Pru’s M&G in sales boom on bond bonanza
A MASSIVE increase in demand for corporate bonds has allowed M&G, the asset management arm of insurance group Prudential, to notch up record levels of investment into its fund range.
Prudential’s results for the first quarter showed M&G saw gross fund inflows of £4.4bn thanks mostly to a tide of investment away from current accounts, which are now delivering record-low returns, and into the bond space.
The group said that, taking all the client withdrawals over the period into account, the net inflow into its fund range was £2.5bn, which represented a record fourfold increase compared to the same quarter of 2008.
Finance director Tidjane Thiam, set to take over from chief executive Mark Tucker in October, said the “outstanding” inflows show the arm is going “from strength to strength”.
The overall Prudential group reported total insurance sales of £697m, beating analyst expectations of £647m, in the quarter although this represented a five per cent fall on same quarter in 2008.
Asian sales, which represent over half of the group’s profits, fell by 11 per cent to just £333m with Prudential blaming exceptionally bad conditions in key markets, including Korea and Hong Kong.
Thiam said the group is focusing on remaining defensively positioned in the recession. And he refused to rule out rumours he may split off the group’s UK arm when he takes over as chief executive.
Charles Stanley analyst Nic Clarke retained his “hold” recommendation on the stock: “We believe that compared to other stocks in the UK life assurance sector the Pru’s performance is likely to be volatile over the next 6 to 12 months,” he said.
Prudential added it had a capital surplus of £2bn at the end of the first quarter, compared with £1.7bn pounds three months earlier, and it expects that figure to rise further to a healthy £2.8bn by the summer.