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Standard bearers

For a long time, Standard Life has traded on an image of strength and steadiness like the castle on the rock visible from its Edinburgh offices. However, some chinks in the armour of the IFAs&#39 favourite life company are becoming apparent.

Last year, Standard, like other life companies, sustained heavy losses in the equity markets and £5bn has come out of its free assets, according to its 2001 accounts.

Standard has a 18 per cent market share of individual and 16 per cent of group stakeholder pensions by offering market-leading commission. For stakeholder to be profitable, Standard accepts that you need to have 20 per cent of the stakeholder market and it calculates it could take up to 20 years before the company sees a positive return.

Standard refutes the suggestion that it is using its orphan assets to buy market share, saying that it is only temporarily leaning on these assets.

Last year, Standard&#39s with-profits bond sales soared to £1.4bn from £384m in 2000 and it says that the modern design of the products makes writing business in those volumes sustainable.

As new business comes into its with-profits fund, Standard says it will increase its weighting in bonds by a further 5 per cent. The present asset mix is 75 per cent equities and 10 per cent bonds, with most of the rest in cash and bonds.

Because the company does so much to showcase its financial strength as the jewel in its crown – Standard has had its AAA rating reaffirmed by Standard & Poor&#39s – there was widespread surprise in the industry at the news that it is going to raise £1bn through a bond issue.

Pointing out that Prudential and Norwich Union took a similar route last year, Standard deputy group finance director David Bentley says it is only following a well trodden path, saying the money will help fund corporate development.

Securing future distribution can also be added to Standard&#39s challenges.

As an office which relies on IFAs for 90 per cent of its distribution, Standard did not welcome CP121 with the open arms of some of its competitors.

Director of corporate affairs Gordon Arthur told Money Marketing that the company would rather see a dip in new business than make hasty decisions but it has also made it clear that it would buy an IFA if the right opportunity presented itself.

The company is keeping a wary eye on arch-rival Norwich Union, which is taking stakes in IFAs. Standard views NU&#39s strategy as “premature” and comments that it “seems to be backing every horse in the race”. The company is clearly counting on its popularity to stop it being locked out in a depolarised world.

Standard takes a robust view about the future of IFAs. Marketing director Michael Leahy says: “IFAs will not disappear – they will evolve.” Because of panels, he believes many IFAs already have a kind of multi-tie, suggesting that secondtier advice will initiate the bigger changes.

Given the battles ahead, Standard is preparing to showcase it mutual status. In a example of some of the battles lines that could be drawn after Sandler, head of with-profits communications David Hare says only with-profits from a mutual is “the real thing”.

The company was not always a mutual – founded in 1825, it mutualised on its centenary so it could more closely emulate Equitable Life. Now, of course, Standard bends over backwards to stress the differences between the two.

Its mutual status has come under attack from carpetbaggers such as Ronnie Sloan and Fred Woollard but Standard recently tightened its rules to make any demutualisation attempts more difficult.

As part of its attempt to preserve its status, it has accepted that it needs to address perceptions of haughtiness and arrogance.

After Scott Bell stepped down in March, Iain Lumsden took over as chief executive. His role as group finance director was filled by John Hylands.

To mark the musical chairs, the company has gone on a charm offensive – it is difficult to find a Standard employee who does not read from the hymnsheet of the need to be open and accountable. However, the company will be facing stiffer challenges as the year unfolds.


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