Video Interview
Clare Spottiswoode talks about the successful conclusion to the negotiations with Norwich Union about its reattribution and the offer to be made to eligible policyholders to buy out their interests in the inherited estates of two of its with-profits funds.
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Interview Transcript
Q: Clare, the negotiation for the reattribution has now finished, so can you assess the results for me?
A: It’s been a triple whammy winner because, not only is it good for the vast majority of policyholders, policyholders also have a choice because there will be some who will prefer to stick with the current position. And the third thing is that those people who do decide to stick will be in as good a position as they are today, so it’s a really good result for everybody.
Q: And can you just tell me the nature of the deal?
A: There is £1bn for around a million policyholders so that’s, on average, £1,000 a policyholder, and we’ve got a minimum payout of £400 which are quite significant sums. So we are really pleased because we think this really does, and will, make a difference to people.
Q: And policyholders have also benefited from a payment earlier in this process.
A: Yes, eligible policyholders are getting a payout of £2.1bn which is their 90 per cent share of the surplus estate, and that is being distributed over the next three years. So that is also a really good deal for policyholders and has come out as part of this process.
Q: And you have said in the past that it would be possible to arrive at an offer that would be worthwhile for lots of policyholders but still one that you would consider fair. So can you explain that, and how do you characterise the deal now?
A: Under the FSA rules it did appear in the early days as if shareholders could really pay very little for getting the whole of this estate and, therefore, get a very high return to shareholders, and that would not be fair to policyholders. But we’ve now got a deal that really is fair across the piece - to shareholders and to policyholders, and that is really good news.
Q: During the reattribution you have challenged a lot of the thinking on with profits and you have pushed the FSA hard on regulation, so has that made a difference?
A: It has and, I think, somewhat to the industry’s surprise because the FSA has tightened up on quite a lot of its rules. There are some things we would still like them to change, but who knows when those rules will change and if they will change. The deal is good under the current rules and we are very pleased with where we are.
Q: And negotiations have also been very demanding on the Norwich Union team, so how have their engaged with you?
A: I think very well. This has been tough, because we have been asking fundamental questions about how with profits are run. This has been a long process, a complex process. It is the first time this has ever been done. So it has certainly been difficult on all the teams because no-one has ever done this before. Inevitably, we are trying things out for the first time and exploring new avenues, but the teams have always been very professional and we are all really delighted we’ve got through to the end and we’ve got something that is good for everybody.
Q: And this has taken a long time to resolve; some would say too long.
A: It has taken a long time. This has been complex. This has been difficult. It is the first time this exercise has ever been done so, naturally, we were all exploring how to do it and getting the numbers right. And it was much more important to get it right than it was to do it faster. And I think the deal we have today shows that it was worthwhile taking that time.
Q: And, as you say, this is a complicated issue, so what will you be doing to explain the deal to policyholders and ensure that they have everything available to make an informed choice?
A: Well what we will not be doing is sending out big wads of legalese. We are sending people a very straightforward brochure. And Norwich Union will send out a very straightforward brochure trying to explain the deal in its simplest terms and only the things that are really relevant for people in making their choice. But behind that will be a lot more work which either we can send to people, they can get information from the call centres and we will have a great deal of information on our website which goes through all the background. So people can choose how much they wish to go through but I hope that, at the end of the day, everybody will have as much as they want.
Q: So what will you be doing in the next few months?
A: There is a lot to be done. First of all, we’ve got to write up all the documents to make sure that it is all documented ready for the courts. We’ve got to make sure that all the legal papers are ready. We, then, have to go to the courts to get approval to put this to policyholders, policyholders have to be given time to think about it and decide whether they want to take up the offer or not and people need to have time to go and get independent financial advice if they would wish to do that. And then, of course, we need to go through the processes to make sure that the money is ready to go and get into people’s bank accounts, or in the post, probably around the middle of next year.