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POSITIONED TO OUTPERFORM
2
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”, “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.
INTRODUCTION
SIR DAVID CLEMENTI
www.pru.co.uk
OVERVIEW
MARK WOOD
www.pru.co.uk
Source: ABI, Prudential analysis.5
IN AN UNCERTAIN WORLD WE MAKE IT POSSIBLE FOR EVERYONE TO ENJOY A SECURE FUTURE
POSITIONED TO OUTPERFORM• Unrivalled combination of brand,
financial strength and investment performance
• Product mix biased to high margin products with high barriers to entry
• Well balanced multi-channel capability
• Operational growth capacity
• 10% growth in 2005 (assuming 5% market growth)
• 14% IRR by 2007
IMPROVING UK MARKET• Stable economic environment
• Signs of savings market regaining confidence
• Regulatory environment favours scale players
• Pension market set to become attractive
• Prospect of market concentration
6
TRANSFORMATION OF THE UK BUSINESSA profitable platform for growth
DISTRIBUTION: SALES BY CHANNEL1 PRODUCT: SALES BY TYPE2
0%
25%
50%
75%
100%
2000 2001 2002 2003 2004
Prop
ortio
n %
Shareholder Policyholder
IFA
B2B
DSF IFA
B2B
Partner-ships
D2C
20042000
0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%
1995 1998 2001 2004
HEADCOUNT & EXPENSE RATIO
2468
1012141618
1995 1998 2001 2004
Expe
nses
exc
l com
mis
sion
/F
unds
und
er M
gt
Empl
oyee
s (0
00s
FTE)
SALES & NEW BUSINESS ACHIEVED PROFIT
-40%
-20%
0%
20%
40%
2001 2002 2003 2004-40%
-20%
0%
20%
40%
Year
-on-
Year
Pe
rcen
tage
Cha
nge
Pru Sales,APE
PruNBAP
ABI MarketSales, APE
Pru NBAPMargin Pru N
BA
P Margin
.Note: 1. Includes DWP rebates. 2. Sales relates to new policies set-up in stated year.
7
DEVELOPING THE SHAREHOLDER BUSINESS
1
2
3
4
5
6
7
8
9
10
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Discontinued products On-going Products
Total In Force Policies
Pol
icie
s (m
illio
ns)
Source: Prudential analysis and indicative projections.
8
WE WILL DELIVER ON OUR COMMITMENTSToday’s focus
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
9
CAPITALUKIO Net Flow of Funds to/from Group - 2001 to 2005
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
(1)
-400
-200
0
200
400
600
800
2001 2002 2003 2004 2005 Plan 2007Indicative
£m
Proceeds from GI DisposalPAC - Shareholder TransferWP & Dividends (indicative)Capital Injections (indicative)
PAC Special Dividend2003-05 only Net Funds FlowPAC - Shareholder
Transfer WP & DividendsCapital Injections(2)
Prudential Analysis. (1) UK Insurance Operations (2) Prudential Assurance Company
10
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRDIVERSIFIED DISTRIBUTION REACHSales by distributor type
THE MARKET, 2004 PRUDENTIAL, 2004
Direct10%
Single Tie26%
Retail IFAs55%
EBCs9%
Direct13%
Single Tie25%
Retail IFAs34%
EBCs28%
Prudential Analysis. Market & Prudential sales include DWP rebates.Prudential sales exclude Europe.
11
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRTHE SAVINGS RATIO DOES NOT ALONE DRIVE THE SIZEOF PRUDENTIAL’S NEW BUSINESS
REPORTED NEW BUSINESS
Prudential Analysis. 1. RP - Regular Premium. 2. SP - Single Premium. Note: UK Sales 2004, excludes European Insurance Operations.
£232m29%
‘NEW’ NEW BUSINESS
PROTECTION
NEW SAVINGS, PENSIONS, BONDS, ISAs
£211m26%
‘INCREMENTAL’ NEW BUSINESS
AVCs
RP PENSION TOP-UPS1
SP PENSION TOP-UPS2
NEW MEMBERS TO EXISTING GROUP SCHEMES
£363m45%
‘INTRA-MARKET’ NEW BUSINESS
WITH PROFIT SWITCHING
PENSION TRANSFERS
VESTING PENSION ANNUITIES
BULK PURCHASE ANNUITIES
= £806m
12
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRACCESSING DISTRIBUTION Selectively manufacturing product
DIRECT WHOLE OF MARKETSINGLE-TIE MULTI-TIE EBC3
Prudential Analysis. 1. RP - Regular Premium. 2. SP - Single Premium. 3. EBC -Employee Benefit Consultant.
‘NEW’ NEW BUSINESS
PROTECTION
NEW SAVINGS, PENSIONS, BONDS, ISAs
‘INCREMENTAL’ NEW BUSINESS
AVCs
RP PENSION TOP-UPS1
SP PENSION TOP-UPS2
NEW MEMBERS TO EXISTING GROUP SCHEMES
‘INTRA-MARKET’ NEW BUSINESS
WITH PROFIT SWITCHING
PENSION TRANSFERS
VESTING PENSION ANNUITIES
BULK PURCHASE ANNUITIES
Directmarketing costs Commission based Fee based
Source:13
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRDEPOLARISATION WILL RESHAPE THE UK L&P MARKETSales by channel
THE MARKET BY CHANNEL2004 ACTUAL 2007 FORECAST
CAGR5% p a
Direct
Single Tie
IFAs
EBCs Direct
Single Tie
WOMAdvisers
EBCs
Multi Tie
NO MATERIAL CHANGE TO DISTRIBUTION MIX IN 2005
EBCs36%
Direct 13%
SingleTie 25%
IFAs34%
EBCs28%
Direct 10%
SingleTie 19%
WOMAdvisers 19% Multi Tie 19%
PRUDENTIAL BY CHANNEL2004 ACTUAL 2007 TARGETED
Source: ABI, Prudential Analysis.
14
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRMARGINManaging mix
PRUDENTIAL SALES BY PRODUCT
2004 ACTUAL 2007 TARGETED
Prudential Analysis. 2007 product order has been presented in line with 2004 NBAP margins.
4%
19%
27%
17%
8%
11%
14%
Protection
Group Pensions(fee based)
Other Pensions Bulks
IndividualAnnuities
Bonds
DWPRebates
REDUCINGMARGIN
3%13%
22%15%
10%
14%
23%
Group Pensions(fee based)
Other PensionsBulks
IndividualAnnuitiesBonds
DWPRebates
Protection
REDUCINGMARGIN
15
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRWE HAVE INVESTED £100M P.A. IN INFRASTRUCTUREUsing technology to support the business
Customer & Policy Aggregation
Scanning & Imaging
Workflow
Single Address
4Front Single Call Centre
Application
Single Number0800 000000
pruadvisor.co.ukpru.co.uk
Contract EngineBonds
Contract EnginePensions
Contract EngineProtection
Contract EngineAnnuities
Single Customer Database
Single Contact
Database
Prudential Analysis.
16
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRANNUITIESIndividual and bulks
0
200
400
600
800
1,000
1,200
1,400
1,600
2001 2002 2003 2004 20070%
5%
10%
15%
20%
25%
30%
35%
Mar
ket S
ize,
APE
, £m
(Bar
)
MarketCAGR 2004-07
8%
EBCs 19%Fee based
(bulks and some internal vestings)
Intermediaries 31%Commission based
(mostly OMOs)Direct 17%
Marketing Costs(internal vestings, some OMOs)
Single Tied 33%Fee & Commission
(bulks & external vestings)
THE MARKET
PRUDENTIAL’S ANNUITIES BUSINESS
PRU FOCUS• Low commission to premium ratio
• Volume & scale
• Mortality expertise
• Efficient quotation, acceptance & payments system
• Investment expertise
• Brand
MARKET DRIVERS• Retirement age population
• Fund Growth
• DB to DC shift
• Pension scheme solvency & risk appetite
ABI, Prudential Analysis.
PruM
arket Share (line)
2004 ACTUAL
17
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2001 2002 2003 2004 20070%
1%
2%
3%
4%
5%
6%MarketCAGR 2004-07
0%
Mar
ket S
ize,
APE
, £m
(Bar
) PruM
arket Share (line)
PRUDENTIAL’S PROTECTION BUSINESS
PROTECTION
ABI, Prudential Analysis.
MARKET DRIVERS• Housing market performance
• IHT planning
• Loan protection demand
THE MARKET
PRU FOCUS• Efficient, low cost processing
• Volume & scale
• Capital efficiency
• Simplified bulk administration for loan books
Intermediaries 6%Commission based
Direct 1%Marketing Costs
Single Tied93%
Commission based
2004 ACTUAL
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
18
0
1,000
2,000
3,000
4,000
5,000
2001 2002 2003 2004 20070%
1%
2%
3%
4%
5%
6%
7%
8%Market
CAGR 2004-076%
Mar
ket S
ize,
APE
, £m
(Bar
) PruM
arket Share (line)
PRUDENTIAL’S PENSIONS BUSINESS
PENSIONS
ABI, Prudential Analysis.
MARKET DRIVERS• A-day
• Pensions Commission
• Investment performance
• DB to DC shift
• Advisers shifting from fee to commission
THE MARKET
EBCs 63%Fee based
(mostly DC & AVCs)
Intermediaries 22%Commission based
(top-ups only)
Direct 15%Marketing Costs (top-ups only)
2004 ACTUAL
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
PRU FOCUS• Persistency
• SP vs RP
• Premium size
• Commission rationality
• Auto-enrolment/take-up on group schemes
19
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2001 2002 2003 2004 20070%2%4%6%8%10%12%14%16%18%20%Market
CAGR 2004-078%
With ProfitBonds
Unit LinkedBonds
Mar
ket S
ize,
APE
, £m
(Bar
) PruM
arket Share (line)
PRUDENTIAL’S INVESTMENT BOND BUSINESS
INVESTMENT BONDS
ABI, Prudential Analysis.
MARKET DRIVERS• Investment market performance
• With-profit to Unit linked shift
• Retirement age population
• Tax-free lump-sums
THE MARKET
Intermediaries 23%With Profit Bonds
Commission based
Direct 2%Marketing Costs
Intermediaries 75%Unit Linked Bonds
Commission based
2004 ACTUAL
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
PRU FOCUS• Volume & scale
• Commission levels
• Persistency
• Efficient low cost processing
20
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRTHE TRANSFORMED BUSINESS PLATFORM DELIVERED PROFITABLE GROWTH IN 2004
2003 2004
15% YoY Growth
9% YoYGrowth
40% YoY Growth
16% YoY Growth
Week
Pru
UK
IO S
ales
, Cum
ulat
ive
APE
, £m
0
100
200
300
400
500
600
700
800
900
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Prudential Analysis.
21
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRTHE TRANSFORMED BUSINESS PLATFORM CONTINUESTO DELIVER PROFITABLE GROWTH IN 2005
9% YoYGrowth
16% YoY Growth
15% YoY Growth
0
100
200
300
400
500
600
700
800
900
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
2003 2004
40% YoY Growth
Week
Pru
UK
IO S
ales
, Cum
ulat
ive
APE
, £m
2005
0
50
100
150
200
250
1 2 3 4 5 6 7 8 9 10 11 12 13
12% YoY Growth
Prudential Analysis.
22
AGENDA
• Financial Review Tim TookeyBREAK
• Distribution and Service - Overview Andy Briggs• Customer Services Jan McNish• The Intermediary Perspective Patrick Gale, CEO, Sesame• Prudential’s Multi-Channel Distribution
– Intermediaries Andy Briggs
– Corporate Partnerships Isabel Hudson
– Business to Business (B2B) Andy Briggs• Conclusion and Q&A Mark Wood
FINANCIAL REVIEW
TIM TOOKEY
www.pru.co.uk
24
FINANCIAL REVIEW CONTENT
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
• Recent performance highlights
• IRR
• Margin
• Expenses
• Cashflows
• Annuities
25
Q1 2005 HIGHLIGHTS
UKI 64 31 8
B2B 63 30 17
Partnerships 27 13 42
D2C 19 9 6
Europe 4 2 100
DWP Rebates 31 15 (9)
TOTAL 208 100 12
Sales Proportion by Growth on Channel Q1 04
(APE, £m) (%) (%)
Prudential Analysis.
26
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRIRR: UK AND EUROPE 12% IRR achieved in 2004 with strong new business growth
2004 (%) Target 2007 (%)
Unit-linked bonds 7 8Corporate pensions 3 15Protection1 1 15Annuities 20 20OVERALL POST-TAX IRR 12 14
• Strong progress towards 2007 target, but mix is critical
• Unit-linked bonds: benefits of scale coming through
• Annuity: barriers to entry and low commission facilitate strong returns
• Corporate pensions (unit-linked): focusing on efficient customer acquisition and servicing
• Protection: price sensitive product, as volume grows we gain efficiencies
IRR ANALYSIS
Source: Prudential Analysis. Note 1: does not include Credit Life.
Source:27
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRMARGIN: VARIES BY PRODUCTOverall margins sustained in 2004
2003 2004
NEW BUSINESS ACHIEVED PROFITS £157m £220m
TOTAL MARGIN 27% 27%
NBAP MARGINS, selected product lines2003 2004
B2B Corporate Pensions 16% 9%Bulks 56% 46%Individual Annuities 43% 43%WP Bonds 41% 41%UL Bonds (12)% 0%
• Expect a few percent reduction in 2005 margins
• Commitment to managing mix
Source: Prudential Analysis.
Source:28
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRMARGIN: DEVELOPMENT IN 2004Product mix and annuity profitability are key
0%
5%
10%
15%
20%
25%
30%
35%
Actual 2003 FinancialAssumption
Changes
Transferinternal
vestings toPRIL
Annuities,including
lower yieldmargins
UL specialoffer
Shift to ULpensions
Otherincluding
lowerexpenses
Actual 2004
Source: Prudential Analysis.
29
MARGIN
CAPITAL SERVICE
DISTRIBUTION
EXPENSESContinued focus on costs and cost efficiency
14% IRR
2
4
6
8
10
12
14
16
18
20
Employees, 000s FTE (B
ar)
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Expe
nses
exc
l. C
omm
issi
on
/Fun
ds u
nder
Mgt
(Lin
e)
Prudential employeesPrudential expense ratio
Prudential Analysis, FSA returns.Total expense ratio defined as total gross OB & IB (form 41) expenses / total admissible assets.
30
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRDEVELOPING THE SHAREHOLDER BUSINESS
1
2
3
4
5
6
7
8
9
10
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total In Force Policies
Pol
icie
s (m
illio
ns) Discontinued products On-going Products
.Source: Prudential analysis and indicative projections.
31
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRGROUP CAPITAL AND CASH FLOWSActive management of capital
CAPITALCONTRIBUTION
CAPITALCONSUMPTION
UK shareholder-backed
businessUK life fund
Reinvestment Reinvestment
2006
PrudentialCorporation
AsiaM&G
Reinvestment Reinvestment
JNL EggShareholder dividendand interest on debt
Reinvestment Reinvestment
32
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRUKIO CAPITAL AND CASH FLOWSActive management of capital
PACShareholder-
backedProducts
Reinvestment
UK life fundPAC With-Profits
Reinvestment
CAPITALCONSUMPTION
CAPITALCONTRIBUTION
UK ShareholderAnnuities (PRIL)
UKIO
£198m Prudential Plc £250m
£100mReinvestment
Reinvestment
£180m
GeneralInsuranceHealthcare
& OtherReinvestment
ServiceCompany
Prudential Analysis. £198m 2005 distribution of 2004 bonuses. £250m UKIO capital consumption is net of in-force release. £100m special dividend is the third and final instalment of the special dividend which commenced in 2003.
33
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRSHAREHOLDER ANNUITY CASHFLOW SIGNATUREAn individual annuity pays back in the 5th year
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Year
CUMULATIVE
IND
ICA
TIV
E C
AS
HFL
OW
0
Prudential Analysis. Note: indicative data 2004.
34
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRINDIVIDUAL ANNUITY - SELF FUNDING FROM 2010
-150
0
150
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Year
New Business Strain In Force Release Net Capital Required
IND
ICA
TIV
E C
AS
HFL
OW
Prudential Analysis. Note: indicative data. Total capital required is net i.e. new business capital less release of in-force.
35
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRA PRUDENT APPROACH TO WRITING ANNUITIESShareholder (PRIL) Individual Immediate Annuities
Price
Realisti
c Liab
ility
YieldDefault
sMism
atchin
gMorta
lityExpen
ses
Contingen
cy
Regulat
ory Lia
bility
Solvency
Marg
in
Total R
egulat
ory Capita
l
Total
Initia
l Exp
ense
s
Tax
Total
New business strainPrice
Prudential Analysis. Note: the waterfall is based on a price with a yield margin of 100bps.
36
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRA PRUDENT APPROACH TO WRITING ANNUITIESShareholder (PRIL) Individual Immediate Annuities
• Business can be sold at different yield margins
• Depending on the yield margin achieved business can be written with little or no capital
Price
Realisti
c Liab
ility
Yield
Defaults
Mismatc
hingMorta
lityExpe
nses
Continge
ncy
Regulatory Liab
ility
Solvency
Marg
in
Total R
egulat
ory C
apita
l
Total Initia
l Exp
ense
s
Tax
Total
Price Net capital released
Prudential Analysis.
37
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRA PRUDENT APPROACH TO WRITING ANNUITIESShareholder (PRIL) Individual Immediate Annuities
Price
Realisti
c Liab
ility YieldDefa
ults
Mismatc
hingMorta
lityExp
enses
Contin
gency
Regulator
y Liabili
ty
Solvenc
y Marg
in
Total
Reg
ulator
y Cap
ital
Total
Initia
l Exp
enses Ta
xTo
tal
Solvenc
y Marg
inYiel
dDefault
sMism
atching
Mortality
Expens
esConti
ngen
cy Tax
MSB Res
erves +
Initia
l Exp
ense
s
MSB profit
• Individual annuities generate positive MSB profit in the year of sale
• MSB profit does not represent cash
Price
Prudential Analysis.
ANNUITIES: REGULATORY AND ECONOMIC CAPITAL
38
• Annuities require capital to cover new business strain
• The chart is based on the requirements of the Integrated Prudential Sourcebook (IPSB) – Pillar I equates to the statutory liabilities plus regulatory capital requirements (required minimum margin)– Pillar II equates to realistic liabilities plus Individual Capital Assessment (ICA) based on BBB economic capital– The use of AA economic capital does not materially increase the overall Pillar II requirement
0%
20%
40%
60%
80%
100%
Pillar IPillar IITotal Assets
Shareholder Annuities (PRIL) Pillar I vs Pillar II
Per
cent
age
of P
illar I
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
Prudential Analysis. Note: IPSB came into effect on 31 December 2004.
39
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRSUMMARYIn good shape
• Strong financial performance in 2004
• Active mix management results in reduction in overall NBAP margin
• Key Financial Focus– Unit cost pressures and overhead absorption– Clear understanding of annuity dynamics
• On track for 14% IRR by 2007
QUESTIONS & ANSWERS
POSITIONED TO OUTPERFORM
DISTRIBUTION & SERVICE
ANDY BRIGGS
www.pru.co.uk
43
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRCONTENT
• Overview
• Customer Services
• Intermediary Perspective– Patrick Gale, CEO, Sesame
• Prudential’s Multi-Channel Distribution– Intermediaries– Corporate Partnerships– B2B
MARGIN
CAPITAL SERVICE
DISTRIBUTION
IRR
44
2004: HOW DO WE COMPARE TO THE MARKETSales by Distribution Channel & Product,Prudential Vs Market
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
THE MARKET 2004 PRUDENTIAL 2004Direct 13%
SingleTie 25%
IFAs34%
EBCs28%
SALE
S B
Y D
ISTR
IBU
TOR
TYP
E
Direct 10%
SingleTie 26%
IFAs55%
EBCs9%
ABI, Prudential Analysis
10%
10%
26%
17%
31%
3%3%
Protection
Group Pensions(fee based)
Other PensionsBulks
IndividualAnnuities
Bonds
DWP Rebates
4%
19%
27%
17%
8%
11%
14%
Protection
Group Pensions(fee based)
Other Pensions
Bulks
IndividualAnnuities
Bonds
DWP Rebates
SALE
S B
Y PR
OD
UC
T
45
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRWHAT ARE WE AIMING TO ACHIEVE?Maintaining the same strategy
Direct 13%
SingleTie 25%
IFAs34%
EBCs28%
2004 ACTUAL 2007 TARGETED
SALE
S B
Y D
ISTR
IBU
TOR
TYP
E
EBCs36%
Direct 10%
SingleTie 19%
WOMAdvisers 19% Multi Tie 19%
SALE
S B
Y PR
OD
UC
T
Prudential Analysis.
4%
19%
27%
17%
8%
11%
14%
Protection
Group Pensions(fee based)
Other Pensions Bulks
IndividualAnnuities
Bonds
DWPRebates
3%13%
22%15%
10%
14%
23%
Group Pensions(fee based)
Other PensionsBulks
IndividualAnnuitiesBonds
DWPRebates
Protection
REDUCINGMARGIN
REDUCINGMARGIN
Source:46
CONTINUED FOCUS ON HIGH MARGIN PRODUCTSAccessing distribution with lower margin products only where needed to unlock volume of high margin products
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
PRUDENTIAL’S PRODUCT FOCUS
Bonds
DIRECT
EMPLOYEE BENEFIT CONSULTANTS
Source: Prudential Analysis.
Group Pensions
(fee based)
MARGIN LowHigh
Risk Products Savings Products
IndividualAnnuities Protection Bulk
AnnuitiesOther
Pensions
INTERMEDIARY: MULTI-TIE
D2C
B2B
INTERMEDIARIES
CORPORATE PARTNERSHIPS
MARGIN LowHigh
INTERMEDIARY:WHOLE OF MARKET
SINGLE TIE
CUSTOMER SERVICES
JAN McNISH
www.pru.co.uk
48
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRROVERVIEW
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
• Delivering more for less
• Investment in infrastructure
• Policyholder experience
• Intermediary experience
Source:49
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRDELIVERING MORE FOR LESSProductivity gains and cost reductions
-30
-20
-10
0
10
20
30
40
2002 2004
2004 HIGHLIGHTS
• Productivity- Productivity improved by 55%
- Improved servicing through technology
- Operational efficiency and flexibility through multi-skilling
• Cost
- Average cost per servicing person down by 9%
- 75:25 onshore:offshore ratio
- UK headcount reduced by 34%
Funds managed per servicing persons (£m)
2005 FOCUS
• Process Simplification• Unit cost reduction
Average cost per servicingperson (£000)
Source: Prudential Analysis.
50
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRWE HAVE INVESTED £100M P.A. IN INFRASTRUCTUREUsing technology to support the business
Customer & Policy Aggregation
Scanning & Imaging
Workflow
Single Address
4Front Single Call Centre
Application
Single Number0800 000000
pruadvisor.co.ukpru.co.uk
Contract EngineBonds
Contract EnginePensions
Contract EngineProtection
Contract EngineAnnuities
Single Customer Database
Single Contact
Database
Prudential Analysis.
51
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRMEETING THE NEEDS OF OUR POLICYHOLDERSFocus on the customer
• One easy to remember freefone number 0800 000 000
• Calls answered by real people, not machines
• 80% of queries answered by first person contacted
• Immediate feedback from customers
• Single postal address for all correspondence
52
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRMEETING THE NEEDS OF INTERMEDIARIESBuilding our adviser franchise
• Dedicated freefone number with callback
• Dedicated and experienced teams
• Single correspondence address
• Dedicated fax and email processing
• Online self-service through our award winning web-site
– Client-specific illustrations– New business submission and tracking– Valuation and top-ups
• Delivering consistent service to agreed service levels
Source : FT Money Marketing ,28th October 2004
53
INDEPENDENT RECOGNITION OF OUR SERVICE IMPROVEMENTS We are committed to delivering quality service
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
INTERMEDIARY MARKET MESSAGE FROM THE TOP 350
NUMBER OF ADVISER FIRMS
PERCENTAGE OF MARKET SALES
84%
16%
TOP 350
NEXT5,150
85%
15%
PERCENTAGE OF PRU SALES
SATISFACTION LEVELS
Satisfied 88%
Dissatisfied 12%
Improved 61%
Same 31%
Worse 8%
SERVICE PERCEPTION
Intermediary commission based market, 2004. Prudential Analysis. HI Europe, independent telephone survey carried out in March 2005. Service perception: Overall, would you say that the service you receive from Prudential has improved, stayed the same or got worse?Satisfaction levels: How satisfied are you with this level of service?
THE INTERMEDIARY PERSPECTIVE
www.pru.co.uk
Patrick GaleChief Executive Officer
20 April 2005
Agenda
The Sesame Model
Market Assessment- Distribution Channels- Why multi-tie sustainable
Why Prudential can win
56
Sesame Network Model
Sesame Services
Propositions
Brand
Research
Compliance
Buying Power
Commission Processing
Technology
Training
Life Companies
Con
sum
er
7,600 RIs
85% <3 RIs
Nationwide
Fund Managers
Lenders
Intermediaries
Cor
pora
te
57
Market Assessment – Population of Distribution Channels
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2003 2004 2005 2006 2007
Multi Tie Intermediaries
WOM Intermediaries
• DSF - Decline DSF creates pool of recruits to IFA sector
• Mortgage Networks stabilise - but consolidate from 80 <20 players
• Multi-tie Network - start in 2005, grow rapidly and dominated <5 players
• WOM Network - on gentle decline due multi-tie
• Banks - progress in certain product segments, but intermediaries remain dominant channel
DSF/Tied
Mortgage Intermediaries
Num
ber o
f RIs
Source: Sesame estimate58
Market Assessment – why multi-tie sustainable model
CONSUMER PRIORITIES (2004 Henley Group Focus Research)Consumers not fooled by “independent tag” – they know advisers are influenced brand, financial strength and commission rates.
Consumers are seeking “objective advice” – advice and service based trusting relationship - product is important, but not top priority.
Consumers do not trust financial service industry – biggest brands have greatest chance to give reassurance.
Consumers want advisers to understand them, not just their money.
MULTI-TIE WORKS AS:Focuses advisers on getting advice proposition right.
If got appropriate panel, can deliver appropriate product and brand strength.
The same town, same club, relationship sales model inherited from IFA tradition fits consumer’s aspiration.
59
Market Assessment – why multi-tie sustainable model
ADVISERS PRIORITIES (Research H2B and NMG)Margin squeeze due cost escalation (PI, regulation) and commission erosion driving focus on profitability
Service standards WOM model weak for adviser/consumer
Regulatory red-tape is becoming evermore burdensome
Want to sell product from brand leaders
MULTI-TIE WORKS AS:Value transfer from provider to intermediary assists profitability
By focusing few providers and changing operating model (e-commerce) can drive up service standards
Multi-tie less complex than WOM from regulatory perspective
Right panel meets brand/product test
60
Why Sesame believe Prudential can win
Pursued multi-tie opportunity early and with clear strategy
Building capability WOM and multi-tie by:– Consolidating traditional strengths:
• Consumer brand• Financial strength• Excellent track record annuities and bonds
– Delivering new capability:• Service• Technology and process• New product (especially protection)• Relationship management
Understand distribution:– Relationships – strong balance corporate and field– Willing to differentiate and truly back partners– Bold in approach market – a leader not follower
• Seek “top 3” in product sectors play• Looking “strong” not at “market” growth
61
PRUDENTIAL’S MULTI-CHANNEL DISTRIBUTIONINTERMEDIARIESANDY BRIGGS
www.pru.co.uk
63
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRTHE RETAIL INTERMEDIARY MARKETHow does the market work?
% OF INTERMEDIARY APE, 2004 MARKET SHARE TOP 10 INTERMEDIARIES
1823.9
26.8 29.232.2
6.57.0
7.87.9
5.3
2000 2001 2002 2003 2004
6 - 10
Top 5
33.8
%
23.3
% 30.4
% 37.0
%
40.1
%
34%
18%
38%
10%
Nationals& Banks
Networks
ProvincialIntermediaries
Regionals
“You've got to get your fee model right if you want to remain independent… …when it comes to the crunch, [advisers] might find they can’t have a workable fee model.”
Steve Petrie, John Joseph Financial Services Director,
3 February 2005
Source: Company data, Prudential Analysis..
64
MARGIN
CAPITAL SERVICE
DISTRIBUTION
INTERMEDIARY: WHOLE OF MARKETMarket Drivers and Pru Focus
14% IRR
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2001 2002 2003 2004 20070%
1%
2%
3%
4%
5%
6%
7%
8%
Mar
ket S
ize,
APE
, £m
(Bar
)
CAGR 2004-07-10%
Protection 2%
Bonds 36%IndividualAnnuities
43%
THE MARKET
PRUDENTIAL’S WOM INTERMEDIARY BUSINESS
PRU FOCUS• Account management - double the salesforce
• Service proposition - intermediary experience
• Product development, mix and profitability- UL Bond volume and IRRs
- Maintaining annuity IRRs
- Sales on WP Bonds
- Launching protection proposition
MARKET DRIVERS• Depolarisation
• Investment market performance relative to other assets
• Intermediary consolidation
ABI, Prudential Analysis.
PruM
arket Share (line)
Other Pensions19%
Pru Share
Pru Share excl. WP Bonds
2004 ACTUAL
65
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRINTERMEDIARY: MULTI-TIEMarket Drivers and Pru Focus
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2002 2003 2004 2005 2006 2007
Mar
ket S
ize,
APE
, £m
(Bar
)
THE MARKET
PRUDENTIAL’S MULTI-TIE INTERMEDIARY BUSINESS
MARKET DRIVERS• Depolarisation
• Intermediary business economics
• Network growth and consolidation
• Volume concentration
• eCommerce opportunity
PRU FOCUS• Drive volume through securing panels
• Drive eCommerce/low cost
• As Whole of Market- Account management - double the salesforce
- Service proposition - intermediary experience
- Product development, mix and profitability
• Launch pensions proposition 02468
101214161820
Q1 04 Q2 04 Q3 04 Q4 04 Q1 05
Qua
rter
ly s
ales
from
Top
7
pote
ntia
l mul
ti-tie
par
tner
s,
APE
£m
ABI, Prudential Analysis.
66
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRSTATUS OF REGULATED MULTI-TIE PANELSPrudential is punching its weight
CONFIRMED PANEL MEMBERSNO OF RIS
34%
18%
38%
10%
Bankhall% of Intermediary Channel by APE, 2004 8,500
Networks
ProvincialIntermediaries
Regionals
(1)7,600Sesame
(1)5,500Tenet
Burns Anderson 610
1,890Millfield
Nationals& Banks
940Barclays
ThincDestini 830
Source: Company data, Prudential Analysis.(1) Appointed as multi-tie panel development partner.
67
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRUNIT LINKED BONDSQuickly achieving scale in the Intermediary market
0%
1%
2%
3%
4%
5%
6%
7%
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05E
INTE
RM
EDIA
RY
MA
RK
ET S
HA
RE,
% • Account management -double the salesforce
• Service proposition -intermediary experience
• Product development, mix and profitability
Source: ABI, Prudential estimates.
68
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRPROTECTIONNew proposition: balancing margin vs volume
• Guaranteed rates
• Competitively priced
• Rapid reprice capability
• Straight through on-line processing
• Teleunderwriting
Source:69
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRPRICING DISCIPLINE IN THE ANNUITY MARKETActive pricing delivers margin & volume
2003
1.
2.3.
4.
Min
imum
targ
etm
argi
n
+15%
+30%
MA
RG
IN
£0
£5
£10SA
LES (4 PERIO
D M
OVIN
G A
VERA
GE) £m
WEEK
£15
1 2 4 53 6 7 8 9 10 11 12 13 14 1615 17 1918 262120 22 23 24 25
Drive up margin on growing sales 1.Sales
Margin
Reduce price to stimulate demand 2.
Develop margin as sales come through 3.
Reduce price as sales start to reduce4.
Source: Prudential Analysis.Note: margin is investment yield less annuity rate.
Source: Prudential.70
NEW PROTECTION PROPOSITIONA range of initiatives aimed at meeting the differingneeds of Intermediaries and their clients
Clean Case5-8 days
Non-Clean Case25-35 days
20-30 days (medical evidence & evaluation)Fax 1 day Post 2-3 days Teleunderwriting
15 mins
Paper based short application
30% less referrals to underwriting
5 days SLA
Clean Case10 minutes
Non-Clean Case20-30 days
20-30 days (medical evidence & evaluation)
Full electronic lodgement
Smart system10 minutesfor clean cases
Clean Case7-8 days
Non-Clean Case30-40 days
2-3 daysUnderwriting
Paper full application
5 days SLA20-30 days (medical evidence & evaluation)
Clean Case7-35 hours
Non-Clean Case25-32 days
Electronic short form application
3-5 mins 20-30 days (medical evidence & evaluation)Teleunderwriting
15 mins
30% less referrals to underwriting
5 days SLA
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
Source:71
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRSUMMARY - INTERMEDIARIESDelivering sales & profit
• Account Management - double the salesforce
• Service Proposition - intermediary experience
• Product development, mix and profitability– Dominate annuities– Grow scale in bonds– Launch protection
• Multi-ties - market leading position
Source: Prudential Analysis.
PRUDENTIAL’S MULTI-CHANNEL DISTRIBUTIONCORPORATE PARTNERSHIPSISABEL HUDSON
www.pru.co.uk
73
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRCONTENT
MARGIN
CAPITAL SERVICE
DISTRIBUTION
IRR
• Corporate Partnerships market
• Building critical mass
• Banks
• External vesting annuities
74
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRCORPORATE PARTNERSHIPSMarket Drivers and Pru Focus
0
500
1,000
1,500
2,000
2,500
3,000
2001 2002 2003 2004 20070%
1%
2%
3%
4%
5%
6%
Sing
le-T
ie M
arke
t Siz
e, A
PE,
£m (B
ar)
THE MARKETMARKET DRIVERS
• Depolarisation
• New Markets
– Solvency and ICAs
– Lack of scale and expertise in annuity pricing and reserving
– Closed book consolidation
PruM
arket Share (line)
Market being redefined by
vesting partnerships & back book transactions
ST non banks ST Banks Back books
PRUDENTIAL’S CORPORATE PARTNERSHIPS BUSINESS
PRU FOCUS• Banks - Barclays, LloydsTSB, National Australia Bank
(Clydesdale & Yorkshire Banks), Alliance & Leicester
• Tied Salesforces - Openwork, St James’ Place
• Insurers - Zurich, Pearl, Royal London
• Affinity Channels - future opportunities
Protection 39%
Back BookAnnuities
54% External Vesting
Annuities7%
2004 ACTUAL
Source: ABI, Prudential Analysis.No projection for 2007 due to transactional nature of this channel.
75
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRBUILDING CRITICAL MASS IN PARTNERSHIPSSignificant growth delivered
PARTNERSHIPS SALES
Week
0
50
100
150
200
250
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
2003 2004
Part
ners
hips
Sal
es, C
umul
ativ
e A
PE, £
m
2004
2004
2004
2004
2004
2003
Source: Prudential Analysis.
76
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRBUILDING CRITICAL MASS IN PARTNERSHIPSContinuing to deliver growth in 2005
PARTNERSHIPS SALES
Week
0
50
100
150
200
250
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Part
ners
hips
Sal
es, C
umul
ativ
e A
PE, £
m
0
5
10
15
20
25
30
1 2 3 4 5 6 7 8 9 10 11 12 13
2003 2004 2005
OPENWORK
Source: Prudential Analysis.
77
DELIVERING ON OUR BANK STRATEGYSourcing business through seven out of the top eight banks
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
Intermediary sales with Prudential
In-house life assurer
Product Tie with PrudentialBank Branches*
2,290
485
2,070
2,238
1,587
1,105
753
310
Single-tieproduct(s) offering
Multi-tieproduct offering
In-house life assurer
Intermediarysales
Source: Datamonitor, Prudential Analysis.
Source:78
DEVELOPING A NEW MARKET: EXTERNAL VESTINGANNUITY PARTNERSHIPSA steady flow of business from other insurers
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
0
2
4
6
8
10
12
14
16
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
£m A
PE(C
umul
ativ
e)
2003 2004 2005
2005OPENWORK
2005
2005
2003
2004
Source: Prudential Analysis.
Source:79
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRSUMMARY - CORPORATE PARTNERSHIPSBuilt-in growth
• A new channel to Prudential
• Growth from £35m in 2003 to £95m in 2004 excluding Royal London
• c15% growth in 2005 already built in on this £95m
Source: Prudential Analysis.
PRUDENTIAL’S MULTI-CHANNEL DISTRIBUTIONB2B
ANDY BRIGGS
ANDY BRIGGS www.pru.co.uk
81
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRB2B MARKETHow does the market work?
EMPLOYEES
EMPLOYERS TRUSTEES
DB INSUREDDC
UNINSUREDDC
OTHERCORE
BENEFITS
FLEXIBLE &VOLUNTARY
BENEFITS
EMPLOYEE BENEFIT CONSULTANT (EBC)
EMPLOYEECOMMUNICATIONS
ADMIN & ITCAPABILITY
PRODUCTSOLUTIONS
FEE GENERATINGOPPORTUNITIES
PRU
DEN
TIA
L
82
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRB2B MARKETMarket Drivers and Pru Focus
0
200
400
600
800
1,000
1,200
1,400
1,600
2001 2002 2003 2004 20070%
5%
10%
15%
20%
25%
30%
Mar
ket S
ize,
APE
, £m
(Bar
)
CAGR 2004-076%
THE MARKET
PRUDENTIAL’S EBC BUSINESS
PRU FOCUS• Improve profitability on insured DC schemes
• Target uninsured DC schemes
• Move into flexible and voluntary benefit sector
• Expand market for bulks
MARKET DRIVERS• Maturing market for Group Pensions
• Top 4 EBCs control over 80% of the market
• Uninsured DC market moves to insured
• Emerging flexible and voluntary benefits market
• Closure of DB schemes and risk transfer
ABI, Prudential Analysis.
PruM
arket Share (line)
Bulk Annuities21%
Group Pensions(fee based)
69%
2004 ACTUALIndividual Annuities
10%
83
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRINSURED DC MARKET Focus on profitability
MARKET LEADING PROPOSITION• Brand and financial strength
• Employee communications
• Employer relationship management
• Service/IT capability
• Product proposition
HENCE
• Premium price
0%
25%
50%
75%
100%
01/01/2004 01/01/2005 01/01/2006Target
Prop
ortio
n fu
lly a
utom
ated
Proportion fully automated
FOCUS ON MARGIN & IRR• Charge premium price
• Focus on fee-based market
• Price schemes individually based on key characteristics
• Efficiency of acquisition
• Automated processing
0 50 100 150
AUTOMATIC ENROLMENT
E-BASED
DIRECT MAIL
TELEPHONY
CRM
Employer’s objectives
GROUP PRESENTATION
Unit cost of acquisition, £
Source: Prudential analysis.
84
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRUNINSURED DC MARKET Target larger schemes
Occupational Pensions Market Size MARKET TRENDS• Historically larger schemes unbundled
• Strength of proposition and pricing on bundled schemes improved
• Move from uninsured to insuredUninsuredDC FUM£147bn
InsuredDC FUM£210bn
AON DC PLUS• Target Aon’s existing uninsured DC clients
and new clients
• Two providers - Prudential is appointed
• Five year partnership
• Fully automated service proposition
Source: Interactive Pension Databook, November 2004, Datamonitor, Prudential analysis.
85
BULK ANNUITIES & RISK MANAGEMENTGenerating a constant stream of business plus occasional one-offs
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRR
BULKS SALES
0
5
10
15
20
25
30
35
40
45
50
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Bul
ks S
ales
, Cum
ulat
ive
APE
, £m
2003 2004 2005
Source: Prudential Analysis.
Source:86
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRSUMMARY - B2BMarket leader in the employee benefits market
• Strong position with EBCs – Group Pensions 20% market share– Bulk Annuities 38% market share
• Targeting uninsured Defined Contribution schemes
• Grow the Bulk Purchase Annuity market from wind-ups into on-going risk management solutions
Source: ABI, Prudential Analysis.
87
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRWELL BALANCED MULTI-CHANNEL CAPABILITY
OPENWORK
CONCLUSIONS
MARK WOOD
www.pru.co.uk
89
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRIRR: UK AND EUROPE 12% IRR achieved in 2004 with strong new business growth
2004 (%) Target 2007 (%)
Unit-linked bonds 7 8Corporate pensions 3 15Protection1 1 15Annuities 20 20OVERALL POST-TAX IRR 12 14
• Strong progress towards 2007 target, but mix is critical
• Unit-linked bonds: benefits of scale coming through
• Annuity: barriers to entry and low commission facilitate strong returns
• Corporate pensions (unit-linked): focusing on efficient customer acquisition and servicing
• Protection: price sensitive product, as volume grows we gain efficiencies
IRR ANALYSIS
Source: Prudential Analysis. Note 1: does not include Credit Life.
90
MARGIN
CAPITAL SERVICE
DISTRIBUTION
14% IRRCONCLUSIONSPOSITIONED TO OUTPERFORM
• Unrivalled combination of brand, financial strength and investment performance
• Product mix biased to high margin products with high barriers to entry
• Well balanced multi-channel capability
• Operational growth capacity
• 10% growth in 2005 (assuming 5% market growth)
• 14% IRR by 2007
QUESTIONS & ANSWERS
APPENDIX: LIFE FUND
LIFE FUND SOLVENCY & INVESTMENT PERFORMANCE
www.pru.co.uk
93
LTICR
REALISTIC
AdmissibleAssets
WPICC
Surplusregulatory
capital
Admissibleassets
Future profits on non-profit
businessInadmissible
assets
Realisticreserves
Risk capitalmargin
Surplus economic capital
REGULATORY
£64.5bn
£4.1bn
£2.1bn
£2.9bn
£52.4bn
£1.1bn
£0.0bn
£64.5bn
£4.1bn
£1.3bn
£60.2bn
Mathematicalreserves
PAC REGULATORY AND REALISTIC BASES SOLVENCY On a realistic basis the RCM of £1.3bn is covered 4.1 times solely from capital in the With-Profits Sub-Fund
Resiliencereserves £3.0bn
Prudential Analysis.
94
FREE ASSETS SOLVENCYThe fund is strong on both a regulatory and a realistic basis
Regulatory
£12.1bnInherited
estate (deterministic)
£6.8bnRealistic Capital (Market
Consistent) £5.4bn
Capital is expected to be required to support solvency for the foreseeable future
Prudential Analysis.
95
INVESTMENT PERFORMANCEConsistently strong performance
ABSOLUTE CALENDAR YEAR RETURNS 5 YEARS ANNUALISED
12.6
19.8
12.6
19.3
3.0
-3.5
-8.1
16.5
13.4 13.3
9.8
4.2 4.93.8
-10
-5
0
5
10
15
20
1996 1997 1998 1999 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004
%
Prudential - Returns shown are real gross returns. Past performance is not necessarily a guide to future performance. Competition: WM Life Funds Universe returns 1996-2000; WM Life Funds WP Universe returns 2001-3; Prudential estimate 2004.
Source:96
LIFE FUND CAPITAL: FINANCIAL STRENGTHA key competitive advantage
• Maintenance of our financial strength remains a key aim of the business
• We have strong funds on both statutory and realistic bases
• We have consistently delivered excellent investment performance
• Bonus Declarations are important - they directly influence the MSB / shareholder cashflows
• Claim values are at affordable levels in 2005
Source: Prudential Analysis.
APPENDIX: PENSIONS
MAJOR A-DAY CHANGES
www.pru.co.uk
98
A-DAYApril 2006
There are many changes occurring with effect from April 2006. These include in broad terms:
• The earliest age at which someone can take a pension will rise from 50 to 55.• Everyone will be able to pay into both a personal pension and occupational pension at the same
time. • The tax relief available for investing in a pension will change to an annual contribution limit called
"The Annual Allowance". The annual allowance will be the lower of annual salary or a contribution limit of £215,000 p.a. across all types of pension arrangements (the cap will increase to £255,000 by 2010). Contributions over the annual allowance will be subject to tax.
• An individual may build up funds, without tax charge, in registered pension schemes up to a lifetime limit called the Lifetime Allowance. This will start at £1.5 million in 2006 and will increase in subsequent years (to £1.8 million by 2010). Some protection is available for those people who have already saved more than this amount before the new rules come into effect.
• Previous methods of restricting contributions into pensions will no longer apply. • The Triviality commutation rules are being changed to enable more people to commute their small
pension funds into cash sums.• A single rule on the amount of Tax Free Cash Sum allowed will be introduced. This will be a
maximum of 25% of the overall pension fund. • People will be able to protect their pre-April 2006 tax-free cash. • Part of Protected Rights benefits can be taken as cash (subject to DWP requirements).• Protected Rights can be taken before age 60. • Trustees will be required by the regulator to have good knowledge of their responsibilities.• Contribution Monitoring rules will change. • Arrangements permit at least one third of the scheme’s Trustees to be member nominated (MNT’s). • There will be more options on purchasing pensions at retirement.• Rules around deferring State benefits will change.
APPENDIX: BRAND
CONSUMER ADVERTS
www.pru.co.uk
100
POSTER ADVERTSInvesting Wisely
101
POSTER ADVERTSInvesting Diversely
102
POSTER ADVERTSInvesting Globally
103
PRESS ADVERTSComplementary campaigns