More than 250 years of history will come to an end on Tuesday when scandal-hit life insurer Equitable Life finally disappears.
The company was at the centre of one of the UK’s biggest financial controversies almost 20 years ago when it came close to collapse because it could not afford to make the insurance and pension payouts it had promised. Policyholders lost billions of pounds in total and the government ended up paying more than £1bn in compensation.
Equitable, which dates back to 1762 and counted Samuel Taylor Coleridge and William Wilberforce among its customers, closed its doors to new customers in 2000. But the remaining business continued to serve those who had already bought policies, steadily shrinking as those policies ended.
That rump business itself will disappear at midnight on December 31 with the completion of a deal to sell it to Utmost, a private equity backed company that specialises in old books of life insurance business.
The deal was announced in June last year, but has taken 18 months to win the approval of policyholders, regulators and the UK courts.
“Everything took a bit longer than expected,” said Ian Maidens, chief financial officer of Utmost. “Everything associated with Equitable gets that extra bit of attention because it has been a high-profile problem child for the best part of 20 years.”
The deal covers more than 300,000 policyholders and around £6bn of assets.
Many of the customers who are still with Equitable have agreed to give up financial guarantees as part of the deal, but in return the value of their policies will increase by between 65 and 75 per cent.
“People were better off with the uplift,” said Mr Maidens. “The uplift gives away the capital of [Equitable].”
The policyholders agreed — 95 per cent of those who voted on the deal earlier this year approved it.
Paul Weir of campaign group the Equitable Members’ Action Group said Equitable policyholders had “finally [had] some benefit for their loyalty”.
Although the company will disappear, EMAG is still campaigning on behalf of 1m people who lost money in the scandal. Mr Weir says that the government has admitted that it owes more than £4bn to people who lost out because of regulatory failures, but has paid less than £1.5bn so far.
“Most people feel a burning sense of injustice,” said Mr Weir. “It was a body blow to my retirement plans.”
The group plans to appeal to MPs to continue to support the cause. “We’ll rebuild our army — there’s a lot of new MPs to talk to,” said Mr Weir.
He said that the Equitable Life scandal would leave a lasting mark on the UK. “Equitable will be remembered as a cautionary tale. It has undermined confidence in saving for retirement.”
The completion of the Equitable acquisition comes as other deals for closed life insurance companies await approval. Legal & General’s £650m deal to sell a book of business to Swiss Re’s ReAssure unit, announced two years ago, is not yet complete. Neither is a £340m deal that Aviva announced in July 2017 to sell Friends Provident International to RL360.
And Axa’s €925m disposal of Dublin-based Axa Life Europe to private equity group Cinven, which was announced in August 2018, is also still waiting for approval.
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