Norwich Union reveals bonus

Norwich Union has announced a £2.3 billion "special bonus" for policyholders and shareholders.

Around 1.1 million with-profits policyholders in the pension and life insurance company's CGNU Life and CULAC with-profits funds will receive a one-off bonus of £2.1 billion, while another £230 million will be delivered to shareholders.

"The bonus will be used to enhance policy values by around ten per cent in total in three installments," the company said in a statement today.

The surplus cash distribution from Norwich Union, a division of Aviva insurance group, will give a typical policyholder with a £30,000 bond an additional windfall of £4,500.

"This is fantastic news for qualifying policyholders. These funds are very strong, with good equity backing ratios and highly competitive returns," said Norwich chief executive Mark Hodges.

"As a result of the funds' financial strength, performance, and the changes made to our investment strategy we can release around half of the inherited estate – 90 per cent to our policyholders and ten per cent to shareholders."

Government regulations require surplus asset distributions to be divided 90 per cent to policyholders and ten per cent to shareholders.

Many with-profit funds accrue large inherited estates as a safety against slow investment years, which then are distributed to beneficiaries.

The leading European insurance provider also said it had improved the reattribution offer given to Policyholder Advocate Clare Spottiswood for a third time, with the hope of reaching an agreement on how best to divide the surplus.

Such distributions have often proven a messy ordeal, involving intense negotiations between parties.

Aviva's share price has slimmed down 2.05 per cent to £5.97 during early trading in London today.