U.K.'s Prudential Reports New Solvency Capital Ratio of 190%

  • First insurer to disclose capital strength under new rules
  • John Foley named chief executive for U.K. and Europe

Prudential Plc reported a Solvency II ratio of 190 percent, the first of the U.K. insurers to disclose its capital strength under new rules that came into force across the European Union this month. The shares climbed.

The London-based company had an estimated Solvency II surplus of 9.2 billion pounds ($13 billion) at the end of June 2015, before allowing for an interim dividend, it said Tuesday. The insurer had 19.4 billion pounds of its own funds and a capital requirement of 10.2 billion pounds, meaning it has almost double the amount required by regulators to withstand a one-in-200 year shock.

“Our Solvency II outcome confirms the strength of the group’s capital position and cash-generative nature of our businesses,” Chief Executive Officer Mike Wells said in the statement before an investor conference in London. “We are continuing to make good progress towards the 2017 financial objectives that we set in December 2013, despite a volatile market.”

Prudential, Britain’s largest insurer by market value, was among 19 firms to have its internal capital models approved by the Bank of England late last year. U.K. insurers have invested at least 3 billion pounds to be compliant with a new EU law.

400 Firms

More than 400 firms in the U.K. will probably be affected by the rules with the majority of companies expected to use the regulator’s standard formula to assess their capital risk, the Association of British Insurers said. Most will disclose their ratios when they report full-year earnings.

“Solvency II will be one of the biggest drivers of share prices for the U.K. life sector over the next 12 months,” UBS Group AG analyst Colm Kelly wrote in a report to clients last week. It has “fundamental implications for capital, cash flow and dividends.”

Prudential climbed 2.9 percent to 1,386 pence by 8:24 a.m. local time. The benchmark FTSE 350 Life Index rose 2.4 percent.

Mainland European insurers including Axa SA and Allianz SE disclosed their capital positions last year as assessed by their individual regulators, reporting ratios of 212 percent and 200 percent respectively.

Separately, Prudential said it named John Foley as its chief executive for the U.K. and Europe with immediate effect, replacing Jackie Hunt who resigned after just two years in the job. Foley was appointed to the post on an interim basis in October, the company said in a statement. He was previously group investment director.

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