Prudential Plc · LSE:PRU
Prudential — FY2001 Earnings Presentation
38 slides from Prudential's earnings presentation, Feb 26, 2002
Slide 1: Prudential Plc 2001 Preliminary Results
PRUDENTIAL PLC 2001 PRELIMINARY RESULTS
Slide 2: Forward-looking statements
This presentation 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 and results. By their nature, all forward-looking statements involve risk and uncertainty be
Slide 3: A Strong Result Across the Group
A STRONG RESULT ACROSS THE GROUP n Total sales of £21.5bn: growth of 54% n Achieved operating profit increased by 15% to £1,186m n Dividend increased to 25.4p US 25% n Geographically diversified business: UK/Europe 37% Asia 38%
Slide 4: Total New Business In-flows
TOTAL NEW BUSINESS IN-FLOWS NEW FUNDS OF £22.5BN IN 2001 2001 2000 Insurance Sales of £11.4bn Products Sales of £10.4bn Investment Sales of £10bn Sales of £3.5bn Products Banking Retail assets Retail assets of Products increase £1.1bn £4.4bn Funds under £163bn £165bn Management
Slide 5: Achieved Basis
ACHIEVED BASIS n Total operating profit up 15%, to £1,186m n New business profit up 10%, to £673m n In-force profit up 24%, to £673m n Group margin 38% (2000: 40%) n Achieved basis shareholder funds of £8.2bn (2000: £8.8bn)
Slide 6: Effect of Active Basis on Prior Year
ACHIEVED BASIS EFFECT OF ACTIVE BASIS ON PRIOR YEAR 2000 as reported 2000 on active assumptions £m £m UK n NBAP 230 208 n In-force 478 410 n AP shareholder funds - long term business 4,227 3,929 US n NBAP 221 243 n In-force (2) (12) n AP shareholder funds - long term business 2,756 2,855
Slide 7: UK Operations New Business Achieved Profit Up 6%
ACHIEVED BASIS UK OPERATIONS NEW BUSINESS ACHIEVED PROFIT UP 6% ON PRIOR YEAR £m 2001 2000 £m £m 400 NBAP 243 230 300 APE* 817 730 MARGIN 30% 31% 200 100 0 1998 1999 2000 2001 *excluding investment products and DSS rebates written in SAIF
Slide 8: Jackson National Life New Business Achieved Profit Down 24%
ACHIEVED BASIS JACKSON NATIONAL LIFE NEW BUSINESS ACHIEVED PROFIT DOWN 24% ON PRIOR YEAR £m 2001 2000 300 £m £m NBAP 167 221 APE 483 508 200 MARGIN 35% 44% 100 0 1998 1999 2000 2001
Slide 9: Jackson National Life Crediting Rates
ACHIEVED BASIS JACKSON NATIONAL LIFE CREDITING RATES 8.0% 8.0% 7.5% 7.5% 7.0% 7.0% 6.5% 6.5% (%percent) (%percent) 6.0% 6.0% 5.5% 5.5% 5.0% 5.0% 4.5% 4.5% 4.0% 4.0% 1-Nov-00 1-Nov-01 1-May-00 1-Aug-00 1-May-01 1-Aug-01 1-Feb-01 Highest Competitor 9 Yr Treasury Normalised JNL crediting rate Competito
Slide 10: Asia New Business Achieved Profit Up 67%
ACHIEVED BASIS ASIA NEW BUSINESS ACHIEVED PROFIT UP 67% ON PRIOR YEAR £m 2001 2000 300 £m £m NBAP 255 153 200 APE* 434 257 MARGIN 59% 60% 100 0 1998 1999 2000 2001 *Insurance sales only
Slide 11: Asia Profit Progression
ACHIEVED BASIS ASIA PROFIT PROGRESSION 1998 1999 2000 2001 CAGR (£m) (£m) (£m) (£m) New business achieved profit 56 90 153 255 66% Margin 74% 73% 60% 59% Net mutual fund sales 39 311 309 1,395 230% Operating achieved profit 83 125 213 415 71% before development expenses MSB profit from established 2
Slide 12: Prudential Asia NBAP Products Mix
ACHIEVED BASIS PRUDENTIAL ASIA NEW BUSINESS ACHIEVED PROFIT PRODUCTS MIX Total - £255m n Linked is now the largest 31% 31% NBAP contributor n Life funds account for only 18% of total NBAP 38% Non linked Linked Accident & Health
Slide 13: In-force Result
ACHIEVED BASIS IN-FORCE RESULT UK & Europe US Asia Total £m £m £m £m Unwind of discount* 393 244 78 715 Jackson spread 0 (12) 0 (12) Jackson persistency 0 (7) 0 (7) Change in assumptions (1) (13) 66 52 Longer term investment loss 0 (74) 0 (74) Other items and experience variances (15) (2) 16 (1) Tot
Slide 14: Jackson National Life Invested Assets Mix
ACHIEVED BASIS JACKSON NATIONAL LIFE INVESTED ASSETS MIX $bn 25 58% 20 53% 15 10 22% 21% 5 11% 9% 5% 3% 5% 3% 2% 1% 3% 3% 1% 0% 0 Commercial NIG - Public Private/144A Private/144A Equities equity & real Cash & other IG - Public Mortgages Private estate assets NIG - IG - 2000 2001 IG: investment grad
Slide 15: Achieved Profits Basis Results
ACHIEVED BASIS ACHIEVED PROFITS BASIS RESULTS 2001 2000 £m £m Operating profit (based on longer-term investment returns) n New business 673 613 n Business in force 673 544 Total long-term business 1346 1157 16% Development costs for long-term business (48) (21) General business 79 33 M&G 75 125 Egg
Slide 16: 9% Increase in Achieved EPS
ACHIEVED BASIS 9% INCREASE IN ACHIEVED EPS 2001 2000 £m £m Operating profit before amortisation of goodwill 1186 1029 Net break fee from American General 338 0 Profit on business disposals 0 223 Amortisation of goodwill (95) (84) Short term fluctuations in investment return (1402) (440) Loss arising
Slide 17: MSB Operating Profit
MODIFIED STATUTORY BASIS MSB OPERATING PROFIT 2001 2000 £m £m UK - long term insurance 435 468 UK - general insurance 79 33 M&G 75 125 Egg (88) (155) UK operations 501 471 US operations 298 466 Asian operations (pre development costs) 44 39 European operations (pre development costs) 5 8 Other (130)
Slide 18: Modified Statutory Basis
MODIFIED STATUTORY BASIS 2001 2000 £m £m Operating profit before amortisation of goodwill 622 840 Net break fee from American General 338 0 Profit on business disposals 0 239 Amortisation of goodwill (95) (84) Adjustment to actual investment gains (480) (48) Profit before tax 385 947 Tax charge (21)
Slide 19: Group Funds Flow: Investing to Grow the Business
GROUP FUNDS FLOW INVESTING TO GROW THE BUSINESS 2001 2000 £m £m Group operating PAT & minority interests 460 591 American General Corporation merger break fee* 332 0 Capital repatriated from businesses 80 123 Proceeds from disposals 0 173 New share capital subscribed 42 45 Listing of shares on NYSE
Slide 20: Financial Highlights
FINANCIAL HIGHLIGHTS £m n Total operating profit up 15%, to 1500 £1,186m n New business profit up 10%, to £673m 1000 n In-force profit up 24%, to £673m n Group margin 38% (2000: 40%) 500 n Achieved basis shareholder funds of £8.2bn (2000: £8.8bn) 0 1999 2000 2001 In-force profit New business achieve
Slide 21: The Group's Performance Ambition
THE GROUP’S PERFORMANCE AMBITION n Goal is to double intrinsic value of the Group over the next 4 years n Intrinsic value is the present value of future cash flows from each business unit n Reporting measures will be: - NBAP and EV for the long-term businesses - MSB profits for non-insurance operati
Slide 22: A Growth Industry
A GROWTH INDUSTRY Ratio of working-age adults (aged 15-64) to Life expectancy at age 65 the elderly (aged 65 & over) in the developed world 20 8 6.8 18 Years of life remaining 6 5.0 16 4.5 4.0 4 3.1 14 2.5 2 12 0 10 1960 1990 2000 2010 2020 2030 1950 1960 1970 1980 1990 1995-6 UK Japan France US Sou
Slide 23: UK Insurance Operations: Clear Strategic Direction
UK INSURANCE OPERATIONS: CLEAR STRATEGIC DIRECTION n Closure of Direct Sales Force n Disposal of general insurance business n Move to single UK brand for long term business n Refocused product range n Multi-channel distribution n £175m reduction in annual costs
Slide 24: UK Insurance Operations: A Future Built on Our Strengths
UK INSURANCE OPERATIONS: A FUTURE BUILT ON OUR STRENGTHS UKIO New Business APE Sales £m 900 n Financial strength n Customer base 600 n Brand n Innovation 300 n Product range 0 2000 2001 Investment Products (excluding M&G) Annuities Life Pensions (including DSS rebates)
Slide 25: UK Insurance Operations: Multi-channel Distribution
UK INSURANCE OPERATIONS: MULTI-CHANNEL DISTRIBUTION M Direct to U consumer L T Business to I business C Affinities H A N Intermediaries N E L Flexibility to respond to the changing landscape
Slide 26: Europe
EUROPE n Building on our strengths in the UK n Continuing to develop partnerships n New distribution agreements n Leveraging Prudential’s product expertise n Strategic review underway to explore potential
Slide 27: M&G: Strategic Overview
M&G: STRATEGIC OVERVIEW n Commitment to growing value n Focus on leading positions: fixed income; retail; life fund management; pooled pension funds n Strong links with other Prudential businesses n International ambition: presence established in Germany n Cofunds: leading position in IFA market n E
Slide 28: Fund Management Growth
FUND MANAGEMENT GROWTH IMPRESSIVE PERFORMANCE: A BASE ON WHICH TO BUILD M&G's position out of top 40 fund managers n Strong short-term performance 0 maintained 5 n Encouraging improvement in 10 longer-term record 15 n 3 year position now 15th (36th at 20 31.12.99) 25 n Life fund relative performance
Slide 29: Egg
EGG n UK business now profitable n Delivered a record year of customer growth (600,000 newly-acquired) n Revenue per customer growing strongly n Costs under control and economies of scale emerging n First step in Europe with exciting opportunity in France n Positioned for growth
Slide 30: JNL's Current Position
JNL’S CURRENT POSITION AMERICAN INVESTORS PERCENTAGE OF HOUSEHOLDS’ INVESTABLE ASSETS JNL GROWTH Percent of Assets Percent of Households Low Assets Mid Assets Upscale Mass Affluent High Net Ultra-High Under $25K $25K - $100K $100K - $500K $500K - $5M Worth Net Worth $5M - $50M Over $50M
Slide 31: Profitability Is Not a Function of Absolute Size
PROFITABILITY IS NOT A FUNCTION OF ABSOLUTE SIZE COST LEADERSHIP Servicing & Overhead (bp/Sales) 500 • • 400 • • • •• •• 300 • • • • • Market • •• • • • 200 • • • •• • • JNL • • • • • 100 * • • 0 0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 Individual Annuity Sales ($B) Source: Townsend & Schupp. Comp
Slide 32: The Way Forward
THE WAY FORWARD n Expand further into mass affluent segment n Begin marketing initiative aimed at Regional Broker Dealers n Enter Registered Investment Adviser market n Product development n Participate in consolidating US market
Slide 33: Asia
ASIA Hong Kong China Korea Japan Taiwan India Hong Kong Hong Kong Japan Japan Taiwan India Thailand Vietnam Philippines Singapore Singapore Malaysia Life Mutual Funds Indonesia Life/Institutional Singapore Malaysia
Slide 34: Asia: Highlights
ASIA: HIGHLIGHTS n Geographic expansion completed - acquisition of sound life companies in Japan and Korea n Gaining market share: - Hong Kong, Malaysia, Taiwan; India and Taiwan mutual funds n Distribution: - agent numbers have more than doubled to nearly 60,000 - bank distribution in place in 9 co
Slide 35: Asian Mutual Funds
ASIAN MUTUAL FUNDS Assets under management n Asian mutual fund market is only c£500 billion today £m n We now operate in 5 markets, with 3500 3206 plans to enter China and Korea 3000 n Assets under management have 2500 grown at CAGR of 254% since 1998 2000 1649 n No 1 private sector player in India
Slide 36: Capital Flows in Asia: Update
CAPITAL FLOWS IN ASIA: UPDATE Net capital flows n Japan and Korea acquisitions £m n Increased investment in Indonesia 274 300 and Taiwan 250 200 Summary (1994 to 2001) 144 158 150 £m 76 Acquisitions 533 100 Working capital 264 50 22 11 (1) 7 Repatriations (106) 0 Net capital 691 -50 1994 1995 1996 1
Slide 37: Driving the Business Forward
DRIVING THE BUSINESS FORWARD n International retail financial services business n Breadth of product and geographies n AAA financial strength n Focus on value, with a clearly-stated target n Strategy for growth in place
Slide 38: Prudential Plc 2001 Preliminary Results
PRUDENTIAL PLC 2001 PRELIMINARY RESULTS