Correspondence: 02/02/2001 - to Chris Headdon re sale of fund management to Halifax Letter to Chris Headdon
from Vincent Nolan, EMAG chair, 2 February 2001
Mr Chris Headdon
Chief Executive
Equitable Life Assurance Society
Dear Chris,
I refer to press reports about a possible deal with the Halifax.
EMAG has always supported the sale of operations (like the sales force) which
are redundant for a closed society. We are also open-minded about the out-sourcing
of remaining activities, if this can be done on terms that clearly benefit the
long-term interests of policyholders.
However, we are particularly concerned about any sale of the investment management
of the with-profits fund, which is the core activity of a closed society. We
learned from David Thomas on 19th January that Equitable's current investment
management is low-cost and that prospective bidders had said "we cannot make
money at that level". The danger is clearly that any transfer of ownership (presumably
with an out-sourcing contract) will result in higher charges, and therefore
lower performance of the with-profits fund, which could outweigh, in the long
term, the benefits from the process of the sale.
We believe that these issues are so fundamental that members should have the
opportunity to scrutinise the terms of the deal and express a view on it, by
a vote at an EGM or AGM. Even though the Board may have the legal right to dispose
of these assets without consulting members, we believe that they do not have
the moral authority to do so in the present circumstances, given that. the Board
no longer has the confidence of the members (as most of the Directors have acknowledged
by announcing their intention to resign). Please let us know whether it is the
intention of the Board to put this aspect of the deal to members for their approval,
before it has been finalised.
One other aspect of the proposed deal also concerns us. We understand that the
Halifax are being advised by Lazards, where Jonathan Dawson is a Managing Director.
If that is the case, there is clearly a potential conflict of interest. Please
let us know whether it is the case and if so, how the situation is being dealt
with.
In view of the importance of the issues, I am copying this letter to Sir Howard
Davies at the FSA. EMAG will also be putting the letter on its website.
Yours sincerely
Vincent Nolan
Chairman, Equitable Members Action Group
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