One of Ireland's largest life assurers, Hibernian, yesterday cut the final payouts and lowered annual bonuses for most of its 44,000 customers holding with-profits policies.

Despite the stock market recovery during 2003, overall maturity payments on traditional with-profits pensions are down by up to 10 per cent, with payouts on endowments up to 7 per cent lower than last year.

Hibernian's with-profits fund made a positive gross investment return of 9.8 per cent in 2003; however, the company said this was not enough to recover the losses suffered over the previous three years.

"The outlook remains volatile; therefore, bonus rates have been lowered reflecting expected lower future investment returns," the company told brokers.

The cuts in annual and terminal bonuses mean that with-profit customers whose policies are maturing in 2004 will receive thousands of euro less than customers whose policies matured in recent years.

On a typical €150 a month personal pension, the maturity payment after 20 years will be €118,535 in 2004 - €17,000 less than maturity payments made last year and over €40,000 less than payouts made in 2002.

A typical €75 a month 25-year endowment policy will pay out a maturity value of €93,041 in 2004, down from payouts of €100,474 in 2003 and €118,196 two years ago.

Annual bonuses on Hibernian's unitised with-profits business, including its Celebration Bond, has dropped from 3.5 per cent to 2 per cent for policies taken out between 2001 and January 13th, 2003.

Customers who took out a with-profit bond since this date will see their annual bonus maintained at 4 per cent. With-profit funds work by smoothing the investment returns for each year of the policy.

Mr Ian Veitch, marketing and product development director for Hibernian Life & Pensions, said this meant investors had been protected from the worst effects of falling markets. "The numbers are still very good value compared to unit-linked business."

Hibernian has 23,000 customers invested in with-profit endowments and single premium bonds, with about 21,000 people holding with-profit pensions. Holders of equity Special Savings Incentive Accounts (SSIA) can also invest part of their savings in with-profit funds.

Just under 1,000 with-profits policies with a total value of €45 million are due to mature this year.