Caught in a vise

Somehow, The Equitable has become the Lloyd's of London of the new millennium.

Like the famed reinsurer a decade earlier, Equitable Life Assurance Society was long viewed by British blue bloods as a sound place to put your money with the expectations of splendid returns. Like Lloyd's, Equitable boasts a long and storied history.

Unfortunately, the similarities don't end there. Like Lloyd's, The Equitable's gleaming faCade has obscured a dirty little secret. Massive financial problems cost Lloyd's investors dearly and led to years of litigation and massive personal losses. The Equitable has been a replay of the Lloyd's disaster. Its viability has been threatened in recent years by losses in court, an uprising by policyholders and deficits on the balance sheets of its investment funds.

Displaying the British penchant for understatement, The Equitable's Web site states: "In recent years the Society has undergone a difficult period."

No kidding. Others size up the situation more acutely. Moody's Investors Service in December 2002 lowered The Equitable's subordinated debt rating to Ca from Caa2, and warned that the firm's capital base fell to pounds 400 million ($427 million) in September 2002 from pounds 1.1 billion nine months earlier.

"The Society still faces substantial litigation and regulatory risk -- in relation to provisions for mis-selling and other issues - - which, along with some asset-liability mismatch uncertainty, represent substantial risk to the Society's weakened capital base," Moody's said in a statement. "Consequently, Moody's views the Equitable's capital base … as very weak and under continued pressure."

The insurer has kept a stiff upper lip, stressing that it's still solvent, meeting the main solvency ratios of its primary regulator, the Financial Services Authority.

Though they won't guarantee that it will continue, company officials insist the latest financial statement shows a pattern of stability in spite of weak markets.

"I believe that these results show that Equitable Life is gradually coming out of intensive care," declared Vanni Treves, who was appointed The Equitable's chairman in 2001, when releasing the latest financial statement in March. "Although responding to treatment, we are still some way off declaring a clean bill of health. There are a number of difficult issues that still need to be resolved, but, looking forward, I am cautiously optimistic...