Standard Life's with-profits fund is like a “dead parrot resting” and is effectively closed in practice, says independent insurance analyst Ned Cazalet.
Cazalet is predicting that bonuses, payouts and equity weightings will be cut in the wake of Standard's strategic review which will consider demutualisation.
He says it effectively looks as though the firm has closed the with-profits fund and that it will now be “trading further down the scale”.
Cazalet says the business has no true excess capital and describes the Standard strategy over the last two years as “getting into a Ferrari in a busy playground and driving at 130mph”, referring to what he says is a loss of more than £12bn capital during that time.
He believes the company might now be worth around £3bn-£4bn, massively down from his estimate of £16bn in 2000, and says people should forget about any idea that this is a “windfall play” if the company does demutualise.
Commerzbank insurance analyst Roman Cizdyn describes the Standard announcement as “dramatic” and believes it is heading towards demutualisation.
He says demutualisation would create a more disciplined market as Standard has not had to answer to shareholders on issues such as pricing and products.
Cazalet says: “Demutualising is a complete about-face on its position. Does that strike you as a strong, robust company? If it was, would Lumsden have his P45 and would the company be taking the action that it is?” Cizdyn says: “It does not look like a company that is a total and utter mess but something needs to be done.”