A leading investment magazine has questioned the decision by the board of Equitable Life, Britain's oldest insurance company, to put the business up for sale following an unfavourable court decision last month.
Equitable Life's directors opted for the sale route after a British House of Lords judgment looked set to cost the 238-year-old mutual an estimated £1.5 billion sterling (€2.46 billion).
Life & Pensions Money Facts, said that Equitable Life's board should have consulted its policyholders before deciding to put the company up for sale.
They said Equitable Life policyholders, 20,000 of which are in the Republic, should now be asking themselves the following questions:
If the society has to be sold, are the present directors, whom many might blame for it getting into this mess, the best people to now be in charge of the sale?
Is a sale really the only option? Equitable Life has assets of almost £33 billion sterling against the reported cost of the court judgment at £1.5 billion sterling, which will be spread over a good number of years.
If things have really got this bad, should someone else be there to ensure that consideration is given on behalf of the members to whether any legal action might lie against the present board?
The magazine adds: "The policyholders of the Equitable are not just customers; they are members. They have the right to an Extraordinary General Meeting.
"It takes 10 per cent of the members to request it, but this shouldn't be beyond the capabilities of the Equitable membership."
A spokesman for Equitable Life said: "Our 450,000 members will be deciding on Equitable Life's future. When we have a clear proposal, we will put it to our members at a Special General Meeting and they will have to approve any move by a 75 per cent majority.
"We believe the board was right to make a swift decision following the court result so as to minimise the period of uncertainty. We do not believe the board is incompetent just because it got a legal decision wrong. We believe a sale of the company is still the best option."
The court case centred on so-called Guaranteed Annuity Rate (GAR) policies which Equitable Life, along with other life insurers, issued in the 1970s and 1980s.
They promised guaranteed rates on future pensions, which were not thought onerous at the time when interest rates were high, but which became expensive to honour when rates fell significantly in the 1990s.
Equitable Life attempted to get around this problem by paying smaller final bonuses to policyholders with the guarantees, so that overall they would not be better off than other policyholders without the guarantees.
But after a long legal battle the House of Lords, the highest court in Britain, decided that Equitable Life should honour its guarantees without cutting final bonuses to those policyholders.
The decision meant that Equitable Life was faced with paying out a much bigger than expected sum - estimated at £1.5 billion - which precipitated the sale decision.
