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

Media Stories: 12/03/2007 - Press Coverage

Paul Farrow, MONEY section editor

Sunday Telegraph 4th March, 2007-03-08

“Is the end in sight for Equitable Lifers?


I wonder how beleaguered Equitable Life members felt on Friday morning when the news emerged that the insurer's former chief actuary, Roy Ranson, had been kicked out of the Institute of Actuaries.

Their misery has dragged on and on, so much so that the very mention of Equitable Life tends to bring from those not involved a sigh and a groan, followed by the question: "Isn't this saga over yet?"

For the tens of thousands of policyholders the answer is, sadly, no. They have endured several reports and are still awaiting the verdict of the Parliamentary Ombudsman's second report on the role of government regulators, including the Department of Trade and Industry, the Treasury and the Government Actuary's Department. It had been expected in October but is now destined to be published in May.

Policyholders have long believed that former directors Ranson, Chris Headdon and Alan Nash were the principal architects of the society's downfall. On Friday policyholders got the answer they had known deep down in their hearts for years – that the trio, Ranson in particular, are responsible for their plight. Ranson was the society's actuary between 1982 and 1997 and managing director from 1991 to 1997 – he was also awarded the CBE for services to the insurance industry in 1996. His reputation is now officially in tatters after being "struck off" and kicked out of the Institute of Actuaries for good.

The institute found Ranson guilty of giving a misleading impression of the society's financial strength, so much so that "no evidence was provided to the panel to indicate any proper degree of financial analysis undertaken by the society".

Crucially, and what the institute's panel found to be the most serious of the charges, is that Ranson did not distinguish between the policies issued before 1988, which paid guaranteed annuities, and those thereafter, which didn't. This provided the basis for the collapse, the panel said.

As the society's actuary during that period, Ranson also oversaw the decision to apply differential bonus rates on policies. The institute, for one, found that Ranson did not take steps to ensure that the life fund could support such future bonuses. Less satisfying for policyholders is that Headdon and Nash were merely "admonished" by the institute (although Headdon had already been barred from working in a regulated capacity by the Financial Services Authority).

Actuaries can be a patronising bunch. Their mathematical skills put them on a different playing field to the rest of us and they frequently close ranks when questioned by mere mortals. They have done so on the Equitable issue despite evidence to the contrary – until now. The significance of the fact they have now publicly turned on three of their own should not be overlooked.

Ranson is only the third institute member to be thrown out in the past 20 years. He is now in his mid-70s and so his expulsion is sadly nothing more than academic, but the evidence against Equitable – and the Government – is mounting.

The Parliamentary Ombudsman's report is finished and was circulated to those at the heart of its investigation in January. The institute's findings will have no bearing on its conclusion. But there is increasing speculation that the Ombudsman will find the Government guilty of maladministration. If it does, the calls for compensation – estimated to be £5bn – will come thick and fast. There are plenty of policyholders who have not given up the ghost. The Ranson verdict probably gave them nothing more than a smidgen of satisfaction – after all, they wanted him found guilty in court – but a deal with Equitable put paid to that. Its policyholders, quite rightly, will not apologise to anyone fed up with the Equitable Life shenanigans, because for them the fight goes on.

Equitable's ex-chief struck off

By Andrew Bolger , Financial Times

Published: March 3


Roy Ranson, the former managing director and appointed actuary of the stricken mutual Equitable Life, has been expelled from the actuarial profession - only the third person to suffer the sanction in the past 18 years.

Disciplinary proceedings found Mr Ranson, now aged 76 and in poor health, failed to give Equitable's board sufficient information and allowed policyholders to be given a misleading impression of the mutual's financial position.

Mr Ranson was awarded a CBE for services to life assurance in 1996, a year before he retired. However, he was criticised sharply by Lord Penrose's report into Equitable Life in 2004, which accused him of running the mutual in an "autocratic manner" and being "dismissive of regulators and their concerns".
Equitable Life closed to new business in 2000 after losing a House of Lords case over its controversial treatment of guaranteed annuity policyholders. Before the test case, the mutual in-sisted it faced an exposure of only £50m to the guaranteed annuity issue, but after losing admitted the liabilities exceeded £1.5bn.

The actuarial profession's disciplinary tribunal admonished Christopher Headdon, Equitable Life's appointed actuary from 1997 to 2000, after finding him guilty of misconduct in two of three charges he faced, which mainly concerned failing to keep his board and the regulator informed.

A charge of failing to act as whistleblower was dismissed and a fourth charge concerning regulatory re-turns was dropped after the tribunal considered Mr Headdon's defence.

The tribunal added it would have suspended Mr Headdon's practising certificate for three years had it been current, but noted the Financial Services Authority, the City regulator, had already barred him from holding any FSA-approved appointment until 2010.

The tribunal censured Alan Nash, who was managing director and actuary of Equitable Life from 1997 to 2000, over a letter he wrote to policyholders in February, 2000, which it held misrepresented the mutual's position. However, a charge of failing to inform the board policy values consistently exceeded the value of the mutual's assets was not proven, because key decisions predated Mr Nash's tenure.

The tribunal said, "taking into account the circumstances" it did not consider financial penalties appropriate and did not seek costs.

Paul Braithwaite, general secretary of Equitable Members' Action Group, said:

"I welcome the fact that the profession has at last cleaned its house and faced the fact that its members were at fault in concealing from policyholders the true financial state of the mutual. The three of them have been hounded through the courts and it would be inhumane to expect them to face further financial penalties. They are not rich men. The important thing is: the truth is out."

The three actuaries were among those pursued in multi-billion-pound litigation brought by Equitable Life against its auditors and former directors, but abandoned at the end of 2005.

Teresa Hunter in Scotland on Sunday

4th March, 2007


“Investors see justice done over Equitable

THREE former senior executives of the collapsed insurer Equitable Life have been severely disciplined by their professional body.

Former chief executive Roy Ranson has been expelled from the Faculty and Institute of Actuaries. His successors Chris Headdon and Alan Nash have both been 'admonished' by the body for unprofessional conduct.

A damning report drawn up by a panel of the FIA's disciplinary tribunal provides insight into the events which led to the collapse of what was once regarded Britain's finest insurance company.

The report reveals a catalogue of poor judgment, incompetence and cover-ups. Most blame is laid at the door of Ranson, chief executive between 1991 and 1997, during which time the majority of the seeds of the society's later problems were sown.

The most serious charges against him were that he knowingly paid out more money than the society was earning, so it could continue attracting new investors.

An internal memo acknowledges that by the end of 1996, the value of policies had been overstated by £1.7bn, with £0.9bn too much having been paid out on matured contracts.

In the report, the disciplinary panel also condemns Ranson for failing to keep the society's board fully informed about the risks being taken.

It says: "The board thought they were directors of a fine, secure insurance company and all the information they received was directed to reinforce that feeling. They did not appreciate that the company was in a uniquely vulnerable position."

But the catalyst came when the competing rights of two very separate groups of policyholders collided: contracts which promised lucrative payouts because they contained valuable pension guarantees were held in the same fund as contracts with no guarantees.

Ranson sought to claw back his losses by reneging on the attractive guarantees. He then failed to tell policyholders how the system for valuing their contracts had changed.

Unsurprisingly, long-standing customers with guarantees complained they were being discriminated against, triggering a series of court cases, leading to an appeal in the House of Lords. The law lords agreed, and judged the so-called 'differential bonuses' unlawful.

Though many commentators celebrated the judgment as a victory for the consumer, it meant the society was effectively bankrupt.

The panel accuses Ranson of irresponsibility over this issue and condemns him for failing to distinguish between different classes of policies and then keeping policyholders and the company's board in the dark.

The report says: "The fact that the management chose to ignore the signals and questioning of its policy at various times and was not prepared to critically re-examine the rationale of its earlier decision in the light of changing circumstances and regulation was irresponsible."

Equitable Life was Britain's oldest insurance society, dating back to 1762.

In 1957, it attempted to broaden its reach in the pensions market. However, in those days, insurers could not act as fund managers, but only offer insurance-style 'risk' policies. Equitable got round this by introducing a guarantee into its pensions which became known as 'deferred annuities'.

In other words, policyholders gave the company so many pounds today, and it guaranteed a certain pension payment at a future date. There was no risk or uncertainty for the customer. Even so, policyholders trickled in slowly.

But in the early 1990s business exploded, with funds under management growing eightfold from £4.1bn in 1988 to £33.5bn in 2000.

Such rapid growth would have caused severe financial strains for any company. However, Equitable's position was more vulnerable, partly because its cushion of reserves was very thin, particularly given that the society was top-heavy with guarantees.

But much worse was to come. In 1993 interest rates began to fall and those guarantees were not so much looking expensive as completely unaffordable.

Yet Ranson's desire to continue expanding the business was relentless, which meant bonuses had to be kept high to attract ever larger numbers of new customers. Even in good years, Equitable paid out more than it earned.

1989 was a good year. Yet Ranson wrote in a memo: "I think it is important that we do not affect our competitive position by an unduly cautious decision regarding the level of bonus on this occasion. An allocated rate of 20% would still leave us 'over distributing' ... leading to an excess of aggregate policy values over market values in the region of £200m."

He didn't change the strategy even when markets imploded. A year later Equitable appeared to have lost 8% of its investments.

Despite this loss, and the overpayment of the previous year, Ranson added a further 12% return to contracts. The society's sums were now well out of kilter. Worse still, the number crunchers had got their sums wrong - Equitable had actually lost 10.4%.

Returns recovered over the following couple of years, but were again negative in 1994, following 1993's sharp fall in interest rates. Falling interest rates brought double jeopardy: not only did returns fall, but they let loose the monster of unaffordable guarantees. Ranson attempted to slay it by introducing differential bonus rates.

But he did not tell policyholders for a further three years that he had substantially changed the way their returns would be calculated in future, despite warnings from his own junior actuaries that "the office was not acting with integrity".

It was too late. A monstrous storm was brewing that would wreck the retirement plans of thousands of investors.

Policyholders have since battled for justice. On Friday, they finally saw it being done.

Called to account

ROY RANSON (chief executive from 1991-1997)

Only the third member to be expelled from the FIA over the past 20 years. Accused of failing to manage Equitable's financial risks, and providing policyholders and the board with misleading information about the society's financial strength, he was further condemned for poor management and judgment.

In mitigation, his defence counsel described him as "a broken man; mentally, physically and emotionally exhausted. He has faced years of turmoil, including four years of civil litigation and personal criticism".

PENALTY: stripped of his professional membership. However, this comes 10 years after he retired, and at the age of 77.

CHRIS HEADDON (assistant actuary from 1988-1997; chief actuary from 1997-2001)

Accused of failing to blow the whistle on Ranson, he was not found guilty of this charge. This may in part be because most of the rest of the industry was familiar with Ranson's approach to bonusing and reserving, and none of these senior actuaries saw fit to blow the whistle either.

However, Headdon was found guilty of misconduct in his handling of the arrangement of a reinsurance treaty with ERC Frankona. Such reinsurance is seen as an artificial way of boosting a company's balance sheet.

His defence counsel "emphasised the grave effects which the demise of the society has had on the personal and professional life of Mr Headdon".

PENALTY: admonishment. The panel said it would normally have removed Headdon's right to practise as an actuary for three years. However, as he has already been banned from the investment world for six years by the Financial Services Authority, the panel deemed no further action necessary.

ALAN NASH (chief executive from 1997-2000)

Nash was at the helm of the society when the decision was taken to fight policyholders all the way to the House of Lords and was responsible for a letter sent to policyholders which seriously misrepresented the risks to the society if the management lost - judged to be a serious breach of professional standards.

In mitigation, his defence counsel said the strain of the affair had led to the breakdown of the 58-year-old's marriage.

PENALTY: admonishment.

Actuaries throw out former Equitable Life chief over collapse

Jill Treanor
Saturday March 3, 2007
The Guardian


Roy Ranson, a former chief executive of Equitable Life, has become only the third actuary thrown out of his professional body over the past 20 years.

Mr Ranson was 76 at the time of the investigation by the Institute of Actuaries, and faced disciplinary proceedings along with Chris Headdon, Alan Nash, and Barry Sherlock, relating to the collapse of the mutual insurer in 2000.

In a 141-page decision yesterday, the Institute said it would have suspended Mr Headdon for three years if the Financial Services Authority had not already barred him from any office requiring regulatory approval until 2010; instead it ordered him to be "admonished" on two charges of misconduct and dismissed another charge. He had become the appointed actuary in 1997, and chief executive in 2000. Mr Nash, the chief executive from 1997 until 2000, was found guilty of misconduct, and was ordered to be "admonished"; he was cleared of one charge. The case against Mr Sherlock, was chief executive from 1972, was dismissed.

Mr Ranson ran the company from 1992 to 1997. He was not represented at the four-week hearing in November and December 2006, because of his "ill health". The tribunal considered his written defence, and expelled him from the institute.

Mr Headdon noted that the most serious charges against him, alleged personal misconduct in relation to Equitable's regulatory returns and alleged "over bonusing", had been dropped or dismissed. He had been advised he had grounds for appeal on the other decisions but said: "In view of the limited nature of the findings against me and the fact it is now six years since I left Equitable, most of which has been spent in litigation of one type or another, I have decided not to initiate a further round of proceedings."

Ian Gordon, at City firm Reynolds Porter Chamberlain, noted: "Traditionally the institute hands down reprimands or fines, or imposes periods of education. In this case the tribunal's determinations are extremely robust."