According to various media reports, which are corroborated by a statement from Prudential, these latest rumours stem from concerns raised by the company’s chief executive, Tidjane Thiam, over new European capital adequacy regulations.
In a statement released early today, the company said: “Prudential regularly reviews its range of options to maximise the strategic flexibility of the group. This includes consideration of optimising the group’s domicile, including as a possible response to an adverse outcome on Solvency II.
“There continues to be uncertainty in relation to the implementation of Solvency II and implications for the group’s businesses. Clarity on this issue is not expected in the near term.”
Thiam highlighted his concerns over the “unintended consequences” of the Solvency II regulations at the World Economic Forum in Davos in January. According to the Financial Times, he warned attendees that if “certain versions of Solvency II insurance rules, due to come into force in 2013, were implemented, investing in corporate bonds, infrastructure and some bank assets would be very difficult”.
Under Solvency II, insurers will be expected to hold capital reserves in line with the amount of risks they take. For Prudential, which has £349.5bn of assets under management, this will be a significant amount of cash. Furthermore, because Prudential also has an American business, it has to hold significant capital reserves for this separately.
However, if it moved to a non-EU jurisdiction only its British subsidiary would be governed by the rules.
It is not the first time Prudential has been subject to speculation that it is about to move to Asia and in 2010 it was even rumoured the company was about sell its UK and US businesses in order to pay for the purchase of AIA – the Asian arm of US insurance giant AIG. The company’s bid for AIA ultimately failed but it did list in both Hong Kong and Singapore during the process, something which has also led to speculation it will soon leave the UK for Asia.
