NU announces special bonus

Aviva PLC
05 February 2008


News release


5 February 2008


 NORWICH UNION ANNOUNCES £2.3*^ BILLION SPECIAL BONUS AND PUTS THIRD, IMPROVED
                  REATTRIBUTION OFFER TO POLICYHOLDER ADVOCATE


•  Special bonus announced for 1.1 million with-profits policyholders on 90/10 
   basis

•  £2.1 billion to go to policyholders; £230 million to shareholders

•  Average addition to policy value of around 10% over three instalments

•  Third, improved reattribution offer put to Policyholder Advocate for balance 
   of inherited estate


Special bonus details

Norwich Union Life, a division of Aviva plc ('Aviva'), today announced a
one-off, special bonus worth around £2.1 billion for around 1.1 million
with-profits policyholders in its CGNU Life and CULAC with-profits funds.


This gives a significant bonus per qualifying policyholder. The bonus will be
used to enhance policy values by around 10% in total in three instalments (the
qualifying dates being 1 January 2008, 2009 and 2010). In accordance with the
way the funds are run, this bonus distribution is being split on a 90/10 basis
between policyholders and shareholders with policyholders receiving a total of
£2.1 billion and shareholders £230 million.


This record special bonus addition has been made possible by the strength of the
two with-profits funds and a change to the investment strategy for supporting
policy guarantees.  This has enabled the business to free up a significant part
of the inherited estate for payment to policyholders. This change will not
affect normal policy returns nor will it impact on policyholders' security or
alter the type of investments backing their policies.


The special bonus has been fully endorsed by Norwich Union's With-Profits
Committee, recently restructured to have a majority of independent members under
the chairmanship of Sir Nicholas Montagu. To receive the first special bonus
instalment a policyholder would need to have a qualifying policy invested in the
CGNU Life or CULAC with-profits funds on 1 January 2008. (See Notes to Editors
for full details).


Mark Hodges, chief executive of Norwich Union Life, said: 'This is fantastic
news for qualifying policyholders. These funds are very strong, with good equity
backing ratios# and highly competitive returns. 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% to our policyholders
and 10% to shareholders. This approach has been endorsed by our With-Profits
Committee.


'This special bonus is a major boost to policy values.  We continue to believe
that well-run, open, with-profits funds deliver real value for long term
investors.


'Over the course of the next few weeks we will be writing to qualifying
policyholders to give them more detailed information.'


* Net of tax; All figures rounded.

^ As at 1 January 2008

# Proportion of investments held in shares and property


Improved reattribution offer made to Policyholder Advocate


In addition to today's special bonus announcement, Aviva, Norwich Union Life's
parent company, also confirmed that it has put an improved reattribution offer
to Policyholder Advocate, Clare Spottiswoode to buy out eligible policyholders'
interests in the remainder of the inherited estate.


This is the third offer put to the Policyholder Advocate following nearly a year
of detailed negotiations and having worked with her for two years. The company
has asked the Policyholder Advocate to respond to the offer by the end of the
month so it can aim to pay electing policyholders before the end of the year.


Mark Hodges said:  'We think it is now time to give clarity to policyholders and
shareholders alike. We have made this improved offer to help bring the
negotiation process to a mutually acceptable close.


'I have asked the Policyholder Advocate to respond to our offer by the end of
this month so we can keep the process moving forward and conclude our
negotiations. We are keen to be able to put an offer to our policyholders as
soon as possible so they can decide for themselves whether they want to take it
or not.


'Today's special distribution will give our policyholders around half of the
inherited estate on a 90/10 basis. We want to reattribute the balance. Our
reattribution offer means that eligible policyholders stand to receive a
significant cash windfall if they decide that's what they want.'


                                    - ends -


Enquiries:


Media

Ed Simpkins/Matthew Newton, Finsbury                             [phone]

David Ross, head of media relations, Norwich Union Life          [phone]

Lucy Grubb, senior media relations manager, Norwich Union Life   [phone]

Hayley Stimpson, director of group media relations, Aviva plc    [phone]


Analysts

Charles Barrows, investor relations director                     [phone]


There will be a conference call today for wire services at 10.30am (GMT) on +44
(0)20 7162 0125 (quoting 'Aviva newswires conference call').  This conference
call will be hosted by Mark Hodges, chief executive, UK Life.


Notes to editors:


How the special bonus will work for policyholders:


1.       Qualification for the special bonus

•  All with-profits policyholders of the CGNU Life Assurance Limited (CGNU
   Life) and Commercial Union Life Assurance Company (CULAC) with-profits funds
   whose policies were in force on 1 January 2008, other than those with a
   stakeholder pension or a Provident Mutual policy.

•  Qualification for the special bonus is different to the eligibility for
   the proposed reattribution, which is a one-off event. The special bonus is in
   line with the process of declaring bonuses each year and so qualification
   follows those principles and has had the approval of the With-Profits Committee.

•  New policies issued after 1 January 2008 and premium increases to
   existing policies will not qualify.



2.       Details of the phasing of the bonus payments

•  The bonus will be used to enhance policy values by around 10% in total,
   in three instalments.

•  To qualify for the second and third instalments, policies will need to
   be in force at 1 January 2009 and 1 January 2010 respectively.

•  Each instalment will be of a similar amount related to policy value and
   will take account of the performance of assets backing policyholder benefits
   (asset shares) in the meantime.

•  The instalments are a recognition of on-going loyalty from invested
   policyholders.


3.       Payout amounts

•  The amount a policyholder will receive will vary significantly based on
   the underlying value (asset share) of the policy.

•  A typical with-profit bond would see a total special bonus added of
   £4,500 (based on a £30,000 investment in 2001).

•  A 25 year endowment policy taken out in 1985 with a £50 monthly premium
   would see a total special bonus added of £3,735.


4.       With-Profits Committee and the approval process

•  The distribution and terms of the special bonus have been approved by
   the new With-Profits Committee which has a majority of independent members 
   under the independent chairmanship of Sir Nicholas Montagu.

•  The other independent members of the With-Profits Committee are Harriet
   Maunsel and John Hylands.


5.       Mortgage endowments

•  The special bonus does not change the terms of the mortgage promise.


6.       Norwich Union Life & Pensions (NUL&P) & Provident Mutual policyholders

•  These policyholders (including Provident Mutual policyholders who chose
   to switch investment into the CGNU Life fund) do not qualify for this special
   bonus.

•  Most NUL&P policyholders benefited from free shares at the time of the
   demutualisation in 1997.


What the special bonus means for shareholders

•  Shareholders receive £230 million from this distribution, equivalent to
   10% of the total amount distributed.  Shareholders will receive the funds in
   three tranches of additional capital over the next three years.

•   This is consistent with the normal bonus process for a 90/10 fund.


Change of investment strategy for supporting guarantees

•  The assets backing guarantees have been 'de-risked'. This has meant the
   replacement of shares and property with high investment-grade corporate bonds
   and government securities.  The result is lower overall investment risk for 
   the funds, leading to a reduction in capital required.

•  The reduction in capital required means that there is now an excess
   surplus over and above that which is deemed necessary for the security of the
   CGNU Life and CULAC with-profits funds. It is as a result of this excess 
   surplus that this special bonus is being made.

•  The special bonus reduces the level of surplus to within the risk
   appetite of the funds, at the same time as safeguarding their security.


Difference between a special bonus distribution and reattribution

•  The special bonus is the way that a 90/10 special distribution is made
   to policyholders and shareholders.

•  A reattribution is a different type of transaction to a distribution as
   it is a negotiated deal between shareholders and policyholders.

•  In a reattribution, policyholders can choose whether to accept a
   payment now in return for giving up their contingent interests in any 
   possible further future special distributions. A cash payment is made from 
   shareholders to policyholders from shareholders' funds, so the with-profits 
   funds are unaffected.

•  In a reattribution, the inherited estate is retained in the business
   and continues its important role of providing security and investment
   flexibility for the fund until it is no longer required for these purposes.

•  In a special distribution, a policyholder benefits from the dispersal
   of surplus assets between policyholders and shareholders on a 90/10 basis. 
   The distribution is made from the funds and so are no longer available to 
   support them.

•  The possibility of such further distributions in the near to medium
   term is substantially reduced following the special distribution announcement
   today.


Aviva plc


•  Aviva is the leading provider of life and pensions to Europe with
   substantial positions in other markets around the world, making it the 
   world's fifth largest insurance group based on gross worldwide premiums at 31 
   December 2006.


•  Aviva's principal business activities are long-term savings, fund
   management and general insurance, with worldwide total sales of £41.5 billion
   and assets under management of £364 billion at 31 December 2006.


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