22 Feb 2005

Prudential with-profits bonus announcement 2005

Prudential shows strength with buoyant bonuses

  • Total bonus rates increased or maintained on all unitised plans, and good year-on-year increases in the value of nearly all with-profits policies
  • Exceptionally strong investment-return on the Prudential with-profits fund of 13.4% (before tax and charges)
    • This compares to the FTSE 100 index (Total Return) of 11.25%
    • Over the last five years, the with-profits fund has delivered a pre-tax return of 20.7%, compared to a negative total return of –19.5% from the FTSE 100 index over the same period
  • Policies paying out in 2005 show strong increases compared with their position a year ago
    • 10-year Prudence Bond (£10,000 single premium) up 7.9% on its 9-year value in 2004
    • 15-year Personal Pension (£200 per month regular premiums) up 7.75% on its 14-year value in 2004
    • 20-year Personal Pension (£200 per month regular premiums) up 10.7% on its 19-year value in 2004
    • 25-year With-Profits Mortgage Endowment (£50 per month regular premiums based on male aged 30 at start of contract) up 11.1% for Prudential and 13.8% for ScotAm on its 24-year value in 2004 Note – All figures are after deduction of tax and charges
  • Annual bonus rates are being maintained for all business
  • With-profits annuities total bonus increased to 7.12% (6.35% in 2004)
  • Buoyant performance enables Prudential to add £2.2 billion to policy values
  • The with-profits fund of Prudential is the UK's largest, with more than £73 billion under management and has 5.5 million policyholders (inclusive of the Scottish Amicable Insurance Fund)
  • Prudential mortgage endowments maturing in 2005 will meet repayment targets and we've seen a significant improvement in Scottish Amicable policies meeting repayment targets
  • A 25-year savings endowment has delivered an annualised return of 8.7% net of tax and charges, well ahead of comparable returns for deposits
  • Prudential remains committed to maintaining a fair Market Value Reduction (MVR) policy. This currently allows customers to withdraw £25,000, free of any MVR adjustment, in any 12-month period, assuming the money has been in the same with-profits fund for at least five years.

David Belsham, Actuarial Director, Prudential Assurance, said:

"We are now seeing the benefit of long-term prudence. We took early action to protect policyholders' funds by switching out of equities ahead of the prolonged bear market and policyholders are now benefiting from the strong returns earned on Prudential's with-profits fund.

"This year's bonus declaration shows that with-profits continues to be an attractive investment for policyholders when provided by a financially strong and well managed fund, such as Prudential."

Mark Wood, Chief Executive, Prudential UK and Europe, said:

"We know from talking to our customers that many people are still looking for attractive returns, but are not prepared to take on the risk associated with investing directly in the stock market.

"As a result, we are confident about the future of the with-profits market and we believe with-profits continues to offer a valuable way of saving. Our financial strength enables us to compete strongly in this market."

Prudential established its independent with-profits committee in January 2005.

This committee assesses effectively and appropriately how the company balances the rights and interests of policyholders and shareholders in relation to its with-profits funds, and whether Prudential complies with its Principles and Practices of Financial Management.

The committee comprises three members, all of whom are independent of Prudential. They are:

  • Andreas Whittam Smith, First Church Estates Commissioner and the founding Editor of The Independent newspaper;
  • Michael Arnold, a Principal and Head of the Life practice in the London office of Milliman; and
  • Jeremy Goford, until recently Principal of Tillinghast-Towers Perrin and President of the Institute of Actuaries.

The committee has overseen the approach to, and setting of, the 2005 bonus declaration.

Full details of Prudential's 2005 bonus announcement are available from:

Enquiries to:

James Murray Tel: 0207 150 2203 Mobile: 07810 181757
Anthony Frost Tel: 0207 150 3001 Mobile: 07886 967649

Paul Keeble

Tel: 0207 150 2191 Mobile: 07904 081250

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Prudential plc is an international company incorporated in the United Kingdom, and its affiliated companies constitute one of the world’s leading financial services groups. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world, and it has been in existence for over 170 years. Prudential plc is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America, or the Prudential Assurance Company, a subsidiary of M&G plc (a company incorporated in the United Kingdom).