CGU Life builds confidence for consumers

Leading financial services provider CGU Life today announced its annual bonuses and maturity payouts on conventional with-profit life and pensions policies.

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

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

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

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

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

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

A typical CGU Life with-profit mortgage endowment taken out 25 years ago by a male aged 30 next birthday for just over Ł30 a month, to cover a mortgage of Ł15,000, reached a maturity payout of over Ł67,000 on 1 January 2000 – equivalent to an annualised rate of return of 13.5 per cent (or around 8 per cent after inflation) and Ł52,000 in excess of the original mortgage target amount – more than three times as much.

"Against the backdrop of wide-spread worry about the potential performance of some endowment policies, I want our customers to know 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 no current need for them to make any further provision. Only companies with the financial strength of CGU can offer such assurance."

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

Notes to editors:

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

   At the end of 1999 CGU’s free reserves were in excess of Ł5 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 mortgage endowment policies issued by CGU’s life companies (that is CGU Life, Commercial Union and Provident Mutual) satisfying our criteria, namely ‘top-up’ payments will only be made where premiums have been maintained throughout the policy term and where the policy has not been materially altered or sold through the second hand endowment market.
3. The merger of the Commercial Union plc and General Accident plc to form the CGU Group was announced at the end of February 1998 and the legal merger of the two companies took place in June 1998. CGU is the UK’s largest broadly-based insurer.
4. CGU Life has 4 million policyholders. Of these, around 600,000 hold endowment policies. CGU Life has funds under management of about Ł30 billion.
5. Independent Financial Adviser (IFAs) and their clients account for nearly 70 per cent of the new business; partnerships with 20 regional building societies account for 20 per cent; and sales direct to the public, primarily through our direct sales force amount to 10 per cent.
6. In 1999, the CGU Financial Services sales force won the coveted British Insurance Association "Life" Assurance Sales Force of the Year’. Andrew Duncan, National Sales Manager, was presented with the trophy on behalf of CGUFS Direct Sales at a ceremony held in the Royal Albert Hall in July 1999.
7. CGU Life has agreed with its Asset Managers clear investment objectives and has put in place well defined processes for the management of the life and pensions funds. The investment teams’ approach is risk adverse and aims to consistently out-perform relevant indices over the shorter-term in line with specific targets, leading to out-performance over time.
8. Full details of the year 2000 CGU Annual Bonus announcement are available from CGU Life press office in the form of a separate document The CGU Life Year 2000 Annual Bonus Statement.
9. CGU will issue a factsheet explaining the with-profit principles to policyholders along with their bonus statement in mid February, a copy of which is attached for reference.

CGU Life press office contacts
PR Manger Fran 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