Will Prudential Quit UK

Will Prudential Quit UK?

There are huge pressures at the moment on both banking groups and insurers. Levy after levy after levy has been applied to the banking sector resulting in HSBC threatening to quit the UK and move its operations overseas.

In the latest squeeze on the financial sector the European Union’s Solvency II rules start for insurance companies in January 2016 and reports over the weekend in The Sunday Times and then across various websites suggest that Prudential is considering moving its headquarters away from the United Kingdom to the far east, possibly Hong Kong where Prudential have been growing their business in Asia for a number of years now. Prudential is the largest insurance group in the United Kingdom so an exit would produce shock waves across the City.

Prudential's operations in the United States and Asia account for around two thirds of the company's profits whereas its traditional home in the UK accounts now for less than quarter of its profits. The issue with the new solvency rules means that insurers must have enough capital in place to cover the majority of its liabilities.

The usual suspects for a new HQ for Prudential would likely be Hong Kong or Singapore. It is likely that Prudential UK would be segmented and floated as a separate business in the UK or indeed the insurers whole UK book sold to a competitor.

Comment

Given that Prudential’s UK operations now form a minor part of the group's total operations with its development focused overseas it is no wonder that any company would consider moving its headquarters to areas without the solvency requirements that will start next year in Europe. That said, we do not believe the Prudential brand, which is one of the strongest in the UK will disappear and we believe it is likely that they will segment the businesses and relocate overseas although the caveat is we do not sit on the board at Prudential so this is purely educated guesswork.