Prudence pays off for the Prudential

INSURANCE giant Prudential is holding annual payouts on its 5.5m policies unchanged after an 'exceptional' investment return of more than 13% by its £73bn with-profits fund last year.

In a break from a run of swinging cuts in the life insurance sector, Prudential said many of the vast majority of policies held by its customers were now showing good yearon-year increases.

A 25-year, £50 a month with-profits endowment maturing this year is up 11.1% on its 24-year value a year ago.

The 13.4% return by Pru's with-profits fund is likely to be the one of the highest in the UK market for 2004. It compares with an 11.25% total return by the FTSE 100 Index in the 12 months.

Prudential is continuing to benefit from its decision to cut its exposure to equities by 20% in the run-up to the dot-com crash. The company switched into corporate bonds.

Borrowing a line from Chancellor Gordon Brown, David Belsham, Prudential's appointed actuary, said: 'We are now seeing the benefits of long-term prudence.'

Friends Provident cut payouts on its with-profits plans by up to 18% last week.