It said it would trim annual bonuses on the former Axa Equity & Law conventional with-profits life and pension policies by 1%.

The move will affect about 10% of the group's with-profit policies - bonus rates for the remaining policies will be announced in March.

The company said the move was due to poor investment returns in 2002 and expectations of "lower returns in future than those achieved in the past".

Industry problem

With-profits policies are designed to smooth out the peaks and troughs of stock market volatility, but stock market falls have forced many firms to trim bonus rates on their policies.

Norwich Union, Prudential, Legal & General and Standard Life - as well as Axa - have all cut payouts in recent months.

Axa's move means that someone paying £50 a month into a 25-year endowment policy will see their final payout drop from £69,747 to £68,017.

"We have again added bonuses to with profits policies, albeit at a lower rate than last year," said chief actuary Peter Shelley.

"This is despite the very poor performance of the stock markets.

"With-profits payouts are still high relative to actual investment performance and, like many of our competitors, we need to ensure that all of our customers are treated fairly and we continue to meet policyholders' reasonable expectations."

Axa also announced it was reducing terminal bonuses on its with-profits bonds, a move which would cut the final payout by between 4% and 5%.