PRUDENTIAL PLC Pan European Strategic Decisions Conference Jonathan Bloomer 29 September 2004 Group Chief Executive
This statement may contain certain “forward-looking statements” with respect to certain of Prudential's plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words “believes”, “intends”, “expects”, “plans”, “seeks” and “anticipates”, and words of similar meaning, are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Prudential's control including among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, the impact of competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Prudential and its affiliates operate. This may for example result in changes to assumptions used for determining results of operations or re- estimations of reserves for future policy benefits. As a result, Prudential's actual future financial condition, performance and results may differ materially from the plans, goals, and expectations set forth in Prudential's forward-looking statements. Prudential undertakes no obligation to update the forward-looking statements contained in this statement or any other forward-looking statements it may make.
PRUDENTIAL PLC: GROUP STRUCTURE UK & Europe USA Asia
A MULTI-NATIONAL LIFE INSURANCE GROUP INCREASING INTERNATIONAL DIVERSIFICATION New business achieved profits New business achieved profits 1998 2004 HY 14% 29% 44% 53% 33% 27% UK and US Asia Europe
GOOD ALL-ROUND PERFORMANCE STRONG START TO THE YEAR ACROSS THE GROUP � UK insurance operations moving strongly forward � An outstanding performance from M&G � Focus on returns in US business � Asia on track to meet full year growth targets � Good numbers across the group*: - APE sales up 13% - achieved basis operating profit up 55% - MSB operating profit up 83% *At constant exchange rates
UK INSURANCE OPERATIONS A TIME OF CHANGE AND OPPORTUNITY Market Prudential’s position � Environment beginning to stabilise � Undisputed financial strength � Market is concentrating: will favour � Powerful product propositions stronger players � Scale business with low cost base � 1.5% price cap provides opportunity and efficient operations � Clarity emerging on distribution � Net winners in changing distribution environment � Restoring consumer confidence is key � The industry’s “biggest” brand Clear beneficiary of market concentration
VAST OVERALL UK SAVINGS MARKET TOTAL GROSS HOUSEHOLD WEALTH (£BN) 2003 Deposits: £808 bn Equities: £370 bn Bonds and loans: £44 bn Other: £87 bn Medium/long-term savings: £1,658 bn Mutual funds: £136 bn Residential property 1 : £2,575 bn Total: £5,678 bn Sources: ONS (UKEA Table 64, & Residential Property Blue Book Table 10.10) 1. Residential property data is 2002
UK INSURANCE OPERATIONS DIVERSIFIED DISTRIBUTION STRATEGY Business to Business Intermediaries Direct to Consumer Partnerships £105m £116m £73m £16m APE sales (1H 03) £113m £141m £63m £40m APE sales (1H 04) % of UK APE 32% 39% 18% 11% sales (1H 04) Consulting Actuaries Retail IFAs Direct Marketing Banks, Distributors, Channel and Benefit Advisers Retail Brands Defined Benefit, With-Profit and Unit- Individual Pensions, Individual Pensions, Defined Contribution, Linked Bonds, Annuities, Savings Annuities, Savings Product AVC and Stakeholder Annuities, and Investments, and Investments, Schemes, Bulk Protection Protection Protection Annuities
UKIO KEY PRODUCT LAUNCHES ACHIEVING MOMENTUM IN PRODUCT INNOVATION CORPORATE PENSION FUND RANGE FLEXIBLE INVESTMENT PLAN PROTECTION ENHANCEMENT INDIVIDUAL PENSIONS PROPOSITION PRUFUND 2003 2004 2005 BULK S32 RISK MANAGEMENT PRODUCTS FOR DB EQUITY PROTECTION PENSION SCHEMES RELEASE PROPOSITION DISTRIBUTION BOND ISAs MONEY PURCHASE PLAN
US INSURANCE OPERATIONS FOCUSING ON VALUE CREATION Market Prudential’s position � Increasingly competitive environment � Low-cost, flexible infrastructure emphasising focus on costs � Innovative ‘unbundled’ product design � Product features, including guarantees � Disciplined pricing � Move toward financial planning and � Strong risk management advice � Relationship-driven distribution model; � Regulatory changes favouring the developing fee-based platform customer Significant competitive advantage
INVESTABLE RETIREMENT ASSETS IN THE US US HAS BY FAR THE LARGEST RETIREMENT ASSETS Total Private Retirement Market Assets $Trillions $14.5 $15 � The US has more Retirement Market Assets $12.5 than 70% of the $10.7 world’s retirement $10 $9.2 assets $7.8 $7.3 $6.6 $5.3 � The UK is second $5 $4.0 with 10% $0 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Cerulli Report, Retirement Industry Update: trends in 401(k) and IRA Markets 2002
JACKSON NATIONAL LIFE: OVERVIEW THE WORLD’S LARGEST RETIREMENT MARKET � Scale player in US life industry � Excellent product manufacturing and administrative capability � Relationship-driven distribution model � Strong risk management capabilities and financial discipline Low-cost, flexible infrastructure � � Consistent growth in GAAP assets
JACKSON NATIONAL LIFE FOCUS ON VALUE WHILE INCREASING SALES Variable annuity premiums � January 2002 1000 – launched Perspective II 900 � August 2003 800 700 – doubled fees for GMDBs 600 – reduced minimum interest rates for fixed option $m 500 400 � May 2004 300 – priced to increase gross margin by 25bps 200 100 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2002 2002 2002 2002 2003 2003 2003 2003 2004 2004
PRUDENTIAL CORPORATION ASIA THE ASIAN OPPORTUNITY Market Prudential’s position � More than half the world’s � Regional scale and leadership population � Strong brand and reputation � Consistently high GDP growth rates � Well-developed multi-channel � Highest savings rates in the world distribution � Minimal social security provision � Impressive joint venture partners � Cash and deposits are dominant � Centralising processing: product and asset class systems development Strongly positioned to capitalise on regional growth
UNIQUE OPPORTUNITY FOR MEDIUM AND LONG-TERM SAVINGS CASH AND DEPOSITS ARE DOMINANT ASSET CLASS TODAY Percent of Holdings by Asset Class The opportunity: 100% Other/Misc 90% � vast populations 80% Mutual Funds 70% Equities � existing levels of wealth 60% Fixed Income � strong long-term economic Securities 50% growth projections 40% 30% Pensions � high personal savings rates 20% Life Insurance � affinity for deposits now 10% Cash/Deposits 0% changing HK Mal Sing Indi Jap Taiw Kor Thai Chin Phil Indo US � high GDP growth rates 44 8 22 5 63 35 26 3 3 4 1 50 Average Income per household (US$k) Source: Central Banks, World Bank, SEC Division of Investment Management
THE ASIAN OPPORTUNITY LIFE PENETRATION INCREASES AS ECONOMIES DEVELOP Life Penetration � North Asian markets dominate in terms Penetration, 2002 of scale = $20bn in Direct Premiums 12% UK � Strong correlation between GDP per 10% capita and penetration of life insurance Japan S Korea 8% Taiwan � Inflexion point at $10,000 where life 6% insurance takes off Hong Kong 4% US Malaysia India Singapore � Tremendous potential for nascent Thailand 2% China markets (eg Malaysia, urban Philippines Vietnam Indonesia 0% populations in China and India) as they 100 1,000 10,000 100,000 move up the curve Per Capita GDP, USD (log scale) Source: Sigma
ASIA: GEOGRAPHIC DIVERSIFICATION GROWTH OF NEWER OPERATIONS 2001 APE SALES BY COUNTRY 2003 APE SALES BY COUNTRY 2002 APE SALES BY COUNTRY TOTAL £434m TOTAL £555m TOTAL £513m Singapore Singapore 14% 14% 12% Singapore 18% 21% 27% Japan 7% Malaysia 11% Malaysia 12% Japan 8% Malaysia 11% Japan 6% Hong Kong 18% Taiwan Hong Kong 31% 19% Taiwan Hong Kong Taiwan 29% 18% 24% China, India, Indonesia, Korea, Philippines, Thailand and Vietnam
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