Like its rivals, L&M is cutting bonuses in expectation of lower investment returns in the 1990s. Unlike some of the others, the company does not expect to have to make further cuts this year.
The bonus changes cut the payout on a 10-year regular premium saving plan by 2.7 per cent. The payment on a 25-year plan actually rises by 1.4 per cent. The impact of yesterday's cut will grow as it continues to be felt in future years.
Bonus cuts reduce the profit available for shareholders. The effect on L&M's 1992 profits was hidden by investment income derived from the shareholders' pounds 112m stake in the group's life fund. This income is believed to have contributed more than pounds 4.5m out of pounds 19.3m transferred from the life business.
Adding back the tax, profits from life and pensions increased from pounds 24.6m to pounds 30.7m. But a pounds 3.4m loss on estate agencies and a pounds 3.7m loss on mortgages left pre-tax profits at pounds 23.4m, little better than last year's pre-exceptional total of pounds 22.6m.
A final divdend of 9.6p increases the total by 5 per cent to 14.25p.