Table of Contents

Corporate Governance in Modern Financial Capitalism

Corporate Governance in Modern Financial Capitalism

Old Mutual’s Hostile Takeover of Skandia

Markus Kallifatides, Sophie Nachemson-Ekwall and Sven-Erik Sjöstrand

This insightful book focuses upon corporate governance processes, and explores the conditions required for effective corporate governance and control in 21st century globalized and financialized economies. In presenting a comprehensive study of a cross-border hostile corporate take-over process, describing the actors, institutions and events involved, this book examines and questions the current forms of corporate governance and control – both from a national and a global perspective. Using Old Mutual’s takeover of Skandia as a case study, the authors address corporate governance theory, and highlight its two fundamental dimensions: financial and operational flows.

Chapter 7: Rebuilding Skandia

Markus Kallifatides, Sophie Nachemson-Ekwall and Sven-Erik Sjöstrand

Subjects: business and management, corporate governance, strategic management, economics and finance, corporate governance, financial economics and regulation, law - academic, corporate law and governance


A PLATFORM In 2003, the world economy was slowly beginning to experience the momentum from the growth of the two biggest economies in Asia – China and India – and also from the activity in former Eastern Europe. Western economies followed suit, as did Skandia. The Skandia accounts for 2003 showed that sales rose 16 per cent to 75 billion SEK (2002: stagnant). New sales of unit-linked assurance rose 6 per cent (2002: minus 18 per cent). Funds under Skandia management increased to almost 310 billion SEK (2002: 240 billion SEK). According to embedded-value accounting, the estimated profit margin for new sales of unit-linked assurance stood at 14.6 per cent. The change in Skandia’s financial situation was even more dramatic. Skandia went from 18 billion SEK in net debt in December 2002 to a 4 billion net debt at the end of 2003. At the end of the first quarter of 2004, after the sale of the unit-linked business in Japan and If P&C, calculations (in accordance with a solvency test marketed by Standard & Poor’s) showed an excess capital of 5–6 billion SEK, not taking into account the legal exposure in the USA, which was money that financial analysts concluded could be returned to shareholders through dividends or share buyback programmes. In the spring of 2004, some financial analysts sold the story of an overcapitalized Skandia to the investment community. At the beginning of 2004, Skandia’s new management team went on its first road show to present Skandia to UK...

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