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Norwich Union slashes policy payouts by 10%

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Date: Thursday 04 Sep 2008

LONDON (ShareCast) - Final bonus rates on more than 2.4 million of Norwich Union’s with-profits policies have been cut due to poor investment conditions since the beginning of the year.

The UK's largest insurer, owned by Aviva, said payouts on unitised policies have been cut by 7.5% and terminal bonuses will drop by up to 10%

Chief actuary John Lister blamed the move on a significant fall in equity markets and drop in value of commercial property and corporate bonds since the start of 2008.

"We are taking responsible action to reflect the market movements over the past nine months,” he said. “We need to ensure that those policyholders who leave the fund do not take more than their fair share at the expense of those customers who remain in the fund.”

The overall return on its core CGNU with-profits fund was -7.3% before tax as at 30 June 2008 versus a positive return of 5.4% at the end of last year.

NU’s changes mean a 25-year £50 a month mortgage endowment maturing 1 September 2008 will pay £42,885, less than the £46,829 if the policy had matured in January 2007.

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