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Mike Hogan writes:

Why I’m seeking election to Standard Life’s board 

6 February 2005

I’m fortunate. I have training in finance. But I was no wiser than 2.6 million other members who trusted Standard Life. 

I took comfort from the rating agency’s AAA rating for Standard Life. But this had no bearing on my investment risk. 

I voted for demutualization in 2000, believing this was the best way of locking in investment value. The company paid about £10 million to persuade us against this. 

Since then, I have seen the likely maturity value of my policy fall from about £230,000 to less than £135,000. 

I have read everything the company has sent me, including its annual reports and accounts. I could not find any explanation for these losses that made sense to me. I knew that the stock markets had fallen but I also knew that fortunes had been made in the bond markets as interest rates fell. 

Why had Standard Life not benefited? I realised that Standard Life had failed to read the markets, and had failed to understand how profoundly financial regulations were changing. Many of those responsible are still directors. 

So what can we do?

This is what I decided. 

Despite the fact that to be nominated as an independent candidate for the board, I need  at least 250 written nominations from members.  

Despite the fact that I have no where near the resources of Standard Life, out of my own funds, I have set up a company for the association and a web site www.raise-the-standard.com. This is a not for profits company and has been designed for conversion into a charity. 

Despite the fact that I am told by Sandy Crombie and others that they will block my attempt to get on the board. 

Despite all of this, I feel members are owed a real say in the reshaping of their company. 

I have to do this. 

I hope that against all these odds my nomination and election campaigns are successful. However, if they are not, I shall continue to campaign for members in the Association to protect their interests in whatever way I can.  

Bonus comment:

The bad bonus figures continue to reflect Standard Life's mistakes in its management of the With Profits fund. These cannot be escaped.

Between 2001 and 2003, its loss rate on the fund was almost twice as bad as better managed UK insurers. Standard Life's loss rate was 8.38% against Prudential's 4.41%. Prudential recognised that UK equities were overvalued and shifted into bonds.

If Standard Life had been as astute, it would today have £6 billion more capital. This really matters. In 1999, it had surplus capital of £9.4 billion. At the date of its last accounts (November 2003) it had £1.32 billion. It has had to cut the with profits equity share to 35.5%. This is substantially lower that its major UK competitors. So it has failed to make big gains from the bond market rally, and cannot increase its equity exposure as that market rises.

What this means: This is like a ship which the captain has steered into an iceberg. We are all in the life boat and the captain insists that he is the only pilot. Members need a much greater say in  what is going on.

Mike Hogan writes:

I recently met Sandy Crombie to discuss why Standard Life now believes that it should demutualise. Crombie says that the new FSA regulations prevent the company from giving its members the benefits of mutuality which caused them to buy Standard's policies. Members used to share in the profits of the company's subsidiaries and joint ventures, which boosted with profits returns. Now, the new regulations require Standard Life to put aside additional capital to support these benefits. After its investment losses of 2001 and 2002, it no longer has sufficient capital. Crombie and colleagues believe that the company should compensate members by giving them the shares in Standard Life. This will restore to them the key benefit of mutuality - participation in the company's profits.

What do we make of this? It has the possibility of compensating members for some of their losses. Demutualization is a costly (at least £100 million) and risky move which  members need to monitor closely. Members should be formally and closely involved in monitoring the company's progress towards demutualization. Please see Our aims - monitoring.

Members need board representation.  Please see Our aims -the board.

Sandy Crombie made a good move when he waived his bonus. In the future, members need to know that their interests come first. Please see Our aims -management rewards.

Notice board: We have had to suspend the notice board. We have had a spate of anonymous and scurrilous postings, which are not acceptable. We are sorry that we have had to take this step and will always try to respond to legitimate inquiries by email.