Equitable takes a £75m hit

EQUITABLE Life took a £75m hit today as it moved in line with the rest of the life insurance industry by strengthening reserves to reflect the fact people are living longer.

The charge came in half-year results which chairman Vanni Treves insisted still showed the society, pushed to the brink of collapse four years ago, is making 'steady and sustained' progress.

The number of policyholders surrendering policies and quitting the group has fallen dramatically while the increase in provisions is negligible compared with a year ago.

Treves also called on Parliamentary Ombudsman (PO) Ann Abraham for a 'fair and fast' inquiry when she reopens her probe into the near-demise of Equitable in the late 1990s.

Abraham's new inquiry is expected to be the last chance for policyholders to win Government compensation. Treves said: 'Most people should accept her decision as final and the PO is the best remaining hope for policyholder compensation.'

The mortality charge pushed Equitable's fund for future appropriations (FFA) - the key measure it uses to test solvency - down by £10m to £532m for the first half to 30 June.

The number of old people in the UK is predicted to increase from 13% of the population to as much as 20% over the next 20 years as life expectancy improves. Two months ago, Legal & General was forced to shave profit targets at its core unit after a £100m charge to reflect the extra cash it is putting aside for savers' pensions.

Treves said the change to the society's FFA was not material and claimed Equitable was 'making good headway'.

Savers are likely to worry, however, that the charge will put more pressure on policy bonus payouts.

Equitable was left with a £1.5bn black hole in its finances in 2000 after the House of Lords said it had to honour promises to policyholders.

Useful links