Talks Regarding Sale Of Skandias U.S. Unit Reported

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Reports surfaced last week that part or all of American Skandia, Shelton, Conn., could be sold by its parent company, Skandia Insurance Company Ltd., Stockholm, Sweden.

The U.S. unit has recently reported dwindling profits due to plummeting stock values.

The New York Times and The Wall Street Journal, citing unnamed sources, said the Swedish company is seeking “strategic alternatives,” including a possible sale of part or all of American Skandia. However, a deal is not imminent, the reports said.

Skandia would prefer to arrange a joint venture or find a suitable investor so that it could keep an interest in its American unit, according to these sources.

American Skandia could fetch as much as $1 billion, said a source cited by The Times.

A company spokeswoman in Shelton declined to comment.

While refusing to comment on the rumors, Mark Rouck, an analyst with Fitch Rating Service, Chicago, notes that like a lot of companies heavily reliant on income from variable annuities, American Skandia is under balance sheet pressure due to equity market declines.

Robert Hasner, an analyst with Standard and Poors insurance ratings unit in New York, notes that his company recently put the entire U.S. life insurance sector on negative outlook. That action was largely due to the effects of a shaky equity market on insurers fee income.

“American Skandias exposure to some of those risks is perhaps more meaningful than a company with a diversified business profile,” Hasner observes.

Moodys Investment Services London office recently downgraded the credit rating of Skandia Insurance to reflect generally deteriorating conditions for fee-based asset accumulation products.

In June, American Skandia said it was curtailing its variable life insurance and qualified plan divisions in order to focus on its largest and most profitable variable annuity and mutual fund market segments.

In March, the company announced salary and staff reductions due to falling sales.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 16, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.