The UK's biggest insurer Prudential has reported sharply lower profits, blaming losses on corporate bond investments and tumbling share prices.

Our financial strength will enable us to continue to deliver growth in future

Prudential chief executive Jonathan Bloomer

The company said on Wednesday that pre-tax profits for the first six months of the year came in at �166m ($232m), down by nearly half compared with the same period last year, while sales edged 2% higher to �926m.

The decline in profits partly reflected a $230m loss on investments in US corporate bonds, including debt instruments issued by bankrupt telecoms firm WorldCom.

Prudential said it planned to inject about �300m of fresh capital into its US subsidiary, Jackson National Life, which bore the brunt of the bond losses.

A steep decline in share prices since the beginning of the year also dented the company's bottom line.

Optimism

But Prudential said it was confident that it would be able to weather the global stockmarket downturn, playing down fears that falling equity returns might force it to sell assets in order to meet its commitments to policyholders.

"Our financial strength will enable us to continue to deliver growth in future," the company's chief executive Jonathan Bloomer said.

The company also cheered investors with news of a 27% increase in new business in its Asian markets, saying the outlook in the region remains "very positive" despite stockmarket weakness.

Prudential shares shrugged off heavy selling pressure on the London stock exchange to climb 5 pence to 425p by 1110 GMT, off earlier highs.