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

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