Page 8 -

month with profits endowment policy would in early 2004 pay out
£62,603, compared with £110,136 in early 2001.

The company also announced a £550m bond issue to bolster its
capital position.

Smoothing of investment returns inherent in with profits policies is
designed to cushion with profits policies from the volatility of
investing directly in the stock market. Whilst smoothing can
cushion short-term fluctuations, it cannot do this indefinitely when
there is a prolonged downturn in the market.

Standard Life decided that its heavy weighting in equities was too
risky for the amount of capital it had and chose to sell £7.5bn of
shares (around 40 per cent of its investments in equity assets
backing with profits policies), switching the proceeds into safer but
lower return bonds. Standard Life, however, did this later than
many of its rivals and at a time when the stock market slump was
coming to an end.

The strategic review was to be wide-ranging and also examined
the group’s business in its entirety, both in the United Kingdom and
overseas, assessing the potential for a number of operational and
financial improvements, but with a particular focus on UKL&P.

To achieve strategy Grimstone puts the Board (Appendix 2) firmly
at the centre of the company where executives and non-executives
were working together to drive the company forward.

“There was very little group structure, everything was
organised in silos. Each of the four groups had their
own ‘Board’. Job losses came as a result of building a
structure.”

Crombie’s radical overhaul of the company saw an extensive
examination of its product range, the introduction of new products
–SIPPs and Wraps (appendix 3), with a concomitant impact on
staffing levels. A reduction in staff of around 4,500 was offset by
the recruitment of around 2,000 people with the relevant skills over
the next three years. During that time new-blood from outside the
company at senior executive level was introduced and a new Head
of Media Relations was recruited to help deal with the company's
damaged media relations.