THE 150,000 Irish policyholders with the Norwich Union life assurance group are in line for a free share bonanza of up to £50 million when Norwich converts into a public company next year.

While Norwich Union has not revealed precise details of its flotation, sources close to the company have indicated that with profits and pensions policyholders - those with investment policies - will receive free shares worth about £500, while non-profits policyholders - those with fixed term and mortgage protection policies - will receive about £200 worth of free shares. All of Norwich Union's employees, including the 530 in Ireland, will qualify for free shares.

A spokesman for Norwich Union in Ireland said that about one-third of the 150,000 qualifying policyholders would have with-profit policies and would

`thus qualify for the higher allocation of free shares, while the balance would have non-profit policies which qualify for the lower allocation.

The inclusion of non-profit policyholders in the free share allocation is something of a surprise, as it had been thought that

Norwich would restrict free shares to its with-profits policyholders. Norwich general manager Mr Vincent Sheridan said, however, that the company's articles of association gave membership in both policyholder groups.

Mr Sheridan declined to speculate on the likely value of the free shares, but based on the breakdown of with-profit and nonprofit policyholders, between £45 million and £50 million free Norwich Union shares will be issued to Irish policyholders in the second half of next year.

In addition, the with-profit policyholders will receive a further allocation of free shares linked to the size of their investment with the Norwich Union, while all qualifying policyholders will be given preferential rights to buy shares at the time of the flotation. In effect, this means that policyholders who want to buy additional shares will go the top of the queue when it comes to allocations of paid-for shares.

Mr Sheridan said that any investors who purchase policies with-profits or non-profit - after yesterday's cut-off date would not qualify for free shares.

Current policyholders whose policies mature between now and the flotation date will also not qualify for free shares. This latter group will, however, receive a special bonus of 3 per cent of the value of their matured policies to partly compensate for the forgone free shares.

The flotation of Norwich Union is a long and complicated process, which began with yesterday's formal announcement and which will culminate in the flotation, probably in the second half of next year. The next stage will be the announcement next spring of how the free shares will be allocated, followed quickly by an extraordinary general meeting of the three million policyholders who currently own the company.

Once the extraordinary general meeting gives its approval then Norwich can go to the High Court in London for approval of the conversion to a plc. When the legal hurdles are overcome there is no remaining obstacle to the flotation, which will value the company at more than £4 billion sterling.

When Norwich Union does come to the stock market next year, the company will have more Irish shareholders than any other public company. The 150,000 Irish shareholders compare to the 134,000 shareholders in Irish Permanent, although Irish Permanent had more than 160,000 shareholders at the time of its flotation in 1994.