It is “unlikely” that life assurance giant Prudential will redomicile to Asia despite the pressures of European regulation such as Solvency II, an insurance specialist has claimed.
However, Barrie Cornes, an analyst for Panmure Gordon, added: “One cannot completely rule this out.
“Companies keep these things under review, and Prudential did a serious exercise in 2012 on whether it would redomicile because at the time there were a number of issues which would impact the business, but those have pretty much disappeared.”
New European regulation, particularly the Solvency II rules, which come into force in January, require all European insurers to increase their capital reserves.
Minimum capital requirements is defined as an amount of eligible basic own funds which does not expose policyholders to an unacceptable level of risk.
According to market speculation, any plan to redomicile could see the UK’s biggest insurer sell its British operations or spin them out into a separate company.
Its latest report and accounts show the Prudential has been doing a lot of business in Asia, where its life and asset management operating profit was up by 17 per cent to £1.14m in 2014, which would make a relocation to Hong Kong or Singapore seem like a logical step.
Prudential, which was founded in London in 1848, failed to buy AIA, the Asian subsidiary of US insurer AIG, in 2010, costing the company £377m.
Then-chief executive Tidjane Thiam apologised for the failure, but then played an integral role in the firm’s rapid expansion and growth in the US and Asia, aided by strong growth in its asset management arm M&G.
In March 2013, the then-FSA fined the Prudential £30m and censured Mr Thiam for failing to inform it of its plans to buy AIA and for not dealing with the regulator “in an open and co-operative manner”.
Mr Thiam has since moved to Credit Suisse and been replaced by Mike Wells, the former chief executive of Jackson National Life Insurance Company.
While the company would not offer any comment, such a move would make Prudential just the latest company to threaten moving its base out of the UK in response to regulatory changes.
Earlier this year HSBC’s chairman Douglas Flint threatened to leave the UK.
Right to reply
A Prudential spokesman said: “Prudential is an extremely cash and capital generative business and Solvency II will affect less than one fifth of our operations.
“Our UK life business is a strong franchise, which recorded a 19 per cent rise in profits at the half year.
“London, our historic home, remains a very attractive place to be domiciled. We have always said that, as a large, international group, we regularly look at the structure of our business to ensure that it remains optimal.”
