[A-List] UK legitimation crisis: Equitable Life

["Michael Keaney" <michael.keaney@xxxxxx>]

Fear of Equitable Life collapse grows as finance director quits

Mary O'Hara and Patrick Collinson
Tuesday November 26, 2002
The Guardian

Fears grew yesterday of a collapse of Equitable Life as its finance director
quit days after the insurer slashed payouts to pensioners by 30% and warned
that it was perilously close to insolvency.

In the latest crisis to hit the business, the finance chief, Charles
Bellringer, left his £210,000-a-year job after only 17 months amid
speculation of a boardroom clash with the chief executive, Charles Thomson.
He will walk away with a payoff of around £175,000, angering policyholders
who have seen the value of their funds decimated.

An Equitable spokesman said Mr Bellringer's departure was "a mutual
decision" and did not indicate further damaging announcements.

"He wishes to find a new and wider challenge," he said, adding that
Equitable was a "long way down the road" to finding a permanent replacement.

But Paul Braithwaite, chairman of the Equitable Members Action Group, said:
"The management of Equitable is totally discredited and the society is
unravelling before our eyes. What Equitable needs now is a company doctor to
try to rescue it."

He added that Mr Bellringer's payoff was "obscene".

Tomorrow a Commons adjournment debate called by Vincent Cable, Liberal
Democrat MP for Twickenham, will press ministers and the life insurance
industry to back a lifeboat operation for Equitable.

"The departure of Mr Bellringer is the last thing they need at the moment,"
Mr Cable said. "The situation at Equitable is much worse than anyone
previously imagined, and there are now serious doubts over its possible
insolvency.

"What is needed now is a lifeboat operation. Equitable is going to need a
big loan, which should not necessarily come from the government but from the
industry. An insolvency on this scale would be potentially very damaging for
the industry as whole."

Ministers will also come under fire for the slow progress of the official
Penrose enquiry into Equitable. The Treasury commissioned Lord Penrose to
conduct an independent enquiry into Equitable more than a year ago, but he
is not now expected to report until the end of next year or even 2004. Other
enquiries, such as that conducted by the parliamentary ombudsman, are
stalled until Penrose reports.

Many fear an establishment cover-up, fuelled by the Treasury's admission
earlier this month that it may suppress parts of the Penrose report on the
grounds of "legal and commercial confidentiality". Mr Cable said: "So far
the Treasury enquiry has been a joke. It is hopelessly adrift."

Over the weekend the financial services authority ruled out a voluntary
winding-up of Equitable, on the grounds that liquidation would leave
policyholders even worse off. But financial advisers are reporting a renewed
surge of policyholders fearing bankruptcy and desperate to get out of
Equitable at any price.

Tom McPhail, pensions analyst at advisers Hargreaves Lansdown, said: "Just
when you thought it couldn't get any worse, it has. Charles Bellringer's
resignation, coming hard on the heels of some very insipid looking accounts,
will send many of the remaining policyholders scrambling for the exit."

One slender hope for Equitable's army of annuitants - pensioners receiving a
monthly income - emerged at the weekend, when Norwich Union said it had held
talks with the Inland Revenue about a potential transfer of individuals on
to its books.

But Norwich Union said yesterday that although technically possible, any
transfer would only be beneficial to policyholders if there were a change in
revenue rules to allow it to offer better terms to Equitable's annuitants.