Presentation to investors and analysts on CGNU s UK life business

Article date: 8 March 2002

Norwich Union Life, CGNU plc’s UK life business, will holda presentation today for investors and analysts. Norwich Union Lifeis the leading UK life insurer with a market share of over 11% andnew business premiums in excess £8 billion in 2001. In total, thebusiness accounted for 36% of the Group’s ongoing net writtenpremiums in 2001.

Philip Scott, Chief Executive Norwich Union Life, commented:"Our multi-channel, multi-product strategy and our proven abilitiesin change management have helped us create the market leader in theUK life market. These, together with our brand and financialstrength, leave us well positioned to continue to lead the UKmarket through the significant changes ahead.

“Our target is for a market share of some 15% by the endof 2005 (2001: over 11%). Our relationships and product breadthwill see us benefit from the de-polarisation expected.

“Sales through our joint venture with The Royal Bank ofScotland Group (RBSG) continue to gain momentum following a strongstart to 2002. We have agreed in principle to extend the RBSG jointventure to include Collective Investments from early 2003.

“With an Inherited Estate estimated at £5 billion and astrong flow of in-force profits, we have the financial and capitalstrength to support this growth, and generate significant value forshareholders.”

Slides from the presentation will be available on theGroup’s website at 11am (GMT) on 8 March.In addition, a webcast will be available later the sameafternoon.


Investors/analysts Steve Riley, Investor RelationsDirector +44 (0) 20 7662 8115

Media Hayley Stimpson, Head of External Affairs +44 (0)20 7662 7544 Alex Child-Villiers, Financial Dynamics +44 (0) 207269 7107

Notes to Editors:

  • CGNU is the world's seventh-largest insurance group and thelargest insurer in the UK. It has worldwide premium and investmentsales from ongoing business of more than £28 billion, and over£200 billion in assets under management at 31 December 2001.
  • The most recent financial reports are available on thisinternet site

Key points from the presentation:-

The UK Market – leadership through change

  • Regulatory change and industry reviews will result insignificant change in the UK life industry
  • £27 billion annual savings gap identified in the UK
  • As the overall market expands, our target is a market share of15% by the end of 2005

Strategy for growth

  • We have leading market positions in most major life andpensions product areas including bonds, pensions and individualannuities
  • We have established the leading position in the emergingstakeholder market, with a market share of 20%. The majority ofthe annual savings gap of £27 billion is in retirementfunding
  • We will continue to develop these market positions through thepower of our distribution
  • Norwich Union has the IFA relationships in place to benefitfrom the de-polarisation that is expected later in 2002. We arethe lead provider to each of the top-six IFA companies in the UKand, we believe these companies are well placed to be the winnersin a de-polarised world
  • We are the market leader in the provision and utilisation ofe-commerce to IFAs through internal and external portals;e-enablement of distribution will be key in closing the savingsgap as it drives down the cost of distribution in the market
  • Sales through the joint venture with Royal Bank of ScotlandGroup (RBSG) totalled £115 million for January and February 2002,(full year 2001: £480 million), with the newly launchedwith-profit bond attracting £50 million in its first fourweeks
  • At these volumes the joint venture has positive new businessadded value
  • We expect sales to continue to gain momentum
  • We have agreed in principle to extend the joint venture toinclude Collective Investments from early 2003. A furtherannouncement on this will follow in due course
  • Our refocused direct sales force has almost tripled itsproductivity in the last two years to over £182,000 annual premiumequivalent (APE) per head and we will look to increase thisfurther as our new, market leading point of sale technology(“RIO”), is rolled-out
  • This technology will also be used through our arrangementswith our building society partners and the sales teams in theNatWest and Royal Bank of Scotland branches
  • De-polarisation will also have a significant impact in thenon-IFA market as multi-ties develop. We are well positioned tolead through this change by building on the significantpartnerships we have in place
  • Our extensive product range will allow us to exploit‘product gap-filling’ opportunities withdistributors
  • The post-tax internal rate of return on total UK life andpensions new business in 2001 was 17% and, 12% for non- profitbusiness

Wealth Management

  • Our Wealth Management business is being integrated into our UKlife business
  • We have developed a robust e-business platform for use in boththe life and general insurance business in the UK
  • A suite of financial planning tools, a share dealing serviceand a supermarket of funds were launched in 2001
  • Personal loans were launched early in 2002, and furtherbanking products backed by RBSG are scheduled for launch later in2002
  • In consolidating these operations we will reduce ongoingannual costs by £10 million per annum

Value through operational delivery

  • An integrated customer service platform is at the core of ourbusiness model
  • Continuing investment of some £75 million per annum is plannedto enhance our customer service capability, develop new productpropositions and increase productivity. Investments are assessedagainst the Group’s target of 10% net real return, as aminimum
  • By 2004 our target is to reduce acquisition costs (excludingcommission) from 25% of APE to 19%
  • By 2004 our target is to reduce maintenance costs by over 20%from 0.16% of funds under management1 to 0.12%
  • Productivity improvements will be driven by our scaleableinfrastructure, continuing investment in process improvement andthe full emergence of merger savings
  • We are committed to extending e-processing throughout ourbusiness and expect 14% of new business to be transacted throughIFA portals and direct e-commerce channels in 2002

Financial strength

  • The estimated Inherited Estate of £5 billion, 13% of totalwith-profit asset shares, demonstrates the financial strength ofour with-profit business. There are no current plans to seek areattribution of the Inherited Estate
  • On the statutory basis the average Free AssetRatio2 across our three major funds is estimated at 8%after allowing for minimum statutory solvency of approximately 4%and after satisfying the resilience test requirements
  • The capital requirements of “non-profit” newbusiness (new business strain) is funded from the release ofprofit from “non-profit” in-force business. We areconfident that we have the capital strength to support our growthplans for new business from Norwich Union Life resources

1 Funds under management – the equity componenthas been normalised to FTSE All-Share at 31 December 1999
2 Free Asset Ratio is measured as (total assets lesstotal liabilities less minimum solvency margin) / total assets andincludes implicit items of approximately 3.5%

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