Provident Mutual mortgage endowment update

Article date: 2 March 2005

Innovative offer for policyholders to earn CGNU with-profitfund returns

Norwich Union has reviewed the investmentstrategy of the Provident Mutual with-profit fund and has reducedthe fund's holdings in shares and property from 24% to 10%. Thischange is necessary to ensure that the substantial underlyingguarantees on the fund are better matched against certainty ofinvestment returns. As a result of this move, Norwich Union haschanged the mid-range projection rate for Provident Mutual mortgageendowment policies from 6% to 4%.

Norwich Union is offering Provident Mutualmortgage endowment policyholders the innovative option to takeadvantage of future investment returns from the stronger CGNUwith-profit fund. This fund has a considerably higher equitybacking ratio of 67% and therefore offers the potential of higherinvestment returns in the longer term. In 2003 the CGNU fund earned12.1% (before tax) and, in 2004, 11.5% (before tax). The mid-rangeprojection rate for the CGNU fund for mortgage endowments is6%.

Provident Mutual policyholders who select thespecial option will retain the benefits and any guarantees whichthey have on their individual policies.

Provident Mutual mortgage endowmentpolicyholders should take no action until they receive theirmailing during March 2005. Policyholders must respond to themailing by 30 June 2005 in order to take up this option. NorwichUnion is urging policyholders to seek financial advice prior tomaking any decision.

Mike Urmston, chief actuary of Norwich Union,said: "We have reduced the fund's holdings in shares and propertyto ensure that the substantial underlying guarantees on the fundare better matched against certainty of investment returns.

"We have also found an innovative way to offerProvident Mutual mortgage endowment policyholders the opportunityto potentially improve their longer-term returns and benefit fromthe investment return of the stronger CGNU with-profit fund. Thisoption firmly underlines our commitment to treat customers fairlyand look for new ways to help our policyholders. We are urgingcustomers to take advice and consider the switch as one of the waysto look at the opportunity to mitigate any endowmentshortfall."

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Notes to editors

  • Norwich Union has 40,000 Provident Mutual with-profit mortgageendowment policyholders. The letters to policyholders will, forthe first time, include time bar details in relation to mortgageendowment complaints. The return on the PM fund in 2004 was 7.6%before tax and in 2003 it was 7.1% before tax.
  • Norwich Union is the UK's largest insurer. It is a leadingprovider of life, pensions and investment products and one ofthe leading IFA providers. IFAs provide around 70% of thecompany's long-term savings business.
  • Norwich Union has strategic alliances with building societiesand other leading UK brand names including Tesco PersonalFinance and The Royal Bank of Scotland Group. NorwichUnion√Ę€™s news releases and a selection of imagesare available from Aviva's internet press centre at www.aviva.com/media.

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