SWEDEN – Insurer and savings products company Skandia says it has agreed to sell its American arm to Prudential Financial Inc. for 1.15 billion dollars.

“Skandia announces that an agreement has been reached with Prudential Financial, Inc. (US) under which Prudential Financial will acquire American Skandia,” Skandia said in a statement.

There will be a significant hit to Skandia’s bottom line. The transaction “will incur a total negative result impact related to the transaction of 4.4 billion kronor (0.48 billion euros) net after tax”.

The sale follows a 255 million dollar capital injection into the American Skandia that was announced in the third quarter.

The proceeds of the transaction will be used to repay external debt.

The move is designed to improve profit margins and shareholder returns, increase strategic flexibility by substantially reducing debt and cash consumption. Skandia will focus on developing its European “core franchises” and its expansion in new growth markets.

Skandia made an operating loss of 2.3 billion (0.25 billion euros) in the third quarter.

Skandia said it expects lower future growth and profitability in the US market, given the change in market conditions and its impact on American Skandia’s rating environment.

Skandia chairman Lars Ramqvist said: “This is a solid solution from the shareholders’ perspective. The board fully supports Skandia management’s plans for further profitable growth that this transaction has enabled.”

Chief executive Lars-Eric Petersson added that the deal has enhanced Skandia’s financial and operating flexibility and that it would have no impact on any of the company’s other operations.

The transaction is subject to regulatory approval and is expected to close during the second quarter of 2003, Skandia said.

Prudential Financial has around 533 billion dollars in
total assets under management.