Page 9 -

Furthermore, Crombie immediately attacked costs aiming for a
20% reduction of the cost base and involving a reduction in overall
job numbers of around 1,000 by the end of 2004. In addition the
company's pension scheme, which gave staff a generous
contribution of 18% of salary but had a deficit of £183m, was to be
closed to new members.

Standard sought to raise funds from a stock market listing. As a
result, it was announced on 17 October 2005 that Standard Life
would proceed towards demutualisation and flotation. This would
allow it to realise value for with profits policyholders (Appendix 4),
reduce the business risks to which they were exposed and provide
access to external equity capital to develop and expand the
group’s business.

External Communications

The company had experienced a difficult relationship with the
press previously. Crombie knew he had to work with the press,
especially as he tried to create survival ‘headroom’ by lowering
customer expectations. To this end the company took the
expected ‘kicking’ from the press over its strategy and kept
working. However, it sought to change its relationship with the
press by being more proactive and attempting to open a
communication process. It worked hard to get credible, well
balanced arguments out.

A practical manifestation of this occurred when the Board
undertook a communication process prior to demutualisation using
Members’ Roadshows to meet its members directly.

The Roadshows had been created as part of a Membership
Engagement Strategy in response to the approach by Fred
Woollard in 2000. The company recognised it had a duty to
communicate directly with its members and in particular to outline
the benefits of mutuality (as a concept, rather than a policy payout
enhancement). However as the events of 2004 unfolded, the
communication shifted towards outlining the best way in which
members could crystalise the value of their stake in the Company
via an IPO.

The meetings gave policyholders facing uncertainty an opportunity
to express their anger and were seen as a safety valve allowing