At its peak in the 1990s, Equitable had 1.5 million policyholders with funds worth £26 billion under management, but it had allowed large unhedged liabilities to accumulate in respect of guaranteed fixed returns to investors without making provision for adverse market changes.

A 2007 European report concluded that regulators had focused on solvency margins and failed to consider the increasing risk of accrued terminal bonuses.

Premiums, which were constant for the duration of the policy,[2] were based on a method devised by the mathematician James Dodson using mortality figures for Northampton[1] and the amount payable on death, the basic sum assured, was guaranteed, a major advantage at the time.

Throughout the society's history, the allocation of bonuses (at regular intervals of up to five years) was a carefully thought-through decision based on actuarial advice, designed to promote fairness and equity between different groups and generations of policyholders.

The latter reflected the anticipated investment return on the lump sum over the annuity holder's lifetime and often changed depending on long-term interest yields and views on future longevity.

It developed market-leading personal pension and additional voluntary contribution plans while maintaining its record of operating with one of the lowest expense ratios in the industry.

[2] Its success was "partly based on its reputation, its strategy of paying no commissions to insurance agents or independent advisers and its tactic of always keeping reserves low and returning to its members more money than other companies".

[15] Having not insured against losing the case, and with no other way to make provision for the immediate £1.5 billion increase in long-term liabilities, Equitable put itself up for sale.

On 4 February 2001 the Halifax agreed to buy Equitable's operating assets, salesforce and non-profit business for a payment of up to £1 billion into the with-profits fund, subject to policyholder agreement.

[13] In November 2008, Equitable announced that the sale of the Society would be put on hold and that the Board would instead review the arrangements to run off its existing business.

This concluded that there was an arguable case that the Equitable had breached the rules of its former regulators, the Life Assurance and Unit Trust Regulatory Organisation (Lautro) and the Personal Investment Authority (PIA) in failing to disclose the risk of the existing GAR policies in the Product Particulars, Key Features and With-Profits Guide to new non-GAR policy holders.

[23][24] The 818-page report[6] found that the company had made over-generous payouts to policyholders, reaching the stage where "The Society was under-funded to the extent of £4½ billion in the summer of 2001" (chapter 19, para 82).

The EU Parliament's remit was to investigate, without prejudice, alleged breaches of Community law in relation to the collapse, to assess the UK regulatory regime in respect of Equitable Life, and to look at the adequacy of remedies available to policyholders including the 15,000 non-UK members.

Whilst a detailed summary of the full document is well outside the scope of this article, an examination of the effectiveness of the supervision of Equitable is given below and closely follows the wording.

The evidence suggests that the regulator focused exclusively on solvency margins, and took little or no account of accrued terminal bonuses in its overall analysis of the financial health of the company.

Although the regulator was given the option of not forcing Equitable to build reserves for discretionary bonuses, that did not absolve the authorities from their duty of financial supervision covering the "assurance undertaking's entire business".

More evidence also strongly suggests that the regulator adopted a conscious and deliberate "hands-off" approach with regard to the Equitable case.

In its conclusion on p. 117, the report said that the powers bestowed on the Secretary of State (as prescribed by Section 68 of the Insurance Companies Act 1982) to waive the application of prudential regulations appear to be incompatible with the letter and the aim of the Directive, and were used inappropriately (particularly when granting authorisation on numerous occasions to include future profits in the assets available to meet the solvency margin), and that therefore ... there are serious concerns that the 3LD was not correctly transposed in full.

[13] In July 2008, the Parliamentary and Health Service Ombudsman completed a four-year investigation, described by Equitable's chief executive as the "best chance of compensation".

[28] In January 2009 the Government issued their response and appointed retired judge Sir John Chadwick as an independent advisor to design an ex-gratia scheme for some policyholders "who have suffered a disproportionate impact as a result of the relevant maladministration".

[30] In March, the Public Administration Select Committee issued a second report in which it described the government response as "morally unacceptable", and repeated the Ombudsman's criticism that it had acted as judge on its own behalf.

[37] However, policyholder compensation would be limited to the "absolute loss they suffered" estimated by Chadwick at a total of £2.3-£3B, compared with the £4B-£4.8B returns that similar companies produced, as calculated by consultants Towers Watson.

[37] Hoban said compensation would follow recommendations of the Parliamentary Ombudsman report and would take Sir John's findings into account, but might be affected by public spending cuts.

[37] Equitable Life pressure group EMAG were unhappy with the announcement but the Ombudsman said she would inform Parliament of her views once she had had time to consider the statement.

[37] Although Equitable's management initially welcomed the announcement,[37] they were concerned that compensation would be based on the Chadwick report, written on the premise that only five of the Ombudsman's findings of maladministration were valid.

[39] Equitable's Chief Executive, Chris Wiscarson, wrote to Hoban saying that they could not support Chadwick's recommendations as they would only cover about 10% of losses and that compensation should be based on a total figure of £4.8B.

[41] The report called on the Treasury and its administrator, National Savings and Investments, to "get their act together" and bring forward publicity for the deadline to July rather than September 2013.

[41] By March 2012, payments were only one third of that expected and Committee chairman Margaret Hodge also criticized the Treasury for destroying details of 353,000 policyholders on data protection grounds.

LCCG (now Utmost Life and Pensions) is backed by Oaktree Capital Management and specialises in buying insurance businesses that are closed to new customers.

The sale required approval by policyholders and the High Court, and, having received this, completed at the end of 2019, with UK policies transferring to Utmost Life and Pensions.