EQUITABLE LIFE MEMBERS

EX DIRECTORS CASE SUMMARIES 

Chris Headdon

Chris Headdon (ex Managing Director)

With thanks to Neil Britten

Also see Alan Nash (ex Managing Director)

Particulars of claim against Headdon

This is also a thick document. First some biographical detail on Headdon (that is relevant)
- Employed as an Actuary from 1985 to 1997
- Assistant to Ranson (MD and appointed actuary)
- From 1/8/97 was the Appointed Actuary (replacing Ranson)
- Also the society's General Manager of Finance and the reporting actuary under the Companies Act (Insurance Companies Accounts) Regulations 1993.
- Appointed as a Director 1/7/99, resigned 1/3/01.

He was at all relevant times "an experiences actuary and Fellow of the Institute of Actuaries"
He was co-author with Ranson of the infamous "with profits without mystery" paper.

Some additional chronology is helpful though much is common with Nash (see earlier post).

Between November 1993 and January 1994, Ranson, Headdon and a Mr. Soundy (another actuary - this must be the beginnings of a joke - How many actuaries does it take to screw up your pension? ….) discussed the risks of the differential bonus policy.

29/11/93: Headdon to Ranson: "Currently we are resisting pressure to pay total fund x GAR … there is a fine balance to strike between being open and not drawing excessive attention to the existence of GARs."

(The implications of this statement are such that it is worth reading it a few times. One wonders for example to whom he was referring when he wondered about making the EXISTENCE of GARs visible? )

13/1/94 (after the board meeting adopting the differential bonus policy) Soundy to Ranson copied to Headdon: " … office is not acting with integrity and is effectively reneging on its guarantees". (You said it pal!)

14/1/94: Headdon to Soundy copied to Ranson: " Our current approach presents us with a public relations problem …"

(Remember this one too when we come to his duties.)

17/1/94: Soundy to Headdon copied to Ranson: "… now believe we should not attempt to reserve for future cost of GARs …

(So clearly it was considered as an option and EXPLICITLY REJECTED by the most senior actuaries in the society - remember this too).

17/2/98: Headdon recommends bonus at Board meeting (previously Ranson).
18/2/99: Headdon produces note entitled "GARs - contingency plan should ELAS lose the Court Case".
24/2/99: Headdon recommends bonus
16/2/00: Headdon recommends bonus

The claim cites similar breaches of duty as a Director to Nash. In addition it consider his duties as appointed actuary and as a Fellow of the Institute. In particular he had a duty to comply with ICA 1982 and Guidance Notes published by the Faculty and Institute of Actuaries, especially the mandatory provisions of GN1 and GN8.

GN1 para 3.3 Amongst other things states "It is incumbent upon the Appointed Actuary to take all reasonable steps to ensure that the company's incoming policyholders should not be misled as to their expectations"

One presumes this was what Headdon meant by a public relations problem?

Also "have regard to the nature of the contracts in force and currently being sold, with particular reference to all options and guarantees" para 4.2

"Regulation 55 requires the actuary to consider what provision is required as a contingency margin … in particular … special care … any contracts containing substantial options."

One presumes this is why he rejected any reserves for the GAR liabilities?

In summary Headdon was in breach of his duty (according to ELAS) as an appointed actuary from at latest February 1998 since he:
- Failed to have regard for the existence and consequences of GARs
- Failed to provide a written condition report setting out the consequences of economic changes
- Failed to ensure that future policyholders were not misled

He was also in breach of duty (according to ELAS) as a reporting actuary in that statutory accounts should have included technical provisions that took account of
" … all options available to the policyholder under the terms of the contract". They did not.

A VERY KEY POINT: Technical provisions should have been included even if the differential bonus policy was correct. Accordingly this "requirement to include such provisions was independent of the decision of the House of Lords in the Hyman litigation".

To sum up then, in the view of ELAS Headdon failed in his duties as:
- a Director
- a Fellow of the Institute
- as Appointed Actuary
- as Reporting Actuary

On the other hand he did a hell of a job on the "public relations problem" didn't he?