Standard Life has announced that it is to lower the price of its shares to between £2.10 and £2.70, reducing the value of windfalls by about a tenth.
Standard Life Assurance Company, the Edinburgh-based mutual life assurer, warned its policyholders to expect smaller windfalls when it converts to a public listed company (plc) next month. (You can learn about Standard Life's plans to demutualise and become a plc in Standard Life: The Float Is On.)
In response to falling share prices during May and June, the company has reduced its flotation price to between 210p and 270p, down from the original range of between 240p and 290p. This means that the 2.4 million policyholders who are entitled to windfall shares (those who have a stake in the firm's with-profits fund) will see the value of their payout reduced by around a tenth (10%) or so.
For example, the average windfall is now predicted to be less than £1,550, down from the £1,700 predicted just a few weeks ago. However, if stock markets continue to fall between now and when the float price is announced around 9 July, the initial share price could change yet again, so be warned!
At a share price of 210p to 270p, Standard Life plc will be valued at around £4.4 billion to £5.3 billion, making it a sure-fire candidate for entry into the blue-chip FTSE 100 index (which measures the value of the UK's one hundred biggest stock market-listed firms).
Given that we Brits are going to have to save and invest a lot more to pay for our retirement and so on, I'm optimistic about the long-term future for life assurers, including Standard Life. Also, this sector is expected to undergo a period of consolidation, leading to mergers and takeovers. For example, earlier this week, Credit Suisse sold insurance firm Winterthur to giant French group Axa for £5.4 billion.
However, as I already own shares in Chaucer Holdings
(LSE: CHU)
, Legal & General
(LSE: LGEN)
and Royal & SunAlliance
(LSE: RSA)
, so I'm going to have to think carefully as to whether I want to invest any more money in insurance firms. Then again, Standard Life is to offer a 5% discount off the float price to its five million members and customers (of which I am one), which sweetens the deal a little.
The 5% discount may tempt me into buying extra shares on top of the shares which my wife will receive as a member of Standard Life. I'll let you know what I decide to do closer to the big day. In the meantime, this cheap and simple fund allows you to invest in seven hundred of Britain's biggest companies with just a few clicks. Eureka!
More: Let the Fool help you compare ISAs, compare savings accounts and compare insurance quotes!
Disclosure: Cliff is a Standard Life customer and writes for its customer magazine, "moneyetc".
