SPP on path to demutualisation
The work of demutualising SPP is now moving into an intensive phase.
"The deficits are under control. If the positive trend continues, Handelsbanken, our owner, is prepared to provide the new risk capital required for a demutualisation," says Göran Holgerson, chief executive of SPP.
The next step is to ask the policy holders their opinion and a poll is planned for May-June this year.
Legally, SPP is only required to inform the policyholders about the demutualisation.
"But we think the issue is so important that we feel we must ask them properly for their approval," says Göran Holgerson.
The policyholders will decide whether they think SPP should become a demutualised life insurance company. Göran Holgerson thinks they will say yes:
"The advantages of a demutualised company are so obvious - the policyholders have increased security, more freedom and the system is truly fair. Demutualisation solves many of the problems which mutual life insurance companies have been criticised for in the last few years."
Göran Holgerson also has a good example: SPP's associated company, Handelsbanken Liv, which was demutualised two years ago:
"In the first year, the company had to inject a total of SEK 195m to cover deficits in the guaranteed capital on the insurance policies and for running the company. If the company had still been mutual, the policyholders would have had to bear these costs themselves."
In the second year, the policyholders's assets had the best value development in the market. The sector average was 1.8 percent - Handelsbanken Liv's policyholders received 5.67 percent.
This, says Göran Holgerson, proved that the demutualised model works in both upturns and downturns on the global financial markets.
However, Handelsbanken, which will add new risk capital if the company is demutualised, has stipulated that SPP must reduce its operating deficit to an acceptable level.
"The year-end figures show that we now have the deficit under control. We have already reduced our costs by 40 percent and should be in balance by the end of 2005. As the situation looks now, we should be able to demutualise the company on 1 January 2006," says Göran Holgerson.
But a demutualisation of SPP also requires approval, both from the policy holders - and the Swedish Financial Supervision Authority, Finansinspektionen.
Finansinspektionen must assess whether "the policy holders' rights will not deteriorate", as the law puts it.
"There are already discussions in progress with Finansinspektionen since some time. These currently focus on how we present the demutualisation to our policyholders - and that it's done in an appropriate manner."
If the policyholders give their approval, Finansinspektionen's scrutiny of SPP's model will continue.
"Thus it's the Finansinspektionen which has the final say. We think that's good, it provides additional security for the policyholders. We have also brought in other external reviewers to make sure that counting of votes and other things are done correctly."
The poll is planned to be carried out in May and finished by the end of June. When Handelsbanken Liv arranged its poll, over 98 percent voted in favour of a demutualisation.
For further information, please contact:
Göran Holgerson, chief executive SPP
phone: +46 8 - 556 850 00
Johan Lagerström, head of corporate communications SPP
phone: +46 8 - 613 22 42,
mobile: +46 70 - 265 80 14