AMP yesterday confirmed it had beaten off stiff competition from other life insurers to win the auction for NPI, which was forced by financial weakness to put itself up for sale at the beginning of October.
Under the offer, NPI's 600,000 policyholders will receive a cash payout of at least pounds 300 each. Among them, over 440,000 who hold with-profits policies will receive a further cash payout averaging pounds 477. Policyholders will receive further unspecified sums in higher bonuses over the coming years.
The offer will be subject to a poll of qualifying members to be held next spring. NPI said it was unlikely that windfalls would be sent out before late summer.
The Australian group beat off CGU and Britannic, two UK insurers, in the final stage of the race for the insurer after about 15 rival companies expressed an initial interest.
If the deal is approved, NPI will cease to exist as a mutual life office and become a subsidiary of Pearl, the mass market UK life insurer owned by AMP. Alastair Lyons, the chief executive of NPI, will retain his post and has been offered a seat on the British board of AMP.
George Trumbull, chief executive of AMP, said the deal would result in some redundancies because of overlaps with Henderson, the investment manager which AMP bought earlier this year. However, he said these would amount to less than 10 per cent of NPI's 2,200 staff "in the short term".
He added AMP was unlikely to make any further UK acquisitions in the short term. "We are a big python that has just swallowed a bull and we need to stop and digest it."
AMP will in effect pay just pounds 510m in new money for NPI. The rest of the pounds 2.7bn figure consists of pounds 1.4bn in assets from NPI's estate - a sum already owned by NPI's policyholders - and a facility of pounds 800m to bolster the financial strength of NPI's life fund, one of the weakest in the life insurance sector.
Yesterday's announcement marks the end of a two-year courtship of NPI by the Australian insurer, which first approached the group in early 1997 after losing to Prudential in a similar battle for Scottish Amicable. Alastair Lyons initially resisted AMP's advances and declared that converting to become a plc would make policyholders "a means to an end, not an end in themselves".
However, the insurer was forced by a combination of financial weakness and turbulent stock markets to start a competitive auction in October.
Swiss Life, one of four insurers to make it through to the due diligence stage, dropped out in the last three weeks after learning of the scale of funds required to boost NPI's financial strength.
The deal is much less expensive for AMP than it would have been for a foreign office such as Swiss Life, because AMP already owns a UK life insurer. AMP can use the assets of Pearl's life fund to assign the pounds 800m needed to return NPI to financial health.
Ned Cazalet, a senior life insurance consultant, said the windfalls were small comfort to policyholders, given the low bonuses paid on NPI policies in recent years.Reuse content