The Equitable Life Assurance Society - Aftermath of The Hyman Case, Sale of Business and Current Trading

Aftermath of The Hyman Case, Sale of Business and Current Trading

Having not insured against loss of the case and with no other way to make provision for the immediate £1.5B increase in long term liabilites, Equitable put itself up for sale. By the end of July, about 10 companies including the Prudential had considered -but rejected a bid. Equitable had intended using money from the sale to allocate bonuses for the first 7 months of 2000 but now this was not available.

On 8 December 2000 it closed for new business and immediately set a Market Value Adjustment of 10% peaking at 15%. On 19 December the Treasury announced a review of the Financial Services Authority (FSA)‘s regulation of Equitable. The following day, Equitable announced that their President and seven non executive directors would step down. Vanni Treves became Chairman in March 2001 with Charles Thomson as Chief Executive. On 4 February 2001 the Halifax agreed to buy Equitable's operating assets, sales force and non-profit business for a payment of up to £1 billion into the with-profits fund -subject to policyholder agreement. On 20 September 2001 the Compromise proposals were published offering 17.5% increase for GARs in exchange for the guarantee and 2.5% for non GARs in exchange for abandoning any legal claim. The deal was accepted by 98% of GAR policyholders and was sanctioned in the High Court in February 2002.

Both policyholders and pensioners received further bad news. In July 2001 policyholders were angered to be told their savings had been reduced by 16%. whilst in November 2002 pensioners were told that,“with-profits annuities, like yours, are now out of line by about 30%. “ 50,000 Annuitants suffered a 20% reduction in income. In February 2007 Equitable completed the transfer of £4.6B of annuities to Canada Life and in November transferred £1.8 billion with-profits annuity policies to Prudential, a deal accepted by 98% of members voting at a meeting. In November 2008 Equitable announced that the process of the sale of the Society would be put on hold and that the Board would instead review the arrangements to run off its existing business. Gross assets as of December 2008 were £8,754 million, around 25% of the value in 2000.