M&G is Prudential's principal problem area, losing pounds 45m before tax last year. Results have deteriorated every year since an pounds 83m profit in 1988.
Prudential has installed new management led by John Engestrom to tackle the heavy losses on the general insurance side of the business. His team has made more than 100 UK staff redundant, reduced M&G's catastrophe exposures and imposed sharp increases in premium rates.
Hans-Erik Andersson, who runs the general insurance arm, said prices achieved during the main year-end renewal season, and during the April 1 renewals, had met M&G's targets in all classes of business. The company's general insurance exposures have fallen by some 50 per cent.
M&G said careful analysis of past losses had enabled it to reduce exposures. It estimates that a repeat of last year's Hurricane Andrew, the largest insurance loss in history, would cost dollars 11.5m rather than the dollars 68m it did cost. Similarly a repeat of the 1990 European storms would cost it only pounds 7m instead of pounds 30m.
M&G intends to increase further the proportion of life reinsurance business that it writes beyond the existing 60-40 split. Although general business will decline in importance, M&G believes its status as a composite might enable it to pick up life business from NRG, the Dutch reinsurer that recently pulled out of the general market.
The life operation made increased profits of pounds 67.3m last year. On the new accruals accounting basis that Prudential has pioneered, life profits amounted to pounds 193m in 1991.
Roger Sansom, director for the life side, said M&G's top 20 clients had been with the company for an average 26 years, while some of them had a much longer relationship. He wants to build on the company's reputation to develop its businesses in Europe and South-east Asia.
Mr Engestrom said M&G would not cut price to keep business: it would rely on its quality of service to allow it to obtain a premium price.Reuse content