THE MAN from the Pru, that great British icon, can hang up his bowler hat: Prudential is no longer a British company. Last year, for the first time, Asia contributed more to its profits than either the UK or the US.
On the face of it, things are still pretty close. On an IFRS basis, Asia generated a profit of £709m, around 34 per cent of the group total, compared to a third each for the UK and the US, which pulled in £683m and £694m respectively.
But take a look at new business profit (NBP) – a key measure of where the growth is going to come from – and the comparison becomes stark. Asia contributed over £1bn of NBP in 2011, around half of the group total, compared to £815m from the US and a paltry £260m from the UK.
Even excluding the threat of Solvency II, a set of punitive new rules for European insurers, there seems to be little case for keeping Prudential’s HQ in the EU, where it generates just 12 per cent of operating profit.
Hong Kong, Asia’s financial powerhouse, looks like a more sensible bet, and some analysts are even suggesting that the insurer could cut its UK operations loose altogether by breaking the group up.
As things stands, that option looks rash. The mature UK business still throws off huge amounts of cash – £577m in 2011 – allowing Prudential to fund its rapid Asian expansion. But that won’t always be the case: Prudential expects Asia to be generating enough cash by 2013 to sustain itself independently.
Make no mistake: moving a complex company like Prudential would be an expensive headache. It would have to get a huge amount of support from shareholders, retain and move key staff and deal with a new regulatory regime. Hong Kong is hardly a light touch. But if Solvency II is implemented in its currently planned form, it will be a price worth paying.