Friends Provident trims with-profits payouts

LONDON (Reuters) - Life insurer Friends Provident FP.L said on Friday it had trimmed payouts for its with-profits policyholders after falling financial markets weighed on the group's investment performance.

As a result of the cuts, a 30-year-old male customer paying 50 pounds a month into a 25-year policy maturing in January 2009 would receive 29,184 pounds, compared with 32,885 pounds for policies maturing in July last year, Friends said.

The insurer said the reduction largely reflected a weak investment performance by its with-profits fund, which had negative investment returns of 10.5 percent in 2008.

"2008 has been a particularly challenging year for almost all types of investment," it said in a statement.

Friends' with-profits fund performance was affected by a 33 percent decline in the FTSE All Share Index during 2008, as well as negative returns on commercial property, the company said.

With-profits funds aim to eliminate sharp fluctuations in policyholder payments by holding back a proportion of returns when times are good to smooth over periods of poor investment performance.

Friends Provident shares were up 0.3 percent at 84.4 pence by 9:58 a.m. British time.

(Reporting by Myles Neligan)