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Norwich Union adding to MVR

Norwich Union has increased its market value reduction and extended it to pension products dating back to 1989 as a result of continued falling stockmarkets.

The move comes as the insurer is being criticised for parent company CGNU using £2bn of future profits in its 2001 returns.

The company argues that this strategy is better than having to sell equities in a falling market.

NU says the higher MVR came into force last Friday and will apply to a wider spread of policies going back as far as 1989 for pension policies due to the FTSE&#39s recent poor performance.

Chief actuary Mike Urmston says: “We believe it is more sensible to use implicit items rather than sell equities in a falling market.

“Financial reinsurance and future profits are essentially the same thing but using future profits does not cost anything. The MVR is only trying to reflect the market moving sharply downwards.”

Cazalet Consulting principal Ned Cazalet says: “Are these future profits that are capable of being earned? The companies should present clear and transparent figures – these are long-term institutions. Future profits were used by Equitable and Enron.”

Informed Choice managing director Nick Bamford says: “What do I say if the clients ask me about the press reports? If the markets recover, will Norwich Union react as speedily in removing MVRs?”

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