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Advocate leads way in Aviva £3bn deal

Norwich Union’s parent company Aviva is to set the ball rolling on the reattribution of its inherited estate but policyholders will have to wait at least 18 months before they are likely to get any windfall.

Former Ofgas head Clare Spottiswoode is acting as policyholder advocate.

Aviva said last week that no formal decision had been taken to proceed with a reattribution of the surplus in its with-profits funds but Spottiswoode says it is almost certain to go ahead and would be “embarrassing” to Aviva if it did not.

Her role is to negotiate a fair deal for policyholders and she is certain that policyholders will be interested in the deal because “it is quite a large amount of money”.

The inherited estate of Aviva’s two main with-profits funds, CGNU Life and Culac, is estimated at £4.2bn but £1.2bn will need to be kept back to meet capital margins which will leave around £3bn potentially to be split between the funds’ total Timeline FOR aviva

REATTRIBUTION PROCESS

November 2006

Independent policyholder advocate Clare Spottiswoode is appointedDecember 2006

Mailings to potentially eligible policyholdersFebruary 2007

Spottiswoode’s consultation with policyholders endsSpring 2007

Spottiswoode starts negotiations with AvivaAutumn 2007

Policyholders informed of any offer and invited to take partWinter 2007

High Court scheme hearingsEarly 2008 onwards

Payments made to eligible policyholders who choose to accept the reattribution offer. Fund transfer takes placeof 1.1 million policyholders and Aviva’s shareholders.

As part of the deal, Norwich Union proposes to merge the two funds to cut costs on administration.

Spottiswoode will start a formal consultation process with policyholders immediately, which will run until the end of February and be supported by roadshows to outline the options to policyholders.

NU chief executive Mark Hodges says: “We will only proceed with a reattribution if it is clear that any negotiated outcome is fair to our policyholders and shareholders. It is important to stress that customers will be completely free to choose whether or not to participate in any offer.”

Spottiswoode says: “I expect that whatever we do will create a precedent that other firms will follow. It is important to know if the FSA is putting pressure on Prudential to give policyholders a share of its with-profits fund because that may change our numbers.”

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