Prudential Plc · LSE:PRU
Prudential — H1 2005 Earnings Presentation
24 slides from Prudential's earnings presentation, Jul 27, 2005
Slide 1: Prudential Plc 2005 Interim Results
PRUDENTIAL PLC 2005 INTERIM RESULTS 27 July 2005
Slide 2: Forward-looking statements
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”, “expe
Slide 3: Mark Tucker, Group Chief Executive
MARK TUCKER GROUP CHIEF EXECUTIVE
Slide 4: First Half Financial Highlights
FIRST HALF FINANCIAL HIGHLIGHTS Strong contributions from all of the businesses • New business up 34% to £1,129 million – UK & Europe +50% – US sales +18% – Asia +26% • Group margin of 37% (2004: 36%) • Achieved basis operating profit* up 31% to £834 million • IFRS operating profit* up 25% to £469 m
Slide 5: Philip Broadley, Group Finance Director
PHILIP BROADLEY GROUP FINANCE DIRECTOR
Slide 6: 2005 Interim Results Highlights
2005 INTERIM RESULTS HIGHLIGHTS • APE sales increased 34% to £1,129m • New business achieved profit margin increased to 37%, leading to a 37% increase in new business profit to £413m • Total achieved basis operating profit on continuing operations increased 31% to £834m • Total achieved basis profit
Slide 7: APE Sales
APE SALES Overall 34% above HY 2004 with growth in all business units £m • Outperforming UK market (growth of Up 50% 2% in Q1 2005(1)). Excluding PLP(2) 600 transaction, 10% growth 500 • Outperforming US market. Retail sales up 11% on HY 2004 400 Up 26% • Strong growth in Asia from newer Up 18% mark
Slide 8: Achieved Basis: New Business Profit and Margins
ACHIEVED BASIS: NEW BUSINESS PROFIT AND MARGINS Strong growth and stable margins at group level VALUE ADDED BY NEW BUSINESS NEW BUSINESS MARGINS £m Half Year 2003 2004 2005 400 UK * and Europe (%) 27 25 30 US (%) 37 34 37 New Business Achieved Profit Asia (%) 51 54 49 300 Group 37 36 37 Insurance sa
Slide 9: New Business Margins: UK Insurance Operations
NEW BUSINESS MARGINS: UK INSURANCE OPERATIONS Managing product and distribution mix Half Year 2003 2004 2005 OVERALL MARGIN * (%) 27 25 30 • Overall margin 5 percentage points ahead of prior year • For full year 2005 expect some reduction in overall margin from 2004 year end level of 27 % 9 * UK mar
Slide 10: New Business Margins: US Insurance Operations
NEW BUSINESS MARGINS: US INSURANCE OPERATIONS Spread maintained and benefits from product pricing Half Year 2003 2004 2005 OVERALL MARGIN (%) 37 34 37 • Spread on fixed annuities ahead of target • VA profitability increased following May 2004 re-pricing of Perspective II • Increased GIC profitabilit
Slide 11: New Business Margins: Asia Insurance Operations
NEW BUSINESS MARGINS: ASIA INSURANCE OPERATIONS Managing product mix Half Year 2003 2004 2005 OVERALL MARGIN (%) 51 54 49 • Margin affected by geographic mix, product mix and change of assumptions • Expect to maintain aggregate margin at or around current levels given planned mix in 2005 11
Slide 12: In-Force Achieved Profit
IN-FORCE ACHIEVED PROFIT Positive assumption changes and experience variances UK and HY 2005 Europe US Asia Total £'m £'m £'m £'m Unwind of discount* 182 100 75 357 Change in assumptions (132) 145 3 16 Variances and other items Persistency - 4 (4) 0 US spread - 44 - 44 Amortisation of interest relat
Slide 13: IFRS Basis Operating Profit
IFRS BASIS OPERATING PROFIT Operating profit up by 25% Proforma (1) HY 2004 HY 2005 £m £m UK and Europe 153 187 US 151 169 Asia(4) 60 110 M&G 79 83 Egg 33 13 Other (102) (93) IFRS Basis Operating Profit (2) 374 469 • UK results reflect PLP(3) transaction and increased annuity sales • US benefited fr
Slide 14: Holding Company Cash Flow
HOLDING COMPANY CASH FLOW HY 2004 HY 2005 £m £m Cash remitted by business units UK life fund transfer * 208 194 Asia 62 58 M&G 38 27 Total cash remitted to Group 308 279 Net interest paid (77) (54) Dividends paid (214) (252) Scrip dividends 61 40 Cash remittance after interest and dividends 78 13 Ta
Slide 15: Holding Company Cash Flow (Cont'd)
HOLDING COMPANY CASH FLOW (Cont’d) HY 2004 HY 2005 £m £m Cash flow before investment in businesses 48 13 Capital invested in business units UK and Europe (28) (9) Asia (88) (80) (DECREASE) IN CASH (68) (76) 15
Slide 16: Returns on Capital
RETURNS ON CAPITAL IRRs FY 2004 HY 2005 Overall post-tax IRR on new business (%) UK and Europe 12 13 US 13 13 Asia >10 above RDR >10 above RDR • UK: strong progress towards target of 14% in 2007 • US: average IRR of 13 per cent • Asia: IRR targeted to be 10% over the country risk discount rates 16
Slide 17: Achieved Profit Shareholders' Funds
ACHIEVED PROFIT SHAREHOLDERS’ FUNDS Continued strong growth in shareholders’ funds ANALYSIS OF MOVEMENT IN AP SHAREHOLDERS' FUNDS: 31 Dec 2004 to 30 Jun 2005 10,000 305 87 220 83 13 269 412 95 242 253 9,500 9,306 413 AP Shareholders Funds in £m 9,000 8,762 8,500 8,000 7,500 7,000 Opening New In-forc
Slide 18: Mark Tucker, Group Chief Executive
MARK TUCKER GROUP CHIEF EXECUTIVE
Slide 19: Focus on Delivery and Execution: UK Insurance Operations
FOCUS ON DELIVERY AND EXECUTION UK Insurance operations • 50% increase in sales, 81% increase in NBAP • Focused on delivery – Capitalising on opportunities in annuities market – Improving group pensions efficiency – Building scale in unit-linked bonds and protection • Diversified distribution strate
Slide 20: Focus on Delivery and Execution: M&G
FOCUS ON DELIVERY AND EXECUTION M&G • Capturing the benefits of rising markets and higher net inflows to deliver 15% increase in underlying profits • Diversifying revenue streams away from internal clients • Capitalising on large customer and asset base • Delivering strong investment performance • K
Slide 21: Focus on Delivery and Execution: Egg
FOCUS ON DELIVERY AND EXECUTION Egg • Focus on profitable growth, with UK revenues 5% increase • Credit card balance growth of 5% • Costs down by 8% – Cost income ratio improved to 44% from 51% • Credit quality remains strong • Total capital ratio of 13.3% OPTIMISING PERFORMANCE AND THE VALUE OF OUR
Slide 22: Focus on Delivery and Execution: Jackson National Life
FOCUS ON DELIVERY AND EXECUTION Jackson National Life • 18% increase in sales, 29% increase in NBAP • Strong product base and relationship-based distribution • Innovative IT, low-cost high quality administration • Emphasis remains on retail sales – Flexibility to manage product mix • Extract synergi
Slide 23: Focus on Delivery and Execution: Asia
FOCUS ON DELIVERY AND EXECUTION Asia • 26% increase in sales, 13% increase in NBAP • Reinforcing position as leader in life insurance and mutual funds across the region • Significant growth across the region – Significant contribution from Korea – China and India key to long-term • Continuing to str
Slide 24: My Priorities
MY PRIORITIES Build on our current strengths • Delivery and execution • Build on our advances in capital management • Developing a longer-term view – Greater focus on the customer – Clear focus on value creation • Extract the benefits of synergies within the group – Operational – People 24