A dispute between UK-based insurer Old Mutual’s subsidiary
Skandia and the latter’s wholly owned Swedish life insurance unit
Skandia Liv has been settled following a long-running arbitration
The saga began in January 2002, well before Old Mutual’s
acquisition of Skandia in 2006, with the sale by Skandia of Skandia
Asset Management (SAM) to Norwegian bank Den Norske Bank (DNB) for
SEK3.2 billion ($395 million). SAM’s primary activity was
management of Skandia Liv’s assets.
An aggrieved Skandia Liv submitted a claim against Skandia based
on what it claimed were excessive asset management fees under the
terms of a 12-year asset management agreement entered into prior to
As an alternative, Skandia Liv claimed that it was entitled to
the full SEK 3.2 billion purchase price DNB paid for SAM.
In June 2004, Skandia and Skandia Liv agreed to settle the
dispute by means of a binding arbitration process.
After more than four years of deliberation the arbitration board
rejected Skandia Liv’s claim to a portion of SAM’s purchase price.
However, the arbitration board found that Skandia Liv had a valid
claim in respect of excessive fees and ruled that for the period 1
January 2002 to 30 June 2008, Skandia must pay Skandia Liv SEK 580
million plus interest, and for the remainder of the agreement
period to 31 December 2013 compensate Skandia Liv for the payments
to SAM that constitute an excess charge.
Run on a mutual basis, Skandia Liv is Sweden’s largest life
insurer. At the end of 2007 it had 1.3 million policyholders, a
market share in traditional life insurance of some 22 percent and
assets under management of SEK 303 billion.
In early 2008 Old Mutual announced that demutualisation of
Skandia Live was being investigated, with a final decision
anticipated to be made in late-2009. Demutualisation of traditional
life insurers has been permitted in Sweden since 2002.