Insurer Prudential has increased annual profits by 39 per cent and predicted further sales growth.

The group, which achieved an overall surplus of £1.12bn last year, said it was well placed to take advantage of a continued upturn in the UK market.

It recently raised £1bn from a rights issue.

The Pru expects UK sales to grow by ten per cent this year, compared with industry expectations of about five per cent. An internal rate of return on sales of 14 per cent has also been forecast by 2007, compared with the 12 per cent achieved last year.

With the market emerging from a three-year slump, the Pru saw UK sales improve by 40 per cent to £817m in the year to December 31.

The Pru said its performance reflected the impact of its brand, track record of investment performance and financial strength. It has also moved from a direct sales operation to one with several distribution channels.