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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: 03/04/2008 - ELAS Press Coverage March 2008

ELAS Press Coverage March 2008

Equitable Life at with-profit fund crossroads

FT: By Andrea Felsted
Published: March 28 2008

Equitable Life is close to kicking off the auction of its 6.8bn with-profit fund, in a move that will help it decide this year on its longer-term future.

Vanni Treves, chairman, said the mutual was now at an "important crossroads".

"We can comfortably run the business off ourselves, but we are also in good shape for others to consider. If one or more third parties can provide a better outlook for our policyholders than we can ourselves, then we will recommend the best approach to our members. Whatever the outcome, the next 12 months is the right time to address this question," he said.

Equitable is close to sending out information to parties that could be interested in all or part of the mutual life assurer, which closed to new business in 2000. It is also close to opening up a data room for interested parties.

There is expected to be broad interest in Equitable's assets, given appetite for closed life assurance funds and portfolios of annuities - contracts that promise to pay their owners an income until they die.

However, the picture is complicated by the fact that Equitable is a mutual and that it has an outsourcing agreement with HBOS. Some analysts have suggested that the most likely outcome is that the mutual's assets will be carved up.

However, Charles Thomson, chief executive, said he was hopeful that a buyer for the whole of the with-profit fund could be found.

He said Equitable had completed a number of partial sales, such as transferring a 4.6bn portfolio of non-profit annuities to Canada Life and offloading 1.7bn of with-profit annuities to Prudential.

"We hope that we will get a number of people who are interested in the whole thing rather than having to do any more partial deals.

"It was a very deliberate strategy [to carry out the partial deals] before, in order to get a more coherent and typical life assurance book of business," Mr Thomson added.

No dates for offers to be submitted have yet been set.

Mr Thomson said Equitable was unlikely to announce any deals before late summer or autumn. If any are concluded, they are likely to be implemented next year.


Equitable invites bid interest

Press Association:

Equitable Life has moved a step closer to a possible sale after announcing it is prepared to listen to approaches for the business.

The mutual life insurer said it was "at a crossroads" following the 1.7 billion transfer of its with-profits annuity book to Prudential last year, adding that 2008 was likely to be a "key year" in deciding the society's longer term future.

It said it was inviting other companies to say what they could do to improve the prospects for policyholders, but it stressed that it remained stable and secure and could continue running its existing policies to maturity.

The group declined to name the companies it was planning to hold talks with, but they are likely to include Pearl, which specialises in buying up closed with-profits funds.

Equitable is now in a better position to be taken over by a third party, following the transfer of its with-profits annuities to Prudential, as it is thought potential buyers may previously have been put off by having to manage the complex products.

The society also transferred its 4.6 billion non-profit annuity book to Canada Life in February last year.

Chairman Vanni Treves said: "The major achievements of the last 12 months have brought the society to an important crossroads. We can comfortably run the business off ourselves, but we are also in good shape for others to consider.

The group's results for 2007, which were also published, showed that its with-profits fund was valued at 6.8 billion at the end of December, while it had excess realistic assets, a key measure of its solvency, of 621 million, representing 9.2% of the fund.

It said bonus rates of 5% for with-profits pensions policies and 4% for life ones would be maintained for 2007, with bonuses also likely to be at this level for 2008. The majority of the with-profits fund continues to be invested in fixed income investments, with only around 20% of assets in equities and property.


Savers' hopes pinned on Equitable sell-off

Sunday Times 30th March, 2008

SAVERS in Equitable Life's ailing with-profits fund have been warned payouts are unlikely to improve any time soon. The life insurer said last week it was inviting bids from rivals that could offer a better outlook for policyholders.

Equitable admitted it was "at a crossroads" and said it had moved closer to selling its 6.8 billion with-profits fund. Chairman Vanni Treves said: "If one or more third parties can provide a better outlook for our policyholders than we can ourselves, then we will recommend the best approach to our members."

Although this could mean better returns for the 400,000 still invested in its with-profits fund, the company said any deals were unlikely to be announced before autumn. A transfer to another firm is not likely to take place until next year at the earliest.

The with-profits fund grew by only 1.9% last year, a lower return than from cash. Returns have been poor since Equitable was forced to close to new business in 2000 as more than three-quarters of the fund is invested in less volatile bonds.

Even if a sale went ahead, experience suggests it could take time for payouts to be turned round. Millions of savers stuck in with-profits schemes once owned by the likes of Royal & Sun Alliance and NPI are still suffering, years after the schemes were sold off to "zombie" fund managers Resolution and Pearl.

However, fresh hopes have been raised of compensation for some losses. The parliamentary ombudsman is expected to publish a report soon into the regulation of the mutual insurance company.

Equitable said it will be "in the forefront of those calling on the government to do the right thing" if the ombudsman recommends government compensation.