Equitable appoints actuary to vet compromise

Equitable Life, the troubled mutual life assurer, yesterday announced it had appointed Michael Arnold, one of the most experienced actuaries in the City, to judge whether an impending scheme which will realign the value of policies is fair to all policyholders.

Mr Arnold has been charged with ensuring "reasonableness and fairness" in the Equitable's "compromise scheme", which will be put to policyholders in the next few weeks and voted on by the end of the year.

Equitable must persuade the majority of both its guaranteed annuity policyholders (GARs) and those without a guarantee to agree to the scheme, in order to cap a potential liability of £2.6bn and ensure investment freedom in the future.

If the scheme is passed, Equitable could receive a further £500m from Halifax, which bought most of the life assurer's assets in February.

But passing the scheme will be challenging as GARs must surrender their valuable annuity guarantee in return for a one-off uplift to their policies values, while non-GARs may see no immediate benefits.

Mr Arnold said there was a formula for allocating the assets. "It is a question of looking at the existing fund and making a qualitative judgement," he said.

Mr Arnold said he has seen a draft copy of the as yet unreleased report by Nicolas Warren QC, who was commissioned to investigate whether non-GARs have a right to compensation, but he would not comment on the contents of the report.