Article date: 8 August 2001
Norwich Union has reduced the final bonus on its with profitslife and pension policies in the light of the continuing poorperformance of the UK stock market. The FTSE 100 index has fallenby around 14% during 2001 with the prospect of further volatilityand uncertainty.
Reductions in final bonus rates have been made to bring payoutsmore closely in line with the investment performance of the withprofits fund. However payouts to policyholders continue to comparewell with other types of investment. All policies continue toreceive bonuses in excess of our investment earnings.
The reduction in returns – as a result of lowering thefinal bonus - will mean total payouts on maturing policies being upto 5% lower than those previously paid. There are no changes to theregular bonus rate.
The underlying financial strength of its with profits fund hasenabled Norwich Union to smooth the performance of its with profitpolicies resulting in a lower reduction than actual investmentconditions would dictate.
Commenting on the changes, Chief Actuary Mike Urmston said:“The current state of the stock market has affected allinvestment related products – not just with profits. Thechanges we have implemented in relation to the final bonus are partof the prudent management of with profits funds and are as a directconsequence of investment markets.
"Customers with policies maturing in 2001 will still enjoy goodrates of return on their investment - for example 25 year withprofits mortgage endowments are on average producing a return of12% a year compared to inflation of 4.6% over the same period."
Notes to Editors
- CGU plc and Norwich Union plc merged on 30 May 2000 to createCGNU plc, the UK’s largest insurance group and one of thetop-five insurers in Europe with substantial positions in othermarkets around the world, making it the world’s sixthlargest insurer based on gross worldwide premiums.
- CGNU’s principal business activities are long-termsavings, fund management and general insurance, with worldwidepremium income and retail investment sales from ongoing businessof over £27 billion and assets under management of more than £200billion.
- From October 2000, the combined life and pensions, generalinsurance and retail fund management businesses in the UK operateunder the Norwich Union brand, while the institutional investmentbusiness operates under the Morley Fund Management brand.
- CGNU’s news releases are available on the internet onthis site
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