Scottish Amicable `no' to Alliance tie

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The Independent Online
Scottish Amicable, the Glasgow-based life company, has admitted holding possible merger talks with the Alliance & Leicester building society, but said these had now ended, writes Magnus Grimond. The company denied a weekend report that it was planning to give up its mutual status.

Brendan Llewellyn, Scottish Amicable marketing director, said yesterday the talks with the Alliance followed its decision last year to set up its own life operation. The building society has been tied to the Scottish company for the sale of life and pension products for the past six years.

Scottish was one of several organisations which tendered for Alliance's back office work, but it was subsequently decided that there should be more substantive discussions, including the possibility of a joint venture or exploring other options. During the course of these talks the possibility of a link between the two organisations was considered, Mr Llewellyn said, but those discussions have now ended. He gave no reason for the termination of the talks, although he said there were no plans to abandon mutuality.

Separate negotiations about the provision of support services for Alliance's life company, due to be launched next year, have been going on for a number of months. Scot Am is competing against others, but already has experience in the field as it provides back office services for J Rothschild Assurance. Mr Llewellyn said they hoped to know whether they had won the contract within the next month.

Abandoning mutual status and conversion to a public company would have been necessary before any stock market float for Scot Am. Given the experience of others, a merger would also have made sense for both companies.

Following the decision by the Halifax and Leeds building societies to merger, the current received wisdom is that building societies need to merge to attain the sort of size needed to survive as independent entities on the stock market, given their attraction to possible predators. Meanwhile a life company like Scottish would receive a frosty reception from investors at the moment, given the unfriendly regulatory changes the industry is going through and the impact on pension sales of recent bad publicity about "mis-selling".