Equitable raises bonuses and ponders sale

Equitable Life offered its 750,000 policyholders a glimmer of hope yesterday that their futures might be brighter than expected. Announcing its results for 2004, the troubled life insurer said its finances had stabilised sufficiently to justify an increase in bonuses paid on savings and pension policies. Equitable also said it was strong enough to begin a strategic review that could lead to its sale.

Equitable Life offered its 750,000 policyholders a glimmer of hope yesterday that their futures might be brighter than expected. Announcing its results for 2004, the troubled life insurer said its finances had stabilised sufficiently to justify an increase in bonuses paid on savings and pension policies. Equitable also said it was strong enough to begin a strategic review that could lead to its sale.

Vanni Treves, the insurer's chairman, said: "The society continues to be solvent and is more stable and secure than at any time in the last four years. We can now turn our focus to developing the various options we have identified for the longer-term future of the society and its policyholders."

Savers with Equitable with-profits pensions policies have been paid a 3.5 per cent bonus for 2004, up from 2 per cent in 2003. Those invested in life policies received 2.8 per cent, compared with 1.5 per cent in the previous year.

The bonus increases are the first positive development for policyholders since Equitable collapsed after losing a legal case in the House of Lords in 2000. The company then closed to new business, and policyholders were forced to accept lower payouts in order to keep the insurer solvent. Mr Treves is expected to give further details of the review at Equitable's annual meeting on 18 May.

The insurer is also considering making its with-profits fund more like a unit trust. This would give policyholders greater choice about where savings are invested. At the moment, the insurer's £10bn with-profits fund is in low-risk assets unlikely to generate strong returns.

In theory, a sale could attract several buyers, with companies such as Hugh Osmond's Life Company Investor Group and its rival Resolution Life already battling for control of its closed life insurance businesses. But insurance experts were sceptical about Equitable's attractions. Ned Cazalet, of the independent insurance analyst Cazalet Consulting, said: "Any prospective buyer is going to ask how much capital there is in Equitable and the answer at the moment is not a lot."