19th Jan 2016 06:52
LONDON (Alliance News) - Prudential PLC on Tuesday sought to demonstrate the strength of its capital position under new rules governing insurers across the European Union, as new Chief Executive Mike Wells put middle classes across Asia, Europe and the US at the heart of the group's strategy.
Prudential provided the update ahead of an investor conference set to be held Tuesday. The conference has been seen as an opportunity for Wells to reassure the market about the sustainability of growth in areas such as Hong Kong, in what is the chief executive's first major interaction with the market since succeeding Tidjane Thiam last summer.
The FTSE 100 insurer was not expected to diverge from a strategy that has seen great success in tapping into Asia's growing middle class, the 'baby boomer' generation in North America, and an ageing population in the UK.
"Prudential has three clear structural long-term growth opportunities across Asia, the US and the UK, driven by the increasing financial self-reliance of the middle classes. This important trend is creating growing demand for savings globally and specifically for health and protection in Asia," Wells said in a statement.
Prudential reported Tuesday a solvency capital ratio - a measure of an insurer's own funds as a percentage of the regulatory requirement - of 190% as of June 30, 2015, under the new Solvency II rules, which came into force at the start of 2016. The group reported a Solvency II surplus of GBP9.2 billion at the same stage, before allowing for the interim dividend paid last year.
"Our Solvency II outcome confirms the strength of the group's capital position and cash generative nature of our businesses. We remain confident that the group will be able to continue to deliver high-quality products and services to both new and existing customers and strong, sustainable, profitable growth for our shareholders," Wells said.
Setting out its resilience to a market downturn, Prudential said an instantaneous 40% fall in equities would wipe about GBP1.9 billion from its surplus and reduce the solvency ratio to 175%. A 100 basis points increase in credit spreads, with credit defaults of 10 times the expected level in Prudential's Jackson life business in the US, would cut the surplus by GBP1.2 billion and reduce the solvency ratio to 181%.
As well as revealing the sensitivity of its Solvency II surplus to equity markets and credit spreads, Prudential said it stood to benefit in the event of a 100 basis points increase in interest rates, a move which would boost its June 30, 2015 surplus by GBP1.1 billion and increase the solvency ratio to 206%.
Meanwhile, Prudential named John Foley, its group investment director, as the permanent chief executive of its UK & Europe operations.
Foley had been serving in the role on a temporary basis following the departure of Jackie Hunt, who left the group after about two years in the role.
By Samuel Agini; [email protected]; @samuelagini
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