Embargo: 07.00am Tuesday 23 October 2007
PRUDENTIAL PLC THIRD QUARTER 2007 NEW BUSINESS RESULTS
All figures in the table below are for the nine months to 30 September 2007,
with comparisons to 2006 at constant exchange rates.
APE Growth PVNBP Growth
Total Group Insurance £1,979 million 15% £14.4 billion 8%
Total Group Retail Insurance £1,894 million 28% £13.5 billion 25%
Asia £939 million 48% £ 5.0 billion 52%
US £511 million 20% £ 5.1 billion 20%
UK Retail £523 million 8% £ 4.2 billion 6%
UK Total £529 million (20)% £ 4.2 billion (26)%
Asia Fund Management Net inflows of £2.4 billion up 59%
M&G Net inflows of £3.6 billion down 30%
Mark Tucker, Group Chief Executive said:
"These new business numbers demonstrate that there is real and continued
momentum across the Group, building on the strong growth of the past two years.
"Year to date sales in our Asian life operations are up an excellent 48 per cent
compared to 2006 and have already exceeded the £908 million achieved for the
full year 2006.
"Jackson, our US business, has recorded further very good growth of 20 per cent
in new business overall with a 33% increase in its variable annuity market
sales, reflecting its competitive advantages in this product.
"UK retail insurance sales were up 8 per cent on the same period last year with
strong performance in individual annuities and corporate pensions, good growth
in lifetime mortgages and further demand for Prudential's with-profits products.
"In our asset management businesses, Asian net fund inflows of £2.4 billion were
up 59 per cent on the same period in 2006, while M&G's net fund inflows of £3.6
billion were 30 per cent down on the first three quarters of last year but still
the second highest on record.
"Our strategy remains focused on the growing global market for retirement
savings and income. Our regional platforms and global capabilities place the
Group in an excellent position to capture a disproportionate share of this
opportunity."
Commentary on Third Quarter 2007 New Business Results
Asia insurance operations
Prudential's Corporation Asia's (PCA's) life operations nine month sales as at
30 September 2007 were £939 million, up 48 per cent compared to 2006 continuing
the trend seen at the half year. Nine month sales in 2007 have already exceeded
the £908 million achieved for the full year 2006. The life operations delivered
new business APE of £320 million during the third quarter this year, an increase
of 51 per cent over the same quarter in 2006. On the PVNBP basis sales for third
quarter 2007 of £1.7 billion are 54 per cent higher than the same period last
year with the comparable numbers for the nine-month period being £5 billion, 52
per cent higher.
The strong growth is attributable to progress with the previously stated
priorities for the region that include the further strengthening of agency
through increasing scale and improving productivity enhancing partnership
distribution, introducing health solutions and developing a holistic retirement
strategy.
In Taiwan growth in the first nine months is 90 per cent above the same period
in 2006, driven by a significant increase in agency activity rates. The momentum
seen in Taiwan during the second quarter, attributed to launch of the retirement
themed VA product, has continued beyond the initial launch period, with third
quarter sales of £50 million being up 67 per cent on the same period in 2006.
The new business mix remains 79 percent unit linked but margins have reverted to
more typical levels as the VA launch incentives have finished.
The pace of growth in India remains strong. Nine month sales to 30 September of
£126 million are up 64 per cent on the same period in 2006. Third quarter sales
are up 95 per cent with Prudential's 26 per cent share recording sales of £43
million. The operation now has 256,000 agents up 98 per cent over 30 September
2006. ICICI-Prudential Life remains the leading private sector insurer in India
and has a 9.6 per cent share of the total market new business. Health related
products remain a focus and whilst these are only a small contributor to new
business volume (2 per cent) they are written at a higher margin than unit
linked products in India.
During the first half of 2007, the pace of growth in Korea had moderated
following weaker market sentiment towards linked products early on in the year,
the constraint from regulatory caps on volumes from individual bank partners and
challenges in recruiting financial consultants. However, following an incentive
programme and encouraging bancassurance with local banks Kookmin Bank and
Industrial Bank Korea the pace has picked up again during the third quarter,
resulting in nine month sales of £192 million, an increase of 25 per cent on
2006, and third quarter new business of £72 million which is 41 per cent higher
than the same period in 2006.
Hong Kong continues to record strong growth with nine month sales of £114
million, up 39 per cent on the same period in 2006. Third quarter new business
of £40 million represented a 25 per cent increase on the same period in 2006.
The key drivers were continuing momentum for linked sales in the agency channel
and a record quarter for bancassurance. We have also just launched a new
critical illness product in Hong Kong.
In Indonesia Prudential is becoming well established as the industry leader with
nine month growth of 66 per cent to £78 million. Growth in the third quarter
was 72 per cent to £31 million. Agent numbers of 44,000 at 30 September 2007 are
up 10,000 over the same time last year as Prudential continues to expand its
agency channel. During September the business very successfully launched its
first takaful product.
Singapore's nine month sales of £89 million show 25 per cent growth on the same
period in 2006 primarily driven by improved agency productivity. Singapore has
also launched a very successful new health product with 53,000 applications to
the end of September.
Japan's new business, at £24 million for the first nine months, is three times
the same period last year driven by Term Life products and success with
partnership distribution.
China has reported a 77 per cent increase in the first nine months of 2007 with
the third quarter being its strongest quarter to date at £17 million, up 89 per
cent on the same period in 2006.
Of all PCA's markets, Malaysia is currently the most challenging with growth at
9 per cent for the first nine months of 2007 compared to the same period in
2006. It is worth noting however that this exceeds the current level of market
growth in Malaysia. There are a number of initiatives to increase sales underway
including a medical plan upgrade, a new VA product and the 'What's Your Number?'
retirement campaign which has already been successful for Prudential in Hong
Kong, Korea and Taiwan.
Whilst Vietnam is a smaller contributor to growth in absolute terms, it has
returned to growth with nine month sales up 33 per cent on the same period in
2006, and we have recently received the final regulatory approvals for the
launch of unit linked products. With one of the market leading life operations,
a successful asset management operation and a newly launched consumer finance
operation, Prudential has an unparalleled platform in Vietnam.
Whilst small in absolute terms, Thailand and Philippines have also shown
encouraging growth in the third quarter.
Overall the long term prospects in Asia remain as compelling as ever and
Prudential sees no material impediments to sustained, profitable growth. We
remain focused on delivering our priorities and previously announced new
business profit targets and expect these to drive further increases in
shareholder value.
US insurance operations
Jackson, Prudential's US insurance business, delivered APE sales of £511 million
in the first three quarters of 2007, representing a 20 per cent increase over
the same period in 2006, driven by continued growth in sales of variable
annuities. Retail APE sales of £432 million were up 21 per cent. APE sales in
the third quarter of 2007 were £159 million, up 20 per cent over the same period
in 2006. On a PVNBP basis, new business sales for the nine months to 30
September 2007 were £5.1 billion.
Jackson delivered record variable annuity sales of £3.4 billion in the first
three quarters of 2007, up 33 per cent on the corresponding period last year.
Variable annuity APE sales for the third quarter of 2007 were £117 million, up
37 per cent over the same period in 2006. For the half year 2007, Jackson
increased its variable annuity market share to 5.1 per cent, up from 4.6 per
cent for full year 2006, and increased its ranking to 11th in variable annuity
sales, up from 12th for full year 2006. Jackson also ranked second in variable
annuity net flows in the second quarter of 2007. This significant sales growth
performance in variable annuity sales was driven by Jackson's distinct
competitive advantages of an innovative product offering, an efficient and
flexible technology platform, a relationship-driven distribution model and award
winning customer service.
Earlier in the year, Jackson continued its track record of product innovation by
enhancing its existing variable annuity offering, namely by adding three new
guaranteed minimum withdrawal benefits (GMWBs), a new guaranteed minimum
accumulation benefit (GMAB), and several new portfolio investment options.
Jackson also launched a new line of retail mutual funds, a simplified variable
annuity, a new universal life product, and a new fixed index annuity.
Fixed annuity APE sales of £42 million were 11 per cent down on the same period
of 2006. APE sales in the third quarter of 2007 were £13 million, 30 per cent
down on the same period of 2006. Industry sales of traditional fixed annuities
were 20 per cent lower at the half year compared to the same period in 2006.
Entry spreads for fixed annuities continued to be challenging in the first three
quarters of 2007 and the interest rate environment limited the crediting rates
that could be offered on the products and has therefore diminished their
attractiveness to customers. Jackson ranked sixth in traditional fixed annuity
sales with a market share of 3.3 per cent in the first half of 2007 up from a
ranking of seventh and a market share of 3.1 per cent for the full year 2006.
Fixed index annuity sales continued to be affected by the uncertain regulatory
environment in the US and industry sales were 4 per cent lower at the half year
compared to the same period last year. APE sales of £34 million were 15 per cent
down on the same period in 2006. APE sales in the third quarter of 2007 were £12
million, 9 per cent down on the same period of 2006 but 11 per cent up on the
second quarter of 2007 driven by strong sales of the new product launched in
June. In the second quarter of 2007, Jackson ranked first in fixed index annuity
sales through banks for the eighth consecutive quarter.
Institutional APE sales of £79 million were up 13 per cent on the same period in
2006, as Jackson continues to participate in this market on an opportunistic
basis.
Curian Capital, a specialised asset management company that provides innovative
fee-based separately managed accounts, continues to build its position in the US
retail asset management market with total assets under management at the end of
September 2007 of £1.6 billion ($3.3 billion) compared with £1.2 billion at CER
($2.4 billion) at the end of December 2006. Curian generated record deposits in
the first three quarters of 2007 of £484 million, up 56 per cent on the same
period in 2006.
Jackson's fixed maturity portfolio is of high quality and its exposure to sub
prime mortgage business is modest and is through structured deals in the highest
rated ('AAA') tranches. Jackson's recognised IFRS net credit related losses for
the total fixed maturity portfolio of £6 million ($12 million) to the end of
September 2007. In determining IFRS operating profit, the longer-term return for
fixed income securities incorporates a risk margin reserve (RMR) charge for
longer term defaults and the net loss position for the nine months to 30
September 2007 is well below the current year RMR charge.
Jackson continues to focus on value-driven growth and is well positioned to take
advantage of the attractive opportunities in the US retirement market, through
organic growth and also through bolt-on acquisitions, where Jackson will
consider taking advantage of securitisation financing, that meet targeted rates
of return.
UK insurance operations
Overall retail APE sales in the first nine months were up 8 per cent
year-on-year to £523 million, driven principally by continued strong performance
in individual annuities and corporate pensions, good growth in lifetime
mortgages and demand for Prudential's with-profits products where customers
benefit from Prudential's asset allocation expertise and experience. In line
with the strategy announced in March 2007, Prudential UK has continued to
de-emphasise low margin, low persistency pension and unit-linked bond business,
which has resulted in third-quarter on third-quarter growth in retail sales of 3
per cent to £165 million. On a PVNBP basis retail sales in the first nine months
were up 6 percent to £4.2 billion.
Total sales for Prudential UK for the first nine months of 2007 were £529
million, a decrease of 20 per cent over the same period last year. This was due
to two large back-book deals in the first half of 2006 which were not repeated
in 2007 as well as £45 million of credit life sales in the first nine months of
2006 under a contract with Lloyds TSB that was not renewed in 2007. On a PVNBP
basis total sales were down 26 per cent to £4.2 billion. Prudential UK will
continue to compete selectively in the wholesale market, only writing business
that delivers an acceptable rate of return. As previously announced, Prudential
UK expects to complete the transfer of Equitable Life's portfolio of in-force
with-profit annuities in the fourth quarter of 2007 at which point it will
recognise new business premium and associated profit from this transaction. This
transaction comprises a book of 62,000 policies and assets of approximately £1.7
billion. Equitable Life's Extraordinary General Meeting is scheduled for 26
October and the UK Court hearing for approval of the transfer is due on 28
November.
Individual annuity sales in the first nine months grew by 14 per cent to £214
million, with sales of £74 million in the third quarter in line with the same
quarter last year. Prudential continues to benefit from the strength of its
internal vesting pipeline with sales in the first nine months of £103 million up
6 per cent on the same period last year. Annuity sales through the UK's direct
channel and its partnership deals of £66 million were 32 per cent higher than
last year. Prudential has recently announced a new partnership agreement with
Barclays, where Prudential UK is the preferred provider for customers who
enquire about a range of annuity options - this is on track for launch in the
fourth quarter with business flows due to start in the first quarter of 2008.
Prudential continues to be the clear leader in the growing with-profit annuity
market with sales of £36 million up 43 per cent on the first nine months of 2006
and sales up 16 per cent on the third quarter of 2006.
Corporate pensions sales increased 20 per cent to £173 million, with sales in
the third quarter 2 per cent above the third quarter of 2006. The sales increase
was due to a combination of new scheme growth, new member growth and incremental
sales to existing schemes.
Lifetime mortgage advances in the first nine months of £108 million have
increased by 96 per cent on the same period in 2006, supported by growth and
development of the face-to-face sales-force as well as continued work to build
relationships in the intermediary channel. Advances in the third quarter of £41
million were 64 per cent above the third quarter of 2006. Prudential UK had
grown its market share to 11.2 per cent at the end of the second quarter.
With-profit bonds sales in the first nine months of £27 million were up 50 per
cent on the corresponding period of 2006 on the back of impressive investment
performance of the with-profits fund over a sustained period of years. Sales in
the third quarter of £10 million were up 43 per cent on the same quarter last
year. Sales of PruFund, Prudential's unitised and smoothed investment plan, have
now exceeded £200m since launch three years ago.
Unit-linked bond sales in the first nine months of £23 million were down 32 per
cent on 2006. Sales of £7 million in the third quarter were down 30 per cent on
the same quarter last year. Prudential has continued its focus on value rather
than volume and moved away from sales of the initial commission-based
unit-linked bond. Prudential launched the Prudential Investment Plan (PIP), a
factory gate priced bond, in August. PIP includes a selected range of investment
solutions, offering both with-profits and unit-linked options, including the
recently launched Cautious Managed Growth and Managed Defensive Funds, which
utilise Prudential's core asset allocation expertise. These two funds have
generated strong relative and absolute investment returns since they were
launched and are available across the full tax wrapper suite, including onshore
and offshore bonds, individual pensions and mutual funds.
Prudential welcomes the publication of the FSA's Retail Distribution Review
discussion papers which outline a number of potential changes designed to
encourage greater levels of transparency, professionalism and sustainability,
with the prime aim of increasing consumers' access to savings and their
understanding of the value of advice. Prudential is encouraged that the concept
of consumer agreed remuneration has been included as part of the Review and
believes that this is an excellent opportunity to put in place a framework that
will better align the interests of consumers, advisers and providers.
Offshore product sales in the first nine months were £34 million, driven by a 59
per cent increase in sales in Europe. This reflected strengthening demand for
Prudential's with-profits offering in its target markets. Although overall
offshore sales were down 29 per cent on the first nine months of 2006, this was
as a result of a large tranche of one-off business that was written with a
particular UK distributor in the first half of 2006. Sales in the third quarter
were up 16 per cent with sales in Europe up 85 per cent compared with the
corresponding quarter last year.
PruHealth continues to progress well and now covers 131,000 lives, an increase
of 47 per cent since the end of 2006. The business has continued to focus on
high quality corporate schemes and retail business and gross written premiums of
£45 million were up 87 per cent on the corresponding period last year. Tied
regional broker networks have recently been established to enhance our
distribution coverage.
Prudential UK and South African joint venture partner, Discovery, launched
PruProtect in September. This is an innovative new protection insurance product
offering customers life cover, income protection and severity-based serious
illness cover.
While less dependent on investment bonds than many providers in the market,
Prudential is, together with others in the industry, consulting the relevant
Government departments to seek clarity on the capital gains tax proposals in the
pre-Budget Report to avoid a detrimental impact on consumers' savings.
Prudential's multi-asset investment capability means that it can provide savings
and income products across all tax wrappers and its new income drawdown product
will provide customers with further options and opportunities to manage their
retirement provision.
Prudential UK continues to focus on the market for retirement savings and income
through selectively competing in areas where it can generate attractive returns
based on its manufacturing strengths and brand.
Asset Management
M&G
Strong fund performance led to M&G delivering gross fund inflows of £10.8
billion during the first nine months of 2007, an increase of 8 per cent on the
same period last year, reflecting M&G's leading positions in retail funds
management, institutional fixed income, pooled life and pension funds, property
and private finance. Net fund inflows of £3.6 billion, while 30 per cent down
on the first three quarters of last year, were the second highest on record.
M&G's retail business continued to perform well, with gross fund inflows up 28
per cent to £6.6 billion compared to the same period last year. Net fund
inflows of £2.4 billion were down 5 per cent relative to the first nine months
of 2006, but were still a solid result in a more challenging sales environment.
While equity markets have proved resilient, increased volatility and uncertainty
in debt markets have had an effect on retail investor confidence. However, M&G
remains extremely well positioned in its retail markets with strongly performing
funds and an excellent UK and international distribution network, combined with
a reinvigorated brand which has been very well received by both intermediaries
and customers.
For M&G's wholesale businesses, gross fund inflows for the first nine months of
the year were £4.2 billion, a decrease of 13 per cent on the same period last
year. Net fund inflows of £1.2 billion were down 54 per cent compared to the
first three quarters of 2006. This decrease has in the main been due to
redemptions in M&G's segregated fixed income business in the third quarter due
to one-off mandate changes and the ongoing reorganisation of mandates by some
larger clients. It is worth noting that as part of this process of
reorganisation, while M&G has seen physical outflows of assets, new revenue
streams have arisen from clients' increased use of derivatives.
M&G's higher margin wholesale product lines have continued to be particularly
strong performers, with gross fund inflows doubling in the first nine months of
the year and net inflows up almost threefold. These business lines, such as
leveraged loans, Collateralised Debt Obligations (CDOs), Infrastructure Finance
and M&G's Absolute Return Business, currently account for 50 per cent of gross
inflows, producing a more profitable sales mix for M&G's third party business.
Despite the recent turmoil in structured credit markets, the performance of M&
G's range of CDOs has remained strong and the CDO team successfully closed their
most recent issue, Panther V, in August. Current market conditions are very
challenging for CDOs, although the market for synthetic transactions, in which M
&G is a leading player, remains open. M&G's leveraged loans business also saw
good inflows despite the wider market context. While activity in the leveraged
loans has been very quiet in Q3, M&G expects to be among the first CLO managers
to be able to conclude deals once activity in the market picks up
For M&G's Absolute Return Business, the 30th of September saw the reopening of
the Episode global macro fund to new investment, having been soft closed for
nine months after successfully reaching its target of $1.5 billion assets under
management. The fund saw inflows of $190 million on the first day of reopening
and M&G expects the $1 billion in new capacity on the fund to be fully
subscribed over the next six months.
Looking ahead, M&G's priorities continue to be to deliver investment
outperformance to its clients, extend distribution through existing channels and
exploit new opportunities, and to leverage its scale and capabilities to develop
innovative products for the retail and wholesale marketplaces.
Asian Fund Management Business
The Asian Fund Management business has continued to perform well in the first
nine months of 2007 with record net flows of £2.4 billion up 59 per cent on the
same period in 2006. This is primarily driven by net inflows in India, Japan and
Taiwan. Of the £2.4 billion in net flows, 60 per cent were in longer-term equity
and fixed income products with 40 per cent in shorter-term money market funds.
Net inflows for the first nine months of 2007 are almost at the same level as
the total net inflows for the full year of 2006.
Total third party funds under management were £16.1 billion at 30 September
2007, up 32 per cent on year end 2006. Taiwan, India and Japan were the main
contributors to the nine month growth with funds under management increasing by
58 per cent, 48 per cent and 31 per cent respectively. In Japan, the growth in
FUM was mainly attributed to net flows of £730 million from PCA Growing Asia
Equity Open, India Infrastructure Equity and Asia Oceania Equity funds. Taiwan's
growth was driven by the successful launch of the Asian Infrastructure Fund in
May that raised £220 million, a discretionary mandate from The Public Service
Pension Fund and institutional clients that contributed £100 million.
We continue to strengthen our distribution capability and reach in the region.
In Korea, we have successfully implemented the PCA Life distribution project
which has provided training and marketing promotion plans to support PCA Life
agents to distribute our mutual fund products. In UAE, we have established
thirteen distribution agreements since launch, with total funds under management
of over £250 million.
We have increased our stake in CITIC Prudential Fund Management, our joint
venture fund management company with CITIC Group in China. Our stake has
increased from 33 per cent to 49 per cent from 12 August 2007, following
approval from the regulators. Prudential and CITIC remain primary shareholders,
each with a 49 per cent share with the balance of 2 per cent being held by
China-Singapore Suzhou Industrial Park Venture Company. Notable achievements for
the CITIC-Prudential operation include launching two well received funds and
securing our participation in the Qualified Foreign Institutional Investor
(QFII) scheme. CITIC-Prudential currently acts as investment adviser to
Prudential Asset Management HK for the latter's participation in China's
domestic stock market through this scheme.
Prudential remains confident that its fund management businesses in Asia are
well placed to achieve strong and profitable growth.
ENDS
Enquiries:
Media Investors/Analysts
Jon Bunn 020 7548 3559 James Matthews 020 7548 3561
William Baldwin-Charles 020 7548 3719 Marina Novis 020 7548 3511
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Prudential PLC announces 3rd Quarter Results
| Source: Prudential plc
LONDON, UK--(Marketwire - October 23, 2007) -