Launching a share offering into a volatile market is never easy. For Standard Life, after a long journey to the threshold of demutualisation, it must be all the more frustrating.

In these circumstances, cutting its indicated price range from 240p-290p to the wider 210p-270p was the only sensible option. Between the insurer first setting the terms in April and their subsequent revision, the FTSE 100 index dropped by 8 per cent and the FTSE life assurance sector by 15 per cent.

The sector’s underperformance has been exacerbated by the dissipation of bid speculation. However, valuations applied to closed life businesses being sold to specialist operators have been edging up.

Earlier this month, Resolution Life bought Abbey National’s life business for the equivalent of 97 per cent of its embedded value, although about 10 per cent of that was attributed to the value of Abbey’s new business infrastructure.

At the middle of the indicated price range, Standard Life, which is generating new business, is valued at about the equivalent of its embedded value. Judgment then rests on how far investors buy the Standard Life recovery story, partly predicated on its success in selling new, higher-margin types of pensions such as Sipps.

New business contribution (a measure of the value of new business written) produced a profit of £30m for the first quarter, almost as much as for the whole of last year. This is encouraging, but the amounts are not breathtaking for a company with an expected market capitalisation at flotation of £4.35bn to £5.25bn.

Retail investors may have been spooked by recent volatility, but a bonus share plan after a year gives them a strong incentive not to sell. And it is still possible that disappointed bidders for Abbey’s business will emerge to circle the publicly listed Standard Life.

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