Scandal-hit Equitable Life to shut up shop after LCCG acquistion
The move will free up £1.8 billion for policyholders.
Scandal-hit mutual life insurer Equitable Life is to shut down and distribute £1.8 billion to policyholders after being acquired by Life Company Consolidation Group (LCCG)
The agreement will see Britain’s oldest mutual life insurer transfer all of its policies to Reliance Life – which is owned by LCCG.
It will free up £1.8 billion held as part of a regulatory capital cushion, which will be distributed to 261,000 policyholders.
The average windfall is expected to be £6,900.
The deal will effectively remove guarantees for some policyholders in exchange for a one-time payout, but will have to be passed in a vote set to take place in mid-2019.
Following further regulatory and court approvals, LCCG said it expect the policy transfer to be completed by the end of next year.
The closure of Equitable Life comes 18 years after its near collapse in 2000, when it lost a legal battle in the House of Lords over the rights of its policyholders, forcing it to close to new business.
When the Equitable closed to new business in 2000, it was inevitable that at some point the Society had to come to an end. Equitable Life chief executive Chris Wiscarson
Over one million UK policyholders and more than 15,000 policy holders in other EU countries, including 8,300 in Ireland and 4,000 in Germany, lost pensions, savings and investments due to alleged mismanagement by Equitable Life.
Equitable Life’s chief executive Chris Wiscarson said: “When the Equitable closed to new business in 2000, it was inevitable that at some point the Society had to come to an end.
“The benefit of bringing Equitable to an end sooner rather than later is that we can capture for with-profits policyholders the near record high values of the investments backing their policies.”
Danny Cox, a chartered financial planner at Hargreaves Lansdown, called it a “wonderful windfall” for policyholders, with the closure drawing a “final line” under the insurance society.
“With Profits funds fell out of favour around the turn of the century, when Equitable almost collapsed and the entire sector had to slash policy values as markets tumbled.
“As a result of the shakeout these funds shuffled their portfolios into bonds in order to reduce risk.
“Loose monetary policy has helped to boost the value of these fixed income assets, which has now prompted Equitable to lock in these gains for policyholders.”
LCCG said the acquisition was the latest move as part of a strategy to snap up open and closed book insurance policies in the UK and Europe, having taken over 10 businesses so far from the likes of Aviva, AXA and Generali.
It currently holds policyholder assets worth around £24 billion.