Pru warns of 'challenging' year

Pru warns of 'challenging' year

Prudential has warned it faces a "challenging" year ahead as the firm reported a 7% slide in insurance sales.

Total group sales of insurance and investment products for the January to March period remained virtually unchanged at £7.7bn ($12bn).

But insurance sales in the quarter fell by 7% from the same period a year ago to £424m, slightly lower than analysts' expectations. UK insurance sales fell by 4%

Prudential's chief executive Jonathan Bloomer said the company had encountered "extremely difficult market conditions which we expect to remain challenging for many areas of our business throughout 2003".

Shares in the firm fell 5% as the market opened, but then recovered to stand 1.6% lower at 359.5p in early trade.

Sars impact

Insurance sales in Asia put in a stronger performance, rising 39% to £133m.

But Prudential said the outlook for the region remained uncertain because of the tough economic climate and the outbreak of Severe Acute Respiratory Syndrome (Sars).

It said the impact of Sars was still unclear, even in Hong Kong where normal business life has suffered the most disruption.

"It is possible that any initial reluctance to have face-to-face meetings may be offset by a heightened awareness of the need for insurance coverage.

"To date we have not seen any unusual impact on claims or the well being of our agents and staff."

Market turbulence

In the UK, sales of life assurance products slumped by 58% to £36m.

With-profits policies have fallen out of favour with bonus rates being cut following the market downturn of the past three years.

Share price falls have hit the insurance sector as a whole, cutting the value of the industry's financial reserves.

Prudential confirmed it had sought a waiver from the UK's financial watchdog, the Financial Services Authority, allowing it to have solvency requirements relaxed.

Many other insurance firms have done the same thing to prevent them being forced to sell equities into a falling market.

But Prudential added that its UK fund remained "among the strongest and comfortably within statutory limits".