CGU Life builds confidence for consumers

Article date: 27 January 2000

Leading financial services provider CGU Life today announced itsannual bonuses and maturity payouts on conventional with-profitlife and pensions policies.

We are using our bonus statement announcement to reveal ourinnovative six per cent endowment promise.

Our six per cent promise means terminal bonuses on CGU Lifewith-profit mortgage endowments will be topped up at maturity,where there is any shortfall between the claim value and themortgage originally targeted – provided future investmentearnings average six per cent a year net.

CGU’s declaration reveals the majority of their endowmentpayouts being held to the same levels as 1999, good news for CGUpolicyholders who will be reassured against a backdrop of fallingpayouts from some other companies.

Commenting on today’s announcement, CGU Life financedirector Mike Urmston said: "CGU has seen another good year ofinvestment returns – some of our customers whose 25-year termwith-profit mortgage policies will mature during 2000, are seeingexcellent returns in the order of 13 per cent or more.Today’s announcement shows the benefits of long-termwith-profit investment strategies, which deliver significant valueto customers.

"No CGU with-profit mortgage endowment has ever failed to meetits target and I can reassure customers today that we expect thisto continue. Provided future investment earnings don’t fallbelow 6% per annum net we intend, if necessary, to ‘topup’ policies at maturity to meet any possible shortfallthrough an enhanced terminal bonus payment.1

"CGU firmly believes its customers should enter into policieswith a clear understanding of how they work. Our policyholders willreceive a factsheet about their CGU with-profit policies with theirbonus statements this year, in line with CGU’s commitment tobetter disclosure."

A typical CGU Life with-profit mortgage endowment taken out 25years ago by a male aged 30 next birthday for just over £30 amonth, to cover a mortgage of £15,000, reached a maturity payout ofover £67,000 on 1 January 2000 – equivalent to an annualisedrate of return of 13.5 per cent (or around 8 per cent afterinflation) and £52,000 in excess of the original mortgage targetamount – more than three times as much.

"Against the backdrop of wide-spread worry about the potentialperformance of some endowment policies, I want our customers toknow that they have made the right decision by investing with CGU.We will be writing to customers shortly to inform them of our‘top-up’ decision and reassuring them that there is nocurrent need for them to make any further provision. Only companieswith the financial strength of CGU can offer such assurance."

Full details of the 2000 declaration are provided in thedocumentation CGU Life year 2000 Annual Bonus Statement.Copies are available from the CGU Life Press Office who can becontacted via the numbers given below.

Notes to editors:

  1. CGU’s intention relies upon it achieving sufficientinvestment returns on its free reserves. CGU’s free reservesare large and the company is confident that future investmentearnings will be sufficient to provide any necessary support.

    At the end of 1999 CGU’s free reserves were in excess of£5 billion following an investment of around 19 per cent gross.Previous year’s investment returns on were as follows.

    YEAR

    1995

    1996

    1997

    1998

    Investment return

    17.7%

    11.5%

    20.8%

    18.6%

  2. Support will apply to all with-profit mortgageendowment policies issued by CGU’s life companies (that isCGU Life, Commercial Union and Provident Mutual) satisfying ourcriteria, namely ‘top-up’ payments will only be madewhere premiums have been maintained throughout the policy term andwhere the policy has not been materially altered or sold throughthe second hand endowment market.
  3. The merger of the Commercial Union plc and General Accidentplc to form the CGU Group was announced at the end of February1998 and the legal merger of the two companies took place in June1998. CGU is the UK’s largest broadly-based insurer.
  4. CGU Life has 4 million policyholders. Of these, around 600,000hold endowment policies. CGU Life has funds under management ofabout £30 billion.
  5. Independent Financial Adviser (IFAs) and their clients accountfor nearly 70 per cent of the new business; partnerships with 20regional building societies account for 20 per cent; and salesdirect to the public, primarily through our direct sales forceamount to 10 per cent.
  6. In 1999, the CGU Financial Services sales force won thecoveted British Insurance Association "Life" Assurance Sales Forceof the Year’. Andrew Duncan, National Sales Manager, waspresented with the trophy on behalf of CGUFS Direct Sales at aceremony held in the Royal Albert Hall in July 1999.
  7. CGU Life has agreed with its Asset Managers clear investmentobjectives and has put in place well defined processes for themanagement of the life and pensions funds. The investmentteams’ approach is risk adverse and aims to consistentlyout-perform relevant indices over the shorter-term in line withspecific targets, leading to out-performance over time.
  8. Full details of the year 2000 CGU Annual Bonus announcementare available from CGU Life press office in the form of a separatedocument The CGU Life Year 2000 Annual BonusStatement.
  9. CGU will issue a factsheet explaining the with-profitprinciples to policyholders along with their bonus statement inmid February, a copy of which is attached for reference.

CGU Life press office contacts
PR MangerFran Elliott Direct Line: 01904-45-2172
PR Officer Sue Lancaster Direct Line: 01904-45-2083
PR Assistant Wendy Vanamburgh Direct Line: 01904-45-2659
Out of hours press contact: Fran Elliott, mobile: 0780-167-9506

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