The announcement came as Prudential reported profits before tax on a European embedded value basis of £1.7bn for 2009 compared to a loss of £2.1bn for 2008.
The firm’s full year dividend for 2009 increased by 5 per cent to 19.85 pence per share.
Prudential announced today that it has reached a £23.5bn agreement with AIG on terms to merge with AIA Group.
Resolution made a stock exchange announcement today, dismissing press speculation it is looking to swoop on Prudential’s UK business. Clive Cowdery’s consolidation vehicle Resolution had been tipped to bid for Prudential’s UK arm, if the insurer seeks to dispose of it after the Asian deal.
The increase in profits of £3.8bn reflects a 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, says Prudential.
Profit before tax from continuing operations attributable to shareholders on an 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.
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.
Management action strengthened insurance groups directive capital surplus, estimated at £3.4bn, £1.9bn higher than at the end of 2008 when it sat at £1.5bn.
Thiam says: “These results represent an outstanding performance against a backdrop of unprecedented economic uncertainty, demonstrating the success of our
strategy to focus on value over volume and capitalise on the most profitable growth opportunities in our chosen markets around the world.
“At Prudential UK, our strategy remained to rigorously focus on balancing new business, with cash and capital preservation while maintaining margins. Our strategy allows us to generate surplus capital for investment in more profitable opportunities for the Group.
“The UK business remains key to the future delivery of the Group’s overall aim of generating sustainable, increased shareholder value.
“With today’s agreement we have a unique opportunity to create the leading pan-Asian life insurer. The combination of Prudential and AIA will create a sector powerhouse in the fastest growing markets in the world.”