The building societies, the mutual insurers, the Co-op ... mutual societies have a long and distinguished history. But what sort of future do they have now that some of the biggest have converted to plc status? Tony Lyons introduces a two-page survey showing why the surviving mutuals believe they still have a lot to offer

Mutual societies have been an established part of the financial scene for over two centuries. Not listed on any stock exchange, and owned entirely by members, they had a cosy existence for most of the time.

There are different types of mutual societies. These range from the Co- operative Society to building societies owned by their saving and borrowing members, plus life offices owned by with-profits policyholders.

Many mutuals were formed originally by local worthies to provide local benefits and financial assistance to members, whether to provide housing in the case of building societies or life cover by the insurers. They had no outside shareholders to demand a return on capital invested.

The past couple of years have seen the existence of mutuals under challenge. As the banks in particular have sought to increase their product range, offering under one roof all the financial services that their customers want, new entrants have emerged in their more traditional markets in the shape of direct providers and supermarkets.

Who would have thought, barely a few years ago, that one might be able to buy investments or pensions at Marks & Spencer, that Richard Branson's Virgin operation would become a significant force in savings and mortgages, or that the some of best instant savings deals would come from Tesco and Sainsbury's.

In order to compete in what they see as a much bigger marketplace, some of the largest mutuals have changed to plc status, enriching their members in the process. Abbey National was the first in the queue nearly a decade ago. The recession slowed the process, however. In the last couple of years Abbey has been joined by several large rivals including Halifax, Alliance & Leicester and Woolwich. They believed that by having a stock market listing they could diversify while at the same time shareholder pressure would increase returns by enabling them to become more efficient.

All this has led to wild speculation as money flooded into potential demutalisers, especially building societies, in the hope of making windfall gains. This dramatically slowed down after many of the beleaguered societies raised their minimum deposit rates for becoming a member from pounds 1 to pounds 1,000 or more. The Government is also coming to their aid by changing the rules so that at least half the members have to vote on any change in mutual status.

As it is, the recent stock market flotations, including that of the insurer Norwich Union, together with a number of take-overs, including Bristol & West, National & Provincial, and Scottish Amicable, have put more than pounds 30bn into the pockets of their former members, equal to some pounds 1,700 for every adult in the country.

The increased competition from proprietary companies with their outside shareholders has made the committed mutuals, and their near cousins the provident societies, sit up and take stock. Gone is the former complacency. Now they are striving not only to retain the loyalty of their existing members but also to compete head on with all comers, as this survey seeks to show. The evidence shows that they are winning the debate.

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