Aviva makes its next move on inherited estates

Policyholders of two Aviva with-profits funds could receive an additional payout in 2008 if policyholders, life office officials and independent adjudicators agree to access the assets inside its inherited estates.

A statement issued today by Aviva - parent group of Norwich Union - says it intends to send letters to policyholders with assets in the CGNU Life and Commercial Union Life Assurance Company (CULAC) with-profits funds highlighting the possibility of additional payouts in return for their right to claim future payouts from the inherited estate funds - thought to be worth £4bn - along with information about the role of the Policyholder Advocate.

This latest move by Norwich Union comes at the same time as the Financial Services Authority is said to have asked similar life insurance companies to consider whether its surplus with-profits capital or inherited assets should be redistributed to policyholders.

Aviva announced earlier this year it had nominated Claire Spottishwoode as its Policyholder Advocate, a newly-created position which would be charged with talking to interested parties representing policyholders to help assess whether it would be in the best interests of policyholders to allow Aviva to access the inherited estate funds which have acquired over time, and negotiate with the firm as to how much of that money policyholders ought to be entitled to.

Spottishwoode has since agreed with Aviva the terms under which she and her team will take up the role and now intends to talk to consumers, IFAs and any other interested parties about the potential payouts, and the impact it might have on policyholders.

IFAs are being invited by letter to a special briefing to be given in London next month, says Spottiswoode, and a series of roadshows will be delivered around the UK in January and February to help IFAs understand her role in the potential reattribution of Norwich Union’s inherited assets while additional guidance will be sought through telephone interviews and online polls.

“My job is to negotiate with Norwich Union the size of payment to eligible policyholders in return for giving up their rights to any possible future distributions from the inherited estates,” says Spottiswoode.

“I am setting out to get the best possible deal for policyholders. They are being asked to give up rights and they need to be properly compensated.

“I want to reach as many policyholders as possible and I am doing this through roadshows as well as telephone and online surveys. IFAs are a very important channel of information to investors and I want to ensure they are kept fully briefed on my role and developments,” she adds.

Policyholders could get a form of windfall payout should Spottiswoode recommend they vote to open access to the inherited estates, and individual policyholders subsequently agree.

That said, the process is very different to a demutualisation vote and every individual policyholder determines whether or not they receive a payout.

Even if Spottiswoode recommends it is in the interests of policyholders to give up their right to future payouts from the inherited estate of the two specified funds, a policyholder could still reject the plan and vote instead to remain within the fund while others would receive payment in return for their loss of right to the assets.

The Policyholder Advocate’s initial consultation closes in early 2007, and negotiations could then begin in spring 2007 with Aviva about any potential payout and the need for a policyholder vote. Should the process then go to a vote and through the High Court for approval of the funds transfer, it is possible policyholders might receive a payout in 2008 if they vote for reattribution of assets into Norwich Union Life.

No decision has been taken at this stage to proceed with a reattribution of assets, but should all parties agree, the funds will actually be moved from the CGU and CULAC funds to a single Norwich Union Life company and “used to support the with-profits funds” but could be distributed as “incentive payments to eligible with-profits policyholders”, says a spokesman for Norwich Union.

Dates and locations for the afternoon roadshows with the Policyholder Advocate and her team are:

• January 10 – Edinburgh
• January 24 – Cardiff
• January 26 – Birmingham
• February 6 – Belfast
• February 8 - Central London

For more information, go to www.policyholderadvocate.org.

If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email julie.henderson@incisivemedia.com.