Customers of Norwich Union get £1bn offer

Insurance giant Aviva today offered one million Norwich Union customers an average cash windfall of £1000 each.

The firm, created in 2000 with the merger of Norwich Union and CGU, announced plans to pay £1 billion in cash to policyholders of Norwich Union life funds.

It came as Aviva delivered a 12% rise in profits to £1.72 billion despite the value of its investments falling by around £1 billion.

The deal follows two years of negotiations with policyholder advocate Clare Spottiswoode on a deal to carve up Aviva's £5 billion inherited estate, the surplus on the funds.

Last month rival Prudential abandoned plans to do something similar with its £8.7 billion surplus and today's deal was seen as good news for Aviva chief executive Andrew Moss, who has been under pressure from a poor share price performance.

In a process known as reattribution, policyholders in the CGNU Life and CULAC funds will be able to choose whether to get cash now in return for giving up their right to receive future payouts from the inherited estate - or stay as they are.

Aviva today warned customers that further sizeable distributions were unlikely "espcially in the next few years".

Mark Hodges, Norwich Union chief executive, said: "This is a great offer. We believe that it represents good value for 99% of policyholders and almost all of the cash payments will be tax-free."

Each payment will depend on the size of the policy and how long it has left to run. Around 700,000 customers can expect between £400 and £1000 and a further 220,000 will get between £1000 and £3500.

In February, Aviva pledged a special bonus of £2.1 billion to shareholders, and the combination with today's offer means the equivalent of 70% of the value of the inherited estate will go to policyholders and 30% to shareholders.