Money Box Interview with Vanni Treves

Paul Lewis interviews Vanni Treves, who took over as Chairman of Equitable Life on March 1st 2001.

Listen to the interview

LEWIS Vanni Treves, let me ask you first, why on earth did you want this job?

TREVES Well I'm not sure that I wanted it. I was invited to do it and I agreed with the approval of my partners. I am still a practicing solicitor, as you may know. I agreed to do it because it's an incredibly important job. The - er - the economic fortunes of perhaps a million people depend in some part on the fortunes of the Equitable. I think it's a very important job, and I hope I can make a difference.

LEWIS And what's the essential thing you have to do to try to protect those investments for a million people?

TREVES Well first of all I want to protect their sense of well being rather than their investments. I want them to feel that the society is safe and that their funds are safe, and I think that the best way of doing that in the early days is restore trust and open communication between the society and our policy holders - that's the first thing.

LEWIS You say - you say restore it - are you saying that you think that's been lost by the present management?

TREVES They told me it has been yes.

LEWIS So how will you go about restoring that because members are very concerned aren't they - they're concerned that their money it's not in any danger of disappearing altogether, but it's not done as well as it might, and you have this unlimited liability to the people with the guaranteed annuities?

TREVES I'm going to be appointed as you know on March 1st. Within a day or two of my appointment there will be advertisements in the press in which I introduce myself to policy holders and tell them what my priorities are. I'd like to write to them individually but I simply can't do it in the time available. And at the same time, within a few days of my appointment I'm going to go around the country to a number of open meetings at which all policy holders are welcome, at which I'm going to explain what the priorities are and I'm going to invite them to share their concerns with me.

LEWIS And, without in any way wanting to undermine the surprise of your adverts what are those priorities going to be?

TREVES Well, first of all talking to them in the way in which I think they would wish to be talked to and with. Secondly, we need to reconstitute the board. As you know the entire board has offered their resignation. I will be accepting their resignations as and when replacements have been identified and appointed. And thirdly, crucially, we're beginning work on the putting together of a compromise between the GAR holders.

LEWIS That's the guaranteed annuity holders?

TREVES The guaranteed annuity holders and the non guaranteed annuity holders, putting forward a compromise which will be put to them for a vote sometime later this year.

LEWIS And is that different from what we've heard already that the guaranteed annuity holders would get an up lift of 20% in their investment fund in exchange for giving up the rights which the House of Lords gave them?

TREVES Well the 20% is a percentage that's been mentioned and is not set in stone, and the chances are that different GAR holders, at different ages will receive different amounts, but certainly all classes of policy holders will be offered something that they don't presently have in order to surrender something that they presently do have.

LEWIS So those are the guaranteed ones, but what will the non- guaranteed ones be offered because they're saying this is too much?

TREVES The non-guaranteed ones will be offered certainty and the expectation of much better investment performance going forward. The effect of a compromise will be complex but two things will certainly happen from it - first of all the Halifax will pay at least 250 million pounds more into the funds and possibly over time as much as 500 million pounds more. Secondly, a compromise will allow the investment policy of the society to be changed so that much more can be invested in equities, and over time we would expect the re-balancing of the investment funds of the society to produce incremental returns to policy holders of between one half and one percent - over time compounded. That's a great deal of extra money.

LEWIS So this is on top of what they could expect under the current circumstances?

TREVES Absolutely

LEWIS Now we've heard a lot of this before. We've heard that this is what any sensible person would do. What proportion have to vote for what you're making sound a very sensible plan in order for it to go through?

TREVES Well there are many safeguards. The main safeguard is that 75% by value and 50% by number of each class of policy holder has to vote in favour.

LEWIS And would those classses include guaranteed would be one class - non guaranteed would be another.

TREVES Absolutely - absolutely. There has to be court approval so any class of policy holder that feels aggrieved can go to the court and complain. There has to be a regulatory approval. The FSA will have to approve. There will be a report from whole independent actuaries as to the fairness of the scheme.

LEWIS And if all those things happen what's to stop some bolshi member saying blow that - I want my House of Lords rights?

TREVES The court approval, if obtained, will eventually obtained will bide all members.

LEWIS So it will overturn the House of Lords' decision?

TREVES It won't overturn the House of Lords' decision, but it will replace it with an alternative and agreed compromise.

LEWIS Do you think you'll get that vote?

TREVES I hope so. The society belongs to the policy holders. The policy holders must be decide by class and as a whole what's in their best interests. My job is to present the policy holders objectively what it is that's advantageous to them, what it is that's less advantageous to them - about what we propose. At the end I would like to think that there will be a recommendation by the board, but they must decide and they will decide in their best interests.

LEWIS Now we heard a week or so ago that the Financial Services Authority was investigating the selling of policies by Equitable Life in the year 2000. A lot of people are calling for compensation. There are allegations of mis-selling hanging over the organisation. What do you think should happen about those?

TREVES Well I've heard Howard Davies speak to the treasury select committee about that. I believe the chances of compensation are not high, but if compensation can be claimed then it should be claimed and it will be paid.

LEWIS And that'll be paid by Equitable Life?

TREVES No, not necessarily. If there has been mis-selling at Equitable Life that would be paid by us and if anybody has any claims of any kind against Equitable Life then they should pursue them.

LEWIS So you're saying that you would be quite happy to see that money leaving the fund because that would only come from other policy holders wouldn't it?

TREVES I believe that under the new management, under the new board, all claims should be looked at objectively and rigorously.

LEWIS The Halifax is giving 250 million pounds on the basis that you will get this agreement so you've said you think you'll get that. They're also giving another 250 million depending on the performance of the sales force. Do you think it's reasonable to continue to demand of that sales force which already have been under a bit of cloud for the way it's sold policies over the last year, that again it's got to be out there selling things to people in order for you to get that extra quarter of a billion pounds?

TREVES Well I think their job is to go out there and sell things - sell products, and they should do so fairly.

LEWIS But not to mis-sell them?

TREVES Absolutely not and there's no suggestion that they will be mis-selling them. I expect them to sell them scrupulously.

LEWIS There have been reports in the press that you have a great many non executive directorships - I think the Times says 29. I don't know if you've counted them recently, including chairmanship of Channel 4. How much time are you going to be able to devote to this job at Equitable Life?

TREVES I am surrendering a lot of the things that I presently do in order to be able to do the Equitable job properly and I will devote as much time to the Equitable as it demands and if that includes weekends then weekends will be spent on Equitable affairs.

LEWIS So you could be working seven days a week?

TREVES Absolutely. I'm fully prepared to do that and everybody understands that.

LEWIS And the objectives you've set yourself - you mentioned restoring trust - there have been allegations by Equitable members of an arrogance about the company, of a failure to understand what members wanted. How can you go about restoring that, in a company that is after all really being closed down and allowed to decline over the next 40 years?

TREVES Well first of all I'd like to impress them that I'm not arrogant. I'm doing this job because I hope I can make a difference and I'm doing it because I've been invited to do it, and encouraged to do it by people who think I can make that difference. I will submit myself as will all the other board members to the approval of the next General Meeting in May and if they think - if they think that I can do a good job, then I'll continue doing it. Anytime that they think that somebody else can do it better I will retire in accordance with my letter of appointment on one day's notice.

LEWIS And with any money?

TREVES Absolutely not.

LEWIS You're painting yourself as whiter than white in a sense. You've said publicly I think that you - you've given up half your own guaranteed policies and converged them into the other half, so in a sense you have an equal foot in both camps. How are you going to convey that to members? How are you going to explain to them that you are really different from the people that have been in charge at Equitable before?

TREVES By talking to them as I'm talking to you.

LEWIS The board is resigning. The president has gone - you've replaced him calling yourself chairman. What about the large number of senior managers and directors - the executive directors who are still there indeed the current chief executive was -was deeply involved in the period when the mistakes were made. Are they going to stay?

TREVES Well many of the senior people in fact many of the people are going over to the Halifax. Those who wish to stay with us, who may stay with us will be reviewed on their merits. Everybody who stays will be considered on his or her merits and I and my colleagues will decide very promptly who should do and on what basis.

LEWIS So you're saying the existing executives will be in effect having to apply for their own jobs?

TREVES Absolutely

LEWIS And they're happy with that are they?

TREVES I don't know how happy or not they are, but that's what's gonna happen.

LEWIS And when will that be?

TREVES Within the next few days.

LEWIS You mentioned the other board members who are resigning - what's the new board going to look like? Who are you looking for to support you in this mission that you have?

TREVES The new board needs to respected and representative. And it needs to have the right experience and the right disciplines. I believe that there will be at least one if not two people who are experts in investment management because going forward this is a huge fund - a 25 billion pound fund which will need the most expert supervision. I believe there'll need to be somebody with actuarial experience. There will need to be some orderly transition and I believe one of the existing board members should stay in order to influence and to ease that transition. I believe that a representative of one or more of the action groups, not necessarily a member of the action groups, but certainly somebody who is applauded by the action groups should be on there, and I believe that the National Association of Pension Funds also wishes to be represented and I will listen to that.

LEWIS So you're trying to get a representative board representing the interests of all the members and also bringing on the skills which you think are needed to make sure the company goes ahead correctly?

TREVES That is so - that is so.

LEWIS Given that Equitable is going to turn itself or has turned itself into a closed fund, do you see any prospect of it opening for new business, or are you really like a very long term liquidator who's going to slowly run this company down and once you've seen it on track for that leave and let it get on with its own demise?

TREVES Well it probably will run down, but it remains open to existing members. Those who have existing policies can add to those policies and may choose to do so once a compromise has been achieved and the society is in a steady state.

LEWIS Just to go back to your - the moment of your appointment on Thursday - you mentioned that would be having adverts - adverts in the press very soon after that. Can you just talk to me again about the time-table for that and what will be in them, and when and where the meetings will be?

TREVES The advertisements will appear within a couple of days of my appointment. I will introduce myself. I will set out my priorities as I've described them to you. And I will also say there that I will going around the country during March to the major centres inviting people to come along to open meetings and to discuss whatever it is that they want to talk about. I believe that I will be visiting at least Bristol, London of course, and I'll be going to the North and to the Midlands. I believe there will be four or five such meetings in March.

LEWIS In a sense are you campaigning to be re-elected chairman in May?

TREVES Absolutely not. If I feel that I don't have the confidence of the policy holders I would very gladly pack up my bags and go back to my firm and to the many other things that I have to do.

LEWIS And you believe that you will manage what has so far proved impossible to unite the interests of two sets of policy holders who appear to have completely different interests at the moment - one has guarantees given to them by the House of Lords, the other says these are too expensive to pay?

TREVES I wouldn't be doing it if I didn't think it was possible, and in any event I'm going to give them my very best shot.

LEWIS Okay. There are a lot of people with money in Equitable Life - a million people who have - don't have guarantees. Why should they keep their money there because ultimately they are going to have to pay something to the people with guarantees aren't they? - they're going to have to lose that element of their investment?

TREVES They've done very well to date. The investment record of the society over time has been very creditable. If they leave now as you know there is a penalty - let's call it that of 10%. That by the way is not outside industry norms, and although other companies and societies wrap it up in different ways, 10% or thereabouts is the going rate in many companies. I believe that if they stay they can look forward to a very stable and encouraging investment performance in a society in which they can have confidence.

LEWIS And what do you say to people who say well you have got more than half a million pounds invested in Equitable Life - it's in your interests to do this and sort it out and that's really your motivation?

TREVES I have no financial motivation at all. As between the GAR and the non GAR holders . I surrendered half of my policies as you may know which were all GAR - into non GAR so that nobody can accuse me of being partisan. And although it is a substantial sum of money I can promise you that I'm not doing anything out of economic self interest.

LEWIS If you fail, is there a danger that Equitable Life will fall into insolvency?

TREVES No. Equitable Life is solvent both on a technical and in a colloquial sense. Technically it's solvent because we pass all the regulatory hurdles and the FSA will confirm to anybody anytime that we are solvent in terms of the law and the rules. We're also solvent in a more amateur sense - by that I mean that there is no expectation, no likelihood that we will be unable to pay all policies out in accordance with their terms over time.

LEWIS So even if you fail, even if no agreement is reached with the guaranteed annuity holders, Equitable Life will not fail?

TREVES Equitable Life will not fail. Equitable Life is and will remain solvent, but if there is a compromise I believe that policy holders will do better.

LEWIS Okay yes thank you very much.