7 February '04 - Press Release - New report into Equitable Life's actual performance: BELOW average.

EMAG noted that the Treasury last year began to brief that Equitable Life's policyholders were fat cats who had benefited from over-generous bonuses in earlier years. EMAG knew the fat cat image to be an unfair generalisation.
To establish the true position, EMAG commissioned a new clinical study from chartered accountants Burgess Hodgson to provide a definitive report (Equitable Life Rates of Growth) on exactly what happened to investments made in each year in the 1990s and to calculate the rate of return achieved.

Burgess Hodgson's results are factual and demonstrate that ALL investment made late in the day - post 1996 - have suffered disproportionately. The report also shows that Equitable Life's bonuses during the 1990s, whilst exceeding Equitable's actual investment performance, were actually BELOW the industry average.

"Once again, EMAG has commissioned helpful, independent evidence. This new report nails the claim that many Equitable policyholders have benefited greatly from earlier years. The fact is that over one million unlucky policyholders paid off the Society's overdraft accumulated over a decade in the swingeing policy value cut in July 2001, which gouged £4bn from overall policy values - of which less than a quarter was used to buy out policyholders contractual rights, including the GARs. Professional classes or whatever, everyone is entitled to believe that the words: 'Regulated by the Treasury' was a guarantee from the government." Paul Braithwaite, general secretary of EMAG

Equitable's venerated status was based upon the bonuses it declared in the 1980s and earlier, which boosted the past performance of long-term policies maturing in the 1990s. This reputation was based much more upon the consistently higher levels of inflation that prevailed in earlier years than on Equitable's later bonuses.

Further, only about one pound in seven in the with profits fund in July 2001 had been invested in the 1980s (or earlier), whereas nearly two thirds of the value of the fund was invested after 1995 - exactly those policies that were hit hardest by the exceedingly rough justice of the across-the-board cuts of 16% imposed on ALL policyholders on 16th July 2001. Whilst there have been further cuts in policy values totalling 10%, these are regarded as a genuine consequence of the stock market.

Burgess Hodgson partner Colin Slater said:
"Our figures show that Equitable Life's 1990s reputation was mostly a myth. Like an ageing prima donna, Equitable enhanced current performances by evoking memories of past ones and by using all the tricks of the trade."

Enclosed, Burgess Hodgson's Summary and Conclusions. For full text of report "Equitable Life Rates of Growth", download from www.emag.org.uk

ENDS.

EDITOR NOTES:

Chartered Accountants Burgess Hodgson has prepared, at EMAG's commission, three previous reports for the benefit of ALL Equitable Life policyholders:

First was the forensic analysis of ELAS 1993-1999, presented on March 26th, 2003. This forensic investigation of Equitable Life's finances discovered and disclosed the additional £1billion 'black hole' (on top of the £1.5billion shortfall previously disclosed)) dating back to the early 1990s that has not been acknowledged by the regulators and auditors.

Second: A study that analysed the magnitude of the losses that are directly attributable to regulatory failure, quantified at £3bn. This report was supplied exclusively to the Treasury in November 2003.

Third: The Alternative Penrose Report, presented on Dec 22nd 2003, which anticipated what Burgess Hodgson believes will form part of the content of the Penrose Report.

EMAG suggests journalists keep the new study: "Equitable Life Rates of Growth" as an aide memoire to compare with the forthcoming Treasury press release summarising the Penrose Report.

Colin Slater is the partner at accounting firm Burgess Hodgson, who was responsible.