Prudential, the insurer, yesterday reported a 30 per cent drop in profits as it struggled to combat the effects of both a sliding dollar and weak consumer confidence among savers in the UK.
Operating profits at the company fell to £794m, as earnings from both Asia and the United States, where more than 70 per cent of its business is won, were hit by the weak dollar.
Profits in the UK fell 28 per cent, after a 21 per cent drop in sales. Overall sales at the group were down 16 per cent over the year, with US sales falling 24 per cent.
The main area for growth in the business continues to be Asia, where sales recovered from the Sars outbreak and were up 8 per cent.
While optimistic for growth in the US and Asia, Jonathan Bloomer, the chief executive, was still cautious on the recovery of the UK markets. The company's distribution deal to sell with-profit bonds through Abbey has boosted sales, but Mr Bloomer said other banks were holding back from signing up with the insurer, given the uncertainty over new rules set to come into force later this year restricting how financial products can be sold.
"The banks are putting off the decision on product providers until the uncertainty has cleared, but we will continue active discussions," Mr Bloomer said.
Shares in the insurer fell nearly 5 per cent yesterday to 487p, as Mr Bloomer dampened hopes of a dividend rise in the near term and warned that a sale of Prudential's majority stake in the internet bank Egg was unlikely to be concluded soon.
As expected, the company cut its final dividend by nearly 40 per cent to 16p. It cut its interim dividend in July, the first time it has reduced shareholder payouts since the First World War.
Prudential was able to give its 4.5 million with-profit policyholders some good news, however, by increasing payouts - a first from a major insurer this year. The payout on a 25-year endowment is now £55,126, up 21 per cent on the payout this time last year. Most insurers have had to slash bonus rates and payouts, and have cut back on the amount they invest in equities. Prudential still has 48 per cent of its fund invested in equities, which compares with 34 per cent for Standard Life.
"We have been managing the business in a cautious fashion throughout 2003, which was a difficult year," Mr Bloomer said. "We have ended the year with a strong balance sheet, and have been able to increase payouts to with-profit customers. This should help restore confidence in the savings industry."Reuse content