UK financial services group Halifax has paid one billion pounds ($A2.68 billion) for troubled British insurer Equitable Life.
As reported yesterday by Money Management, Halifax was competing for the UK life insurance group with GE Capital who had made a £1.2 billion offer including an £800 million loan.
The price Equitable has accepted from Halifax will be paid out on March 1, but it is understood that an as yet unnamed remainder will be paid for the Equitable business once it has sorted out the problem it has in honouring its policies.
Equitable ran aground with its policy holders when it could not honour policies written in the 1980s when interest rates were high, which have recently become expensive in the current low interest rate climate.
The House of Lords ruled recently against Equitable Life, pressuring them to honour 90,000 holders of guaranteed annuity rate policies that were originally written guaranteeing high-return pensions.
The sale of Equitable follows two months of speculation after the insurer closed its doors to new business after negotiations with Prudential collapsed.
Prudential was at one stage tipped to become a likely buyer, and Australian Life giant, AMP, also had a look in. AMP broke off negotiations last week when a price could not be agreed upon.
Equitable chief executive Chris Headdon says that the sale to Halifax is “a good result for policy holders”.
However, despite the news of the closure of the deal, GE Capital still considers itself in the race, and will be making another bid for Equitable Life in a few days, according to a report in The Financial Times in the UK.
But according to Headdon, the sale is closed.
“Equitable has signed a binding contract with Halifax and that is the end of it … it’s like selling your house to someone and then saying you will sell it to someone else,” he says.
