38)    The Transaction gives rise to horizontal overlaps in the markets for the provision and for the distribution of non-life insurance products. The Transaction also gives rise to vertical relationships between the parties' activities in the markets for provision of certain types of insurance products and the distribution of such products. Lastly, the transaction creates limited horizontal overlaps as well as vertical links in the market for insurance distribution.

5.1.             Non-life insurance

(39)    As regards the provision of non-life insurance, the Parties' combined market share is above [10-20] % in the following segments in Denmark: (i) accident and sickness insurance ([10-20]% with an increment of [0-5]%), (ii) motor vehicle insurance ([20- 30]% with an increment of [5-10]%), (iii) property insurance ([20-30]% with an increment of [5-10]%), (iv) MAT insurance ([20-30]% with an increment of [5- 10]%) and (v) liability insurance ([30-40]% with an increment of [10-20]%). The merged entity will be the market leader in the sub-segments for the provision of motor vehicle and property insurance.

(40)    However post-transaction, the merged entity will continue to face competition from various market players. In particular, the merged entity will continue to face Tryg, the second biggest market player in Denmark ([20-30]% in the overall non-life insurance market, [20-30]% in motor vehicle insurance and [20-30]% in property insurance), Codan, which is the third biggest player ([10-20]% in the overall non-life insurance market, [10-20]% motor vehicle insurance and [10-20]% in property insurance) and various other players, whose market shares are not insignificant.

(41)    The market investigation indicated that generally IF P&C and TopDK are not close competitors.24 Customers perceive IF P&C as competing primarily against international insurance companies, whereas TopDK competes primarily locally in Denmark.25 A limited number of competitors are inclined to consider IF P&C and TopDK as close competitors in the sub-segments for accidents and sickness and motor vehicle insurance, due to similarities in their customers' portfolios and to the fact that their products are seen as close substitutes.26

(42)    The market investigation confirmed the Notifying Party's submission that customers would face no difficulties to switch to other insurance providers in the event of a price increase post-merger. Indeed, the market investigation indicated that  customers have the ability to select an alternative insurance provider and that switching is relatively easy in all segments of the overall non-life insurance market.27

(43)    Regarding MAT insurance in Denmark, the Transaction eliminates a player holding a [5-10]% market share, with the merged entity having a combined market share of [20-30]%  in  a  market  where  three  strong  players  would  remain  post-market and where other players have minimal market shares.28 Post-transaction Codan will  remain the market leader with a large market share of around [50-60]%. The Notifying Party submits that the merged entity would therefore be able to increase its competitive pressure on Codan. Moreover, the Notifying Party explains that this sub- segment is subject to significant international pressure, as most MAT customers are large commercial customers with sufficient means and knowledge to place risks outside Denmark.

(44)    The market investigation largely confirmed the Notifying Party’s arguments. As regards MAT insurance, the vast majority of customers select their insurance provider via a tender process which is frequently organised at EEA level.29 In addition, both customers and competitors largely confirmed that international players exercise strong competitive pressure on providers of MAT insurance in Denmark.30 They emphasised - almost unanimously - that post-transaction they will continue enjoying a large choice of MAT insurance providers.31 In addition, the market investigation revealed that customers generally do not face particular difficulties to change the insurance provider in the segment.32 Therefore even if a market wider than national is to be considered, the transaction will not raise serious doubts regarding its compatibility with the internal market.

(45)    Regarding the segment for liability insurance in Denmark the merged entity will be the second biggest market player ([30-40]% combined market share) after Tryg ([30-40]%) and will continue to face competition from Codan ([10-20]%) and HDI- Gerling ([5-10]%) as well as from several other smaller competitors active in Denmark. The market investigation largely confirmed that there are no obstacles preventing customers from switching the insurance provider on this market segment.33

(46)    In light of the above, the Commission concludes that the Transaction does not give rise to serious doubts as to its compatibility with the internal market as regards the various possible relevant markets for non-life insurance.

5.2.           Insurance distribution

(47)    The market investigation revealed that the vertically integrated insurance companies have to be considered as part of the market for insurance distribution in Denmark. In this context, the merged entity's market share on an overall Danish market for insurance distribution, which includes the distribution of both life and non-life insurance products is [5-10]%, while its market share in the market for the distribution of life insurance only is [0-5]%. However, in a hypothetical market for the distribution of non-life insurance only (including direct means of sale), the merged entity would have a market share of [10-20]% (with an increment of [0-5]%) and the Transaction would therefore give rise to an affected market.

(48)    The merged entity's main competitors in the market for the distribution of non-life insurance are Tryg (with a market share of [10-20]%) and Codan (with a market share of [10-20]%). In addition, this market features a significant number of third party distributors, including bancassurance, trade unions, car dealerships and others, with an aggregated market share of around [10-20]%. Given the moderate market share of the merged entity, the small increment brought about by the Transaction and the large number of competitors active in this market, it is highly unlikely that the Transaction will lead to any significant impediment of competition.

(49)    In the light of the above and as far as the possible Danish market for distribution of non-life insurance is concerned, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market.

5.3.                 Vertical relationships

(50)    Only if individual types of risks were to be seen as constituting separate relevant product markets, the Transaction would result in vertically affected markets. In particular, the merged entity’s market share would exceed [20-30]% on the following sub-segments: motor vehicle ([20-30]%) and liability insurance ([30-40]%). This would create a vertical relationship between these two sub-segments and the market for the distribution of non-life insurance.

(51)    The Notifying Party submits that neither IF P&C nor TopDK sell/distribute insurance products other than their own. The same applies to each company's respective tied agents and in general to the Danish insurance market.34 Internal distribution remains the main route for sales of insurance products in Denmark and makes up approximately 85% of the Danish market for the distribution of non-life insurance.

(52)    The market investigation largely confirmed the Notifying Party’s arguments. Indeed, Danish insurance providers do not generally distribute the products of their competitors. 35 For this reason, already pre-transaction the Parties neither offered their products to competitors for distribution, nor constituted important distribution outlets for those competitors. In addition, given the absence of a significant degree of market power in the upstream markets of provision of motor vehicle ([20-30]%) and liability insurance ([30-40]%), input foreclosure of other downstream distributors of such insurance products as a result of the transaction does not appear likely. Conversely, considering the fact that the combined market shares of the Parties on the possible downstream market for distribution of non-life insurance products in Denmark is [10- 20]% and considering the largely internal distribution method of such insurance products, customer foreclosure effects on upstream providers of non-life insurance products is equally unlikely. In light of this, even if this vertical relationship between the  provision  and  the  distribution  of non-life  insurance  in Denmark  constitutes an affected market, it is highly unlikely that the concentration will have any impact on competition in the market.36

(53)    In view of the foregoing, the Commission concludes that the Transaction would not raise serious doubts as to its compatibility with the internal market as regards these hypothetical vertical links between the provision and the distribution of insurance products.

6.          CONCLUSION

(54)    For the above reasons, the European Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

1.       OJ L 24, 29.1.2004, p. 1 ("the Merger Regulation"). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of the TFEU will be used throughout this decision.

2.       Publication in the Official Journal of the European Union No C 244, 24.8.2013, p.7.

3.       On 18 June 2013, all shares held by IF P&C Finland were transferred internally to IF P&C.

4.       Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings, OJ C 95, 16.4.2008, page 1.

5.       This prospective analysis was carried out on the basis of the methodology applied in Case No COMP/M.4994 – Electrabel/Compagnie Nationale du Rhone, para 45. The conclusion of the prospective analysis would not differ, even if one were to consider the proportion of voting rights required to achieve simple majority at the 2008-2013 GMs. Again, also based on this method a shareholder with 26.51% of the voting rights, just like IF P&C, would have achieved simple majority at all those seven GMs. For example, the 2012 Annual GM featured an attendance rate of 42.47% (excluding treasury shares). This means that a shareholder with slightly more than half of this proportion (i.e. slightly more than 21.24%) would have been capable of obtaining a majority.

6.       Turnover calculated in accordance with Article 5 of the Merger Regulation.

7.       Case   COMP/M.6217   Baloise   Holding/Nateus/Nateus   Life,   para.   10;   Case      COMP/M.6053

CVC/Apollo/Brit Insurance, para. 12; and Case COMP/M.4284 AXA/Winterthur, para. 7.

8         Case COMP/M.6053 CVC/Apollo/Brit Insurance, para. 16; Case COMP/M.4284 AXA/Winterthur, para. 15; and Case COMP/M.3395 Sampo/If Skadeförsäkring, para. 10.

9         Case  COMP/M.6217  Baloise  Holding/Nateus/Nateus  Life,  para.  11;  and  Case     COMP/M.6053

CVC/Apollo/Brit Insurance, para. 16.

10      Case            COMP/M.6053    CVC/Apollo/Brit Insurance,             para.      16;          and         Case       COMP/M.4284

AXA/Winterthur, para. 9.

11      Cases COMP/M.6521 Talanx International/Meiji Yasuda Life Insurance/Warta, para 19; COMP/M.4701 Generali/PPF Insurance Business, para. 22; and Case COMP/M.4284 AXA/Winterthur, para. 14.

12      Replies to question 6 - Questionnaire IF P&C/TopDK (competitors); and replies to question 3 - Questionnaire IF P&C/TopDK (customers).

13      COMP/M.6649 Allianz/Insurance portfolio and Brokerage services of Gan Eurocourtage, para. 15; Case COMP/M.6053 CVC/Apollo/Brit Insurance, para. 19; and Case COMP/M.1307 Marsh & McLennan/Sedgwick, para. 8.

14      COMP/M.6649 Allianz/Insurance portfolio and Brokerage services of Gan Eurocourtage, para.15; and Case COMP/M.6053 CVC/Apollo/Brit Insurance, para. 20.

15      Case COMP/M.1307 Marsh & McLennan/Sedgwick, para. 9.

16      Replies to question 7 - Questionnaire IF P&C/TopDK (competitors).

17      Replies to questions 4 and 5 - Questionnaire IF P&C/TopDK (customers)

18      Replies to question 8 and 25 - Questionnaire IF P&C/TopDK (competitors)

19      Case COMP/M.6521 Talanx International/Meiji Yasuda Life Insurance/Warta, para. 56; COMP/M.6053 CVC/Apollo/Brit Insurance, para. 17.

20      Replies to questions 9 and 10 - Questionnaire IF P&C/TopDK (competitors).

21      Replies to question 7 - Questionnaire IF P&C/TopDK (customers).

22      Replies to question 8 - Questionnaire IF P&C/TopDK (customers).

23      COMP/M.6053 CVC/Apollo/Brit Insurance, para. 21; and Cases COMP/M.4284 AXA/Winterthur, paras. 19-20.

24      Replies to question 10 - Questionnaire IF P&C/TopDK (customers).

25      Replies to question 10 - Questionnaire IF P&C/TopDK (customers).

26      Replies to questions 13 - Questionnaire IF P&C/TopDK (competitors).

27      Replies to question 11 - Questionnaire IF P&C/TopDK (customers).

28      Besides the Parties, Tryg and Codan, the remaining market players have a combined market share of below 2%.

29      Replies to question 14 - Questionnaire IF P&C/TopDK (customers).

30      Replies to question 15 - Questionnaire IF P&C/TopDK (customers); and replies to questions 21 - Questionnaire IF P&C/TopDK (competitors).

31      Replies to question 16 - Questionnaire IF P&C/TopDK (customers).

32      Replies to question 11.4 - Questionnaire IF P&C/TopDK (customers).

33      Replies to question 11.5 (Questionnaire IF P&C/TopDK (customers).

34      IF P&C has a distribution agreement with Sygeforsikringen "Danmark" which markets and distributes IF P&C's accident insurance to its members ([…]). In addition, IF P&C has distribution agreements for commercial healthcare insurance products with three undertakings ([…]).

35      There are, however, some arrangements between non-life insurance companies and life insurance companies to provide together a complete insurance package for customers. Replies to questions 24 - Questionnaire IF P&C/TopDK (competitors).

36      Replies to questions 22 and 26.4 - Questionnaire IF P&C/TopDK (competitors); and replies to question 16 and 19.2 - Questionnaire IF P&C/TopDK (customers).