Norwich Union has announced that the investments within their with profits funds increased by 11.5% before tax, during 2003. This is a healthy increase on the 8.6% return in 2002. Because of the better growth during 2003, Norwich Union confirmed that annual bonuses for policyholders would stay at the same level as paid in 2003.
There was also good news on the Market Value Reduction front. This penalty on policyholders for moving out of the with profits fund was cut from 9% to 8%. The only glitch in the good news was for policyholders with maturing policies during 2004. These payouts are likely to be lower than in 2003 by around 5% to 10%.
Our View
Norwich Union seem to be giving policyholders a fair deal for 2004. They don't appear to be overstretching themselves on the bonus front and, if investment returns continue, we could see bonuses being increased or Market Value Reduction penalties abolished.
The news will be bittersweet for those people with maturing policies. However, during the time they have been invested, returns have been poor and final policy values must reflect this fact.