Aviva compensation cheques for property fund customers
Investors in Aviva’s Irish Property Fund have begun receiving compensation cheques and an apology from the company for mistakes it made in calculating the fund’s losses.
In a letter to policyholders, the insurance and investment giant admitted this week that it had incorrectly assessed the value of its customers’ Irish Property Fund investments.
“I can confirm that the value of your policy was understated and I apologise for this,” Aviva’s head of operations, Derek Aherne, wrote in a letter that accompanied the compensation cheque to customers.
Mr Aherne also admitted that policyholders had been “inadvertently disadvantaged” by Aviva’s mistake as it tried to shore up the fund in 2008, “during a period of uncertainty in the Irish property market”.
In a question-and-answer supplement, the letter adds: “When we work out the value of your policy, we use unit prices as part of our calculations ... as the unit price for the Irish Property Fund, or another fund that had a partial investment in the Irish Property Fund, was incorrect, the units you hold/held in this fund were incorrect, which affected your policy value.”
Around 80,000 customers are expected to receive cheques worth a total of €25 million this month.
Aviva charged policyholders for an overdraft it had to take out to compensate for the huge numbers of customers taking out their money as the fund’s value plummeted in 2008.
An Aviva representative on an Irish Property Fund helpline said yesterday that the company was forced to take out the overdraft to cover the high level of “encashment” as large numbers of investors sought to get out of the fund in 2008.
She said the compensation cheques would cover the cost to the investors of Aviva’s decision to take out the overdraft.
The apology added that an additional interest payment of 4 per cent per year had been applied and all relevant taxes had been paid.
The €89 million Aviva Irish Property Fund has lost two-thirds of its value since the market peak in 2007. At one stage it was worth €414 million.
It purchased the AIB Bankcentre in Ballsbridge, Dublin, for €177 million in 2006 and sold it in September for €77 million. Its current property investments include Riverside 1, Sir John Rogerson’s Quay in Dublin 2; Creation House in Grafton Street, Dublin 2; 66 Grafton Street; Plantation House, Herbert Street, Dublin 2; and 43-44 Patrick Street, Cork.
Despite huge losses, the fund is still considering new investments in the Irish property market.