Bloomberg News

Prudential Weighs Domicile Move to Hong Kong in Response to EU Regulations

February 27, 2012

Tidjane Thiam, chief executive officer of Prudential Plc. Photographer: Chris Ratcliffe/Bloomberg

Tidjane Thiam, chief executive officer of Prudential Plc. Photographer: Chris Ratcliffe/Bloomberg

Prudential Plc (PRU), the U.K.’s biggest insurer by market value, said it may move its headquarters from Britain, where it was founded 164 years ago, if new European regulations hamper the business.

“Prudential regularly reviews its range of options to maximize the strategic flexibility of the group,” the London- based insurer said in statement today. “This includes consideration of optimizing the group’s domicile, including as a possible response to an adverse outcome on Solvency II.”

Solvency II, a set of rules the European Union plans to introduce in 2013, is designed to align insurers’ capital reserves with the risks they take. Prudential Chief Executive Officer Tidjane Thiam has warned the new regulations may lead to “unintended consequences.”

The insurer may be concerned it will be forced to hold additional capital if the European rules clash with solvency regulations in the U.S., where the company gets more than a third of its revenue, according to Marcus Barnard, a London- based analyst at Oriel Securities Ltd.

The stock dropped 1.2 percent to 713.5 pence at 10 a.m. in London trading, valuing the firm at about 18.2 billion pounds ($28.9 billion).

“There continues to be uncertainty in relation to the implementation of Solvency II and implications for the group’s businesses,” Prudential said in the statement. “Clarity on this issue is not expected in the near term.”

‘Serious and Viable’

Prudential shares are already listed in Hong Kong, and the city is the insurer’s second-biggest Asian market by revenue. Donald Tsang, Hong Kong’s chief executive, said in September he would “absolutely” welcome U.K. financial firms HSBC Holdings Plc (HSBA) and Standard Chartered Plc (STAN) if they decided to move their headquarters to the Chinese financial hub.

Hong Kong is a “serious and viable option” for Prudential, according to Eamonn Flanagan, a Liverpool-based analyst at Shore Capital Group Ltd.

The firm has a strategic goal to use capital generated in its U.K. business to build its Asian division, which accounts for about 40 percent of its sales.

To contact the reporters responsible for this story: Kevin Crowley in London at kcrowley1@bloomberg.net; Blanche Gatt in London at bgatt@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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