More NU shares for members

Norwich Union, the UK mutual insurer set to float on the Stock Exchange on Monday, said yesterday it would be clawing back pounds 400m of shares from institutions and selling them to its 3 million members. The company's move follows strong demand from members, who had originally been allocated pounds 800m worth of shares, with the rest going to institutions.

Norwich Union's clawback means the public offer to institutions, non- members and the company's own staff, originally expected to be more than pounds 1.5bn, will be scaled down to a maximum of pounds 1.2bn.

Members of Norwich Union, including with-profits and unit-linked policyholders, will receive almost 1.3 billion free shares from the flotation. They are also entitled to apply for between pounds 400 and pounds 100,000 worth of shares each at a 25p discount.

The company said recently that if demand were heavy, excessively high applications would be scaled down. A Norwich Union spokeswoman said yesterday that details of the number of applicants and allocation rates would not be disclosed until Sunday.

Norwich Union's conversion to a quoted company on Monday comes 18 months after it admitted it was considering a stock market flotation. The float reflects a reorganisation in the insurance sector in the past two years which has seen the merger of Royal Insurance and Sun Alliance, the acquisition of Scottish Amicable by Prudential and a wave of smaller takeovers and mergers.

Heavy demand for the shares comes as analysts said their value was likely to be significantly above the range of 240p to 290p suggested as the flotation price by Norwich Union.

A report by Trevor May and Andrew Pitt, insurance analysts at Salomon Brothers, suggested the company's share price was more likely to be in the range of 320p and 340p.

"It is possible that the post-flotation price could offshoot. The valuation does not look excessively stretched up to a price of 380p," the report said. If so, the discount to members would be worth about 6 per cent a share.

Salomon's top estimates would value Norwich Union at more than pounds 6.5bn, more than 20 per cent of the share value of the UK life assurance sector.

The share prices of Legal & General and Prudential have run ahead strongly in recent months, partly due to the anticipated stock shortage, given that some 75 to 80 per cent of Norwich Union shares will be held by members.