(Bloomberg) -- Equitable Life Assurance Society is to be acquired by a British consolidator of funds, a deal that brings an end to the checkered history of the U.K.'s oldest customer-owned life insurer.
Life Company Consolidation Group's Reliance Life unit will acquire Equitable's remaining business, according to a statement Friday on both firms' websites. The deal values the company at 1.8 billion pounds ($2.4 billion), with most of its almost 400,000 policyholders sharing some of the proceeds, the Financial Times reported.
Equitable almost collapsed at the turn of the century after it was unable to afford payments that had been guaranteed on policies to more than 1 million customers. Since then, it has been managed in so-called run-off, without writing new business. After a campaign by policyholders whose pensions were cut, the U.K. government ultimately had to pay out more than 1 billion pounds in compensation due to regulatory failures.
“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 Chief Executive Officer Chris Wiscarson said in the statement. Due to “record high” values for investments backing the firm's policies, it was a good time to sell, he said.
To read about Equitable's regulatory travails in 2001, click here.
The sale plan would see capital distributed on so-called with-profits policies increased to between 60 percent and 70 percent, up from 35 percent currently. Eligible customers will be asked to vote in favor of removing policy guarantees and the transfer to Reliance Life, with approval also needed from the High Court.
The deal is expected to see the assets transferred to Reliance Life toward the end of 2019. Equitable, which was established in 1762, manages 6.3 billion pounds of assets.
Wiscarson also told the FT that Solvency II rules introduced two years ago put a long-term reserve burden on a company that was destined to be wound down.
To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net
To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net, Keith Campbell, Paul Armstrong
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