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Keep the Standard flying as a mutual

Mutuality works for Standard Life. For the last 75 years it has been the

company&#39s abiding principle and is the underlying reason for its position

as one of the UK&#39s leading life and pensions providers. And there is no

reason why mutuality would not continue to work for Standard Life long into

the future.

Sadly, enormous pressure is being applied to persuade policyholders to

abandon mutual status – despite it having served them so well over the

generations – and convert Standard Life into a plc.

It should not be overlooked that Fred Woollard, the main protagonist, has

much to gain from the demutualisation of Standard Life. By his own

admission, he expects to make at least 150,000.

The reality is that demutualisation would be damaging for Standard Life.

Our mutual status – which means the company is owned by its members and run

primarily for their benefit – is an important contributor to the strength

and stability which attracted them as customers in the first place.

Not having shareholders has allowed the company to concentrate its efforts

on meeting the needs and expectations of its customers, providing excellent

returns on investments and developing the business. Independent statistics

show that mutual comp- anies have consistently outperformed plcs on returns

for life and pension policies over the longer term. Analysis of figures

shows that returns from mutuals have, on average, been around 4 per cent

higher than plcs over the last 15 years. Standard Life policyholders have

done even better. Our payout record is, on average, 9 per cent better than

the average plc.

Intermediaries, perhaps more than anyone, understand the benefits of

mutuality. We have awards to prove it. Standard Life was Money Marketing&#39s

Company of the Year in both 1999 and 2000 and has been the PIMS Life &

Pensions Company of the Year for four years running.

To convert the company to a plc, thereby distributing “free” shares to

policyholders, may seem superficially attractive but it would result in

wide-ranging changes to the company. Ownership of the company would change.

The company would belong to its shareholders who would take priority over

policyholders in controlling the company. While ownership might initially

lie with policyholders, this would quickly change as institutions build up

their weightings and make their presence increasingly felt.

So what would be the quid pro quo?

In most cases, it would not be the “average” windfall of 5,000 to 6,300

per policyholder being touted by Fred Woollard. Nobody can predict the

value of Standard Life shares in a stockmarket flotation which will

probably be two years away.

To illustrate what might happen, let us assume that the company might be

valued at 12bn – one of the figures used by Mr Woollard. On a typical

distribution basis, with a minimum payout of 250, about half of the members

would receive windfalls worth less than 2,500. One in five would receive

6,000 or more but hundreds of thousands of policies would be due less than


Anyone who suspects these figures have been pitched deliberately low

should remember that this illustration is based on one of Mr Woollard&#39s own

valuations of the company. They should also consider how other former

mutuals have performed since demutualisation. It is quite clear that being

a successful mutual does not ensure success as a plc, as shown by the fact

that shares in some former building societies are currently trading at less

than their flotation price.

So before voting on June 27, members will need to consider the possible

long-term consequences of a short-term gain of uncertain value. And for

anyone minded to consider it, there is a much greater principle at issue


Standard Life has always strived to treat all its members fairly and

equally. Every current member benefits from our strong capital base,

something which has benefited many previous generations of policyholders.

They have not paid for this privilege and we believe that the same benefit

should be passed to the next generation of members.

The proposal to demutualise Standard Life has been put forward by one

two-hundredths of 1 per cent of the voting members of the company. Should

such a small minority be allowed to pick off a large, successful

organisation such as Standard Life? Of course not.

There is absolutely no business reason for demutualisation. Standard Life

has no need of additional capital – one of the reasons other mutuals have

either floated or been taken over.

Other reasons which have been put forward – transpar- ency,

accountability, efficiency and competitiveness – are equally spurious.

The only reason that Standard Life policyholders are being asked to

surrender the company&#39s mutuality is to add to the existing wealth of a

small number of people with no real interest in Standard Life. And that is

no reason at all.


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