IN JUST under a fortnight, Gerry Grimstone will be taking questions on Standard Life's performance over the last year and he's already got his answers ready.
Is there any change in chief executive Sandy Crombie's retirement plans? No. Is the comp
any hunting for acquisitions? No. Has it received any approaches from predators? No.
What about Trevor Matthews who quit the life and pensions business to join Friends Provident? Is there a replacement waiting in the wings? Er… well…
The chairman evades this last question at least three times and is clearly not wanting to say whether there are people they want to talk to. "It would be misleading to say we are about to appoint someone," he says. "Sandy's dealing with it, and I don't know what stage he's at."
Aah, the get-out clause. In any case, Grimstone believes the departure of the biggest contender for Crombie's job will mean that at least questions over the latter's future will stop. Well, maybe not, though it won't be for the lack of trying. As Grimstone told this newspaper last month, the board is putting no pressure on Crombie and there is no vacancy. The board would rather get on with the process of turning round the company, a process he likens to a privatisation.
He knows quite a bit about privatisations, having been at the centre of the Thatcher Government's programme of selling state assets in the Eighties. He was assistant treasury secretary, working on nationalisations and privatisations, and his work on one of the Tory Government's biggest post-war policies earned him the sobriquet of Mr Privatisation. He was involved in 20 in all, including Cable & Wireless, British Gas and BAA. "It taught me a lot about public offerings and banking which were skills that civil servants didn't have," he says. That experience gave him a particular take on the role the Government played in the Northern Rock debacle and he has some sympathy with those officials and ministers who had to deal with it.
"One problem the Treasury had was that there was no one used to these situations. No one who had done this before. Luckily, we had not had runs on banks very often, but at least in my day there were people around who were familiar with the markets."
He doubts that Northern Rock will leave any long-term damage on the wider financial services market beyond the perception overseas. "People overseas were surprised to see photos of people queuing up outside a British bank and that left the impression that things were not well run in the UK."
Northern Rock, he says, was a symptom of the crisis and the lesson for all financial services companies is for them to look at their liquidity and to be more cautious. In the context of what happened to the company, Standard Life's problems appear minor, but it remains under the spotlight as it gets used to the listed sector.
It is still in development mode after its 2006 flotation that ushered in a vast change in culture, a new business model and a requirement to be more fleet of foot. After a hectic first year in the chair, Grimstone will be hoping for a period of calm and time to rebuild confidence in the wider sector.
To that end, he is unhappy with current relations between the Government and the financial services industry. "I have never known such ill-will between Government and major financial services institutions," he says. "No one expects companies to be in the pockets of the Government or vice versa, but Government and big financial services companies should find ways of working together."
He is particularly critical of the Treasury's handling of the changes to capital gains tax which has had a knock-on effect. "They had an idea to change it but they did not realise that there is a lot of stuff that takes advantage of it," he says, giving the insurance bonds market as an example. "Did the Government ask us about this? Not at all. There were unintended consequences."
A new pensions bill is now going through Parliament and Grimstone is concerned that it is a recipe for more confrontation with the industry. "I say to Government: come and talk to us. Trust us. We will reply with integrity. We will not try to pull the wool over your eyes. Let industry and Government trust each other more in the interests of the customer and in the interest of getting these proposals right first time."
His willingness to speak his mind suggests he's left behind his years of relative anonymity in the civil service. He joined the Department of Health and Social Security as an Oxford graduate in chemistry and became private secretary to David Owen at the health ministry. "I was David Owen's Bernard," he says, recalling the character from Yes, Minister.
After the DHSS he joined Schroders, the merchant bank, raising capital for companies and working on mergers and acquisitions, eventually heading its offices in Hong Kong and New York.
Now 58, he is nearing five years into his membership of the Standard Life board and May will mark a year since succeeding Sir Brian Stewart in the chair. "I had a taste of the old Standard Life as a mutual. My view was that mutuality was a great theoretical concept, but for a big financial services company it was not right. There was no accountability, no transparency. I felt (demutualisation] was the only way forward for the company."
He joined the board in July 2003 and by the end of that year it had reviewed the business and decided big changes were required. The company was losing money and if it had carried on with its business model it would have been just three years from being in a "precarious position".
The board parted company with chief executive Iain Lumsden and sold £7bn of equities. "Iain believed passionately in what he was doing. When we looked at the financial strategy of the company we thought it was taking bigger risks than it could justify," he says. "If the market had gone further down you would have been gambling with the fate of the company. It was clear to us the company was taking unwarranted risks. The board decided it could not continue as it was, taking these big bets on the equity market.
"We had to take these decisions right away as it was a priority to make sure the company was stable."
He is aware that critics question its current strategy, particularly after promoting the flotation on a strong organic growth story which then appeared to be dropped in favour of acquisitions. It bid for Resolution Life last year, only to lose out to Pearl.
Grimstone says it was an opportunity to add value and that the board saw it more as an expansion of the organic strategy as the extra two million customers in Resolution's inactive, so-called "zombie" funds would have transferred seamlessly to Standard Life. It is an unusual way of looking at an acquisition, but he insists it did not represent a switch of strategy. "The returns we could have got would have been very attractive for our shareholders," he says, adding that the board has not considered a second tilt in the event of the tie-up with Pearl failing.
"We have a very good organic business, though that is not say we will not seize on opportunities where we see good value. But this is not a machine for making acquisitions. It is not how we are running the company."
The full article contains 1279 words and appears in Scotland On Sunday newspaper.
