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: 07/03/2001 - EMAG Meeting with Vanni Treves

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Report on the joint meeting held on 7th March , at ELAS request with representatives of EPHAG ; EMAG ; ELM Group ; and Stuart Bayliss, to discuss possible compromise deals between GAR and non GAR policyholders.

These minutes were prepared by ELPHAG after the joint meeting and are represented here for ease of access by EMAG members

Present were Charles Thomson and Alistair Dunbar on behalf of ELAS, and Emrys Thomas and Bob Widdess representing EPHAG (Equitable Policy Holders Action Group), Vincent Nolan and Paul Braithwaite representing EMAG (Equitable Members Action Group), Liz Kwantes and Alan Bevan representing ELM (Equitable Life Members Group), and Stuart Bayliss, from The Equitable Life Guaranteed Annuity Action Group

On the first of March, the 'Halifax deal' was completed, effectively spliting the 'old' Equitable off, and leaving the With Profits fund as a stand alone entity. The search is now on to find a formula that will provide the basis for an agreed deal between the GAR and non GAR policyholders, that will enable stability and re-assurance to be brought back to the W.P. fund. EMAG had previously pressed for the release of documents relating to the sale of parts of ELAS to the Halifax, and details of any comparitive work done on the merits of any proposed compromise scheme between GAR and non GARs. These documents were received by Action Group members on Tuesday evening, and were also made available to policyholders via ELAS web site. (follow the link on page 2 of our web site to access the documents). This did not give much time for Action Group members to digest the contents, but is a welcome change from the negative responses to past requests for information we used to get from the 'old' Equitable Board. We now sense the start of a welcome change in attitude in keeping members informed.

In a pre-meeting discussion, the action Groups agreed the following main principles :
  1. An agreed joint comminique would be issued on behalf of all the groups.
  2. Whilst there are still many questions to be answered about the causes of the Equitable disaster, we must look to the future, and try to bring some stability back to the W.P. fund, and return a degree of confidence to policyholders.
  3. All Action Groups agree that a compromise agreement between GAR and non GAR's is essential, otherwise there is a real danger that ALL policyholders could suffer.
  4. It cannot be repeated enough that the Equitable mess was NOT CAUSED BY THE H.O.L. DECISION. The responsibility for the debacle rests with the 'old' ELAS Board and/ or their advisors. The Action Groups took great exception to the phrase in the consultation document that said ' The House of Lords gave additional rights to policyholders with GAR's'. This is not correct. They just confirmed rights already written in GAR contracts. This, we are afraid is still symptomatic of the 'old' ELAS thinking, and we will make no progress until ELAS accept that the 'old' Board were prime amongst those who made the mistakes that have brought about the present situation. Most of the 'old guard' have either gone, or are going, and we now feel a line should be drawn under events up to 1st March, and everyone must now work to get the best value for all With Profit policyholders.
Charles Thomson advised that ELAS now has a staff of just 8, although he would be happier with 10. The new Chairman Vanni Treves took over on March 1st, and has announced a series of meetings around the country to guage members feelings(see our web site for details). Mr Thomson said that Equitable is now 'a virtual life company'. Many people were under the misaprehension that the Halifax sale has solved everything. The life industry sells TRUST and SAFETY - people are scared because they feel their pension and savings are at risk. It is therefore essential that some people will have to give ground to restore this feeling of trust

We had hoped that ELAS would have devised a compromise scheme already, but the documents we received only pointed out the necessity for such a scheme. We felt that ELAS were starting from a particular solution, and Vincent Nolan proposed that all possible solutions should be considered, and ELAS should 'think outside the box'. It was felt that Stuart Bayliss's basic principles should be integral in attempting to achieve a solution, and Stuart emphasised that the successful scheme should include that there be no further legal action (excepting of course for culpability)

Action Group representatives felt the suggestions put forward in the consultative document were vague and non-conclusive. Stuart Bayliss crticised the assumptions that underestimated the possible liability, in particular the assumption of only a 50% take up. EMAG pointed out the 1.3bn liability was the actuarial best estimate of the cost, if left to run. This would not be the same as buying out GAR options today, which could cost considerably more due to increased life expectancy. Stuart estimated the open market cost difference to be 23% for a 65 year old, and nearer 35% for a 75 year old. He also suggested that younger GAR's should be considered as if they were at an age to crystalise. - say 60

Possible solutions floated included
  1. Winding up the W.P. fund.
  2. Take no action, and continue to run as a closed fund.
  3. Seek a compromise deal between GAR and non GAR's.
  4. Seek to re-open the company by seeking more capital (effectively de-mutualise).
There are plusses and minus's for all the above, but the consensus was that a compromise between GAR and nonGAR's would offer the best value and restore certainty to members. One such suggestion involved a deal to enhance the value of policyholders funds in exchange for GAR's giving giving up their rights. The value of this enhancement, and the method of application need careful thought, but a fair deal on this basis would remove a lot of the current restrictions on the operation of the W.P.fund, and would go a great way towards relieving policyholders worries about their pension funds, and other W.P. investments. There are obviously various ways to achieve these objectives,and ELAS undertook to consider all options, and we hope to have the opportunity to discuss these in more detail at a future meeting.It was suggested that ELAS commission a survey by their sales force of a reasonable number of GAR's (around 1000), to measure their feelings towards settlement proposals.

ELAS confirmed that policy surrenders are now back to 'normal levels', and that the value of the W.P. fund is approximately £25bn

EPHAG with the support of the other Action Groups re-iterated their request for a full legal audit into the posibility of legal action being taken against the old Board and/or their advisors, and of the subsequent claiming of damages if any parties were found to have acted negligently in this matter. Charles Thomson stated he was concerned not to involve members in further expensive legal action, but the Action Groups unanimously pointed out that there was a tremendous groundswell of support for this from members, who genuinely feel they have 'been robbed'. Mr Thomson agreed he would give serious consideration to the request, and we await his decision.

The Action Groups' general consensus of the meeting was :
  1. ELAS had no 'fleshed out' solution for a compromise to offer.
  2. The data available at the meeting was woefully inadequate. In particular, GAR age profiles ; GAR liability by time to maturity of policies ; details of the split of the W.P. fund in proportions of individual / group schemes etc., were not available.
EMAG suggested that ELAS may wish to withdraw the consultation document from its web site in the light of our discussion.