Prudent Prudential?

Posted on: 04 March 2010 by Gareth Hargreaves

Unease among financial service providers over FSA plans could lead to an exodus of top firms from the City in the not too distant future.

Are the cracks beginning to show in the love affair between the big financial brands and the City?
On Monday Prudential rebutted suggestions that it was selling its UK life assurance business to Resolution - an investment vehicle buying up life assurance books and 'running them off'. Resolution denied the rumour at the same time. However, later in the day, Prudential announced it was to buy AIA, the Asian assets of the American firm AIG. Funny timing you might say, but maybe this is a portent of things to come.

The FSA has made it clear to banks and insurers that they will all need a larger share capital basis to operate in future. If the Pru relocated the whole company to the Asia it could significantly reduce these capital requirements. Is this the start of the migration of our financial services overseas? Very sad if it is - the boom of Labour's first 10 years was based on the profits from the city!

The deal Prudential is proposing has not gone down well in the City, where shares have been marked down by a swingeing 20%. Pretty dramatic stuff and at the current rate the price of the purchase is going to be a lot more expensive as the funding is to be by issuing more shares.

Time will tell whether this is going to be good for the Pru but one thing is sure, more and more companies are going to see their future development  in the Far East and the new jobs will go there as well. Last one out turn the lights off please!

If you have views you would like to share - drop me a line.
Tony.page@anthonypage.net

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