Norwich Union float to go ahead

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The Independent Online
Norwich Union, the country's second largest mutual insurance company, will confirm this week that it intends to press ahead with a stock market flotation.

The float will capitalise the company at around pounds 4bn and bring an average windfall of pounds 500 or more for its three million life policyholders.

The company intends to float by the summer of 1997. First, however, it has to gain the approval of its life policyholders who currently own the business and must sanction the abandonment of its mutual status.

Under a complex process, Norwich will be restructured in order to liberate a surplus of around pounds 1bn that is currently locked in the life fund. This will form the basis of the distribution to life policyholders, whose windfall will be paid in the form of new shares.

As part of the restructuring, Norwich will raise up to pounds 1.5bn of new money from the stock market, which will help to recapitalise the life fund.

The decision to demutalise comes a year after the insurer first announced it was considering the move. Advised by merchant bankers Kleinwort Benson, the board has concluded it no longer has the option of maintaining the status quo.

Kleinwort also advised Abbey National when it became the first building society to abandon mutual status and gain a stock market listing.

By floating, Norwich executives believe the company will be able to offer a more efficient structure for its policyholders.

Norwich is unusual in that it is a mutual insurer with both a life and general business. General car and household insurance policyholders, however, will not be entitled to any free shares.

Norwich will write to policyholders next month to alert them to its plans and advise them what to do in preparation for demutualisation.