Bumper £4bn Pru profits boosts FTSE

The market value of the UK’s biggest insurer, which employs 1,300 staff at its Stirling hub, climbed nearly 3 per cent, or 38.5p, to £13.65 after it shrugged off global market volatility and a shake-up of Britain’s pension industry to post the dramatic rise in operating profits.

The FTSE 100 Index rose 20.88 points to 6,146.32 on the news.

The Pru’s UK life and pensions business swelled £500 million last year to hit £1.2 billion, boosted by a one-off £339m injection from the new Solvency II regulations on capital.

The group’s performance was above analysts’ consensus – forecast for £3.8bn pounds, according to Thomson Reuters data.

The firm, which is listed in Asia as well as London, said it would pay a total dividend of 38.78p per share, up five per cent from 2014, though below a forecast of 39.69p. It said it would also pay a special dividend of 10p, its first since 1970.

Fund management arm M&G, which contributes around a third of the group’s operating profit and recently recruited Aberdeen Asset Management’s chief investment officer Anne Richards to become its new chief executive later this year, saw a seven per cent outflow of funds to £246bn as retail investors fled the volatile markets.

Expressing an opinion on the upcoming EU referendum, chief executive Mike Wells said M&G’s distribution and client base was in Europe and it was “in our interest” for the UK to remain in Europe.

Mr Wells was among 36 FTSE-100 bosses to sign an open letter last month claiming that Brexit would put the UK economy at risk, and he said yesterday it would make it harder for M&G to win business.

The UK performance was helped by re-insuring more of its longevity risk and adjusting its fixed income portfolio.

Operating profit in Asia, a key driver of growth, rose 17 per cent and asset management arm Eastspring posted record third-party net inflows.

Mr Wells said economic slowdown an in China was not impacting business, as a more cautious outlook was encouraging China’s rising middle-class to buy more insurance products.

He said: “In Asia, our portfolio of businesses remains focused on serving the protection and investment needs of the growing middle classes through a high-quality agency force and well-established bank partnerships.”

Prudential, which was the first British insurer to announce its solvency capital ratio under new European rules, said its ratio at the end of 2015 was 193 per cent, up from 190 per cent at the end of June.

A ratio of 100 percent shows insurers have sufficient capital to cover underwriting, investment and operational risks.

Mr Wells said: “We have delivered a strong performance in 2015. We continue to grow across our key metric s despite the macro-economic uncertainty and the challenges presented by low long-term interest rates.”

He said IFRS operating profit increased 22 per cent to £4bn and EEV new business profit grew 20 per cent to £2.6bn. The life and asset management businesses had delivered a combined IFRS operating profit of £1.32bn, up 17 per cent.

Last week, the Financial Conduct Authority announced that Prudential was among six life insurers being investigated as poor practice was uncovered during a review of the treatment of long-standing customers with old products.