Pru launches £1bn rights issue

INSURANCE giant Prudential stunned investors today by launching one of the biggest rights issues for more than year, a £1bn cash call to boost its war chest in Britain.

The group, which scrapped the planned sale of its stake in online bank Egg this summer, said it wanted to take advantage of clear market openings.

But some £100m will go towards bolstering the group's solvency position ahead of the new European Union Financial Groups Directive which comes into force in January.

More than 337m new shares are being sold in a one-for-six rights issue at 308p - a near-33% discount to Prudential's closing price yesterday.

The move essentially draws a new line in Prudential's UK business, dramatically restructured since the group ditched its 'Man from the Pru' direct sales force.

It is also a clear signal that the life market is on the brink of a new battle between the leading insurers, Pru, Aviva, Standard Life and Legal & General, as they pull away from smaller players in the sector.

Chief executive Jonathan Bloomer said: 'This rights issue is about raising capital to grow the UK business.'

Details of the cash call came as Prudential posted new business figures showing total insurance sales rose 16% in the first nine months of the year to £1.3bn.

Sales in Britain and Europe in the third quarter were 29% up on a year ago at £161m on the industry standard annual premium equivalent basis.