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Insurance industry

Norwich Union Announces Further Cuts to Mortgage Endowment Policyholders

Strategic Insights

— 1 min read

Over a million longer-term mortgage endowment policyholders with Norwich Union will face another round of cuts to maturity payouts, despite the insurer's with-profits funds generating an 11.5% return in 2004. The company is reducing payouts on policies taken out more than 15 years ago by between 5% and 11.5%, mirroring the level of reductions seen in 2004. Norwich Union has emphasized that the total payout on a £50-a-month, 25-year mortgage endowment is now £52,576, a significant decrease from the £63,819 paid in July 2003.

Key Takeaways:

  • Norwich Union will cut maturity payouts on policies taken out over 15 years ago by 5-11.5%, similar to the reductions seen in 2004.
  • The total payout on a £50-a-month, 25-year mortgage endowment is now £52,576, down from £63,819 in July 2003 and £59,444 in January 2004.
  • Punters who took out 15-year endowment policies saw maturity values fall 5% compared with a year ago, with payouts on a £50-a-month policy now totalling £14,409.
  • Norwich Union declared bonuses totalling £1 billion for its three million with-profit policies in 2004.
  • The company has maintained a commitment to assisting policyholders who faced a shortfall on their mortgage endowments since 2000.
  • Norwich Union's current reserving stands at £1 billion.

Statistics:

  • £1 billion: Total bonuses declared for Norwich Union's three million with-profit policies in 2004.
  • £50 billion: Value of Norwich Union's with-profits funds in 2004.
  • 11.5%: Return on Norwich Union's with-profits funds in 2004.
  • £52,576: Total payout on a £50-a-month, 25-year mortgage endowment in 2005.
  • £63,819: Total payout on a £50-a-month, 25-year mortgage endowment in July 2003.
  • £59,444: Total payout on a £50-a-month, 25-year mortgage endowment in January 2004.
  • 5%: Reduction in maturity values for 15-year endowment policies with payouts now totalling £14,409.

Sources:

  • "Norwich Union cuts mortgage endowments." The Times, 2005.
  • Norwich Union Annual Report, 2004.
  • Financial Services Authority Press Release, 2000.

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