Pru refuses to provide for pensions compensation: 'Our customers have been satisfactorily and properly dealt with'

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The Independent Online
PRUDENTIAL Corporation yesterday demonstrated its confidence in its sales procedures by declining to make a specific provision to pay compensation to investors mis-sold personal pensions.

Other life insurers have set aside additional funds to meet the feared pounds 1bn cost of compensating customers who were wrongly advised to transfer their retirement savings from occupational pension schemes to personal pension plans.

Financial regulators are still trying to quantify the damage caused by the life insurance industry's widespread mis-selling.

Mick Newmarch, Prudential's chief executive, said: 'We see no justification for the assumption that there will be a serious potential charge against the corporation for the selling of these contracts. We are confident that our customers have been satisfactorily and properly dealt with.'

Many in the life industry believe financial regulators have exaggerated the problem. But Prudential is alone in publicly rejecting the applicability of KPMG Peat Marwick's findings that up to 90 per cent of the 500,000 personal pension transfers give grounds for concern.

KPMG did not look at Prudential, Britain's largest life office and leader in personal pensions.

'The decision to transfer may well be a very sensible one,' Mr Newmarch said. 'It has been so for many people. You should not infer that transfers are per se wrong. They are not.'

Prudential was reporting strong growth in pre-tax profits, up 45 per cent to pounds 589m in 1993.

Profits from the main life insurance business increased from pounds 444m to pounds 481m, but most of the improvement came from a pounds 149m turnaround in the general insurance side of Mercantile & General, its reinsurance arm.

On the 'accruals' basis, which Prudential believes gives a better indication of its underlying profitability, life profits were pounds 80m higher at pounds 887m, lifting the group result from pounds 769m to pounds 995m.

Analysts expect further improvement this year from the non-life side of M&G. Last year it made a profit of pounds 6m.

Premium volumes fell by 21 per cent as it turned away business.

M&G's life arm increased profits by 9 per cent to pounds 73m.

As previously indicated, Prudential has cut the bonuses paid on its with-profits policies, reducing payouts on savings contracts of less than 20 years' duration. This reduction slashed pounds 20m from life profits.

Prudential is paying an 8.7p final dividend to increase the total by 10.9 per cent to 13.2p.