I once read that the average lifespan of a PLC on the London Stock Exchange is seven years. That seems remarkably short. Friends Provident plc managed eight. For a venerable institution that had thrived for 169 years, since its inception in 1832, the end was swift and brutal. That birth was in Bradford. It was created by Samuel Tuke and Joseph Rowntree to provide financial security to its Quaker members. It was run as a ‘mutual’, that is, it was owned by, and operated on behalf of, its members. This was the organisation that I joined as an IT graduate in 1999. At that time the purpose-built head office was at Pixham End in Dorking, as it had been since 1957. Various acquisitions over the years meant that it also had a large presence in both Salisbury (UK Provident) and Exeter (London & Manchester) and a smaller one in Portsmouth (National Mutual).
Joining this company was a bit like marrying into a family. Everyone knew everyone else. Everyone, it seemed, had been there forever. Whatever it was that you needed to know could be discovered quickly and easily. We all worked for the same company; we all had a common interest; everyone knew their bit intimately. Yes, like every family, there were the strange uncles, and weird siblings who were best left undisturbed, but on the whole it was a pleasant, relaxed and rewarding place to work. Add to that a corporate dislike of overtime, a working week of just 35 hours and flexitime, there was really very little of which to complain. And then it all started to unravel.
It was in 2001 that the main man, Keith Satchell, proposed floating the company on the London Stock Exchange, a process colloquially known as de-mutualisation. That seemed like a good idea, at the time. After all, everybody else was doing it. Free shares were flowing out to policyholders in recompense for their loss of status as part owners of the company. As employees, we also qualified for free shares. We were tempted with the opportunity to buy additional shares. Shares were added to our bonus scheme. There were share save schemes. What was there to dislike? There were shares everywhere. Everyone was a winner. Briefly!
The problem was that the share price, after an initial flurry from its flotation price of 225p, just went down, and down, and down further. Not dramatically, but the decline was steady and prolonged. Policyholders, employees and investors had had faith in this wonderful company but now they wanted to see a return on their investments and it just wasn’t happening. Who wants to sell at a loss? How do you know when to cut your losses? How long do you believe the promises to reverse the trend?
As a mutual there was very little pressure on the company to perform. Most pension, investment and assurance policies were sold on a ‘with profits’ basis. As long as the company made a profit each year, sufficient to add bonuses to keep client funds growing in real terms, and was in line with market expectations, nobody cared how the company was run. But joining a stock exchange comes with a whole gamut of rules and regulations. This in itself adds pressure and costs. But with shareholders also baying for blood, the company was driven to desperate measures, and it was policyholders who initially paid the price with the slashing of the final bonuses of its with-profits policies. But that doesn’t address any underlying issues so more was wanted - more profitability, more money, more efficiency, more flexibility. Ah, of course, outsourcing was the way forward. So they teamed up with the Pune-based Wipro. This didn’t go down too well at the ‘coal-face’. Most of the people with whom we were now working spoke English, theoretically. Nevertheless, we could understand neither a word they said nor their culture of saying ‘yes’ to everything, even when it became clear that they were equally clueless about what we were requesting of them. Then a plan was hatched to make FP considerably bigger. We would, as if by magic, become a top five player! Our relationship with Wipro, who had access to vast resources in India, meant we could quickly and cheaply scale-up. In IT, oddly, this meant giving up our capacious corner desks for smaller ones, to squeeze more bodies into the same space. Of course, the expansion plan didn’t work and the next we knew, many of our colleagues were being made redundant. Those axed were mainly our programmers. The rationale was that ‘subject matter experts’ would be retained whilst the mundane tasks would be done in India. Of course, outsourcing doesn’t, and cannot work. The justification is ‘de-risking’. Everything has a known cost, and that keeps the accountant happy. But at what cost? Something that once could be done in half an hour with a single phone call now took three days, multiple managers and an entire process of request, authorisation, scheduling, prioritisation, action, review and invoicing. And the whole process divides loyalties. Wipro had its own bottom line to care for. Although it should be a symbiotic relationship, ultimately the client becomes a cash cow to be milked day and night. Passing the risk buck doesn’t come cheaply.
Meanwhile, up in the ivory towers, the shenanigans continued apace. There had been a number of take-over attempts. Keith Satchell sloped-off and his hand-picked successor, Philip Moore, was required to fall upon his sword of failure. His seat was filled by the brash Aussie, Trevor Matthews (is there any other kind of Aussie?). In 2009 FP was acquired by Clive Cowdery’s Resolution 2. In 2011 he engineered a ‘take-over’ of AXA’s life and pensions business. I say take-over but as the purchasee was bigger than the purchaser it was more of a merger. Anyway, the Friends Provident brand was dropped along with its logos and identity and replaced with Friends Life. To rub salt into the wounds of the faithful, Cowdery enforced a share consolidation scheme. It was complicated, but in essence each shareholder was given the option of buying Resolution shares or else selling their FP shares. Cough up or cash out were the only choices. My bill for remaining a shareholder was calculated at about £1,800. The attraction of sinking yet more money into this bottomless pit was less than clear so I had no choice but to sell. Given that FP shares were trading at their lowest point, at around a quarter to a third of their original price, it was basically legalised theft and highway robbery. Approval by the High Court made it legal. It certainly was not moral.
As if the lessons of the Wipro experiments hadn’t been learned, in Nov 2011 we were all stunned by the announcement that the Wipro deal was to be terminated, and that we were all to be outsourced in totality to Diligenta, an arm of the giant Indian conglomerate, Tata. They were going to take over the running of the entire heritage business, i.e. all business sold under the previous FP brand. Diligenta presented to us early in 2012. They were full of bravado and (over) confidence. They were going to migrate all the policies onto their own systems and manage it all in India. All the analysis would be completed by the end of 2013, the policies being migrated by type through Q1 and Q2 2014. We would all be redundant by mid-year and the Salisbury office closed in December. It was easy. They had done at all before. Only they hadn’t. The previous projects were closed-book accounts. This was alive and kicking. Initially nothing changed, save a few office signs and the name on our bank statements, but slowly our work-load started to decrease. Who wants to spend money on systems that are about to be decommissioned? But Tata really had, as we had long-suspected, bitten off more than they could chew. And the Financial Conduct Authority (FCA) was busy throwing its newly-found weight around to justify the demise of the FS(ervices)A, with lots of pointless, regulatory requirements. The contract to hand the offices back to the landlord had to be reversed. The delays were costing Tata a fortune, given that they had signed a fixed-price contract. So in the extras, FP was being screwed for every penny. Experts were deliberately being made redundant so that an ignoramus could do the work badly at a grossly over-inflated price. I was retained until September 2015 even though I had had nothing to do for a year or more; paid to sit in the office to provide the very occasional annuity re-price and a bit of tech support. The last I heard, in April 2016, my two team colleagues were still there, Mike doing his fund admin and Steve doing approximately nothing, grateful that his mortgage was still being paid and that there was food on the table for his three young children.
In 2015 Aviva purchased Friends Life. Now, the whole Friends Provident story has come to an end. Aviva has had everything rebranded. A company that had existed for 169 years as a mutual has been consigned to history; dismantled by membership of a stock exchange, complete disregard for its purpose and history, utter incompetence and pure greed. Cowdery has since been knighted as a reward for making tens of millions of personal fortune. But is Cowdery the villain of the piece? Probably not. FP was there for the taking and he did what businessmen do – saw an opportunity and went for it. If not him, somebody else would have seized the moment. FP the plc was floundering, rudderless, vulnerable. It had been a FTSE100 company but the sliding share price soon had it crashing out of that elite club. It was too big to be ignored but too small to compete. The villain was Satchell. He was the man with a plan but without the wherewithal to make it work. He knew how to get things kicked off, didn’t think it through, completely lost his way, and yet somehow knew how to make a personal fortune along that way. He started but couldn’t finish! And so he just walked away, taking his millions of share-options with him, and took up directorships of other unsuspecting companies.
As a post-script to illustrate how likes attract, in this case incompetence, Satchell’s friend, Rupert Lowe, was the chairman who ‘masterminded’ the demise of Southampton FC; their demotion from the Premiership, bankruptcy and relegation to the third division. It’s true that he moved the club away from The Dell, a small and cramped home, and built them a spacious and shiny new stadium at St Mary’s. FP became both the stadium and shirt sponsor. It all seemed like a good idea but he seriously threatened the existentiality of the club. It was only the largesse of Austrian digger man, Markus Liebherr, who rescued them and restored them to the upper echelons of the football hierarchy.
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