Pru move to allay fears

Huddersfield Daily Examiner (Huddersfield, England), Oct 21, 2008

INSURER Prudential today said it was strong enough to withstand much heavier downturns in stock markets as it sought to soothe investor nerves.

Concerns have mounted that the insurers' capital strength could be whittled away by tumbling share prices amid the economic downturn.

The Prudential said it had a "buffer" of pounds 1.2bn at the end of September. The figure is down from pounds 1.4bn at the end of June, but the company said it was enough to "remain resilient to a significant further deterioration" in markets and the economy.

A further 40% slide in share prices from mid-October would wipe just pounds 250m off its capital surplus, the insurer added.

The Pru's own shares have fallen by more than a third in the past month, but chief executive Mark Tucker stressed the firm's position was "robust".

Although the group's overall insurance sales rose by 15% to pounds 2.3bn during the third quarter of 2008, the company's fast-growing Asian business has been set back by the recent turmoil.

Mr Tucker had hoped to achieve the group's target of doubling profits from the region by 2009 - a year ahead of schedule, although this is now unlikely.

But Prudential remains upbeat about longer-term prospects in the region and has been linked with a possible pounds 8.7bn deal to buy the Asian arm of US insurance giant AIG, which was nationalised by theGovernment in September.

Prudential reported a recovery for its previously struggling UK business - where total third-quarter sales rose by 38% to pounds 732m, maintaining the strong performance seen in the first half of the year.

Sales of its with-profits bonds almost trebled to pounds 74m, reflecting demand for "diversified" investments.