Prudential Plc · LSE:PRU
Prudential — Investor Presentation (October 2005)
29 slides from Prudential's investor presentation, Oct 26, 2005
Slide 1: Prudential plc Group Update
PRUDENTIAL PLC GROUP UPDATE 26 October 2005
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: Mark Tucker, Group Chief Executive
MARK TUCKER GROUP CHIEF EXECUTIVE
Slide 4: Agenda
AGENDA • Q3 New Business update • Group and regional business strategies update • Group Capital update • Summary • Questions 4
Slide 5: 2005 Nine Months New Business Sales
2005 NINE MONTHS NEW BUSINESS SALES Strong growth at the nine month stage LIFE INSURANCE FUND MANAGEMENT APE Sales Retail net fund flows Up 343% Up 249% 1000 900 800 Up 34% 800 700 700 600 Up 27% 600 500 Up 17% £m 500 £m 400 400 300 300 200 200 100 100 0 0 US Asia UK & Europe M&G Asia 9M 2004 9M 200
Slide 6: Group Update
$f GROUP UPDATE
Slide 7: Developing a Longer-Term View
DEVELOPING A LONGER-TERM VIEW Sustainable customer and shareholder value Continuous process over time Bottom up, top down review Assessment of Global Retail • Based on projections of economic profit pools Financial Services Markets 10 years out • Country risk analysis • Individual market dynamics an
Slide 8: Developing a Longer-Term View: Fundamental questions
DEVELOPING A LONGER-TERM VIEW Fundamental questions 1.How important is the US market and the ownership of Jackson for the group? 2. Do we risk selling ourselves short in Asia by focusing too much on near-term cash generation? 3. Are we optimising our position and strong franchises in the UK market?
Slide 9: Developing a Longer-Term View: Fundamental questions and answers
DEVELOPING A LONGER-TERM VIEW Fundamental questions 1.How important is the US market and The US is a primary engine of growth and JNL is a the ownership of Jackson for the group? great asset 2. Do we risk selling ourselves short in Asia by We can meet our challenging medium-term growth focusing too
Slide 10: US Regional Strategy
US REGIONAL STRATEGY A major growth opportunity as 77 million ‘boomers’ retire TOTAL U.S. FINANCIAL ASSETS BY AGE COHORT (IN TRILLIONS) $7.4 $6.4 • Focus on pre and post retirees’ $5.1 financial services needs $2.7 $1.3 • Emphasis on profitable advice-based 25-34 35-44 45-54 55-64 65+ distribution c
Slide 11: Asia Regional Strategy
ASIA REGIONAL STRATEGY Pan-Asian position to take advantage of significant growth GROSS DOMESTIC SAVINGS FLOW • Continuing rapid organic growth with 1.2 no major change to insurance footprint 1.0 • Key growth drivers North Asia (China, 0.8 Taiwan, Korea) and India £ Trillion an Jap 0.6 US A • Flexib
Slide 12: UK Regional Strategy
UK REGIONAL STRATEGY Strong franchises to build a broader position in retail financial services RETAIL FINANCIAL STRONG FRANCHISES GREATER VALUE FROM SERVICES MARKET CLOSER COLLABORATION • Retail financial services • Strong retail brand • Egg provides a savings market provides Prudential • Top tier
Slide 13: Asset Management Worldwide
ASSET MANAGEMENT WORLDWIDE Strong businesses in growth markets PROFITS 120 • Strong trends in favour of retail asset management US – Greater product transparency 100 120% Asia – Growing role of open architecture 80 – Cross border opportunities £m 60 M&G • Positive cash generation and favourable capi
Slide 14: Accessing Group Benefits
ACCESSING GROUP BENEFITS Group Opportunities • Capital management • Risk management • Information Technology – Single Group infrastructure – Global support unit – Initial savings estimated at £20-25 million p.a. • Regional opportunities in Asia and UK 14
Slide 15: Capital Management and Allocation
CAPITAL MANAGEMENT AND ALLOCATION At the centre of the management agenda • Robust capital modelling process in place • Capital and cash to fund medium term organic growth • Capital efficiency is improving • Transitioning to a risk adjusted approach for measuring value creation and allocating capital
Slide 16: Philip Broadley, Group Finance Director
PHILIP BROADLEY GROUP FINANCE DIRECTOR
Slide 17: Capital Management and Value Creation
CAPITAL MANAGEMENT AND VALUE CREATION An integrated, robust approach based on economic capital VALUE CAPITAL MANAGEMENT RISK CREATION GOVERNANCE Economic Capital Available Convergence with • Improved capital Capital Regulatory Capital • Integrated framework allocation framework and Rating Agency bas
Slide 18: Regulatory Capital
REGULATORY CAPITAL Group surplus of £845m at 31 December 2004; surplus expected to be broadly maintained at end 2005 CAPITAL RESOURCES LESS CAPITAL • Non-designated territories valued RESOURCES REQUIREMENTS using FSA requirements 4000 • No value to future 90:10 shareholder 3500 transfers permitted 3
Slide 19: Economic Capital
ECONOMIC CAPITAL 1.9x covered at end 2004 AS AT 31 DECEMBER 2004 • Default target of 4.4% over 25 years equivalent to cumulative probability 5 of AA bond default 4.5 • Group solvency model captures 4 0.9 cashflow from business units 1.4 1.4 3.5 allowing for restrictions on capital 3 mobility 1.6 £bn
Slide 20: Taiwan: Whole of life guaranteed benefits
TAIWAN Whole of life guaranteed benefits CAPITAL • Economic capital used for FCD capital requirement EMBEDDED VALUE • Guarantees modelled stochastically in economic capital model calibrated to AA default • Uses a grading of long-term bond rates to end 2012 (2% to 5.5% ultimate at H1 2005) • EEV incl
Slide 21: Taiwan: Embedded value sensitivity to bond rates
TAIWAN End 2004 achieved profits embedded value sensitivity to bond rates IMPACT OF 1% MOVEMENT IN IMPACT OF 1% PARALLEL SHIFT START RATE 250 350 300 200 250 £148m Embedded Value £m £70m Embedded Value £m 200 150 150 100 100 £84m £153m 50 £153m £204m 0 50 -50 -100 0 2004 EV 100bps increase 100bps de
Slide 22: Taiwan: Growing proportion of unit-linked sales
TAIWAN Growing proportion of unit-linked sales 7% Traditional 22% A&H 24% Unit-Linked A&H 65% 13% Traditional 69% 22 A&H – Accident & Health
Slide 23: Robust Capital Position
ROBUST CAPITAL POSITION Additional sources available • Conservative approach to capital modelling • Capital position sufficient to meet the Group’s medium-term plans • Further alternative sources available: – Debt capacity expected to increase over medium-term – Other sources such as securitisation
Slide 24: Cashflow
CASHFLOW Cash to fund organic growth in the medium-term Prudential Rights Issue UK life fund M&G JNL Corporation Egg available as transfer Profits Remittance Asia required Reinvestment Reinvestment Reinvestment Reinvestment Reinvestment £770m expected £194m received 2005 Post-tax profits $150m to be
Slide 25: Mark Tucker, Group Chief Executive
MARK TUCKER GROUP CHIEF EXECUTIVE
Slide 26: Summary
SUMMARY Compelling positions in the world’s leading retail financial services markets • The US is a primary engine of growth and JNL is a great asset • We can meet our challenging medium-term growth targets for Asia and be cash positive from 2006 • In the medium-term we can drive more value through
Slide 27: Summary: Build on advantages, deliver value
SUMMARY Compelling positions in the world’s leading retail financial services markets • Leading life business • Positions of strength • Leading player in retirement • Customer focus services • Leverage capabilities • Growth in asset management • Expand our proposition • Broader financial services po
Slide 28: Appendix
APPENDIX
Slide 29: Taiwan: Premium income from in-force business
TAIWAN PREMIUM INCOME FROM IN-FORCE BUSINESS 600 Linked Group PA 500 Life <4% Life 4% - 6% Life >6% 400 Premium income £m 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 2030 2035 2040 29