Nfu Mutual, the specialist farmers' insurer, has pledged to fight a takeover bid which would force demutualisation.
It is understood that a former director of the life and general insurer, John Murray, has held talks with venture capital groups with the intention of making a bid and turning the mutual into a plc.
Murray, who spent 20 years at NFU Mutual, claims the society's general insurance business has about £1bn of surplus capital. He said if the insurer joined the stock exchange, thousands of farmers could receive windfalls of £25,000 each.
He said, in a report, that the insurer was “overcapitalising”, expanding out of the farming market and using money to fund discounts on premiums.
A spokeswoman for NFU Mutual said: “We do not believe we are overcapitalised and, given recent high-profile troubles, it is clear insurers need to have strong reserves.
“We have no intention of relinquishing our mutual status. We have not received a bid and would not welcome one.”
Murray's talks with one consortium broke down because he was unhappy with its proposals, but he is still looking to talk to other interested parties, the report said.
NFU Mutual, which is based on Stratford-on-Avon, has about 850,000 policyholders.
The National Farmers' Union (NFU), which has close ties with NFU Mutual, is backing the insurer's fight. An NFU spokesman said: “NFU Mutual has provided vital support for farmers over the decades, but most recently during foot-and-mouth. A non-farming owner would have no interest in providing the current specialist financial services the industry needs.”
The AA-rated NFU Mutual was set up more than 90 years ago, and has more than 400 offices throughout the UK. It has a wholly-owned subsidiary, general insurer Avon Insurance, and managed assets of more than £8bn.