by Michael Mata
Insurance giant Prudential plc recently stated that it may transfer more funds from its asset management arm in London to Luxembourg or Dublin. These transfers will be made in order to maintain access to the EU’s single market after Britain chose to leave the union at the end of June.
Like other British insurers, Prudential experienced volatility in its share price due to the uncertainty caused by the EU referendum. Fortunately, strong growth in Asia is helping offset lower profits in Europe.
"At the group level, the immediate impact of Brexit will not be material," chief executive officer Mike Wells reassured reporters during a conference call. "Asia has been and will continue to be the growth engine of this group."
On the other hand, Prudential admitted in a statement accompanying its first-half results that its UK-domiciled operations (including its fund management arm M&G) could be negatively impacted by Brexit.
Anne Richards, M&G’s chief executive, told reporters that the company was considering increasing the number of funds domiciled in Luxembourg and Dublin, depending on the outcome of the Brexit negotiations. Under current rules, asset managers need an EU base in order to sell investment funds to retail investors in continental Europe. It remains unclear how these rules will apply post-Brexit.
“What we are trying to do is give ourselves options so we are in a position to react and adapt,” Richards stated. “Dublin and Luxembourg would potentially be options for us if we decide we want to have additional funds domiciled in Europe.”
Prudential reported a 6% rise in its first-half operating profit to £2.06 billion on August 10, led by growth in the Far East. Operating profits in Asia rose 15% to £743 million, while M&G’s operating profits fell 10% to £225 million. Prudential stated that M&G continued to experience significant net outflows in the first half.
Growth in Asia is being fuelled by a robust demand for savings and insurance schemes.
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