Despite announcing profits of 14% on its With Profits fund, Legal & General have announced bonus cuts for investors. The insurer has taken the same stance as some other companies, in that whilst profits were made this year, losses from earlier years still have to be taken into account. This is obviously a negative feature of with profits policies but means investors are more protected in poor equity markets.
Our View
Legal & General have taken the opportunity to bolster their reserves whilst they can. Their Chief Executive said that the group's assets were now comfortably in excess of liabilities. Whilst many policyholders will not be happy with the bonus cuts, they should be welcoming the fact that Legal & General is protecting its long-term business by maintaining reserves.