Standard Life considers market flotation

LIFE ASSURER Standard Life said yesterday that it was considering a stock market listing, which will trigger windfall bonuses for the insurers’ millions of policyholders, including 40,000 in Ireland.

The society, in discussions with Britain’s Financial Service Authority (FSA) watchdog over its balance sheet, said it launched a strategic review of options for changing its structure, including demutualising.

If Standard Life decide to pursue a flotation it will mean bonuses for members, who could reap up to 5,000 each.

However, the company stressed that demutualisation was only one of the options. If the society was to float the process would take up to two years. The review was prompted by the introduction of an accounting regime by the FSA, to calculate insurers’ assets and liabilities on a more realistic basis.

Under the new regime Standard Life will have to increase its reserves, and the society said it would have access to more options to raise money as a listed company than it would as a mutual.

However, the society said it would no longer include these benefits in policy projections, although it stressed that it would continue to pay them and the maturity value of policies would not change as a result of the move.

The society said its financial position remained “very strong” in both relative and absolute terms, and on November 15th its available assets were stg£4.6 billion compared with stg£4.2bn the previous year.

It added that the FSA had reduced the level of implicit items, such as the inclusion of future profits, it was allowed to include in its balance sheet from stg£1.75bn to stg£1bn, and as a result it would raise stg£750m in debt to help fund business.

The society will also set aside increased reserves for guaranteed bonuses paid to its policyholders, and will improve the calculation of its future liabilities.

Chairman Brian Stewart said: “Standard Life remains financially strong.

“We have to recognise that the world is changing and this is why the board commissioned a strategic review to examine how we should best respond to this changing industry and regulatory environment.”

The society will announce the preliminary findings of the review at its annual general meeting on April 6.

But not all members are happy at the prospects for the society. Gordon Nardell, a barrister and policyholder at Standard Life, said asking members to vote in favour of demutualising was like asking a turkey to vote for Christmas.

He said: “Part of the problem that has affected Standard Life is having too great a holding of its investments as listed equities.”