Standard Life weighs share float

STANDARD Life chief executive Iain Lumsden quit today as the troubled insurer laid out plans for a strategic review that will trigger the biggest shake-up in its 178-year history.

Europe's largest mutual conceded that a stock market float was now an option as it looks to shore up its weakened balance sheet and adjust to 'realistic' solvency rules introduced by the Financial Services Authority.

Lumsden, due to retire in 18 months, leaves immediately, and deputy chief executive Sandy Crombie will take over to lead and implement a strategic review.

Chairman Sir Brian Stewart said: 'The board accepted Iain's view that he would not have been able to see the strategic review through to implementation because of his planned retirement date.'

The review will consider demutualisation, previously fiercely resisted, alongside options such as selling non-core operations or further fund-raising in the debt markets.

The group, which employs 12,000 UK staff, revealed today it plans a £750m junior-bond issue next month and that it is selling £350m of shares in developer Hammerson.

A float could bring windfalls of up to £1,000 for the mutual's 2.5m with-profits policyholders.

Standard Life has been locked in talks with the FSA since December about implementing new solvency rules designed to reflect a life company's liabilities more accurately.

It approached the regulator after discovering a 'significant divergence' in the calculation of its liabilities under the new regime compared with the current actuarial-based approach.

Crombie defended Standard Life's financial health, pointing to figures showing available assets at the end of the financial year on 15 November of £4.6bn against £4.2bn in 2002. 'No one can say Standard Life is anything other than strong,' he said.

But analysts were far from convinced, given the group's admission that it has been forced by the FSA to increase reserves for guaranteed policies and improve the calculation of its liabilities.

They added that Standard Life's decision to allow customers who have bought policies since 16 November to reconsider, without penalty, indicated that the company may be worried about potential litigation.

Insurance analyst Ned Cazelet said: 'Strong? This company's so strong the CEO has gone. They're so strong they've been led by an FSA shotgun to sorting themselves out.'

New era under loyal company servant

SANDY Crombie is probably the best placed director at Standard Life to lead it into a new era of de-mutualisation, given his experience in managing tens of billions of pounds of listed company investments at the group, write Patrick Hosking and Nick Goodway.

Crombie, 54, is a Standard Life lifer with 37 years at the mutual. He joined the investment team as a general manager in 1994, becoming chief executive of Standard Life Investments in 1998. Four years later, he added deputy chief executive of the whole group to his responsibilities.

He is best known in the City as head of the investment committee of the Association of British Insurers, the body which represents institutional shareholders in corporate governance issues. He has also played a role in some of the most colourful sagas of the past few months, including the succession plans at Barclays and BSkyB.

Only last year, Standard Life fiercely fought attempts by carpetbagger David Stonebanks to force a de-mutualisation, but Crombie conceded today the collapse of the with-profits market meant the mutual, which pulls its capital exclusively from its with-profits fund, had to think of new ways of raising finance.

'It's important to keep under review what is in the interest of the company's members,' he said.