Prudential Plc · LSE:PRU
Prudential — Investor Day (December 2015)
24 slides from Prudential's investor day presentation, December 2015
Slide 1: Strategy & Performance
Strategy & Performance Barry Stowe – Chairman & Chief Executive Officer Jackson
Slide 2: Forward Looking Statements
Forward Looking Statements This document may contain ‘forward-looking statements’ with respect to certain of Prudential's plans and its goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements that are not historical facts, includin
Slide 3: US Retirement Landscape
US Retirement Landscape Americans are approaching retirement with inadequate resources Social Security was never intended to Private Defined Benefit Plans are Government Defined Benefit Plans are be the primary retirement plan and its disappearing underfunded long-term status is in question 170,172
Slide 4: US Retirement Landscape: Longevity and Complex Investing
US Retirement Landscape Americans face the prospect of increasing longevity and a complex investing environment Life expectancy (years) at age 65 has Probability of at least one member of Individual investors struggle to increased significantly a couple living to…. capture market returns 88% 19.3 11
Slide 5: Measuring the Gap
Measuring the Gap Median Net Worth by Age Cohort Americans have not saved enough – Highlighted group has median household income of ~$60k that will need to be replaced in retirement 232.1 – Social security is only projected to replace 40% of pre-retirement income 194.8 – 70% is recommended, meanin
Slide 6: Jackson's Value Proposition
Jackson’s Value Proposition Variable annuities can provide both guaranteed income and access to market growth Annuities are the only way for investors to access guaranteed income for life – effectively a defined benefit plan for the 21st century Jackson and its variable annuity products are un
Slide 7: Jackson's Track Record of Success
Jackson’s Track Record of Success Variable Annuity Sales Market Share EEV New Business Margin 19% 50% 18% 45% 17% 16% 40% 15% 14% 35% 13% 30% 12% 11% 25% 10% 9% 20% 2010 2011 2012 2013 2014 3Q2015 2010 2011 2012 2013 2014 3Q15 YTD Source: MARC Operating ROE Elite Access Lifetime Cumulative Sales, $b
Slide 8: Jackson's Track Record of Success
Jackson’s Track Record of Success $30 Sales & Deposits S&P at year end (Right Axis) 2500 Fed Bond Buying Taper 10yr treasury rates hit all-time low 2000 $20 Tech Bubble Burst Housing Bubble Burst 9/11 Terror Attack Global Financial Crisis 1500 Afghanistan War Enron Collapse Great Recession Asian Fin
Slide 9: Department of Labor Fiduciary Rule
Department of Labor Fiduciary Rule Current Status Final rule expected in the first half of 2016 There is an expectation for some change to the rule, but the basic framework is presumed to remain intact At a time when guaranteed income and investment advice have never been more critical, this p
Slide 10: The Future
The Future 5.0 Millennial Generation Millions (1981-2000) Baby Boom Generation Generation X ~87 million (1946-1964) (1965-1980) ~75 million ~66 million 4.5 Significantly increasing Turned 65 in 2015 retirement population over the next decade 4.0 The Millennials have 3.5 surpassed the Baby Boomer
Slide 11: Financial Update
Financial Update Chad Myers – Executive Vice President & Chief Financial Officer Jackson
Slide 12: Continued Diversification of Sales by Risk Type
Continued Diversification of Sales by Risk Type $30 $25.6 $24.6 $25 $1.1 $23.0 $1.4 $0.9 $0.6 $0.6 $1.4 $20.2 $1.7 $0.9 $20.6 $5.1 $19.6 $20 $0.4 $0.9 $1.1 $0.5 $17.7 $1.5 $1.3 $4.0 $0.8 $0.7 $0.5 <$0.1 $0.8 $0.5 $2.1 $1.7 $2.0 $2.8 $3.8 $2.4 $3.8 $15 $1.3 $1.6 $2.2 $2.2 $10 $15.5 $16.3 $14.5 $15.1
Slide 13: Constrained Variable Annuity Sales
Constrained Variable Annuity Sales Variable Annuity Quarterly Sales Excluding Elite Access 2010 – 3Q15 ($ billions) 5.5 Non-Elite Access variable annuity sales 5.0 have been managed to a quarterly level averaging approximately $4.5bn Quarterly Average = 4.5 4.5 Successful new product development
Slide 14: Variable Annuity Sales on a Risk Weighted Basis
Variable Annuity Sales on a Risk Weighted Basis $22,000 75% Nominal sales growth has been modest $18,000 65% Sales without living benefits have become a larger proportion of total $14,000 55% VA sales $10,000 45% Living benefit VA sales have experienced a decline in guarantee intensity $6,000
Slide 15: Strong Variable Annuity Net Inflows
Strong Variable Annuity Net Inflows Variable Annuity Quarterly Gross Sales and Benefits/Lapses 2010 – 3Q15 ($ billions) 7.0 Variable annuity net sales have been very strong over the last 5 years 6.0 This has reflected an upward sales trend 5.0 combined with strong persistency 4.0 YTD Q3 2015 s
Slide 16: Back Book Generates Healthy Free Surplus
Back Book Generates Healthy Free Surplus Expected Free Surplus Generation (undiscounted) at YE 20141 (in £ millions) 1,200 Jackson’s back book is large and profitable 1,000 Long-term nature of annuity contracts means 800 that run-off of book is a measured process 600 Even with no new sales, Ja
Slide 17: Unhedged GMWB Cash Flows Remain Resilient
Unhedged GMWB Cash Flows Remain Resilient $millions S&P @ 9/30 = 1,920 Includes guarantee fees only 2,000 Guarantee Fees Base, 5% Gross Return Uses prudent best estimate assumptions (AG43, C3P2) 1,800 PV Future Guarantee Fees 9,158 1,600 Benefits PV Benefits 2,199 5% gross return is well below
Slide 18: Reserves are Based on Conservative Return Assumptions
Reserves are Based on Conservative Return Assumptions S&P Statutory 500 Historical EEV IFRS IFRS Mean Return vs S&P 500return) Historical (percentages (percentages (percentages as annualized as as annualized annualized return) return) 1010 Chart Title 10 10 4.5 99 9 9 4 Chart Title 4.5 3.5 88 8 43 7
Slide 19: Investment Portfolio is Defensively Positioned
Investment Portfolio is Defensively Positioned Public IG Corporates $58.9 billion as of September 30, 2015 49.8% Cash/Treasuries are over 10% of portfolio US Treasury & Agency 9.1% High Yield is significantly below benchmark with 70% BB Cash/Other 5.2% Common and Banking and finance sector h
Slide 20: Credit Spreads Wider in 2015
115 135 175 195 215 155 75 95 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 Investment Grade May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Credit Spreads Wider in 2015 Sep-15 Nov-15 225 275 325 375 425 475 525 Jan-12 Mar-12 May-12 Jul-12
Slide 21: Energy Exposure
Energy Exposure Impact of oil prices varies substantially by sub-sector Energy Portfolio by Sub-Sector - Total IFRS Book Value, in billions September 30, 2015 $4.7 Total energy portfolio of $4.7bn $4.7 $2.0 – Market price of 101.3 Higher $0.2 $1.4 sensitvity to oil A- or Higher, $0.7 pricesHigher
Slide 22: Metals & Mining Exposure
Metals & Mining Exposure The majority of metals and mining exposure is investment grade Metals and Mining Portfolio - Total IFRS Book Value, in billions September 30, 2015 Total metals and mining portfolio of $1.1bn $1.1 $1.0 – Market price of 91.2 $0.1 A- or Higher, – Market price of steel sector
Slide 23: Continued High Level of Remittances
Continued High Level of Remittances Cumulative cash remittances, $m 2008-2015 $3,258m 64% 53% 59% 197 680 710 470 400 280 333 125 63 2008 2009 2010 2011 2012 2013 2014 2015 RBC Ratio 438% 417% 483% 429% 423% 450% 456% Net remittances in 2011 include $197m representing release of excess surplus to th
Slide 24: Summary
Summary Jackson has a long history as an industry leader Advisor-focused distribution model with the largest, most skilled, and most productive wholesaling network Best-in-class customer service at industry leading expense ratios Consistently stable financial strength ratings and capital gen