Lloyds of London has played down reports that it is considering demutualising as part of its plans to modernise the insurance market, but analysts believe the option is still being actively considered. A demutualisation or conversion to a private company would yield substantial windfalls for Lloyds' 4,500 investors or names.

Lloyds' new chief executive, Mr Nick Prettejohn, is considering a range of options and many analysts suggest Lloyds could become a private company within three years. A spokesman has denied that demutualisation is on the cards but added that several members of Lloyds had suggested demutualisation as an option worth examining. "Our objective is to create a market in which businesses can thrive. To achieve this we are looking at all sorts of ways in which we can modernise the way the market does business. However, demutualisation is not currently being discussed."

Mr Prettejohn is preparing to unveil a consultation paper for distribution to investors next month.

Plans to modernise Lloyds come as the London market comes under pressure from a rise in competition and a squeeze on margins.