The UK insurer Aviva kicked off its attempt to unlock £4bn of "orphan assets" from its with-profits estate yesterday, appointing the former gas regulator Clare Spottiswoode to represent policyholders' interests, and revealing she will be paid an annual salary of £250,000.
Policyholders will share the bill for Ms Spottiswoode's salary with Aviva if the company, which owns Norwich Union, succeeds in reattributing the assets. However, Aviva will pay for her whole package if the reattribution does not go ahead.
Ms Spottiswoode marked the first official day in her new job by making it clear that she would not shy away from a fight on behalf of policyholders if she could not come to an agreement with Aviva over how the estate should be redistributed.
She said: "There's arguments on both sides, but my job is to get the best deal for policyholders. If Aviva doesn't offer enough, I'll just say to policyholders that they're better off not taking the deal."
The £4bn is made up of surplus assets held within two of Norwich Union's with-profits funds, which were built up from strong stock market returns and which are not directly attributable to any one policyholder.
Although the law states that the funds are owned by the company, 90 per cent of all distributions from NU's with-profits funds are normally made to policyholders, with only 10 per cent going to shareholders. Aviva wants to pay policyholders a small sum to forgo their rights to the surplus assets.
Axa was the last insurance group which tried to unlock its orphan estate, catapulting it into a messy battle with the Consumers' Association, now known as Which?. Policyholders were bought off for a small sum of money. In the six years since, the regulations have been changed, compelling companies to appoint an independent consumer representative before considering a reattribution.
Ms Spottiswoode said: "There's definitely things to be learnt from the Axa case. How could they make a decision when there was effectively no one representing the position of the policyholders, except for the Consumers' Association, which came on board very late, and which had very few resources?"
Which? said yesterday it would be vocal in the debate with Aviva to ensure policyholders received a full 90 per cent of any reallocation.
Aviva director Stephen Mann stressed that a reattribution would only take place if it was in both policyholders' and shareholders' interests.
Ms Spottiswoode will now begin a two-month consultation period with financial advisers and policyholders before analysing the with-profits funds in detail after the group's full-year results are released in March.
A decision on whether the reattribution is to go ahead is not expected to be made before next autumn, with any payments unlikely to be made before 2008. Some 1.1 million policyholders would potentially be eligible for some of the funds.Reuse content