A win-win

– why Nordea’s pension and life insurance company sell-off became a reality


March 2019

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Henrik Bjerg Tufvesson

The article was originally authored by Olaf Valentin.

"Over the last several years, it has become more and more clear that Nordea has not been the right owner of Velliv. Not because Velliv hasn’t created results, but because it’s difficult to fit the business model for the Danish pension and life insurance company into Nordea’s efficient banking machine. We have been subject to policies and guidelines as a systemic bank based on Swedish legislation, and this has affected our strategy and business development in an unfavourable direction. The separation has clearly been a win-win situation for both parties.”

This is how Gitte Aggerholm, CFO of Velliv, formerly called Nordea Liv & Pension until autumn 2018, answers the question of why Nordea’s pension and life insurance company sell-off became a reality.

According to Gitte Aggerholm, the selloff does not have much to do with the current good market conditions in the financial sector in general. She points out that the popularity and legitimacy of financial conglomerates has varied over the past 20-30 years, and right now there is a clear tendency to focus on the core business and sell off the parts that “don’t go down the assembly line”.

“Nordea sold off general insurance already in 2002 (Tryg Forsikring) after a merger between Unibank and Tryg back in 2000. And recently, activities in Nordea Ejendomme have been separated. Nordea does still have pension and life insurance activities in Norway, Sweden and Finland, but here, the business model is primarily bank assurance to the private market and fits in nicely with the strategy that Nordea has, which is focussed on synergy and economies of scale,” she says.

Short lines of decision-making and high ceilings

But what does the newfound independency really mean for Velliv as an organisation and for clients and employees?

“Clients will first and foremost feel that we are now a truly client-owned company with real membership democracy. If you want influence, you can get it. For example, our board of directors is now made up of individuals who have an interest in the Velliv business, in contrast to previously where the board primarily included leaders from the bank, whose main task was to carry out other business areas in the bank. And one last important point: we distribute the profit we create to our clients.”

As to the question of whether it is the same as when Nordea was the owner, Gitte Aggerholm replies: “It’s absolutely not the same. When we were part of Nordea, the profits went to Nordea as dividends for the capital that Nordea had made available to us. Now with our concept of ‘Your capital’, it’s clients that provide us with capital. This is a huge difference, and it’s the connection to clients that is important to us.

In relation to the separation process itself, the first thing that Velliv did was focus on finding a new name and visual identity – in reality, this was developing a completely new brand. This has had a high priority simply because the agreement with Nordea is conditional on Velliv not using the Nordea name in branding, including the logo and blue colours, for longer than six months after entering the agreement.”

Velliv has managed to do this and in parallel with the process, the company has defined a range of central projects in the continued separation and transition process. For example, the more than 100 group directives and policies, which the old Nordea Liv & Pension was subject to, have been revised and in many cases, they have been scrapped because they simply did not make sense for Velliv. At the life insurance company, an investment function, HR and procurement function and a risk management function has been scaled down to something that makes sense for Velliv, have been established. In addition, an IT separation project has been initiated with the objective of Velliv being completely out of Nordea’s infrastructure within 12-24 months. Another very central factor in the IT project is the development of new digital solutions to clients – an area where Velliv has lagged behind for many years due to lacking strategic prioritisation and funding.

It is also full speed ahead in the organisational and managerial areas. “The returns that we can deliver on our clients’ investment are our primary competitive parameters. Therefore, it has been extremely important for us to continue and extend our competences in the field of investment, and if you look at what we have achieved this year, we can, in all modesty, say that it has gone very well,” Gitte Aggerholm says and continues: “Our goal is to create an organisation built on the values of care, orderliness and optimism, where lines of decision-making are short and where each employee can see the results and meaning of their work.

Before, the logic of decisions that we were instructed to execute was not always clear, and they were sometimes difficult to follow. Why should we, for example, lay off employees when the bottom line grew and new customers were pouring in? It was very difficult for many of our employees to understand.

Now, you come to a company where there are high ceilings and where decisions depend on the bottom line impact more than costs. Despite extreme busyness, we have very satisfied employees who we are able to recruit among the very best in Denmark.”

The future is called scale and efficiency

As to the question of how she sees the future within the field of pension and life insurance, Gitte Aggerholm says: “We see a consolidation, and there are several good reasons for this – first and foremost, the Solvency II Directive, which not only makes heavy demands on companies’ solvency but also their administrative muscles. Therefore, we are also seeing some occupational pension companies beginning to interfere in the commercial market, as scale is crucial.

We see Danica, which bought SEB; AP, which took over Skandia; we see Arkitekterne and Dyrlægerne merge with Sampension; and we also see PKA who really wants to enter a commercial collaboration with Danica.

Today, the Danish life insurance and pensions market consists of four big commercial or customer-owned companies as well as Topdanmark and Alm Brand. The question is whether this will still be the case in five years, when it is also likely that more occupational pension companies will have come together in one way or another in order to interfere in the commercial business market.”