1st October 2001 - COMPROMISE - LONDON ROADSHOW

These notes cover the general tone of the meeting and highlight some specific points. I guessed there was about 3-400 people present.

GENERAL TONE

Several speakers thanked the board for its efforts and supported the compromise as an unpalatable but necessary way forward. It was clear from the audience response that this view was very widespread.

There was a short presentation by VT & CT followed by quite a long Q & A session. The general standard of questions was much higher than that seen at the AGM, with a smaller proportion of wafflers. Questions were taken at random around the hall, so it was not possible to develop any particular line of questioning.

PARTICULAR POINTS

I have concentrated on new lines of argument and changes in old ones.

• Class Action
  CT said that the Board had been advised that the non-GAR case could not be dealt with as a class action. VT went on to say that the various types of non-GAR claim were so disparate as to require thousands of test cases. I came to this view some months ago, but it is the first time I have heard it expressed by the directors.

• Herbert Smith
  VT said that HS are considering a claim against the regulators. But he thought that this should await the outcome of the FSA's own investigation. Miscreants would be pursued 'with vigour' (post compromise)

• Current premium Income
  VAT said this was £50 million per month 600 million per year. VT tried to make this sound good but compared to the previous £4,000 million it is drop in the ocean.

• WP Annuitants
  There was a lot of pleading by WP annuitants for special treatment. It seems they might be allowed to revise their policies to spread their loss more conveniently, but there was no commitment to put this in the compromise. Something might (or might not) be done afterwards.

• Parliamentary Ombudsman
  Sir Gordon Downey criticised his successor's decision not to take up the Equitable case.

• The Insurance Ombudsman
  His attitude seems to be 'we have our hands full'.

• Vanni Treves
  VT was asked whether, post compromises, there would be more nasty shocks. His response was that there would be 'no more traps'.
  
  He was asked about further fund reductions in respect of stock market falls after 11^th Sept. He said there were no current plans for further reductions. He said the 16^th July hit meant the Society could cope at today's rates. On 13^th July (before Black Monday) the FTSE100 stood at 5537. On Friday 28^th Sept it closed at 4,903. This represents a fall of almost 11.5%. Even if only 40% of the fund is now in equities this still suggests a fund loss of over £1,000 million. He went on to suggest that only if the FTSE went down another 1000 points, (about 20% or £1,750 million) would he have to make a further reduction. He was very much more bullish on this point than he has been before, even though the FTSE has fallen significantly in the meantime.

• Current Investments
  VT gave the current ratios as 40% equities, 12% property and 48% cash and gilts.

• Claims for non-GAR mis-selling (a la Warren)
  VT was surprised (or acted surprised) when it was suggested that a significant number of leavers put in their claim for mis-selling, as a matter of routine upon departure.