Slide 1: Prudential plc acquisition of AIA
Prudential plc acquisition of AIA March 2010
Slide 2: The information contained in this presentation concerns the proposed combination of Prudential plc ("Prudential")
The information contained in this presentation concerns the proposed combination of Prudential plc ("Prudential") with AIA Group Limited, a wholly-owned subsidiary of American International Group, Inc. (the "Transaction"). This presentation is for information purposes only and is not intended to and
Slide 3: Acquisition of AIA
Acquisition of AIA 73 PRUDENTIAL
Slide 4: A macro perspective of the future: GDP
A macro perspective of the future: GDP South East Asia provides the highest growth of all the Asia regions Share of global GDP at PPP Asia ex-Japan contribution to the 2008-2030 forecast GDP growth $bn 100% = $1.1bn $5.3bn $69.7bn $183.5bn Rest of the World $113.8bn $183.5bn 40% 32% Asia ex- 34% 14%
Slide 5: Exposure to Under-penetrated Markets with High Growth Prospects
Exposure to Under-penetrated Markets with High Growth Prospects Life penetration ratio (Life premiums as % of GDP) 9.9% 8.0% 6.3% 4.0% 2.8% 2.2% 1.8% 0.9% 0.9% 0.7% Hong Kong South Korea Singapore India Malaysia China Thailand Indonesia Philippines Vietnam 5 Source: Sigma Swiss Re
Slide 6: Potential profit pools at the macro level
Potential profit pools at the macro level 2014 global profit pools for life insurance Granular view of Asia New business margin (2008) % of APE New business margin (2008) % of APE 90 90 80 80 South East Asia, HK + SGP 70 70 Latin America 60 60 China - accessible to foreign JVs 50 50 Asia Total Asia
Slide 7: Overview of AIA
Overview of AIA AIA • Extensive geographical presence in the Life segment Latest ranking (% market share) – 7 top 5 positions by market share • Strong multi-channel platform, with Agency as the main distribution channel: – strong agency franchise with c.300,000 agents (excl. India) – c.130 banking r
Slide 8: AIA 2009 financial highlights
AIA 2009 financial highlights EV: £12.8bn New business profit after tax: £367m Other Other Markets Markets 9% 14% China China 5% 7% Malaysia Hong Kong 4% 31% Malaysia Hong Kong 4% 42% Singapore 13% Singapore 15% Korea Thailand 6% Thailand 19% Korea 21% 10% IFRS Operating profit after tax: £925m TWPI
Slide 9: Transformation into leading Asian insurer
Transformation into leading Asian insurer Asia as % of Group 2009 embedded value 2009 IFRS operating 2009 new business profit earnings (pre-tax) (post tax) 66% 60% 58% 47% 38% 22% Prudential Combined Prudential Combined Prudential Combined £23.5bn(1) £2.6bn £1.5bn (1) Assumes Prudential EV plus AIA
Slide 10: No 1 in every major South East Asian market
No 1 in every major South East Asian market AIA Prudential Asia Combined Rank Rank Rank Hong Kong 3 2 1 Singapore 4 1 1 Malaysia 4 1 1 Thailand 1 12 1 Indonesia 9 1 1 Philippines 1 3 1 Vietnam 5 1 1 China 1 4 1 India 8 1 1 Korea 12 16 - Source: Prudential and industry data Note: Based on the latest
Slide 11: Capital position, Rating and Dividend policy of the enlarged group
Capital position, Rating and Dividend policy of the enlarged group Capital Rating • Key rating agencies leverage ratios expected to be maintained within “A” range or better Pre IGD surplus £5.4bn acquisition £3.4bn – progressively moving towards a level in a higher band of the “A” £2.0bn rating Avai
Slide 12: Synergies
Synergies 73 PRUDENTIAL
Slide 13: Expected cost synergies
Expected cost synergies • Cost advantage arising from significant synergy benefits • Only assessed management related expenses at this stage • Anticipated fully phased cost synergies (pre tax) of c.$340m per annum – c.$200m from head office – c.$140m from countries • Nature of overlap means that mos
Slide 14: Potential for revenue synergies
Potential for revenue synergies Agency Distribution • Driving improvement in AIA sales force productivity to best in class, leveraging Prudential's agency management capabilities Partnerships • Extract more value from AIA’s current partnerships by utilising Prudential’s unique staff-embedded model P
Slide 15: Capability to deliver quickly: Bancassurance Partnership with UOB
Capability to deliver quickly Bancassurance Partnership with UOB • Partnership with 2nd bank in Singapore, with strong presence in South-East Asia • Involved the acquisition of UOB Life in Singapore and the signing of exclusive distribution agreements in Singapore, Thailand and Indonesia • Overview
Slide 16: Record New Business Volumes in Asia (£m APE)
Record New Business Volumes in Asia (£m APE) Indonesia 36% Malaysia 60 70 72% 50 60 50 40 40 30 30 20 20 10 10 0 0 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Hong Kong Singapore 100 90 60 98% 80 85% 50 70 60 40 50 30 40 30 20 20 10 10 0 0 Q108 Q208 Q308 Q408 Q109
Slide 17: Integration
Integration 73 PRUDENTIAL
Slide 18: The integration will focus on maintaining business momentum
The integration will focus on maintaining business momentum Maintaining business momentum Retaining and motivating salesforce Maintaining customer relationships Aligning cultures 18
Slide 19: Four structural and geographical variants
Four structural and geographical variants 1 2 Hong Kong headquarters ‘Mergers of Equals’ Capture quick wins from Merge Prudential and AIA consolidation of both HQs, businesses in countries (e.g., without compromising Malaysia, Singapore, Hong longer-term people model Kong) where neither is domin
Slide 20: Regulatory and competition considerations
Regulatory and competition considerations • Performed in depth review on both regulatory consent and anti-trust filings • Advice obtained on regulatory consent by Slaughter and May and from local legal counsel makes us confident we should be able to obtain approvals as required • Review of anti-trus
Slide 21: Valuation
Valuation 73 PRUDENTIAL
Slide 22: Indicative valuation metrics
Indicative valuation metrics Combined indicative valuation based on current market valuation and transaction multiple P/ EV (last reported) 3.22x China Life AXA SA acquisition of Ping An 2.68x AXA APH Asia operations 2.63x AXA APH Asia 1.70x 1.49x AMP (1) Prudential combined 1.46x Great Eastern Curr
Slide 23: Scope for AIA new business profit improvement
Scope for AIA new business profit improvement Post tax NBP Margin 2010 scope for recovery 41% • Q1 sales growing well 31% • Margins expanding • Scope for good growth if these trends continue 2008 2009 Illustrative recovery potential ($m) Post tax NBP ($m) 88 772 114 968 570 41.1% 570 2008 2009 2009
Slide 24: Summary valuation multiples paid
Summary valuation multiples paid Price: $35.5bn • P/EV: 1.69x • 2009A P/E (excl. cost synergies): 24.7x Implied Multiples • 2009A P/E (incl. fully phased cost synergies): 21.1x • Implied 2009A NBP multiple: 25.4x 24
Slide 25: Transaction structure / funding
Transaction structure / funding • New TopCo structure (“New Prudential”), will be the holding company for both Prudential and AIA • $35.5bn / (£23.3bn) acquisition price • $20.0bn / (£13.1bn) rights issue (net, $20.7bn / (£13.6bn) gross) fully underwritten by Credit Suisse, JP Morgan Cazenove and HS
Slide 26: Expected timetable to completion
Expected timetable to completion Event Timing Publication of the Prospectuses and Circular April / May Prudential Shareholder meetings to approve Rights Issue, and May Transaction Rights Issue trading period commences May Rights Issue trading period ends Early June Regulatory approval and acquisitio
Slide 27: Acquisition of AIA
Acquisition of AIA • Rare opportunity to bring together two outstanding companies • Ideally positioned to capture future Asian growth • Number one life insurer in Hong Kong, Singapore, Malaysia, Thailand, Indonesia, Philippines and Vietnam(1) • Acceleration of our stated strategy to deliver value to
Slide 28: Appendix
Appendix 73 PRUDENTIAL
Slide 29: AIA 2009 audited results highlights
AIA 2009 audited results highlights
Slide 30: Key financials for AIA – IFRS income statement
Key financials for AIA – IFRS income statement (US$ in millions) 2007 2008 2009 Premiums and fee income 9,573 10,674 10,433 Premiums ceded to reinsurers (833) (392) (331) Net premiums and fee income 8,740 10,282 10,102 Investment return 6,409 (6,998) 8,843 Other operating revenue 77 526 71 Total rev
Slide 31: Key financials for AIA – IFRS balance sheet
Key financials for AIA – IFRS balance sheet (US$ in millions) November 2007 November 2008 November 2009 Assets Intangible assets 200 232 228 Investments in associates and joint ventures 63 47 53 Property, plant and equipment 352 332 326 Reinsurance assets 2,668 147 284 Deferred acquisition and origi
Slide 32: One-year Value of New Business as at 30 November 2009
One-year Value of New Business as at 30 November 2009 ($ in millions) RDR Hong Kong 206 Thailand 124 Korea 65 Singapore (incl. Brunei) 101 Malaysia 29 China 47 Other Markets 90 After-tax value of group office expenses -40 Adjustment to reflect Hong Kong reserving and capital requirements -52 Total 5