Prudential's profits slide below forecasts

Britain's second-largest insurer Prudential unveiled a sharper-than-expected 30 per cent drop in annual profit today and signalled…

Britain's second-largest insurer Prudential unveiled a sharper-than-expected 30 per cent drop in annual profit today and signalled no swift return to a higher dividend, sending its shares sharply into the red.

Prudential was down more than 3 per cent to 493 pence in a flat market as investors digested the sober dividend outlook and a warning from chief executive Mr Jonathan Bloomer that a sale of its majority stake in Internet bank Egg was not expected any time soon.

Kicking off the UK insurers' results season, Prudential said operating profit on an achieved basis had fallen to £794 million sterling ($1.48 billion) from £1.133 billion pounds the previous year due to a poor performance in the United States and Britain and a weaker dollar, which also hit some of its Asian profits.

As expected, the company slashed its dividend for the first time since World War One, by nearly 40 per cent to 16 pence.

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A Reuters poll of 10 analysts had forecast a consensus operating profit of £848.5 million with a range of £803-898 million. Achieved operating profit reflects the profit of an insurer's book of policies in the reporting period to give a more realistic picture of its financial health.

There was little news on the timing of the Egg sale. "There is no point in trying to rush things through," Mr Bloomer told a conference call, declining to say how many parties were involved in the four-week auction.

Some analysts have said Prudential could get a £1.3 billion cash injection from its 79 per cent stake in loss-making Egg, which would provide some welcome respite for the company.