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Honeymoon over for Prudential boss facing boardroom, regulation woes

* Challenges mount for CEO Wells after 5 months in job

* Investors eyeing economic slowdown in Asia

* Potential regulatory change a worry for U.S (Other OTC: UBGXF - news) . business

* Management changes a concern after UK boss Hunt leaves

By Carolyn Cohn and Sinead Cruise

LONDON, Oct (HKSE: 3366-OL.HK - news) 23 (Reuters) - After five uneventful months settling into the top job at Britain's largest insurer, the challenges facing Prudential (HKSE: 2378.HK - news) boss Mike Wells are beginning to mount.

Half-year figures posted at the height of summer reflected a company in rude health, with new business booming and profits topping expectations.

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But autumn has brought questions about how the company is coping with regulatory scrutiny on both sides of the Atlantic, volatile Asian markets and how effectively Wells - who has wowed investors with his charismatic persona - is managing his top talent, following the surprise exit of UK boss Jackie Hunt.

Over the longer term, the cattle-rancher who moved to Britain from Nashville, where he ran Prudential's U.S. business, is also grappling with a more intractable problem: how to make his mark on the company when a money-spinning four-year strategy laid out in 2013 by ex-CEO Tidjane Thiam eventually expires.

Wells pledged to implement "current strategy plus" - without elaborating - when he took over from Thiam, who left in May after a six-year stint to run Credit Suisse (LSE: 0QP5.L - news) .

"The message he has given very clearly is that the strategy that he took over is the strategy that will remain in place. It ain't broke, so don't fix it," said Rob James, equity analyst at Old Mutual Global Investors, which holds Prudential stock.

Under Thiam, Prudential shares rose more than threefold as the former management consultant shifted focus to the insurer's Asian business, setting out clear targets - and meeting them.

But the recent economic slowdown in China, combined with fierce competition from the likes of rival AIA (HKSE: 1299-OL.HK - news) , has raised concerns that Prudential might not be able to rely on Asia to keep profits rising at the pace seen under Thiam.

The insurer, which started out in 1848 and now has a market value of 39 billion pounds ($60.1 billion), makes a little under a third of its operating profit from Asia, a similar amount from Britain and nearly 40 percent from the United States.

The Asian business still relies on the use of several hundred thousand on-the-ground agents - the traditional Man (Swiss: MAN.SW - news) from the Pru (HKSE: 2378-OL.HK - news) - in a region seen as vastly underinsured.

"It (Other OTC: ITGL - news) really comes down to what you think drives the life insurance growth in Asia," one of the Pru's top-15 investors said, reflecting on China's sub-7 percent economic growth.

"Do you need very high GDP growth for that to continue growing very quickly? Or is it pushed in some other way? No one really goes out to buy life insurance products. You need to be educated about it ... you need someone to give you a nudge."

Prudential declined to comment.

U.S. REGULATION

Wells earned 11.4 million pounds in his last year in charge of the Pru's U.S. business Jackson Life, where he oversaw rapid growth in sales of pension products known as variable annuities.

The products have gained quick popularity among U.S. retirement savers as they offer a variable rate of income often above a guaranteed minimum level, rather than the fixed-rate annuities most commonly seen in Britain.

But with U.S. authorities considering new rules to compel savers to pay for advice before buying this kind of product, revenues the Pru could earn from sales are likely to take a tumble, analysts and investors fear.

Bernstein analysts expect Jackson's earnings growth to halve over the period to 2019, compared with the rate achieved since 2008, with sales slowing in the mature U.S. market and potential regulatory reform adding to pressure.

"We do have a wariness about (variable annuities). Personally, if that was a smaller business, would I feel happier? Yes I would," OMGI's James said.

Prudential's U.S. division had operating profit growth of 11 percent in the first half, compared with 17 percent in Asia and 19 percent in the UK life insurance division that accounts for most of the insurer's UK and European business.

With both Asia and Jackson potentially making smaller contributions to profits in future, maintaining strong growth in Britain - and accelerating it - could be crucial.

But at Prudential's half-year results presentation in August, slides devoted to the Asian business, described as "long-term opportunity", and the U.S. business vastly outnumbered slides on the UK.

HUNT EXIT

The sudden loss of key personnel as Europe's insurance industry gears up for the introduction of Solvency II capital rules in January 2016, seen as particularly onerous for life insurers, has increased pressure on Wells.

Hunt's departure follows the exit of chief risk officer Pierre-Olivier Bouee, who joined Thiam at Credit Suisse.

These high level staffing changes have triggered speculation of boardroom tensions between members loyal to Thiam's way of working, and the new regime that Wells - himself a Prudential (Amsterdam: PD8.AS - news) 'lifer' - is trying to assert.

"(Hunt) was widely seen as a strong leader ... at a time of other management dislocation within the group," said Jefferies analysts. "This is negative for the stock and destabilising, at a time of volatility in Asia and U.S. regulatory change."

Speculation aside, her exit comes at an awkward time, with Prudential seeking approval from Britain's regulator about its own non-standard capital models, which it hopes will reduce the capital it must hold against underwriting and investment risks.

"The market is fixating on ... what the outcome of those negotiations will be," said the top-15 investor, adding that British regulators may impose a "haircut" charge on the group's capital from its Asian business.

Panmure Gordon analyst Barrie Cornes still expects the firm to meet its end-2017 targets, and cautioned against unnecessary or rash changes by a new man trying to make his mark.

"There's always that danger," he said.

($1 = 0.6489 pounds) (Editing by Pravin Char)