04 February 2009
Aviva is cancelling a £1bn payout promised to
policyholders - blaming the falling value of its investments. Aviva
said it would now see if it could "restructure" the offer.
Last year a million policyholders in two of Norwich Union's
with-profit funds were offered payouts that would have averaged
£1,000. But the company said that the falling share and
property prices had eroded the surplus in its funds, making the
offer "no longer fair".
Aviva said it was now looking at how it could revise the payout
offer, which had been made to investors in two of Norwich Union's
oldest funds - the CGNU Life and CULAC with-profits funds.
The policyholders' payout was announced last July following long
negotiations with the policyholders' advocate, Clare Spottiswoode
who agreed with Aviva's reasons for cancelling the current offer
but was confident a new one could be devised.
Ms Spottiswoode said: "The company has opened discussions with
us about how to keep the prospect of a reattribution offer alive.
We are considering how we might be able to restructure the offer to
move in line with the size of the estate at a point close to the
time payments could be made".
The policyholders in the affected funds are mainly people with
endowment policies, pension policies and with-profits bonds. About
700,000 people were due to be offered between £400 and
£1,000 and another 220,000 would have been offered a payout
between £1,000 and £3,500 if they accepted.
The payout would have come from shareholders' funds, in order to
buy-out policyholders' rights to any future claim on the surplus in
the two with-profits funds - known as "inherited estate".
The surplus had been built up over decades because Norwich Union
had put aside more money than it needed as a financial cushion in
the funds.
Aviva said: "We realise that this will be disappointing for our
eligible policyholders but it does reflect the nature of the
current exceptional investment market conditions. We expect to be
able to update policyholders in the next few months."
