STOCKHOLM, Sweden, Dec. 9, 2005 (PRIMEZONE) -- Skandia Liv's board of directors is proposing a changed shareholding structure for Skandia Liv, with the intention over time to convert Skandia Liv into a bona fide mutual company. The life assurance policyholders' influence over their savings will be guaranteed by granting them responsibility for appointing Skandia Liv's board of directors.
"A number of measures have been successively adopted to strengthen the influence of Skandia Liv's life assurance policyholders. The current concerns shared by customers and employees and the large number of questions show the need for further clarity surrounding Skandia Liv's future playing field," says Bo Eklof, chairman of Skandia Liv.
The main features of the proposal are as follows:
- The shares in Skandia Liv will be transferred to a foundation with the aim of converting Skandia Liv to a bona fide mutual company. Skandia will thereby cease to own Skandia Liv, and the parent company/wholly owned subsidiary relationship will be dissolved.
- The close operative co-operation between Skandia Liv and Skandia will continue in its present form in order to preserve and develop the significant revenue and expense synergies that have long existed in the Skandia group. All business relations between the companies will continue to be conducted on strictly market terms. Operational co-ordination in marketing, sales and administration will be maintained through a long-term co-operation agreement.
- Skandia Liv and Skandia will continue to jointly operate under the Skandia-owned brand. Skandia Liv's business will continue to be focused on mutual life assurance products.
The proposal has been submitted to Skandia and has the same relevance regardless of the outcome of the ongoing offer process.
Motives
The primary motives for the proposal are:
1) To create a clearer company form and to change Skandia Liv's position as a "hybrid company" by making the bona fide mutual form of operation also Skandia Liv's formal operational form. Skandia Liv is run on a mutual basis, but its 1.2 million policyholders today lack influence at general shareholder meetings, since Skandia Liv is a wholly owned subsidiary of the listed company Skandia.
2) Through a clear company structure, to facilitate strategic planning and thereby enhance long-term growth in value.
3) To strengthen long-term confidence in Skandia's brand and business.
Statement by Bo Eklof, Chairman of the Board of Skandia Liv:
"Skandia Liv has successively been taking measures to strengthen the influence of its life assurance policyholders. Following a period of discussions and studies by Skandia Liv's board, we have found it proper to propose a new ownership structure for Skandia Liv that puts influence over the company with our 1.2 million policyholders. In recent time Skandia Liv has made progress toward attaining an increasingly independent position in the Skandia group in an open co-operation process between the parent company and its subsidiaries. Everyone has had an understanding of the problems of working as a mutual company, but not being one. Aside from the decisive issue in principle, the current concerns of customers and employees underscore the need for further clarity surrounding Skandia Liv's future playing field. Through our proposal, we will acquire a company structure that facilitates strategic planning and thereby enhances long-term growth in value. It is also highly important that we have the opportunity to continue developing everything that we share with Skandia -- not least the Skandia brand -- in the same way as in the past."
Livforsakringsaktiebolaget Skandia (publ.)
The Board of Directors
Appendix 1 to press release from Skandia Liv's board of directors, 9 December 2005
BACKGROUND
Skandia Liv is a wholly owned subsidiary of Skandia. However, Skandia Liv is prohibited by law from distributing profits to Skandia. The intention of this is to ensure that pension-savers' managed assets and the returns on these are only used to secure Skandia Liv's obligations to its policyholders. In other words, to preserve and increase the value of assets and returns, and thereby ensure that savers receive their pensions.
The operations are thereby run on a mutual basis, but they are not mutually owned. Skandia Liv is owned by Skandia, which is listed on the stock exchange and is owned by a large number of private and institutional shareholders in Sweden and abroad.
"Hybrid form"
This company structure is relatively common; however, in recent years it has become increasingly questioned. The model of a ``mutual life assurance operation" conducted by a stock corporation like Skandia Liv without any opportunity to distribute profits represents a sort of ``hybrid form". This creates a lack of clarity regarding influence and ownership of the actual value for the life company's customers, i.e., Skandia Liv's pension-savers, in relation to the life company's owner, Skandia, and its shareholders.
The independent investigative panel set up by Skandia Liv's board illuminated this lack of clarity in the company structure in its report from September 2003:
"When a stock life assurance company is a subsidiary, as is the case with Skandia Liv, opportunities arise for advantages through the utilisation of synergy effects in e.g., asset management, marketing and the organisation of operations. However, on the other hand, tangible risks arise that such synergy effects will not benefit the life assurance operations. Potential conflicts of interest between the shareholders' and policyholders' interests are built in to the structure of a stock life assurance company that is run on a mutual basis."
Insurance company study
This lack of clarity one reason why the company forms for life assurance operations have been the subject of review by the so-called Insurance Company Study (directive 2003:125). Policyholders and society in general are increasingly expressing their expectations that company structures will be changed for life assurance operations. What is often said is that the hybrid form in which Skandia Liv conducts its operations should be done away with. A refinement would be better: either a mutual company controlled by the policyholders themselves, or a profit-distributing company controlled by shareholders.
In Skandia Liv's opinion, the traditional, mutual life assurance product has great advantages and will be in demand in the foreseeable future. Skandia Liv's very long heritage shows the great and long-term strength that can be created through the collective risk capital in this form of insurance, among other things through the unique, long-term equalisation of risk provided by the insurance. In Skandia Liv's case, it can be added that current and historical returns have been very favourable. Further, the buffer capital that exists above and beyond the guaranteed obligations is among the highest in the industry.
An ongoing process
Skandia Liv is one of Sweden's largest and most important pension and asset managers, and plays an important role in the Swedish market for taking responsibility for and developing traditional life assurance for its 1.2 million existing policyholders and future customers. During the past year the company has steadily regained the confidence of pension-savers. This positive trend in confidence is coupled to Skandia Liv's ambition to demarcate a clearer independent position in the group and to strengthen the policyholders' long-term influence in close co-operation with the utilisation of all of the significant synergies that exist within the Skandia group. The position of Skandia Liv's policyholders has been strengthened, among other things by creating a voting majority for independent directors on the board, clear conflict-of-interest rules and stricter guidelines for transactions between the companies.
Skandia Liv's proposal entails a development toward a more secure and suitable form of structure over the long term. In a few years, when the Insurance Company Study can be expected to have led to new legislation, further steps toward fulfilment of the mutual principle will most likely be taken.
Appendix 2 to press release from Skandia Liv's board of directors, 9 December 2005
AN OWNER FOUNDATION FOR THE SHAREHOLDING IN SKANDIA LIV
A foundation entails that capital is managed for a specific, permanent purpose. Today in Sweden there are approximately 50,000 foundations and funds. Several of these control ownership in large Swedish companies. In the insurance world there is Trygg-Stiftelsen, which has a substantial shareholding in SEB and a ``golden share" in the insurance company SEB Trygg Liv Gamla.
Purpose
Skandia Liv's board proposes that a foundation be formed with the purpose of working for the favourable development of the insurance operations of Skandia Liv and for good corporate governance of Skandia Liv. The foundation would have the power at Skandia Liv's general shareholder meetings. At the core would be set of foundation bylaws that would govern the activities of the foundation.
Ownership of Skandia Liv
The purpose would be fulfilled if the foundation were to own the shares of Skandia Liv, which conducts life assurance business and continues to further develop its current co-operation with Skandia according to the long-term and commercially motivated agreements.
Life assurance policyholders appoint board A board would be responsible for the foundation's organisation and administration. A majority of the board members shall represent the policyholders. They would be appointed by organising the policyholders in an assembly of representatives that would appoint the company's board members. The foundation would offer an opportunity to adapt to local legislation, which would create a possible avenue in the future to handle the conversion of Skandia Liv to a bona fide mutual insurance company.
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