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‘Pru is not for turning’ on taking stakes in IFAs

Prudential will not use any of its 1bn war chest to buy stakes in IFA firms but will help to finance them, says UK chief executive Mark Wood.

The firm’s trading update for the half-year shows a 50 per cent rise in UK and Europe sales to 541m on an APE basis, including the Phoenix Life & Pensions transaction, which increased APE sales by 145m. Excluding the Phoenix deal, sales growth was 10 per cent, with sales of unit-linked bonds doubling, individual annuities up by 12 per cent and bulk annuity business up by 67 per cent. New business achieved profits rose to 159m from 88m in 2004. But in-force profit fell by 85 per cent to 23m after a 132m charge reflecting with-profits surrenders. The firm expected PruBond surrenders to fall after the February bonus announcement but surrenders have continued and Pru has strengthened the persistency assum- ption by 40 per cent.

Wood says Pru has only spent 9m of the 1bn it raised in a rights issue last year but expects to have spent about 250m by the end of the year. He is prepared to offer financing to profitable advisers but Pru will not be taking stakes.

In the first half, IFA sales doubled. Business margins rose from 25 to 30 per cent although Wood admits this is likely to fall in the second half due to pricing pressure as insurers vie for market share. He says the impact of enhanced commission paid on multi-tie distribution will not have an impact until 2006-07. Pru failed to secure a place on Burns-Anderson’s multi-tie panel despite having worked in its development.

Wood says: “We will help finance IFAs with strong financials but will not take stakes. The Pru is not for turning. We expect some margin pressure in the second half but that is more about price competition than multi-ties.”

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