The society announced plans for an pounds 800m takeover of Clerical Medical, a deal recommended by the insurer to its policyholders. Special bonuses worth up to thousands of pounds are being offered to 650,000 of Clerical's policyholders to vote for the deal.
The move could herald a new round of potential windfalls and restructuring in the world of financial services, with a number of life insurers being taken over and others, such as Norwich Union, handing out free shares as part of their conversion to stock market companies.
But carpetbaggers hunting for the next windfall should be wary. Life insurance windfalls may prove much less tangible than those from societies.
Who gets what?
Some 650,000 Clerical Medical "with-profits" policyholders will have pounds 111m of special bonuses attached to the value of their policies. This is most of Clerical's endowment holders as well as many holders of its savings plans and personal pension policies. Holders of Clerical Medical PEPs, unit trusts, straightforward life insurance and policies that are not with-profits get nothing.
The way the bonuses are calculated is complicated. Clerical says that for the holder of a typical with-profits endowment policy which has been in force for 15 years and carries a guaranteed death benefit of pounds 30,000, this special bonus will amount to pounds 2,172. A handful of people with very large policies in force for a long time will get special bonuses worth tens of thousands of pounds, it says. But many recent policies will get just a few pounds.
To qualify for a special bonus you must have a with-profits policy that is in force for the period midnight 22 March 1996 to 31 December 1996 or that matures during this period.
Policies bought through the "traded endowment policy market" - created from people selling policies they no longer want rather than cashing them in early with the insurer - will give their new owners the special bonuses.
How does the takeover affect the Halifax share handout?
It shouldn't directly. The same Halifax customers as before will get shares. Clerical Medical policyholders will not qualify for Halifax shares as a result of the takeover.
But the society's savers and borrowers who qualify for the free Halifax shares should benefit from the takeover. The Halifax says the takeover should enhance its profits and the value of the shares when it joins the stock market, expected to be in the summer of 1997.
Is the deal a good or bad thing?
According to the Halifax and Clerical Medical, both the society's members and Clerical's policyholders stand to benefit from the takeover. Halifax members gain because of the expectation of the value of their shares being enhanced. The takeover means greater financial stability for all Clerical's customers. As well as the pounds 111m special bonuses, the Halifax is pumping other monies into the fund out of which with-profits policyholders are awarded their bonuses. The idea is that this should allow enhanced returns for policies maturing in the future.
Also, as part of the deal, Clerical's with-profits policyholders are being offered a five-year guarantee that costs taken out of the fund will not increase at greater than the rate of inflation.
People with policies maturing in the next few years have very little to worry about, say industry insiders. Policyholders can also take some comfort from the fact that the proposals are supported by an independent actuary as being fair. In addition, since it is a sellers' market for life insurers, overall policyholders can believe they are being offered a reasonable price.
The main concern for people with policies not maturing for many years is that the special bonuses may be offset by reductions in the normal investment bonuses they are awarded. After the five-year cost guarantee, for example, the Halifax could significantly bump up charges, with consequent reductions in investment returns.
The loss of one mutual life insurer is not really a cause for mourning. There are still far too many of them, say analysts. And the mutuals have probably done an even worse job than the building societies in marketing the supposed benefits of mutuality.
What happens next?
A letter explaining the deal went out to Clerical Medical policyholders last week. Detailed proposals will follow in late May, and the vote in June. In the meantime there is a 24-hour information line on 0800 100555.
Who is next?
Friends Provident, Scottish Provident, NPI, Scottish Amicable, Scottish Life, and Scottish Widows could all be among the mutual targets in the sights of potential predators, including Abbey National, Sun Alliance and Woolwich building society.
Should I buy a policy in the hope of a windfall?
There's no point buying a new Clerical Medical policy in the hope of benefiting directly from the takeover - you have already missed the 22 March deadline.
However, firms selling second-hand policies say prices of Clerical policies have only risen slightly since the insurer publicly put itself up for sale. The value of the special bonuses may well not be reflected in the prices of second-hand policies simply because the full detail of these bonuses is not yet known.
It is unlikely to be worth taking out a new policy from other insurers simply on the off-chance of a windfall. Life policies are long-term commitments and by comparison any bonus may not amount to much. But there may be a case for buying a second-hand endowment - as with Clerical, the prospect of special bonuses may not be in the price. Alternatively, you could buy shares in the Life Office Opportunities Trust (Loot) run by Edinburgh-based manager Scottish Value. This buys policies that stand to yield special bonuses.