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&#39Prudent&#39 Britannic suspends bonus payments

Britannic is to suspend with-profits bonuses and shareholder dividends in

an emergency action brought on by a third year of falling equity markets.

The news comes as the CBI warns that financial services companies reliant

on stockmarket performance might have to shed ten of thousands of jobs.

Britannic Group managing director Bryan Portman says its with-profits fund

has not breached solvency requirements and could still sell equities,

reinsure or use derivatives if it comes under further pressure. The

£6bn fund has a free-asset ratio of 6 per cent, of which 3 per cent is

future profits to lift it above the regulatory minimum of 4 per cent.

Britannic says it has had to bolster reserves as it has misjudged annuitant

mortality along with the rest of the industry. However, there will be

bonuses for policies maturing this year. One million policyholders are

affected.

The fund&#39s equity backing ratio has reduced to 42 from 72 per cent. Shares

in the company have halved following the announcement to 164p from 332p.

A senior industry source says: “Deferring bonus sounds like a nicer way of

passing up on bonus. The FSA could be pushing them to do this rather than

shave solvency too closely.”

Portman says: “We believe the markets will be choppy and volatile and these

are prudent actions taken to maintain the financial strength of the fund.

We will be updating the market on strategy in March.”

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What employers should expect over the next five years

A major feature of our articles is looking into the Jelf Employee Benefits crystal ball to predict changes and trends that may influence the short and medium term shape of UK employee benefits.  By flagging such changes early we aim to provide our followers with the tools to make sensible and informed decisions on their benefits offerings.

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