11^th January 2002 - Notes on the Equitable's GAR meeting

These meetings are very extensively reported in this weekend's press.

I will not therefore cover points, including my own. that have generated comment. As usual though, the Telegraph's Nina Montagu-Smith got it wrong. I did NOT demand that the whole board get no bonuses. I started by saying that I appreciated the non-executives and endorsed the proposal to up their fees from £10,000 to £25,000 each (see my question in full).

The first question elicited a surprising response. The speaker complained that insufficient detail was provided about how the Society will be run after henceforward. Treves frankly admitted that he and his board had only begun to address this in their now weekly board meetings THIS year! He promised that the board would explain their conclusions at the time it announces the voting result at the end of January. One wonders how our board could get to 2002 and NOT have discussed the running of the Society in three months time after an irreversible strategic change.

For me the bombshell was Vanni Treves' response to a question by Liz Kwantes (ELMHG). He clarified that there is currently NO financial provision for non-GAR mis-selling claims from people, late-joiners included, who have left and are hence not bound in any way from pursuing mis-selling claims by the possible adoption of the Scheme Proposal.

Several GARs complained that the comparative true open market rate (CAR) had not been fairly described.

An example of a serious mistake by the Society had been spotted only by the vigilence of an astute professional policyholder, who had the devil's own job getting any serious attention. Only the threat of marching with bagpipes outside the offices made the breakthrough (there's a lesson there!). The result was that 300 members were retrospectively notified that their uplift offer of just 4% was incorrect and that they were due 20%. Well done that man.

On a question about the 16% devaluation, Treves frankly admitted that leavers prior to July 16^th were taking broadly 16% more than their asset share. A far more honest explanation than the "story" we had been so consistently spun, thus far.

Edward Doogan asked several quite technical but important questions. He pointed out that our Society is not limited by guarantee and in years to come that may have unpleasant ramifications for members. He also cross-examined the re-insurance contract story and proved much more articulate than on earlier occasions.

We were given the usual line on the Financial Adjustment: "under constant review in light of current conditions."

Thomson admitted that historically Equitable was famed for having the industry's lowest management expenses. But they have been very high in 2001 and are expected to remain very high in the first half of 2002. Thereafter, "they should reduce to a level better than anyone in the industry." Was that a pig I just saw flying by?

Treves maintained that the board wished to publish the full details of the Feb 5^th 2001 contract of sale but Halifax refuses permission, citing commercial sensitivity. EMAG, having fought this battle (thanks to Alex Henney) over and over and over?unsuccessfully.

EMAG's own committee member Adrian Howard-Jones raised the last question. In his view the document deliberately misleads GARs and builds on outdated rates, as identified by Professor Blake. Charles Thomson denied that and, once again, lashed Blake - saying that there are important errors in all of his Report's first five paragraphs. Adrian interjected to demand exactly what, but Thomson would not be drawn.

Thomson decried that Blake hadn't taken up the Society's offer to meet with him before publication. This completely misses the point of the Blake Report. Without edge, Blake was given EXACTLY what every voting policyholder received. And he was asked to comment on whether the contents were adequate, fair, objective and comprehensive. No policyholder, no Action Group, was afforded a private privileged tutorial. I have three questions I asked Charles in writing in late September that have been re-sent two more times that remain unaddressed three months later and I am not alone! EMAG regrets Charles Thomson's repeated unwarranted denegratory attacks on Professor Blake.

Adrian then raised Professor Gordon Gemmell's question from the FT earlier in the week. Instead of answering, Thomson claimed that Gemmell was roundly put-down in a letter by our so-called Independent Actuary in today's FT paper (a subsequent reading revealed no such adequate answer). Adrian pressed for an explanation of the term used by the I.A. "fairness in aggregate". A convenient method of burying gross injustices to one group by averaging them out with a group achieving a much more reasonable proposal. Late-joiners may resonate with this unjust and unsatisfactory averaging. My answer - not Thomson's!

The Society expects to announce the result at the end of the month. Target date for lodging at the Registrar of Companies looks nearer mid February than Feb 28^th.

Paul Braithwaite

11^th Jan, 2002