By Sudip Kar-Gupta

LONDON (Reuters) – Insurer Old Mutual is to sell its Nordic business at a paper loss to Skandia Liv for 22.5 billion Swedish crowns to cut debt and return surplus capital from the deal to shareholders.

The businesses being sold comprise Old Mutual’s long-term savings and banking operations in Denmark, Norway and Sweden operating under the Skandia brand.

Old Mutual had originally bought those Skandia businesses for around $6 billion towards the end of 2005, but the company has come under pressure from shareholders to divest non-core assets in order to improve returns for investors.

“The sale of Nordic to Skandia Liv represents a truly unique opportunity to create value for both Skandia Liv’s policyholders and Old Mutual’s shareholders through unlocking significant synergies from the combination of Skandia Liv and Nordic,” chief executive Julian Roberts said on Thursday.

Roberts added that Old Mutual’s Skandia UK business would not be impacted by the sale, and that Old Mutual expected to complete the deal towards the end of the first quarter of 2012.

Old Mutual shares surged nearly 10 percent higher in early morning trade on the back of the planned sale. Its London-listed shares were up 9.5 percent at 121.41 pence, making them the top gainer on Britain’s benchmark FTSE 100 index.

“It’s a hugely positive announcement. It goes a long way to reducing the complexity of Old Mutual, and will make the group less geared and easier to understand,” said an analyst, who declined to be named.

OLD MUTUAL’S “CONGLOMERATE DISCOUNT”
  Continued…