Claire Spottiswoode delivered on months of marathon negotiations yesterday after 1m Norwich Union policyholders will be offered pay outs of around £1000 each.
Aviva, the group’s parent company, is offering cash to qualifying customers in two of its with-profits funds, in exchange for buying out their right for any future pay-outs or redistribution of money.
The deal between insurance giant Norwich Union and policyholder advocate Spottiswoode, who was hired two years ago to represent policyholder interests, finally solved the puzzle of how to distribute the so called ‘orphan assets’- billions of pounds in surplus funds held by life insurers.
Under the arrangements about 700,000 people will receive between £400 and £1,000 and another 220,000 will net between £1,000 and £3,500.
The pay out scheme, worth £1bn, will allow Aviva to write a lot of new business in the future.
Investment bank Lehman Brothers said in a note yesterday: “It will give Aviva access to the £2.1bn estate. This can be used to write new business in the UK and as a result, £800m of extra cash is expected to be paid from Aviva UK life to the group over the next 5 years.”
Policyholders, who do not have to accept the windfall, will receive the money next summer.
It comes just five months after Norwich Union announced a similar special distribution deal where £2.1bn of its inherited estate- where surplus cash has built up in its with profits funds- was handed out to policyholders and shareholders.
This deal benefits the vast majority of policyholders. Those who might not wish to take the cash would be customers whose policy is years away from expiring; those who might benefit from any future pay outs.
Spottiswoode said yesterday she had “challenged many aspects of the rules of the with-profits industry”. Yesterday Aviva posted a 12 per cent rise in first half operating profit to £1.72m and its shares rose 6.5 per cent to 497p.