The board of Europe's biggest mutual life insurer, Standard Life, yesterday gave the green light for its demutualisation, clearing the path for a £4 to £6 billion London flotation next year.
The Edinburgh-based society fought off an attempt by some of its members to demutualise five years ago but, after a strategic review last year, it is urging members to approve the flotation to help shore up its balance sheet. It is expected to raise at least £1 billion in new funds as part of the offer.
Standard's members will vote on the proposal next May or June and it aims to float "as soon as practicable" after that if 75 per cent of eligible members who vote agree to end its mutually owned status.
The insurer is expected to list in July in what will be one of Britain's biggest and most hotly anticipated initial public offers in recent years.
Standard Life said anyone who buys a policy after October 18 would not be eligible for membership rights.
Analysts expect the insurer to be valued at between £4 billion and £6 billion, which could yield a windfall for members of between £500 and £1,000 each.
But analysts warned the valuation will be swayed by outside factors such as the value of the stock market and life insurance stocks plus investors' views on the strength of the company's balance sheet, how much capital it will raise and the turnaround plan for its UK business.
"This is a company that has gone through a dramatic change in its core UK business since February last year and that new business model has really only started motoring since the start of this year," said Ned Cazalet, UK life insurance consultant.
"But Standard is trying to reinvent itself in a marketplace that continues to be difficult and unstable and so it will be interesting to see what the City makes of it."
Mr Cazalet said an accurate estimate was impossible but Standard was likely to be nearer to Legal & General's market capitalisation of £7 billion than Friends Provident's value of £3.8 billion.
"You can say with a reasonable amount of certainty that this will be a FTSE 100 stock, and therefore institutions will need to buy this stock," he added. Standard Life said investment banks Lazard, Merrill Lynch and UBS would advise it on the offer.
Five years ago, Standard Life fought off an attempt by some members to force its demutualisation, but it later dropped its opposition amid poor returns from its investment funds.
The investment downturn contributed to a reduced capital base for Standard Life and other insurers and came at a time of less trust in the financial services industry and tighter regulations to protect policyholders, meaning Standard Life has to keep more capital in reserve.
Standard Life's UK sales rose 10 per cent in the first half of this year, the first increase in more than two years, and overall insurance revenues rose four per cent to £619 million.