Prudential cost-cutting threatens 3,000 UK jobs
Prudential chief Mark Tucker says the insurer is confident about its prospects
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Thursday, 15, Mar 2007 10:47
Prudential has today announced a 15 per cent profit increase, announcing plans to cut its costs further in moves which could affect around 3,000 jobs in the UK.
In a statement, the insurer revealed that its full-year operating profit on a European embedded value basis was 1.98 billion in 2006, ahead of analyst expectations.
The company also increased its dividend for the year by five per cent, to 17.14p a share, a move which Prudential chief executive Mark Tucker described as a demonstration of the group's confidence in its future.
However, in a bid to further increase profits for shareholders, Prudential announced that it was increasing its cost reduction from £115 million to £195 million by 2010.
Prudential said that the targets will be achieved through a combination of internal cost-cutting and an expansion of its offshore and outsourcing operations, with around 3,000 customer service and other jobs in the UK expected to be affected by the plans.
The insurer, which said it intended to consult with trade unions and employee representatives in relation to the plans, has announced the cost-cutting measures following a review of its operations. This was launched after the company fended off a merger approach from rival Aviva last year.
The group's latest plans to reduce costs follow the sale of its loss-making internet bank Egg to Citigroup in January for £575 million.
Prudential also indicated that it intends to focus its business on optimising the competitive advantages it has in the life assurance market and on the provision of financial services for the retirement market, while further developing its asset management business.
In addition, the insurer revealed that it has initiated negotiations with regulators about the possible reattribution of its inherited state - money that has accumulated in the group's main with-profits fund above that which is needed to meet the company's commitments to policy holders.
Commenting on the group's plans, Prudential chief Mr Tucker said: "Our UK strategy, following the sale of Egg, builds on a strong performance in 2006 and our industry-leading position in the retail retirement annuity sector, eliminates uneconomic products and sets the scene for an enhanced contribution to future earnings."