Pru warns capital rules are a threat to UK jobs and growth


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The Independent Online

Prudential’s chief executive Tidjane Thiam has described new capital rules from Brussels as “one of the biggest threats to UK jobs and growth”.

Mr Thiam warned that the Solvency II guidelines could prevent companies such as Prudential investing in infrastructure and property if they are too onerous.

The rules were designed to protect consumers but have been kicked into the long grass because of fears they will penalise life insurers by forcing them to hold too much capital. The Pru has warned in the past that it could relocate overseas if they are not watered down . Despite some progress, Mr Thiam, pictured, remains cautious.

“Political processes are unpredictable,” he said. “We will never declare that we are happy with the rules until we have seen the final draft. Prudential invests billions of pounds into the UK economy and we will fight hard to ensure we continue to do so.”

The company posted a strong set of half-year results, driven by growth in Asia. Pre-tax profits actually halved in the six months to 30 June from £1.16bn to £506m, hit by hedges taken by its US business, and the sale of its Japanese life business to SBI Holdings earlier this year. However, operating profits were up 22 per cent to £1.4bn and the group raised its dividend by 15.8 per cent to 9.73p.

The shares rose 48p to an all-time high of 1,232p after the insurer said it hit another two of the six financial targets it set itself in 2010. Two – including doubling operating profits in Asia – were met at the end of last year, and the Pru said it had now met two cash generation targets

“We are on track to achieve the remaining objectives of doubling Asia’s 2009 new business profit by 2013 and delivering over £350m of net remittances from the UK by the end of the year,” Mr Thiam added.

“We will continue to implement our long-term strategy in Asia to meet the savings and protection needs of the Asian middle class, the key driver of our sustainable and profitable growth, and to focus on our strengths in the US and UK.”

The results round off a mixed few months for Mr Thiam. In March, he became the first chief executive of a FTSE 100 company to be censured by the City regulator, over the insurer’s failed takeover of AIA in 2010. At the time, the Financial Services Authority said Prudential had failed to tell the watchdog it planned to launch a $36bn (£23bn) bid for its Asian rival. Along with the censure, Prudential was fined £30m because it “failed to deal with the FSA in an open and co-operative manner”.