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Pru profits up £3.8bn on 2008

Prudential reported profits before tax on a European embedded value basis of £1.7bn for 2009 compared to a loss of £2.1bn the previous year.

The firm is increasing dividends to shareholders by 5 per cent.

Prudential says the increase in profits of £3.8bn reflects the growth in operating profit of £225m and an increase in the aggregate effect of non-operating items of £3.6bn, which mostly arise from the net effects of improved financial markets.

Profit before tax from continuing operations attributable to shareholders on and IFRS basis was £746m in 2009 compared to a loss of £450m the year before.

In the UK, the long-term business IFRS operating profit of £606m increased by 11 per cent from £545m in 2008.

Prudential says this reflects growth from the shareholder-backed annuity business, with operating profits being £194m higher than in 2008, partially offset by lower contribution from the with-profits business of £281m in 2009, compared with £395m in 2008.

The lower profit from the with-profit business reflected the impact of rate reductions in the February 2009 bonus declaration made in response to recent volatile investment performance.

These lower bonus payments to policyholders have a corresponding negative impact on operating profit as they reduce the consequential transfer to shareholders from the with-profit fund, calculated as one-ninth of the cost of policyholders’ bonus.

M&G’s operating profit for 2009 was £238m, a decrease of 17 per cent from £286m in 2008.

Pru Protect reported a 311 per cent year-on-year increase in annual premium equivalent for 2009, representing sales of £14m.

This primarily reflects the relative levels of equity and property markets between 2008 and 2009, with the FTSE All Share being on average 15 per cent lower than in 2008, as well as higher staff costs and lower performance-related fees.

These negative impacts were partly offset by revenue earned on the net inflows during 2009 of £13.5bn compared with £3.4bn in 2008.

Prudential is increasing dividends by 5 per cent. The board intends to recommend a final dividend for 2009 of 13.56 pence per share payable in May 2010 to shareholders. The interim dividend for 2009 was 6.29 pence per share.

As a result, the total dividend for this year, including the interim dividend and the recommended final dividend, amounts to 19.85 pence per share compared with 18.90 pence per share for 2008.

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