21 May '03 - Questions for the Equitable Life AGM (Updated from 14May '03)

The Equitable Life's AGM will be held on Wednesday May 28th. EMAG asked policyholders to submit questions they would like answered at the AGM. We publish this list to help give the ELAS board advance notice of policyholders' concerns. The questions do not represent the views of EMAG's committee. We will publish more next week.

Why not submit your question/s to: emagpr@yahoo.com

1. In the light of Glaxo, Smith-Kline revolt against rewarding FAILURE, what director severance packages does the Society have, including Charles Thomson's?

2. Why will the board not give WP annuitants a schedule of the reduction in final bonus, adjustment to the accrued reversionary bonus/guaranteed etc and the fundamental model used in their pension re-calculation? Surely all annuitants should be entitled to know the basis of their ongoing monthly income?

3. Since many WP annuitants have an anticipated bonus rate higher than the 4.5% likely to be achieved on the WP fund, they are likely to see their pensions continue to reduce year after year - on top of the 30% or so that is currently being removed, Will the board explain how this investment policy can make anything other than a complete nonsense of the concept of the with profits annuities sold by ELAS?

4. I understand that 10% of the 30% cut in WP annuities is the financial adjustment that you currently take from maturing policies. How can you possibly justify applying a maturity penalty years after annuities have been entered into?

5. Why has the board not given annuitants the protection provided by the Pensions Act 1995? This legislation takes the eminently reasonable view that in the event of a financial shortfall payment of pensions should take priority as it is pensioners who are less able to make good their losses by seeking paid employment.

6. Why ELAS is continuing to pay the coupon on its bonds, when the Society's capital is so weak as to enable the board to quite legally not pay coupons. If the board's primary duty is to policyholders, why is the Society paying out desperately needed cash to bondholders?

7. Why does the board not buy the bonds back in the market? If today, one bought £1m of ELAS bonds for £500,000, the society is liability is to pay 8% annual interest in August on the face value i.e. £80,000 - thus giving a yield of 16%. Since the Society makes about 4.5% on its WP fund, paying 8% on face value (i.e. 16%) seems to be much less sensible than buying back at 50% of face value - and that has the additional benefit of lowering the debt and hence the RMM.

8. Why, in the voting pack, do you deliberately mislead members by stating that: "You should vote for four candidates", when members can vote for as many or few as they chose?

9. Will the Society undertake to publish the results of the AGM votes the mandated votes EXCLUDING all proxies - which it did not do last year?

10. Why was Bacon & Woodrow hired to prepare the actuarial review required by the FSA when that firm was so clearly NOT "independent" because it had represented Equitable Life for all sales made through Guernsey and supplied under contract the Appointed Actuary Peter Nowell during 2001/2?

11. In the year-end accounts, provisions rose from £627m to £960m, whilst the value of the WP fund fell from nearly £20 billion to £13 billion. Please give members an up-to-date view on the various provisions, which fall on every decreasing number of policyholders' shoulders.

12. EMAG commissioned a forensic accounting analysis that claimed there was a 'black hole' that had nothing to do with GARs dating all the way back to the1990s. It was supplied in advance to the Charles Thomson in January. Will the board be using it as evidence and modifying the claim against the previous board?

13. Does the board, which has access to all the relevant papers, agree with the conclusions of the report by Burgess Hodgson? If not, on what points does it disagree, and why?

14. If Charles Thomson's involvement with his ex secretary has been above board, why was the news not managed by the Society rather than left to be sensationalised in a manner demeaning to the Society?

15. Is the Society seeking actively to move the book of annuitants to an alternative provider?

16. When will the Society be contacting those who had previously been told they were eligible for GAR rectification to describe the new rectification scheme?

17. If the Society loses in the Ernst & Young Appeal Court hearing will the board give us an undertaking that they will not proceed to the House of Lords?

18. Given that the 15 former directors, despite the claim for £3,000 millions cannot possibly generate more than a modest number of millions in compensation, why does the board not drop all except Ranson, Nash, Headdon and Sclatter to save the Society legal fees?

19. There appears to be many mistakes with the new 2002 FSAVC statements. Will the board undertake to re-run all calculations and send out corrected valuations?

20. It is apparent from the accounts - as in the first half of 2001 the same in 2002 - for months all policyholders who left in the first half of the year took hundreds of millions of pounds more than their asset share. Why, for the second year running, did this board fail to protect the interests of the remaining policyholders by not acting promptly? Can it be that the board did not wish to prejudice the compromise with a second devaluation immediately on the heels of July 2001?

21. Why, at Special Resolution 5, is the board seeking change to allow it to increase borrowings infinitely, without recourse to its members? Why has this new proposal suddenly appeared, 'under the wire', without ANY prior notification at any stage of consultation?

22. Why was the true state of Equitable's finances, including the second 'black hole', not revealed to policyholders at the time of the compromise, in December 2001?

23. There are £346m of bonds outstanding that do not show in the returns as debt but nevertheless have to be serviced and ultimately re-paid, except in receivership. Given that the Society has ever diminishing member numbers, how does the board intend to provide for this; a liability falling increasingly on with-profits annuitants and those remaining?

24. Last AGM you told us that you intended to re-negotiate operating terms with Halifax/Clerical Medical. Were you successful in lowering the charges?

25. The Society is invested 90% in gilts and bonds, which are NOT without risk, being exposed to the ramifications of any interest rate rise. The only course in that situation would be yet another devaluation. How much (or little) of the £12.5 billion with-profits fund is now non-guaranteed?

26. Derek Higgs's recommended changes on directors includes that no individual should chair more than ONE major company. Given Vanni Treves' role as chairman of Interetek Testing, Channel 4, London Business School plus two dozen other non-executive directorships and as many more arts, legal, City and other charity roles, will Vanni Treves now step down?

27. What measures have been taken to investigate whether fraud was committed by the previous board?

28. In last years letter of April 15th, Charles Thomson declared the Society's strategy would be to return to being a normal WP fund with much higher investment in equities (at that time 15%, now 4%). But on March 9th in The Herald Charles Thomson admitted there is now no scope, however much the FTSE takes off, to get back into equities. So what is the strategy now?

29. Given the straight-jacket need for reserving for GIRS, how can the fund possibly be described as 'with-profits', when since closure, it has been consistently 'with-losses'?

30.Given that the board had been correctly advised in September 1998 of the magnitude of the financial consequences of initiating its Hyman litigation, how was it possible for Equitable Life to recommend annuities in 1999 and 2000 without it having committed deliberate deception Ð or fraudulent misrepresentation?

31. The House of Lords required the Society to make reparation to 30,000 annuitants in a GAR rectification scheme. In almost three years, only one third have been resolved and now the board has cancelled the scheme. How can this be fair to the remaining 20,000 all of whom were notified that they qualified?

32. Why did the Society mislead WP annuitants in November 2002 into believing the cuts this year would be a maximum of 20% when clearly large numbers have
received cuts between 25% - 27%?

33. Why does the board not offer to go to a non-judicial binding arbitration to resolve the claims of the late joiners?

34. Why has the Society consistently refused to divulge the number of members since June 2001? How many members are eligible to vote at this AGM and what proportion of those are annuitants?

35. How much has this board spent during its two-year tenure on all its lawyers and professional advisors?

36. Where is the paper promised last June by Charles Thomson, subsequent to Sir Jeremy Lever's question at the AGM, evaluating all the pros and cons of
unit-linking?

37. What has Ron Bullen achieved on policyholders' behalf?

38. Will whatever compensation is offered to the clients of Class Law and Irwin Mitchell be extended to all other ex-policyholders who have similar claims?

39. Why is Equitable's own website so inferior to the helpful sites provided by both EMAG and ELMHG? Will the Society henceforward contribute to the costs of
maintaining those two helpful sites?

40.Why did Charles Bellringer, who joked last year in dubious taste about "solvency abuse", receive ANY bonus with his pay-off, reported in the accounts to be £195,000?

41. Why does the ELAS board so persistently refuse to back all the seven policyholder groups in calling on the Parliamentary Ombudsman to immediately broaden her
study of maladministration to embrace the 1990s, when it would cost the Society absolutely nothing and could result in massive Government compensation?

42. Given the on-going dire performance of the Society and the cuts that policyholders have repeatedly suffered, how dare the board pay our chief executive in excess of £1,000,000 for his first two years of service, including more than £320,000 in discretionary bonuses?

43. Has the board received explicit written advise that Denton Hall should not be pursued for compensation on the explicit grounds that they, through obvious conflict, could not possibly fairly represent both the Society AND the non-GARS?

44. Post the AGM last year the board put the following objectives on the Society's website. Please review and report on progress against them:

"Our objectives going forward are:

i. To continue to increase stability and strengthen the fund
ii. To use any improvements in strength to reduce investment constraints and, if and when appropriate, to increase equity holdings.
iii. To continue to restore high quality customer service
iv. To reduce expenses and aim to restore the low expense business model
v. To resolve the outstanding claims against the fund."

45. The damaging Sunday Times story on September 29th, 2002 met with the promise of a witch-hunt and the threat of litigating against that paper. Six months on, what has been the result of the internal investigation?

46. Does not the treatment of policyholders who joined post 1996 as nonGIRs - giving them nil bonus for 15 months to April 2003 - expose the Society to the risk of claims that they were mis-sold (per Warren 2)?

47. Many late-joining annuitants feel, in retrospect, that the compromise was totally unjust to them. Unlike the non-GAR late joiners they had NO option to leave. Will the board, in the light of the Bacon & Woodrow actuarial review, consider compensating those late-joining locked-in annuitants?

48. Why has the board gone to the Appeal Court, after the damning judgement in the Ernst and Young strike-out action, when the most likely outcome appears to be that E & Y's full costs may be awarded against the Society?

49. Why does Charles Thomson persist in claiming that the primary cause of the Society's problems as the stock market, when ELAS has suffered proportionately
FAR less than any other life company, achieving a positive return in 2002 of 4.8%?

50. How can the board justify using £200 million of future profits in the solvency return when the Society is closed, the FSA deplores the practise and Equitable has just 4% in equities?