Good times in Norwich

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The Independent Online
It Seems like deja vu all over again. Or, if it's Monday, a major financial institution must be floating its shares. Last week it was the Halifax; tomorrow, it is the turn of the Norwich Union.

Unlike the Halifax, Norwich Union is also raising up to pounds 2.4bn in new money, split between an offer of new shares to members, and a public offer.

So strong was demand from members that the group had to increase its offer to them by pounds 400m, to pounds 1.2bn.

That alone was enough for bets on where the shares start trading to jump again. On Friday, IG Index, a betting agency, was quoting a price of 346p- 354p, up from 334p on Thursday morning before the news was announced.

It is way above the 240p to 290p range Norwich Union had set for the public offer - on which members have a 25p discount.

Members can also expect a windfall gain of, on average, pounds 1,500 in free shares.

Compared to its peers, NU is a well-managed business, which has escaped some of the woes to have befallen the rest of the sector. For example, it features hardly at all in the pounds 4bn pension mis-selling scandal, where it has only 5,300 policy holders or so deemed to be priority cases. Other companies, such as the Prudential, have had to make substantial provisions for offering clients inadequate advice.

Over the years, NU seems to have made a good fist of running its business. Its traditions as a mutual society - again, unlike some societies - have not left it open to accusations of lagging behind the competition. Its forte is life assurance, and also property and casualty insurance, where it has a market share of about 5 per cent. It also earns 26 per cent of revenues from a strong set of overseas operations.

NU depends on the independent financial adviser (IFA) market for distribution, where it is well entrenched. Pensions, especially with Labour noises about reform of the welfare state, also look a promising area for the company to develop.

It has also hacked away at costs - since 1991, the UK life expense ratio has halved, with overall costs falling by 40 per cent over the same time.

Norwich Union looks less jaded than some of the competition. Investors have a chance to buy into a solid company with some exciting prospects, and even up to 370p, the shares would look to offer good value.