Standard Life pressed ahead with its stock market flotation yesterday after disclosing that it had turned down the offer of a merger.
The all-share offer from an unidentified suitor was rejected because it undervalued the business and was not in the best interests of members, Standard Life said.
Flotation of Europe's biggest insurer will be the biggest initial public offering (IPO) that Britain has seen for five years.
Standard Life said yesterday that it expects to raise £1.1 billion of new capital, while eligible members stand to pocket one-off windfalls of up to £1,000 each.
Confirmation that the society had rejected a potential merger offer came yesterday as chief executive Sandy Crombie outlined plans for the demutualisation.
He said Standard had received a number of other approaches, including requests to take a significant shareholding in the business, but had turned these down as well.
Standard Life's board had rejected the approaches because they significantly undervalued the business.
The approaches are "symptomatic of the whole urge to consolidate in the UK life market; it's an area where people are wracking their brains on how to make money," said one analyst at an investment bank who declined to be named.
Competition in UK life insurance market is cut-throat, with most of the main players reporting a decline in the profitability of new policies last year as they were forced to cut prices to maintain market share.
Standard expects to achieve a potential market value of £4.8 billion to £5.5 billion based on a likely price range of 240p-290p, which advisers said would have been the range had the shares been traded on April 13.
This market value would make Standard Life the fifth largest UKlisted insurer, behind Aviva, Prudential, Old Mutual and Legal & General but ahead of Friends Provident.
If its members approve the demutualisation and listing plan at a shareholders' meeting on May 31, Standard Life would be London's largest debut since telecoms firm Orange listed in 2001.
Mr Crombie said the Standard Life board was convinced that demutualisation and flotation was the best strategy for the firm and said he expected eligible policy-holders would strongly back the proposal to list the firm.
The board said it would continue to review possible alternatives to a stock-market listing.
In a detailed breakdown of results and strategy before a key vote on its future, Standard Life said it had swung to profit and boosted new business, helped by a review of its strategy started in January 2004.
Members are due to vote in May on whether to demutualise the business. Three-quarters of voting members have to approve the plan for it to go through.
Half of the 2.4 million eligible policyholders stood to reap windfall share payments worth more than £1,000 from the flotation, while the remainder would get £500-£1,000.
Standard Life, which has 50,000 members in the Birmingham area, said it would use the money raised in the flotation to expand its UK business and support capital adequacy.
It posted a pretax profit of £152 million for 2005 under IFRS accounting standards, against a loss of £340 million in its 2004 financial year.
Its 2005 European embedded value operating profit before tax was £395 million, more than double the £180 million posted the previous year.
The mutual insurer shocked rivals and customers two years ago when it announced plans to go public, saying tougher regulatory capital requirements and a declining market for with-profits products forced it to turn to the stock market for cash.
Tom McPhail, head of pension research at Hargreaves Lansdown, said policyholders should vote in favour of demutualisation as "standing still" was not an option for Standard.
He said: "The reality of what is being put in front of policyholders is that if they choose not to vote in favour of this deal, Standard Life will start going backwards.
"Where Standard Life is now, the business pressures, the investment conditions of the last few years, the regulatory environment and the competitive pressures mean it needs to demutualise in order to move forward."
He added that because of this it was "slightly academic" to talk about whether the windfall was big enough to compensate people for losing their membership of a mutual.
While the windfall may not be large enough to compensate policy-holders for suffering in the past, he said there would still have been pain as a result of the stock market fall whether Standard had been a mutual or a plc.
Mr McPhail added that while Standard had failed to anticipate the way the regulator would treat mutuals, and as a result of this had been forced to sell equities in a falling market, the group had made some "very astute moves".
If Standard does demutualise there would be only a handful of mutual life insurers left, including Equitable Life, which is closed to new business.