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These were prepared to assist policyholder in coming to their decision about the Aviva offer to buy out policyholders interest in the inherited estates of CGNU and CULAC. The reattribution was approved in the High Court on 19 September 2009 (see ‘News & Articles')

 

42) What are the inherited estates?

The inherited estates – often described by the media as orphan assets - is the expression used to describe surplus assets in a with-profits fund (in other words, assets not required to meet the liabilities of the fund). The inherited estates will often build up over many years. Whilst the inherited estates, like other assets allocated to a with-profits fund, is owned by the company, it cannot be used entirely freely by the company but is used for a variety of things including:

• to provide investment flexibility (for investment in shares, which
offer higher returns than some other investments, but are also higher risk); • to smooth bonuses;
• to provide extra security against unexpected calls on reserves;
• to support the sale of new business;
• to pay shareholder tax;
• to pay for the costs of mis-selling;
• to make strategic investments.

There are basically only two ways in which the shareholders of the company can access the estate for other purposes – both of which have different characteristics – that is, through a distribution or a reattribution of inherited estates.

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