An Australian insurer's decision to abandon its mutual status could benefit many British teachers by up to Pounds 5,000, says David Budge. More than 50,000 British teachers stand to receive windfalls of between Pounds 285 and Pounds 5,000 each if Colonial, the Australian life insurance company, secures a stock market listing early next year.
Colonial, official financial services provider to the National Association of Schoolmasters Union of Women Teachers, is believed to have up to 60,000 teacher customers, most of whom should receive substantial pay-outs on the back of their insurance or pension policies. Only unit trust and personal equity plan customers will receive nothing if Colonial sheds its mutual status. Mutuality is the arrangement whereby an insurer or building society is owned by its customers.
Under the terms of the proposed flotation, Colonial customers will receive 225 shares worth a total of Pounds 285 for every qualifying policy. They will also be allocated 225 share options. But 90 per cent of Colonial customers will receive more than the minimum allocation, and about half are expected to qualify for shares worth Pounds 1,300 because they hold several policies. About 7,000 of Colonial's UK policy-holders will receive around Pounds 5,000 as the share allocation will be partly determined by the size of the policies and the length of time they have been running.
Norwich Union is the only other mutual insurer in Britain with plans to float on the stock market. But Colonial is confident that its policy-holders will vote in favour of the deal at a meeting at Wembley Arena on November 11.
Colonial, which has been discussing the flotation plans since 1993, has argued that mutual status is restrictive, particularly for a company that wants to raise additional capital for expansion.
Eamonn O'Kane, deputy general secretary of the NASUWT, admits he had mixed feelings about Colonial's decision. "I suppose I am really torn between Mammon and principle," he says. "As a union we are in favour of the principle of mutuality. After all, trade unions in some respects spring from the same source as the building societies and insurance companies. We were established to help people in times of need and difficulty.
"But we have to accept that, in today's financial climate, mutuality may no longer be possible. I am glad, however, that many of our members stand to benefit."
The shares will be issued to anyone who held a Colonial policy on August 2, 1996, that was accepted on or before April 30, 1995