Equitable is back on track, willing to sell on its terms

Equitable is back on track, willing to sell on its terms

	Published : Fri, 31 Mar 2006 11:50 By : Richard Owen Print this Story

LONDON: British insurance company Equitable Life Assurance Society said Thursday it is in talks with a number of parties over possible sale of all or part of the company. The mutual insurer, the country's oldest, which was on the verge of a virtual collapse in 2000, said its financial position has improved in 2005, and it can now afford to talk to parties willing to buy it from a position of strength.

The firm, which was forced by the House of Lords in 2000 to honour guarantees it had given even 30 years ago, claimed its solvency margin was 669 million pounds in 2005 compared with 455 million pounds in 2004. The House of Lords decision had cost the company as much as 1.5 billion pounds.

The firm's chief executive Charles Thomson described the discussions to sell the company as serious but said there is no certainty of any deal. "We are a mutual, we have to do a deal that makes sense from the point of view of our policyholders," he added.

Thomson also said there is no situation of a forced selling as the company now sees itself as strong enough to run on its own.

The insurer in all probability would sell parts of its business. Thomson indicated that a sale of its book of annuities, which is worth around 7 billion pounds, could be a possibility, which can be justified on the premise that it would take some amount of risk off its balance sheet.

There have been reports late last year that Prudential has expressed interest in Equitable Life's stock of annuities.

Thomson said any sale of all or part of its portfolio of with-profits policies is difficult to accomplish as it would require approval from all its policyholders, who are its owners.

The company has seen improvements in its finances. Policyholders cashing in policies early had almost halved in 2005 to a value of 482 million pounds, from 835 million in 2004. Bonuses on with-profits policies will rise to 4.5 per cent for 2005, from 3.5 per cent in 2004.

The company said it would resume collecting money from customers with with-profits annuities at a rate of 0.5 per cent of their policy over six years to cover the cost of payouts to guaranteed annuity rate policyholders.

According to analysts, potential bidders for Equitable Life's annuity policies include besides Prudential, Legal & General Group. Canada Life Financial Corp. and Pearl Group Ltd.