Aviva announces restructured reattribution offer

Aviva announces restructured reattribution offer

Flexible offer to reflect value of inherited estate
Minimum payment of £200
90% of eligible policyholders to receive between £200 and £1,150
Individual choice whether to accept cash - not a majority vote
Financial strength of funds not affected
Aviva plc (”Aviva”) has agreed with the policyholder advocate Clare Spottiswoode that a restructured reattribution offer can be put to policyholders.

Mark Hodges, chief executive of Aviva’s UK Life business, said: “This is a good deal for our customers and shareholders. We’ve worked hard with Clare and her team to come up with a flexible offer which accommodates the exceptional market conditions but still represents good value for the vast majority of our eligible customers.

“We believe that giving customers the opportunity to benefit from a reattribution is the right thing to do and each one of them will have the opportunity to choose whether to accept our offer.

“This is in addition to the special bonus of £2.1 billion allocated to policyholders at the beginning of 2008, of which two thirds has already been added to policies.”

Clare Spottiswoode, the policyholder advocate, who represents the interests of policyholders said: “This is good news for policyholders after the turmoil in the financial markets that affected the plan announced last year. This offer is also good for the great majority of policyholders under the FSA’s current rules.

“The Aviva proposal shows that together we have found an imaginative way of keeping the reattribution in place which includes the opportunity for policyholders to benefit from any increase in the estates. Policyholders who decide not to accept the offer and keep their rights to future special distributions are also protected.”

The company will write to the one million policyholders in two of its with-profits funds with details of the revised reattribution offer.

Flexible payout to reflect value of inherited estate
The new, flexible offer will accommodate future changes in the value of the inherited estate in the lead-up to the reattribution later this year. This means that the payout to customers will change to reflect rises or falls in the value of the inherited estate.

The final payments to customers will be based on the average value of the inherited estate over the three-month period from June to August. This calculation will be made before a High Court hearing to approve the deal, planned for September 2009.

90% of policyholders to receive between £200 and £1,150
The most recent valuation of the inherited estate was £1.4 billion (at 31 March 2009). If the estate were to remain at that level, around 90% of the one million eligible policyholders would receive a cash payment of between £244 and £1,150, depending on the value and maturity date of their policy. The remaining 10% of policyholders will receive higher payments.

Eligible policyholders will receive a letter giving an indication of their individual offer based on an inherited estate value of £1.2 billion, because this is the lowest valuation at which Aviva would proceed with the reattribution. If the value of the estate is higher at the effective date of the reattribution then policyholders will automatically receive a bigger payment.

Assuming an estate value of £1.2 billion, around 90% of policyholders could expect to receive a cash payment of between £200 and £1,000, with the remaining 10% receiving more.

The majority of the cash payouts will be tax-free and Aviva expects to start making payments to policyholders in November 2009.

Individual choice and strength of funds unaffected
Each customer will be able to choose whether they wish to accept the cash payment - it will not be a majority vote.

If policyholders choose not to accept the payment, they will continue to receive their normal bonuses and it 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 continue to provide support to the business until it is no longer needed, to protect customers by making sure that the funds stay financially strong.

Next steps
Eligible policyholders will receive a voting pack in June explaining the offer and the process in more detail, and need take no action until then. In the meantime, the reattribution timetable is available at: www.norwichunion.co.uk/fundtransfer or the policyholder advocate’s website: www.policyholderadvocate.org/.

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