Aviva reaches reattribution deal with Spottiswoode; £1bn more for policyholders

Norwich Union has finally reached a deal on the reattribution of its inherited estate, with an average offer of £1,000 for one million of its with-profits policyholders.

Policyholders in two of Norwich Union with profits funds - CGNU Life and CULAC - have the option of recieving a cash payment in return for giving up their right to receive any possible future payouts from the funds' inherited estates. Alternatively they can stay where they are.

On top of the £2.1 billion special payment Norwich Union pledged earlier this year, today's announcement means the insurer is paying out around 70% of its £5 billion inherited estate.

'We believe that it represents good value for 99% of policyholders and almost all of the cash payments will be tax free,' said Mark Hodges, chief executive of Norwich Union Life. 'Most importantly, we recognise that policyholders have a choice and everyone will be entirely free to make their own decision whether or not they accept the offer.'

The amount each individual could receive will depend on the amount already accrued in their with profit fund.

Aviva, which owns Norwich Union in the UK, said that around 700,000 people can expect to receive between £400 and £1,000 if they accept the offer, while 220,000 will receive between £1,000 and £3,500.

Policyholder advocate Claire Spottiswoode, who was hired to represent the interests of policyholders, said: 'There is a substantial amount of cash available for them and this offer providers a fair return to shareholders.'

Payout will not depend on a majority vote from policyholders but will require FSA approval. In an initial review the FSA said that the offer was fair and should be put to shareholders.

The insurer announced the news alongside a 12% rise in operating profits to £1.79 billion. Aviva's share price rose by 6.27% after announcing its results alongside the reattribution deal to 497p.