March Update
Dear Policyholder,
The next stage in the possible reattribution has taken place with Clare's response to Norwich Union's January offer going to the company this afternoon. At this stage we cannot give details of the response. You may recall that Norwich Union did not give details of its offer when it announced that it was seeking our response by the end of February, subsequently changed to early March.
As you will see from the media release below, the response is very detailed and that is a reflection of the complexity of the task. That complexity is shown in even greater detail if you look at the provisional list of chapters for the final report given at the end of the release. That report will be made available as the process continues and details are given to policyholders.
I should also say that we are all very aware how frustrating for you it must be that details are so sparse and we are able only to tell you about the stages we are going through. Everyone involved is very keen to get to the point where you get the details and can see what has been done on your behalf by this office. We are doing all we can to get there as soon as possible.
And to finish this note, I have also included some recent media articles which may be of interest to you.
Yours faithfully,
Jonathan Haslam
director of communications
Media Release 12 March 2008
Spottiswoode to respond today to Norwich Union reattribution offer - an offer should be put to policyholders Good progress towards final report
Clare Spottiswoode, policyholder advocate in the possible Norwich Union reattribution, will today give her formal response to the company's recent offer of a payment to buy out policyholders' rights and interests in the inherited estates in two of its with-profits funds.
She commented:
'My formal response to Norwich Union's offer will be presented to the company today. It will comprise a 19 page letter and some 70 pages of supporting material which address all the points which were in Norwich Union's two page offer letter. It will comment, among other things, on the fairness of the overall offer, on the basis of the advice I would give to policyholders about whether they should accept the offer, on the fairness of the way Norwich Union plans to allocate the offer between policyholders and on the way it intends to treat any policyholders who might decide not to accept an offer.
'The response will also be made available also to the Financial Services Authority (FSA), which has been kept constantly up to date with progress since February 2006 when I was first nominated as policyholder advocate. As part of its consideration the FSA will form a view of whether the overall proposals are fair to the firm's policyholders once negotiations are complete.
'The next stage will be for the company to consider my response in detail and form its own conclusions about how to proceed.
'My position is very clear - I want an offer to be made to policyholders so that they can make their own decision.
'I am pleased to say that good progress is being made towards my final full report (See Notes below) and we are today issuing provisional details of the chapter headings so that its scope can be seen clearly. Altogether it will consist of more than 40 separate chapters underpinned by detailed appendices. We are also well advanced in preparing the information brochure that will go to policyholders.'
End of quote
Notes
Details of the policyholder advocate's final report into the proposed reattribution
The provisional chapter headings are as follows:
- PA Report Provisional Chapter Headings
- Chapter Headings
- Foreword and Executive Summary
PART 1 - Introduction
- The Reattribution: Process and Roles
- Objectives and Approach of the Policyholder Advocate
- Information: Access and Due Diligence
PART 2 - Background
- Regulatory Background
- Norwich Union: the Reattribution in Context
- Background to With-Profits Policies and CGNU Life and CULAC life insurance companies
- The History of Inherited Estates and Reattributions in With-Profits Funds
- Capital Requirements for Life Insurers and Risk Appetite
- Investment Policy, Smoothing and Bonus Policy
- Approaches to Modelling: Stress Testing, Scenario Analysis and Stochastic Modelling
- Market Review of With-Profits Insurance Industry
- Economics, Governance and Regulation
- Equity between Policyholders and Shareholders
- Equity between Policyholder Groups
- International Experience
PART 3 - The Norwich Union Reattribution Scheme
- Norwich Union's Scheme
- Actuarial Function Holder's Report
- With-Profits Actuary's Report
- Independent Expert's Report
PART 4 - The Policyholder Advocate's Review
A. Context
- Eligibility for reattribution
- Eligibility for distribution
- Consultation with Policyholders and Other Interested Parties
- Contributions to the Inherited Estates
B. Fund Management in the Future
- Policyholders' and Shareholders' Rights and Interests in the Inherited Estates & Uses of the Inherited Estates
- FSA guidance letters and responses
- Policyholders' Future Security and Risk Appetite
- Investment Policy, Smoothing and Bonus Policy
- Tax Considerations
- Governance Principles and Practices of Financial Management (PPFM) and Consumer Friendly PPFM
- The Position of Non-Electing Policyholders
C. Policyholders' Incentive Payments: Numerical Analysis
- a) Key Inputs
- Approaches to Modelling for the Purposes of Calculating the PIP
- Size of the Inherited Estates
- Surplus for Distribution
- The Financial Considerations underpinning the Reattribution
- Norwich Union's new business forecasts
- b) The Policyholder Advocate's Evaluation of Norwich Union Offer
- The Norwich Union Offer
- Evaluation of the Aggregate Offer
- Analysis of the benefits forgone by current policyholders
- Review of the method for allocating the aggregate offer between policyholders
- Expected future distributions to non-electing policyholders, with and without a reattribution
- Formulating advice to individual and groups of policyholders
- Conclusions
PART 5 - Conclusions
- Overall Conclusions and Recommendations
Notes to editors
- 1) High resolution images are available from www.vismedia.co.uk Telephone 0207 613 2555
- 2) Clare Spottiswoode was appointed policyholder advocate on 21 November 2006.
- 3) Clare Spottiswoode's response to the Norwich Union offer is in respect of the remaining inherited estates in the CGNU Life and Commercial Union Life Assurance Company Limited (CULAC)
- 4) The Treasury Select Committee announced on 26 February 2008 that it was to hold hearings into the inherited estates. Written evidence has been requested by 14 April 2008. Dates of hearings have not yet been announced.
- 5) The FSA review of the fairness of the deal will focus on the fairness of the offer being made to policyholders vis-á-vis the overall value being received by the shareholder.
- 6) More information is available on http://www.policyholderadvocate.org
- 7) Norwich Union announced a special pre-reattribution distribution (90 per cent to policyholders and 10 per cent to shareholders) of £2.3 billion on 5 February 2008. Payments to policyholders will be made in three stages for those eligible on 1 January 2008, 2009 and 2010.
End of release
Financial Times
http://www.ft.com/cms/s/0/070a0aa0-ec56-11dc-86be-0000779fd2ac.html?nclick_c
The Observer
http://www.guardian.co.uk/business/2008/mar/09/insurance
This is money Follow link, go to 'columnists', scroll down and click on 'Tony Hazell'
http://www.dailymail.co.uk/pages/dmstandard/frame.html?in_bottom=http://www.thisismoney.co.uk/news
BBC website
http://news.bbc.co.uk/1/hi/business/7291694.stm
Money Marketing
http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=160925&d=340&h=341&f=342
IFAonline
http://www.ifaonline.co.uk/public/showPage.html?page=742460
Reuters (the headline has got a little ahead of the story)
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSL1252680420080312
Forbes
http://www.forbes.com/markets/feeds/afx/2008/03/12/afx4761917.html
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