Local view for "http://purl.org/linkedpolitics/eu/plenary/2006-07-03-Speech-1-063"
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"en.20060703.13.1-063"2
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"Mr President, I would like to thank the rapporteur, Mrs Wallis, for an excellent interim report, as also the Chairman, Mrs McGuinness, who will, I am sure, be a thorn in the side of the regulators and ensure that we can get to the bottom of what actually happened with Equitable Life.
Equitable Life is the world’s oldest assurance company; right up to the end of 1999, even Westminster MPs’ pension funds were still being invested in the company. Thousands of investors have lost money because of the cost of over-bonusing ‘with-profit’ life assurance policies. Many assurance companies offer with-profit policies – I have several such policies myself – but provided the company does not pay out more bonuses than it can afford the system works perfectly well. In my opinion, from the mid 1990s until 2000 the Equitable Life Assurance Society over-bonused its with-profit policies, which showed on paper at least that Equitable Life had the best results of all major assurance companies, thus encouraging people to take Equitable Life policies out.
The problem is that the cost in real terms of overvaluing the policies meant that Equitable Life paid out nearly GBP 6 billion more than it earned between 1997 and 2000. No assurance company, however large, can afford such sums.
From the information and evidence collected for the committee, it all seems very convenient that so many people carrying out the checks and balances of the company came very late to the party: i.e., the present board of management took over in 2000 after the company had all but ceased taking on new business; the Financial Services Authority was not created until late 1999, so it is not responsible for what happened before it came into existence; the financial actuaries advising the UK Government before the FSA was formed maintain that Equitable Life was always solvent, although one actuary giving evidence to our inquiry did admit there are up to six ways of valuing an insurance company.
The committee has heard from many people who invested in Equitable Life and who have lost a great deal of money, which has caused them great hardship. The committee will carry on its work and we are determined to find out what went wrong with Equitable Life so that these problems do not happen in the future. We will try to get the best deal for those who have Equitable Life policies."@en1
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