Preliminary figures completed: 90 percent say yes to demutualisation of SPP
SPP's policyholders want the company to be demutualised.
During May-June, customers have had the opportunity to vote on the question of whether the life insurance company should be run on mutual principles or demutualise. The vote was completed on Thursday and the preliminary results indicate that some 90 percent of those who voted are in favour of demutualisation.
Of the total number of eligible voters, considerably fewer than 10 percent voted no. This means that the voting requirements have been fulfilled by a broad margin.
"This gives us a very clear mandate to continue with the next stage of the process," says Göran Holgerson, chief executive of SPP.
Handelsbanken-owned SPP is now well on its way to becoming the second life company which offers traditional life insurance to be demutualised in Sweden. Two years ago, its sister company Handelsbanken Liv was demutualised.
"Our customers appear to like our demutualised model," says Göran Holgerson, who was also involved in the process of demutualising Handelsbanken Liv. On that occasion, customers also gave a very clear vote in favour.
According to Göran Holgerson, this should give food for thought:
"In the space of two years, we have asked over half a million policyholders if they want a demutualised life insurance company, instead of one which is run on mutual principles. Some 400 000 have opted to vote actively and 90 percent of these have said yes."
In a demutualised life insurance company, the company assumes a large part of the risks which the policyholders themselves are currently forced to share in a company run on mutual principles. If a non-mutual company is badly run, the company pays instead - not the customers. This applies both to the operating and risk results.
If the return is worse than promised, a non-mutual company must pay for the deficits in the guaranteed capital. If, on the other hand, the company can pay higher return than it has promised the customers, the company receives 10 percent of the total return.
"Customers of a well-run company conducted on mutual principles are forced to forgo at least the same amount as this in order to build up risk capital. But in a company run on mutual principles, you never know how much you will have to forgo from year to year. Last year the average amount was 70 percent. We never take more than 10 percent."
Furthermore, a demutualised SPP will guarantee at least 85 percent of the customer's savings. If there is a deficit when it is time to pay out the money, SPP will pay the difference - not the other policyholders.
"We will also implement a proper right to move insurance funds to another company, without complex rules and high charges. Unlike the changes in legislation currently being proposed, our right to move funds covers everybody - both old and new customers."
According to Göran Holgerson, demutualisation means that policyholders will have increased security now that the company is taking over a large part of the risks, increased fairness when policyholders no longer have to refrain from their return to cover for other policyholders, and increased freedom as a result of the far-reaching right to move funds.
In preparation for the demutualisation, SPP arranged a vote among policyholders whose rights are affected, in spite of the fact that this is not a legal requirement. A majority could not be against demutualisation - and there was also very strong protection for a minority: it could not be opposed by more than ten percent of all eligible voters.
"Our preliminary figures show that we have a comfortable margin to the 10-percent limit. But I have the greatest respect for those people who for some reason felt uncertain about demutualisation. Nevertheless I hope to be able to prove to them that our demutualised life insurance company is better."
The participation level surprised Göran Holgerson. Before the vote, the goal was to achieve 50 percent. Preliminary figures now indicate over 60 percent.
"Unfortunately, life insurance is not an issue which attracts a lot of interest. It is therefore fantastic that so many of our customers have made the effort to learn about this and make an active choice."
Ahead of the vote, the Swedish Financial Supervisory Authority set very strict requirements on the information to be sent to the policyholders. The Supervisory Authority examined the material very carefully and established that it was correct.
The next step is for the Supervisory Authority to examine in detail the whole of SPP's demutualised model. Following their approval, the board of Handelsbanken must also resolve to inject SEK 6-8 billion in new risk capital. This will enable SPP to assume the risks and deficits which only the policyholders share at present.
"According to our plan, everything should be ready for demutualisation on 1 January 2006".
But with this, a major step has already been taken in the process. By an overwhelming majority, SPP's customers have voted yes to demutualisation. The preliminary figures show that around 90 percent are in favour of demutualisation and far fewer than 10 percent of the total number who are eligible to vote are against.
The vote has been checked by independent auditors, who will now check the vote-count once again. The final result of the vote is expected to be completed by mid-August.
For further information, please contact:
Göran Holgerson, chief executive SPP
tel: +46 8 556 850 75
Johan Lagerström, head of communications SPP
tel: +46 8 613 22 42
mobile: +46 70 265 80 14
The press release can be downloaded from the following link: