Necessity not choice prompts ScotAm flotation
Friday 17 January 1997
That, lamentably, is unlikely to be true of policyholders. The final value of their policies will be higher as a result of what's proposed, but there won't be a free shares bonanza of the type associated with the demutualisation of building societies or Norwich Union. The main purpose of Scottish Amicable's demutualisation and its subsequent flotation on the stock market seems to be to raise capital to strengthen the life fund, which is in a state of some disrepair.
You do not have to look far to find out why. Scottish Amicable set about a very rapid and aggressive expansion programme in the 1980s, led from the front by the formidable Bill Proudfoot. It is now suffering the consequences - a highly restricted investment strategy. This is because the rules require investment in equities to be backed by large amounts of capital. If that capital is depleted by taking on new business, investment performance is eventually going to suffer, since the life fund will be forced out of high-performance equities and into safe but low-performing bonds.
This appears to be what's happened at Scottish Amicable. Just look at the figures. Standard Life, probably the most financially healthy of the big mutuals, has just 17 per cent of its funds in cash and fixed interest. At Scottish Amicable the proportion has risen to a massive 41 per cent, which means it has dramatically missed out on the bull market of the past four years.
And if ScotAm needs more capital now, this is doubly likely to be the case in future. Scottish Amicable is faced by a progressively more competitive market place and, because so many life companies are choosing to demutualise by being taken over, some much better capitalised rivals than it has had to deal with in the past.
The bottom line is that there is undoubtedly money for policy holders in these life assurance demutualisations, if only because extra capital ought to mean better investment performance, but they hardly mirror the building societies bonanza. For certain big, well-run mutuals with adequate capital resources, such as Standard Life, the interests of policy holders are much better served by remaining mutual.
- 1 Woman 'suffocates newborn baby in plastic bag and puts it in her desk minutes after giving birth'
- 2 I've been called an abusive and dangerous parent, when all I did was listen to my transgender child
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 4 Teaching profession headed for crisis as numbers continue to drop and working lives become 'unbearable'
- 5 Chinese student carries disabled friend to school every day for three years
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...