STOCKHOLM, Sweden, April 26, 2002 (PRIMEZONE) -- Skandia:
* Sales totalled SEK 31 billion
* The result of operations increased to SEK 860 million (804)
* The operational return was 12%, which is unchanged compared with
the full-year 2001
* The profit margin was 8.8%, which is an improvement compared with
7.8% for the fourth quarter of 2001
* The group's operating result was SEK 170 million (-2,543)
* Funds under management increased by 4% during the last 12 months
* Assets under management increased by 3% during the last 12 months
* Borrowings down SEK 2.5 billion. Cash position strong
(*) Does not include Livforsakringsaktiebolaget Skandia, which is run on
a mutual basis. All return measurements for shareholders' equity and
net asset value as per March 2002 pertain to moving twelve-month
figures. All comparison figures pertain to March 2001 unless stated
otherwise.
Comments by Lars-Eric Petersson, President and CEO:
The uncertain market situation we saw in 2001 has stabilized somewhat. However, in many of the world's savings markets, customers are still waiting on the sidelines. Although the financial markets have recovered from the low point following September 11, the recovery has been hesitant due to a number of coinciding economic and market factors.
Naturally, Skandia is affected by the current market conditions, but despite this we see several good signs. Sales have been rising slightly in recent quarters, even though we still have a way to go before we achieve our long-term target levels. Funds under management - our revenue base - continue to increase. Our market shares in the strained U.S. market are recovering, and our financial position is strengthening in accordance with our plans.
In anticipation of clear signs of a market recovery, we continue to focus our business strategy in our core businesses. We are launching new products and strengthening our distribution capacity. Skandia's business model, combined with the underlying need in the market for increased long-term savings, creates conditions for favourable development in the future.
OVERVIEW
Despite lower sales volumes, the result of operations for the group increased by 7% during the first quarter, to SEK 860 million (804), and the operational return was 12%, which is unchanged compared with the full-year 2001. The operating result, which includes financial effects, was SEK 170 million (-2,543).
Sales of unit linked assurance amounted to SEK 22.3 billion (25.8). New sales decreased by 19%. However, sales were higher than in the last two quarters. The result of operations for unit linked assurance increased by 9%, to SEK 955 million (877). The profit margin was 8.8%, which is an improvement compared with the last two quarters.
Sales of mutual fund savings products decreased by 34%, to SEK 7.2 billion. Here, too, however, sales were higher compared with the preceding two quarters. Operations showed a negative result of SEK -58 million, which is attributable to investments in new markets and product development.
Funds under management have increased by 4% during the last twelve months, to SEK 631.9 billion.
The acquisition of Bankhall in the UK was carried out during the first quarter. This operation is included in the accounts as from 5 February 2002. It is expected that the awaited regulatory clearance that is required to complete the sale of Skandia Asset Management can be received during the second quarter of 2002.
In 2001 the operational cash flow in the unit linked assurance operations was positive in the amount of SEK 1 billion, and for the group as a whole it was positive in the amount of SEK 0.1 billion. The underlying cash flow remained positive during the first quarter, and total borrowings decreased by SEK 2.5 billion. As previously announced, our goal - assuming all other factors are unchanged - is to reduce the group's borrowings by approximately SEK 5 billion during the first half of 2002.
INSURANCE AND SAVINGS PRODUCTS
Market and Sales
Unit Linked Assurance
Sales of unit linked assurance decreased by 14%. Sales have increased successively during the last two quarters. New sales decreased by 19% (new sales defined by the industry-wide definition as periodic premiums recalculated to full-year figures plus 1/10 of single premiums during the period).
Sales in the U.S.A decreased by 26% in local currency. Following weak market conditions in the last two years, sales have stabilized since the third quarter of 2001. Skandia is the market leader in the independent broker distribution channel. According to preliminary estimates, Skandia continued to improve its total market position during the first quarter as a result of continued renewal of its product offering. The focus on the core variable annuity and mutual fund products entails a considerable increase in Skandia's distribution capacity in the independent brokers segment.
In the British operation, sales decreased by 20% in local currency. New sales decreased by 21%. The sales decline is mainly attributable to the offshore market and single-premium products, while sales of products with annual premium continued to rise.
Sales in Sweden decreased by 7%. Skandia is the market leader and has a balanced product portfolio. New sales decreased by 21%, mainly due to the impact of individual contracts during the preceding year.
In Germany, sales increased by 20% in local currency. The product portfolio built up by Skandia is now contributing to stable sales growth. In Japan, sales increased by 300% in local currency. The increase is attributable to new distribution agreements, which are now having an impact on sales.
Funds under management increased during the last twelve months by 4% to SEK 499 billion. Net flows were positive during the first quarter, while the strengthening of the Swedish krona had a slight negative impact on asset values. Payments to policyholders, expressed as a percentage of assets under management, amounted to 10.5% on a moving 12-month basis (9.8% at year-end 2001). Surrenders accounted for 9.0 percentage points (8.3) of this total, which is within underlying assumptions.
Mutual Fund Savings Products
Following a long period of falling sales in connection with the stock market decline, sales increased by 4% compared with the fourth quarter of 2001, to SEK 7.2 billion. However, sales were down 34% compared with the same period a year earlier.
Sales in the U.S.A have stabilized and were unchanged compared with the fourth quarter of 2001. Compared with the first quarter of 2001, sales were down 57% in local currency. In the U.K., sales increased sharply compared with the preceding quarter, to SEK 2.1 billion. Skandia's market share gradually increased during the second half of 2001 in a contracting market. Sales in the German market are showing continued strong development.
Funds under management increased by 12% during the last twelve months, to SEK 111.3 billion. Net flows remained positive during the first quarter, while exchange rate movements had a slight negative impact on the value of funds under management during the first quarter.
Life Assurance
Sales in Spain decreased as a result of a shift in focus toward unit linked assurance products. Consequently, assets under management decreased from SEK 15.4 billion to SEK 14.3 billion.
Operating Result and Profitability
Unit Linked Assurance
Cost-cutting measures have begun to have an effect, and thus the result for newly written business was higher than during the two preceding quarters. The lower sales volume compared with the first quarter a year earlier had a negative impact on the result. The result for newly written business during the year decreased to SEK 295 million (395).
The profit margin was higher compared with the second half of 2001 in both the U.S.A and the U.K., but lower compared with the first quarter of 2001. In Sweden the profit margin remained good. In other markets together the margin fell compared with the first quarter of 2001, mainly due to the sharp rise in sales volume in Japan, which is not yet making a positive earnings contribution.
Despite lower sales volumes, the result of operations increased by 9% compared with a year earlier, to SEK 955 million (877). Once again, the outcome compared with operative assumptions made a positive contribution to the result, which is an expression of the conservative assumptions used in pricing products.
Mutual Fund Savings Products
The result was SEK -58 million (13). The result decline is mainly due to acquisition costs in connection with the growth in sales of products with a term extending over several years in new markets, such as Germany. These costs are not deferred. The increase in sales of these products is making a positive contribution to future earnings. The result was also charged with development costs.
Life Assurance
The result for life assurance was SEK 59 million (34).
BUSINESSES
It is expected that the awaited regulatory approval that is required to complete the sale of Skandia Asset Management can be received during the second quarter of 2002. The result for the day-to-day business was SEK 8 million (2). SkandiaBanken's result decreased to SEK 8 million (27), mainly due to strong expansion, which requires greater investments in infrastructure. Skandia-Banken grew its customer base during the first quarter by 42,000, to 1,163,000 customers. SkandiaNetline's result improved to SEK 7 million (-13). The result was charged with development costs for the banking operation in Switzerland and costs for the group's Global Business Development unit.
The investment income generated by the group's treasury unit improved. The market risk associated with the parent company's investments has decreased.
Group Expenses
Group expenses comprise management and structural costs. Goodwill amortization has been allocated to the respective business units.
Exchange Rate Effects
Currency movements had a slight negative impact during the period. Sales were affected by SEK 55 million and the operating result for the group by SEK 3 million, after recalculation to lower average exchange rates compared with the full-year 2001. Total assets decreased by SEK 45 billion during the year as a result of currency movements.
BALANCE SHEET AND NET ASSET VALUE
Skandia's financial position strengthened during the first quarter. Borrowings decreased, and liquidity is good. Unutilized credit facilities amounted to SEK 9.1 billion.
During the first quarter the acquisition of Bankhall was carried out in the U.K., leading to an increase in goodwill of SEK 3.0 billion. In connection with the acquisition, as previously announced, a management buyout was conducted of the accompanying IT business, Lynx plc, with financial support to be provided by Skandia for a maximum period of three years.
Skandia now owns 19% of If, which means that If is no longer reported in accordance with the equity method. In connection with this, If's continuing result is no longer included in Skandia's result. If is therefore reported in the balance sheet as an investment asset valued at SEK 2.8 billion. The book value of If on the balance sheet is lower than Skandia's share of If's net asset value.
Net asset value amounted to SEK 37.2 billion (SEK 37.2 billion at year- end 2001). Capital employed in the group, which in addition to net asset value consists of borrowings to finance investments in subsidiaries, amounted to SEK 52.4 billion (51.5).
Borrowing and Liquidity
In 2001 the operational cash flow in the unit linked assurance operations was positive in the amount of SEK 1 billion, and for the group as a whole it was positive in the amount of SEK 0.1 billion. The underlying cash flow remained positive during the first quarter, and total borrowings decreased by SEK 2.5 billion. As previously announced, our goal - assuming all other factors are unchanged - is to reduce the group's borrowings by approximately SEK 5 billion during the first half of 2002. Subordinated loans totalling approximately SEK 700 million were floated.
Stockholm, 26 April 2002Lars-Eric PeterssonPresident and CEO
For questions, please contact: Jan Erik Back, Chief Financial Officer, tel. +46-8-788 3720 Harry Vos, Head of Investor Relations, tel. +46-8-788 3643 Michael Wolf, Chief Investment Officer, tel. +46-8-788 4559
This interim report has been prepared in conformity with the guidelines of the Swedish Financial Supervisory Authority and Recommendation RR20 of the Swedish Financial Accounting Standards Council. Aside from an adaptation to new accounting recommendations of the Swedish Financial Accounting Standards Council, which took effect on 1 January 2002, the interim report has been prepared in accordance with the same accounting principles as in the 2001 Annual Report. The new recommendations have not had any material impact on the group's profit and loss account or balance sheet.
Financial calendar:
14 May 2002, April sales release 8 August 2002, interim report January-June 30 October 2002, interim report January-September
Skandia's published financial reports are available on Skandia's website: www.skandia.com. Skandia's website also provides links to the webcast of the conference call on Friday, 26 April 2002. In addition to the interim report, Skandia has also published the document Financial Supplement Q1 on www.skandia.com, under Investor Relations/Reports and Events/Interim Reports.
GROUP OVERVIEW Moving
12-
month
figures
2002 2001 2001 2002
SEK million March March Dec. March
Sales
Unit linked assurance 22,285 25,827 93,502 89,960
Mutual funds 7,228 11,001 34,831 31,058
Life assurance 247 344 1,276 1,179
Direct sales of funds (1) 1,064 650 3,781 4,195
Businesses 126 107 414 433
Total sales 30,950 37,929 133,804 126,825
Result summary
Unit linked assurance 955 877 4,341 4,419
Mutual funds -58 13 -28 -99
Life assurance 59 34 111 136
Businesses 13 -19 41 73
Group expenses -109 -101 -469 -477
Result of operations 860 804 3,996 4,052
Financial effects unit linked assurance -690 -3,347 -5,085 -2,428
Operating result (2) 170 -2,543 -1,089 1,624
Assets under management, SEK billion 1,001 973 1,013
Funds under management, SEK billion 632 609 638
Net asset value, SEK billion (3) 37 36 37
Shareholders' equity, SEK billion 21 21 21
Total assets, SEK billion 605 579 611
Operational return on net asset value % (3) 12 18 12
(4)
Return on adjusted net asset value, % (3) (4) 5 9 -2
Return on shareholders' equity, % (3) (4) 1 10 0
Per-share data
Operating result per share before dilution, 0.17 -2.92 -2.06
SEK (5)
Earnings per share before dilution, SEK (3) 0.16 -0.20 -0.05
(5)
Earnings per share after dilution, SEK (3) 0.15 -0.20 -0.05
(5)
Net asset value per share, SEK 36.31 34.95 36.38
Shareholders' equity per share, SEK 20.03 20.37 20.07
1) Direct sales of funds for 2001 have been recalculated due to the sale
of Skandia Asset Management (SAM).
2) The holding in If now amounts to 19 %, which means that If is no
longer reported in accordance with the equity method. For the sake of
comparison, earlier periods have also been adjusted accordingly. The
operating result for If for these periods amounted to SEK - 445
million as per March 2001 and SEK 1,015 million as per Dec. 2001.
3) For definition, see page 16.
4) All return measurements for shareholders' equity and net asset value
pertain to moving twelve-month figures.
5) According to recommendation RR18 of the Swedish Financial Accounting
Standards Council, the dilutive effect is calculated if the key ratio
"Earnings per share" deteriorates.
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