Standard Life: The Float Is On!

Members of the Standard Life Assurance Company have voted overwhelmingly in favour of converting the mutual (member-owned) life assurer into a stock market-listed company.

Over 98% of Standard Life members approved the firm's plans to demutualise and float the company on the London Stock Exchange. In total, 1,545,314 voted in favour of demutualisation, with only 32,474 dissenters. Standard Life needed three-quarters (75%) of its members to approve its flotation plans, so this resounding "Yes" vote probably exceeded the directors' wildest expectations.

Thus, Edinburgh-based Standard Life can now proceed with its plans to become a plc (public listed company). Subject to approval from the Scottish courts, the company will end eighty years of mutuality by floating on the stock market in July.

Given that Standard Life plc will be valued at around £5.5 billion, it is certain to enter the FTSE 100 at the next review of the blue-chip index, which measures the value of the UK's one hundred largest listed companies.

However, as I explained in 2.4 Million Windfalls On The Way, two-thirds of Standard Life's seven million customers worldwide will not receive shares in Standard Life plc. Only the 2.4 million members who have a stake in Standard Life's with-profits fund will receive windfall shares. The average shareholding should be worth around £1,667, with the minimum award of 185 shares being worth just under £500. These members, and some other customers and employees, will be entitled to buy additional shares at a preferential price. Details of this preferential offer are being mailed out from 15 June.

Furthermore, in order to encourage members-turned-shareholders to hold onto their shares, Standard Life will offer one bonus share for every twenty shares which members still hold one year after the initial public offering. In addition, the company will become the UK's fifth-largest listed life assurer, which could make it a takeover target in the next round of industry consolidation.

However, there is some evidence to suggest that converting from a mutual to a plc often leads to lower returns to policyholders, because of the requirement to pay dividends (the income from shares) to shareholders. Then again, if you hang on to your shares, you will benefit from any rise in Standard Life's share price, as well as twice-yearly dividends, so it's pretty much swings and roundabouts.

Although my wife has a stake in Standard Life's with-profits fund and therefore is a Standard Life member, this is our only with-profits investment, because I'm not a big fan of these funds. Personally, when I want to keep my money safe, I put it in a savings account paying a table-topping rate of interest. Otherwise, if I want to invest my money, I either buy shares in individual companies via my tax-free ISA shelter, or invest directly in a low-cost index tracker, which is the cheapest and simplest way to build long-term wealth from shares.

More: Let the Fool help you compare savings accounts and compare insurance quotes!

Disclosure: Cliff is a Standard Life customer and writes for its customer magazine, moneyetc.