Today & History

(last updated 26 March 2008)


Equitable Life Today 

The Society has a stable and secure future, even though, inevitably, it will face some challenges as a closed fund in ‘run-off’.

It is from this position of relative strength and security that we are about to invite third parties to approach us with proposals which could improve the prospects for policyholders. We will also continue to look for improvements that could be made internally.

During 2008 we expect to be able to determine whether the next phase of the Society’s future will be best for policyholders if we continue independently, or whether one or more third parties can produce the prospect of better outcomes for policyholders. No such change would take place without the approval of members. If such a change appears to be the right way forward it would probably be implemented during 2009.

In 1762 Equitable Life Assurance Society was established as the first mutual life assurance company, set up and run for its members and continues to run as the oldest mutual life assurance company in the UK.  Although the longest surviving life assurance company, it has in recent years undergone an exceptionally difficult period. Following a House of Lords ruling against the Society in July 2000, the company closed to new business on 8 December 2000.  The operating assets and the economic interest in much of the non profit business was sold to Halifax in February 2001.  From March 2001 Equitable continued as an independent company with services provided under contract by Halifax.

A new Board was appointed in March 2001. Since then it worked hard to ensure the continued smooth running of the Society in meeting its regulatory and solvency requirements.  Equitable Life remains solvent and continues to fully satisfy regulatory requirements. The continued maintenance of solvency, together with treating different groups of policyholders fairly, have been, and continue to be, the fundamental goals for the current board. 

2007 saw some very important milestones in the strategic development of the Society:

• Most of the Society’s fixed pensions transferred to Canada Life Limited in February 2007;

• University Life Assurance Society was transferred to Reliance Mutual at the end of May 2007;

• The Subordinated Bonds were redeemed in August2007; and

• The Society’s with-profits annuities (pensions in payment) transferred to Prudential in December 2007.

Since 2001 the Society has substantially eliminated its equity holdings to protect policy values and to reduce significantly the risk posed to the fund by volatility of its assets.  The Society’s investment strategy continues to be to hold very little in equities in order to minimise the risk to solvency from volatile equity markets.  It is expected that the mix of assets backing the sterling with-profits business will remain in the range shown below:

Gilts and Corporate bonds	75 - 90%
Property related investments	0 - 15%
Equity-type assets	0 - 15%
Cash	0 - 5%

The Society’s investment portfolio is managed by Insight Investment, part of the HBOS group.  Insight Investment has been managing the fund since 1 March 2001.  The Society’s investment strategy is decided by the Investment Committee, a sub set of Equitable Life’s Board.

The History of Equitable Life

Equitable Life Assurance Society started life in 1762, based on the inspiration of a man ahead of his time – James Dodson.

It was not until 1750 that James Dodson, Fellow of the Royal Society, revolutionised the way that life assurance worked by developing his scientific basis for calculating premiums. Dodson used mortality tables and probability studies to calculate tables of fair annual premiums. The great advantage of these was that the policyholder's premium was fixed throughout the term of the policy and the amount paid on death was guaranteed.

Although Dodson died before Equitable was founded, his ideas formed the basis of modern life assurance upon which all life assurance schemes were subsequently based. The 'Society for Equitable Assurances on Lives and Survivorships', as Equitable Life was originally called, was founded in 1762. As early as 1777 the Society was able to reduce all premiums by 10%. Another reduction in premiums followed in 1781 and a regular system of bonuses was subsequently developed.

The combination of fair dealing and reasonable bonuses rapidly attracted new business and by 1799 there were 5,000 policies in force for sums totalling around £4 million. By 1810, membership approached 10,000. Notable policyholders of the nineteenth century included such esteemed characters as Samuel Taylor Coleridge, William Wilberforce and Sir Walter Scott.

The end of the nineteenth century saw another period of rapid growth for Equitable Life and in 1913 the Society started to sell pensions. In 1957 the Society built on its reputation for innovation by launching the Retirement Annuity - a flexible pension for the self-employed. Again the Society was able to boast some notable members including John Galsworthy, Neville Chamberlain and W G Grace. Corporate pension scheme members included such familiar names as the NHS, Unilever and the Post Office.

During the 1980s and 1990s Equitable Life experienced a further period of rapid growth. The Society developed market leading personal pension and additional voluntary contribution plans while maintaining its record of operating with one of the lowest expense ratios in the industry.

In recent years the Society has undergone an exceptionally difficult period. During 1999 and the first half of 2000 a legal test case was fought to clarify the Society's approach to the Guaranteed Annuity Rates (GAR) offered by some with-profits pension policies sold up to the late 1980s. In July 2000 the House of Lords ruled that the Society's approach was inappropriate. As a result the then Board decided that it was in the best interest of members to put the Society up for sale.

After much initial interest in the Society, each potential purchaser withdrew.  Without the proceeds of a sale to restore the capital strength of the with-profits fund, it was clear that the investment freedom, and so the performance of the fund, would be constrained. The former Board decided on 8 December 2000 to stop selling new business.

In March 2001 a new Board, led by Chairman, Vanni Treves and Chief Executive, Charles Thomson was appointed.

During 2001 the new Board consulted on a compromise scheme to restore the stability of the Society. Members voted overwhelmingly in favour of the proposals to change the status of GAR and non-GAR investments. The scheme was sanctioned by the High Court on 8 February 2002.