From the Interim Accounts, which can be downloaded at: http://www.equitable.co.uk/content/content_16.asp

“In largely finishing these reviews and making appropriate payments, a significant financial uncertainty relating to the Society’s past has been substantially reduced and the provisions attached to these reviews have been reduced by £90m.”

Some observations on the half-year results obtained from EMAG’s accountant advisers, Burgess-Hodgson:

• The main feature seems to be an increase in asset values 'Changes in net asset values, valuation assumptions and valuation rates of interest £149m'
• Reading between the lines this seems to arise from an up valuation of the property portfolio.
• Equities don't amount to very much and Gilts are specifically excluded.
• Interest rates fell by about 1/2 over the period increasing gilt values.
• This seems to have been (rightly) eaten up increasing the future cost of the GIR.
• As of Dec 2004 gilt returns were about 4.5% of which 1% went in expenses leaving 3.5% to cover the GIR.
• Absolutely nothing to spare(indeed in 2004 there was a shortfall). It now looks as though the parity situation has been achieved, i.e. the Society can just about afford the GIR.
• The other feature is a reduction in provisions. These seem to relate to the Managed Pension Review & the Rectification Scheme. I guess the write back of provisions for more general mis-selling will come next year.
• Remaining policyholders are still stuck in the GIR straightjacket. They had no chance of benefiting from the uplift in equity values over the last 2 years. Nor will they in the future.
• Concentration on the FFA is worrying. There is no provision for terminal bonuses.
• The number remains open to actuarial juggling.
• The Office Valuation would be much more reliable. (WP Assets at market value compared to aggregate policy values inc TBs as communicated to PHs)
• This is a gilt fund with the prospect of some write back of provision in the future (or maybe some more claims).
• Not an investment for widows & orphans or pensioners.