The British bank Halifax said today it had agreed to take over ailing life assurer Equitable Life for £1 billion sterling (euro 1.57 billion) in a deal that comes as a relief to tens of thousands of policy holders.
Two months after Equitable closed its doors to new business after a previous deal with Prudential collapsed, Halifax unveiled a deal to keep it alive by buying its insurance businesses, assets and sales force.
Halifax will pay £500 million sterling on March 1st, with the remainder to come once Equitable has resolved a long-standing problem with policy holders who were guaranteed high return pensions which the insurer ultimately could not afford to honour.
Equitable was effectively sunk by a House of Lords ruling which forced it to honour final payments to 90,000 holders of guaranteed annuity rate policies.
The policies promising guaranteed pension returns were written in the 1970s and 1980s during times of high interest rates, but have recently become expensive to honour in a climate of low interest rates.
The ruling immediately saddled Equitable with obligations of £1.5 billion, and prompted Prudential to withdraw its offer of a takeover.
AFP