Correspondence: 12/11/2002 - Letter to John Tiner and Roger Allen of the FSA from Alex Henny regarding the lack of information provided by the Equitable to its members 12 November '02 - To
John Tiner and Roger Allen of the FSA from Alex Henny
Dear Messrs. Tiner and Allen,
A complaint regarding the
lack of information provided by the Equitable to its members
- I was holding this letter
until we received the interim accounts to make any appropriate comment on
them. The accounts (up to 20 June) were promised in October, but October is
coming late this year. I imagine you are well aware that companies normally
get their interims out 6-8 weeks after the end of the period.
- I imagine that you would
agree that one of the root causes of the difficulties of the Equitable Life
was the inadequate provision of information about the situation of the with-profits
fund both to prospective members and to existing members. You are well aware
that one of the key strands of your With-Profits Review has been to stress
the importance of providing customers of insurance products in general, and
with-profits policies in particular, with adequate information both before
and after point of sale.
- The original objective
of the Equitable Members Action Group was: "to support with-profits members
in making informed decisions on the best long-term future of members".
You will see from our re-designed website www.emag.org.uk that EMAG still
strives to obtain and publish information of help to policyholders (past and
present) of every hue. We were thus pleased when Mr. Treves wrote in an open
letter published in various newspapers on 1 March 2001 that:-
"I will communicate
openly. This is our Society and members are entitled to know everything
about how it is run unless open disclosure would be commercially damaging…I
look forward to an atmosphere of trust and transparency between the policyholders
and our Society".
- In similar vein the
Annual Report and Accounts for 2001 claimed that "The Board is committed
to a policy of openness in communication with policyholders". Notwithstanding
those claims, he and the chief executive, Mr. Charles Thomson, have consistently
obstructed us achieving our objective. The members have been subject to obfuscation,
some misinformation, and much spin for the whole period since Mr. Treves became
chairman. I provide you with nine examples:
(i) Inadequate information
on the Halifax Equitable deal. Your colleague Michael Foot once told
me he could see no reason why members should not be provided with information
about the deal. We were provided with some information by way of the draft
heads of terms, but no figures which would allow us to judge whether it
was in our interests, nor the level of costs we could expect for the services
that HBOS would render us. (It seems that these costs are high). I wrote
to you about this issue, and attach the relevant extract from the letter,
see attachment 1.
(ii) No quantification
nor background for the reduction in policy values by 16% on 16 July 2001.
The information provided to the policyholders (open letter to the members
of Equitable, 16 July 2001) merely stated:-
- Stockmarkets have fallen
heavily over the last 18 months;
- Maturity values now
significantly exceed the value of the investments underlying maturing policies;
- As a mature fund, a
large number of policyholders are currently retiring and taking their benefits.
The fall of the stock
market at that point accounted for only about 5% of the reduction in value
of the fund - could we not have been advised of this? Why did we have to wait
until December 2001 for the Independent Actuary's report in the Compromise
to tell us that the fund had been 10% over-valued at 31/12/2000? And what
is the relevance of the third point? Was it a euphemism for the fact that
it took Mr. Thomson so long to appreciate that members who took contracted
exits in the first half of 2001 received (we estimate) about £200m more
than their asset share?
Mr. Treves and Mr. Thomson
provided the following reasons for not providing adequate information about
the value reductions:-
- "it would be too
expensive" - in the context of £4,000 million, too expensive? Given
the large legal fees incurred by the Society and how much is spent on Burson
Marseller to "manage" information, the response cannot be regarded
as serious
- "it would involve
too much work" - yet either there was a directors' summary, which could
have been provided or, as has since been claimed, the directors had no summary
in which case it is difficult to see how they could have taken on a £4bn
decision
- "the press would
misinterpret it" - even if that were true, it should not prevent the
publication of information to which the members are entitled
- "it would assist
claims against former directors or advisers" - an incomprehensible reason
- "the auditors would
not allow it" - why not? who pays their fees? complete nonsense
- "no other with profit
office does it" - no other with profits office is in the mess in which
the Equitable is
I hope you will agree
with us that providing such a set of ill founded reasons to members is not
compatible with the spirit, if not the ruling, of the message you are conveying
in your Review.
(iii) Omissions in
the Compromise Document. We commissioned Professor David Blake to prepare
a report for us entitled "An Assessment of the Adequacy And Objectivity
of the Information Provided by the Board of the Equitable Life Assurance
Society in Connection with the Compromise Scheme Proposals of 6 December
2001". Professor Blake asked:-
"Is the information
provided the most up-to-date available? Most of the information in the
above documents is now nearly six months old. In the interests of transparency
and full disclosure, the following additional information is needed: a
statement of affairs at November 30 providing information on:-
- Number of policyholders
(both GAR and non-GAR) still in the fund
- Value of the fund
- Solvency level of
the fund
- Fund available for
appropriations."
Mr. Thomson rubbished
Professor Blake's report, alleging in a letter to the FT that Professor
Blake had not seen certain information. Professor Blake had seen the information.
He also alleged that "Blake had made mistakes in all of his first five
paragraphs". Despite two courteous and precise requests from Professor
Blake, Mr. Thomson did not substantiate his allegation. Subsequently the
Society has relied on Mr. Justice Lloyd's views on the matter - despite
his lack of academic expertise in Professor Blake's field and his seeming
lack of awareness of the possibility of using the press or the internet
to update members inexpensively.
(iv) The Equitable's
attempt to hide its solvency return in May 2002 until after the AGM.
As you know the Equitable was obliged to provide its solvency return in
digitised form to the FSA by 30 April 2002. During May EMAG, the Financial
Times, the Daily Mail and some consulting actuaries tried to obtain a copy
of the return before the AGM on 27/5/02. All were fobbed off by the Equitable.
Finally, after all postal votes would have been despatched, on 24 May we
read:-
"The Financial Times was last night supplied with a full copy of the
statutory solvency return after making repeated requests to Equitable. The
mutual said that it had wanted to wait before distributing copies until
they were available to everyone from Companies House".
At the AGM the Society's
chief investment officer and finance director, Mr. Charles Bellringer incorrectly
claimed that the reason for the delay in providing the solvency return was
due to a delay by the FSA in providing it to Companies House, from where
members and journalists could request it. Yet by virtue of Rule 9.7 of the
interim "Prudential Source Book: Insurers", policyholders have
a right to receive "deposited documents" once they are deposited.
There was nothing stopping the Society from providing the information to
those who asked for it - and we had.
One is bound to ask
whether the responsible officers of the Society were trying to hide the
Society's weak solvency position and its reliance on financial engineering
to scrape by.
(v) A consistent
refusal to publish the number of members. We have on a number of occasions
asked for - and on each occasion been refused - the number of members. We
then thought that we would count the register. The Equitable made it as
difficult as possible, saying we could only see it in Aylesbury for two
hours a day and have access to one terminal - compare this with Mr. Treves'
fine words quoted in paragraph 2 above. Attachment 2
is a letter I wrote to the relevant official in the Company Law Bill Team,
see attachment 2. As of November 2002, the most recent
count we have is for 16 months ago and the Society refused to provide the
qualified member voting base at the time of the AGM.
(vi) Information not provided in the Annual Report & Accounts and
at the AGM. At the AGM I asked for information which was not provided
in the Annual Report & Accounts. The information was not provided, and
so I wrote to Mr. Treves on 13 June setting out a request for the following
information (see attachment 3):-
- in laymen's terms
an analysis of the with-profits fund's available assets together with
a comparison between, on the one hand, the available assets and, on the
other hand, aggregate policy values, where the latter are differentiated
between guaranteed and non-guaranteed elements and the annuitants
- a proper analysis
of the fund's performance i.e. return by asset class the membership issue
- the nature and implications
of the GIR issue
You are no doubt well
aware that in your reports on the With-Profits Review you clearly indicated
that the first two pieces of information should be available. And I imagine
you would not disagree that information about GIRs should be available as
it is a material risk to the Society. I attach the most unsatisfactory reply
I received, see attachment 4. When I received it
I was very angry and told Mr. Treves that I regarded it as "contemptible
drivel".
(vii) Failure to
provide information under article 65 of the Society's Memorandum and Articles
of Association. You are aware that we suffered two further policy value
reductions this year. Knowing that we would be provided with little or no
information, we checked the Society's Memorandum and found that article
65 reads as follows:-
"The Directors
shall at such intervals as they deem expedient but at least once every
three years…cause an investigation to be made into the financial
condition of the Society…by the Actuary…the Directors report
to the Members upon the results of the valuation".
I wrote to Mr. Thomson
on 5 September and drew his attention to the article and to the OED's definition
of the relevant meaning of the word "report" and commented "While
the Directors have made statements, they have not reported in the proper
meaning of the word on the investigations made into the financial condition
of the Society that led to cuts in policy value of July 2001, April 2002,
July 2002. I would be obliged if you would provide the members of the Society
with the reports as required by the Articles of Association by publishing
them on the website.
I received the following
reply from the Society's new head of press relations and corporate communications,
Mr. Tony McGarahan on 16 September:
"The investigation
under Article 65 is the annual valuation of the Society; published in
the returns to the FSA, formerly to the Insurance Directorate. This document
is on the Society's website."
On 7 October, after
talking to Mr. Roger Allen, I wrote to Mr. Treves (see attachment
5), reciting the two letters and then pointing out (among other things)
that:-
- the Directors' Report
dated 15th April 2002 refers to "Valuation and bonus declaration",
which was obviously not the solvency return
- Article 65 refers to
a "Directors' report to members", not one to a regulatory authority
and quite distinct from the Accounts prepared under Article 64. It also states
"Provided that in the valuation of the assets the values thereof be not
estimated beyond the market prices [if any] of the same ..." which clearly
implies that future income should not be included. The solvency return includes
future income
- Mr. Allen advised me
that solvency returns "are not used for valuing the assets and declaring
bonuses. Valuation and bonuses are worked out from first principles. They
[i.e. solvency returns] are not a tool in that process
- recently, another day
and another (and slightly more elaborate) story from McGarahan, which is attachment
4. We are now taking legal advice on the issue
This pathetic little
episode shows the depths to which the Board will go to hide information
from the members.
(viii) Recently,
our general secretary sought policy clarification of whether the GIR accrues
daily both for on-going contracts and for non-contractual departures.
The written reply was typical: "The Society is not prepared to discuss
circumstances surrounding other clients policies….I feel that no useful
purpose will be served by any further correspondence on this matter."
So, the Society's policy basis of accrual of GIRs remains unexplained to
its members (we would have put the answer on our website).
(ix) Basis of valuation
of members leaving the fund. We have repeatedly been alerted by departing
members to the refusal by the Society to provide substantiation for the
payment figure received. The FSA has refused to intervene. Several
such cases, when brought to the attention of quality newspapers have resulted
in an immediate hike in payment and admission of mistake. Any respectable
financial institution must surely provide chapter and verse on the calculation
of a final fund payout?
- I could provide more
evidence, but trust you will consider that I have provided enough - if not
more than enough - to make the point about how the Society keeps members in
the dark. The result of that policy is that policyholders are not provided
with the information that they need to make informed judgments about their
financial futures, while those who are annuitants have received no explanation
of their prospects.
- If Mr. Treves, Mr. Thomson,
et al were running a tight ship, they might get away with secrecy. But they
give the appearance of not knowing what they are doing - other than cutting
members' policy values:-
I believe that sooner or later there is bound to be a full and proper independent
investigation of the way in which the Equitable has been managed and supervised
not only before the departure of the old Board but also since then. One purpose
of this letter is to ensure that there will then be no doubt about the extent
to which EMAG has raised with the FSA our concerns about the inadequacy of the
provision by the Society of relevant information to policyholders over the past
two years and the continuing inadequacy of such provision of information. More
immediately the letter is intended to express EMAG's hope that, in line with
the fine words in the FSA's documents, the FSA will now act to help ensure that
the members of Equitable receive the information to which they are entitled.
This letter is written with
the agreement of the Committee of EMAG. For your information it is the only
properly constituted Action Group representing policyholders with a constitution,
an elected Committee, a register of paid-up members, and a non-trivial bank
balance.
Yours sincerely.
ALEX HENNEY
c.c. EMAG Committee, EMAG
website, Equitable Board, various journalists, various MPs, Mr. Allan Asher,
Director of Campaigns, Consumers' Association, and Mr. Hugh Burns, Penrose Inquiry.
ATTACHMENT 1
Extract from a letter to
John Tiner, dated 17 January
The ELAS/Halifax deal
I write on behalf of the
Committee of EMAG.
On February 9 2001 members
of EMAG (and EPHAG) met with Mr. James Crosby, Chief Executive of the Halifax
(now HBOS) and with Mr. Headdon, formerly the Chief Executive of ELAS. This
meeting followed the deal whereby Halifax took over various operations of
ELAS.
It seemed to the members
of the EMAG Committee attending the meeting that we had a right to be provided
with figures that would enable us to judge the deal, and furthermore a right
to figures about the additional future costs we would incur for Clerical &
Medical to manage our funds going forward. To this end I prepared a letter
which was tabled, see attached. After the meeting Mr. Crosby mentioned to
Mr. Vincent Nolan, then chairman of EMAG, that he thought we were entitled
to the figures.
In the event Halifax agreed
that ELAS could put on its website a letter dated 28 January 2001 setting
out the principal terms on which Halifax was prepared to negotiate, but it
did not provide any quantified answers to our questions . Subsequently I raised
the matter with Mr. Treves, and he agreed we should have the figures but he
would need to get clearance from the Halifax. In a letter dated 8 August I
wrote to him wondering how the matter was progressing. He responded on 9 August
saying that "We asked the Halifax for their consent to make the full
agreements with them available to anybody who wanted to see them as long ago
as 8 June. We have reminded them as recently as a few days ago, but have not
yet heard. As soon as we do, I will let you know". On 4 September I wrote
to Mr. Crosby raising the matter and enclosing my letter of 9 February. I
did not have the courtesy of a reply, so I wrote again on 20 September, and
the following day was told that Mr. Abercrombie, the Chief Executive of Clerical
& Medical was dealing with it. After several weeks, I still had no reply
so I telephoned Mr. Abercrombie and after several calls we talked. Mr. Abercrombie
commented that there was material in the agreement that was commercially confidential
to the Halifax. I stressed we wanted the information that related to our concerns
which we could not imagine was confidential to Halifax. In due course I received
a letter from Mr. Baines which is corporate blather, see attached. Mr. Nolan
wrote again to Mr. Crosby and received an unsatisfactory reply (see attached).
Mr. Crosby's word does not seem to be his bond.
ATTACHMENT 2
13th August, 2002.
Ms. Anne Scrope
Company Law Bill Team
DTI
4 Abbey Orchard Street
London SW1P 2HT.
Dear Ms. Scrope,
Access to company registers
As I mentioned to you,
the Equitable is constituted under the Companies Act (as is Standard Life).
When EMAG approached the Equitable to seek access to the list of members,
Equitable made it as difficult as possible subject to doing the minimum necessary
to comply with the Regulations. (I attach their response to our request).
The Society hold the list electronically, and could have offered to provide
access at its head office in London; the limitation to one terminal is quite
unnecessary because with people on holiday there must be a number of free
terminals in Aylesbury; and likewise the limitation to two hours is quite
unnecessary other than as a means of obstructing us in our intention to discover
how many members the Society has.
I also mentioned to you
that when we asked for the whole register 18 months ago we were provided with
a CD Rom for nothing. When we asked for it this January, the new Board wished
to charge us some £7000 to provide hard copy, which was not only expensive
but also very inconvenient to mailshot members. While we are mindful of the
scope for abuse of registers of shareholders (which we hope is guarded by
the Data Protection Act), we believe that access to the register should be
made convenient to the owners (i.e. be they shareholders of a "normal"
company or members of a mutual) of a company for proper purposes relating
to the conduct of the company or the interests of the owners. The convenience
should cover location and hours of access, and also in provision of the register
in electronic form when the register is held electronically. The cost should
reflect cutting a CD or shipping data over a modem. I note that paras 2.29
and 2.30 of "Modernising Company Law" stresses the benefits of electronic
communications.
You may be interested
to know that to facilitate competition in electricity each Regional Electricity
Company (like London Electricity) has to provide on request to a licensee/supplier
(i.e. retailer) a free CD Rom of all customers connected to its distribution
network. The CD is updated quarterly.
Yours sincerely,
ALEX HENNEY
ATTACHMENT 3
Dear Vanni,
As you and your colleagues
did not provide adequate or correct answers to most of the questions I asked
at the AGM, I restate them and would be grateful if you would answer the following
outstanding points:-
In relation to the foregoing
three points I note that Mr. Thomson has on occasion claimed that Equitable
is more transparent in its reporting than other life funds.
" Please set out
clearly the nature and implications of the GIR issue. You alleged that information
about GIRs was included in the Compromise document, and the website report
on the AGM Q&A session claimed that "…GIRs were fully described
in the Compromise Scheme documents…". Unless I have missed relevant
scripting, these claims are incorrect. The GIRs were not referred to in the
first set of documentation sent out. They were not listed in the "Definitions"
of Schedule D of the Compromise Document. They were mentioned briefly on pp100
and 102 of Appendix III, Summary of the Associated Actuary's Report and the
summary of the Independent Actuary's Report merely alluded on p113 to "other
guarantess accruing under policies"
.
Furthermore you and/or one of your colleagues made the claim that GIR and
non-GIR policyholders were treated equally. It is true that so long as bonus
rates to non-GIR policyholders are not less than that guaranteed to GIR policyholders,
the two classes get the same bonus rate. But they are not treated equally
since the GIR policyholders benefit from a guarantee and the guarantee is
in fact given by the non-GIR policyholders to the extent that the guarantee
can be honoured out of their policyholder funds with the Society. The apparent
equality of treatment is therefore in fact of very unequal situations. In
these circumstances there is an overriding need that the Board should now:-
* explain the risk that
non-GIRs bear of possibly having to fund the GIR benefit if the return on
the fund reduces below 3.5%. I suggest that this information is part of what
the FSA's Issues Paper 3 means by explaining to consumers the risks of the
with-profits product
* provide a reasoned
explanation (rather than the one line assertion included in the AGM Q&A
session) of why the Society did not address the GIR issue in the compromise
(as EMAG urged it to do)
* clarify the implications
of the GIR for investment policy which seem to be a matter of confusion. Thus
the Appointed Actuary commented on p102 of the Compromise Document that "I
expect that the Society's investment strategy would remain broadly the same
in the short term as it is now…the high level of guarantees within the
with-profits fund may severely restrict [investment in equities] for some
time". This observation directly contradicts the contemporaneous claim
by Thomson reported in The Times on 7/1/02:-
"Equitable Life
has vowed to splash out £4 billion on buying shares, if the troubled
insurer wins a crucial vote this week aimed at shoring up its ailing finances.
Charles Thomson, chief executive of Equitable, told The Times that the insurer
would halt a divestment programme triggered after a controversial ruling in
the House of Lords effectively forced Equitable to close its doors to new
business. Since then Equitable has steadily reduced its exposure to the equity
markets from a peak of 60 per cent to today's level of 34 per cent…Mr.
Thomson said: "If we get backing from our members over the compromise
deal, we will bring the equity ratio back up to a fully competitive level.
The current 34 per cent level is a low figure based on historical comparisons"."
I note the figure for
equities is now 25 per cent.
Furthermore the extent
of GIRs and the lack of reserves appear to render the Board's objective stated
in "Equitable Life 2002 and Beyond" of "moving the with-profits
fund closer towards being a conventional with-profits find" meaningless.
That is unless the Board's plan to siphon off virtually all profits beyond
that required to meet the GIRs plus a token bonus into building up reserves.
I suggest it would be appropriate to explain how the Board intends to square
this circle
Mr. Bellringer incorrectly claimed that the reason for the delay in providing
the solvency return was due to a delay by the FSA in providing it to Companies
House from where members and journalists could request it. In fact by virtue
of Rule 9.7 of the interim "Prudential Source Book: Insurers" made
pursuant to the Financial Services Act, policyholders have a right to receive
"deposited documents" once they are deposited. There was thus nothing
to stop the Society putting the return on its website the day after it was
deposited with the FSA, nor to provide it to any policyholder or journalist
who asked for it. I subsequently learned that when Mr. Bellringer offered
an excuse to a number of professional actuaries who sought the solvency return,
the Association of Consulting Actuaries sent him an e-mail asking him to stop
playing games. My informant commented that it was clear that the objective
was to keep the return under wraps until after the AG (as you kept the letter
to the annuitants)
Either you or one of your
colleagues suggested misleadingly that neither discussion of the GIR issue
nor the appointed actuaries' policy that liabilities should be within +5%
of asset values could be mentioned in the Annual Report, the content of which
was statutorily prescribed. I note that the AGM Q&A session states that
"The report is largely driven by the requirements of the Companies Act".
This statement implies not only that the Companies Act prescribes the minimum
of what must go in (which it does), but also that the Companies Act prescribes
what may not go in, which is incorrect. S9 of Schedule 10 of the Companies
Act 1989 states that "The directors' report should contain particulars
of any matters…So far as they are material for the appreciation of the
company's state of affairs by its members…". In my opinion both
of the aforementioned matters meet that requirement.
I hope you will agree
with me that directors should now provide adequate and accurate answers to
questions put at an AGM. I cannot stress too strongly the damage done to the
Society by making inaccurate or misleading statements and by the evasion of
issues that are sooner or later identified by the responsible media as being
relevant to policyholders' interests.
Finally I believe that
unless the Board now publicly and candidly addresses the issues raised in
this letter, and rapidly finds a way of enabling non-annuitants to substitute
unit linked policies for their current interest in the with-profits fund,
the Society will quite shortly find many except annuitants (who cannot move)
will transfer their funds elsewhere unless even more punitive measures are
adopted to prevent their doing so.
I reserve the right to
copy this - and I hope in due course your reply - to our website and various
journalists.
Yours sincerely,
ALEX HENNEY
ATTACHMENT 4
Response to my letter to
Treves dated 13/6/02:
10 July 2002.
Dear Mr. Henney,
Thank you for your letter
of the 13 June addressed to Vanni Treves. I am responding on his behalf.
Some of the information
you request is beyond that which might be reasonably expected from any business,
in an industry, seeking to maintain efficient operations and protect the interests
of its customers or members.
The Society now publishes
an Interim Report as well as the Annual Report and Accounts for the year ending
31 December. In these publications we detail the corporate activities of the
period and a comprehensive financial report. We do not intend to produce selective
corporate information outside of these reporting periods, which would be potentially
misleading and costly. Much of the information requested is not, in any case,
readily available and would become quickly out of date given current market
uncertainty. To give any individual or small group selective information would
be unfair to all other policyholders. The Interim Report, for the period ending
30 June, will be published in the autumn and made available to all policyholders
by post and on our website.
On the matter of the FSA
returns, clearly there was some confusion regarding availability of the annual
returns brought about, we understand, by the new procedures introduced for
filing. Like all parties concerned, we can learn from this too and, hopefully,
next year will be a smoother process for all concerned. Very few policyholders
have requested a copy. The FSA returns underline that the Society remained
solvent and met the regulator's stringent required minimum margins for solvency.
I note your possible intent
to post this correspondence on the Internet and issue it to journalists. You
are, of course, free to do so and we have no problem in dealing with any journalist
who may wish to speak with us on this matter. I fail to see, however, what
the news value would be.
Yours sincerely,
Tony McGarahan
Chief Communications Officer
ATTACHMENT 5
7th October, 2002.
Dear Treves,
On 5th September I wrote
as follows to Thomson:
"Article 65 of the
Society's Articles of Association states "The Directors shall at such
intervals as they deem expedient but at least once every three years…cause
an investigation to be made into the financial condition of the Society…by
the Actuary…the Directors report to the Members upon the results of the
valuation". The Shorter Oxford English Dictionary (3RD Edition) defines
the relevant meaning of the word "report" as follows:-
"An account brought
by one person to another of some matter specially investigated".
"A formal statement
of the results of an investigation, or of any matter on which definite information
is required, made by same person or body instructed or required to do so".
While the Directors have
made statements, they have not reported in the proper meaning of the word
on the investigations made into the financial condition of the Society that
led to cuts in policy value of July 2001, April 2002, July 2002. I would be
obliged if you would provide the members of the Society with the reports as
required by the Articles of Association by publishing them on the website."
I received the following
reply from McGarahan on 16 September:
"The investigation
under Article 65 is the annual valuation of the Society; published in the
returns to the FSA, formerly to the Insurance Directorate. This document is
on the Society's website."
The reference to timing
in Article 65 is perhaps a feature of the Articles that need modernisation
and I assume (I would be grateful if you would confirm this) that the Directors
have decided on an annual investigation and valuation by the Actuary. This
is mentioned as occurring in the section of the Directors' Report dated 15th
April 2002 headed "Valuation and bonus declaration". Article 65
refers to a "Directors' report to members", not one to a regulatory
authority and quite distinct from the Accounts prepared under Article 64.
The intent of Article 65 has the Actuary reporting to the Board of Directors
and then the Directors reporting to the members. Please note that the phrase
"Provided that in the valuation of the assets the values thereof be not
estimated beyond the market prices [if any] of the same ..." would seem
to imply that future income should not be included unless "for reasons
to be set out in the Directors' report to the members upon the results of
the valuation". The Returns to the FSA include future income. There is
nothing in the Directors report to members dated 15th April 2002 on future
income. I can find nothing in the Articles of Association which refer to the
provision of reports and notices to members in electronic form, and so the
provision of a report on the website of the Society does not meet the requirements
of the Articles [see Article 69]. I checked with Mr. Roger Allen, Head of
the Insurance Division of the FSA. On Friday afternoon 27 September he advised
me that solvency returns "are not used for valuing the assets and declaring
bonuses. Valuation and bonuses are worked out from first principles. They
[i.e. solvency returns] are not a tool in that process".
I repeat my request for
the reports to which the members are entitled under Article 65. I would also
be obliged if the Society cease trying to fob us off with obviously incorrect
and misleading responses to our requests. While Mr. McGarahan may not know
much about life insurance companies, we do.
Yours sincerely,
ALEX HENNEY
c.c. EMAG Committee, EMAG
Website, Board, Journalists.
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