Pru profits hit by market wobbles

Prudential is focusing on the profitable annuity market in the UK

UK insurer Prudential has reported a drop in annual pre-tax profits after financial market volatility hurt short-term investment returns.

Pre-tax profit was £1.166bn in 2007, compared with £1.372 in 2006.

However, when investment returns are not taken into account, the firm saw operating profits rise 25% to £2.542bn.

That is better than many analysts had expected and helped push Prudential's shares 2.2% higher on optimism that profit growth will continue in 2008.

Prudential's shares added 7.5 pence, or 1.2%, to 661.5p.

"Each of our businesses is performing strongly representing a powerful geographic spread to our growth platform," said Marc Tucker, Prudential's chief executive.

"Spectacular growth in Asia has been accompanied by a very strong performance by the US and clear profit growth in the UK.

"Combined with our excellent performance in asset management across the group, these results demonstrate the benefits of Prudential's diversified, international strategy."

According to Prudential, its new business profit climbed by £1.215bn.

One of the main drivers of earnings was the rapid expansion of its Asian earnings, where profits grew 34% to £653m. It expanded its agency force in the region by 125,000 to 410,000.