Outlook: NPI

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UNTIL RECENTLY, was a mutual life insurer with a mission. "We are committed to remaining mutual because we believe it is the right constitution for an organisation specialising in providing financial security in retirement," said Alastair Lyons, its chief executive.

For years, suggestions that might have to seek a bigger partner were dismissed out of hand. might have less financial muscle than its rivals, it might have flagging sales, it might even have poor investment returns - but it would stay mutual.

Then quite suddenly Mr Lyons switched tack. The market for pensions and life assurance was demanding "greater financial capacity than we can realistically create on our own as a mutual", he said two weeks ago. After 163 years, the life office was throwing in the towel and looking for a buyer.

Anyone's entitled to change their mind. Unfortunately, by waiting until now to do so Mr Lyons has served the interests of his 600,000 policy holders poorly. Given the state of the stock market, he can hardly expect a good price. The fall in the stock market also means is negotiating from a position of extreme financial weakness.

There is a triple effect here. Tumbling equity markets mean its assets are worth less. A fall in gilt yields also means its liabilities will cost more. And it might have to reserve tens of millions of pounds to cover policy guarantees made in the 1970s and 1980s.

The upshot is that members may not be able to look forward to the windfalls normally associated with demutualisation. is expected to fetch between pounds 1.2bn and pounds 1.5bn. Divided between 600,000 policyholders that comes to at least pounds 2,000 each. Will they get that money? Probably not. Whoever buys will have to inject a big chunk of the asking price, perhaps running into hundreds of millions of pounds, to replenish 's reserves. As a result, policyholders may find themselves getting much less than they hoped.

Just how much the delay in selling up has cost 's policyholders is hard to say. The financial workings of a life office are shrouded in actuarial mystery. The extent to which the life fund will have to be bolstered depends on the purchaser's own financial strength, as well as its judgement. Whatever the outcome, this looks like more of a forced than a voluntary demutualisation. Other smaller mutuals must surely follow