Equitable Life withdraws suits against former directors

Equitable Life withdraws suits against former directors

	Published : Sat, 03 Dec 2005 20:05 By : Phil Bateman Print this Story

LONDON: Troubled mutual insurer Equitable Life has dropped its litigation against nine former directors seeking claims to the tune of 1.7 billion charging they had failed to act early enough to deal with the financial problems that caused its near collapse in 2000. This follows a similar abandonment of a 2 billion-pound legal case against former statutory auditors, Ernst & Young in September.

Equitable Life said these failed legal actions had cost it an equivalent of 75 pounds per policy holder. In the case involving Ernst & Young, the case was withdrawn after the two sides agreed to pay their own costs, which left Equitable Life with a 30 million-pound legal bill. Subsequently, it had settle with six of its former directors, while pursuing case against the nine. These cases too have now been withdrawn.

Meanwhile, the insurer seems to have received takeover bids, which it feels worth considering. Chairman Vanni Treves disclosed it had received encouraging approaches from prospective buyers for all or part of its business. He refused to disclose the identity of the bidders but media reports indicated the bidders included Prudential, Resolution Life and privately-owned Life Company Investor Group.

Treves revealed that the society had engaged Lexicon Partners to advise it on a potential sale.

Equitable Life had almost collapsed in July 2000 after the House of Lords ruled that it was legally bound to pay higher bonuses than had been guaranteed to some of its policyholders. The decision led to a severe cash crunch and forced it to close its with-profits fund to new members. It also cut down on its bonus payments to existing customers. It had sold its ongoing business to Halifax in 2001 and concentrated on staying afloat and honouring policies bought by its 600,000 customers, by slashing bonuses and imposing high penalty charges on those clients who tried to withdraw their money.

The society then alleged that 15 former directors had failed in their duty when they could not anticipate the crisis and sought 1.7 billion pounds in damages. It brought a similar claim against its former statutory auditors seeking damages of 2 billion dollars.

Treves said having settled the claim against Ernst & Young, the cost effectiveness of carrying on against the former directors alone was reviewed and it was decided that the litigation should be ended on the best terms available.

He said the overall position of the company has strengthened, with improvement in free assets of 166 million pounds over over the first half of 2005 and the increased bonuses announced from 1 October.

Its former directors include Peter Davis, the one-time lottery regulator, and Jenny Page, the ousted head of the Millennium Dome.