Equitable pays up to keep its sales force

Equitable Life, the mutual life insurer, has offered its 400-strong salesforce golden handcuffs to stop them leaving in the wake of last month's decision to put the business up for sale.

Equitable Life, the mutual life insurer, has offered its 400-strong salesforce golden handcuffs to stop them leaving in the wake of last month's decision to put the business up for sale.

The news is likely to anger Equitable Life pensioners, who are seeing bonuses cut because of the insurer's need to meetguaranteed payments to its annuity holders.

Staff were summoned to a special meeting in London last week to be told that the management would put in place a package to ensure that staff bonuses would be maintained at last year's levels, even if sales were to collapse this year.

Rival firms have been seeking to exploit uncertainty surrounding Equitable's future following the House of Lords decision enforcing full payment to annuity holders. Competitors are trying to poach the insurer's staff because of their blue-chip reputation. The management is keenly aware that unless it keeps the sales force intact the value of the business will quickly erode.

An Equitable spokesman yesterday refused to confirm details of the package. However, he said: "We have put in place a package to support salesmen because we want to sell the business as a successful business."

Analysts have given it a tentative price tag of £3.5bn. At least £2bn of that will be needed to plug the hole in the life fundopened up by the Lords' ruling.

Equitable's sales have been hurt by the bad publicity. Sales last year were down by 8 per cent to £2.4bn. However, at that level Equitable sales staff will still have brought in £6m each, making them the most productive in the business.

The firm has the lowest expense ratio in the business, at 4 per cent, at a time when rivals worry about how they will compete in the "1 per cent world" ushered in by the low-cost stakeholder pension. The average expense ratio for the industry is much higher, at 14 per cent.

Although Prudential has already put down a marker by admitting publicly that it is interested in looking at Equitable, bankers say they believe that Equitable's chief executive, Alan Nash, would probably prefer an overseas buyer to keep the existing management team in place.

Axa, the French insurance giant, and Allianz of Germany are both believed to be interested. So is CGNU, which has tried and failed to get both Gartmore, the fund management group, and NPI. Legal & General and Halifax last week ruled themselves out.

Barclays Bank is also seen as a potential buyer following the statement by Matt Barrett, its chief executive, that he wants to grow the bank's life insurance business.

Schroders Salomon Smith Barney, which is handling the sale, is expected to get a sales memorandum out next week. However, Equitable has warned its 650,000 policyholders that the sale will take time.