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Equitable closed to new business

Today is a sad day for traditionalists as Equitable Life, the worlds oldest mutual life insurer closed its door to all new business. The dramatic news comes after a lengthy court case and the failure of a planned sell off. Existing customers should refrain from worrying as the company has been declared solvent and shall continue with business as usual for present customers.

The Equitable, which was formed in 1762, has been on sale since July after a High Court ruling that the company must guarantee to honour pension payout worth around £1.5 billion. The company was unable to meet the debt itself and so decided a sale was the only course of action.

Although the company has been functioning well, a sell-off has not been secured as potential buyers fear the real cost of debt may rise to between £3 and £5 billion. The company itself is valued at around £3 billion.

The company's problems have centred around Guaranteed Annuity Rate (GAR) where customers could choose a minimum payout for their pension plus a bonus when the policy matured. Other institutions offered similar agreements but extended life expectancies have caught the Equitable short and they now cannot meet their debts. The Equitable asked policyholders to accept a lower payout and won the first round of ensuing legal battles. Unfortunately for the company, the decision was overturned by the Court of Appeal and since upheld in the Lords.

The bad news is that the impact of lower than expected growth until June this year, worth about 5% of policy values, is now unlikely to be recovered. Policyholders should consult the advice line on 0870 900 8020 for further advice.