Prudential, the 174-year-old insurance company founded in London’s Hatton Garden, is severing one more of its roots. It has announced that its next chief executive will be based in Asia once the incumbent, Mike Wells, steps down in March. This has little to do with Brexit Britain. Instead, it is the final, logical step of a pivot towards Asia and Africa many years in the making. What is missing is certainty over where exactly Wells’s successor will be based. In normal times, it would be assumed that the new chief executive would be based in Hong Kong, where the company shares its primary listing with London and has its biggest Asian business. But these are not normal times. Prudential’s reticence to spell out the precise location of its future top team speaks volumes about the current business climate in Hong Kong.
On the one hand, the timing of Wells’s departure is apposite: he oversaw a restructuring that shed Prudential’s US and UK businesses, leaving a rump focused squarely on Africa and Asia, and with its sights on China. This was the natural evolution of a process started by his predecessors, most notably Tidjane Thiam. It is also a path advocated by Third Point, the activist investor, which also wanted Prudential to ditch its London head office.
A business without US or UK baggage is now a more attractive proposition to a potential buyer such as Ping An, China’s biggest insurer, which would have faced political hurdles in buying the old Pru. Wells’s successor may be able to park for now the thorny issue of whether to abandon the UK entirely by delisting in London. But having a chief executive in the same region as Prudential’s growth engine, main regulator and operational focus makes perfect business sense. Where the timing is less kind is that Prudential now finds itself in want of a China-focused chief executive at possibly the worst moment.
Hong Kong is in the tightening grip of Beijing: both a national security law and China’s zero-Covid policy mean the territory is becoming increasingly closed off from the rest of the world. Global businesses are reviewing the operational risk of remaining in Hong Kong, where coronavirus infections this week hit their peak during the pandemic, and are rising, prompting forecasts of even more stringent measures. Mandarin Oriental, the hotel group, and Pernod Ricard, the French spirits maker, have told senior staff in Hong Kong to relocate temporarily. Bank of America is also reviewing whether to shift employees to Singapore.
But financial institutions in general, and Prudential in particular, would have difficulty executing a similar relocation of its senior team, even if temporarily. The optics are dubious, particularly from the viewpoint of the PRC. From both a logistical and political perspective, for a company looking to China for growth, and listing its shares in Hong Kong, to have its boss sitting outside the Chinese territory at such a delicate moment is less than ideal.
That means that Prudential may have to focus its recruitment efforts on candidates willing to remain in Hong Kong, come what may. As any local headhunter will attest, that may prove tricky. One mooted internal candidate, Nic Nicandrou, who at present leads Prudential’s Asia business, is already based in the territory at least. But other global businesses in Hong Kong, such as the law firm Norton Rose Fulbright, are facing “localisation”: that as companies do more business with Chinese clients on the mainland, they hire more Chinese employees for senior roles that would have previously gone to expats. For Prudential’s pivot to China, a Mandarin-speaking boss may be the logical last step.