As a result of investment market conditions over recent months and the continuing uncertainty, Norwich Union has introduced market value reductions (MVRs) on unitised with-profit policies with effect from today.
As a result of investment market conditions over recent months and the continuing uncertainty, Norwich Union has introduced market value reductions (MVRs) on unitised with-profit policies with effect from today.
John Lister, chief actuary at Norwich Union, said: "Since the beginning of the year we have seen equity markets, commercial property and corporate bonds fall significantly in value. As a result we have reviewed the situation and have decided to introduce MVRs for policyholders who have unitised with-profits policies and who wish to make a partial or total withdrawal from the CGNU, NULAP and CULAC funds. These are on average between 13% and 22% across different years of business.
"MVRs are a mechanism to ensure that those policyholders leaving or wishing to take money out of the fund do not take more than their fair share of the fund at the expense of those policyholders who remain. This measure reflects our prudent management of the fund in extreme market conditions ensuring that all of our with-profit customers are treated fairly and to ultimately protect the funds in times of market turbulence. The decision has been made in consultation with the majority independent With-Profits Committee, ensuring that the interests of all policyholders are represented."
| Year units purchased | Average MVR rate - 21/10/2008 |
| 2001 | 13% |
| 2008 | 13% |
| 2002 | 15% |
| 1996-1999, 2004-2006 | 16% |
| 1995 | 17% |
| 1988, 2007 | 18% |
| 1990,1994, 2003 | 19% |
| 1989, 2000 | 20% |
| 1991, 1993 | 21% |
| 1992 | 22% |
-ends-
Press office contacts:
Louise Soulsby - 01904 452617
David Gwyer - 07800 693187
Notes to editors:
Market value reductions generally do not apply to:
- A death claim
- When an endowment matures
- MVR-free guarantee on certain policy anniversaries
How an MVR works
Suppose there are three investors in a With-Profits Fund, who each pay in £10,000, so the total With-Profits Fund is worth £30,000. Stock markets fall by 10% so that the total With-Profits Fund drops to £27,000. If one investor then withdraws his original £10,000, without introducing an MVR, this would leave only £17,000 in the fund to be shared between the remaining two investors. The investor who encashed his policy early would take more than his fair share of the fund.
Independent ratings confirm our financial strength
The strength and consistency of these ratings show that Norwich Union is in an excellent position:
Norwich Union
| Agency | Rating | Meaning | Outlook | When |
| Standard & Poors (S&P) | AA | ‘Very Strong' | Negative | On 30/7/08 |
| Moodys | Aa3 | ‘Excellent' | Stable | On 15/08/08 |
Special bonus payments
In February, Norwich Union announced three special bonus payments for eligible customers in the CGNU and CULAC funds. The first of these special bonuses is being included in maturity and surrender values being paid. The special bonus is possible because we've changed the way we manage our with-profits funds to reduce investment risk. These special bonuses will continue to be paid on top of today's announcement.
Reattribution
Norwich Union recently announced a £1 billion reattribution offer for approximately one million customers in the CGNU and CULAC funds.
About Norwich Union
Norwich Union is the UK's largest insurer. It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK. Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.