December 5, 2012 / 11:41 AM / 5 years ago

UPDATE 1-Allianz German unit cuts life insurance interest rate

* Current interest rate cut 0.4 pct points to 3.6 pct

* Rival Ergo cut rates by 0.6 pct points

* Allianz says ECB policy weighing on fixed-income rates (Releads on current interest rate, adds background)

FRANKFURT, Dec 5 (Reuters) - Allianz’s German unit will trim the current interest rate it will pay to life insurance policy holders next year by 0.4 percentage points to 3.6 percent, as rock-bottom capital market interest rates bite.

Other insurers have also announced rate cuts for next year, reflecting dwindling investment income from government bonds and other investments in the wake of the financial crisis.

“The accommodative monetary policy adopted by the European Central Bank for years continues to affect the interest rate level for fixed-income securities,” Allianz said in a statement on Wednesday.

The cut in the current interest rate, which applies if the policy is not held until maturity, is less substantial than the 0.6 percentage point reduction unveiled by rival Ergo on Tuesday.

The move brings Allianz’s overall 2013 rate of return on German life insurances to at least 4.2 percent if the policy is held until maturity, down from 4.5 percent for 2012. (Reporting by Ludwig Burger and Jonathan Gould; Editing by Helen Massy-Beresford)

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