Prudential shareholder fires warning shot over potential HQ move

ONE of Prudential’s institutional shareholders has warned of the dangers of the insurer moving its head office from London to Hong Kong to try to sidestep tough solvency rules being introduced in Europe in January.

Robin Geffen, managing director of Neptune Asset Management, claimed such a move would raise questions about the “financial health” of the Pru and stir memories of the company’s abortive $35 billion (£24bn) bid for AIG’s Asian arm, AIA, in 2010.

Geffen’s comments came amid speculation – undenied by Prudential – that Pru chief executive Tidjane Thiam had ordered the review of the company’s UK domicile.

Geffen, whose group has an undisclosable sub-3 per cent stake in the insurer, told The Scotsman he had strong reservations about a move to Hong Kong.

He said: “If this is a way of the group avoiding European solvency ratios, then investors would have every right to be worried.

“If Prudential wants to head offshore in search of less stringent solvency rules then it would raise serious questions about the fundamental health of the business.”

The Neptune boss said other objections to such a switch of HQ to Asia included that it would raise questions about the future of Prudential’s strong UK business, including a highly-regarded City of London asset management business, M&G, that he said was better sited here.

“They [the Pru] need to be very careful about this. They have already tried to make a major, expensive Asian acquisition, which the shareholder base was not prepared to tolerate,” Geffen added.

“If this was a backdoor way of repeating this it would be doomed to failure. It would leave them [management] to answer questions of the future of the UK business, and M&G in particular.”

There were calls for Thiam’s head two years ago, along with chairman Harvey McGrath, when they admitted “mistakes” in the bid for AIA that was based on a rationale of a flourishing Asian insurance market.

There was seen to be inadequate consultation with institutional investors at the time about what was deemed a “top dollar” price the Pru was paying for the assets. The company also had to fork out £450 million in break fees and costs of the failed offer.

A report at the weekend said Prudential, founded in London more than 160 years ago, would admit to the domicile review in its annual report. It has followed periodic speculation over the past couple of years that the Pru might leave London.

The new European Union insurance industry regime, known as Solvency II, will require insurers to beef up their capital requirements to reduce the risk of insolvency.

Thiam said at the World Economic Forum in Davos last month that the new regime would force the company to dispose of £11bn of investment in British infrastructure projects.

A spokesman for Prudential declined to comment yesterday.