Making Your Choice

Policyholder Update 18 September 2009

Dear Policyholder,

At 2pm today Mr Justice Norris informed the Court that he agreed to the Aviva fund transfer and reattribution going ahead.

You may recall that in yesterday's update I mentioned a technical point about Portugal and the judge had been asked to decide if the Financial Services Authority (FSA) should issue a certificate that would mean that Aviva could apply the reattribution to policyholders resident there. Mr Justice Norris said that he had decided that, notwithstanding the concern of the Portuguese regulator, the FSA should issue the certificate.

The Judge said that he would give his written judgement on all the issues raised during the hearing 'at the start of term', which I understand means the beginning of October when the full High Court sessions resume. We will post details on the website and send you a notification.

As I mentioned yesterday, we will providing a detailed account of proceedings and will notify you when it is put on the site.

In the meantime please see below the media release from the policyholder advocate, Clare Spottiswoode, about the outcome of the case.

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Media Release 18 September 2009

Aviva reattribution: 'Good for policyholders under current FSA rules – but rules favour shareholders' says Spottiswoode

Welcoming the High Court decision to approve Aviva's reattribution of inherited estates, the policyholder advocate Clare Spottiswoode said:

"I am delighted that policyholders who voted to accept the cash offer from Aviva can now look forward to receiving their money before the end of the year.

"The reattribution, together with the special distribution payment announced in 2008 means that policyholders will be getting about 70 per cent of the inherited estates. This is more than double the percentage that policyholders were offered in the AXA reattribution of 2000.

"It is also important that policyholders who did not vote to give up their rights to any future special distributions from the inherited estates in exchange for Aviva's cash offer will have their position protected. Nevertheless, I have argued vigorously for even stricter governance for such policyholders. As this has not been agreed there is now an even greater responsibility on Sir Nicholas Montagu and his with-profits committee to exercise every possible power they have on behalf of policyholders.

"The reattribution has been conducted under current FSA rules (which I sought to have changed). I do not believe that those rules properly protect the interests of policyholders and I intend to make the deficiencies and their remedies known to the FSA with-profits review that is to take place."

The policyholder advocate also wishes to put on record that she does not agree with the FSA statement to the Court that she indicated to the FSA that she had "obtained the best deal available in the circumstances' (see Notes to editors 1).

Ms Spottiswoode said:

"Even within the current FSA rules, the ability to improve the offer from Aviva lies with the FSA not with me. I have not had the power to get 'the best deal' or to judge whether more might be available if a stronger approach were taken by the FSA – only the FSA can do that. As the Treasury Committee pointed out, 'it is up to the FSA to ensure that a fair price is offered, not just an adequate price. They are two quite different things' (see Notes to editors 2).

"I am delighted we have done as well as we have in persuading the FSA to give us some negotiating support. However, that support fell short of what I had requested.

"As an example, the FSA said that they had no objection to the inclusion of additional governance measures 'assuming that they are agreed with Aviva' (see Notes to editors 3). This statement takes no account of the fact that without FSA help we cannot get improvements in governance or anything else."

Notes to editors

• The Second Report of the Financial Services Authority (High Court reference 13755 of 2009), paragraph 71.1, page 18
• Treasury Committee 'Inherited Estates Twelfth Report of Session 2007-8, 19 June 2008, page 50, paragraph 10.
• The Second Report of the Financial Services Authority (High Court reference 13755 of 2009), paragraph 101, page 29, 'In the circumstances, the FSA has no objection in principle to the inclusion of such additional measures in the Scheme (assuming they are agreed with Aviva)'.

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Yours faithfully

Jonathan Haslam

director of communications