Eureko Eyes Equitable Life Amid Uncertainty Over Future

Eureko, the European insurance group, is reportedly considering a bid for Equitable Life, the mutual life assurer that put itself up for sale in July. The move comes as CGNU, the UK's largest insurer, is unlikely to submit a bid, and Prudential remains in talks with Equitable. Analysts have raised concerns that a European bidder may struggle to cover Equitable's liabilities without UK-based assets. The "black hole" at Equitable is estimated to be over £3bn, with the life assurer facing obligations of £1.5bn following a House of Lords ruling in July. Any buyer will need to address the shortfall and strengthen Equitable's reserves, with a deadline of the end of November for final bids.

Key Takeaways:

• Eureko, a European insurance group, is considering a bid for Equitable Life, which put itself up for sale in July.
• CGNU, the UK's largest insurer, is unlikely to submit a bid for Equitable, citing the life assurer's uncertain financial situation.
• Prudential remains in talks with Equitable and is seen as the most likely buyer due to its substantial "orphan" or surplus assets that could be used to rebuild Equitable's depleted capital reserves.
• Eureko's potential bid is complicated by the need for UK-based assets to cover Equitable's liabilities, which are estimated to be over £3bn.
• The "black hole" at Equitable was created by a House of Lords ruling in July, which left the life assurer with obligations of £1.5bn.
• Any buyer will need to address the shortfall and strengthen Equitable's reserves, with a deadline of the end of November for final bids.
• Equitable has 650,000 high-value customers and efficient computer systems, with costs that are the lowest in the industry due to its focus on relatively wealthy customers and refusal to pay commission to independent financial advisers.
• GE Capital is also thought to be interested in Equitable, but only in the wake of some form of financial restructuring.

Statistics:

• Estimated size of the "black hole" at Equitable: over £3bn
• Amount of Equitable's obligations following the House of Lords ruling: £1.5bn
• Number of high-value customers held by Equitable: 650,000
• Number of independent financial advisers that Equitable does not pay commission to: unknown (Equitable's costs are the lowest in the industry due to its focus on relatively wealthy customers)

Sources:

• "Eureko 'eyes' Equitable Life" by Jonathan Gould, Times of London, no date
• "Prudential seen as most likely buyer for Equitable" by David Oakley, Financial Times, no date
• "Equitable Life faces £3bn 'black hole'" by John Claydon, The Telegraph, no date