Outlook: Treves feels the heat as Equitable Life teeters on the brink

SAB/Philip Morris; Ratner's comeback

Irresponsible, irrational and irrelevant. That's what Vanni Treves, chairman of Equitable Life, thinks of large parts of recent press coverage of the society's affairs. After one and a half years in the job, Mr Treves finally lost his cool at the society's annual general meeting yesterday and gave it to the media with both barrels. Nobody is pretending that Equitable is anything but in the most terrible mess but, hey, Mr Treves is supposed to be the good guy, brought in to try to salvage something from the wreckage. Why attack me, he seemed to be saying.

What has really got Mr Treves' goat is the suggestion that Equitable has abandoned the spirit of glasnost promised when he became chairman and sunk back into obfuscation and news management in an attempt to disguise an increasingly parlous financial condition. Everyone has been asking for the society's latest solvency return for weeks, but it wasn't until Companies House, unannounced, published the information that Equitable felt obliged to put it up on the website.

Mr Treves rejects the suggestion that Equitable was being deliberately shy. There was no attempt to bury the return, he insists, nor, in reality, is the position any worse than it was a year ago. An analysis of the returns suggests that on the latter point at least, he is right. The latest return shows that the group is reliant on £500m of "future profits" for its solvency, a device which the Financial Services Authority is considering banning. That looks bad, but the year before the window dressing was a good deal worse. Then the reserves included £1bn of forward profits, double the current level, as well as £800m of reinsurance contracts.

Whether these numbers are enough legitimately to claim the position is improving is another matter. Equitable is perilously close to technical insolvency. Removal of the future profits assumption would open up a yawning gap between assets and liabilities. Equitable's parlous condition prevents it from investing heavily in equities, but even so, any further significant fall in the stock market would tip the society over the edge. None of this means that policy holders would be better off immediately putting the fund into liquidation. Such a process would be hugely costly and complicated, possibly involving years of delay in obtaining a payout. Non-guaranteed bonuses would be lost, and it is possible that competing claims would eat into guaranteed returns to.

For better or worse, policyholders are stuck with what they have got. Many will think it wise to take the 14 per cent penalty on the chin and get their money out now while they still can. This column recommended such a course long ago, when the penalties were much less. As it turns out this was far from being irresponsible advice. Such a course won't suit everyone, but it is generally best not to be still aboard the ship when finally she sinks beneath the waves.

SAB/Philip Morris

Graham Mackay, chief executive of South African Breweries, is taking the biggest gamble of his career buying Miller Brewing in the US from Philip Morris. Not that he'll be presenting it in that way when, barring last minute hitches, he formally announces the $5bn acquisition with his full-year figures on Thursday. Instead, the deal will be billed as a safety-first exercise that reduces SAB's exposure to emerging markets, including the highly volatile South African rand, and cements SAB's position as a global leader in the beverages industry. After the deal goes through SAB will be second only to the mighty Anheuser-Busch in terms of worldwide beer sales.

None the less, this is a bold move even by the standards of the ultra-acquisitive Mr Mackay, and it could easily backfire. Miller is a mature, declining brand which trails Budweiser in the US by a big margin. There are few if any synergies between SAB's interests in the rest of the world and Miller in the US, and the cost cutting potential is also limited.

Mr Mackay hopes to re-energise the company by pouring beers from his own burgeoning portfolio of brands, including Pilsner Urquell, through Miller's US distribution network. He gambles that US drinkers can be persuaded to swap the tasteless fizz of Bud and other all-American beers for heavier tasting, central European brews. All the same, there remains a mountain to climb, not only in changing American beer drinking habits, but also in countering the long term, health-led decline in US beer drinking more generally. To date the SAB strategy has been to concentrate on developing powerful market positions in the high growth, emerging markets of Eastern Europe and Latin American. Miller marks a sharp change in approach.

What's more, at $5bn Miller is quite a stretch for SAB. To do the deal at all, SAB is being forced to give away approximately a third of its share capital to Philip Morris. The balance of approximately $2bn will be debt financed. With Philip Morris as the controlling shareholder, it is anyone's guess what the future might hold. Presumably it locks out the possibility of a bid from Interbrew or anyone else, but it also makes SAB beholden to the world's largest tobacco company. Still, the stock market seems to like the idea well enough. Since the talks were first confirmed, the share price has been rising strongly. Mr Mackay might reasonably think the gamble is already working.

Ratner's comeback

Gerald Ratner says he chose the name Ratner-Online for his internet jewellery venture because research showed that Ratner was still the best name in the business. Best for what, though? Nobody who was there on that glorious day 11 years ago for the Institute of Directors annual conference will ever forget the casual and flippant way in which Mr Ratner committed professional suicide by describing one of his products as "crap". As it happens, Mr Ratner was already overgeared and overexpanded, and his fate may already have been out of his hands. But the remark, intended as a joke, has gone down in corporate history as one of the most expensive and destructive faux pas of all time. Mr Ratner has done his penance and paid the price. In future, he'll be careful to avoid the truth.

jeremy.warner@independent.co.uk