Slashed tax rate boosts Prudential profits
A 6% fall in its effective tax rate helps the Pru deliver 33% profit increase
Life insurance group Prudential, which delivered a 33% increase in operating
profit from £1.27bn to £1.71bn for 2005, was boosted by a 6% fall in tax rate,
it revealed yesterday.
Announcing its final results yesterday, the £14bn insurer said its effective
tax rate on operating profit was reduced from 27% in 2004 to 21% this year.
The FTSE100 group said the drop in the rate was a result of resolving
outstanding issues with the HM Revenue & Customs, believed to be related to
City bonuses, and a European Court of Justice ruling on group relief.
‘The reduction in the 2005 effective tax rate arises from a number of
factors, including settlement of a number of outstanding issues with HMRC and
benefit taken for prior year losses incurred in France following a recent
European Court of Justice decision,’ the company said in a statement.
The strong results, which were helped by the lower tax rate, were vital for
the Pru’s chief executive Mark Tucker as he defends the group against a takeover
approach.
Analysts believe that the life insurance sector is ripe for consolidation.
The Pru has been linked with Aviva, Legal & General and Friends Provident.