The Prudential Assurance Company today announced bonuses on traditional and accumulating with-profits business, in its 2019 With-Profits Declaration, expected to be worth £2.2bn.
Investment returns for the £109 billion Prudential With-Profits Fund (The Fund), which has global holdings in shares, bonds, property and private assets, were -2.8% in 2018. In contrast, the FTSE All-Share^^ and FTSE 100^^ indices fell 9.5% and 8.7% respectively, including the reinvestment of dividend income. These returns do not allow for any management fees. (^^See financial performance and policy value notes).
When setting bonuses, Prudential aims to smooth some of the extreme highs and lows of investment performance by holding back some returns in good years to support bonus rates in years where returns are lower.
As a result, the bonuses announced for 2018 mean that policyholders of accumulating with-profits policies will typically see year-on-year returns ranging from a small loss of 0.5% to a gain of up to 2%. These returns are net of all management fees.
Over the longer term, the Fund has generated returns which are greater than those from many investment markets. In the ten years to the end of 2018, the Fund produced a cumulative gross return of 129.5% before tax and charges. This compares with a 121.4% return from the FTSE 100 Index^^ over the same period, not allowing for any management fees.