Prudential Plc · LSE:PRU
Prudential — Investor Day (2018)
47 slides from Prudential's investor day presentation, 2018
Slide 1: Investor Conference 2018
INVESTOR CONFERENCE 2018 PRUDENTIAL Mike Wells Group
Slide 2: Forward-looking statements
This document may contain ‘forward-looking statements’ with respect to certain of Prudential's plans and its goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements that are not historical facts, including statements about Prudenti
Slide 3: Context of demerger: evolution of mix
Prudential plc Context of demerger Evolution of mix EEV shareholders’ funds1, % International 28% International 26% 49% 72% £45bn 44% 51% £15bn 23% 28% Asia US UK 2007 2017 UK centric International focus • Emerging Asia business reliant on Group funding • Leading Pan-regional Asia business deliverin
Slide 4: Prudential plc post demerger
Prudential plc post demerger Group Prudential plc Prudential Jackson Prudential Corporation Asia National Africa 2018 INVESTOR CONFERENCE 4
Slide 5: Ambition and operating principles
Prudential plc post demerger Ambition and operating principles Capturing structural opportunity | High quality Operating resilient Sustainable with outcomes growth discipline Enhancing capabilities 2018 INVESTOR CONFERENCE 5
Slide 6: Capturing structural opportunity
Capturing structural opportunity Unrivalled access to world’s largest and fastest growing markets Asian growth +1million US wealth More than $ 15 trillion Total advisor distributed assets1 People entering the working population every month2,3 Leading Pan Asian +1 billion business Leading provider of
Slide 7: Superior growth markets with further upside
Capturing structural opportunity Superior growth markets with further upside US – Managed growth Mature • Enhance product set • Capture fee based opportunity • Proactive risk management US (2017) GDP growth Africa - Build Africa Asia - Accelerate (2017) Rest of • Leverage scale Asia • Expand health
Slide 8: Focused and disciplined capital allocation
Operating with discipline Focused and disciplined capital allocation History of capital allocation optionality and strategic flexibility Strategic exits/ Reallocation Reinvestment De-emphasis of resources Portfolio Distribution Product Thanachart Japan Life Life of Georgia UOB Korea Life REALIC Stan
Slide 9: Enhancing capabilities
Enhancing capabilities Leveraging strengths • Investment freedom • Chatbot technology • Over 100 fund choices Customers Creating awareness and Superior customer Increasing Enhancing the educating consumers proposition automation customer journey Africa ` ` Solutions Asia Micro insurance Diversifying
Slide 10: Complementary portfolio
Complementary portfolio Balance by geography, sales, risk and stages of maturity Balanced and complementary growth profile Business units at different stages of maturity Geographical balance New business profit1,2,3 Nascent Emerging Established business units business units business units Ghana Zamb
Slide 11: Continued focus on insurance and fee income
High quality resilient outcomes Continued focus on insurance and fee income Asia US High quality earnings Insurance income as a % of total income1,2 70 % Fee income2 £ 1.2 bn Fee and insurance income % of operating income1,2 vs 61% at HY13 vs £0.6bn at HY13 70% 83% 179 1,016 480 91 HY13 HY18 HY132 H
Slide 12: Asia - Accelerate: Driving global growth
Asia - Accelerate Driving global growth Fastest growing Major contributor to global growth GDP growth1 GDP current prices1 10 year CAGR 2007-2017 US$tn 10.4% Asia contribution to 21 114 global GDP growth2 39% 13 80 1.8% Rest of Asia 2017 Asia Rest of 2023 the world the world 1 Source: IMF. 2017 GDP
Slide 13: Large and growing population with low penetration
Asia - Accelerate Large and growing population with low levels of penetration Middle class Urban population Working age Penetration Population1, bn Population2, bn Population2, bn 2.7 2.5x 1.3x +1m Insurance per month % penetration3 3.5 (UK=7.5%) 2.0 2.5 2.3 Mutual fund penetration4 12% (US=96%) 1.5
Slide 14: Large health and protection gap
Asia - Accelerate Large health and protection gap Protection gap Chronic diseases Proportion of Mortality protection gap1 US$ 45 tn 46% protection gap due 1.8 Asia health & to chronic diseases3 protection gap2 US$ tn Asia % of world’s Ratio of protection gap vs protection needed1, % Out of pocket ex
Slide 15: New opportunities: retirement and high net worth
Asia - Accelerate New opportunities Retirement opportunity High net worth opportunity Population over 651, m Retirement savings gap2, US$ 2.9 x Total Asia HNW financial wealth3 US$ 10 tn 800 85 2050 14% India 13% 700 tn +450m 3tn 12% 600 2015 10% 500 10% 9% 400 2050 119 300 7% China tn 200 11tn 5% 2
Slide 16: Market leading positioning and capabilities
Asia - Accelerate Market leading positioning and capabilities Footprint Scale Positioning 24 businesses across 14 countries 15m Pru life customers 3 in 9 of 12 life markets Access to 3.6bn of population Top 1 2 In Asia since 1923 Eastspring 25m policies Market leading pan regional Asian Retail Fund
Slide 17: Compounding growth underpins resilience
Asia - Accelerate Compounding growth underpins resilience to market volatility 90% 10Y Retention CAGR > rate1 +15% MSCI Asia ex Japan3 Renewal Regular premiums1 94% premium income4 5.2 6.1 4.3 £bn 3.5 3.1 7m to 15m 2.6 Number of 1.6 1.6 1.9 2.2 1.5 customers2 HY08 HY09 HY10 HY11 HY12 HY13 HY14 HY15
Slide 18: Growth across all metrics
Asia - Accelerate Growth across all metrics New business profit1,2,3 IFRS operating profit1,2,4 Free surplus generation1,2,3 £m £m £m 10Y 10Y 10Y CAGR CAGR CAGR 1,016 590 1,122 +19% +25% +24% 194 112 68 HY08 HY18 HY08 HY18 HY08 HY18 1 Comparatives have been stated on an actual exchange rate basis. 2
Slide 19: Grow in advisory market and enhance brokerage position
US – Managed growth Grow in advisory market and enhance market leading position in brokerage Jackson positioning Enhance Grow Largest and most productive variable Our market-leading VA position in In the advisory retirement solutions annuity wholesaling force2 the brokerage market market VA wholesal
Slide 20: Long-term retirement opportunity
US – Managed growth Long-term retirement opportunity Structural opportunity Demographic shifts Significant and growing gap Consumer needs Survey outcomes6 50 Ageing population1 57 % Population over 65 millions Coverage gap Not enough Americans Without private have private pension % pension coverage
Slide 21: Operating with discipline
US – Managed growth Operating with discipline Operational discipline Managed risks New business management Consistently conservative pricing Approach to market risk Variable annuity excl Elite Access, Living benefit fee, bp $bn average per quarter • Benefits individually priced Self-imposed volume c
Slide 22: High quality, risk-managed capital generation
US – Managed growth High quality, risk-managed capital generation Attractive returns Sustained capital generation Well-capitalised, resilient solvency position Statutory capital generation ratio1,% Total adjusted capital before dividends RBC ratio,% and regulatory impacts, $bn 19% 483 481 485 10.3 4
Slide 23: Building a presence in underserved life markets
Africa - Build Building a presence in one of the world’s most underserved life markets Ghana 2014 Acquisition of Express Life 1.3 billion people 2015: Distribution partnership with Société Générale 2015: Distribution partnership with Fidelity Bank Population of Africa1 2016: Distribution partnership
Slide 24: Long-term track record
Delivering sustainable growth Long-term track record New business profit1,2,3 IFRS operating profit1,2 Free surplus generation1,2,3,4 £m £m £m 10Y 10Y 10Y 1,863 1,767 2,405 CAGR CAGR CAGR +17% +15% +14% 510 619 375 HY08 HY18 HY08 HY18 HY08 HY18 M&G Prudential Asia and US6 segmental profit5 1 Compara
Slide 25: Conference agenda – Day 1
Group Conference agenda – Day 1: Wednesday 14 November 08.30 – 09.00 Group Strategic overview Mike Wells Grand Ballroom L3 09.00 – 09.30 Group Financial update Mark FitzPatrick Grand Ballroom L3 09.30 – 10.15 Asia Strategic overview Nic Nicandrou Grand Ballroom L3 10.15 – 10.45 Break Foyer L3 10.45
Slide 26: Conference agenda – Day 1 (continued)
Group Conference agenda – Day 1: Wednesday 14 November 14.15 – 16.15 Asia Innovation showcases Wilf Blackburn & Showcase 1 – Customer segmentation Salon 6 L2 Raghu Hariharan Guy Strapp & Showcase 2 – Direct to customer Salon 5 L2 Robin Spencer Lilian Ng & Showcase 3 – Customer fulfilment Drawing Roo
Slide 27: Conference agenda – Day 2
Group Conference agenda – Day 2: Thursday 15 November 07.00 – 08.00 Breakfast Grand Salon L2 Barry Stowe, Brad Introduction, Risk management framework, Pricing Harris & Steve 08.00 – 09.10 US Grand Ballroom L3 and ALM Binioris 09.10 – 09.25 Break Grand Salon L2 Barry Stowe, Chad 09.25 – 11.15 US Eco
Slide 28: Group Financial Update
Group Financial Update Mark FitzPatrick Chief Financial Officer Prudential 28
Slide 29: Group 3Q 2018 update
Group 3Q 2018 update Resilient performance Life new business profit Group external FUM Solvency II surplus1,2 £m, CER3 £bn, AER4 £bn +17% Cover (2)% ratio 202% 205% 2,755 14.1 2,351 210 207 13.3 9M17 9M18 31 Dec 17 30 Sep 18 31 Dec 17 30 Sep 18 1 After allowing for payment of the 2018 first interim
Slide 30: Asia 3Q 2018 update
Asia 3Q 2018 update Continued focus on quality New business profit Eastspring external funds £m, CER under management £bn, CER +15% +8% +19% 1,762 1,531 H&P new 49.8 45.9 business profit 9M17 9M18 31 Dec 17 30 Sep 18 • Growth broadening with 7 markets • YTD net outflows of £2.0bn reporting double-di
Slide 31: US 3Q 2018 update
US 3Q 2018 update Stable performance New business profit Separate account assets £m, CER $bn +5% +22% 716 176.6 185.3 586 9M17 9M18 31 Dec 17 30 Sep 18 • NBP increase reflects benefit of lower Increase mainly driven by positive tax rate and higher interest rates investment performance • YTD and 3Q V
Slide 32: M&G Prudential 3Q 2018 update
M&G Prudential 3Q 2018 update PruFund underpins positive momentum PruFund funds under management M&G external funds under management £bn £bn (4)% +19% 42.9 163.9 157.4 35.9 31 Dec 17 30 Sep 18 31 Dec 17 30 Sep 18 • PruFund net inflows of £6.6bn Net outflows of £5.6bn, including a • Total NBP +18%, A
Slide 33: Group risk exposure: balanced profile
Group risk exposure Balanced profile Solvency II SCR by risk type1 Solvency II SCR credit exposure1 31 Dec 17, undiversified Undiversified, % of total risk FX translation / Other Equity Operational 7% / Expense 14% 24% 11% Longevity 13% Rates 7% 17% 5% Other 14% market Persistency 5% 24% Mortality /
Slide 34: Managed risks - Jackson
Group risk exposure Managed risks - Jackson Jackson Statutory RBC ratio Equity market impact on Statutory reserves Equities Equities 409% >409% up down No change No change until (as already floored AG43 reserves Reserves out at cash exceed cash surrender value) surrender value 31409% Dec 17 30 Jun 1
Slide 35: De-risked investment profile – US and Asia
Group credit exposure De-risked investment profile – US and Asia Jackson shareholder asset portfolio Asia shareholder debt portfolio 30 Jun 18, 100% = $59bn1 30 Jun 18, 100% = £14bn Treasury / Cash / Agency Other <BBB Common / preferred stock Private equity Commercial 13% Government (2007: 1%) debt3
Slide 36: De-risked investment profile – M&G Prudential
Group credit exposure De-risked investment profile – M&G Prudential M&G Prudential shareholder annuity portfolio1 M&G Prudential shareholder annuity portfolio1 30 Jun 17, 100% = £38bn Following reinsurance of annuity liabilities sold2 30 Jun 18, 100% = £24bn <BBB <BBB BBB BBB- BBB- BBB BBB+ UK gover
Slide 37: M&G Prudential demerger: process steps on track
M&G Prudential demerger Process steps on track Achieved to date Additional process steps M&G Prudential HoldCo established • Change in control processes to be completed for insertion Corporate structure Multiple change in control approvals received of M&G Prudential HoldCo and transfer of Hong K
Slide 38: M&G Prudential demerger: capital update
M&G Prudential demerger Capital update M&G Prudential Solvency II capital position, pro-forma at demerger £bn Positive impact on Solvency II cover ratio • M&G Prudential expected to hold c£3.5bn of sub-debt Cover ratio 153% c.170% • M&G Prudential SII cover expected to be c170% at demerger around 8.
Slide 39: Group embedded value: consistent growth
Group embedded value Consistent growth Group embedded value £bn CAGR +15% 47.4 +£25.0bn 44.7 38.9 15.9 +£8.9bn 32.3 15.3 29.2 14.0 24.8 9.9 22.4 8.8 7.4 Net worth 7.0 29.4 31.5 +£16.1bn 22.4 24.9 Value of 20.4 15.4 17.4 in-force 2012 2013 2014 2015 2016 2017 30 Jun 18 2018 INVESTOR CONFERENCE 39
Slide 40: Consistent growth, led by Asia in-force
Group embedded value Consistent growth, led by Asia in-force Group embedded value Group value of in-force £bn £bn 47.4 5.3 (1.0) 8.1 15.9 31.5 66% of total increase 5.4 12.6 22.4 10.7 Net 7.0 15.4 worth 31.5 Value of 15.4 in-force 31 Dec 12 Asia US UK Other 30 Jun 18 31 Dec 12 Asia Other 30 Jun 18 2
Slide 41: Driven by new business contribution
Group embedded value Consistent growth, led by Asia in-force, driven by new business contribution Asia value of in-force Group value of in-force £bn £bn 31.5 +£10.7bn 5.4 15.4 10.7 0.5 18.2 0.4 31 Dec 12 Asia Other 30 Jun 18 (5.2) 4.1 10.9 Asia % Group 7.5 58% New business value added >2x Asia % val
Slide 42: Compounding high quality new business
Asia embedded value Compounding high quality new business New business contribution to value of in-force Drivers of increase in new business profit £bn 2012 indexed to 100, CER CAGR FY12 - FY17 10.9 +20% 1.3 HY18 245 2.7 FY17 32 12 2.4 FY16 101 100 1.8 FY15 1.4 FY14 1.3 FY13 FY13 FY14 FY15 FY16 FY17
Slide 43: EEV methodology and assumption changes
Asia embedded value Compounding high quality new business EEV methodology Assumption changes and experience variances1 Average annual contribution % opening VIF Value of future capital generation, discounted for timing of distributable earnings, 2013 to 2017 considers all capital constraints on the
Slide 44: New business drives attractive cash generation
Asia embedded value New business drives attractive cash generation profile New business contribution to stock of Emergence of expected future expected future cash generation1 cash generation Life business, undiscounted, £bn Life business, £bn New business contribution, FY15 2015 2025 2035 2055 1.4 N
Slide 45: Consistent, attractive returns
Group embedded value Consistent, attractive returns Asia operating return on EEV1 Group EEV returns FY13 - FY17 Average, FY13 - FY17 30% FY13 – FY17 17% 17% average 20% 20% 10% 0% FY13 FY14 FY15 FY16 FY17 Operating return Net return on EEV2 on EEV3 1 EEV operating profit expressed as a percentage of
Slide 46: Growth in value and cash, driven by new business
Group embedded value Growth in value and cash, driven by new business Group growth in EEV shareholders funds 31 Dec 12 – 31 Dec 17, £bn Total return +17% CAGR 5.1 7.7 14.6 44.7 22.4 31 Dec 12 New business contribution Other movements1 31 Dec 17 to value of in-force Total dividends paid 2013 - 2017 1
Slide 47: Summary
Summary Resilient new business performance, underpinned by strong capital surplus Well-managed risk profile, with de-risked credit position Demerger of M&G Prudential is progressing in line with our expectations Growing stock of embedded value, driven by high quality new business 2018 INVEST