Finances are stable, says Equitas, despite accountant's concerns
Tuesday 07 October 1997
Mr Newbigging, who confirmed he will leave as non-executive chairman during the second half of next year, said that both payouts and income to 31 March had outstripped plans laid down when the company started in September 1996.
"We have made real progress towards creating a professional, cost-efficient organisation. We have not encountered any major surprises, nor have we identified any external event, trend or emerging issue that we believe could endanger the financial stability of Equitas."
However, Equitas, which aims to reinsure and wind down pounds 15bn of unresolved claims incurred before 1992, already has precarious finances.
Between September and March, the group increased its shareholder funds from pounds 588m to pounds 617m.
But in its auditors' report, Coopers & Lybrand said there were "significant uncertainties as to the accuracy of the provision for claims outstanding of pounds 11,830m, reinsurers' share of claims outstanding of pounds 3,128m and reinsurance recoveries of pounds 1,481m".
Coopers & Lybrand cast doubt on a projection by Equitas that it could expect a rate of return of 6 per cent on its investments, all of which are in fixed-interest stocks. A crucial assumption, that claims would take an average of eight years to settle, was also questioned.
The auditors criticised a failure to conduct an independent audit of the records passed to them by Equitas from the Lloyd's syndicates which first incurred the losses. Information was incomplete and not always accurate, the auditors said.
"Had we been able to obtain all the evidence necessary to satisfy ourselves in respect of the matters described , we might have concluded that material increases or decreases are required to the provision for claims outstanding... [which] could be material enough to exceed the amount of shareholders' funds," said the Coopers & Lybrand report.
Equitas is thought to be reluctant to pay the cost of an independent audit of the syndicates' records. In the past seven months it has cut the amount paid to other accountants for auditing syndicate data from pounds 4.74m to pounds 990,000.
The rescue company has to contend with poor record-keeping by some of the syndicates. In some cases, the managing agents who ran the syndicates failed to keep copies of stop-loss reinsurance policies designed to protect them.
A spokesman said: "We are well aware of the problems and we are doing very pro-active things to solve these problems." However, analysts believe the difficulty of getting the right information is such that Equitas accounts may never get an unqualified audit.
Should assets be too small to meet liabilities, Equitas has special arrangements adopted at the behest of the Department of Trade and Industry. These allow it to pay claims at a reduced rate.
- 1 Rarest Beanie Baby bought for just £10 at car boot sale could be sold for £62,500 on eBay
- 2 Katie Hopkins and The Sun editor are reported to police for incitement to racial hatred following migrant boat column
- 3 Katie Hopkins has just written a piece so hateful that it might give Hitler pause – why was it published?
- 4 Australian student Tommy Connolly, 23, adopts his pregnant, homeless 17-year-old cousin to give her a chance at 'a better life'
- 5 Cancel Sky at your peril: man spends 96 minutes in chat but fails to get rid of service
Rarest Beanie Baby bought for just £10 at car boot sale could be sold for £62,500 on eBay
Katie Hopkins and The Sun editor are reported to police for incitement to racial hatred following migrant boat column
'Jihadi John': Isis executioner Mohammed Emwazi wanted to wage jihad in Somalia until his friends were betrayed and killed by al-Shabaab
80 per cent of Missouri town’s police quit after election of first black mayor
Australian student Tommy Connolly, 23, adopts his pregnant, homeless 17-year-old cousin to give her a chance at 'a better life'
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...