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Thiam backs Pru UK as a core business

Prudential has deflected speculation its UK arm may be Resolution’s next target by insisting on its importance to the group.

Chief financial officer and incoming chief executive officer Tidjane Thiam refuses to comment specifically on the rumours but says: “Regarding the UK, our results are very strong with margins increasing from 29 to 32 per cent. The UK provides us with cash – about £290m, a significant sum in this economy – and capital. The group’s rating relies very heavily on the strength of the UK balance sheet. It is a core business for us and we are quite happy with its performance.”

Pru has raised its interim dividend by 5 per cent, to 6.29p per share. European embedded value operating profits fell by 8 per cent to £1.2bn for the first half compared with the same period last year but, using international financial reporting standards, it was up by 6 per cent to £688m.

The group’s annual premium equivalent new business sales were down by 8 per cent to £1.3bn, but margins increased over the period. In the UK, total sales were down by 14 per cent to £376m. Capital surplus was increased to £3bn at the end of July from £2.5bn in June.

Analysts have also put forward Aegon’s UK business as a possible target for Clive Cowdery’s consolidation vehicle, although the company would not comment on the subject as it posted its results last week.

Aegon has launched an £860m rights issue in a bid to repay part of the £2.5bn hand-out it received from the Dutch government last year.

It posted underlying earnings of £328m for the first half, compared with £1bn for the same period in 2008. In the UK, underlying IFRS earnings were £24m for the first half, down by 67 per cent from the previous year. UK new life and pension business fell by 19 per cent to £512m in the first half compared with the first half of 2008.

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Accrual twist

When Stewart Ritchie retired from Aegon a year ago, I asked him to write a farewell column on what he felt was the most pressing issue facing pensions. He chose the rising cost of public sector pensions as his subject matter and made a strong case as to why this was a problem in need of drastic action. But he also concluded that, with so many people set to benefit from public sector pensions, the chances of radical change to address the issues were slim.

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