Prudential Loves London; Brussels, Not So Much
Web Producer, CNBC.com
The management of UK-based Prudential has made no decision on whether to relocate outside of the European Union but is watching with apprehension Brussels' plans to introduce new regulation for insurers, CEO Tidjane Thiam told CNBC in an interview Tuesday.
The European Parliament is discussing new rules called Solvency II which would, among other things, force insurers based in the EU to use tougher models to calculate their capital requirements.
Companies that have their headquarters in the EU might have to apply the Solvency II norms even to businesses outside Europe if Brussels considers that local regulations are not strong enough, according to some market commentators.
The Sunday Times reported last month that Prudential was reviewing its domicile as a result of the Solvency II capital regulations.
Thiam said the company still sees London as its preferred location.
"We love London as a place to do business. London is the best place for Prudential to be located," he said, explaining that the debate over relocating was "because of things that are happening or not happening in Brussels."
"Certain extreme versions of Solvency II we believe could cause damages," Thiam added. "We are penalized for our success."
He said 88 percent of Prudential's profit comes from outside the EU, and the company has an important presence in the US.
The insurer also has a big presence in Asia, which helped it post profit in line with expectations on Tuesday.
Prudential's operating profit rose by 7 percent to 2 billion pounds ($3.12 billion) last year, in line with analysts' expectations. The Asian business became for the first time the biggest contributor to the group's earning,s with profit up 32 percent to 709 million pounds.
"The story is intact and the long-term potential of Asia is intact," said Thiam, who cited Hong Kong, Malaysia, Indonesia and Thailand among the countries where Prudential is particularly successful.
Last week, the Sunday Telegraph reported that Prudential held talks with the Brazilian government about possibly relaxing current legislation with an eye toward possibly opening a general insurance business in the fast-growing Latin American country. It also said the company might start conducting business in Cambodia.
Asked how much Prudential was going to expand, Thiam said: "As much as we can. We think that the opportunities are great…the results are very good."