Prudential Plc · LSE:PRU
Prudential — H1 2004 Earnings Presentation
30 slides from Prudential's earnings presentation, Jul 27, 2004
Slide 1: Prudential plc 2004 Interim Results
PRUDENTIAL PLC 2004 INTERIM 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: Jonathan Bloomer, Group Chief Executive
GROUP CHIEF EXECUTIVE JONATHAN BLOOMER
Slide 4: Good all-round performance
GOOD ALL-ROUND PERFORMANCE STRONG START TO THE YEAR ACROSS THE GROUP n UK insurance operations moving strongly forward n An outstanding performance from M&G n Focus on returns in US business n Asia on track to meet full year growth targets n Good numbers across the group*: - APE sales up 13% - achie
Slide 5: Philip Broadley, Group Finance Director
GROUP FINANCE DIRECTOR PHILIP BROADLEY
Slide 6: Achieved profits basis: new business sales, NBAP and margins
ACHIEVED PROFITS BASIS: NEW BUSINESS SALES, NBAP AND MARGINS APE SALES UP 13%, NBAP UP 9%* APE and Group Margin* New Business Achieved Profits* £m £m 400 1,000 50 800 40 300 600 30 200 400 20 100 200 10 0 0 0 HY 2002 HY 2003 HY 2004 HY 2002 HY 2003 HY 2004 UK & Europe US Asia Margin UK & Europe US A
Slide 7: Achieved profits basis: UK and Europe
ACHIEVED PROFITS BASIS: UK AND EUROPE 2004 HY 2003 HY* 04 vs 03 £m £m % APE sales 361 313 15 NBAP margin(1) 25% 27% NBAP 88 86 2 In-force Unwind 187 156 20 Change in operating assumptions - (50) Experience variances and other items (35) (18) Total in-force 152 88 73 Total AP operating profit 240 174
Slide 8: Achieved profits basis: US
ACHIEVED PROFITS BASIS: US 2004 HY 2003 HY* 04 vs 03 £m £m % APE sales 244 223 9 NBAP margin 34% 37% NBAP 82 83 (1) In-force Unwind(1) 89 76 17 Change in operating assumptions (3) - Experience variances and other items 30 3 Average realised losses in excess of RMR (22) (34) Total in-force 94 45 109
Slide 9: Jackson National Life: sensitivities of relative value at risk
JACKSON NATIONAL LIFE SENSITIVITIES OF RELATIVE VALUE AT RISK 120% 106% 104% 108% 107% 104% 103% 103% 100% 100% 100% 86% Percent of Level Scenario 80% 60% Hedged Unhedged 40% 20% 0% LEVEL UP 100bp UP 200 bp UP 300bp UP 700bp Rate Scenario Includes new business
Slide 10: Achieved profits basis: Asia
ACHIEVED PROFITS BASIS: ASIA 2004 HY 2003 HY* 04 vs 03 £m £m % APE sales 248 221 12 NBAP margin 54% 50% NBAP 135 110 23 In-force Unwind 65 49 33 Change in operating assumptions (29) - Experience variances and other items 4 (18) Total in-force 40 31 29 Total AP operating profit(1) 175 141 24 (1) Excl
Slide 11: Achieved profits basis: total achieved basis operating profit
ACHIEVED PROFITS BASIS: TOTAL ACHIEVED BASIS OPERATING PROFIT 2004 HY 2003 HY* 04 vs 03 £m £m % Total long-term business 591 443 33 Asia development expenses (10) (11) M&G 79 38 Egg (4) (22) Asian fund management operations 10 2 US broker dealer and fund management (2) (1) Other income and expenditu
Slide 12: M&G: underlying profits up 55%
M&G: UNDERLYING PROFITS UP 55% 2004 HY 2003 HY 2002 HY £m £m £m Operating profit (before PRF* and carried interest) 59 38 33 Performance-related fees 1 - 1 Carried interest 19 - - Operating profit 79 38 34 Average FT All Share 2223 1857 2487 * Performance-related fees
Slide 13: Achieved profit shareholders' funds
ACHIEVED PROFIT SHAREHOLDERS’ FUNDS EMBEDDED VALUE PER SHARE OF 285p** £m 7,700 7,500 AP Shareholders Funds in £m 7,300 7,100 6,900 6,700 6,500 NBAP Inforce Non-long Goodwill Economic Tax FX Dividends Other 2004 opening ST assumption 2004 half year profit term movements paid to shareholders’ fluctua
Slide 14: Modified statutory basis: MSB operating profit
MODIFIED STATUTORY BASIS MSB OPERATING PROFIT 2004 HY 2003 HY* 04 vs 03 £m £m % UK and Europe insurance operations 152 138 10 M&G 79 38 108 Egg (4) (22) UK and Europe operations 227 154 47 US operations 114 76 50 Asian operations 74 32 131 Asia development expenses (10) (11) Other income and expendi
Slide 15: Modified statutory basis: MSB total profit
MODIFIED STATUTORY BASIS MSB TOTAL PROFIT 2004 HY 2003 HY* 04 vs 03 £m £m % Operating profit 304 177 72 Amortisation of goodwill (49) (49) Short-term fluctuations in investment returns 27 72 Total 282 200 41 * At reported exchange rates
Slide 16: Holding company cashflow
HOLDING COMPANY CASHFLOW 2004 HY 2003 HY £m £m UK life fund transfer * 208 286 Cash remitted by business units 100 66 Total cash remitted to group 308 352 Interest (79) (76) Dividends (214) (341) Cash remittances after interest and dividends 15 (65) Tax received 0 40 Equity (scrip dividends and shar
Slide 17: Jonathan Bloomer, Group Chief Executive
GROUP CHIEF EXECUTIVE JONATHAN BLOOMER
Slide 18: Continuing momentum
OPPORTUNITY TO BUILD ON STRONG START TO THE YEAR CONTINUING MOMENTUM n UK insurance operations - new products and distribution agreements n Managing for returns in the US - focus on value and profits n Asia on track to meet full year growth targets - profitable and sustainable growth across the port
Slide 19: UK insurance operations: a time of change and opportunity
UK INSURANCE OPERATIONS A TIME OF CHANGE AND OPPORTUNITY Market Prudential’s position n Environment beginning to stabilise n Undisputed financial strength n Market is concentrating: will favour n Powerful product propositions stronger players n Scale business with low cost base n 1.5% price cap prov
Slide 20: UK insurance operations: diversified distribution strategy
UK INSURANCE OPERATIONS DIVERSIFIED DISTRIBUTION STRATEGY Business to Business Intermediaries Direct to Consumer Partnerships APE (H1 03) £105m £116m £73m £16m APE (H1 04) £113m £141m £63m £40m % of UK APE (H1 04) 32% 39% 18% 11% Channel Consulting Actuaries Retail IFAs Direct Marketing Banks, Distr
Slide 21: Diversifying the product pipeline
DIVERSIFYING THE PRODUCT PIPELINE BUILDING MOMENTUM THROUGH PRODUCT INNOVATION 2002 2003 2004 2005 Flexible Income 2 Risk Management Annuities products for defined Drawdown Plan benefit pension schemes International Ideal Flexible Prospects Distribution Investments PruFund Prudence Bond Fund Investm
Slide 22: M&G: delivering on its strategy
M&G: DELIVERING ON ITS STRATEGY UK Retail Benefiting from the gearing of higher markets Fixed Income Continue to build new sources of external profit Property Capitalise on substantial customer and asset base Equities Deliver targeted performance in cost-effective manner International Build funds un
Slide 23: Egg: focusing on profitable growth in the UK
EGG FOCUSING ON PROFITABLE GROWTH IN THE UK n Profit in 2Q 2004; half year losses reduced to £4m from £23m n UK profit of £35m despite increased competition and rising rates n Almost 300,000 net new customers acquired n Card balances have broadly maintained market share n Personal loan sales totalle
Slide 24: US insurance operations: focusing on value creation
US INSURANCE OPERATIONS FOCUSING ON VALUE CREATION Market Prudential’s position n Increasingly competitive environment n Low-cost, flexible infrastructure emphasising focus on costs n Innovative ‘unbundled’ product design n Product features, including guarantees n Disciplined pricing n Move toward f
Slide 25: Jackson National Life: focus on value while increasing sales
JACKSON NATIONAL LIFE FOCUS ON VALUE WHILE INCREASING SALES Variable annuity premiums n January 2002 1000 900 – launched Perspective II 800 n August 2003 700 – doubled fees for GMDBs 600 – reduced minimum interest $m 500 rates for fixed option 400 n May 2004 300 – priced to increase gross 200 margin
Slide 26: Prudential Corporation Asia: the Asian opportunity
PRUDENTIAL CORPORATION ASIA THE ASIAN OPPORTUNITY Market Prudential’s position n More than half the world’s n Regional scale and leadership population n Strong brand and reputation n Consistently high GDP growth rates n Well-developed multi-channel n Highest savings rates in the world distribution n
Slide 27: Asia: life insurance operations, strong trend in sales
ASIA: LIFE INSURANCE OPERATIONS STRONG TREND IN SALES* 20 10 30 25 25 20 15 20 APE £m APE £m APE £m APE £m 15 10 5 15 10 10 5 5 5 0 0 0 0 H1 2003 H1 2004 H1 2003 H1 2004 H1 2003 H1 2004 H1 2003H1 2004 India (1) China Korea Japan (2) 45 25 20 60 40 20 50 35 15 30 40 APE £m APE £m APE £m APE £m 15 25
Slide 28: Asia: fund management, rapid growth in funds under management
ASIA: FUND MANAGEMENT RAPID GROWTH IN FUNDS UNDER MANAGEMENT Top 5 rankings in mutual fund markets Funds Under Management India ü £bn 20 18 Taiwan ü 16 14 12 Malaysia ü 10 8 6 Hong Kong ü 4 2 0 Japan H1 2004 1998 1999 2000 2001 2002 2003 Korea Life Funds Mutual Funds Total Singapore
Slide 29: Conclusion: building momentum for the second half
CONCLUSION BUILDING MOMENTUM FOR THE SECOND HALF n A good performance from each of the businesses - achieved basis operating profit up 55% - new business achieved profit up 9% - MSB operating profit up 83% - APE sales up 13% n Momentum to continue in the second half - new products and distribution w
Slide 30: Questions
PRUDENTIAL PLC 2004 INTERIM RESULTS Questions