EMAG

The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

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Media Stories: 22/12/2007 - ELAS For Sale - Sensible Press

ELAS For Sale - Sensible Press

David Prosser's Outlook: A sad end to 250 years of Equitable Life

The Independent: 22 December 2007

Had things turned out differently, staff at Equitable Life might just now be beginning to think about how best to celebrate the insurance company's 250th anniversary in 2012. Founded in 1762, Equitable is one of the UK's oldest companies and until the scandal that brought it to the verge of collapse in 2000, it was also one of the most widely respected. Since then, however, it has faced exceptionally difficult times and chairman Vanni Treves' announcement yesterday that Equitable will be auctioned off next year means the company will close its doors once and for all just four years short of its 250th birthday.

This may be a sad ending for Equitable, but the final chapter in its history has actually been much happier than it might have been largely thanks to the efforts of Mr Treves, who was parachuted in as the company hit rock bottom in early 2001. His biggest achievement was to get backing from policyholders for a compromise deal that curtailed many of the payouts they received, but saved the insurer from outright insolvency.

Since then, Equitable has slowly managed to move towards more stable ground. Last year's sale of the non-profit pension annuity book to Canada Life was only possible after several years of careful financial management. The same applies to the deal Equitable is now close to completing with Prudential, which is to take over its with-profits annuity business.

Still, a sale of Equitable's final sizeable asset, its with-profits investment fund, is the best hope that ongoing policyholders have of any significant uplift to their future benefits. As an independent insurer running a closed fund, Equitable does not have the fin-ancial muscle to invest in assets likely to produce improved returns. A rival manager, such as one of the specialists in closed-end funds, might do better.

The auction of Equitable will, however, be a timely reminder of just how badly the insurance company's policyholders have been let down by financial watchdogs, which failed to spot the black hole lurking in the insurer's accounts, failed to protect policyholders when the scandal broke, and then failed to bring to book the executives responsible for the scandal.

There's certainly an interesting comparison to make with Northern Rock. Equitable's problems were in one sense very similar to the crisis that hit the mortgage bank this year. It was suddenly confronted by vast numbers of customers who wanted to withdraw their cash at the worst possible time for the insurer. Unlike at Northern Rock, however, the Government was not prepared to get involved, let alone consider a bail-out.

There may yet be a fascinating and controversial footnote to the Equitable affair. Ann Abraham, the Parliamentary Ombudsman, has spent much of the past three years investigating whether those hit by Equitable's collapse were victims of government maladministration. When Ms Abraham eventually publishes her findings a verdict is not expected before next April she may rule that policyholders were failed by regulators to such an extent that the Government should compensate them.

Such a verdict would be sure to meet with a hostile reception from ministers, who fear a compensation bill that could run into billions of pounds. For Equitable policyholders, on the other hand, Ms Abraham is their last hope for a victory in their seven-year fight for justice."


Equitable accused of fund 'fire sale'

The Scotsman, by Teresa Hunter, Personal Finance Editor

EQUITABLE Life campaigners have condemned as a "fire sale" plans to sell the rump of the troubled fund, bringing more uncertainty and worry for 500,000 investors this Christmas.

Paul Braithwaite, chairman of the Equitable Members Action Group, said: "Plans to hive off Equitable's remaining policyholders are entirely predictable. This is a fire sale, designed to nail the coffin of this troubled company before the Parliamentary Ombudsman delivers her report next summer.

"But investors should be careful what they wish for. If it goes into one of the zombie funds, they will treat these policies as milch cows and consumers may be no better off."

Equitable members are used to bad news. What was considered the UK's finest insurance company closed in 2000, after a House of Lords ruling forced it to pay pension guarantees it could not afford.

Members saw the value of their policies cut twice: first in 2001 by 16% and then again in 2002 by 10%.

In addition, that year chief executive Charles Thomson switched the stricken fund out of equities and into lower-risk fixed interest gilts, which meant members missed out on the gains enjoyed elsewhere as share prices soared.

The firm has shrunk from 26bn to 7bn as investors have fled. Canada Life bought the annuities book in February and the Prudential is due to take over the with-profits annuities policies on December 31.

Chairman Vanni Treves plans to put the remainder of the business up for sale in the new year in an attempt to improve investment prospects for investors. He indicated he had already received tentative approaches.

Treves said: "Whether we will run the society off or pass it to someone who can offer our policyholders something better, 2008 will decide the future of Equitable Life."

Elsewhere, opinion is divided over whether a sale will be good for policyholders. Financial adviser Alan Steel, of Alan Steel Asset Management, said: "If it is taken over by a company with a good reputation and track record, then this will be welcome news.

"The worst that can happen to these poor souls is that there is no change in performance, and the takeover makes no difference."

Laith Khalaf, Hargreaves Lansdown's pensions analyst, argues that everything will depend on the financial strength of the acquirer and its scope to increase over time the Equitable fund's exposure to equities, which hold out the prospect of superior long-term returns compared with gilts.

He said: "The Pru acquisition of the with-profit annuity book, for example, looks like a good deal for policyholders because it will allow them to share in the Pru's superior asset allocation.

"But if it goes into one of the consolidation or zombie companies, or any other company without a strong equity-asset mix, then it is unlikely that things will improve."

A report into the failure of Equitable by Parliamentary Ombudsman Ann Abrahams is due before June after a number of delays.