Standard life to Float Windfall Shares

leosayer39

Hi all,

Thanks Payless, we'll have to keep a close eye on this one. Don't want to lose out just because the policy reaches maturity.

Luckily enough it isn't attached to our mortgage so we will be free to do with it whatever we want.

Leo

redlakes

Avalittle

V. INTERESTING
thanks for taking the time.

(In the past Martin's said it's preferable to post a link to an article like Cliff D'Arcy's rather than cutting & pasting it verbatim - copyright etc...)  ;)

Point taken, know for next time, sorry

Galstonian

Well given the attitude of all the with profits clients so far I guess the "benefits of mutuality" are non-existant and the flotation will be going ahead then...

Lady_K

This might be a daft question but is this bad news for me as an endowment holder with S.L.? I mean I'm claiming for a mis-sold endowment coz I didn't even know it had anything to do with the stock market I never do anything that involves that kind of risk. So arent the risks worse if this happens... I don't even know what floating on the stock market actually means to be honest

payless

After floatation a % of the profits currently given to w/p policy holders will belong to shareholders.

Galstonian- yes, short term , whether its the right thing or not,- I agree if it goes to vote I can't see any other result.

redlakes

I think certainly that the vote will mean a float of Standard Life.
A previous vote where members agreed to stay a mutual for the benefits hasnt really seemed to help. The many people that were misled when they took an endowment and the vast shortfalls, not just with Standard Life but most companies, have left people pretty fed up. Standard Life policy holders will be relieved that there may be a small windfall in the offing and grateful for anything extra back. Hopefully, they will have taken other action to plug the gaps already, by way of switching to repayment or part repayment mortgages, and so my guess is that whether its better long or short term to float, they wont care, as long as the ones that qualify have some guaranteed money now, whatever that may be, they will vote yes.

Galstonian

Lady_K,

you could still receive a windfall if SL floats provided you still have a with profits policy.

Standard Life is owned by everyone who holds with profits policies. This is the "benefit of mutuality", everyone gets a share of the profits of the company. Standard Life exposed themselves to great risks and lost lots. As a result they have had to scale back on risks even more so they can become more solvent again.

Floating the company means that the owners of the company (with profits policy holders) will sell shares in the company on the stock exchange. WP policy holders will probably receive some shares in the company and the money raised from the other shares will be funnelled into the company to help dig it out of the hole it is in. After that the benefits of a harder edged attitude and ruthless efficiency (which we all know is inherent in all companies listed on the stock exchange?!) will mean that Standard Life will return as a leaner meaner and ultimately more profitable beast (in theory at least).

Practically all investments are based on stocks in some way or other, at least any that do not give a fixed return but offer greater potential growth.

Galstonian

avalittle,

I think standard life have pretty much tied their own noose - they have been vociferous in leading the "stay mutual" front yet have underperformed a market that was in a terrible state anyway. Perhaps there is a general bad feeling across the market but I think it would be best to try and concentrate on how SL have performed in relation to others in the same circumstances - the flotation isn't about mis-sold endowments and its not just endowments anyway; other customers have with profits funds as part of their investments, for example pensions.

Off the top of my head I reckon windfalls of somewhere vaguely above £300 - hardly enough to plug the gap in most endowment mortgages and certainly not enough to buy much of a pension.

Lady_K

Thanx Galastonian

How can I tell if I've got a with profits policy where would it say on the papers I have? All I know is its a 25 year endowment mc 80 whatever that is or is it something else I should look for on statements ect?

Pal

I agree with Gal. The payment from mutuality is only like to be a few hundred pounds at most.

SL is doing this to boost its cash reserves, and that means giving less shares to existing members and instead selling most of the shares on the market to raise cash. This money would then, in theory, be used to boost future returns on the with-profits fund by allowing SL to underwrite further new business and keep it growing.

I guess one way of looking at it is that the current owners of SL (the with-profits policyholders) are holding a company that is technically worth very little. They will then sell most of the company on the market to shareholders who will pay over the odds for the shares on the basis that most of the cash they pay will go straight into the company that they now own, rather than going to the previous owners, the policyholders. In theory, the new shareholders are paying themselves, with a small token amount going to the existing policyholders as a fop to get them to vote it through.

I cannot really see any way that demutualisation would be a good deal for the existing policyholders. The benefits of mutuality are tenuous but surely Standard Life would have been in a far worse situation had it been floated years ago and had still taken the same decisions, but had also been paying out money to shareholders as dividends?

In the end the existing policyholders have a choice to make. Stay mutual and stay with a crap company that cannot afford to pay you decent returns and is entirely at the mercy of investment markets, or alternatively demutualise, give away a huge chunk of the company in return for a token windfall, and then hope that the company might be better run going forward, despite that fact that any profit being generated going forward now has to be shared with the new shareholders.

A rock and a hard place I guess.