Doorstep Armlock, Evergreen, Resolution Life and the orphans of the storm
Ionce drafted a short book called How to make money out of life assurance: 'Don't buy it, sell it.' The obvious winners, I thought, were the salesmen from Doorstep Armlock, whose commissions were the first charge on the policies they sold. They have long since moved on to sell fully fitted kitchens and the policyholders are left with the babies — infants which (or some of them) never really put on weight as they were meant to and now look like basket cases. Why, I wondered, should the Evergreen Mutual market itself to a new generation of customers? It was supposed to be run for the benefit of its members, and what had posterity ever done for them? They should tell the Evergreen to shut its doors, fire the sales force, turn off the advertisements, move into a smaller head office and pass the savings back to them. Their society would then be an increasingly exclusive club, and the last surviving member might be seriously rich. This experiment has now been tried, but has not worked out as I had hoped. The Evergreen and its rivals have run into trouble and run short of capital, two dozen of them have shut their doors to new business, and their policyholders, trapped inside the doors, are stuck — penalised if they try to leave, penalised if they opt to stay. Now that the Evergreen no longer needs to impress its new customers, why should it care what becomes of the old ones? These closed funds are the orphans of the storm that has blown through life assurance and left so many of its customers, actual and prospective, to draw their moral from my book. Now the orphans are being offered a home.
Stately home
It would be nice if the orphans could all go and live in the splendid episcopal townhouse in Dover Street, now home to Fleming Family and Partners, where Sir Brian Williamson is based. Their plight, he says, represents a failure of the market, and requires a market solution. He found solutions like these in the City as a promoter and (twice) chairman of Liffe, London's financial futures markets. Now he is in the chair of Resolution Life, which has been formed and backed by a group of long-term investors for the sole purpose of buying and running closed funds. Resolution can certainly expect to buy from willing sellers, led by Royal & SunAlliance, and the policy holders must be gratified to think that someone actually wants their custom. That would make a change from life under the spell of the zombie funds — as AKG Actuaries call them — which offer their policyholders little more than continued existence.
Don't trust the Fairy
Resolution intends to improve on the zombies. It expects to hold costs down, to give better information and advice, and to use the funds' capital more flexibly where that might be of help. This is at least a practical alternative to trusting in the Compensation Fairy to wave her wand and put everything right. As Sir Brian says, it is a market solution. Resolution's shareholders have the same time-horizon as the policyholders, and both need to hope that their patience will be rewarded. They might even live to discover that my original theory was right, and that a simplified, efficient, low-cost savings scheme can represent a rewarding club for its members. The House of Commons Treasury committee, now wondering how to restore confidence in long-term savings and to make buying a better bet than selling, will always be tempted to call for more regulation. I would have more confidence in Resolution.
Exorcist wanted
No fund could be more zombie-like than the wraith now haunting the premises of Scottish Mutual. Long ago this life office was what its name suggested. Then it turned itself into a company and sold out to Abbey National, and the policyholders, clutching modest handouts, must have thought, as I would have thought, that their future was safe under that familiar umbrella. Alas, they have been caught up in Abbey's troubles, and have been told that most of them can forget any hope of being paid terminal bonuses. The Irish pub fight over Abbey — 'hold me back, hold me back' — is still being acted out or, rather, spun out, for tactical advantage. In the end, the winner will have more to think about, by way of cuts and closures, than the plight of customers who signed on the line years ago and have nowhere else to go now. All the more reason for prospective bidders for Abbey to be asked what plans they have to exorcise its zombie.
Room at the top
Lunch at the top of the Gherkin: the City's name for the Swiss Re's 650ft glass and steel zeppelin, now standing on its tail in St Mary Axe. Other tower-builders (the NatWest's, for instance) left the machinery parked on the roof, mistakenly thinking that no one would notice. Lord Foster tucked it away inside, so that the zeppelin's nose-cone is a dining-room with views all round the horizon. To call this the City's most elegant tower is faint praise. (It looks down on the bulbous domes now being abandoned by Barclays.) How it rates as a practical office block we shall find out as Swiss Res two agents — CB Richard Ellis has just joined the team — set out to find takers for the top half of the fuselage. Would suit discerning tenant with own stock of curved desks and circular carpets.
Paddling in the Drain
A cheering bulletin from Athens: BRITON PADDLES TO SILVER MEDAL. Paddling, I thought, is an Olympic sport to which I could relate, and if no one was there to watch, so much the better. All those pictures of an echoing stadium with empty seats must have transformed the economics of putting on the Games. Until now my plan has been to compete for them, brush up London's transport, and finish second — but if nobody came, that would obviate the need to accommodate all these non-existent spectators and provide trains to take them to and fro. Some challenging events could be staged on London's existing transport system: paddling in the Drain, for instance, or a lap of the Circle Line, avoiding the black hole in the Aldgate area, or the marathon journey from Canary Wharf to Heathrow, with one change (at Green Park) and 27 stops. Start from either end.
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