Standard Life may drop its plans to demutualise as anger grows within the Scottish insurer about what is seen as unfair treatment by the Financial Services Authority.
The group lost its chief executive, Iain Lumsden, last month and announced it was considering ending 178 years of mutual status after a row blew up with the City regulator about how the new "realistic reporting" would affect Standard's capital position.
As a result, it has sold £7.5bn of equities over the past six weeks, and on Wednesday revealed figures that showed its capital strength was twice the minimum required by the FSA.
Many senior executives within the company believe the figures show that Standard does not need to drop its mutual status. Some are actively opposing any demutualisation.
"We should look for alternatives that give us ways to raise capital without being on the market," a senior figure told The Independent on Sunday. These include setting up special-purpose vehicles, with a select group of friendly large shareholders that can invest in capital-intensive business areas.
Merchant bank Lazard isconducting a strategic review and will report in April.
"There are a lot of people expecting this will be the start of the flotation process. They could be disappointed," said a source close to the insurer.
One of the reasons Standard may put off any plans to demutualise is that it does not believe it would get the best value by floating now, as the stock market has not recovered from the bear run that ended last spring.
Another is a feeling that Standard executives do not want the strategy of the company dictated by the FSA.
Many are angry that they were in effect forced to sell the £7.5bn of shares when they did not believe this was in the best interests of policyholders. "There are policyholders who will lose out because of what we have had to do," said a fund manager at Standard.
There is a body of opinion, which goes right to the top, that Standard was treated unfairly by the FSA in January.
Many within the life and pensions industry believe the realistic reporting method is biased against mutual companies, since it means they must make reserves against the extra returns they give policyholders because they do not pay dividends to shareholders. Public companies do not have to make reserves against their dividend payments.
In a letter sent earlier this month to Vincent Cable, the Liberal Democrat spokesman on trade and industry, the FSA's chief executive, John Tiner, denied any bias.
Senior figures in the Scottish financial community have also argued that Standard was put under too much pressure by the FSA last month when it forced the insurer to publicise the row over realistic reporting. They point out the FSA is still confused about the application of its new rules, which it has delayed while it sorts out the tangle. They argue the FSA chose to make Standard an example, knowing it could not fight back.
"It's like the BBC after the Hutton report," said one senior figure.
"You can't argue against the referee, because he'll just send you off," said a source close to Standard.Reuse content