Tough markets hit Pru's profits

Earnings fell from �1.13bn in 2002 to �794m as market volatility sent buyers of its life products fleeing for cover.

As a result its dividend was cut for by 38% to 16p - the first such move since World War One.

Prudential also announced it was cutting bonuses for its personal pensions and with-profits endowments.

Shares in Prudential were down 25 pence, or 4.9%, at 485.25p by midday on Tuesday.

Lower payouts

A total of 3.25 million Prudential customers will be affected by the cuts to bonuses in 2004.

However a Prudential spokesman said customers would still see policy values increase - for example a 15 year policy still rose �7,451 over the past year.

Annual bonus rates will fall to 3.25% from 3.5% for its 3.25 million personal pension customers.

Bonuses for the group's 500,000 with-profits endowments policyholders are unaffected and bond rates will remain at 3.25% following a 0.75% cut last year.

Scramble for Egg

We ended the year in good shape Jonathan Bloomer, Prudential chief executive Check out Prudential's latest share price

The company added it was still in talks with potential buyers over the sale of its loss-making online bank Egg. But it remained tight-lipped over potential buyers.

Royal Bank of Scotland, a front runner for Egg in the early stages of the sale, has now ruled itself out, but speculation in the City suggests there is still healthy interest in the company.

The list of potential takers includes credit card firms MBNA and Capital One as well as General Electric's ultra-acquisitive unit GE Capital, analysts and dealers believe.

Growth hopes

Experts say proceeds from the sale could usefully span a major funding gap created by its fast-growing, but cash-hungry Asia business.

The company added the weaker dollar had also affected its performance, which also hit some of its Asian markets.

Prudential, which also owns Jackson National Life in the US and has a fast-growing Asian business, now generates 70% of its sales outside the UK.

Chief executive Jonathan Bloomer said: "There were some increasingly positive trends in the third and fourth quarters as markets began to stabilise and sales started to recover, and we ended the year in good shape.