The company's owner, Royal Bank of Scotland, is to pay a further pounds 20m to buy Mr Wood out of his lucrative contract and will pay him only pounds 350,000 a year in future.
Mr Wood's soaring bonus put an unwelcome spotlight on the discreet Edinburgh-based banking group, chaired by Lord Younger of Prestwick, the Tory former Secretary of State for Defence, who said the 'high profile' payment was one of the reasons for the buyout. The bonus this year is nearly 150 times Lord Younger's last reported salary of pounds 126,000, for 1992.
The contract was originally agreed in exchange for Mr Wood's 25 per cent shareholding in Direct Line. The company's policy of slashing costs and selling directly to customers instead of through brokers proved a roaring success and this year it became Britain's biggest insurer of private motorists.
Mr Wood, who has called himself boring, yesterday described himself as a workaholic - apart from a passion for tennis - and said: 'I have very standard house insurance and I'm not into possessions - jewellery and all that stuff.' He is married, with five daughters, lives in the London commuter belt and is wary of his sudden fame.
Since the computer specialist turned insurance salesman moved into the multi-million bracket with pounds 6m earnings in 1992 - after pounds 1.6m in 1991 - he has bought a 'modest property abroad' and moved house in the UK, though he still has his old house.
But the bulk of his money has gone into the stock market and his pension. Mr Wood said: 'I'm just a prudent investor.'
Royal Bank is paying pounds 7m of the buyout to Mr Wood's pension fund. He has agreed to buy and keep for at least five years pounds 10m of Royal Bank shares and put a further pounds 1m into a new insurance company, jointly owned with Royal Bank, which will try to pull off the same trick as Direct Line selling insurance to high- risk drivers and householders.
Mr Wood said he would probably lose financially from the buyout. Next year's bonus would have been at least pounds 8m.
If Direct Line's move into the household insurance market was as successful as he expected, 'I believe that in one or two years I would have picked up another really big bonus of the order of this year's'
He said that if he had known of the publicity he would get because of his bonus he would have stayed with his original 25 per cent shareholding. 'The only thing I regret is the media attention.'
High risk venture, page 31
View from City Road, page 32
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