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&#39Standard is playing with-profits roulette&#39

Influential analyst Ned Cazalet has made a blistering attack on Standard Life&#39s with-profits strategy, calling it the man that will not leave the roulette wheel and is praying for a win to get him out of trouble.

Speaking at a round table meeting organised by F&C in London last week, Cazalet said the Scottish mutual has seen reserves plummet from about £10bn to just over £1bn.

He said the company&#39s dogged adherence to a high equity backing ratio for its with-profits fund has transformed its risk profile.

He said: “It has gone from boring beige to being a psychedelic hedge fund.”

Cazalet said Standard&#39s current payout policy, thought to be 130 per cent of asset share, without a market value reduction was unsustainable. Despite three consecutive years of stockmarket falls, Standard, along with Liverpool Victoria, is one of the few companies not to have imposed an MVR.

Standard deputy group financial director David Bentley says: “We are only one of six life companies worldwide to have a triple-A rating from Standard & Poor&#39s and Moody&#39s. It is the right policy to be heavy in equities – we would not want to sell equities when the markets are low.”

He declined to comment on surplus, payout policy and what action it could take to shore up solvency in the future but said the position regarding imposing an MVR is being monitored very carefully.

Cazalet said: “Standard is taking riskier and riskier bets – it is the man who cannot leave the roulette table and is praying for a win.

“Eventually Standard is going to have to sell – it is not the Sultan of Brunei. But if they sell out of equities now, they will never get back in.”

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