Two major U.K. insurers--Prudential PLC (PRU.LN) and Standard Life PLC (SL.LN)--on Tuesday expressed confidence in their businesses in the coming year despite economic uncertainties, but they also warned about the possible negative impact of upcoming Europe-wide capital rules for insurers called Solvency II.

The warning adds to increasing worries that Solvency II wouldn't be passed into law in time for its scheduled transitional implementation beginning in January next year.

Tidjane Thiam, chief executive of Prudential, the U.K.'s largest insurer by market value, said that "we are well-positioned to deliver continued relative outperformance in the medium-term," helped in part by the company's strong presence in the growing markets of Asia.

Prudential posted a 4% rise in 2011 net profit to GBP1.49 billion from GBP1.43 billion a year earlier. This comes even as total revenue fell 23% to GBP36.5 billion from GBP47.6 billion a year earlier.

The revenue figure was hit in part by huge fall in investment returns. However, the net profit figure was boosted in part by a smaller amount paid in claims and benefits to customers.

Operating profit, more closely followed by analysts because of its focus on core business operations, rose 7% to GBP2.07 billion from GBP1.94 billion in 2010 as the company had a strong performance in Asia.

The result is higher than a GBP1.99 billion average forecast from 24 analysts.

For the first time, Prudential's life insurance business in Asia became the single largest contributor to total operating profit.

David Nish, CEO of Standard Life, said that though economic backdrop remains uncertain, "we are well on track to achieve an ongoing improvement in financial performance," helped by its strong capital position and continued improvements in operational efficiency.

Standard Life posted a 31% fall in 2011 net profit to GBP298 million from GBP432 million a year earlier. This came as total revenue fell by 51% to GBP9 billion due to a huge fall in investment returns. Standard Life also paid a bigger amount in claims and benefits to customers compared to the previous year.

However, the key operating profit figure showed a strong 28% rise to GBP544 million from GBP425 million in 2010, helped by a stronger performance in its Canadian and asset management businesses. The result is also higher than a GBP476 million average forecast from 19 analysts.

Prudential increased its full-year dividend by 5.6% to 25.19 pence a share, while Standard Life raised its dividend by 6.2% to 13.8 pence a share.

At 1317 GMT, Prudential shares were up 1.5% at 739 pence, while Standard Life was up 0.1% at 238 pence, and the FTSE 100 index was up 0.7%.

Panmure Gordon analyst Barrie Cornes said Prudential "has delivered a strong set of year-end results despite the tough comparator of last year, and has confirmed that it remains on track to meet stretching targets for 2013 profit growth and cash generation, which we view as very positive." Cornes kept his buy rating and target price of 924 pence on the stock.

Shore Capital analyst Eamonn Flanagan said Standard Life's operating profit and dividend were better than he expected.

He noted that Standard Life warned that new business sales may be hit by the poor economic backdrop and weak consumer confidence in the first quarter, but said that "the group's focus on costs should alleviate some of this pressure on the top-line, with the group committed to a progressive dividend policy."

Flanagan kept his hold rating on Standard Life.

In separate briefings, Prudential and Standard Life raised their concerns regarding Solvency II.

Prudential's Thiam said one major question regarding the new capital regime is whether it should cover the non-EU businesses of EU insurers like Prudential, AXA SA (CS.FR), Allianz SE (ALV.XE), ING Groep NV (ING) and Aegon NV (AEG).

"The EU can say, 'We'll allow [E.U. insurers] with companies in the U.S. to run those companies as they always have.' That is what's called equivalence. If they say the U.S.'s regime is equivalent to Solvency II--end of the story. That's what the industry wants, not just us, but all the people who'd been successful in the U.S., like AXA, Allianz, ING and Aegon," Thiam said.

"We think that the U.S. has a reasonable solvency regime and all we want is for the EU to accept that," he said.

There are concerns that EU insurers would have to hold extra capital to protect their U.S. businesses if the EU doesn't recognize the "equivalence" of U.S. solvency rules.

"The EU might ask us to run our businesses in the U.S. on a Solvency II basis. And I can tell you that fighting U.S. competitors who don't need to worry about Solvency II--we just won't have a market, we won't be able to sell our products at all," Thiam said.

Thiam reiterated that Prudential is looking at whether it should move its headquarters away from the U.K. due to the uncertainties surrounding Solvency II.

Standard Life Chief Financial Officer Jackie Hunt said her company is also concerned over "equivalence" in Canada, where Standard Life has strong business.

"For us, clearly, if we don't get equivalence for our Canadian business, the impact is that it would be quite difficult to compete with North American insurers on an equal footing in Canada and to maximize the regulatory capital position from the European perspective," she said.

"Fundamentally, it would be quite difficult to manage an insurance company with two regulatory regimes--the local plus the European," Hunt said.

- By Vladimir Guevarra, Dow Jones Newswires. Tel. +44 (0) 2078429486, vladimir.guevarra@dowjones.com