Life Company Consolidation Group (LCCG) is buying Equitable Life for £1.8bn. The transaction is expected to complete towards the end of 2019 and brings an end to the troubled history of the UK’s oldest customer-owned life insurer.
The deal is estimated to increase the current 35% capital distribution on with profits policies to between 60 and 70%. Over 400,000 policyholders will move to LCCG’s Reliance Life subsidiary. About £1.8bn in capital will be released by the move, which equates to an average windfall of £6,900 for the 261,000 remaining policies.
Equitable Life was at the centre of a major UK financial scandal in 2000 after failing to put sufficient funds aside to pay for guaranteed payouts it promised on some of its pensions.
LCCG chief executive, Paul Thompson, said in a statement his firm was not interested in “acquiring the mutual as a mutual” and would convert customers’ policies into funds that were expected to give them higher returns. Policyholders will be able to vote on the deal in the middle of next year, and High Court approval will also be needed.
The chairman of Equitable Life, Ian Brimecome, said on Friday it was sad to bring an end to the mutual assurer, but “the potential to enhance with-profits policy values to the extent made possible by a transfer to Reliance Life is fundamentally helpful in distributing capital to our policyholders as fairly and as soon as possible”. Equitable, which was established in 1762, manages £6.3bn of assets.
The deal forms part of LCCG’s strategy to acquire open and closed book insurance assets in the UK and Europe. LCCG operates in the UK, Republic of Ireland and the Isle of Man, having previously acquired ten businesses, including from Aviva, AXA and Generali.