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Crombie admits policy failure

Standard Life chief executive Sandy Crombie has admitted to a panel of MPs that demutualisation is a result of poor management decisions rather than the fault of regulation.

In evidence to the all-party Parliamentary group on building societies and financial mutuals last week, Crombie conceded that Standard failed to predict the full impact of the new solvency regime. He accepted this could be seen as a management failure.

He said the company’s previous policy would have been to ride the equity rollercoaster but the equity cycle had been altered by the imposition of new solvency regulations. He said regulatory reaction to Equitable Life’s problems and new EU solvency regulations made capitalising an insurance business increasingly difficult.

Crombie said Standard Life was at pains not to blame the FSA for the decision to demutualise.

The MPs’ short inquiry into financial mutuals coincides with the Myners’ inquiry examining the corporate governance of mutual insurance societies.

Crombie said: “We blame ourselves, I think, for not seeing the full impact of these new solvency regulations soon enough. We did not respond to them early enough and we had some major changes to make around about the turn of the year. Certainly, I am not blaming the FSA.”

All-party group chairman Adrian Bailey MP says: “We find that Standard Life, just like its predecessors, is seeking demutualisation in order to access more capital. It is effectively the architect of its own predicament. Alone among mutual insurers, it followed a strategy ultimately doomed to failure.”Matthews’ interview, p4

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