Standard Life views the Canadian market as a strategic component of its international activities, given the country’s ranking as the world’s fourth largest pension fund market.
Interviewed by The Insurance Journal, Sandy Crombie, group chief executive of Standard Life Group, headquartered in Edinburgh, Scotland, and Sir Brian Stewart, the group’s chairman, made it very clear that the Canadian subsidiary constitutes a strategic asset in the company’s international portfolio. The two were interviewed at Standard Life Canada’s headquarters in Montreal at the end of June. They were in Montreal to attend a meeting of the group’s top executives.
Mr. Crombie and Sir Stewart have thus reiterated the message delivered by Joseph Iannicelli, the president and chief executive officer of Standard Life Canada, who dismissed industry rumours that the Canadian operations were up for sale in the May issue of The Insurance Journal.
“We have a strong incentive to stay in Canada,” states Mr. Crombie. It would be completely irrational for the group to leave Canada under the current conditions, he says.
Some 70% of Standard Life’s Canadian revenues consist of annuities, investment funds and individual and group insurance plans.
Here to grow
The rumours that Standard Life Canada was up for sale are linked to its relatively small size in the market. While recognizing that new global insurance market realities favour a certain critical mass, Mr. Crombie flatly rejects this concern. Competitors may say what they want about Standard Life, he says, “but all that we’re interested in is offering high quality products and service. That’s what will win the loyalty of our clients and distributors. We’ve been in Canada for 72 years. We’re not about to be influenced by the latest trend.”
The United Kingdom remains Standard Life’s primary market. “But our Canadian subsidiary is the oldest of our non-UK activities,” continues Mr. Crombie. “It represents 12% of our global portfolio.”
In addition, Canada represents an excellent growth opportunity, adds Sir Stewart. “Clearly, we want to optimize its value. But this optimization will be done through growth, not dilution.”
Sir Stewart, who says he normally does not grant interviews to the media, is also emphatic in explaining the value of the insurer’s offer compared to that of its competitors. “We are strongly oriented towards service,” he affirms. “Our way of doing business is based on extensive experience. We capitalize on our history and expertise, not on the latest fad to hit our industry. These traditions are our strength and add value to our company.”
Sir Stewart also stresses the importance of these values as the insurer goes through a major change: demutualization (see box). If the insurer loses its personality, it will be taking a very big risk, he adds.
A raging debate
Sir Stewart’s insistence on this issue may be due to the heated debate in Europe surrounding the demutualization of the institution. In fact, the debate is so stormy that many believe it led to the resignation of Mr. Crombie’s predecessor and certain members of the board of directors. Sir Stewart, who has been a member of the board of the insurer for the past 11 years, disagrees with this point of view.
In business, he says, experience teaches you not to resist the winds of change and you know instinctively when you’ve reached the point of no return. Such is the case with the insurer’s demutualization project. There’s no question it’s a big change, but it will not have a major impact on the way the insurer does business. More than anything it is a change in financing methods. It is important that clients not perceive it as an upheaval, he adds.
Sir Stewart also acknowledges the increased pressure from stock markets for information. “We were in the habit of communicating financial information to our members,” he explains. “The change will be in the frequency and depth of the communication.”
Of Standard Life’s seven million clients, 1.2 million represent financial services other than insurance. The company has 2.6 million members world wide.
A formula for growth
Standard Life is standing by its growth formula. In an era when empire builders are a dime a dozen, Standard Life has set itself apart through its focus on organic growth. In the May issue of The Insurance Journal, however, Mr. Iannicelli said he would consider making acquisitions to grow the Canadian operations.
uestioned on this new strategy, Mr. Crombie and Sir Stewart said they are not against such an orientation, provided it benefits the company.
“My preferred formula is pretty boring,” says Sir Stewart. “It is a combination of stable revenues and careful underwriting. But you can be sure that if an acquisition opportunity presents itself in Canada, we’ll have the means to carry it through.”
Mr. Crombie adds that many players have increased their acquisitions, but the quality of their service has suffered as a result. It is difficult to successfully manage the integration of an acquisition while maintaining a high quality of service, in particular because of the many different technological platforms involved, he states.
“At Standard Life, we are satisfied with the quality of our technological infrastructure, which is the same around the world.”
Mr. Crombie applauds the ambition of his Canadian executive, but adds that he will not authorize any acquisition that threatens the quality of the organization.