Prudential, the UK's second largest life insurer, conceded yesterday that its internet banking arm, Egg, is to run up yet another hefty loss in the second half of the year, as rising bad debt levels continue to get the better of the business.
Publishing its third-quarter results yesterday, the group said it expected Egg to run up a similar level of losses in the second half to the £39m operating loss which it chalked up in the first six months of the year.
The group chief executive, Mark Tucker, said rising levels of bad debts, particularly on Egg's personal loan book, was the main reason for the loss, claiming that the bank had seen a 40 per cent rise in the number of its customers using debt management companies over the past quarter. These organisations help customers write off some of their debts by negotiating with all their creditors.
Mr Tucker was unable to reassure investors that Prudential would put Egg back into profit next year.
Egg has become an embarrassment for Prudential over the past year. After taking over as chief executive in 2005, Mr Tucker decided to buy the remaining 21 per cent stake in the internet bank that the company did not already own. In the months since the deal was completed, the bank's fortunes have taken a turn for the worse.
The group's overall revenues for the nine months to the end of September were in line with expectations, up 6 per cent on the same period last year. However, the UK business saw revenues fall 7 per cent as the group shifted its focus to only writing profitable business.
Sales of bulk-purchase annuities, which have accounted for a large proportion of the UK sales growth over the past few years, fell during the quarter. Mr Tucker said this has been due mainly to an increase in competition in the markets, adding that Pru was only prepared to take on new business if it met its capital return targets.
However, the group gained market share in both the US and Asia, where its sales were up 14 and 22 per cent respectively.
Shares in the company fell more than 2 per cent in early trading, before recovering to close up 2.5 per cent at 645.5p, giving the company a market value of £15.6bn.Reuse content