EMAG

The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

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Documents: 27/03/2003 - 10 Reasons why Equitable is unique - No, it was NOT just the GARs and the stockmarket!

27 March '03 - 10 reasons why Equitable Life is utterly unique:

(No, it was NOT just the GARs and the stockmarket!)

1. When the Equitable Life (ELAS) closed in December 2000, after a 9-year 'raging bull' market, it was in deficit to the tune of £3 billions at a time when one would have expected a surplus of at least £1 billion. This, at a time that the FTSE 100 was at 6,220 - near the very peak of the stockmarket.

2. For more than a decade ELAS systematically over-declared bonuses and pensions and exploited over-declared performance by claiming, for marketing purposes, to be the best performer. This fuelled what was effectively a pyramid scheme, with those retiring or transferring throughout the 1990s receiving excessive handouts funded by newcomers.

3. ELAS revealed its substantial GAR liability to the regulator in 1994. It made NIL financial provision, yet this drew no interest from the regulator until the Government Actuaries Department's survey in 1998 revealed that Equitable Life had THE biggest liability and the smallest provisions.

4. Whilst ELAS's With Profits fund grew from £5 billions to £26 billion in a decade its free asset ratio, the normal safety yardstick, was padded with every device of financial engineering available, yet still the free assets fell year after year to nothing and the regulators did not intervene.

5. ELAS wasn't a With Profits fund. Its strategy was defined in an actuarial policy paper in 1989 (With Profits, Without Mystery). This articulated a hybrid form whereby ELAS did not build any 'estate'. It was really a managed fund that capitalised and distributed all gains, with no 'smoothing kitty' for a rainy day.

6. Because it operated through its own sales force ELAS wasn't subjected to the normal IFA 'checks and balances'. It was actually a slick, up-market direct sales operation but, because ELAS was venerated as 'blue blooded' royalty in a class apart, it was treated by successive regulators as being above scrutiny.

7. Only ELAS sent statements every year to its members showing their newly enhanced policy value INCLUDING non-guaranteed terminal bonuses, which led to misunderstood and inflated expectations compared to all competitor life companies.

8. ELAS is the ONLY lifeco that has been the subject of ANY published investigative reports and ELAS is the subject of SIX:
Penrose Inquiry, Parliamentary Ombudsman, Treasury Select Committee, The Baird report into the FSA's role, The Faculty of Actuaries Corley Report, the Joint Disciplinary Scheme's investigation for the Institute of Chartered Accountants.

9. ELAS has actually been less affected by stockmarket falls than other life companies. Since the House of Lords decision in 2000, ELAS pulled out of equities, every step of the way ahead of the market. In consequence it was the BEST performing fund in 2002. True, there have been substantial losses attributable to the stockmarket's collapse but these have been dwarfed by the cost to policyholders of making good the £3billion shortfall that existed at the time of closure,

10. Back in 1990 ELAS had a huge hidden deficit of more than £1billion - 25% of the value of its With Profits fund. Thereafter, there was a persistent huge shortfall on liabilities, measured in billions, throughout the decade despite the steadily rising equity market. The problems certainly date back to the mid 1980s.