£1.8bn windfall for Equitable Life policyholders
POLICYHOLDERS in the world’s oldest life insurer, Equitable Life, are expected to receive £1.8bn in payouts almost two decades after it nearly collapsed and closed for new business.
The company has agreed a sale to fellow mutual insurer the Life Company Consolidation Group (LCCG). Under the terms of the deal around £1.8bn in capital will be returned to Equitable Life’s 300,000 policyholders.
This equates to an average £6,000 payout to each person. The two companies said this represented a 35pc increase in capital distribution for each policyholder.
The sale is expected to complete by the end of 2019, which would trigger the payouts. Completion is subject to regulatory and court approval. Members will vote midway through next year.
Equitable Life almost went under in 2000 after hundreds of thousands of policyholders lost money when it failed to meet ambitious financial targets.
A House of Lords ruling that year resulted in it closing to new customers. The Government ultimately had to shell out £1.5bn in compensation to customers.
At its peak Equitable Life had almost 1.5m policyholders who trusted it with £26bn. Equitable Life and its remaining £6.3bn of assets will be rolled into LCCG’S Reliance Life business.
The deal would take LCCG’S life assurance policy assets to more than £30bn. “It was always inevitable the Equitable would come to an end – to get one where policyholders get £1.8bn is deeply satisfying,” Chris Wiscarson, chief executive of Equitable Life, said.
LCCG plans to convert Equitable Life’s “with profits” policies to “unit linked” funds. Paul Thompson, chief executive of LCCG, said this switch, along with an injection of capital from LCCG, would put the assets on a surer footing.
Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “This is a wonderful windfall for Equitable Life policyholders, who now stand to pick up a nice bonus.
“The uplift is so substantial it’s well worth hanging on for,” Mr Cox said.