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&#39We will stay on the rollercoaster. You have more to lose by delaying going into the market than staying in&#39

Standard Life is rattled by the extent of the negative publicity it has received since the beginning of the year. As one of the initiatives to improve its public relations – and to meet its obligations following its £1bn bond issue last year – Standard has begun to issue results and give briefings in the City in a similar manner to its publicly quoted rivals.

Standard Life was one of the last companies to impose a market value adjuster and reduce equity holdings.

Speaking to Money Marketing, deputy chief executive Sandy Crombie says it is easy to apply hindsight and adds: “We do not have the ability to time things perfectly. I accept the criticism for two years&#39 underperformance but please take a balanced view.

“We will stay on the rollercoaster. It is less risky to stay – that is what we have tried to do. You have more to lose by delaying going into the markets than staying in.”

In an attempt to be more open and draw a line under concerns about its solvency ahead of the full filing of its accounts on March 17, the mutual has disclosed that it lost £4bn on the markets in each of the last two years. But Standard points out it made £10bn on the markets in the previous two years, so the recent losses have left it in the position it was in four years ago.

Overall, it has working capital or free assets of £4bn, which is generally in line with figure announced by Norwich Union and Prudential.

Crombie dismisses analyst Ned Cazalet&#39s claims that Standard&#39s true free-asset ratio is 0.8 per cent and that the company has only £500m in capital. He says Standard&#39s accounts have been approved by ratings agencies, independent scrutineers and also the FSA.

Standard has announced a free-asset ratio of 13.8 per cent, using future profits for the first time, without which the FAR would be 8.9 per cent.

Crombie describes the use of future profits as a interim, temporary bridge until the FSA ushers in its new regime, which will look at a company&#39s “realistic” solvency rather than the current statutory solvency.

He says: “The existing statutory basis is unhelpful and forces companies to sell equities in a falling market.”

The solvency waiver, which Standard has said it is applying for, will give the company additional financial flexibility, says Crombie, hinting that Standard would like to be able to buy equities again.

Asked whether Standard Life &#39s policy of only providing smoothing at maturity for with-profits policyholders is an indication of financial weakness, Crombie says: “It is not that we cannot smooth on surrenders, it is that we do not want to. What else can you do when surrenders treble?”

Ironically, the whirlwind of media criticism – which has seen Standard feature as the lead item on BBC&#39s 10 o&#39clock news and the front pages of national newspapers – comes at a time when Standard has overtaken arch-rival Norwich Union to become the IFA market leader. It has an overall market share of 13.3 per cent and 18.2 per cent of the IFA market.

How will future sales be affected? Crombie says: “There is no significant evidence of sales being affected but IFAs are asking questions and being more thoughtful.”

He says the greater risk is that confidence in all life and pension providers will be sapped. “There is more risk that the whole market will be checked, rather than just us. There is a lot of cynicism out there.”


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