Friends Provident cuts bonuses

FAST-GROWING life insurer Friends Provident has reduced bonus rates on more than 1m with-profits policyholders for the third time in a year.

The former mutual's move, which comes a fortnight after it declared 2003 as its best-ever year for life and pensions sales, means policy payouts fall by an average of 6%.

The maturity value of a £50-a-month, 25-year endowment is now £51,283, compared with £58,535 following the previous round of cuts last August. The maturity value of a £200-a-month, 20-year personal pension falls from £146,372 in 2003 to £127,273.

Friends Provident managing director Ben Gunn said the group was still suffering from the hangover caused by the three-year bear market.

'Although the with-profits fund has returned positive growth, at 9.4%, for the first time in three years, the cumulative investment return since 2000 is still negative, at minus 6.5%,' he said.

'Our objective in setting new bonus rates is to be fair to our customers both now and into the future.'

Friends achieved record new business sales of £429.2m last year, a 14% increase bolstered by foreign acquisitions and distribution deals. Its market share in the first nine months of 2003 rose by 25% to 4.2%.