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PRUDENTIAL PLC
Jonathan Bloomer, Group Chief Executive
6 October 2004
Merrill Lynch Banking and Insurance Conference
“MANAGING COMPLEXITY”
1
This statement may contain certain “forward looking statements” with respect to certain of Prudential plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements containing the words “believes”, “intends”, “expects”, “plans”, “seeks” and “anticipates”, and words of similar meaning are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond Prudential's control including among other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, and the performance of financial markets generally; the policies and actions of regulatory authorities, the impact of competition, inflation and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions in which Prudential and its affiliates operate. This may for example result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. As a result, Prudential’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in Prudential’s forward-looking statements. Prudential undertakes no obligation to update the forward-looking statements contained in this statement or any other forward-looking statements it may make.
2
ATTRACTIONS OF DIFFERENT MARKETS
3
Canada (2.2%)
US (32.1%)
Mexico(1.9%)
GuatemalaColombia Venezuela
Brazil(1.6%)
Equador
Peru
Chile
Argentina Uruguay
UK(4.7%)
Norway Sweden Finland
Denmark
Spain(1.9%)
Ireland
Portugal
France( 4.3%)
Belgium
Neth(1.2%)
Italy( 3.5%)
Switzerland Austria
Germany(5.9%)
Poland Ukraine
Russia (1.0%)
Czech Slk
Bel
RomSlvCroHungary
TurkeyGreece
Kaz
Uzb
Japan(13.5%)
South Korea(1.5%)
Australia(1.2%)
South Africa
NigeriaMorocco
TunisiaAlgeria Egypt
Israel
HongKong
China(3.8%)
Thailand
SingaporeMalaysia
Philippines
Indonesia
New Zealand
SyriaIndia(1.6%)
Ban
Pakistan
All othercountries
HOW MONEY SHAPES THE WORLD
Share of global Gross National Income, 2002 %GNI per capita (PPP basis) 2002
Prudential operationsRest of the world
Viet.
Taiwan
Adapted from the Financial Times, 20 January 2004
3
PRUDENTIAL PLC: GROUP STRUCTURE
AsiaUK & Europe USA
4
A MULTI-NATIONAL LIFE INSURANCE GROUP
INCREASING INTERNATIONAL DIVERSIFICATION
New business achieved profits
1998
New business achieved profits
2004 HY
53%
14%
33%
29%
44%
27%
UK and Europe
US Asia
5
ASIA
6
THE ASIAN OPPORTUNITY
Population (m)
3.3% 3.5%
4.9%5.9%
6.5% 6.6% 6.9%7.6% 8.0% 8.1%
8.6%
0%
2%
4%
6%
8%
10%
Japan Phil India Indo Thai HK Malay Korea Sing Taiw an China
Long-term GDP Growth Rates
Mutual Funds
Equities
Fixed Income Securities
Pensions
Life Insurance
Cash/Deposits
Other/Misc
0%
20%
40%
60%
80%
100%
HK Mal Sing Indi J ap Ta iw Ko r Tha i Chin P hil Indo US
Percentage of Holdings By Asset Class
Now 20301,259
98620612680766246222274
China IndiaIndonesia JapanVietnamPhilippinesThailand S. KoreaMalaysiaTaiwanHong Kong Singapore
1,4701,380
2851171101197753343284
18.5%22.3%
26.0% 27.8% 29.8%33.0%
36.4% 38.1%
51.2%
0%
10%
20%
30%
40%
50%
60%
US India Taiw an Japan HK Korea Thai Malay Sing
Savings Rates
7
THE ASIAN OPPORTUNITY
LIFE PENETRATION INCREASES AS ECONOMIES DEVELOP
North Asian markets dominate in terms of scale
Strong correlation between GDP per capita and penetration of life insurance
Inflexion point at $10,000 where life insurance takes off
Tremendous potential for nascent markets (eg Malaysia, urban populations in China and India) as they move up the curve
Penetration, 2002
Per Capita GDP, USD (log scale)
= $20bn in Direct Premiums
PhilippinesIndonesia
Thailand
MalaysiaSingapore
Hong Kong
India
Taiwan
China
S Korea
UK
Japan
US
0%
2%
4%
6%
8%
10%
12%
100 1,000 10,000 100,000
Vietnam
Life Penetration
Source: Sigma
8
ASIA: GEOGRAPHIC DIVERSIFICATION
GROWTH OF NEWER OPERATIONS
2001 APE SALES BY COUNTRYTOTAL £434m
2003 APE SALES BY COUNTRYTOTAL £555m
2002 APE SALES BY COUNTRYTOTAL £513m
Singapore14%
Malaysia11%
Taiwan24%
Japan6%
27%
Hong Kong18%
China, India, Indonesia, Korea, Philippines, Thailand and Vietnam
Singapore14%
Malaysia12%
Taiwan29%
Japan8%
18%
Hong Kong19%
Singapore21%
Malaysia11%
Taiwan31%
Japan7%
12%
Hong Kong18%
9
ASIA: POTENTIAL TO BE ONE OF WORLD’S LARGEST RFS MARKETS
INDIAIndia Life Insurance Market Shares
April 2002 - March 2003Joint venture with ICICI- restricted to 26% ownership
Full product rangeMulti-channel distribution
- 12 bank distribution agreements
Acknowledged as market leading operation
- ‘the leading private sector Indian life insurance company on all counts” *
- Insurance Award for “impressive growth and innovation” **
Private Share Total ShareLIC - 92.2%ICICI - Prudential 38.1% 3.0%Birla Sun Life 13.5% 1.1%HDFC Standard Life 13.5% 1.1%Max New York Life 8.0% 0.6%SBI Life 7.6% 0.6%Tata AIG 6.2% 0.5%Allianz Bajaj 5.6% 0.4%OM Kotak 3.2% 0.2%ING Vysya 1.8% 0.1%AVIVA Life 1.3% 0.1%MetLife 0.6% 0.1%AMP Sanmar 0.5% 0.0%
100.0% 100.0%
* Business Today; ** Outlook Money Magazine
10
ASIA: POTENTIAL TO BE ONE OF WORLD’S LARGEST RFS MARKETS
CHINA
50:50 with joint venture partner CITIC- c15% market share in Guangzhou- strong start in Beijing, Q3 launch in Suzhou
- fourth licence expected this year
Market undergoing further change- IPOs of domestic insurers- opening up of new cities and provinces
Main challenge is limited amount of experienced human resource
- PCA leverages Chinese speakers from existing operations
- already a well-known name
11
PRUDENTIAL CORPORATION ASIA: A WELL-ESTABLISHED BUSINESS MODEL
STRONG GROWTH IN SALES AND IN PROFIT
0
100
200
300
400
500
600
1998 1999 2000 2001 2002 2003 H1 2004
APE sales NBAP
£mStrategy has delivered excellent results
30% CAGR in AP shareholders’ funds since 1998
Now present in all 12 target markets
Product and distribution models well-established
Cash positive in 2006
At constant exchange rates
12
USA
13
INVESTABLE RETIREMENT ASSETS IN THE US
US HAS BY FAR THE LARGEST RETIREMENT ASSETS
$4.0$5.3
$7.3 $7.8
$9.2
$10.7
$12.5
$14.5
$6.6
$0
$5
$10
$15
1995 1997 1999 2001 2003 2005 2007 2009 2011
Total Private Retirement Market Assets
The US has more than 70% of the world’s retirement assets
The UK is second with 10%
$Trillions
Ret
irem
ent M
arke
t Ass
ets
Source: Cerulli Report, Retirement Industry Update: trends in 401(k) and IRA Markets 2002
14
JACKSON NATIONAL LIFE: OVERVIEW
Scale player in US life industry
Excellent product manufacturing and administrative capability
Relationship-driven distribution model
Strong risk management capabilities and financial discipline
Low-cost, flexible infrastructure
Consistent growth in GAAP assets
THE WORLD’S LARGEST RETIREMENT MARKET
15
JACKSON NATIONAL LIFE
FOCUS ON VALUE WHILE INCREASING SALES
0
100
200
300
400
500
600
700
800
900
1000
Q12002
Q22002
Q32002
Q42002
Q12003
Q22003
Q32003
Q42003
Q12004
Q22004
$m
January 2002
– launched Perspective II
August 2003
– doubled fees for GMDBs
– reduced minimum interest rates for fixed option
May 2004
– priced to increase gross margin by 25bps
Variable annuity premiums
16
JACKSON NATIONAL LIFE: CONTINUING POSITIVE TRENDS
STRONG GROWTH IN US GAAP ASSETS
$m
$46,727
$7,048$8,508
$45,813
$35,394
$37,428
$28,729$31,810
$25,638
$41,034
$33,816
$44,980
$1
$5,126
$4,522
$1,952$ 1,122
$5,586
$370
$4,386
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 H1 2004
General Account* VA General Account Assets** VA Separate Account
$29,148
$33,096$36,214
$40,521
$43,942
$47,242
$51,626
$56,080
$25,639
$58,590
* Excludes FAS-115, FAS-133, reverse repurchase obligations, and securities lending deposits** VA General Account Assets breakdown ($m) - 1995 = 0,1996 = $49, 1997 = $164, 1998 = $446, 1999 = $605, 2000 = $928, 2001 = $1082, 2002 = $2260, 2003 = $3219, H1 2004 = $3,355.
17
JACKSON NATIONAL LIFE: GROWTH FROM AN ADVANTAGED POSITION
LOW-COST STRUCTURE OFFERS COMPETITIVE ADVANTAGE
bp
•
0
100
200
300
400
500
600
700
0 5 10 15 20
••
•
•
•• •
••• •
•
•
•
•
•
•••
••
••
•
Exp
ense
s/A
nnui
ty P
rem
ium
s (b
p)
Annuity Premiums ($Bn)
800
25
• Market JNL 20032001 Curve
Source: National Underwriter Insurance data Services/Highline Data (formerly Thomson Financial)Note: Data points indicate peer competitors, cost curve represents universe of annuity competitors
2002 Curve 2003 Curve
18
UK AND EUROPE
19
LARGE OVERALL UK SAVINGS MARKET
TOTAL GROSS HOUSEHOLD WEALTH (£BN) 2003
Medium/long-term savings: £1,658 bn
Deposits: £808 bn
Equities: £370 bn
Bonds and loans: £44 bn
Other: £87 bn
Mutual funds: £136 bn
Residential property1: £2,575 bn
Total: £5,678 bn
Sources: ONS (UKEA Table 64, & Residential Property Blue Book Table 10.10)
1. Residential property data is 2002
20
UK INSURANCE OPERATIONS
A TIME OF CHANGE AND OPPORTUNITY
Market Prudential’s position
Environment beginning to stabilise
Market is concentrating: will favour stronger players
1.5% price cap provides opportunity
Clarity emerging on distribution
Restoring consumer confidence is key
Undisputed financial strength
Powerful product propositions
Scale business with low cost base and efficient operations
Net winners in changing distribution environment
The industry’s “biggest” brand
Clear beneficiary of market concentration
21
MARKET CONCENTRATION IN THE UK
MARKET SHARE OF TOP 10 LIFE PLAYERS HAS INCREASED TO 71%
40
60
80
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
71%
46%
% m
arke
t sha
re
Sources: Prudential / Datamonitor
22
UK INSURANCE OPERATIONS
DIVERSIFIED DISTRIBUTION STRATEGY
Business to Business Intermediaries Direct to Consumer Partnerships
APE sales (1H 03)
APE sales (1H 04)
£105m
£113m
£116m
£141m
£73m
£63m
£16m
£40m
% of UK APE sales (1H 04) 32% 39% 18% 11%
Consulting Actuaries and Benefit Advisers
Retail IFAs Direct Marketing Banks, Distributors, Retail BrandsChannel
Defined Benefit, Defined Contribution, AVC and Stakeholder Schemes, Bulk Annuities
With-Profit and Unit-Linked Bonds, Annuities, Protection
Individual Pensions, Annuities, Savings and Investments, Protection
Individual Pensions, Annuities, Savings and Investments, Protection
Product
23
UKIO KEY PRODUCT LAUNCHES
ACHIEVING MOMENTUM IN PRODUCT INNOVATION
DISTRIBUTION BOND
PROTECTION PROPOSITION
FLEXIBLE INVESTMENT PLAN
BULK S32
RISK MANAGEMENT PRODUCTS FOR DBPENSION SCHEMES
PROTECTION ENHANCEMENT
2003 2004 2005EQUITY
RELEASE
CORPORATE PENSION FUND RANGE
INDIVIDUAL PENSIONS PROPOSITION
PRUFUND
ISAsMONEYPURCHASE PLAN
24
CONCLUSION: ATTRACTIONS OF DIFFERENT MARKETS
Half of the UK workforce are estimated to be
under-saving for their retirement
Asia has many of the fastest
growingeconomies in
the world
40 million baby boomer households in America will move into retirement in the
next 20 years
70% of the world’s retirement assets are in the United States
Approximately 30% of the UK population is
forecast to be aged 60 and over by
2030 2030
Significant opportunities in
Asia due to strong savings
culture