Final payouts on some of Norwich Union's conventional with-profits policies are to be reduced by up ...
Final payouts on some of Norwich Union's conventional with-profits policies are to be reduced by up to 5%, effective from 1 July.
In the latest review of its with-profits policies and rates, the group has also decided that in light of improving market conditions, it will lower its market value reduction (MVR) rate from 11% to 9%, effective immediately. However, it will leave regular bonus rates on conventional and unitised with-profits policies and final bonuses on unitised with-profits policies rates unchanged.
Norwich Union chief actuary, Mike Urmston, said: 'The market recovery has worked through in the form of a lower level of MVR. However, on conventional policies that have matured in 2003, we have been paying out around 118% of what has been earned (asset share) so some further adjustment to payouts is necessary for overall fairness.
'On longer-term conventional policies, we still need to see payouts more in line with asset shares as the higher investment returns of the past are gradually replaced by the lower level of investment returns we are now seeing. However, if we see a further recovery in the markets, we can start to build up unitised final bonus values again.'
The group is forecasting the average return on its with-profit funds for the first half of 2003 will be around 7% before tax. The return on the funds during 2002 was -8.5% and -9.5% in 2001.
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