Standard Life policyholders will receive letters from today confirming the life insurer plans to demutualise if members support the proposal in 2006.
Details of the group’s plan to list on the London Stock Exchange are still sketchy at this stage, as the firm has yet to decide whether the Special General Meeting will be held in May or June 2006.
But the provider says in a statement this morning it will be writing to eligible members before the end of this month to check their policy details to ensure they are eligible for a windfall.
No indication has yet been given by Standard Life as to how much policyholders might receive in compensation, but early indications suggest the average payout could be between 500-£1,000 per eligible member.
In order for the demutualisation to go ahead, at least 75% of voting policyholders will need to support the proposals, and those members whose with-profits policies mature on or after 18 October will be eligible for free shares in Standard Life plc.
That said, not all of its 2.4 million eligible members will receive shares in the listed company, according to Standard Life, and membership of the life group closes from tomorrow (18th October) so new business received from tomorrow will not be eligible for membership rights.
While most members will get an allocation of free shares as compensation for their mutual membership, some members, including those residents in the United States, Australia, New Zealand or “certain other overseas jurisdictions” will instead receive cash or policy enhancements, says Standard Life.
Under the terms of the deal, the provider says eligible members are “predominantly members in respect of a policy which has been continually invested in with-profits since 31 March, 2004...and are still in force on the day of an SGM”, although the firm also points out most new members who have made a with-profits investment since 31 March 2004 waived their rights to enter the vote and receive demutualisation compensation.
Those qualifying members who took up policies prior to March 31st 2004 and which are still active after 18th October 2005 will be eligible for a windfall.
According to Sir Brian Stewart, Standard Life’s chairman, the benefits of remaining as a mutual insurer are no longer apparent to policyholders as while with-profits is still a popular investment in Germany, for example, there are increasing risks to with-profits policyholders on “progressively fewer people” and the firm no longer has the flexibility to offer extra benefits for being within a mutual.As a result, it is necessary to unlock the value of the firm, reduce the risk to with-profits policyholders and gain access to external capital to help secure the firm’s position.
“The Board continues to believe that demutualisation and flotation is the best way forward and in the best interests of members, customers and the Company. We expect to put proposals to members ahead of a Special General Meeting next May or June,” says Stewart.
“If the proposals are supported by members, most eligible members will have the opportunity to receive free shares in place of their membership. However, it is too early to speculate on the value of these shares.
“Under the leadership of Sandy Crombie, we have made excellent progress since the strategic review of the business began in January 2004. There remains a lot of work to be done before our proposals can be put before members, but I believe Standard Life has an exciting and successful future. The proposed demutualisation and flotation are key stepping stones in realising our ambitions,” adds Stewart.
Even if policyholders vote ‘yes’ to the deal, plans still have to gain approval from both the Financial Services Authority and the Court of Session in Scotland as well as other legal and regulatory hurdles.
Independent qualified actuary - Mike Arnold – will also review the likely effects of the demutualisation proposal and prepare a report to be submitted to the Court of Session.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email [email protected].IFAonline
Joined as head of strategy, multi asset, in June
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