Comment: Mutual champion deserves to succeed

A cynic would argue that, unlike many others, Alastair Lyons, newly appointed chief executive of National Provident Institution, can afford his strongly pro-mutual principles. He very recently received a near three-quarters of a million pound payoff following Abbey National's takeover of National and Provincial Building Society, so he doesn't have to be in awe of the share options, long-term incentive plans and bumper salaries that tend to be on offer in proprietary companies. Well, maybe, but the observation is a little unfair, for Mr Lyons was as vehement a defender of mutuality while at National and Provincial as he intends to be in his new job at National Provident.

The pressures for demutualisation among life assurers are very different from those at work among the building societies, but the basic argument in defence of mutuality is much the same - if the customer and the owner of a business are one and the same, then logically the customer is better off since there is no separate class of shareholder that has to be serviced. This assumes, of course, that the mutual is able to match the proprietary company in terms of efficiency and profits, which is not always the case. None the less, the underlying logic of the argument cannot be faulted, so why are so many building societies and life assurers converting?

With building societies the answer lies with the very substantial free shares windfall that demutualisation is able to deliver to members. With life assurers the case is less clear cut, for with one or two exceptions (notably Norwich Union), conversion doesn't on the whole deliver these upfront gains. To make the case for selling out, the life assurer is generally forced to resort to the argument that it needs more capital in order better to pursue a high-return investment strategy. The gains, such as they are, come on the reversionary and terminal bonuses. But who's to say the life assurer wouldn't have delivered these gains anyway over the lifetime of these policies?

Mr Lyons believes he can find new capital to support his growth and investment strategy without actually selling the business. He doesn't pretend it won't be hard, for National Provident lacks the financial strength of the two other firmly committed life mutuals, Standard Life and Scottish Widows. But he does think he can provide a viable mutual future, with clear advantages over an outright sale to Australian Mutual or some such other. Like those building societies that have chosen to stay mutual, he's going to have to find a way of demonstrating the advantages of mutuality to policyholders by offering tangible mutual benefits. Let's hope he succeeds.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific