Aviva announces bonus for policyholders

By Clara Ferreira-Marques

LONDON (Reuters) - Insurer Aviva (AV.L) will pay a 2.1 billion pound bonus to 1.1 million policyholders at its UK unit as part of efforts to resolve the future of surplus assets built up in two key funds.

Aviva, which has been considering options for the surplus for two years, said it had split the total, deciding the future of the first half with an outright bonus distribution.

That has resulted in the windfall for policyholders at UK arm Norwich Union, but also for shareholders, who will get 230 million pounds in the "90-10" split, the insurer said.

Both shareholders and policyholders will receive the money over the next three years.

Aviva said a typical with-profit bond, based on a 30,000 pound investment in 2001, will generate a special bonus of 4,500 pounds.

At the end of June, the surplus, known as the "inherited estate", was worth a total of 5.4 billion pounds, though that has been eroded by the market turbulence of recent months.

The inherited estate is money built up in with-profits funds over the years, over and above the amount needed to meet policyholder commitments.

The surplus has also been swollen by a change in the investment strategy, as assets were switched to high investment-grade corporate bonds or government securities, which require less capital.