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: 17/05/2006 - John Newman's Speech



I’d like to thank policyholders who nominated me giving me this chance to address you; as I did in 2005.

Well, last year I stood for the first time and tried to present an olive branch to reconcile the positions of EMAG with the Board. Regrettably, at every stage, the branch was spurned.

Last year I invited the Chairman to consider his position on his 65th birthday in November 2005, if the litigation failed. The response was that the litigation was instigated and pursued with the approval of all the Board and had the support of the professional advisers to the Board. Now the litigation has failed totally and the Society has even had to pay many millions of the costs of the other sides with the bill totalling more than £40m. The epithet in the legal journals was “misconceived”.

In 2001 Mr Treves was appointed not for his insurance company skills, not for information technology or actuarial knowledge but because his core competence was as a City lawyer for 40 years. He became chairman of the Board and of the legal committee. Law is his key area of expertise and competence.

He has let us down. Furthermore, I understand he didn’t go to Court 76 for even one single day. To me his legal credibility is now zero because of this waste of our money. He and the Chief Executive should have taken responsibility for their actions and resigned.

They have failed in court. What else have they failed to do?

The regulators have not been held to account for their failure. I want the Society to support policyholders’ European pursuit for compensation from the Government. On 25th April, Charles Thomson gave half-hearted and economical evidence before the European Parliament’s Inquiry. This was an attempt to stab complainants in the back; he dismissed them as “opportunists”.

I also want the Society to plan for the Parliamentary Ombudsman’s decision and not just sit idly by. It is time for the Society to campaign for policyholders on the valid grounds that it was misregulated and to stop selling us down the river.

Last year I suggested that ways must be found to diversify assets and improve the position. I still want imaginative and constructive ways to change the structure. I want to explore unitisation, separate funds for differing classes of policyholders and investigate if annuitants can transfer or recast their choice of annuity. But where we appear to be heading today is for a break-up, whatever the price to policyholders.

So the Board has come up with the Canada Life deal. The only figures you can glean from the letter and press release are the transfer of £4.6 bn. of assets to Can Life and 130,000 annuitants are involved. None of the with-profits annuitants are dealt with. The advantage according to Charles Thomson, and I quote, is:

“(it) will remove a significant risk to the business”. …

“people’s life expectancy has been increasing rapidly and the cost of paying annuities has been increasing….”

“the cost of paying these pensions is greater than expected and that cost falls on the with profit fund.”

The accounts for 2005 Note 16 d. ii do talk about mortality risk and say there has been an “Investigation”. The effect of the Investigation means an extra £240m has been provided for, this year, out of the pockets of with profit policyholders.

So the obvious four questions on the deal are:

[1] What are the costs of advisors Lexicon, Deloitte, Lovells, KPMG/Jenkins, Finsbury, and the QCs in Court? Please give us a clue of the size of the competitively tendered budget??

[2] What about the HBOS (then Halifax) ten year administration agreement of 2001 – is the termination charge invoked? Is this £75m or what? Do “we” still pay the full and excessive administration costs of Aylesbury, having disposed of two thirds of the annuities in payment? (Can Life is taking over the admin remember).

[3] In addition if there are discussions with HBOS why has the position of the reassurance arrangement of the unit linked business not been cleared up?

Why are they still on our books and have not been transferred off, as they wish?

[4] Actuarially, why was there an “Investigation” this year? Why did Mr Thomson not do it much earlier?

I suspect someone did: in 2004 a mortality charge was made that year of £62m. Nil in 2003. In 2002 the fund had to be strengthened by £179m and in 2001 £150m. The tables of assumptions in the mortality calculations were stated to be consistent throughout up to the investigation. So the cost in total over the last five years is £631m: a big number!

The last question begs thought as to the competence of Mr Thomson as Actuary. Why did Mr Thomson not wake up earlier to this mortality risk? I thought there was a continuous review going on. It has been a hot topic since 2000 in actuarial circles. I am tempted to conclude that this years’ £240m injection was a sweetener to give the appearance that “no money changed hands”. Could the mortality risk have been re-assured? What would that have cost?

Mr Thomson then uses what is known as “motherhood and apple-pie speak” on the subject of other potential deals - “the challenge is … to deliver improved benefits to policyholders.”

MY challenge to Mr Thomson is to prove the Canada Life deal shows benefits to all policyholders today.

With the Can Life deal consummated the remaining fund will almost exclusively be in bonds: where is the scope for “with profits”?? We need to know.

Around 80% of us have Guaranteed Investment Returns of 3.5%. There is no quantification in the press release of the impact – why? Will the admin cost burden per remaining policyholder rise as a consequence of Can Life, thus increasing risk to those still at risk? Will the regulatory corset of the GIR Guarantee tighten on the investment scope – not a word on this.

I criticised last year the high costs of HBOS and the poor investment return: has Mr Thomson done anything on this? Has he done anything about EXPENSIVE DIRECTORS and employees? For 2005, these figures have risen again, as they have for 4 years in a row.

Well, am I qualified to be a director? I consider I am personally well qualified to represent policyholders and I think I can do a considerably better job than the three directors up for re-election today.

I will NOT cost nearly a £1 Million a year! I will add to the Board something not measured in terms of skills or experience – a deep feeling of duty & responsibility to the policyholders.

Finally, I would remind you that if I am elected I will be the first truly independent director of the Society. Could I thank you all for listening and ask you to vote just for me, vote against all the others and particularly the costly and disastrous Charles Thomson.

Thank you for your time today.

John A Newman