Old Mutual’s Hostile Takeover of Skandia
7. 7.1 Rebuilding Skandia 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...
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