Aviva announces £1 billion reattribution offer

Aviva announces £1 billion reattribution offer

Cash payments of at least £400 and average of £1,000 for eligible policyholders
Offer fair to policyholders and shareholders and fully endorsed by Policyholder Advocate
Individual choice for policyholders - payments likely summer 2009
Payment is in addition to previously announced special distribution
Aviva today announces that it intends to offer a cash payment averaging £1,000 to one million policyholders in two of Norwich Union Life’s with-profits funds.

In a process known as reattribution, policyholders in the CGNU Life and CULAC funds will be able to choose whether to receive a cash payment now in return for giving up their right to receive any possible future payouts from the funds’ inherited estates* - or to stay as they are, in the knowledge that sizeable distributions are unlikely, especially in the next few years.

Mark Hodges, chief executive of Norwich Union Life, said: “This is a great offer. We believe that it represents good value for 99% of policyholders and almost all of the cash payments will be tax-free. Most importantly, we recognise that policyholders have a choice and everyone will be entirely free to make their own decision on whether or not to accept the offer.”

The cash payments will not depend upon a majority vote. All policyholders, regardless of whether they accept the cash offer, will continue to receive their normal bonuses and the payment will have no impact on the security or performance of their investment.

The payouts will come from Aviva’s shareholder funds, not the inherited estate or the with-profits funds. This means that the inherited estate will remain in the with-profits funds, until it’s no longer needed, to protect policyholders by making sure that the funds stay financially strong.

Later this year policyholders who are entitled to the payout will receive a letter from Norwich Union telling them the value of their individual payout. Each payment will depend on the size of the policy and how long it has left to run. Around 700,000 people can expect to receive between £400 and £1,000 if they accept the offer. A further 220,000 will receive between £1,000 and £3,500.

Earlier this year Aviva announced that £2.1 billion of the inherited estate would be given to policyholders in the form of a special distribution. The combination of today’s offer and the special distribution means that an equivalent of around 70% of the value of the inherited estate would be released to policyholders, if all policyholders voted to accept their payout.

The offer has been negotiated with an independent Policyholder Advocate, Clare Spottiswoode, who represents the interests of policyholders. She said: “I’m delighted that we have a deal that is in the interests of the vast majority of policyholders. There is a substantial amount of cash available for them and this offer also provides a fair return to shareholders. This deal is good in all respects.”

Mark Hodges added: “We’re able to make this offer without compromising the excellent strength of our with-profits funds. Having led the industry on this issue and after more than 18 months of complex negotiations, we’re very pleased to have agreed an offer that is fair to both our policyholders and our shareholders. Our policyholders can be confident that Clare and her team have acted with tremendous conviction and have represented their interests with great tenacity.”

The offer will only be made following a review by the Financial Services Authority (FSA), and will be subject to board and High Court approvals. The FSA has already carried out an initial review, and has concluded that the offer is fair and should be put to policyholders.

Eligible policyholders do not need to take any action now and will receive a voting pack by the end of the year explaining the process in more detail. Further information is available from: https://www.life.norwich-union.com/fundtransfer/announce/home.do or the Policyholder Advocate’s website: www.policyholderadvocate.org.

Further analysis of the financial effects of the reattribution for Aviva and its shareholders are available in today’s interim results announcement, which is available on the group’s website at www.aviva.com.

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