Skandia reports profits boost

Swedish insurer Skandia, which is being stalked as takeover prey by foreign competitors, reported on Tuesday improved earnings for the first quarter, underlining its status as a juicy bid target.

Pre-tax profit more than doubled to 386 million kronor, against 186 million a year earlier. Net profit fell to 423 million kronor from 1.21 billion, but this included a 834 million kronor one-off capital gain in the first quarter of 2004 from the sale of its Japanese operation.

“We can say that business is performing well and that we are achieving the financial targets that we have set,” chief executive officer Hans-Erik Andersson said in a statement.

Andersson highlighted Skandia’s higher market share in Britain’s insurance market, which analysts believe to be the company’s most tempting asset in the eyes of sector predators.

Old Mutual, an international financial services group of South African origin listed in Britain, acknowledged earlier this month that it was in talks with Skandia in view of a “possible transaction”.

But other insurers and banks, such as Nordic banking group Nordea, are also believed to be eyeing Skandia, possibly with the intention of breaking up the company and selling off the unwanted bits.

French group Axa and America’s AIG have also been rumoured as possible bidders.

For months, financial markets have been rife with speculation that Skandia, which has been embroiled in a financial and legal scandal, would be snapped up by a foreign insurer.

Skandia made headlines in 2003 amid allegations of fraud, creative accounting and exorbitant bonuses, and an internal Skandia probe which confirmed many of the allegations sent ripples of shock and indignation through Sweden’s financial establishment.

Skandia’s Swedish business was badly hit by the scandal, but Andersson said on Tuesday that operations in its home market had begun to recover.



Scania review board dissects Volkswagen bid

The independent committee looking at Volkswagen's take-over bid of Swedish truck giant Scania began its work on Tuesday, stating promises that headquarters would remain in Sweden were paramount.

Scania review board dissects Volkswagen bid
IF Metall Union representative Johan Järvklo sits on the independent review board. File: TT

Åsa Thunman was appointed chairwoman of the committee, which has invited financial consultants from Deutsche Bank and Morgan Stanley as well as legal advisors from Swedish law firm Mannheimer Swartling to assist them in their appraisal.

Thunman said in a statement that the committee would look at whether the $9.2 billion bid was in the best interest of Scania shareholders.

The effect on Swedish industry would also be considered, underlined committee board member Peter Wallenberg Jr.

"It has noted that Volkswagen does not foresee any significant changes with regards to Scania and that Scania’s headquarters and its development centres will remain where they are today," Wallenberg Jr. said. "These matters are of course of importance to the company and for Sweden.”

At the plant in Södertälje, employees have been busy discussing the bid. Assembly line worker Ahmed told The Local that his colleagues did not fear that production would be relocated to Germany.

"They couldn't possibly move all these machines and equipment," Ahmed, which is not his real name, told The Local on Tuesday. "But everyone on the floor has been discussing the offer."

Volkswagen tabled their $9.2 billion bid to swallow up Scania last Friday. It already owns 89 percent of Scania's voting rights and 62.6 percent of the company, with VW eager to secure the nearly 40 percent they do not own. The takeover has encountered resistance from two of Scania's minority owners, however. Both insurance outfit Skandia and pension fund AP4 have expressed reservations about selling up to Volkswagen.

“Scania’s prerequisites to maintain its leading position are better as a listed company than as a subsidiary in a larger group. Skandia doesn't intend to accept the offer," Caroline af Ugglas, head of equities at Skandia, told Bloomberg over the weekend.

Scania, which was founded in 1891 and has operations in more than 100 countries, boasts 38,600 employees. Around 16,000 work with sales and servicescross the company's subsidiaries, and over 12,000 work in production units. The company has headquarters in the Swedish town of Södertälje, where almost 6,000 employees work. The headquarters also hosts the research and development operations, with 3,300 employees.

"Changing owners won't make any difference to us in the near future," assembly line worker Ahmed said. "But we do wonder if the rules will change later on."