Skandia Insurance Company, Ltd.

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Skandia Insurance Company, Ltd.

Sveavagen 44
S-103 50 Stockholm
Telephone: +46 (08) 788-1000
Fax: +46 (08) 788-3080
Web site:

Public Company
Incorporated: 1855
Employees: 7,200 (2001 est.)
Sales: SKr 198 billion (US$18.6 billion) (2000 est.)
Stock Exchanges: Copenhagen Frankfurt London Stockholm
Ticker Symbol: SDIA
NAIC: 524113 Direct Life Insurance Carriers; 525120 Health and Welfare Funds; 524114 Direct Health and Medical Insurance Carriers; 524126 Direct Property and Casualty Insurance Carriers; 523930 Investment Advice

Since its founding in 1855, Swedens Skandia Insurance Company, Ltd. (Fdrsdkringsaktiebolaget Skandia in Swedish) has grown from a small fire and life insurance company to that nations top insurer and financial services group, operating in more than 20 countries worldwide. Skandia is headquartered in Sweden, but as of 2002, most of its business is conducted internationally. The company was among the seven firms listed on the Stockholm Stock Exchange when it opened in 1863, and in 2002 it is the only one of those original companies still listed there. While Skandia is still involved in the insurance businessselling and handling life, non-life, and pension insurances primarilythe company has shifted its main focus to financial services, offering loans, long-term personal savings products, mortgage loans, savings products for banking cardholders, financial and risk analyses, and new company development. As of 2000, Skandia leads the world in sales of unit-linked assurances, and the company achieves sales of SKr 198 billion (US$18.6 billion), a company record. These traditional measures of success are not the only by which Skandia measures itself: since 1994 the company has supplemented its annual reports with accountings of its intellectual capitalemployee knowledge and expertise and other intangible assetsand is considered a pioneer in the movement to quantify such assets.

Early Days: 1850s-1890s

Skandia was established in 1855 as a mixed insurance company called Skandia Group Insurance Co. Ltd. by Carl Gustav von Koch when he acquired a series of small insurance companies throughout Sweden. In January 1855, Swedens King Oscar I granted Skandia a concession to become the countrys first life assurance company and nationwide fire insurance company. Its first offices were in a three-room apartment at Mynt-torget 1 in Stockholms Old Town, adjacent to the Royal Castle. Early company documents describe its business as life assurance and fire insurance related therewith.

As European society became increasingly industrial, larger numbers of people became aware of a need for financial security for themselves and their families, sparking a wide interest in life insurance. Skandia benefited greatly from these new developments and the company expanded rapidly during those early years. Skandia was soon operating internationally with offices in Christiana (now known as Oslo), Copenhagen, Hamburg, and Rotterdam, and had significant operations in St. Petersburg, Russia. Skandias stock shares began trading publicly for the first time on February 4, 1863, with the opening of the Stockholm Stock Exchange. By 1889 the companys life assurance business included 7,000 policyholders. Most of these policy-holders were middle-class men; however, working-class people and women were showing a growing interest as well. The company introduced accident and disability insurance in 1890, and had expanded to 50 employees.

A New 20th Century

Skandias robust expansion continued into the 20th century. In 1900 the company established operations in the United States and became the first non-British foreign insurance company to set up business there. At the dawn of the century, the company recognized that it could reduce the major risks involved with such disasters as the 19th centurys great city fires by reinsuring fire premiums. As a result, most of the companys premium income was soon resulting from sales of fire insurance. Ironically, it was the U.S. expansion and the increased focus on fire insurance that caused the company to suffer one of the greatest losses in its history with the 1906 San Francisco earthquake and fires, which resulted in the loss of 3,000 lives and over 28,000 buildings.

The losses caused by the earthquake were offset by the benefits the company enjoyed as a result of the advances made in Swedens social legislation at the hands of the monarchs Oscar II and Gustav V. Besides progressive laws concerning factory conditions, voting rights, and working hours for women and children, Sweden adopted a statutory social insurance scheme during this time. Occupational accident insurance and pension insurance became obligatory in the first decades of the 20th century. Skandia became a pioneer in motor insurance, writing its first policy in 1920, almost a full decade before third-party motor liability insurance and vehicle damage insurance were mandated by law. In 1938 the company introduced home insurancean innovation which enabled policyholders to hold a single policy that covered fire, burglary, flooding and liability insurance, with one premium and one due date.

Modern Skandia: 1950s through 1980s

Swedens neutrality during the two world wars buffered the company from some of the damages suffered by other European companies, particularly during World War II, and the company began the second half of the 20th century in much the same way it had spent the first halfwith rapid expansion and growth. In 1953 it entered the South American market with a venture in Colombia, and in 1955 made its first foray in Asia with an operation in India. The 1950s also marked a technological advance for Skandiain 1957 it used a computer for the first timethe IBM650 Magnetic Drum Calculator, which is now on display at Stockholms Museum of Science and Technology.

Skandia experienced a rebirth in the 1960s. At the beginning of the decade, the company purchased life insurer Thule (which had been established by the grandfather of Olof Palme, Swedens late prime minister). Skandia followed that purchase with the merger of five companieswhich originally consisted of 53 small Swedish insurance companiesand the new Skandia group was introduced in 1964. The company simultaneously unveiled its umbrella logo, which remained the company symbol in 2002.

Skandia began the 1970s with more expansion, opening an office for international reinsurance in Australia. In 1971 the company renamed its subsidiary Thule Skandia Liv, creating a separate, but wholly owned mutual insurance company. Also in 1971, the company shut down its India operations when that country nationalized its insurance industry. Skandia introduced child insurance in 1974. This insurance provided compensation for disability or handicapsregardless of causefor children up to age 20. In 1979 the company established Skandia Life UK in London. This company was one of the first to sell unit-linked pension insurance (also known as variable annuity)a form of insurance that lets the policyholder invest a portion of the premium in a variety of investment alternativesin the United Kingdom.

Skandias growth continued unabated during the 1980s. In 1986 the company acquired the share capital of Almendahl Investment Co. and Internationell Assurans AB. It also began a series of real estate acquisitions with 20 percent of the shares in Fastighetsbolagets Hufvudstaden and the majority of the shares in Fastighets AB Stockholm Badhus. In 1987, Skandia opened a member financial services company, American Skandia Life Assurance, in Shelton Connecticut. The new company implemented innovations that would be later adopted throughout the financial services field: it worked with external money managers to help it remain unbiased, and it sold its products wholesale to brokers rather than to a network of distributors. American Skandias business flourished, and by the year 2000 had more than US$36 billion in client assets. Skandia acquired Skandia International and Vesta-gruppen A/S, Norway in 1988; and in 1989 it acquired National Insurance & Guarantee Corp., Spains Skandia Comp de Adm Immobilaria, the Netherlands Argo Properties, and Reinhold International Properties in London, the United Kingdom, in Madrid, Spain, and in Lisbon, Portugal. Also in 1989, the companys shares were listed on the Oslo Stock Exchange (Skandia would be delisted from that exchange in 1995). In 1990 the company once again benefited from governmental changes when Sweden adapted its insurance industry legislation, allowing Skandia to introduce unit-linked assurance in its home country. That year, the companys shares were listed on the London Stock Exchange.

Development of the Intellectual Capital Concept

By the early 1990s, Skandia was heavily invested in real estate, beginning with its acquisitions in the mid-1980s, and during that time the Swedish real estate market suffered a collapse. Between the liabilities of its insurance contracts and the devaluation of its land assets, on paper, Skandia appeared to many analysts to be in serious trouble. To the company, however, the future looked good: it still had tremendous assets in its people, its customers, and its products. Within Skandia, processes that create value for customers, shareholders, and the staff are carried out on a daily basis. Many of these are.invisible, wrote CEO Bjorn Wolrath, Nevertheless, they are innovative, and they create value. Skandia felt that the traditional ways of financial reporting did not allow the company to tell its full story. We needed a way to explain that we had a lot more value than just real estate, remembered Scott Hawkins of American Skandia.

Company Perspectives:

Our vision at Skandia is a declaration of our interest in helping people achieve their goals for quality of life. Our products and services enable people to invest and build up the financial resources they need to make their dreams come true.

In the fall of 1991, Skandia hired Leif Edvinsson, who had an M.B.A. from the University of California at Berkeley and a background in banking, as its firstand, indeed, the corporate worlds firstdirector of intellectual capital. Edvinsson and others at Skandia developed a means by which to measure a companys intangible value, or its Intellectual Capital (IC). Skandia defined IC as the sum of human capital such as employee competence, expertise, and knowledge, and structural capital (software, customer lists, trademarks, and so on). Edvinsson felt that the value of a companys intellectual assets far exceeded the value of tangible assets that normally appear on a balance sheet. By developing sophisticated tools to measure ICsuch as its Dolphin Navigator and Skandia Intellectual Capital IndexSkandia was able to demonstrate how the companys knowledge could be converted into value.

In 1993, Skandia took the theory one step further and began supplementing its annual reportwhich reports on the companys traditional assetswith an IC report. This report quantified Skandias IC, and made forecasts on how likely the company was to meet its strategic goals based on those quantifications. The theory proved highly successful: between 1993 and 1999, Skandias share price quadrupled. Skandia was the first company to report on its IC in this manner, though many companies soon began emulating the approach. Edvins-son left the company in 1999, but Intellectual Capital remained a cornerstone of Skandias corporate philosophy into the early years of the 21st century.

A New Focus for a New Millennium

Over the course of the 1990s, Skandia continued its tradition of expansion, and by the end of the decade had operations in more than 20 countries around the world, including Chile, the United Arab Emirates, China, and Poland. That decade also saw a major shift in the direction of the company. For 135 years, Skandia had focused on the insurance business; in the early 1990s, the company saw greater potential in the financial services industry and began to shift its core business in that direction. The realization at the company was that growth comes from vigorously seeking out new market opportunities rather than calculating the market share of markets youre already in.

So we transformed Skandia from an old insurance company into an innovative financial services organization, said Leif Edvinsson in 2000.

Skandia made this transformation through a series of sales and acquisitions over the course of the decade, and by growing its financial services business unit (Skandia AFS). Skandia AFS adopted a new business model, setting itself up as a wholesaler of financial services with a wide range of products based on external funds management. These products were then sold by a sales force of carefully selected and trained independent financial advisors.

The new model proved highly successful: in 1990, Skandia AFS accounted for only 12 percent of the companys total income. In 1996 it represented nearly 50 percent; a year later, that total was 70 percent, and Skandia was garnering praise in Europe and the United States for the strength of its products. The company became a global Fortune 500 company in 1997. Also in 1997, Lars-Eric Petersson took over the role of CEO from Bjorn Wolrath, and continued steering the company in the financial services direction. When the companys core profits doubled in the first quarter of 2000, he declared, the restructuring of the Skandia group into a pure-play savings and assets management company is complete. In 2001, Skandia sold SINSER Holding A.B. to Aon Corporation, shedding the last of its risk management consulting services and property/casualty insurance operations.

Despite its successes, Skandia was not immune from the economic troubles of the early 21st century. After a peak in the first half of 2000, the worlds stock markets experienced sharply falling pricesand the United States (where Skandia had significant interests) was particularly hit hard. Skandias sales in Sweden dropped 10 percent, its growth in new markets slowed, and its sales fell by 37 percent. CEO Petersson, while regarding the downturn as an economic blip, rather than a reflection of company weakness, nevertheless responded with a series of cost-cutting measures that included a 13 percent reduction in its U.S. workforce and an aggressive reduction in operating expenses. The company also sold its asset management operations to Den Norske Bank in 2002. The prolonged duration and severity of the market pullback, along with the difficulty in predicting the timing of its culmination have led us to these hard decisions, Wade Dokken, CEO of America Skandia said in 2001.

Key Dates:

The company is founded in Stockholm, Sweden, as Skandia Group Insurance Co. Ltd.
Skandias stock is listed on the Stockholm Stock Exchange.
The company introduces accident and disability insurance.
Operations in the United States are established.
The company introduces motor insurance.
Home insurance, a single policy covering fire, burglary, flooding, and liability is introduced.
Operations in Colombia, South America are established.
The company establishes operations in India.
The company begins to computerize its operations.
The company acquires Thule, merges five other companies, reorganizes, and unveils its umbrella logo.
Child insurance is introduced.
American Skandia Life Assurance opens in Shelton, Connecticut.
Skandia is listed on the London Stock Exchange.
Skandia supplements its annual report with its first Intellectual Capital (IC) report, which quantifies the value of the companys human capital.
Skandia CEO Lars-Eric Petersson declares that the restructuring of Skandia into a savings and assets management company is complete.

Even with these economic difficulties, Skandia had reason to be optimistic for its prospects in the new millennium. In the companys 2000 annual report and its third-quarter 2001 interim report, CEO Lars-Eric Petersson pointed to several factors that indicated a healthy future for the company: the overhaul of social security systems in many countries and changes in the labor market were resulting in the need for more individual savings. Additionally, Skandia had no liability claims resulting from the events of September 11, 2001such claims had a significant impact on the insurance industryand the companys global focus insulated it from the worst effects of the decline in the U.S. market. The company also quickly launched a number of new products in response to the new economic climate. Our rapid-response business model is our strength in turbulent times, wrote Petersson in the companys September 2001 interim report. He continued, The ongoing process of refining our business activities, product development, and distribution strength creates solid opportunities for the future.

Principal Divisions

Americas; Europe; UK; Asia Pacific.

Principal Operating Units

Global Business Development; Global Funds; Offshore.

Principal Competitors

Allianz; AIG; Generali.

Further Reading

About American Skandia, January 30, 2002, http://www.newcentury

Bender, Yuri, Skandia Goes Back to Basics, The European, May 9, 1996, p. 22.

Bolton, Norah, Your Organizations Most Important Asset, The Canadian Manager, Winter 1996, pp. 25-26.

Bradford, Michael, Deal Makes Aon Top Captive Manager, Business Insurance, August 13, 2001, pp. 1, 27.

Bukowitz, Wendi R., and Gordon P. Petrash, Visualizing, Measuring and Managing Knowledge, Research Technology Management, July/August 1997, pp. 24-31.

Cariner, Stuart, 1 + 1 = 11, Across the Board, November/December 2000, pp. 29-34.

, The Swedes Are Coming, Across the Board, June 1999, pp. 31-35.

Commission Clears Sampo/Varma-Sampo/Skandia/Storebrand Venture, European Report, December 22, 2001, p. 362.

Deering, Ann, The Insurance Professional in a Virtual World, Risk Management, November 1995, p. 37.

Duffy, Daintry, Keeping Score, Performance Management and Positive Reinforcement, January 31, 2002,

Edvinsson, Leif, and Michael S. Malone, Intellectual Capital: Realizing Your Companys True Value by Finding Its Hidden Brainpower, New York: HarperBusiness, 1997, p. 240.

European Report: Commission Clears Diligentia/Skandia Life Insurance, European Report, May 17, 2000, p. 1.

FS Skandia, Storebrand ASA AND Pohjola-Yhtyma Notify New Life Insurance Company, European Report, July 17, 1999, p. 1.

Galagan, Patricia A., Strategic Planning Is Back, Training & Development, April 1, 1997, pp. 32-36.

Garrity, Mike, Skandia Adopting Novel Distribution Plan, Mutual Fund Market News, May 10, 1999, p. 1.

Gerwig, Kate, Bandwidth: Skandia Seeks Network Insurance, InternetWeek, January 19, 1998, p. 33.

Great Minds Write Alike, Fast Company, April 1, 1997, p. 44.

Haapaniemi, Peter, Intellectual Capital, Chief Executive, January/February 1997, p. 59.

Hafnia Humbled, The Economist, April 18, 1992, p. 78.

Hibbard, Justin, Cover Story: Intellectual Capital, InformationWeek, February 22, 1999, p. 50.

Hobday, Nicola, Den Norske Bank Buys Skandia Asset Management, The Daily Deal, January 8, 2002,

Icon Group International, Inc. Staff, Forsakrings Ab Skandia: International Competitive Benchmarks and Financial Gap Analysis, San Diego: Icon Group International, Incorporated, 2000, p. 24.

Icon Group International, Inc. Staff, Forsakrings Ab Skandia: Labor Productivity Benchmarks and International Gap Analysis, San Diego: Icon Group International, Incorporated, 2000, p. 20.

Kielmas, Maria, Skandia Rumors Grow, Business Insurance, September 1, 1997, pp. 69-70.

The Knowledge Gurus, New Statesman, September 27, 1999, p. 21.

LaBarre, Polly, How Skandia Generates Its Future Faster, Fast Company, December 1, 1996, p. 58.

, The Rush on Knowledge, Industry Week, February 19, 1996, pp. 53-55.

Leavitt, Wendy, Technology & Profit: Crunching More than the Numbers, Fleet Owner, October 1, 1998, pp. 51-55.

Maglitta, Joseph, Smarten Up!, Computerworld, June 5, 1995, p. 84.

Melymuka, Kathleen, Showing the Value, Computerworld, March 27, 2000, p. 58.

Merline, Kimberly, Leading Lights Interview with Leif Edvinsson, Community Intelligence Labs, November 1997,

Moberg, Gunnar, How Skandia AFS Defines and Grows Its Customer Base, Managing Service Quality, 1996, p. 24.

Moore, Michael, Insurance: Two Claimants for No. 1 in Variable Annuities, American Banker, September 14, 1999, p. 10.

Naiman, Linda, Vision Quest: Transforming the Way We Live and Work, Creativity at Work, (Health Work and Wellness Conference proceedings), October 1, 1997,

Nordic Insurance: Scrapping over Skandia, The Economist, January 18, 1992, p. 82.

Racanelli, Vito J., European Trader: Singing the Earnings Blues, Barrons, November 5, 2001, p. MW12.

Roos, Johan, Goran Roos, Nicola C. Dragonetti, and Leif Edvinsson, Intellectual Capital: Navigating in the New Business Landscape, New York: New York University Press, 1998, p. 208.

Simon, Emma, Personal Equity Plans Guide: Charge of the Multi-Pep the Investment Industry Is Divided about the Rapid Growth of Umbrella Funds and the Price You Pay for Them, The Sunday Telegraph, February 28, 1999, p. 67.

Skandia Adds Subordinated Feature to $800m Debt Shel, Euroweek, December 12, 1997, p. 8.

Skandia Increases Pohjola Stake to 10.9%, European Report, January 5, 1996. p. 1.

Skandia Sells Two Subsidiaries, European Report, September 16, 1998, p. 1.

Stewart, Thomas A., and Stephanie Losee, Your Companys Most Valuable Asset: Intellectual Capital, Fortune, October 3, 1994, p. 68.

Strassman, Paul A., Intelligence in Question, Knowledge Management, October 2000,

, Behind the Hype, Computerworld, September 4, 2000, p. 4.

Sweden, Microsoft Encarta Encyclopedia, Redmond, Washington: Microsoft Corporation, 1999.

Swedens Spat, The Economist, July 9, 1994, p. 78.

Syedain, Hashi, A Helping Handicap, Chief Executive, May 2001, pp. 20-21.

Tapsell, Sherrill, Making Money from Brainpower: The New Wealth of Nations, New Zealand Management, July 1998, pp. 36-43.

Up the Fjord, The Economist, August 29, 1992, p. 70.

Weiss, Ruth Palombo, Recipe for Innovation, Training & Development, June 2001, pp. 32-33.

Wormuth, Diana W., Scandinavian Highlights: Insurers Open to Possibilities, Bests Review, October 1996, p. 22.

, Scandinavian Market Reflects Consolidation in Europe, Bests Review, February 1997, pp. 24-26.

Zimmerman, Eilene, What Are Employees Worth?, Workforce, February 2001, p. 32.

Lisa Whipple