CGU 'will top up' mortgage policy shortfalls

CGU, the life and general insurer, yesterday moved to reassure 700,000 customers who have taken out mortgage endowment policies with a promise to make up any shortfall when the policies mature.

CGU, the life and general insurer, yesterday moved to reassure 700,000 customers who have taken out mortgage endowment policies with a promise to make up any shortfall when the policies mature.

The pledge follows concern about the values of endowment policies being insufficient to pay off a mortgage on maturity. Most companies no longer offer endowment policies as a result, although CGU still sells them.

The company said its life with-profit mortgage endowments would be topped up at maturity if there were any shortfall between the claim value and the mortgage originally targeted. However, the promise depends on CGU making future investment earnings averaging 6 per cent a year net. The company has made net investment earnings of about 16 per cent in recent years, said Graham Berville, the company's development director.

Mike Urmston, CGU life finance director, said: "No CGU with-profit mortgage endowment has ever failed to meet its target, and I can reassure customers today that we expect this to continue... There is no current need for [policy holders] to make a further provision."

However, in announcing its annual bonuses and maturity payouts, CGU did declare lower interim bonus rates on life policies and pensions. Its compound interim bonus rate for with-profit life policies was 5.75 per cent for 2000 until further notice, down from 6.25 in 1999. That on pensions was 6.75 per cent, compared with 7.25 last year.

The company also said it was developing a property database to simplify the home selection and moving process.