Pru cuts dividend to save £200m
INSURANCE giant Prudential bowed to the inevitable today, chopping its dividend 38% - its first cut since the start of the First World War - to save cash.
The group is cutting more than £200m from its divi bill by taking the half-year payout down from 8.9p to 5.3p and the full-year return to just 16p from 26p.
Chief executive Jonathan Bloomer said the new payout reflected the need to strike an 'appropriate balance' between shareholder returns, cashflow and future investment.
The three-year bear market has hammered life insurers' funds and Bloomer warned he believed there was little prospect of growth over the second half.
'I'm still cautious about the rest of this year in the UK and the US because there is still a degree of uncertainty in the stock market,' he said.
Half-year results today showed falling demand for life and pension products pushed the Pru's operating profits down 27% to £397m, which was below the City's most pessimistic expectations.
Sales in the UK and Europe on the industry standard annual premium equivalent basis tumbled 18% to £329m over the six-month period - to 30 June - on sharp falls in sales of with-profit bonds. New business earnings fell 10% to £94m in the US.
Only continued strong demand in the Prudential's fast-growing Asian business, which absorbed a hit from the killer Sars virus in Taiwan, helped total group insurance and investment sales nudge 1% higher to £15.5 billion.
Bloomer said: 'The first half of 2003 has been the harshest operating environment for life insurers in the UK and the US for a long time.'
Prudential's new chairman, David Clementi, warned five months ago the group was reviewing its dividend policy, stunning investors who believed it would be committed to further growth.
Norwich Union owner Aviva slashed its payout by 40% last year and Britannic suspended its divi, but the Pru's move came just months after one of its own directors, Michael McLintock, reminded companies of the importance of paying out a decent sum.
Analysts say Prudential has only been able to avoid a cut until now because of one-off gains, such as the £415m break fee it received when US giant American General rejected its takeover bid two years ago.
