January 19, 2016 / 5:03 AM / in 2 years

Prudential capital ratio beats forecasts, appoints new UK head

LONDON (Reuters) - British insurer Prudential Plc (PRU.L) posted a slightly above-forecast capital ratio under new European rules and appointed a UK head as it attempts to woo investors later on Tuesday.

The sun reflects in a window above the raised lettering of the former Prudential Assurance building in the City of London May 28, 2010. REUTERS/Luke MacGregor

Prudential has been a darling of investors but worries about Asian markets, where it is focusing its expansion, have hit its stock price in recent months.

Prudential’s solvency capital ratio was 190 percent at end-June, 2015 before allowing for the 2015 interim dividend, it said in a statement ahead of an investor day, where it will update investors and analysts on its progress toward 2017 financial targets.

Prudential is the first British insurer to report its ratio under the Solvency II rules which took effect this month.

“The market will be relieved by this number and expect the (stock) to rally on open,” Bernstein analysts said in a client note.

Bernstein, Panmure and UBS had expected the insurer to report a ratio of at least 180 percent. A ratio of 100 percent or more shows insurers have sufficient capital to cover underwriting, investment and operational risks.

Prudential also said it appointed John Foley as chief executive of Prudential UK & Europe and as an executive director on its board. Foley was appointed interim chief executive of the unit in October, replacing Jackie Hunt.

Hunt resigned a few months after Mike Wells took over as group chief executive from Tidjane Thiam, who left to run Credit Suisse CSGN.VX.

“The recent departure of CEO Jackie Hunt has created a degree of uncertainty over strategic direction of (the UK) division,” UBS analysts said in a recent note.

Prudential, which has been focusing on expanding its Asian business, has seen its shares fall 20 percent from a multi-year high reached last April.

Chinese and other global stocks have also fallen sharply in that time, however, with the FTSE 100 index .FTSE dropping 17 percent.

In addition to concerns about the performance of Asian markets, analysts are also eyeing possible regulatory changes in the United States that could affect sales of annuity products by Jackson, the company’s U.S. business. Wells previously ran Jackson.

Prudential’s solvency ratio is lower than that of European insurers Allianz (ALVG.DE) and AXA (AXAF.PA), which have reported ratios of 200 percent or more.

Insurers say ratios are likely to be more volatile under the new rules, however.

Regulators are also concerned that investors will use the ratios as buy or sell signals for insurers across Europe.

The Bank of England said in an open letter last week that “great care is required when attempting to draw comparisons on relative capital levels”.

Reporting by Carolyn Cohn in London; Editing by Gopakumar Warrier and Muralikumar Anantharaman

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