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: 10/12/2002 - Letter to Mssrs Mr. Tiner and Mr. Strachan of the FSA

10 December '02 - Letter to Mssrs Mr. Tiner and Mr. Strachan of the FSA

Dear Mr. Tiner and Mr. Strachan,

Information and unitisation

I imagine you are aware that last week we released a paper by Ned Cazalet (see www.emag.org.uk) on the Society's financial situation. We also published a paper by Colin Slater FCA analysing the Interim Report and Accounts and a note by John Newman FCA. (I attach their papers). Both Cazalet and Slater proposed the possibility of unit linking.

In response to my letter to you of 12 November I received the attached unsatisfactory note from Equitable's Charles Thomson. As far as he is concerned the words you write in your With-Profits Review appear to be of no concern, nor is the following statement from the FSA's Integrated Prudential Sourcebook (CP97 June 2001):-

"We consider that quantification of the provision for terminal bonuses and its recognition as an on-balance sheet liability would help the FSA, policyholders and the firm's own management in determining whether adequate resources are being maintained to meet policyholders' reasonable expectations".

We would be grateful if you would instruct the Society to address forthwith the wishes of the FSA regarding disclosure of information to policyholders.

In addition to illustrating the complacent and lax standards that have traditionally characterised the life assurance industry, Thomson's note illustrates another characteristic of the way we have found he treats members. He appears incapable of arguing on an issue - he merely asserts a position. Thus, in this instance, he asserts the "media" as describing the Interims as being a full statement of the position of the company. We are not aware of any and he has declined my request to advise us who the admiring "media" are. You may perhaps agree that conducting a rational discussion with someone who trades in unfounded assertions is a difficult task.

What is, however, more serious is the way he has consistently treated our request to seriously consider the issue of unit linking. Following an explicit request at the May AGM he agreed to provide Sir Jeremy Lever with a considered answer, but he has not yet done so. Without providing any evidence that the issue has been analysed, he has simply asserted that it would be complex, time wasting and expensive.

Members do not understand the finances of the Society; do not understand the significance of the GIRs in possibly pushing it towards insolvency because the Board has never explained the issue. Not many will be aware that last year's GIR was paid for by reducing maturity values by 4%; nor will many understand the significance of unit linking. It is, therefore, thus not surprising that members are not knocking on his door asking for it.

In EMAG's opinion the Society's strategy has been flawed, as articulated in our letter to the non-executive directors of 29 November (copy enclosed). The central plank in Charles Thomson's plan is to become, over time, a "normal" with-profits fund. This objective was not viable in April when he announced it, let alone now.

We would be obliged if the FSA would either undertake - or instruct the Society to undertake - to publish a thorough study into the feasibility of unit linking the fund, as suggested by Colin Slater and Ned Cazalet.

Yours sincerely,

Chairman of EMAG

c.c. Charles Thomson, EMAG Committee, EMAG Website