Mortgage bank the Halifax today agreed to buy the assets of life assurer Equitable Life in a two-stage deal valued at £1 billion.

In the first part of the deal, Halifax will pay £500 million to buy the Equitable's non-profit and unit-linked business, its operating assets and its sales force.

The second part, two chunks of £250 million, will be paid by the Halifax once the Equitable has reached agreement with holders of guaranteed annuity policies over its £1.5 billion liabilities.

Halifax's move follows its admission last week that it was interested in buying parts of the troubled life assurer.

Equitable, the world's oldest mutual insurer, put itself up for sale in July after losing a legal battle and being ordered to make full final bonus payments to 90,000 holders of guaranteed annuity policies.

The decision by the House of Lords left Equitable with obligations of £1.5 billion.

However, the insurer failed to find a buyer and on December 8 said it would close its doors to new business and run itself down as policies matured over the next 40 years.

Under the terms of the deal announced today, the Equitable's operating assets will be managed by Clerical Medical, the former mutual acquired by the Halifax in 1996.

The Equitable's sales force will be rebranded The Halifax Equitable.

Clerical Medical will also provide fund management and administration to Equitable's closed fund.

Once the Equitable has achieved agreement with its guaranteed annuity policyholders, Halifax will pay out £250 million unconditionally.

This will be followed by the further £250 million once there has been an agreement on achievement of new business sales and profitability targets in 2003 and 2004 by the sales force.