STOCKHOLM (Dow Jones)--Old Mutual PLC (OML.LN) supports a proposed new ownership structure for Skandia Liv, the life insurance subsidiary of Foersaekrings AB Skandia (SDIA-SEK.SK), Old Mutual's chief executive said Friday.

Old Mutual, a London-listed, South African financial services company, in September launched a takeover bid for Skandia, Sweden's largest insurer.

Skandia Liv, which is run as a mutual life insurance company but is owned by Skandia, Friday proposed passing its ownership over to its policyholders in order to become a pure mutual life insurer.

The restructuring must be approved by Skandia shareholders. Old Mutual's offer period expires Dec. 16. The company recently cut the level of acceptance to "more than 50%" from 90%.

"We would, in principle, vote in favor of the proposal," Old Mutual CEO Jim Sutcliffe told Dow Jones Newswires.

At the same time, Sweden's Ministry of Finance is running an investigation to find out how to strengthen the position of insurance policyholders.

Politicians are aiming for new legislation on corporate categories for insurance companies in 2008. So far, the findings point to a scrapping of the "hybrid" ownership form of Skandia Liv and 11 other insurers, as it may cause a conflict of interest when it comes to corporate governance.

"It's a fundamentalproblem that policyholders (in these companies) contribute capital and, at the same time, have a very limited influence over, and insight into, the companies," Sven-Erik Oesterberg, Sweden's deputy finance minister, said in a speech recently.

One example was Skandia's sale of the right to manage assets of Skandia Liv to Norwegian financial services group Den norske Bank, now DnBNOR ASA (DNBNOR.OS), in 2002. Skandia Liv last year claimed more than SEK2 billion from Skandia, saying the profit from the sale should go to the policyholders of Skandia Liv.

The matter will be settled by arbitration. Skandia said it expects a ruling on the dispute next year.

Under Skandia Liv's proposal Friday to change its ownership, the shares in Skandia Liv would be transferred to a foundation with the aim of converting Skandia Liv to a pure mutual company.

Skandia Liv is run on a mutual basis, but its 1.2 million policyholders lack influence at general shareholder meetings, since it is wholly owned by Skandia.

"The new governance arrangements would be to the benefit of customers," Old Mutual's Sutcliffe said.

Skandia Liv has total assets of SEK270 billion but a value in Skandia's books of only SEK600,000, according to Skandia Liv Chairman Bo Ekloef.

In valuing Skandia's shares, Sutcliffe said Old Mutual "always put a 'zero' value on Skandia Liv."

"Skandia Liv's value is zero only because it has a capital that you, as an owner, can never turn into cash or get dividend from," Ekloef said.

Ekloef added that the real value of Skandia Liv lies in sales and cost synergies between Skandia Liv and Skandia.

"The value of the synergies is very large - I would say several hundred million (Swedish) kronor per year," he said.

Sutcliffe said those synergies would also remain with Old Mutual as an owner of Skandia.

Old Mutual has said it needs just above 50% of acceptance for its takeover offer for Skandia to complete it.

Skandia's board has rejected Old Mutual's offer of SEK43.60 a share in cash and equity. However, since the offer was launched, a rise in the value of Old Mutual shares and an appreciation of the British pound has pushed up the offer value to about SEK47.16 a share.

At 1545 GMT, Skandia's shares were off SEK0.1, or 0.2%, to SEK46.80.

Company Web site: http://www.oldmutual.com

http://www.skandia.com -By Maria Akerhielm, Dow Jones Newswires; +468 54513093; [email protected].