Aviva cuts its with profits windfall payments
Shareholders at a presentation given by Mark Hodges, the chief executive of Aviva, Norwich Union, learnt that they would receive a reduced payout on their with- profits policies. They were expecting a payout of £800 million but this will now be halved. The policy holders that agree to this reduced payout will waive their rights to future payments from the company’s “inherited estate”. The inherited estate part of the fund is the surplus withheld by the insurer in good years.
Aviva had originally agreed to pay an average of £1,000 but this was on the condition that the FTSE 100 did not slip below 5,000 points which it did and it fell to 4,164 points. Aviva said if its policyholders agreed it would pay an average of about £500 but could be anywhere from £200 to £1,150. Falls in the value of its investments has meant its inherited estate has decreased to £1.4 billion from £2.1 billion at the end of March.
Mr Hodges said “This is a good deal for our customers and shareholders. We have worked hard with Clare Spottiswoode (the Policyholde Advocate) and her team to come up with a flexible offer”. He also said that if they chose not to accept the offer but to take their usual bonus, they would see a significant upside to their shares.
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