Standard Life has said it will sue independent life insurance analyst, Ned Cazalet, for defamation following his release of a document criticising the life office’s figures as it attempts to retain its mutual status.
A spokesperson at Standard Life said: “We have presented Mr Cazalet with true facts and figures in relation to the attempt to force Standard Life to demutualise. Relevant figures were verified by a leading firm of actuaries. Despite this detailed response, Mr Cazalet published a grossly defamatory and intemperate attack on the company and we cannot let this go unchallenged.”
Cazalet, proprietor of Cazalet Financial Consulting, said that he is yet to receive a writ.
In the document he said that Standard Life has 530,000 mortgage endowment policyholders whose policies are off target and, while he holds no views on mutuality, believes that with the prospect of increasing their mortgage outgoings, most are likely to be grateful of any available windfall benefits to help address any shortfalls.
But Standard Life is contesting this charge and stated that all policies had grown at a higher rate than projected when taken out.
Jim Stretton, chief executive of UK operations, said that, like other providers, it would be writing to its members as the FSA wants all policyholders to understand that in a low inflation/low investment return environment the maturity value of the policy may not cover the mortgage.
He said: “In respect of Standard Life’s customers, the issue of mortgage endowment shortfalls has been greatly overstated by recent commentators. Risk-averse savers may wish to increase their savings, but no Standard Life policy has to date failed to repay its associated loan.”
Standard Life is also trying to demonstrate to its members that demutualisation would not be in the interests of its members.
Gordon Arthur, director of communications, said: “The history of recently-demutualised life offices shows that bonus rates and payouts have fallen significantly on maturing policies post-demutualisation.”
For example, using the case of a 25-year with-profits endowment held by a 30 year old male paying £50 a month, a Norwich Union endowment in 1997 would yield a payout of £93,179. Three years later, after demutualisation, this fell to £89,518. Over the same period, Standard Life said its endowment would have risen from £102,674 to £110,373.
“People need to think about whether the windfall they may receive in two years time is adequate compensation for the risk of underperformance,” Arthur added.
But Cazalet said: “Standard Life likes to make a play of its past performance. It is true that Standard has notched up a large number of top 10 places in annual endowment surveys, but closer scrutiny that breaks down the components of recent performance shows that overall policy returns owed much to historically competitive policy expense deductions, whereas going forward the company’s charges for with-profits business are relatively uncompetitive.”
l Speculation is mounting as to whether Bradford & Bingley will put itself up for sale rather than float as shares in mortgage banks drop. Abbey National has been put forward as a potential buyer but dismissed the claim as “pure speculation”.
Robert Guy, technical manager at John Charcol, the specialist mortgage broker owned by Bradford & Bingley, said: “Internally the company is working for a flotation. Anyone wanting to acquire the company would have to do so quickly.”
While mortgage bank shares may be falling, Guy said that the society would not be floating as “just another mortgage bank”.
“Bradford & Bingley will float with a different proposition with a chain of estate agencies, John Charcol and an e-business strategy,” he said.
