NPI board cashes in

DIRECTORS of NPI, the mutual life insurer, stand to gain windfall bonuses of up to pounds 30,000 once the company's sale is complete.

Directors, whose salaries last year ranged from pounds 118,000 to pounds 156,000, will receive a 20 per cent bonus in recognition of their extra work for the company's sale, while administrative staff will receive 5 per cent - around pounds 500 on a salary of pounds 10,000.

Chief executive Alastair Lyons will not receive a bonus. "I think it is important that I am not seen to benefit from arranging the company's sale," he said. Mr Lyons said the extra payments were designed to reward the loyalty and hard work of the company's staff. "It's an incentive to try to keep all our staff and people together."

About 12 major companies are thought to have expressed an interest in NPI. A shortlist is likely to be drawn up in the next few weeks, with the directors hoping to announce the successful suitor by the end of the year and completion of the sale by April. Analysts expect NPI to fetch between pounds 1.2bn and pounds 1.5bn. Divided between 600,000 policyholders that amounts to at least pounds 2,000 each, in comparison with directors' bonuses of pounds 30,000. Mr Lyons took the helm of the Tunbridge Wells- based mutual life assurer and pension group 16 months ago after a pounds 1.2m pay-off from his former employer, Abbey National. He had previously been chief executive of the National & Provincial building society and had masterminded its sale to Abbey National and eventual de-mutualisation.

On his arrival at NPI, he nailed his colours to the mast of continuing mutualisation and gave several presentations arguing that policyholders were better off with mutual companies, whose profits were shared among members rather than shareholders.

But last week he said he was convinced that NPI needed the additional resources of a larger plc if it was to compete effectively in the UK retirement market. He denied suggestions that the sale had been forced by poor results and a potential liquidity problem caused by falling equity values.

Last week, a report by Cazalet Financial Consulting, a leading authority on the life sector, said NPI had been affected by the falling markets. It said that if NPI's assets were reviewed on current performance it might not show any free assets above the minimum requirement for solvency.

Mr Lyons disputed the findings. "If anyone is trying to argue that we have not got the funds that is absolutely not correct," he said. The eventual windfall bonus payments to policyholders would depend on the eventual outcome of the sale. "I still believe, all things being equal, that a mutual company will make better use of resources. But in this case we felt it was not in the best interests of the policyholders to remain as a mutual. This is a long-term decision based on three to five years ahead and not a reaction to current market trends."

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