Prudential capital ratio beats forecasts, confirms UK head

By Carolyn Cohn

LONDON (Reuters) - Insurer Prudential Plc (PRU.L) posted a slightly better than forecast capital level under Europe's new Solvency II rules and named John Foley as permanent head of its core UK business on Tuesday, boosting the shares ahead of a meeting with analysts and investors in London.

Prudential has been a darling of investors but worries about Asian markets, where it is aiming to expand, have hit its share price in recent months.

Chief Executive Mike Wells said on Tuesday the firm was "continuing to make good progress" towards its Asia-focused 2017 financial objectives.

"We have an operating model that's not dependent on any one market, any one product, any one element of macro-economics, interest rates, equity performance, volatility," Wells said at the firm's investor day presentation in London.

The company also said it had appointed John Foley as chief executive of Prudential UK & Europe and as an executive director. 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).

Prudential is the first British insurer to report its capital levels under the Solvency II rules for EU insurers which took effect this month.

Prudential's solvency capital ratio was 190 percent of the minimum requirement at end-June, 2015 before allowing for the 2015 interim dividend, it said. Analysts had expected 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.

"The estimated ... capital level of 190 percent will be taken positively and remove any concerns on capital," Barclays analysts said in a note to clients.

Solvency II would not affect the way Prudential calculates its dividend, Chief Financial Officer Nic Nicandrou told the investors and analysts.

However, he also said the high capital costs of UK annuities meant Prudential was likely to reduce its volume of business in bulk annuities - taking on the risk of company defined benefit, or final salary, pension schemes.

Prudential's shares were up 3.4 percent at 1,392 at 1053 GMT, when the FTSE 100 index (.FTSE) was up 1.78 percent.

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.

However, insurers say ratios are likely to be more volatile under the new rules.

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".

(Editing by Muralikumar Anantharaman and Greg Mahlich)