Daily Insurance Industry News
Daily Insurance Industry News
Sunday 18th of November 2018
February 19, 2009

L&G slashes with-profits bonuses

by Gill Montia

Story link: L&G slashes with-profits bonuses

Legal & General (L&G) has followed other leading insurers in slashing bonuses for investors in its with-profits fund.

Holders of with-profits bonds will be worst affected with bonuses on investments begun in 2004 down 18.3% over the year.

The company has not been able to give an average rate cut because investor profiles are very varied.

However, based on an initial investment of £10,000 in 1999 a with-profits policy has a maturity value of £11,224 today, compared with £13,645 this time last year.

L&G says it is confident the £24.5 billion fund remains a sound investment, having achieved a return of 27% over the past five years, and says it is acting to preserve its long-term strength.

Both Norwich Union and Friends Provident have announced cuts to with-profits bonuses since the beginning of the year, by up to 15% and 20% respectively.

Last week, the Financial Services Authority observed in its 2009 Financial Risk Outlook report that “falling asset values combined with low interest rates are a particular issue for with-profits firms”.

The regulator is therefore on the lookout for companies that take “mitigating actions” to deal with today’s financial pressures and end up failing to treat policyholders fairly.


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