Life assurer cuts policy payouts

One of Ireland's largest life assurers, Hibernian, yesterday cut the final payouts and lowered annual bonuses for most of its…

One of Ireland's largest life assurers, Hibernian, yesterday cut the final payouts and lowered annual bonuses for most of its 44,000 customers holding with-profits policies.

Despite the stock market recovery during 2003, overall maturity payments on traditional with-profits pensions are down by up to 10 per cent, with payouts on endowments up to 7 per cent lower than last year.

Hibernian's with-profits fund made a positive gross investment return of 9.8 per cent in 2003; however, the company said this was not enough to recover the losses suffered over the previous three years.

"The outlook remains volatile; therefore, bonus rates have been lowered reflecting expected lower future investment returns," the company told brokers.

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The cuts in annual and terminal bonuses mean that with-profit customers whose policies are maturing in 2004 will receive thousands of euro less than customers whose policies matured in recent years.

On a typical €150 a month personal pension, the maturity payment after 20 years will be €118,535 in 2004 - €17,000 less than maturity payments made last year and over €40,000 less than payouts made in 2002.

A typical €75 a month 25-year endowment policy will pay out a maturity value of €93,041 in 2004, down from payouts of €100,474 in 2003 and €118,196 two years ago.

Annual bonuses on Hibernian's unitised with-profits business, including its Celebration Bond, has dropped from 3.5 per cent to 2 per cent for policies taken out between 2001 and January 13th, 2003.

Customers who took out a with-profit bond since this date will see their annual bonus maintained at 4 per cent. With-profit funds work by smoothing the investment returns for each year of the policy.

Mr Ian Veitch, marketing and product development director for Hibernian Life & Pensions, said this meant investors had been protected from the worst effects of falling markets. "The numbers are still very good value compared to unit-linked business."

Hibernian has 23,000 customers invested in with-profit endowments and single premium bonds, with about 21,000 people holding with-profit pensions. Holders of equity Special Savings Incentive Accounts (SSIA) can also invest part of their savings in with-profit funds.

Just under 1,000 with-profits policies with a total value of €45 million are due to mature this year.

Laura Slattery

Laura Slattery

Laura Slattery is an Irish Times journalist writing about media, advertising and other business topics