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

Documents: 06/10/2001 - Report on Equitable's first "compromise" roadshow

Report on Equitable's first "compromise" roadshow

By Paul Braithwaite,

Members at the Equitable Life's first roadshow at the Birmingham ICC were in dour mood tinged with anger on last Saturday's grey and damp morning. It was ever thus for Section 425 Schemes of Arrangement, because they always entail creditors being asked to take less than their contractual entitlement.

The Birmingham meeting and all those that will follow are a pre-amble to the formal Section 425 vote in December. What's missing is a current financial "Statement of Affairs". As so often has been the case with the Equitable, the policyholders are expected to take on trust the substantiation for yet another write-down in value. On the recent BBC TV "Watchdog" special the presenter said that the Society, once blue ribbon, is now "institutionally untrustworthy" and trust is certainly at a low ebb.

On Saturday the slick AV presentation, TV cameras and fancy venue belied our new status as an impoverished and fatally wounded closed-fund. The show started with a 20 minute review by our smooth, part-time chairman Vanni Treves and the avuncular chief executive, Charles Thomson. Dr. Andrew Threadgold, a non-exec director, was present and praised by Vanni for being a shrewd chairman of our Investment Committee. We must own the luckiest of with-profits funds with only 40% of our leaky bucket in equities (that said, none of the others has devalued). There followed an 80 minute session that addressed some 20 questions from the floor.

I had attended one of the Equitable's roadshows back in March and the AGM in May, as had others in the audience. This was apparent from the bitterness of one comment that policyholder loyalty, asked for earlier, had most certainly not been rewarded. This, immediately after Vanni confessed that everyone who departed the Society in the first half of the year had left with far more than their fair shares.

"I'd like more figures", said member Christine Cope. A sentiment echoed again and again. Vanni promised that with the voting pack in late November we'll be getting interim accounts to June 30th. This was pitched as an unprecedented gift. But the data being sought is for the hiatus period post the Society's own "Black Monday" July 16th. The mood of the audience was much preoccupied with this devaluation of all policyholders' funds by one fifth and a kind of collective fantasy "can we have our ball back, please?" prevailed. The stark answer is "No".

Vanni "laid on thick" the absence of viable alternatives. In liquidation, even annuitants might not get paid for months and months. With seeming relish he said, "There will be no government lifeboat, because Ruth Kelly, the Economic Secretary (what an apt title), has said so". Make no mistake, there will surely be a galaxy starship to zap us to obscurity if we turn down this rather emaciated gift-horse.

Whilst there is apparently scope for some variance at the edges, the board appears to be willing to offer us only one billion pounds in total. This is a pretty meagre sum for very material rights to be foregone by ALL policyholders.

One has to wonder what size of the smoothing fund is retained and whether the new auditors have already insisted on a full provision for the new mis-selling "black hole" so explicitly identified in QC Nicholas Warren's excellent subsidiary opinion.

Someone asked why the Halifax's £250m incentive could not be distributed in the form of guaranteed uplift. Thomson failed to deliver a credible answer. It takes chutzpah to offer three quarters of the owners of the Society just a 1.1% guaranteed uplift. No-one added the obvious "Why can't we have the £500m already paid by Halifax, too?". The answer is probably that it's already gone on distributions greater than asset share, on the hopelessly overloaded Aylesbury admin machine and on the lawyers and PRs who've spent months masterminding this indigestible, purple-prose package.

Vanni was very frank on the administration's inability to cope in every area all this year, with little prospect of any improvement. One wonders why Mr. Thomson has so patently failed to come to grips with this after nine months in situ. Aylesbury lives under siege. At times a rumoured 92,000 files have been in process. A policyholder said he'd been waiting for the paperwork to surrender since July and Vanni expressed concern, claiming that average delay in payment is now 3 to 5 weeks. This is simply not borne out by experience.

One policyholder observed that the principles spelled out were very worthy but that what's missing is "justice" for innocent policyholders. This, he added with passion, is just one more in a series of financial debacles.

Much was made of the patent unfairness to late entrants and transferees who had, clearly in the minds of the questioners, been unequivocally misled and mis-sold. Vanni has talked in the past about his personal average return over 20 years being 11.2% pa, but those joining recently have been savagely mauled and such platitudes are "red rags to a bull" to them.

Before and after the presentation young pollsters from NOP conducted rather basic market research. "Do you think that the compromise document is an improvement in communications by the Society?" - is a bit of a no-brainer. "What do you think of Mr Treves'/the board's performance to date?". It might have been more illuminating to ask how many could name any of them. All conducted under the watchful eye of the ultra-expensive, shadowy supervision of PR crisis managers Burson-Marsteller, in the person of spin-meister Gavin Grant.

The acid test on whether this is truly a consultative period or a cynical going-through-the-motions exercise will be whether material changes are incorporated. Without big improvements in the offer for post 1998 non-GARs and a much greater sensitivity towards the 70,000 annuitants, one fears for the final result. But this was just the first of 16 member meetings and it's early days, as the vote isn't in until Christmas.

Paul Braithwaite

Chairman of EMAG