EMAG and ELM Response to Compromise Proposal

Last Updated: Friday, October 12, 2001 06:03 PM

EMAG and ELMHG's constructive response to The Equitable Life's compromise proposal:


EMAG and ELMHG are the two policyholder groups without any commercial affiliations who seek information and influence on behalf of ALL the classes in the Equitable Life.  Here are our 10 constructive suggestions:


1.      Policyholders cannot form any conclusive views until they are provided with a comprehensive financial explanation, including a comparison of asset and policy values. We request that the board publish a "Statement of Affairs" as at 30th Sept.


2.      We believe that the board has given insufficient weight to the further opinion of its own leading counsel, Nicholas Warren, QC.  His conclusions were largely supported by the FSA's legal opinion from Ian Glick QC, the latter received immediately after publication of the proposal. Both indicate that ALL non-GARs have a reasonable prospect of succeeding in a claim against the Society for mis-selling.  In particular, late entrant non-GARs (i.e. post 1998) are treated totally unsatisfactorily in the proposal.  This group was hit disproportionately and unfairly in the July 16th' devaluation.  They have a very strong legal case and 2.5% uplift to them is woefully inadequate.


3.      As part of the compromise, those non-GARs with post July 16th "negative equity" (i.e. a notional fund value for transfer and for bonus calculations below their guaranteed fund) should have their funds made up to the guaranteed value.


4.      The 70,000 with-profits annuitants, being the one group that is totally locked-in, have the strongest case to be a separate class. We repeat our request that the Society fund legal representation for them.


5.       They should be allowed the flexibility to modify their annuities in the light of the recent much changed circumstances (vary their Assumed Bonus Rate, convert to conventional etc).  The Society should try to help those that wish it to negotiate a group transfer to another provider (subject to the prevailing Financial Adjustment) and obtain a dispensation from the Inland Revenue by way of a Statutory Instrument.


6.      The full details of the Halifax contract of sale should be published immediately.  For six months EMAG has made repeated written requests to Vanni Treves and more recently to the Halifax for the full terms of the sale contract of Feb 5th, 2001.


In the compromise documentation, for example, we read for the very first time that there are six basic objectives for the agreement to achieve, including " classes….. being  no greater than the minimum practical…"


7.      The Society must honour its duty to publish, as soon as it is known, the Court, Judge and Date for the hearing on establishment of classes for those wishing to make representations. Also, the Society should make available to members their Instructions to Counsel and their Opinion that there are only the two classes.


8.   The £250m payment upon success by Halifax should be distributed "guaranteed".


9.      In the Section 426 "Explanatory Statement" in November the board must review and revise the costings, projections and uplifts to be based on the most up-to-date much lowered numbers of both GARs and non-GARs who remain at the time of voting.


10.   Also, it should address the future of the fund with particular regard to "unitisation" for transparency, resolving the residual problem of the GIRs and incentivising ongoing loyalty, such as by undertaking that net proceeds of successful legal pursuits will be distributed by special bonus declaration pro rata to all policyholders remaining, including those who subsequently leave due to contractual events, after any compromise agreement is achieved.



The "acid test" of whether this is truly a consultative process is if our board adopts members' suggestions and makes changes to the existing proposal. We observe that the Consultation Feedback Form is highly structured and politically designed to channel and constrain the responses sought. Claims made by the Society very early on that it appears to have "pitched the offer bout right" do not augur well. We expect our board to resist the temptation to try to secure the vote by expenditure on a large-scale advertising campaign.