Pru UK profits climb 19% as M&G hit by fixed income slump

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Prudential has recorded a 19 per cent increase in UK profits for the first half of the year despite tumbling annuity sales and outflows for M&G hitting £3.4bn.

Overall pre-tax profits increased from £1.4bn to £1.9bn. The insurer’s UK life business recorded an operating profit of £436m, up from a restated figure of £366m, which has been amended to take into account the sale of its 25 per cent stakes in PruHealth and PruProtect in November.

Total UK life sales, on an annual premium equivalent basis, rose 22 per cent from £419m to £510m for the first six months of the year, with Pru’s retail business saw sales increase 25 per cent from £315m to £393m.

The provider reported a continued slowdown in annuity sales which contributed £66m to the UK earnings, down from £85m in 2014.

Of the total, £49m came from bulk transactions, which also fell from £60m in the first half of last year.

The retail business saw individual annuity sales drop 56 per cent from £63m to £28m.

Pru also confirmed two new bulk annuity deals, bringing in sales of £117m and new business profit of £75m.

This compares to four deals in the first half of 2014, which generated sales of £104m and new business profits of £69m.

In its full year results in March, the firm said that profit from new retail annuities halved from £110m in 2013 to £57m in 2014.

Asset management business M&G recorded an operating profit of £251m, up 11 per cent on 2014’s equivalent figure of £227m, which the firm attributed to higher average funds under management.

But it also warned net outflows in Q2 had increased bringing the total outflows for the first half of the year to £3.4bn,a dramatic swing from the £3.8bn of inflows seen at the same time last year.

Pru attributed the shift for a lack of appetite for fixed income funds, and warned it expects this to further dampen profits in the second half of the year.

Group chief executive Mike Wells says: “In the UK our life business is positively transitioning to a changing landscape of pension and savings provision, while M&G, despite near-term headwinds, remains well-positioned to build long-term wealth for its customers.”