Pru with-profits bond sales up 48% but total UK new business down 14%

Prudential UK's total APE sales for the first half of the year were down 14% to £376m with a strong showing for with-profit bonds and individual pensions offset by falls for individual annuities, offshore bonds and corporate pensions.

Retail sales on an APE basis were also down, by 8% to £374m, with lower sales volumes resulting in a reduction in New Business Profit (EEV) of 5% to £122m.

In the first half of 2009, with-profits bond sales of £71m were up 48% on the same period in 2008. Prudential says this strong sales growth reflects the attractiveness of its with-profits offering and in particular the £1.5bn PruFund.

Individual pensions sales of £24m were 50% higher than the first half of 2008. Sales of the Flexible Retirement Plan, its factory-gate priced individual pension product which can help customers consolidate their pension funds, have continued to grow with sales in 2009 of APE £10m up 131%.

However, over the period corporate pension sales of £115m were 9% lower than 2008 although growth into existing schemes has remained healthy.

On the annuities side, Pru actively managed its sales volumes to reduce capital consumption. This resulted in very strong margins but overall individual annuity new business sales falling by 17% to APE £114m.

Part of this reduction was due to consumers delaying taking out an annuity as well as lower pension pots available for annuitisation as a result of weak investment returns. Internal vestings continued to perform well with sales up 1% to £73m.

The group said customers also responded positively to the launch of its new Income Choice Annuity, which allows them to choose an income between a defined maximum and minimum level, and re-set these levels every two years.

Asset management arm M&G had a particularly strong half, with net inflows surging to unprecedented levels, more than three times those in the same period in 2008.

Total net inflows were £8.6bn with £4.1bn from retail investors; a leap of almost 360% on sales for the same period in 2008.

Meanwhile, PruProtect sales also jumped to £6m in the first half of the year compared to £1m in the first half of 2008 following the relaunch of its product range in November 2008 and an improved distribution model.

On a group wide basis, new business APE premiums were down 8% at £1,321m. Operating profit on an IFRS basis was up 6% to £688m while new business profit also rose by 25% to £691m.

Mark Tucker, group chief executive, says: "These results demonstrate a continuing strong performance by the Prudential Group in what remain challenging market conditions.

"As a result of the decision we took last year to focus on capital conservation and cash generation by concentrating on expanding sales in our most profitable product lines, we have been able to manage our investment in new business and improve our margins across the Group in the first six months of the year"

The group also announced its 2009 half year dividend increased by 5% to 6.29p per share.