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Last Updated: Monday, 8 March, 2004, 18:43 GMT
At-a-glance: Penrose report
Lord Penrose's report into the circumstances surrounding the near-collapse of Equitable Life have been published. Here are his key conclusions:

  • The balance of blame lay more with Equitable than with its regulators. "Principally, the society was author of its own misfortunes. Regulatory failures were secondary factors," Penrose wrote. But he went on to identify a variety of failings in the way the firm was supervised.
  • There were serious failings among senior management dating back to the 1980s. The report identified "a culture of manipulation and concealment", under which the firm did not communicate details of its finances to members or regulators. Roy Ranson, chief executive in 1991-97, was particularly criticised for failing to provide pertinent financial information.
  • Non-executive directors were "ill-equipped", "ill-prepared" and "incompetent", as regards the particular difficulties of supervising a complex life assurance firm.
  • Mr Ranson, in addition to his management role, was appointed actuary at the firm from 1982 to 1997. This overlap of regulatory and executive functions led to confusion.
  • The system of regulation, which handled Equitable with a light touch, was "inappropriate". There was, however, no evidence of "maladministration or negligence" among regulators. But the Department for Trade and Industry (DTI) in particular had insufficient understanding of how to measure the solvency of a firm like Equitable.
  • The Government Actuary's Department (GAD), which along with the DTI, the Treasury and others regulated Equitable, was singled out for criticism. In particular, GAD was insufficiently tough on the society, failing to respond to changes in bonus policy, and failing to demand disclosure from management.
  • Details of auditing lie outside the report's remit, and Lord Penrose had nothing to say about accountants Ernst & Young, which Equitable is currently suing for allegedly failing to spot problems. But he argued that there had been a "comprehensive failure by industry and by standard-setting bodies" to produce workable accounting standards for the life assurance industry.
  • A review of mutual life-assurance firms is to be launched, headed by Sir Paul Myners, author of a 2001 report into corporate pensions.
  • Sir Derek Morris, chairman of the Competition Commission, is to lead a study of the actuarial profession.
  • As a general principle, Lord Penrose wrote that "building false expectations of regulators can lead to a destruction of public confidence", and stressed that regulators themselves must inform consumers about the realities of the financial system. "Effective consumer education is essential."
  • Lord Penrose pointed out that his conclusions would not determine legal liability for Equitable's woes, or compensation for those who lost money. However, he sympathised with policyholders for the "worry and distress" they had suffered.

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