Pru UK profits surge due to Solvency II

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Profits in Prudential’s UK business jumped 60 per cent in 2015, driven by a one-off £339m boost as result of Solvency II regulations.

The increase in pre-tax operating profit – from £729m in 2014 to £1.2bn last year – includes £339m gained from the insurer’s response to the European capital requirements.

Its full-year results say a “repositioning of the fixed income asset portfolio, increasing to 95 per cent the proportion that would benefit from the matching adjustment under Solvency II” produced the boost.

However, Pru also confirmed it would be retreating from the bulk annuity market because of the impact of Solvency II.

Individual annuities sales, on an APE basis, fell 46 per cent to £57m while the bulk annuity division generated APE sales of £151m, down from £171 in 2014.

The firm says Solvency II “significantly reduces our appetite to transact bulk business going forward”.

However, APE sales of drawdown contracts almost trebbled – to £102m – while individual pension sales more than doubled to £150m compared to 2014. Across the group, total pre-tax operating profit grew 26 per cent from £3.2bn to £4bn.

Group chief executive Mike Wells says: “We have delivered a strong performance in 2015. We continue to grow across our key metrics despite the macroeconomic uncertainty and the challenges presented by low long-term interest rates.

He adds: “The fundamentals of the group remain compelling, our opportunities are intact and we are in an enviable position to benefit from the attractive structural and demographic opportunities in Asia, the US and the UK.”