Friends Provident has linked its desire to demutualise to its ambitions in the stakeholder pensions ...
Friends Provident has linked its desire to demutualise to its ambitions in the stakeholder pensions marketplace.
Analysts estimate the market value of the mutual on the stock exchange at around £4bn, although Keith Satchell, group chief executive of Friends Provident, said the mutual had not yet decided how much it would look to raise through a flotation.
Satchell said: "We are competing well and over the short term this will continue. However, we have decided to list so we can grow in the medium to longer term. Stakeholder and the general trend of margins getting thinner means companies need large scale to be able to compete."
Last week the mutual announced that it was sending letters to its 1.7 million members with voting rights, notifying them of the its intention to go for a listing. The demutualisation vote will take place in the early part of next year with the insurer hoping to obtain a stock market listing towards the end of 2001.
The announcement came a week after Standard Life said it would hold a vote with regards to its mutual status in June. One argument which Standard Life has used in favour of maintaining its mutual status is that policyholders would be worse off if it was a listed entity. Satchell did not want to be drawn into the Standard Life situation but said Friends Provident policyholders would not be worse off if they voted in favour of demutualisation. He added that in the case of demutualisation an independent actuary had to be appointed to ensure existing benefits to policyholders were not damaged.
The biggest windfalls will go to the 750,000 with-profits policyholders, whose windfalls could average around £3,000, according to analysts, assuming the company floats with a market cap of £4bn.
Policyholders with London & Manchester and National Mutual Australasia are not entitled to vote. In order to protect the business and the position of existing policyholders, the mutual has introduced a range of measures to ensure new policies, switches to with-profits investment, and non-contractual incremental payments under existing policies, will not give rise to windfall benefits.
Both existing and new policyholders will benefit from the greater financial flexibility that Friends Provident and the improved investment performance which should result, according to Satchell.
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