Aviva shames its rivals with extra payout

Jul 31, 2008 (Daily Mail - McClatchy-Tribune News Service via COMTEX) -- NUNPF | Quote | Chart | News | PowerRating -- Jul. 31--Pressure is growing on insurers to return up to GBP30bn in unclaimed assets after Aviva agreed to hand back a further GBP1bn to policyholders.

Norwich Union's owner Aviva (up 39p at 506p) is already giving back GBP2.1bn to policyholders from its GBP5bn inherited estate into two funds -- CGNU Life and the CULAC fund.

Yesterday, as it announced its first-half results, it said that another GBP1bn will be handed out in cash payments.

One million policyholders will get an average of GBP1,000 depending on the size of their policy and the length it has left to run.

The news is likely to cause a backlash among policyholders of Prudential, which is sitting on an even bigger pot of so-called orphan assets, which are typically built up from dead policyholders whose relatives don't make claims on their policies.

The Pru went through the same process as Aviva of employing an independent expert to look into redistributing its GBP8.7bn inherited estate. But it controversially decided to hold onto the cash instead.

A spokesman for the Pru said: "No two insurance company funds are the same. We have many more policyholders and more than 300 different types of policy. We made a decision that it was not in the benefit of our policyholders or shareholders to redistribute the money."

Legal & General has GBP1bn of what it calls a "with-profits surplus." It said it has no plans to hand back this cash to policyholders as it uses the money as working capital.

Aviva said it won't take the GBP1bn directly from its inherited estate, but shareholder funds will be used to make the payments next summer. In return shareholders will get the rights to a GBP1bn slice of the inherited estate which will stay untouched.

At present the fund has lost GBP550m through stock market turbulence which calls into question the timing of the payouts.

Aviva saw first-half profits rise by 12pc as it moved into new markets of the US and China, where it is now the second-biggest insurer for premium income.

It revealed that it has GBP642m of outstanding loans from the Dawnay Day Group, which went bust this month, but that this money was secured on properties with diversified tenants.

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