Prudential UK Moves US$50 Billion In Assets To Luxembourg Ahead Of Possible No-Deal Brexit

Prudential UK
Flags flutter outside the Houses of Parliament, ahead of a Brexit vote (Photo: Reuters)

Ahead of a possible no-deal Brexit, Britain's largest insurance company has now made moves to protect its assets by shifting close to US$50 billion to its newly formed Luxembourg subsidiary. Along with the announcement of the asset movement, the company also reported a six percent rise in total profits.

Numerous financial institutions in London have already started to move their assets to their various EU subsidiaries, with transferred figures now believed to be in the trillions of dollars. Insurance companies such as Standard Life Aberdeen and Old Mutual have already taken steps to restructure their business as they face increased regulations and competition from foreign companies. Most of these financial institutions have reportedly made these drastic changes regardless of the outcome of the Brexit crisis as a safety precaution. This has basically reversed years of market integration in Europe's financial markets.

Following a heavy parliamentary defeat in striking a deal with the EU, various firms are now fearful of a possible exit without a transition agreement. Parliament has already voted against a no-deal Brexit and a vote for a delay is also still possible.

According to Prudential's CEO, Mike Wells, the decision was not made with a specific assumption of the outcome of Brexit but was instead made based on what the company's clients had wanted. Prior to the current Brexit situation, the company had apparently already spent more than US$35 million to set up its new operation in Luxembourg. The newly formed subsidiary, which was established specifically to move the company's assets, only has 35 staff members.

Prudential also announced that it was making headway in its demerger plans for M&G Prudential through a stock market listing. If successful, the demerger would remove Solvency II capital requirements for the company's non-European business. This would essentially place its Asian business under Hong Kong regulations, while its headquarters would still remain in Britain.

In terms of its profits, Prudential has had a good 2018 thanks to partly its Asian business. The company reported an operating profit higher than initially forecasted. The company revealed that its operating profit for 2018 had reached a higher than expected US$6.36 billion. Its Asian business managed to increase by 14 percent in operating revenues. M&G Prudential reported an increase in profits of 18 percent. However, the company's business in the United States under its Jackson subsidiary reported a decrease of 11 percent, mainly due to the recent fall of US stock market prices. 

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