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Moore&#39s code

For the IFA community, attacking Standard Life has for years been all but unthinkable.

This, after all, is the institution that has continued to support independent advisers, both large and small, while many competitors have treated them as an increasing irrelevance, with some actively colluding in efforts to hasten the demise of the humble high street broker.

It could even be argued that the bastion of Scottish financial probity has given IFAs ammunition for their contention that commission-based independent advice has served many consumers well.

Standard has, after all, always received high levels of support from IFAs despite largely shunning the practice of buying new business by offering eye-popping up-front commission payments.

Standard also used to steer away from attempting to produce flashy investment numbers, concentrating on providing its customers with solid, consistent returns of the sort that has made millions of people very happy to have been associated with the company.

It is this factor which goes a long way to explaining why Standard managed such a strong vote in favour of retaining its mutuality in the teeth of promises of windfalls averaging £6,000 or more.

Hardly surprising, then, that the life office enjoys such strong support among brokers. Happy clients mean repeat business and fresh leads from their friends, family and associates. Given this formidable record, then, why are so many questions being raised over Standard&#39s current strategy?

Standard Life would contend it is just down to nasty journalists spreading dirt and ignoring the reality of the company&#39s triple-A rated financial strength. Standard has been particularly hard on analyst Ned Cazalet, who has raised some searching questions over its finances. But the few figures that are in the public domain – as a mutual Standard Life&#39s disclosure requirements fall far short of those its plc rivals operate under – tell their own story.

Standard Life&#39s accounts are, with typical contrariness, published for the year to Nov-ember 31. They show that the fund for future appropriations – surplus cash in English – held in the life office&#39s with-profits fund lost £5bn to £8bn during that period last year. I was told by Standard earlier this year that it needed the with-profits fund to return 6 per cent in 2002 just to keep this surplus steady because of strains on the with-profits fund such as the cost of writing new business and the need to smooth bonus payments in the current volatile investment climate.

Since the last accounts, however, the FTSE 100 has plummeted in value while Standard Life has consistently stuck to a higher equity component in its fund than its main competitors. It has taken a resolutely bullish stance despite all the evidence to the contrary. This is hardly the action of an institution renowned for the conservatism of its investment strategy, a strategy which has served it very well up until now. Yet, Standard is still offering some of the best with-profits maturity values available, even after its 10 per cent bonus cut and 10 per cent MVA, which have come very late in the day compared with its major competitors. Standard Life is, like most life offices, overpaying policyholders&#39 current asset shares when they cash in their policies. Unlike Legal & General and Norwich Union, however, the company has declined to say by how much. The payouts look generous to say the least.

New policyholders may come to rue the company&#39s current largesse because they will see their future bonuses imp-acted as a result. Taken together, these factors mean that the surplus in the fund is likely to have fallen sharply – by exactly how much is unknown and Standard is not telling.

It is no wonder that Cazalet is asking questions. Even Standard & Poor&#39s has belatedly acted, putting Standard Life&#39s much vaunted AAA rating on negative outlook.

It seems Standard has finally realised it has a public relations problem and decided to take action. Certain members of its management team have taken the radical step of departing their Edinburgh eyries to head down to the City of London as part of a twin-pronged strategy.

Journalists have been offered interviews with the top men and there have been dinner and lunch invitations to smart restaurants. Standard is operating what is known in the trade as a charm offensive. At the same time, questions have been raised over quality of the criticisms Standard has faced and the motivations of those behind them. Amid all this hail fellow well met, fancy some nice food at a posh restaurant and you must agree our critics are all horrid rotters, there has been one thing lacking: Figures to back up Standard&#39s contention that it remains “strongly capitalised”. In fact, the only supporting evidence offered has been S&P&#39s underreview rating.

Let us not forget that critics have been questioning the way these ratings are issued recently, given agencies&#39 less than stellar record of predicting corporate troubles despite the high level of access they enjoy. There is one simple way that Standard Life could see off its critics and that is to come clean. Provide the figures and let everyone make their own minds up.

IFAs have a responsibility to their clients to make this point to Standard Life. They have rightly been strong supporters of the Edinburgh life office in the past but, as they should be well aware, past performance is not necessarily a guide to the future and no life office deserves a blank cheque. If these figures are provided and they back Standard&#39s claims, I will happily shut up. If Standard wishes to give them out over a nice lunch, more power to them but a simple telephone call from Edinburgh would do.

James Moore is life insurance reporter at The Times

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