Aviva Norwich Union Reattribution Offer Finally Made but Halved in Value
Aviva / Norwich Union policyholders finally get a reattribution offer but at £500m it’s just half of what it was last year. Aviva say this is a flexible payout and will change to reflect rises or falls in the value of the inherited estate. It claims 90 percent of eligible policyholders will receive between £200 and £1,150 while the remaining policyholders will receive higher payments. Payouts are expected to start in November 2009.
It will be up to the individual policyholder to decide if they want to accept the payment. Should they decline they will still get normal bonuses and Aviva say it will have no impact on the security or performance of their investment. The payment figures given for 90 percent of eligible policyholders are based on a valuation of the inherited estate at £1.4 billion. However eligible policyholders will receive a letter giving an indication of their individual offer based on an inherited estate value of £1.2 billion, since this is the lowest valuation at which Aviva would proceed with the reattribution. Should the value of the estate fall below this they would be unable to proceed. If the inherited estate has a higher value then payments will be larger.
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”. Policyholder Advocate, Clare Spottiswoode, is also happy with the deal saying ‘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”. However Which? chief executive believes that many policyholders will be disappointed with the reduced offer and said the FSA had failed to protect them.
Policyholders will be getting voting packs in June and payments are expected to start in November. By voting to accept payment, rights to further distributions from the surplus are given up. Final payments will be based on the average value of the inherited estate over the three-month period from June to August. The amount and length of time an investment has to run will also determine the size of the payment.
While many policyholders may be dissapointed it’s likely that shareholders will be happier. Mark Hodges felt the offer enhances Aviva’s reputation and is “good timing in terms of our brand change”. He said it’s a good deal for shareholders since they are buying assets at “very depressed market values”. Additionaly he predicts a “very quick payback on the investment” and “significant and real upside potential for the shareholder”. He aslo explained the upside potentail is greater now than when the offer was announced in July. Another main benefit to the company and its shareholders is that the reattribution offer immunises them from future regulatory changes. Aviva is expecting an 80 percent take-up rate.
