Prudential Plc · LSE:PRU
Prudential — FY2003 Earnings Presentation
33 slides from Prudential's earnings presentation, Feb 24, 2004
Slide 1: Prudential plc 2003 Preliminary Results
PRUDENTIAL PLC 2003 PRELIMINARY RESULTS
Slide 2: Forward-looking statements
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”, “expe
Slide 3: Introduction: A Platform for Growth
INTRODUCTION A PLATFORM FOR GROWTH n Underlying fundamentals of the business are strong n Clear benefits from international diversification n Financial strength is key competitive advantage n Positioned to deliver profitable growth
Slide 4: Achieved Basis: New Business Profits and Margins
ACHIEVED BASIS: NEW BUSINESS PROFITS AND MARGINS SOLID PROFIT PERFORMANCE Value Added by New Business New Business Margins £m 800 1999 2000 2001 2002 2003 UK and Europe 32% 32% 30% 30% 27% 700 US 46% 44% 35% 39% 35% New Business Achieved Profit 600 Asia 73% 60% 59% 60% 52% Group 39% 40% 38% 41% 38%
Slide 5: UK Insurance Operations: Margin by Product
UK INSURANCE OPERATIONS MARGIN BY PRODUCT 70% 60% n With-profit margin adversely impacted by lower New Business Achieved Profit 50% investment returns 40% n Rising annuity margins 30% through increased use of shareholder capital 20% 10% 0% 1999 2000 2001 2002 2003 With-profit bonds Corporate pension
Slide 6: Jackson National Life Retail Sales and Margins
JACKSON NATIONAL LIFE RETAIL SALES AND MARGINS $m % 7,000 50 6,000 40 5,000 30 4,000 3,000 20 2,000 10 1,000 0 0 1999 2000 2001 2002 2003 Fixed Annuity Equity Linked Indexed Annuity Variable Annuity Margin
Slide 7: Asia: 2003 NBAP by Product Type and Margin
ASIA: NEW BUSINESS ACHIEVED PROFITS 2003 NBAP BY PRODUCT TYPE AND MARGIN 2003 NBAP Total £291m 2003 NBAP Margin 28% n Impact of introduction of 45% RBC in Taiwan n Refocus of Japanese business resulting in higher unit costs in the short term n 1% adverse impact of change in country mix 27% n Adoptio
Slide 8: Asia: Geographic Diversification
ASIA: GEOGRAPHIC DIVERSIFICATION GROWTH OF NEWER OPERATIONS 2003 APE SALES BY COUNTRY 2002 APE SALES BY COUNTRY 2001 APE SALES BY COUNTRY TOTAL £555m TOTAL £513m TOTAL £434m Singapore Singapore 14% 14% 12% Singapore 18% 21% 27% Japan Malaysia 7% 11% Malaysia Japan 12% 8% Malaysia 11% Japan 6% Hong K
Slide 9: Achieved Basis: Long-Term Businesses Total Operating Profit of £956 Million
ACHIEVED BASIS: LONG-TERM BUSINESSES TOTAL OPERATING PROFIT OF £956 MILLION UK and Europe US Asia Total £m £m £m £m NBAP 166 148 291 605 Unwind of discount* 343 178 115 636 Change in assumptions (67) (21) (27) (115) Persistency variance (35) 10 (14) (39) US spread variance - (17) - (17) Average real
Slide 10: Achieved Profits Basis Results
ACHIEVED BASIS ACHIEVED PROFITS BASIS RESULTS 2003 2002 £m £m Total long-term business 956 1,283 Asia development expenses (27) (26) M&G 83 71 Egg (34) (20) Broker dealer, fund management and Curian (3) 14 Other income and expenditure (181) (189) Underlying total operating profit 794 1,133 All resul
Slide 11: Achieved Basis
ACHIEVED BASIS 2003 2002 £m £m Operating profit before amortisation of goodwill 794 1,133 Amortisation of goodwill (98) (98) Short-term fluctuations in investment return UK and Europe 531 (1,021) US 132 (440) Asia 1 66 Other 18 11 682 (1,406) Effect of change in economic assumptions UK and Europe (1
Slide 12: Achieved Profit Shareholders' Funds
ACHIEVED PROFIT SHAREHOLDERS’ FUNDS 2003 ACHIEVED PROFIT SHAREHOLDERS’ FUNDS Analysis of Movement in AP Shareholders' Funds : 2002-2003 9,000 682 540 8,500 AP Shareholders Funds in £bn 324 135 98 355 8,000 605 348 7,500 320 7,196 32 7,043 7,000 6,500 6,000 Closing New In-force Non-life Goodwill ST E
Slide 13: Modified Statutory Basis: MSB Operating Profit
MODIFIED STATUTORY BASIS MSB OPERATING PROFIT 2003 2002 £m £m UK and Europe insurance operations 256 372 M&G 83 71 Egg (34) (20) UK and Europe operations 305 423 US operations 162 153 Asian operations 98 88 Development expenses (27) (26) Other income and expenditure (181) (189) Operating profit from
Slide 14: Prudential Assurance Company Remains Strong
PRUDENTIAL ASSURANCE COMPANY REMAINS STRONG n Inherited estate of over £6 billion Asset Mix of PAC With-Profit Fund at 31.12.2003 Total Long-Term Fund FUM of £79.9bn n Form 9 ratio increased to 10.5% at 31 2% December 2003* n Fund performance in 2003 was 16.5% 33% 31% - 5 year CAGR 4.9% - 10 year CA
Slide 15: Holding Company Cashflow
HOLDING COMPANY CASHFLOW 2003 2002 £m £m UK life fund transfer* 286 324 Cash remitted by business units 300 212 Total cash remitted to group 586 536 Interest (127) (124) Dividends (447) (509) Cash remittances after interest and dividends 12 (97) Tax received 77 59 Equity (scrip dividends and share o
Slide 16: Asia: Expected to Become Cash Positive in 2006
ASIA: EXPECTED TO BECOME CASH POSITIVE IN 2006 NET CAPITAL FLOWS £m 274 n Net capital invested from 1994 300 to 2003: £931m 250 n More mature businesses 200 143 increasingly repatriating 144 150 158 97 capital 76 100 n Gross investment maintained in 2004 and 2005 50 22 11 7 (1) n Cash positive in 20
Slide 17: Steady Growth in Funds Under Management
BUILDING A PLATFORM FOR GROWTH STEADY GROWTH IN FUNDS UNDER MANAGEMENT £bn 90 n Assets have grown from £49bn in R: 11% 1998 to £82bn at 31 December 80 CAG 2003 Funds under management 70 60 n UK shareholder-backed assets have 50 doubled since 1998 40 n M&G growing institutional and retail 30 funds un
Slide 18: UK Insurance Operations: Market Shares in Key Product Segments
UK INSURANCE OPERATIONS: GROWTH OPPORTUNITIES MARKET SHARES IN KEY PRODUCT SEGMENTS 30% 25% n Products developed since 2000 represent 37% of 2003 sales* 20% n 16% market share of the defined 15% contribution occupational pension scheme sales 10% n 42% market share of IFA with- 5% profit bonds 0% n 2
Slide 19: UK Insurance Operations: Cost Reductions Delivered
UK INSURANCE OPERATIONS: COST REDUCTIONS DELIVERED COST SAVINGS ACHIEVED £m 250 209 200 175 n £200m of savings realised 150 130 n Annualised value of £201m 100 n 800 employed in Mumbai office 50 10 0 n Ongoing focus on costs remains -8 -50 -42 -49 -100 -90 2001 2002 2003 2004 Cost savings Transition
Slide 20: M&G: Another Strong Profit Performance
M&G: ANOTHER STRONG PROFIT PERFORMANCE UNDERLYING PROFIT UP 43% £m 90 2800 n Continued profit progression 80 2600 70 despite falling equity markets 2400 60 2200 n Increasing contribution from new 50 40 business lines 2000 30 1800 n Another good year for performance 20 10 1600 related fees 0 1400 200
Slide 21: Jackson National Life: Continuing Positive Trends
JACKSON NATIONAL LIFE: CONTINUING POSITIVE TRENDS STRONG GROWTH IN US GAAP ASSETS $m $60,000 $56,080 $55,000 $51,626 $7,048 $50,000 $47,242 $4,386 $43,942 $45,000 $5,126 $40,521 $45,813 $5,586 $40,000 $36,214 $44,980 $4,522 $33,096 $41,034 $35,000 $ 1,122 $1,952 $29,148 $37,428 $30,000 $25,639 $370
Slide 22: Jackson National Life: Low-Cost Structure Offers Competitive Advantage
JACKSON NATIONAL LIFE: GROWTH FROM AN ADVANTAGED POSITION LOW-COST STRUCTURE OFFERS COMPETITIVE ADVANTAGE bp • 800 •• Expenses/Annuity Premiums (bp) 700 • • 600 • • 500 • • • 400 • • • • • • • • • • • 300 • • • •• Þ • • • 200 • • • • 100 0 0 5 10 15 20 25 Annuity Premiums ($Bn) 2001 Curve 2002 Curve
Slide 23: Prudential Corporation Asia: Strong Growth in Sales and Profit
PRUDENTIAL CORPORATION ASIA: A WELL-ESTABLISHED BUSINESS MODEL STRONG GROWTH IN SALES AND IN PROFIT £m 600 n Strategy has delivered excellent 500 results 400 n 30% CAGR in AP shareholders’ funds since 1998 300 n Now present in all 12 target 200 markets 100 n Product and distribution models 0 well-es
Slide 24: Asia: Life Market Position
ASIA: LIFE MARKET POSITION DIVERSIFIED REGIONAL PRESENCE Singapore Development of Market Japan Malaysia Developed Taiwan Hong Kong South Korea Vietnam Emerging China India Indonesia Thailand Philippines Growing Leading Prudential Market Share
Slide 25: Asia: India
ASIA: POTENTIAL TO BE ONE OF WORLD’S LARGEST RFS MARKETS INDIA India Life Insurance Market Shares April 2002 - March 2003 n Joint venture with ICICI Private Share Total Share - restricted to 26% ownership LIC - 92.2% n Full product range ICICI - Prudential 38.1% 3.0% Birla Sun Life 13.5% 1.1% n Mult
Slide 26: Asia: China
ASIA: POTENTIAL TO BE ONE OF WORLD’S LARGEST RFS MARKETS CHINA n Only British life insurer operational in two cities with 50:50 joint venture partner CITIC - 4th place market share in Guangzhou - strong start in Beijing n Market undergoing further change - IPOs of domestic insurers - opening up of n
Slide 27: Conclusion: A Platform for Growth
CONCLUSION A PLATFORM FOR GROWTH n Underlying fundamentals of the business are strong n Clear benefits from international diversification n Financial strength is key competitive advantage n Positioned to deliver profitable growth
Slide 28: Appendix
PRUDENTIAL PLC 2003 PRELIMINARY RESULTS Appendix
Slide 29: Prudential plc: Group Capital
PRUDENTIAL PLC: GROUP CAPITAL Group Gearing 25% n AP shareholders funds of £7.0bn 20% n MSB shareholders funds of £3.3bn 15% n Senior debt gearing of 7.3% n Core debt rated AA- by S&P 10% 5% 0% 2001 2002 2003 Gearing = Senior debt* / (senior debt* + hybrid + APSHF) Gearing = (Senior debt* + hybrid)
Slide 30: Jackson National Life Retail Sales by Channel
JACKSON NATIONAL LIFE RETAIL SALES BY CHANNEL $7,000 $6,000 $2,008 $5,000 $2,824 $4,000 $2,228 $1,108 $2,357 $3,000 $1,714 $787 $1,515 $958 $1,646 $2,000 $755 $443 $1,000 $2,168 $1,524 $1,665 $1,639 $1,385 $1,277 $0 1998 1999 2000 2001 2002 2003 Independent agents Bank Broker dealer Note: sales excl
Slide 31: Asia: Continuing Development of Bancassurance
ASIA: DIVERSIFIED DISTRIBUTION MODEL CONTINUING DEVELOPMENT OF BANCASSURANCE 2003 NBAPE by Distribution n 28 partner banks in 11 countries 9% n Particular success in India 13% 78% Agency Bank Other
Slide 32: Achieved Basis: Asia Profit Progression
ACHIEVED BASIS: ASIA ASIA PROFIT PROGRESSION 1999 2000 2001 2002 2003 CAGR (£m) (£m) (£m) (£m) (£m) New business achieved profit 90 153 255 307 291 34% Margin 73% 60% 59% 60% 52% (1) Retail FUM 453 1,649 3,296 5,232 6,596 95% Operating achieved profit 125 213 415 32% 516 378 before development expen
Slide 33: M&G: Strong Growth in Underlying Profit
M&G STRONG GROWTH IN UNDERLYING PROFIT 2003 2002 2001 £m £m £m Equity Revenue 99 112 129 Fixed Revenue 94 83 77 Property Revenue 41 38 37 Private Equity Revenue 21 21 23 Transactional Revenue 31 18 11 286 272 277 Staff Costs (148) (128) (131) Other Costs (79) (100) (114) Outsourcing Project (7) (13)