Friends takes the axe to bonuses

FRIENDS Provident has become the latest insurer to slash bonuses on its with-profits policies in response to falling stock markets, saying total payouts will have to be reduced by about 6%.

Annual bonuses on unitised with-profits products will also be trimmed, probably by 0.5%, as Friends seeks to cope with the devastating impact of market turbulence on the insurance industry.

The cut means the maturity value of a 25-year £50-a-month policy on 1 August 2002 will be £72,947 compared with £77,096 just four months ago. On a 10-year policy, the maturity value falls to £7,687 compared with £8,126 in April.

The extent of the fallout was highlighted by Friends's interim results, which showed a £242m pre-tax loss for the six months to 30 June compared with a £19m profit previously.

The loss was due to a £356m charge relating to poor investment returns, which overshadowed its increase in operating profit from £125m to £161m.

Life and pension sales jumped 17% to £845m with assets under management doubling to £66bn following the acquisition of Royal & SunAlliance's asset management arm.

Friends said a maiden interim dividend of 2.45p a share, representing one-third of the year's expected payout, would be made. Friends shares, issued at 225p, ended 7 3/4p higher at 140 3/4p.