Friends Provident Plc, the 177-year-old U.K. insurer, plans to cut bonus payments to some policyholders after the value of investments declined last year.
Friends Provident will reduce payouts after investments related to its so-called with-profits fund fell almost 11 percent, compared with a gain of 5 percent a year earlier, the Dorking, England-based company said in an e-mailed statement today. The average policy payout will drop by 5 percent this year, Mike Collins, an actuary at the insurer, said in a telephone interview.
“This bonus announcement ensures payouts from the with-profits fund more closely reflect the value of the underlying investments,” Friends Provident said.
The insurer follows Aviva Plc (AV/), Prudential Plc (PRU) and Standard Life Plc (SL/), the U.K.’s three biggest insurers, which cut final bonus rates for some customers last year, citing declining values of equities, commercial property and corporate bonds.
So-called with-profits policies are meant to smooth returns over time to reduce the impact of market swings.
Friends Provident declined 0.1 pence, or 0.1 percent, to 84 pence as of 11:31 a.m. in London, giving the insurer a market value of 1.96 billion pounds ($3 billion).
To contact the reporter on this story: Kevin Crowley in London at firstname.lastname@example.org
To contact the editor responsible for this story: Frank Connelly at email@example.com; Mike Anderson at firstname.lastname@example.org