British insurer Friends Provident suffered a 5 per cent fall in profits and said it expected its dividend to grow at a slower rate than previously indicated.
The group, which demutualised in 2001, made an operating profit of £305 million sterling last year, broadly in line with analysts' expectations. This included a charge of £56 million to pay for revised annuitant mortality rates. The profit in 2001 was £321 million.
Friends proposed a divided of 7.25 pence, an increase of 3.6 per cent on the year earlier but said its policy of above inflation growth had to be revised due to the fall in equity markets.
"We're not giving any forecasts, but if investment returns come through we would be looking to grow the dividend, though at a lower rate," said Keith Satchell, chief executive.
The firm abandoned its two-year-old policy of increasing dividend payments by more than inflation, further undermining confidence in a sector that traditionally gave handsome payouts.
Friends Provident shares were down 6.25 per cent to 82-3/4 pence sterling in morning trade, following in the footsteps of its larger rival Prudential, whose stock slumped 20 per cent last week after it also backed away from a pledge to grow dividends.
"Insurers across the world have struggled as stock markets have fallen for three years - reducing the value of the investments they use to pay claims and build customers' savings.
The firm increased its total dividend in 2002 by 3.6 per cent to 7.25 pence but will not repeat that performance in 2003.
"While we expect to continue to grow our dividend in the future, growth will be at a lower rate than previously indicated," said chairman Mr David Newbigging.