Insurance Chief Turns To Friends In High Places

The Age

Saturday February 2, 2008

Julia May, London

AS A qualified actuary, Trevor Matthews has presumably modelled the risks of his defection this week from one of Britain's biggest insurers, Standard Life, to its rival, Friends Provident.

Regardless, he knows his future is uncertain, given that Friends is vulnerable to takeover - perhaps even before he takes the helm in July.

On Tuesday, the Australian "turnaround king" resigned as head of Standard Life's British life and pensions business, a day before the group's fourth-quarter results presentation.

When the Macquarie University graduate took over in 2004, the insurer was virtually unable to write business, so shaky were its fundamentals. With responsibility for 70% of the company's business, Mr Matthews had been tipped to succeed Sandy Crombie as chief executive, but had reportedly become frustrated by Mr Crombie's refusal to outline a retirement plan and the board's failure to recognise him as successor.

Further signs of strain emerged as Standard Life confirmed it would enforce Mr Matthews' six-month notice period. Mr Crombie said: "Standard Life has a great many developments in train. We wouldn't want them walking into a competitor while they remain very much alive for us."

Mr Matthews, 52, gained prominence as managing director of Legal & General Australia until 1996, before a two-year stint at National Australia Bank. His appointment comes at a crucial time for Friends, which unveiled the conclusions of a two-month strategic review on Thursday.

In a shift back to life insurance and superannuation, Friends paved the way for a sell-off of its 52% stake in F&C Asset Management, and Lombard, its investment firm for high net-worth people, as well as Pantheon, its financial advisory business. It said it would cut 600 jobs - 15% of its workforce - and halve its dividend next year, which immediately wiped 10% off its market capitalisation. Investors and analysts are sceptical that the restructure will protect Friends from a takeover by the private equity firm JC Flowers, which said last week it was considering a bid.

Tim Young, an analyst with Collins Stewart in London, said in a note: "With the management vacuum and disastrous trading, Friends is wide open to takeover by Flowers. Investors will be begging for such a transaction."

Which leads even Mr Matthews to hedge his bets on his new role: "I have some protection from the company if the job is not there when I get there," he said.

© 2008 The Age

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