Global demographic trends An ageing society Life expectancy at birth (change between 1980 and 2015) Share of population aged 65 or more (change between 1980 and 2017) UK 81 73 JAPAN 19% 15% NORTH AMERICA 83 75 79 EUROPE 1 73 27% 9% CHINA 77 16% 71 11% 76 66 20% 13% 11% 5% LATIN AMERICA 75 63 8% 4% AUSTRALIA 82 74 16% 10% 1. Data refers to the European Union 12 Source: United Nations, Department of Economic and Social Affairs, Population Division (2017). World Population Prospects: The 2017 Revision; World Bank
Retreat by corporates and governments A widening saving gap Corporates retreat … governments defer … while savers face a from DB schemes… statutory retirement age… widening retirement gap Number of FTSE 100 companies with Retirement age in key European markets 2015 retirement gap by country and DB schemes open to new employees expected growth multiple by 2050 2 Country Current Future $28tn $11tn $8tn $3tn $2tn 67 by 2028 1 65 65 and 7 months 67 by 2031 x4.9 x4.3 x4.1 x3.0 66 and 2 months 67 by 2023 x2.4 26 20 12 10 4 65 and 5 months 67 by 2027 2011 2012 2013 2014 2015 US JA UK CA NL 67 by 2022 1 DB scheme closed to new employees 66 and 7 months Growth in retirement gap in the 2015 to 2050 period DB scheme open to new employees 1. Future retirement age set to automatically increase further in line with life expectancy improvements; 2. World Economic Forum estimate 13 Source: Deloitte “FTSE 100 DC pension survey 2016 - 17”, ETK Finland, and World Economic Forum
Putting cash to work The biggest opportunity In Europe, a significant portion … representing a huge untapped of financial assets is still held as cash… potential in the savings market Cash deposits as % of financial assets in Europe (Sep-18) Cash deposits assets in Europe (2016, in EUR trillion) 2.2 1.8 1.4 45% 41% 40% 40% 37% 33% 31% 29% 28% 24% 17% 15% 14% 1.3 Total €10tn 0.8 Other EU-28 2.5 Cash deposits Other Financial Assets countries Source: INVERCO and Eurostat 14
Investment Engine Investment solutions meeting customer needs Our aim is to make all our investment capabilities available to the broadest range of retail customers and institutional clients, through their preferred channel, platform and tax wrapper Segregated and Smoothed solutions Mutual funds pooled mandates • PruFund is part of the largest • A complete range of funds • One of the leading European With-Profits Fund in the UK spanning all major asset classes investors in private assets • AuM Currently stands at over • c.£76bn in retail AuM, over half • £71bn of external institutional £43bn of which raised outside the UK AuM on top of £118bn assets from Prudential UK & Europe 3 • PruFund Growth pension • 74% of AuM are in the top 2 delivered positive returns every quartiles for performance 2 • 88% of mandates achieve or year since its launch in 2008 1 exceed target outcomes 4 1. The pension version of PruFund Growth has delivered positive returns in every full calendar year since its launch in November 2008, and most notably in 2018; a feat that is unmatched by its peers in the ABI Mixed Investment 20-60% Shares and 40-85% Shares sectors, and IA equivalents 15 2. 3-year performance weighted by AuM as of Dec-2018; 3. Prudential UK&E AuM managed by M&G, plus £2.8bn AuM from Prudential Asia Corporation and Asia Life Fund ; 4. Internal performance measure; Source: M&GPrudential as of FY2018
Customer and Distribution Attractive growth opportunities UK Europe International Broaden proposition Deepen presence Focused investments through digital and investment across institutional and retail to capture global growth capabilities markets opportunities • Transform digital customer • Enhance institutional • Leverage existing retail experience coverage in retail markets distribution partnerships and vice versa model with global banks • Seize tactical growth opportunities e.g. CDI 1 • Capitalise on demand for • Disciplined expansion in investment solutions large institutional markets (e.g. Japan, US, Australia) • Increase private asset origination capacity • Increase private asset origination capacity 1. Cashflow Driven Investing 16
Finance and Capital Our financial priorities Proactive and disciplined managers of capital … … delivering attractive shareholder returns balancing dividend and profitable growth… … while supporting transformation to drive customer experience, scalability, efficiency and capability 17
An international leader in savings and investments The scale of our ambition Where we come from Where we are going An international leader in savings and A leading UK savings and Who investments business with a investments with investment management we are growing European footprint and asset origination hubs around the world An integrated proposition to help Two businesses providing What individuals and institutions grow and manage annuities, retail and institutional we do asset management solutions their savings and meet their financial needs Transform our business to ensure we can Distributing through financial How service our customers however partners and largely servicing we do it customers via telephone and paper they want, whenever they want 18
M&GPrudential's story Key messages 1 Unique and compelling business mix ; a fund manager with a balance sheet 2 Differentiated and high-value savings and investments solutions to address customers’ needs 3 Proven track record for growing new franchises , at home and internationally 4 Well positioned to capture opportunities from demographic shifts and the search for yield 5 Attractive total return profile with capital discipline and profitable growth 19
1 2 Investment Customer and Customer and Customer and 1. Investment Engine Distribution Distribution Distribution Engine 3 Finance and Capital Finance and Capital Jack Daniels 3 July 2019
Asset Owner and Asset Manager Being both an asset owner and Asset Owner Asset Manager manager is a key competitive Managing 3 rd party funds Managing own funds advantage and allows us to: • Understand clients’ needs In-house fiduciary Investment manager manager for Pru UK&E specialised in active • Maintain a long-term investment philosophy Allocates £174bn across high-value add solutions asset managers (£265bn in total) • Align incentives £115bn managed by M&G £118bn from Pru UK&E 1 • Rapidly deploy seed funding £76bn from 3 rd party Retail £59bn allocated to other managers 2 • Invest at scale £71bn from 3 rd party Institutional These assets back our annuity book, With-Profits and unit-linked solutions • Attract third party funds 1. Also includes £2.8bn AuM from Prudential Asia Corporation and Asia Life Fund; 2. Predominantly other asset managers within the Prudential PLC group 21 Source: M&GPrudential as of FY18
Innovation benefits internal and external clients Leveraged loans example Leveraged loans AuM in £bn 9.0 8.0 • One of the first non-bank 7.0 investors in the asset class 6.0 First pension fund • Development of capability 5.0 client investment and track record attracted Launch of 4.0 third-party money pooled fund One of the first 3.0 non-bank investors • Now a leader in the field, in European 2.0 serving 200+ clients, with leveraged loans c. £8bn AuM 1 1.0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Internal Pru UK&E assets 3rd party Institutional assets 1. Includes all holdings in the portfolio; i.e. cash, Floating Rate Notes and Fx considerations 22 Source: M&G 31 December 2018. M&G figures are shown on a nominal basis plus committed capital
Our approach to investing 1 Listen to clients to understand Customer their underlying needs centric Value based 5 2 Develop convictions and Combine proven active Differentiated long-term identify value through capabilities with the strength capabilities discipline bottom-up analysis of the With-Profits Fund Stable and 4 3 Focus on retaining talent and Develop and offer clients high-value Focus on experienced foster collaboration between solutions, not just products innovation team investment professionals 23
Industry leading capabilities Our investment capabilities Some of our achievements We are one of the largest Private Multi-asset Debt Investors in the world (and 2 nd in Europe) 2 … Private Public Infracapital 1 Real Public Fixed Fixed Cash … as well as one of the largest & Estate Equities Alternatives Income Income Private Real Estate Debt Fund Managers (again 2 nd in Europe) 3 Private assets Our With-Profits Fund is one of the Winner of Multi-asset largest multi-asset funds in Manager of Europe 4 … the Year Greater demand from institutional clients … and we also run the 3 rd largest bond mutual fund in Europe 5 Greater demand from retail customers 1. M&GPrudential Infrastructure team; 2. PDI50; 3. PERE Debt Funds 50; 4. OBMG, the largest sub-fund of our With-Profits Fund; 24 5. Refers to the M&G (Lux) Optimal Income Fund; Source: Morningstar Asset Flows Europe OE ex MM ex FoF ex Feeder as at 31 March 2019. Based on AuM data in Euro
Scale in high-value market segments AuM by strategy AuM by asset class ∑ £265bn ∑ £265bn Look-through of Multi-asset holdings Public Cash Multi-asset Fixed internal Income SAA Infracapital 1 Multi-asset asset Private Assets £132bn £57bn 1. M&GPrudential Infrastructure team 25 Note: All internal AuM have been categorised as multi-asset; Source: M&GPrudential as of FY18
Strengths in the right places Search for yield Volatility management Pension de-risking Low yields drive shift from Desire to limit volatility drives shift DB pension scheme de-risking deposits to Fixed Income and towards assets with less drives need for solutions to match from Public to Private assets correlation to financial markets cash flows Trend benefits: Trend benefits: Trend benefits: Public Public Private Private Multi- Private Fixed Fixed Assets Assets asset Assets Income Income 26
Asset Owner 1 Being both an asset owner and Asset Owner Asset Manager Asset Manager manager is a key competitive manager is a key competitive Managing 3 rd party funds Managing 3 rd party funds Managing own funds advantage and allows us to: advantage and allows us to: • Understand clients’ needs Understand clients’ needs In-house fiduciary Investment manager manager for Pru UK&E specialised in active high- • Maintain a long-term investment philosophy term investment philosophy Allocates £174bn across value add solutions asset managers (£265bn in total) • Align incentives Align incentives £115bn managed by M&G £118bn from Pru UK&E 1 • Rapidly deploy seed funding Rapidly deploy seed funding £76bn from 3 rd party Retail £59bn allocated to other managers 2 • Invest at scale Invest at scale £71bn from 3 rd party Institutional These assets back our annuity book, With-Profits and unit-linked solutions • Attract third party funds Deep-dive 1 1. Prudential UK & Europe – also includes £2.8bn AuM from Prudential Asia Corporation and Asia Life Fund; 2. Predominantly other asset managers within the Prudential PLC group 27 Source: M&GPrudential as of FY18
The role of the Investment Office 1 Prudential UK&E assets Investment Office Asset managers ∑ £174bn ∑ £174bn Unit-Linked and other Predominantly other asset Non-Profit £18bn managers within the Prudential PLC group Strategic Asset Allocation Shareholder Annuities £25bn 1 Other managers Manager selection With-Profits M&G £131bn Implementation 1. Includes surplus assets 28 Source: M&GPrudential as of FY18
Characteristics of the With-Profits Fund 1 Long-term Diversification Active Importance of Illiquidity Credit risk Evolving asset approach management value and premium premium mix and new valuation asset classes Investment Office strategy and process 29
Strategic Asset Allocation 1 Evolution of the With-Profits Fund Asset allocation evolution between 2010 and 2019 Asset allocation as of April 2019 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Equities Real Estate Alternatives Fixed Income UK Asia ex. Japan UK Private Equity UK and Europe Africa TAA 1 Europe China Europe Hedge Fund US Alternative Credit 2 Cash North America GEM North America Infrastructure Asia Japan MEA Asia 1. Tactical Asset Allocation mandate; 2. Includes: Convertibles, Bridge Loans, Private High-Yield 30 Source: Allocation as of 1 st of May for OBMG, the largest of the funds within the With-Profits sub fund with £77.8bn as of YE2018
With-Profits Fund delivers superior outcomes 1 Annualised 5-year rolling returns 1 PruFund Growth returns vs. peers 25% 20% 15% 10% 5% 0% 1950 1960 1970 1980 1990 2000 2010 -5% 1. Data shows OBMG returns; OBMG is the largest of the funds within the With-Profits sub fund, backing PruFund Growth Fund, with £77.8bn as of YE2018 31 Source: M&GPrudential as of FY2018
Management of shareholder annuities 1 Seniority composition 1 Public vs. private asset composition 1 86% of the £39bn £39bn £25bn £39bn £39bn £25bn portfolio is rated A or higher 2% 2% 3% (46% is AA or higher) 19% 28% 31% 66% 78% 78% 56% 42% 40% 34% 27% 27% 23% 22% 22% 2016 2017 2018 2016 2017 2018 Risk Free Secured Senior Unsecured Subordinated Private Assets Public Assets 1. c.£1bn asset that are not rated, comprising cash, derivatives and junior notes including direct property holdings, have been excluded from the secured/unsecured analysis. Cash and derivatives have also been excluded from the private asset % in the analysis but junior notes have been 32 included. In March 2018, M&GPrudential announced the sale of £12bn (as at 31/12/2017) of its Shareholder Annuity portfolio liabilities to Rothesay Life, with the liabilities reinsured to Rothesay Life on 14 March 2018
Asset Manager 2 Being both an asset owner and Asset Owner Asset Owner Asset Manager manager is a key competitive manager is a key competitive Managing 3 rd party funds Managing own funds Managing own funds advantage and allows us to: advantage and allows us to: • Understand clients’ needs Understand clients’ needs In-house fiduciary In house fiduciary Investment manager manager for Pru UK&E manager for Pru UK&E specialised in active • Maintain a long-term investment philosophy term investment philosophy Allocates £174bn across Allocates £174bn across high-value add solutions asset managers asset managers (£265bn in total) • Align incentives Align incentives £115bn managed by M&G managed by M&G £118bn from Pru UK&E 1 • Rapidly deploy seed funding Rapidly deploy seed funding £76bn from 3 rd party Retail £59bn allocated to other managers 2 allocated to other managers • Invest at scale Invest at scale £71bn from 3 rd party Institutional These assets back our annuity These assets back our annuity book, With Profits and book, With-Profits and unit linked solutions unit-linked solutions • Attract third party funds Deep-dive 2 1. Prudential UK & Europe – Also includes £2.8bn AuM from Prudential Asia Corporation and Asia Life Fund; 2. Predominantly other asset managers within the Prudential PLC group 33 Source: M&GPrudential as of FY18
Growth in 3 rd party business 2 298 Asset Management AuM in £bn 265 265 264 246 244 228 c.55% 201 198 3 rd party 147 174 167 164 AuM 149 141 126 111 24 118 87 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 3 rd party AuM Internal AuM Source: M&GPrudential as of FY18 34
Depth of investment expertise 2 £132bn Multi-asset Income Growth Target Return Conservative Macro Allocation £118bn Pru UK&E SAA £14bn 3 rd party assets Infracapital 1 & Private Real Public Equities Fixed Income Estate Alternatives Fixed Income Leveraged Loans UK Commercial Infrastructure Equity Flexible Bond Fund Income Direct Lending Long Income PE Fund of Funds 2 Emerging Markets Value Distressed Debt & Cash Residential High Yield Recovery Restructuring Multi-asset Continental Europe Absolute Return Emerging Markets Illiquid Credit Asset Backed Asia-Pacific Government Bonds Japan Securities (ABS) Real Estate Debt Capital Solutions Inflation Linked Convertibles Total AuM 25 28 4 139 58 11 ∑ £265bn Private assets ∑£57bn 1. M&GPrudential Infrastructure team; 2. PE Fund of Fund mandate of £2.2bn not included in the reported AuM 35 Source: M&GPrudential as of FY18
Successful record of product innovation 2 Largest mutual funds Largest pooled mandates £21bn Optimal Income £8bn Alpha Opportunities Public FI Private/Public FI £7bn Dynamic Allocation £4bn All Stocks Corporate Bond Multi Asset Public FI £5bn Global Dividend £4bn Real Estate Secured Property Income Equity Income £4bn Corporate Bond £3bn European Loan Public FI Loans £3bn Global Fl. Rate High Yield £2bn European Property Public FI Real Estate £3bn Property Portfolio £2bn Asian Property Real Estate Real Estate £3bn Strategic Corporate Bond £2bn Infrastructure Infracapital Partners III Public FI Equity Typically retail customers Typically institutional clients Source: M&GPrudential as of FY18 36
Consistent ability to anticipate market demand 2 Our mutual fund launch success rate is almost double the industry average 1 Mutual fund launches 2 UK inflation linked Conservative Allocation 3 Recent fund launches 4 AuM at 3-year mark corporate bond £2,486m £775m Focus on value-add solutions Optimal Income Global Dividend Income Allocation Multi-Asset £1,412m £1,314m £779m • Global Target Return • Multi-Asset 2023 • Conservative Allocation Emerging markets 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 • EM Income Opportunities • EM Hard Currency Bond Episode Allocation Global Emerging Global Recovery ESG £242m Markets £432m £269m Global floating high • Global high yield ESG bond yield £3,796m • Positive impact • Sustainable allocation Global Convertibles Dynamic Allocation • Sustainable multi-asset £305m £197m 1. Mutual fund launch success rate of 60% vs. industry average of 29% - According to Mackay Williams partial success requires fu nds to gather €100m AuM within 3 years from launch (full success requires €500m) 37 2. M&GPrudential data includes all funds launched between Dec-06 and Dec-15; 3. AuM 9 months after launch; 4. From 2017 onwards
Strong investment performance 2 Mutual funds performance Segregated / pooled performance 1 Weighted by fund size % As % of revenues 16% “Achieving 5% 39% objectives” typically 55% Top quartile requires beating benchmarks by an agreed 88% 90% 91% threshold 58% 35% 19% Upper quartile 8% Lower quartile 14% 21% 18% Bottom quartile 4% 5% 8% 3% 4% 7% 12% 2016 - 3 year 2017 - 3 year 2018 - 3 year 2016 2017 2018 10-year Achieving objectives Fund is less than 3 years old 5-year Behind objectives 1-year 1. Numbers based on internal calculations. 38 Source: M&GPrudential, December 2018.
Resilient fee margins driven by solutions 2 Mutual funds Segregated / pooled Margins As % of AuM As % of revenues Average fee margin 1 (bps per AuM including internal client) 40 37 36 58% 66% 70% 93% 94% 95% 42% 34% 30% 7% 6% 5% 2016 2017 2018 2016 2017 2018 2016 2017 2018 Building blocks Solutions Market orientated Solutions 1 Fee margin calculated as fee based income, excluding performance fees, over monthly average AuM. Performance fees were FY16: £33m; FY17: £53m; FY18: £15m 39 Source: M&GPrudential as of FY18
Positive market outlook in our core areas 2 Global revenue pool (in $bn) and split by asset type $168bn $275bn $375bn Alternatives 40% 43% 43% (including Private Assets) 5% Solutions 10% 12% (including Multi-asset) 23% 20% 19% Active specialties 28% 21% 17% Active core Passive 7% 6% 4% 2008 2017 2022 Source: BCG Global Asset Management survey 40
Confident about the future 2 Expert Consistent High-value Supportive where it matters track record solutions market dynamics We have an established We have a long history Through continuous Customers’ demand presence in segments and strong reputation innovation we have is expected to where credible for meeting (and gradually moved strengthen over time expertise is scarce , exceeding) the needs away from simple , in our core areas of and threat from passive and expectations of low-value, building expertise (private is limited our customers blocks to high-value asset and multi-asset investment solutions in particular) Source: M&GPrudential as of FY18 41
Investment Engine Key messages Combination of asset owner and manager as key competitive advantage Long-term, active, investment philosophy with emphasis on value Extensive range of capabilities in public and private markets Ethos of customer-focused innovation Growth opportunities in our core areas of expertise 42
Institutional deep-dive William Nicoll 3 July 2019
What we mean by institutional clients Organisations investing their own assets … Pension Schemes • …where there are legally mandated liabilities … Insurance Balance Sheet Assets • …to be delivered within specified Sovereign Wealth Funds regulatory guidelines … • …in which a fiduciary duty must be Foundations and Endowments exercised and evidenced 44
Retail and Institutional markets are not the same Retail Institutional • Industry set up to buy • Industry set up to maintain status quo • Add value by equipping advisers to • Add value by solving problems service their clients • Large number of small decisions • Small number of large decisions • Focus on upside gain • Focus on downside protection • Targeted and regular communications • Careful and selective communications 45
The institutional market is attractive The market is large, growing and concentrated… … with attractive dynamics Pension schemes Global AuM in $ trillion 32% • Natural growth is underpinned by strong macroeconomic-factors 41 • Market favours established players 31 due to quality standard requirements • Mandates are large and long-term oriented Top 300 pension • Client relationships are persistent funds represent 40%+ of global and assets sticky pension assets 2012 2017 300 largest Rest of the market pension funds Source: The Global Pension Asset Study (GPAS) by Willis Towers Watson Thinking Ahead Institute Paper September 2018 46
A differentiated approach We aim to always be trusted partners by leveraging: Deep expertise and • We have one of the largest dedicated credit teams in Europe stable team • Retain talent and foster collaboration across investment teams Disciplined, • Adopt a truly bottom up approach long-term view • Do not forecast: pure fundamental research Innovation within a • Pursue innovation as a joint effort between the sales and investment team clear control framework • Avoid creating fashionable products that don’t deliver, or good ones that no one wants • Tell the truth, always – this is a genuine differentiator Client centric approach • Be patient and prioritise best client outcomes – only invest in the right opportunities 47
Solving clients’ problems, not selling funds Win Pitch We help clients formulating 12-18 months their own requirements and Buy rating identifying relevant solutions We aim to be influential at Onsite due diligence the critical, client centric points in the process The market focuses Consultant researches on influencing the manager consultants Client defines requirements 48
Innovation is core to our proposition Route to innovation Product case study – Illiquid Credit Opportunity Fund • Launching new products is Fund I Fund II Fund III not easy ; the industry is setup to resist buying • We do not waste clients’ time Idea Education Pitch Ed. Pitch and only take ideas that are highly relevant to them 18 months process 9 months Pre-launch • Clients trust us and are willing to seed our new products • We gain a lead-time £0.5bn AuM raised £0.8bn AuM raised £1.1bn advantage on peers Pre-orders 2 Pitch conversion rate 1 ~80% Pitch conversion rate 1 ~80% • Capital raise cycle repeats faster and at greater scale 1. Excludes pitches pending result; 2. Verbal commitments as of April 2019 49 Source: M&GPrudential
Our long-term partnership approach works Client case study – large UK pension scheme Conditions to build trust Start with low- Grow initial mandate(s) Shift from low to margin products start higher-value ones high-value solutions £1.4 £5 Client AuM in £bn £1.2 1 Offer solutions that £4 solve client problems £1.0 £3 £0.8 2 £0.6 £2 Fulfil our promises £0.4 £1 £0.2 £- £- A product agnostic, client-centric 2011 2012 2013 2014 2015 2016 2017 2018 approach has grown AuM by 4x Low-value/margin High-value/margin Client and revenue by 9x products solutions Revenue Source: M&GPrudential, December 2018; revenue and AuM numbers are based on committed values and fully ramped private debt portfolios 50
20 year track record of innovation 2018 Cash Flow Driven Investing 2017 Consumer Loans 2017 Impact Financing 2014 Illiquid Credit Opportunity Funds 2009 Direct Lending Fund 2007 Multi Asset Credit 2007 Real Estate Debt 2002 Asset Backed Securities 2001 Infrastructure Equity 2000 Long Lease Property 1999 Leveraged Loans 1997 First Private Placement investment Corporate Credit 51
We build solutions that consistently deliver Solving client problems Delivering on promises As % of revenues As % of revenues “Achieving objectives” typically requires beating benchmarks by an agreed 88% 91% 90% 93% 94% 95% threshold 4% 5% 3% 8% 4% 7% 7% 6% 5% 2016 2017 2018 2016 2017 2018 Achieving objectives Solutions / Outcome orientated Fund is less than 3 years old Market orientated Behind objectives 95% of strategies: M&GPrudential delivers performance - Are solutions that meet a clear client need expectations consistently over time - Cannot be replicated by ETF Source: M&GPrudential, December 2018. Numbers based on internal calculations. Institutional Fixed Income and Real Estate. 52
Being a trusted partner brings repeat business 1 2 Work Grow existing with us relationships Our pitch conversion rate 250+ clients invest in multiple strategies for the last 3 years is 79% 1 with us (~55% of institutional AuM) 3 Seed our new products 70% of Funds launched in the last 5 years have been seeded by external clients 1. Based on UK institutional fixed income pitches, excludes pitches pending result 53 Source: M&GPrudential, December 2018
Our Institutional model takes time, building relationships on trust that pay dividends in the long term 3 rd party UK institutional revenues in £m 180 UK revenue has increased over 20 times in past 15 years to over £160m 160 140 120 100 80 60 40 20 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: M&GPrudential, December 2018. 54
We have implemented this strategy internationally, with similar results 3 rd party institutional revenues for selected international markets in £m 18 We initially assess markets through fly-in fly-out Before moving to a light touch dedicated coverage model Netherlands 16 14 12 Nordics 10 Switzerland 8 6 Japan 4 2 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: M&GPrudential, December 2018. Finance data. 55
New office openings in North America and Australia enable us to tap a pool of institutional assets of ~$30tn Institutional AuM in $ trillion US 24.7 Japan 3.1 UK 2.9 Australia 1.9 Canada 1.6 Netherlands 1.5 Switzerland 0.9 = New dedicated coverage 1 Norway 0.9 = Existing coverage South Korea 0.7 Germany 0.6 1. Data from PWC market research centre as Norway is not covered by WTW 56 Source: WTW Global Pensions Asset Study 2018
Institutional deep-dive Key messages Large scalable market Market favours established players Clearly differentiated approach Proven track record Significant growth opportunity 57
1 2 2. Customer Investment Investment Customer and Engine Engine Distribution and Distribution 3 Finance and Capital Finance and Capital 3 July 2019
M&GPrudential Customer and Distribution Become the best loved and most successful Our vision: savings and investments company Investment Engine: Infracapital 1 & Private Fixed Real Multi- Public Public Income Estate Alternatives asset Fixed Income Equities Unified range of proprietary investment solutions Smoothed solutions | Mutual funds | Segregated and pooled mandates Savings & Asset Management Customer and Distribution: Retail Institutional Heritage Integrated proposition and customers clients distribution approach 1. M&GPrudential Infrastructure team 59
M&GPrudential broad customer relationships Savings & Asset Management Retail Institutional Heritage customers clients customers 1 0.7 4.8 c. 900 Customers million million £127bn £71bn £123bn AuM £51bn Retail Savings Institutional Asset Management £76bn Retail Asset Management Guidance and advice Segregated mandates Traditional With-Profits Core Insured multi-wrapper services and Pooled mandates Shareholder Annuities solutions (e.g. PruFund) products Mutual funds and Corporate Pensions sub-advisory solutions and Other 1. Excludes annuity customers expected to transfer to Rothesay Life 60 Source: M&GPrudential as of FY18
Customer and Savings & Asset Management Retail Institutional Distribution Heritage customers clients Savings & Asset Management David Macmillan & Joffy Willcocks 3 July 2019
Savings and Asset Management segment UK retail customers Direct Tied advisers David UK retail IFAs 1 Macmillan customers DFMs 2 and top-end advisers International retail customers Global banks & wealth managers Joffy Willcocks Investment consultants Institutional clients In-house investment teams 1. Independent Financial Advisers 62 2. Discretionary Fund Managers
Significant opportunity from dynamic market trends, with exceptional experiential innovation at the core Regulatory focus on customer Winning characteristics Demanding new responses from Customer experience innovation is providers to deliver successfully key to competing in all areas CAPABILITIES: Investing in skills, Cyber Crime infrastructure & digital technology Vulnerability Attitude to Risk Delivering DIGITAL: superior customer Self service, outcomes and Automation and scale preventing harm Value for Money Transparency PROPOSITION: Differentiated offerings, Decision Support expanded solutions & intuitive experience 63
Capitalising on market trends via our unique multi- wrapper ‘smoothed’ solution (PruFund) Market Share of UK Retirement (%) PruFund inflows (£bn) 12.0 40% Pensions Pensions 0.5 Freedom Freedom Retirement Account 35% Announced Live Post-retirement 30% Retirement Account 6.0 Pre-retirement 25% ISA 20% 1 Legacy Pensions (incl. TIP) 1.3 15% 0.9 Offshore bonds 10% 0.9 1.8 0.3 5% Onshore bonds 0.3 2.4 1.2 0% 2013 2014 2015 2016 2017 2018 2013 2018 Pension Accumulation Drawdown Smoothed returns attractive to customers who Full range of wrappers addresses customer wish to remain invested in or at retirement needs for smoothed returns 1. Trustee Investment Plan 64 Source: ABI Q4 Market Data and M&GPrudential as of FY18
We gather assets directly onto our digital platform, bypassing open architecture platforms Our adviser support base PruFund inflows (£bn) IN-HOUSE 12.0 11.8 Prudential Financial Planning Generalist open 8.4 architecture platforms 380+ tied advisers 1 • c25 credible platforms 5.5 IFAs 2 and non-M&GP tied advisers 3.2 • Standard offering 17 supporting Network Distributors 1.8 c3,000-6,000 funds c.2,500 Advisor Firms • No ‘smoothed’ offering c.7,000 Registered Individuals 2013 2014 2015 2016 2017 2018 Demand for differentiated propositions (such as PruFund) bypasses open architecture platforms BYPASS 1. As of June 2019 65 2. Independent Financial Advisers
Merger provides broad value chain coverage and proprietary influence over customer proposition Comprehensive value chain Multi-channel distribution participation including guidance and advice Guidance & Advice Rich stream of real data from customers and advisers to shape experiential innovation Direct & PFP 1 Direct channels support existing and new customers with access to full financial planning capability Progressively integrating technology into our advice offering Unrivalled wealth and retirement manufacturing capability Wealth Platform Full range of wrappers with digital experience – SIPP, Drawdown, ISA and Bonds UK IFAs 2 Broad appeal amongst IFAs 2 driving strong market share growth Expert proprietary investment management Insured & Non- Wide range of M&G funds and highly diversified global management capabilities Insured Strategies Foundation for competitive range of investment solutions for our customers Smoothing and guarantees via PruFund 1. Prudential Financial Planning 66 2. Independent Financial Advisers
Allowing our proprietary fund range to expand to target untapped growth opportunities Merger-enabled customer solutions PruFolio: A multi-asset range for all needs Increasing share of wallet through existing One risk-rated range with three consistent wrappers and channels drives growth investment styles meets customers needs Expected PruFolio Range M&G OEICS 9 1 1 14. 1 Return onto Prudential % 0 2 5% 7 wrappers % % % Delivered PruFolio launched At Retirement Responsible 2019 Income Investing delivery Funds Range No Risk Lower Medium Very High Higher …with plans to continue to evolve our offer Expected volatility ceilings 67
Accelerating transformation to deliver against our objective of superior customer outcomes CAPABILITIES - Investing in skills, infrastructure & digital technology CX 1 designers, customer insight specialists, coders and data scientists Rapid, iterative digital development of customer applications DIGITAL - Self service, automation & scal e Delivering Intuitive interfaces for customers, advisers and colleagues superior customer outcomes and Advice algorithms embedded in service journeys to guide and protect customers preventing harm Straight-through processing eliminating unnecessary delays and errors PROPOSITION - Differentiated offerings & expanded solutions New investment solutions to meet more customer needs Automation enabling price reductions to enhance value for money 1. Customer Experience 68
Retail Savings Key messages PruFund is the successful anchor on our digital platform – more than just drawdown Broad market coverage from our multi-wrapper offering – which continues to expand Merger enables ongoing proposition expansion – starting with PruFolio risk-rated range Transformation investment creates critical capabilities – a step change in customer outcomes Relentless focus on customer proposition and experience is the key to success 69
Savings and Asset Management segment Retail and Institutional Asset Management Direct Tied advisers David UK retail IFAs 1 Macmillan customers DFMs 2 and top-end advisers International retail customers Global banks & wealth managers Joffy Willcocks Investment consultants Institutional clients In-house investment teams 1. Independent Financial Advisers 70 2. Discretionary Fund Managers
Growing our international footprint £ 321 bn AuM 51 UK EUROPE 20 distribution offices 123 31 12 £260.2bn £49.4bn 55 37 28 markets ASIA-PAC 0.4 £7.8bn 2 0.8 2.9 AMERICAS MIDDLE EAST 4.9 & AFRICA 1 £1.2bn £6.4bn Retail Savings Retail Asset Management Institutional Asset Management Heritage Distribution centres 1. Assets from Prudential Investment Managers South Africa are recorded on a proportional basis in line with M&G’s 49.99% ass ociate shareholding; 2. Includes £3.8bn of assets managed by M&G for other Prudential plc Group companies 71 Note: AuM as at December 2018, based on client domicile
The evolution of M&GPrudential’s third party assets M&GPrudential 3 rd party assets by distribution channel 2003-2018 (in £bn) and international distribution offices 1 New York Miami Melbourne Sydney 2 164 164 Distribution offices Japan opened pre-2003 Sweden 147 137 137 Singapore Germany 126 53 Hong Kong 126 Austria 44 Netherlands 112 36 France 41 32 33 Luxembourg 92 Switzerland 89 23 37 32 37 21 70 Spain 24 41 39 42 39 51 17 47 Italy 45 33 30 36 11 23 8 11 29 74 24 71 5 16 64 15 14 55 55 3 51 13 50 1 11 38 10 35 30 24 22 22 18 15 13 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Institutional Asset Management UK Retail Asset Management International Retail Asset Management 1. UK and Ireland offices not shown as they are considered “home” markets; South Africa not shown as it an associate sharehol ding in PIMSA; Poland not shown as it distributes Retail Savings and not Asset Management solutions; 2. Sydney office opened in early 2019 72 Note: offices in Germany and Austria were established in 2001- 2002; “PPL GILP” has been classified in Institutional from 2003 -2014 and moved to UK Retail for 2015-2018
Asset Management flows 2016-2018 M&GPrudential asset management net flows Retail market flows 2 (£bn) Europe and Int’l mutual funds net sales excl. ETF & Index Funds (by asset class in €bn) 40 30 6.6 20 10.8 10 4.1 1.2 0 -7.5 -10 -9.3 -20 -6.5 1 -30 -40 2016 2017 2018 2016 2017 2018 Institutional Asset Management Bond Equity Mixed Assets Retail Asset Management 1. Outflow of one particular £6.5bn low- margin Institutional mandate as referred to in Prudential plc’s Full Year 2018 results 73 2. Source: Broadridge FundFile Net Sales as of December 2018. Figures in EUR, region is Europe (including UK) and International, data exclude ETFs and Index funds
A proven ability to grow internationally: M&GPrudential in Italy Evolution of M&GPrudential Italy AuM M&GPrudential Italy AuM by asset class £bn 18.6 Leveraged 17.4 Other institutional Institutional: 3% Loans 3% strategies 1% Sub-Advisory: 11% 10.9 10.0 10.4 Retail Advisory: 56% Fixed Income Multi-asset 6.8 54% 35% 3.7 0.1 0.3 0.5 0.7 0.3 0.5 1.2 1.7 Discretionary: 30% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: M&GPrudential. As at end of December 2018 74
What is Sub-Advisory? Partnering with distributors to develop Driven by changes affecting our bespoke customer solutions distributors (and their clients) Off-the-peg Adapting to RDR Regulatory and MIFID II, with e.g. existing range of mutual funds changes rebates gradually disappearing (building blocks) Demonstrating Solving the Negative products meet Suitability bank balance specific customer cash rates sheet problem needs Tailor-made solutions • Segregated mandates or single Enhancing the distributor mutual funds valuation of a Economics distributor by • Outcome-oriented solutions, extending their flexible investment approaches value chain 75
Sub-Advisory markets present a huge opportunity for M&GPrudential European Sub-Advisory Growth Attractive new business stream (forecast in € trillion) for M&GPrudential 1.7 • Institutionalise the wholesale distribution model 1.5 1.4 1.3 • Democratising Institutional Asset Management 1.1 capabilities for retail customers 1.0 0.9 0.9 0.8 • Opportunity to build deeper partnerships with 0.7 0.6 key global distributors: − Lower margins but greater volumes − Higher asset persistency − Chance to become a partner of choice − Greater share of wallet Alternatives (Illiquid) Equity Fixed Income Money Market Multi Asset Source: InstiHub & StrategicInsights 76
Drivers of growth What we are doing Sub-Advisory Created dedicated ‘Investment Solutions’ team to develop bespoke client solutions European Sub-Advisory market forecast to hit € 1.7tn by 2028 1 ESG Integrating ESG principles into everything we do and defining new ways to differentiate ourselves Set to attract $420bn of new assets over the next 5 years 2 Smoothed returns Opportunity to address the needs of clients looking for smoothed returns, low volatility, and an alternative to cash €10tn+ of retail wealth in Europe currently in deposit accounts 3 Cross-selling Joined institutional and wholesale distribution and proposition teams under a common leadership to offer International institutional distribution efforts historically focused on our whole suite of products to all clients across geographies northern Europe (and wholesale ones on Southern) 1. InstiHub; 2. Impactvesting; 3. Eurostat 77
Priorities by region Retention and tactical Deeper into Focused international growth in the UK Europe expansion Year of entry: 1848 Year of entry: 2001 AuM: £15bn AuM: £260bn AuM: £49bn SOUTH AFRICA ASIA NORTH AMERICA AUSTRALIA • Europe continues to drive short to • Asia: Leverage existing partnerships • UK is a mature but significant market for medium term growth with global banks and our new SICAV M&GPrudential offering and solutions capabilities • Opportunities to enhance institutional • Focus distribution efforts on top end of coverage in traditional retail markets and • US: Remains the largest savings and the retail market and on retaining vice versa investments market; new distribution existing assets and clients offices opened in NY and Miami • Capitalise on growing demand for • Seize tactical growth opportunities e.g. solutions with Sub-Advisory, ESG and • Institutional: Disciplined expansion in cashflow driven investing (CDI) smoothed return products large markets (e.g. Japan, US, Australia) 78
Retail and Institutional Asset Management Key messages Strong history, brand and penetration in the UK market A successful track record in internationalising our business Unified investment engine to create tailored solutions to meet customers’ needs Evolving business model to take advantage of opportunities in existing and new markets Wide international coverage, but with local customer service Well positioned to capitalise on international growth opportunities 79
Customer and Savings & Asset Management Savings & Asset Management Retail Institutional Distribution Heritage customers clients Heritage Roddy Thomson 3 July 2019
Our business transformation is designed to deliver real outcomes to our customers 4.8 0.7 0.7 Retail Retail Institutional Institutional Heritage c. 900 c. 900 customers customers clients clients customers 1 million million million Customer & People Digitally Enabled Simplified Low Risk Driven To enable scalable To ensure a To improve customer To serve customers growth at declining continued strong outcomes and effectively, the way marginal costs, control environment become the best they want, when leveraging partner and operational loved company they want capability resilience Supporting M&GPrudential’s vision to become the best loved and most successful savings and investments business 1. Excludes annuity customers expected to transfer to Rothesay Life 81 Source: M&GPrudential as of FY18
The transformation of our Heritage book Heritage Purpose customers 1 To deliver the best possible service outcomes to 4.8 Heritage customers million Our Challenge £123bn AuM Service delivery that adapts to the changing landscape, whilst driving down costs & improving controls Traditional With-Profits £85bn Our Vision Shareholder Annuities £25bn Simplified, enabled and upgraded customer operations through transformation of operational & IT environment Corporate Pensions £14bn and Other 1. Excludes annuity customers expected to transfer to Rothesay Life 82 Source: M&GPrudential as of FY18. Totals may not sum as a result of rounding
We will move from 14 policy administration systems to just one Some of our Heritage policy admin systems are over 30 years old (figures reflect policy numbers) NPT (New PruTrust) <0.1m IB 1982 WoL, bonds, protection (Industrial Branch) Lamda 2.0m 1968 <0.1m PSP2 1998 “Man from the Pru” Pension schemes (Pension Saving Plan) <0.1m 1980s GPDA Pension schemes OPAL DAPA (Group Pensions Deferred Annuities) <0.1m (Online Pension & Life) (Deferred Annuities Pensions Admin) <0.1m 0.6m 1978 1987 2002 Pension schemes, deferred annuities Bonds, life & pensions Deferred annuities SALAS (ScotAm Life Admin System) 0.5m Atlantis OB UAPS 1979 1995 <0.1m (Ordinary Branch) (Unified Annuity Payment System) 0.2m Endowments, pensions, bonds 1.3m Pensions 1970s 2000 Life & pensions CAPSIL Annuities (Capsco System for Insurance & Life) OPT 0.4m HartLink 1989 (Old PruTrust) 0.4m <0.1m 2010 Bonds (inc. PruFund), pensions 1970s Pension schemes Unit-linked 1960s 1970s 1980s 1990s 2000s 2010- 83
We signed a 10-year partnership with Diligenta to provide proven digital and PAS 1 migration expertise Outsourcing the administration of the UK Heritage book enables us to variabilise our cost base Diligenta has strong credentials and is a regulated business since 2005… before our partnership, it already administered c.12m policies on behalf of eight clients Scope of activities now undertaken by Diligenta Distribution Customer Services & Digital IT Services PAS migration Services Finance transformation Services Over 2,400 colleagues transitioned to TCS/Diligenta in 2018 • Around 1,800 Capita staff (of which c. 1,100 UK based) transferred to Diligenta in August • Nearly 650 Prudential colleagues (of which c. 450 UK based) transferred to Diligenta in October 1. Policy Administration System 84
Our roadmap delivers significant customer outcome benefits and cuts total costs of ownership by 50% Migration 3 Diligenta service Pensions, Bonds, Life commencement customer policies Migration 5 dates Migration 2 annuity customers Corporate Pensions Migration 1 (SALAS) Migration 4 policies Pensions, Bonds, Life IB, and Pensions, customer policies Bonds, Life policies 2018 2019 2020 2021 Digital Customer self-service: All customer calls on one Digital enablement Foundations Single workflow for contact centre platform completed in place Operations E2E customer journey (MyPru) Key Delivered In progress Planned 85
Significant improvements in customer service are already being delivered Transformed approach 44% reduction in to customer end-to-end journey management – Journey NPS up by days since August 1 from transactions to 14 points since end-to-end journey August 1 outcomes … and we’re delivering continuous improvements for customers IVR 2 platform BaNCS CRM Re-platform and Online bond claim Modernised assisted registration for customer and statements and for MyPru advisors reduced charges 1. Period from August 2018 until end 1Q 2019. 2. Interactive Voice Response 86
Significant improvements in customer service are already being delivered Transformed approach Transformed approach 44% reduction in 44% reduction in to customer to customer end-to-end journey end-to-end journey management – management – Journey NPS up by Journey NPS up by days since August 1 days since August 1 from transactions to from transactions to 14 points since 14 points since end-to-end journey end-to-end journey August 1 August 1 outcomes outcomes … and we’re delivering continuous improvements for customers … and we’re delivering continuous improvements for customers IVR 2 platform BaNCS CRM Re-platform and Online bond claim Online bond claim Modernised Modernised assisted registration for customer and for customer and statements and statements and for MyPru advisors advisors reduced charges reduced charges 1. Period from August 2018 until end 1Q 2019. 2. Interactive Voice Response 87
Re-platform for MyPru provides the foundation for digital transformation ambitions • Foundations in place to ensure that customers who wish to engage online can do so (scalable) • Supported registration (where customers require help) allows set-up of access within minutes • User-friendly and easy to navigate on all devices • Two-way secure messaging and document sharing capability • Substantially improved stability & response times • Provides customer insight – in turn informs prioritisation of future development 88
Significant improvements in customer service are already being delivered Transformed approach Transformed approach 44% reduction in 44% reduction in to customer to customer end-to-end journey end-to-end journey management – management – Journey NPS up by Journey NPS up by days since August 1 days since August 1 from transactions to from transactions to 14 points since 14 points since end-to-end journey end-to-end journey August 1 August 1 outcomes outcomes … and we’re delivering continuous improvements for customers … and we’re delivering continuous improvements for customers IVR 2 platform IVR 2 platform BaNCS CRM BaNCS CRM Re-platform and Re-platform and Online bond claim Modernised Modernised assisted registration assisted registration for customer and statements and statements and for MyPru for MyPru advisors reduced charges reduced charges 1. Period from August 2018 until end 1Q 2019. 2. Interactive Voice Response 89
Online bond claims launched in late 2018, improving customer experience… 35% take -up to date Online bond claim for customer and advisors – c. 35% of claims now processed digitally, halving the number of touchpoints & reducing cycle time by over 75% Initiated via phone or paper forms… As was… E2E time ~16 days (5% >47 days), ~11 ‘touches’, 56% paid on time Initiated via MyPru app… As is… 3.5 days, ~3 ‘touches’, BaNCS will automate payments 90
Significant improvements in customer service are already being delivered Transformed approach Transformed approach 44% reduction in 44% reduction in to customer to customer end-to-end journey end-to-end journey management – management – Journey NPS up by Journey NPS up by days since August 1 days since August 1 from transactions to from transactions to 14 points since 14 points since end-to-end journey end-to-end journey August 1 August 1 outcomes outcomes … and we’re delivering continuous improvements for customers … and we’re delivering continuous improvements for customers IVR 2 platform IVR 2 platform BaNCS CRM BaNCS CRM Re-platform and Re-platform and Online bond claim Online bond claim Modernised assisted registration assisted registration for customer and for customer and statements and for MyPru for MyPru advisors advisors reduced charges 1. Period from August 2018 until end 1Q 2019. 2. Interactive Voice Response 91
Modernising statements & other customer communications whilst improving customer value Improved investment proposition Reduced charges 280,000 customers 172,000 customers Modernised Annual Benefit Removed Exit Charges from all Statements personal pension products c. 1.7 million customers Over 1 million customers by the end of 2018 92
Heritage transformation Key messages Digital transformation Systems rationalisation and simplified operating model Step change in customer outcomes Efficient and variabilised cost base Improved resilience and enhanced control environment 93
1 2 Investment Investment Customer and Customer and Customer and Engine Engine Distribution Distribution Distribution 3. Finance and Capital 3 Finance and Capital Clare Bousfield 3 July 2019
Finance and Capital Our financial priorities Proactive and disciplined managers of capital … … delivering attractive shareholder returns balancing dividend and profitable growth… … while supporting transformation to drive customer experience, scalability, efficiency and capability 95
What we will cover today ► Introduction to our new segmentation To be covered closer to the time of demerger: ► Merger & transformation project • Prospective financial direction • Capital generation ► Capitalisation • Capital and risk management framework • Dividend policy ► Capital management preview 96
New financial segmentation: Reflecting how we see business opportunities Historical view New financial segmentation A B Savings & Heritage Asset Management Asset Management > 1 1 Retail Savings Traditional With-Profits (incl. PruFund) With-Profits Fund 2 2 Retail Shareholder Annuities UK & Europe Life Insurance Asset Management 3 3 Institutional Corporate Pensions Asset Management and Other 97
AuM by sub-segment AuM by year, 2016-18 351 (£bn) 321 311 74 Institutional Asset Management 71 64 Savings & Asset 90 76 Retail Asset Management Management 73 44 32 51 Retail Savings (incl. PruFund) 12 12 Other Heritage 14 39 39 25 Shareholder annuities 1 Heritage 91 90 Traditional With-Profits 85 2016 2017 2018 Totals may not sum as a result of rounding 98 1. In March 2018, M&GPrudential announced the sale of £12bn (as at 31/12/2017) of its Shareholder Annuity portfolio liabilities to Rothesay Life, with the liabilities reinsured to Rothesay Life on 14 March 2018
Net flows by sub-segment Net flows by year, 2016-18 (£bn) 6.6 Institutional Asset Management Retail Savings FY16 FY17 FY18 10.8 Net Flows PruFund 6.5 9.0 8.5 4.1 Other (0.2) (0.3) (0.3) 1.2 Retail Asset Management 8.7 8.2 Total Retail Savings 6.3 8.7 8.2 6.3 Heritage Retail Savings (incl. PruFund) (7.0) (7.1) (7.7) FY16 FY17 FY18 Net Flows Shareholder annuities (1.4) (1.7) (1.3) (7.5) (9.3) Traditional With-Profits (5.4) (5.5) (5.3) Heritage Other (0.3) (0.5) (0.4) (6.5) 1 Total Heritage (7.1) (7.7) (7.0) 2016 2017 2018 1. Outflow of one particular £6.5bn low- margin Institutional mandate as referred to in Prudential plc’s Full Year 2018 results 99
Earnings by source – FY 2018 2018 Adjusted Operating profit Asset With-Profits s/h Shareholder £m, pre-tax Management transfers 1 Annuities & Other 2 Total A Savings & Asset 468 473 54 (59) Management B - 201 961 1,162 Heritage Total Segments 473 255 902 1,630 Corporate centre (13) Total Adjusted Operating Profit 1,617 1 With-Profits shareholder transfer, net of hedging effects; 2. Heritage includes specific positive items in relation to annuities, including longevity assumption changes (£441m) and gain from insurance recovery related to provision for past annuity sales (£166m) 100
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