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Standard Life: float vote is just end of beginning

5th June 2006
By Ingo Nachbaur

Standard Life has received the go-ahead from members for demutualization.

Standard Life's plans for demutualization were overwhelmingly welcomed by its members with 98% of voters favoring flotation. However, recent stock market trends have cast a shadow on the demutualization process which could affect windfalls. Indeed the vote to float may only be the first of a number of hurdles the insurer faces, among them the possibility that it could become a takeover target.

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The day before the historic vote on demutualization, UK life insurer Standard Life announced better than expected first quarter results with profits of GPB30 million - compared to GBP33 million for the whole of 2005. Sandy Crombie, chief executive of Standard Life believes that "these results further underline that the business has made a strong start to 2006, and demonstrate we are progressing well in building a business for the future".

Of course, whether the results will convince potential investors to put their money into Standard Life plc remains to be seen. The first step towards demutualization was taken on May 31, 2006 when more than 1.5 million members (or 98% of respondents) voted in favor of plans for a stock market flotation.

The decision to float had been widely expected, although the scale of the landslide vote shocked observers. Without doubt, many voters were lured by the prospect of an average windfall of GBP1,700. However, recent stock market volatility could pose a threat to Standard Life and its members. Share prices of insurers are more prone to market fluctuations than other listed companies as both investments and new business inflows are affected.

Despite Mr Crombie's reassurance that the Edinburgh-based firm will remain a "very fierce competitor" with the ability to "compete wherever we want to compete", Standard Life is entering a crucial phase in its history. Potential issues from the removal of member-owned independent status may even include a takeover offer followed by further job losses.

In addition, the uncertainty that arises during the period of adjustment could damage new business inflows. The biggest challenge for Standard Life is to retain IFA and investor confidence and hold its position as one of the largest players in the UK life and pensions market.
'End Intelliext

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