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During the latter half of 2003 and early part of 2004 a series of
announcements from Standard added to the growing sense of
unease.

Grimstone commented that he:

“wouldn’t have wanted to stay on the Board if changes
weren’t being made. Capital was being spent. The
Board realised there was a problem and took steps to
rectify the problem.”

It emerged that Standard Life had been in discussions since
December 2003 with the Financial Services Authority (FSA) with a
view to arriving at an agreed method for the application of the new
realistic approach to reporting its financial position. Standard Life
and the FSA reached an agreement satisfactory to both parties.
Standard Life would publish a balance sheet confirming its strong
financial position. The FSA’s commitment to improving the realism
of life insurance companies’ balance sheets and improving
transparency of with profits funds was satisfied.

In 2003 Standard Life thought realistically they had a huge amount
of capital but this didn’t stack up under the new guidelines.

“December 2003! The only time in my professional life
I’ve lost sleep. If you have all the information then you
can work on solving the problem.

We had to work out the size of the problem before we
could set about fixing it.”

Malcolm Wood

In January 2004, Standard Life announced the departure of its
chief executive Iain Lumsden. His deputy and the head of
investments, Sandy Crombie, took over the top job.