International Insurance Society 44th Annual Seminar Mark Tucker, Prudential plc, Group Chief...

International Insurance Society44th Annual Seminar

Mark Tucker, Prudential plc, Group Chief ExecutiveJuly 2008

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Strategic allocation of capital

Underpinned by:

• Constant evaluation

• “Good growth” (RoCE > CoC)

• Sustainable earnings

Financial DriversGrowth, Productivity, Risk

Strategic DriversParticipation, Competitive, and

Organisational Strategy

Shareholder Value

NOTE:RoCE - Return on Capital EmployedCoC - Cost of Capital

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Building a Franchise

Managing the Franchise

Two-pronged approach

1

2

4

Evolution of the Prudential Group

• Driving performance across an international Group

• Re-deployment of capital to high growth markets globally

• Strong heritage from leadership in UK life and pensions

AssetManagementInsurance

Asset ManagementAsset Management

Asia

UK

US

Where we have come from The Group today

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Participation • Should we be in our historic markets and sectors or new ones or both?

Ambition • What goals, targets and timeframe should we set for the franchises we are building?

Competitive Advantage

• What choices should we make regarding entry strategy, management model, distribution, product participation, and brand?

Leveraging Capabilities

• What sources of competitive advantage can we utilise in building up a new franchise?

Consistent strategic thinking about business fundamentals

Building a Franchise: Overview

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China

Indonesia

India

Japan

Malaysia

Singapore

Philippines

Thailand

Taiwan

South Korea

VietnamHong Kong

1992

2000

2008

No Participation

Life Business Participation

Driven by regional growth and stability

Building a Franchise: Participation

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Building a Franchise: Ambition

Clear ambition…

• Recognised as market leader

• Market share growth not at expense of profitability

Disciplined focus on market leadership and profitability

…leading to results

New Business

Value

418

208

243

241

144

367

266

259

277

285

653514

0

200

400

600

800

1,000

1,200

2004 2005 2006 2007

Asia US UK

£ million

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Building a Franchise: Competitive Advantage and CapabilitiesReliance on organic growth on the back of accelerated greenfield acquisitions and JVs

Life Business Participation

China

Indonesia

India

Japan

Malaysia

Singapore

Philippines

Thailand

Taiwan

South Korea

Vietnam

‘Cold start’

Acquisition of entry vehicle

JV

No Participation

Hong Kong

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• Clearly defined Group ambitions and growth targets• Empowerment of the country CEO to define business strategies within this

framework• Inter-regional and inter-Group leverage of expertise and support

FederalManagement

Model

Distribution

ProductParticipation

Brand

• Strong agency relationships• Innovative bank distribution• Direct sales

• Product innovation• Tailored to consumer needs• Consistently striving to meet customer needs with capital efficient solutions

• Brand recognition• Striking logo transcends language barriers• Common set of customer friendly values• All based on financial strength and long term commitment to markets

Bus

ine

ss M

ode

l

Building a Franchise: Competitive advantage and capabilities

Country management aligns business model to local needs

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1.Consistency between product range and customer proposition

2.Low cost without sacrificing quality of service

3.Flexibility

Building a Franchise

Market-driven product portfolio management

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•Launching consumer finance

•Entering the drawdown space

•Meeting a wider range of customer needs

•Assessing current offers in the market

Managing the Franchise

Expanding the product portfolio in Asia

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Conclusion

•Disciplined capital allocation

•Disciplined risk management

•Capital adequacy

•Returns and growth