Aviva has confirmed that it has completed the reattribution of the inherited estate in its CGNU and CULAC with profits funds. The total value of the inherited estate for the reattribution is £1.25 billion, based on the average calculated estate values at the end of June, July and August 2009**.
The completion of the reattribution deal follows the High Court’s approval of the offer in September, and final approval by the Aviva plc and Aviva UK Life boards.
Just over 87% of eligible policyholders voted during the election process, with 96% of them choosing to accept the offer. The voting period has now closed and those customers who have voted “yes” do not need to do anything further to receive their payment.
Customer payouts slightly higher than indicated
Approximately 90% of payments to eligible customers will be between £214 and £1,230. The final payments will now be slightly higher than the indicative offer included in policyholders’ individual voting packs, because the final value of the inherited estate is higher than minimum level of £1.2 billion on which the offer was based.
Customers will automatically start receiving their payments from early November with most receiving them by the end of the year. In total, £470 million will be paid from shareholder funds to policyholders. The vast majority of the payments will be tax-free.
The reattribution offer is in addition to the special bonus of £2.1 billion for policyholders announced at the beginning of 2008. The first two instalments of the special bonus have already been added to policies. The last special bonus payment will be added in 2010. Through the special bonus and reattribution payments, Aviva will have allocated the equivalent of around 70% of the value of the inherited estates to customers.
All policyholders, regardless of whether they have accepted the offer, will continue to receive their normal bonuses and the reattribution will have no impact on the security or performance of their investment.
Anticipated shareholder benefit updated
As previously stated, from a shareholder perspective the reattribution is expected to enhance the cash flow profile of Aviva’s UK life business and will bring significant financial benefits. In return for the £470 million shareholders are expected to gain access to around £650 million of additional capital over five years, to fund new, non profit business. It is anticipated that the reattribution will also create a one-off profit of around £180 million on an MCEV basis and £80 million on an IFRS basis. Ongoing annual earnings are expected to be around £30 million on an MCEV basis and around £45 million under IFRS.
A fair deal for policyholders and shareholders
Mark Hodges, chief executive, Aviva UK Life, said: “Our objective has always been to create a reattribution that was fair to both shareholders and policyholders, and that’s exactly what we’ve achieved. I’m particularly pleased that we’ve been able to conclude the process in time for most customers to receive their payments by Christmas.
“We’ve always made sure that customers had a choice of whether they wished to accept the offer, depending on what was best for their personal circumstances, and we believe this offer is good for 99% of policyholders so it’s great to see that so many customers have voted ‘yes’.”
* Of the £470 million paid out from shareholder funds, £450 million will be in cash and the remaining £20 million will be added to policies in the form of bonuses.
** Based on the average values of £1.163 billion in June, £1.251 billion in July and £1.336 billion in August, plus interest.
