Old Mutual to Sell Nordic Operations to Skandia Liv as Part of Ongoing Retrenchment

In an effort to simplify its structure and reduce debt, Old Mutual plc said it will sell its Nordic insurance operations operating under the Skandia brand to Skandia Liv for 22.5 billion Swedish kronor (US$3.22 billion).

Old Mutual said it anticipates holding an extraordinary shareholders meeting to vote on the proposed sale of Skandia Insurance Co. Ltd. (Skandia AB) in the first quarter of 2012. It anticipates closing the transaction toward the end of that quarter.

Proceeds from the sale would be used to reduce Old Mutual's debt and return surplus capital to shareholders, the group said.

The sale involves Old Mutual's long-term savings and banking operations in Sweden, Norway and Denmark operating under the Skandia brand. Old Mutual'sFinland operations are not part of the deal.

"The transaction will enable us to reduce complexity within the group consistent with our stated strategy and to focus more sharply on those parts of our long-term savings business where the greatest opportunities are available," said Julian Roberts, Old Mutual's chief executive, in a conference call. He added Skandia AB is a better fit with Skandia Liv, given the two entities' synergies, and the combination will create "a strong and efficient Nordic champion."

As part of the deal, an Old Mutual joint venture in China, which is held by Skandia AB, will be transferred to Old Mutual South Africa. The joint venture, Skandia-Guodian Life Insurance Co., is a 50-50 joint venture between Old Mutual and China Guodian Capital Holdings Ltd.

According to Old Mutual, the sale of Skandia AB is part of a strategic plan set out in March 2010 that included plans to reduce the group's complexity and focus on its core business. Old Mutual also announced its intention to reduce its group debt by at least 1.5 billion pounds (US$2.3 billion) by the end of 2012.

Old Mutual said Skandia Liv had initiated discussions on the deal.

Another step in Old Mutual's restructuring strategy occurred in 2010, when Old Mutual sold its U.S. life insurance operations to affiliates of Harbinger Capital Partners LLC (Best's News Service, Aug. 6, 2010). That transaction was completed in April 2011.

Skandia Liv, a traditional life insurer with customers in Sweden and Denmark, is a hybrid structure wholly owned by Skandia AB, itself a wholly owned subsidiary of Old Mutual. But Skandia Liv operates as a mutual with independent governance under Swedish law. It is prohibited from distributing profits to Old Mutual.

All assets and liabilities of Skandia Liv are attributable to its policyholders. At year-end 2010, Skandia Liv had policyholder assets of 295 billion kronor and solvency capital of 122 billion kronor.

The sale partly unwinds Old Mutual's acquisition of Skandia in 2006. Old Mutual offered 3.3 billion pounds for Skandia at the time (Best's News Service, June 20, 2006).

The acquisition of Skandia was expected to boost Old Mutual's market value by 60% and give it access to Skandia's fast-growing savings business in the United Kingdom. Old Mutual's market value at the time of the acquisition was about $8.9 billion, while that of Skandia was about $5.9 billion.

(By David Pilla, international editor, BestWeek: [email protected])