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Carpetbaggers left out in the cold

The flotation of Scottish Amicable is not for carpetbaggers because of the way payouts are structured to benefit long-term investors, writes Nic Cicutti. Up to 1.1 million members investing in the company's with- profits fund will benefit from the company's demutualisation and eventual flotation. About 300,000 investors in unit-linked schemes will be excluded from the payouts.

Payouts will take place in two stages. Assuming a vote in favour of demutualisation by a 75 per cent majority of voting members, the first payout of pounds 75m will take place in May. This will involve bonuses being attached to endowments.

Paul Bradshaw, deputy chief executive at Scottish Amicable, admitted that it was not possible to stop potential carpetbaggers taking out a policy until March.

But any bonus payable is linked to the length of time the premiums are paid in. They are worth about 2.5 per cent of the bonuses so far attached to policies.

Policyholders with a 25-year, pounds 30,000 sum assured policy maturing on 1 April would receive pounds 1,503. This falls as the maturity date lengthens, so that a person with a policy maturing in 2012 would receive just pounds 287.

The second stage of payouts, estimated at a further pounds 200m, will be payable on flotation in three to five years's time. Mr Bradshaw said it was proposed to continue with bonuses rather than free shares but no firm decision had been taken.

The seven-strong ScotAm executive's shares windfall worth up to pounds 14.4m depends on 25 per cent growth in the New Business Fund over each of the next four years. This was described by the company as a "tough but realistic target".