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environment. One moreover, where a number of other mutual
companies had shed or were about to shed their mutual status,
these included Norwich Union (June, 1997), Halifax (June, 1997),
Scottish Widows (March, 2000), and Friends Provident (July,
2001).

As a mutual, Standard Life’s capital was provided by its with profits
policyholders. Over the period 1999 to early January 2003 stock
market performance had declined significantly. For example, the
stock market value of some companies such as Legal & General,
Aviva and the Prudential fell by up to 40% (Appendix 1). It was an
industry most commentators believed was ripe for consolidation.

Combined with the prolonged decline in the stock market were the
current low inflation rates that were being projected into the future.
These contributed to falling investment returns and reduced capital
bases for some companies, including Standard Life. This led to
less trust in the financial services industry in general and reduced
popularity in with profits investments in particular.

Following the Woollard attack, the business strategy was reviewed
and Standard Life dropped some of its product lines to move into
the Stakeholder market, which was being heavily promoted across
the industry by the government. The underlying principles of
mutuality and the historical desire to repay customers and staff for
their loyalty was the driver for the prevailing strategic direction,
which was strongly led from the top.

“Endowments sold in the 1980’s in a high inflationary
period had a high growth potential. In 2000 those
expectations should have been lowered.”
Sandy Crombie

Over the period 2000-2004, a number of factors combined to
impact Standard Life’s capital base, namely;

1. the costs involved of smoothing with profits payouts over a
prolonged downturn in the market
2. provisions set aside to cover the mortgage endowment
promise
3. reduced popularity of with profits policies meant fewer
customers choosing with profits policies