Friends Provident Cuts Payouts After Investment Loss

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 kcrowley1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Mike Anderson at manderson34@bloomberg.net

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