What are the details of the deal?

Under the agreement, 70,000 policyholders with guaranteed annuity rate pensions (GARs) will get a 17.5% increase in their policy values, in return for signing away their rights to a guaranteed minimum annual payment.

Previously, GAR policyholders were paid a guaranteed minimum annuity every year, typically around �12,000 per �100,000 invested, on top of a bonus when their policy matured.

Equitable's 415,000 'with-profits' pension holders - whose payments depend on the company's own profitability - will gain a 2.5% increase in their policy values, but have agreed not to sue Equitable for mis-selling as a quid pro quo.

The company would have been highly vulnerable to lawsuits from aggrieved with-profits policyholders, whose policy returns have fallen steeply over the last two years.

Many of these policyholders argue that they were not told of Equitable's true financial position when they signed up with the company.

What was the significance of the High Court ruling?

The High Court had to give its approval to the rescue deal before Equitable could proceed with the one-off payouts to policyholders.

The approval of the deal should also pave the way for the life assurer to receive a much-needed cash injection from the Halifax bank.

The Halifax - which is now part of the HBOS banking group - bought Equitable's assets last year for �500m.

But it said it would pay the life assurer another �250m if a deal to cap the mutual's losses was put in place by 1 March 2002.

Will the deal ensure that Equitable survives?

Yes.

Persuading GAR policyholders to abandon their guaranteed annuities, and convincing its remaining customers not to sue, should ensure that the cash-strapped life assurer avoids financial collapse.

Equitable should also be able to re-open for new business, having closed its doors to potential new customers when the crisis began in earnest in December 2000.

Are Equitable's troubles over?

The company has won a reprieve, but some pitfalls remain.

Many with-profits policy holders - who have lost out during the company's long bout of enforced inactivity - are expected to take their savings elsewhere as soon as they can.

And while Equitable may soon be free to start soliciting new business, it is questionable whether any new life insurance customers want to entrust their money to a firm that suffered such a near-death experience.

Equitable is also facing legal action from a group of policyholders who pulled out of the company before voting on the rescue plan.

What are the origins of the crisis?

In 1999, Equitable found that lower interest rates and longer average life expectancy meant that it could not afford to pay minimum guarantees and bonuses to its GAR policyholders, most of whom had signed up during the high-inflation and high-interest rate 1970s.

The company tried to renegotiate its GAR policies, but was sued by aggrieved savers.

In July 2001 the House of Lords ruled that the company had to meet its full obligations to policyholders.

The Equitable was presented with a stark choice: either persuade policy holders to accept cuts in their pensions, or go bust.