Independent insurance industry analyst Ned Cazalet believes Standard Life has only two options to recapitalise if the FSA believes its capital position is as dire as he thinks it is.
In a release issued over the weekend, Cazalet says he belives the capital position is relatively unchanged from the 2002 year end, but this was still cause for concern. He suspects the FSA now holds a similar view to Cazalet Consulting.
on Standard's capital position and says it may result in the mutual insurer having to reduce the amount of new business it does, cut bonuses and reduce payouts more than most other life offices and reduce its with-profits fund equity weighting from around 55 per cent to Cazalet's suggested 25 per cent.
Cazalet says the debt markets are effectively closed to Standard because of the little “equity-type capital” it has and that recapitalisation would almost certainly need to be carried out hrough demutualisation and flotation or trade sale.
He goes on to say “heads would need to roll at the top of Standard Life” to make floatation a credible proposition for new investors. Cazalet says: “In our view, heads would need to roll at the top of Standard Life to make this a credible proposition for new investors subscribing hard cash to rebuild the company, which has blown more than £12bn of capital during the past three years, much of which was lost on account of Standard's reckless and financially imprudent leadership.”