Tensions were running high this week when the embattled chairman and chief executive of Equitable Life addressed a crowd of policyholders at London's Intercontinental Hotel over the future of the society.
Vanni Treves and Charles Thomson took to the stage to urge the 320-strong group to accept a compromise agreement giving policyholders with a guaranteed annuity rate (GAR) an average 17.5 per cent uplift in return for their forgoing their guarantee, and would distribute a 2.5 per cent boost to the value of non-GARs' funds.
Mr Treves, a City lawyer, and Mr Thomson, a trained actuary, are more used to the confidential inner workings of organisations than a gruelling schedule of travelling around the UK to personally win over hundreds of irate policyholders.
The pair, who have had to deal with angry Equitable members over the last few months, have an entertaining routine to persuade policyholders to accept the compromise. That said, the nine meetings over the next week are by ticket only, and Equitable is unwilling to make public details of the venues.
At last Tuesday's London meeting, the quietly spoken Mr Thomson said: "If there is no compromise, the worry and uncertainty will continue for years to come." Mr Treves chipped in, telling policyholders "don't even think about" winding Equitable up into insolvency, an option supported by some policyholders. This would probably leave them with 90 per cent of the guaranteed core of their fund, leaving them to wait months for the pay-out. The rationale for accepting the compromise, the pair argue, is that it will cap the £1.06bn liability created by existence of GARs, providing more stability for the with-profits fund as it runs off. The other advantage of ratifying the scheme by 1 March next year is that it would trigger a further injection of £250m from the Halifax banking group, which bought most of the society's assets in February.
But not all policyholders are wowed by the slick Vanni and Charles road show, which kicked off last weekend in Birmingham. One London Equitable member, Bruce Coles, said the two were "scaremongering and forcing policyholders into this situation [of accepting the compromise]."
The two Mr Ts have heard many concerns before in the seven turbulent months since they took over from the old, much-criticised management of Equitable.
They reject suggestions they are fudging the true situation. Mr Treves conceded that it was not in the interests of every one of Equitable's one million with-profit policyholders to support the scheme, which must be supported by 50 per cent of both GARs and non-GARs by number, and 75 per cent by policy value. They are also keen to stress that the meetings provide an opportunity for people to suggest changes to the scheme before the final draft is sent to policyholders in late November, ahead of a final vote in December. But Mr Treves has admitted there is no realistic prospect of fundamentally redrafting the proposals. Observers agree, but they point out that those living on a with-profits annuity are in a particularly grim position and deserve a better deal.
The problem the society faces in sweetening the deal is that it has a meagre pot of money that it must distribute effectively to encourage a majority of both GAR and non-GAR policyholders to accept the offer. This is particularly difficult, because the House of Lords ruled last July that Equitable had to increase its pay-outs to more than 70,000 GARs, making the value of their guarantee on average 30 per cent more than the next best annuity on the market. Not only that, following legal advice from three QCs, the society faces the possibility that 930,000 non-GARs could sue it for selling them non-guaranteed contracts without warning of the potential damage to their policies of the presence of GARs. Mr Thomson said that if non-GARs rejected the compromise in favour of pursuing legal action, "they will effectively be suing themselves and the main beneficiaries will be lawyers."
Yet Equitable could face a serious glitch if the compromise succeeds, in theory ruling out legal action against the society by non-GARs, while a number of this group refuse to vote. As they will not have made any individual undertaking not to sue they could still do so, contin- uing Equitable's uncertain prospects.
Meantime it is likely that Equitable's management will not take on board suggested changes to the compromise which are in the narrow self-interest of certain policyholder groups. Mr Thomson said: "If members can tell us who should get less so that others can get more, we will listen, but if it is simply self-interest, I may not be listening too hard."
These hard-talking tactics appear to be working. Equitable said two days ago that anecdotal evidence suggests two-thirds to three-quarters of policyholders support the deal.
Yet, in view of the seemingly endless flow of bad news from Equitable, the two Mr Ts may think it prudent to have held back a little pot of funds to give the final version of the compromise some sparkle.
For times and dates of the Equitable Life Road Show, phone 0870 166 6626Reuse content