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Business and Financial Overview

Business and Financial Overview. Mark Tucker. Chief Executive. Garth Jones. Managing Director, Finance, Actuarial & IT. 15th Nov, 2000. Content. Key messages PCA’s mandate PCA’s profitable growth strategy PCA: Today PCA: The future. 1. Key Messages. 1.

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Business and Financial Overview

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  1. Business and Financial Overview Mark Tucker Chief Executive Garth Jones Managing Director,Finance, Actuarial & IT 15th Nov, 2000

  2. Content • Key messages • PCA’s mandate • PCA’s profitable growth strategy • PCA: Today • PCA: The future 1

  3. Key Messages 1 Significant, material & profitable growth opportunities in Asia 2 PCA has now succeeded in breaking through the formidable entry barriers PCA has a pan-regional presence and platform PCA has a clear strategy & business model for life and retail financial services and a track record of delivery 3 4 PCA is very well positioned and resourced to takeadvantage of the region’s exciting growth potential 2

  4. Group’s 1994 Mandate To PCA “ Quantum change in pace, size and return from the Asian region on a scale which in time will make a significant & positive impact on the Group’s results ” Business and Financial Overview 3

  5. PCA’s Strategy For Growth: Four Dimensions • Geography • Expand into Asian markets with largest, profitable pools of target customers • Distribution • Improve still further effectiveness of current channels • Expand options • access more customers • maximise “stickiness” & productivity through cross-selling • Products • Continue to meet customer needs for core life insurance savings products • Offer broader range of RFS products to deepen customer relationship Target Customers Professional/ Mass-affluent segment 4

  6. Understanding Our Customers • In depth local research • UK heritage & history • Prudence Trust & Credibility A competitive advantage 5

  7. Mutual Funds 20% Life 80% Customer Growth: 1994-2000 2000 1,500,000 +1,000% 1994 150,000 Life 100% 6

  8. Hong Kong Malaysia Singapore Geography: 1994 Business and Financial Overview 7

  9. China HK, Singapore Hong Kong India (AMC) Japan Taiwan India (life) Vietnam Thailand Philippines Malaysia Singapore Indonesia Geography: 2000 Business and Financial Overview 8

  10. Products & Distribution: 1994 Geography Sin HK Mal Products Life -Traditional - Unit Linked General Distribution Agency 9

  11. Products & Distribution: 2000 Geography HK Sin Mal Thai Indo Phil Vietnam India Taiwan China Japan Products Life -Traditional -Unit linked Mutual Funds General Distribution Agency Bank Broker Direct 1994 2000 10

  12. ….. now A Regional Life Insurance Leader Number of markets among top 5 • AIG PCA 2000 3-5 PCA 1994 • Manulife • Sun Life of Canada • New York Life • CMG • Great Eastern Life • Cathay Life 1-2 • AXA • ING Aetna • RSA • CGNU • Aegon • Allianz • Zurich/Eagle Star • Prudential US None 3-6 7-8 9+ 1-2 Market presence/licences 11

  13. Summary: Key Drivers Of Growth • Favourable regional economic growth & wealth distribution trends • Success in getting licences • Successful JV partnering with respected local financial brands • Building competitive advantage focusing on quality, productivity and economic value of dominant agency distribution channel 12

  14. Summary: Key Drivers Of Growth • Excellence in regional brand promotion • Systematic processes rolled out regionally • Consistent application of a delegated “Think regional, Act local” management approach 13

  15. PCA Today: Overview • A trusted brand across Asia • Overcoming barriers to entry - unlocking opportunities for profitable growth • Establishing joint-ventures and alliances to accelerate profitable growth • A vision and operational & management structure designed for the future with people who can deliver • A financial track record that demonstrates all of the above 14

  16. A Trusted Brand Across Asia 15

  17. Overcoming Barriers To Entry • Limited number of licences available • Early market presence and history critical • Understanding operating and regulatory environment • People constraints; experience and expertise 16

  18. Establishing JV Partners: Selection Criteria • Financially sound • Strong ethical approach to business • Well trusted brand with good reputation in market • Appreciation of financial services sector and its challenges • Prudential ownership/shared ownership of the customer 17

  19. Strong Existing JVs/Alliances With Major Financial Institutions 18

  20. PCA’s Vision Today 1994 To be Asia’s #1 life & retail financial solutions provider “ Quantum change in pace, size and return from the Asian region on a scale which in time will make a significant & positiveimpact on the Group’s results #1 in customer focus #1 in attracting the best people ” Maximising shareholder value 19

  21. PCA’s Operating Structure • Investment Management • Hong Kong • Singapore • Japan • Mutual Funds • India • Taiwan Life • Established Markets - Hong Kong, Singapore, Malaysia • Emerging Markets - Thailand, Indonesia, Philippines, Vietnam, India • China & Taiwan • Level of market development • Scale of operations • Depth of management resources 20

  22. Tan Suee Chieh Established Mkts Dominic LeungTaiwan & China Toru UedaPPM Japan Ajay SrinivasanMutual Funds Dan BardinEmerging Mkts PCA’s Management Team Mark E Tucker Chief Executive Mina HsuBrand & Communications Garth JonesFinance, Actuarial & IT Peter BoothHuman Resources Mike BishopAlternative Distribution Hugh DaviesAsia Desk Gary BennettBusiness Development Mutual Funds Investment Mgt Life 21

  23. PCA’s Operating And Management Structures Leverage expertise & resources across borders Capitalising On Regional Synergies Spread corporate values Develop critical areas of excellence Make Prudential a household name 22

  24. PCA’s People: Fundamental To Our Success • Recruitment of core competency talent • PRUflexiben • PRUuniversity • MBA fast-track programme developing management resource pipeline The financial services employer of choice 23

  25. PCA: Financial Overview

  26. PC Asia Financial PerformanceStrong, Diverse and Sustainable 1 Very strong growth all round in sales and achieved profits The diversity of geography, product and type of business That significant and material shareholder value has already been delivered 2 3 25

  27. New Business: Strong Life Regular Premium Growth Rebounding from Crisis earlier than expected +120% on9 mths 99 £m 150 +17% 100 -34% +34% 50 0 1996 1997 1998 1999 9 mths 2000 Established Emerging Taiwan & China 26

  28. New Business: Strong Life Single Premium Growth Single Premiums also recovered rapidly from Crisis £m +62% on9 mths 99 250 200 150 +157% 100 +333% -81% 50 0 1996 1997 1998 1999 9 mths 2000 Established Emerging Taiwan & China 27

  29. New Business: Life APE CAGR 9 mths 1996 - 9 mths 2000 of 20% £m 160 140 120 100 80 60 40 20 0 1996 1997 1998 1999 9 mths 2000 Full Year 9 mths 28

  30. New Business: Life APE New Business Geographic Mix 9 mths 2000 Taiwan 29% Emerging 10% Established 61% 29

  31. Life Operations: New Business Achieved Profits CAGR 6 mths 1996 - 6 mths 2000 of 35% £m 90 80 70 60 50 40 30 20 10 0 1996 1997 1998 1999 6 mths 2000 6 mths Full Year 30

  32. Life Operations: NBAP Product Mix 6 mths 2000 Non Par 30% Linked 40% Non-Linked 30% New business achieved profit on APE 60% 31

  33. Life Operations: Building Core Agency Distribution Numbers of agents ‘000s 25 20 15 10 5 0 Dec 96 Dec 97 Dec 98 Dec 99 Sep 00 32

  34. Agency: Productivity & Persistency • Prudential’s agency force more productive than market • Malaysia +200% • Singapore + 28% • Hong Kong + 28% • Prudential’s persistency also higher than market 33

  35. Mutual Funds India: Net Sales #1 in Private Sector £313m net sales for 9 mths 2000 up 46% over 9 mths 1999 £m 350 300 250 200 150 100 50 0 1998 1999 9 mths 2000 Full year 9 mths 34

  36. PCA: Total Funds Under Management £bn 12 • Asian Investment Management businesses all reporting to PCA from 1999 • Acquisition of Prudential Taiwan SITE adds a further £1.1bn 10 8 6 4 2 0 Dec 96 Dec 97 Dec 98 Dec 99 Jun 00 UK Life Fund PCA Life Mutual Funds Pensions 35

  37. PCA: Total Funds Under Management - June 2000 Pensions 2% PCA Life 30% UK Life Fund 62% Mutual Funds 6% Total FUM £10.4bn excluding Prudential Taiwan SITE 36

  38. Operating Achieved Profits CAGR 6 mths 1996 - 6 mths 2000 of 35% £m 120 100 80 60 40 20 0 1996 1997 1998 1999 6 mths 2000 Full Year 6 mths 37

  39. MSB Profits £m 16 14 12 10 8 6 4 2 0 1996 1997 1998 1999 6 mths 2000 Full Year 6 mths 38

  40. PCA: Value Added To Shareholder Funds £m ROE: 28% 60 50 40 30 20 10 0 2000 1 Jan - 30 Jun 1999 1 Jan - 30 Jun Expected Return Value Added 39

  41. PCA Contribution to Group Results New Business Achieved Profits • 18% of new business achieved profits 6 mths 2000 - up from 15% in 1999 • £250m APE sales 9 mths 2000 19% of group-wide total - up from 11% in 1999 UK & Europe 40% US 42% Asia18% 40

  42. PC Asia Financial PerformanceStrong, Diverse and Sustainable 1 Very strong growth all round in sales and achieved profits The diversity of geography, product and type of business That significant and material shareholder value has already been delivered…. and we are confident it will continue 2 3 41

  43. PCA: The Future

  44. PCA: 2000-2005 Profitable Growth Objectives • Regional alignment with savings market opportunities • Promote long-term savings through life insurance and value adding product enhancements • Complement life offering with expanded product range and retail financial services customer proposition • Multiple distribution • Scale applied to capture operating economies 43

  45. Challenges - External • Political instability • Economic shocks • Regulatory environment • Competition 44

  46. Challenges - Internal • Attracting, retaining and developing the best people • Managing in multilingual/ multicultural environment • Integrating acquisitions • Maintaining excellent relationships with JV partners • Keeping our unique PCA culture as we grow 45

  47. Products & Distribution PCA 2000 Geography HK Sin Mal Thai Indo Phil Vietnam India Taiwan China Japan Products Life -Traditional -Unit linked Mutual Funds General Distribution Agency Bank Broker Direct 1994 2000 46

  48. PCA: Sources Of Competitive Advantage • Proven formula for transforming acquired and start-up businesses • Prudential Group’s financial strength: where security of many large regional players in doubt • Success breeds success: PCA’s track record - real advantage in deal-making and partner selection 47

  49. PCA: Sources Of Competitive Advantage • Understanding of customer retail savings needs • Ownership of key customer relationships • Life agency network and management model • Ownership of successful bancassurance distribution model • Profit consciousness inculcated at all levels of the business 48

  50. Summary 1 Significant, material & profitable growth opportunities in Asia 2 PCA has now succeeded in breaking through the formidable entry barriers PCA has a pan-regional presence and platform PCA has a clear strategy & business model for life and retail financial services and a track record of delivery 3 4 PCA is very well positioned and resourced to takeadvantage of the region’s exciting growth potential 49

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