SOURCE: Prudential plc

April 17, 2008 02:24 ET

Prudential PLC announces 1st Quarter Results

LONDON, UK--(Marketwire - April 17, 2008) -

PRUDENTIAL PLC FIRST QUARTER 2008 INTERIM MANAGEMENT STATEMENT

TOTAL GROUP INSURANCE SALES UP 13%

All figures in the table below are for the three months to 31 March 2008,
with comparisons to 2007 at constant exchange rates.


                                      APE                         Growth

Total Group Insurance            GBP729 million                     13%

Total Group Retail Insurance     GBP688 million                     14%

Asia                             GBP375 million                     30%

US                               GBP165 million                     (7%)

UK Retail                        GBP189 million                      4%

UK Total                         GBP189 million                      4%

Asia Asset Management            Net inflows of GBP0.5 billion down 17%

M&G                              Net inflows of GBP0.6 billion down 59%

Mark Tucker, Group Chief Executive said:

"The Group has made a very positive start to the year with overall Group new business up 13 per cent. This continues our strong momentum despite an environment characterised by high levels of uncertainty and volatility. This performance confirms the resilience that we derive from our geographic spread across three regions, and particularly the role of Asia as our leading source of new business.

"Asia's excellent new business growth momentum continues apace. In the US, although difficult market conditions are affecting sales of certain types of retirement products, we remain confident that we shall continue to out-perform the market over the longer-term. UK growth of four per cent is particularly pleasing as we have maintained our value driven focus on writing only the business that meets our profitability criteria.

"Our asset management businesses in the UK and Asia achieved GBP1.1 billion net inflows in extremely tough conditions, with Prudential's financial strength and track record of investment performance enabling us to be a beneficiary of the flight to quality that accompanies economic uncertainty.

"The current economic environment is challenging but I am confident that our geographic diversity, advantaged distribution, product expertise and management capability position us well for future growth. Our prospects for 2008 remain positive."

Asia insurance operations

Prudential's Asian life operations delivered new business APE of GBP375 million representing growth of 30 per cent over the first quarter 2007 continuing the strong growth trend seen in 2007. PVNBP basis sales for first quarter 2008 of GBP2.0 billion are 35 per cent higher than in the same period last year.

Despite the recent global investment market turmoil, demand for linked products has remained strong with the proportion of sales of linked products increasing slightly from 67 per cent of APE for the first quarter of 2007 to 69 per cent of APE in the first quarter of 2008. The main drivers of growth by country during the quarter compared to the first quarter last year were India, with our share of sales at GBP89 million an increase of 41 per cent, Indonesia at GBP40 million up a very strong 90 per cent, Hong Kong at GBP54 million up 50 per cent, Japan at GBP22 million up 100 per cent and Singapore at GBP38 million up 41 per cent.

Product innovation remains key and we have continued to develop our retirement, Takaful and health propositions to deepen our relationship with distributors and customers. Our ability to find creative solutions for our customers and to innovate allows us to grow profitably. New business from health products was 79 per cent ahead of the same quarter last year.

These strong performances came from a wide range of drivers that continue to demonstrate the success of Prudential's regional model. In India the growth reflects the investment in new branches and agency during 2007. Indonesia's agency momentum has continued through the first quarter and this operation now has 51,500 agents, a growth of 71 per cent over the first quarter of 2007, making it Prudential's second largest agency force in the region behind India. Also, the launch of Takaful products continues to be a success with 20 per cent of Indonesia APE now coming from these products. Hong Kong had a very strong first quarter with the successful launch of the new PRUlink Wealth Builder, the operation's first regular premium back-end loaded index linked product, supported by marketing activity for retirement planning. In Japan the exceptional growth has been driven largely by Term Life products where the tax benefits have now been reduced; this operation is now focusing on Variable Annuity products. We anticipate a slow down in new business volumes relative to the term life product. Singapore has also benefited from a one-off boost in single premium sales relating to changes in the Central Provident Fund investment limits effective from 1 April 2008.

Having led Prudential's Asian growth in 2007, Taiwan delivered new business APE of GBP35 million, down eight per cent. Single premium sales were particularly affected by adverse market sentiment towards investment products with a reduction of 43 per cent compared to the first quarter of last year.

In Malaysia the Takaful business continues to grow strongly, up 70 per cent on last year and representing 28 per cent of the total APE, up from 14 per cent last year. Total new business was down six per cent reflecting challenging market conditions. Korea delivered new business APE of GBP59 million, up 11 per cent, in a market that remains highly competitive.

On a comparable basis to 2007, APE sales in China were up by 50 per cent. In recently released market data for 2007, domestic players on average grew by 33 per cent and foreign/joint ventures by 21 per cent.

Vietnam, Thailand and Philippines have continued the strong growth seen in 2007 with collective first quarter APE sales of GBP15 million, up 36 per cent on last year. Unit linked products were launched in Vietnam in January and they represented five per cent of the country's sales in the first quarter.

Prudential has an excellent track record of building a profitable business in Asia and its focus continues to be on profitable and sustainable long-term growth. The business continues to expect to deliver doubling 2005 EEV NBP a year early by 2008.

US insurance operations

Jackson, Prudential's US insurance business, delivered APE sales of GBP165 million in the first quarter of 2008, representing a seven per cent decline from the same period in 2007. This was primarily driven by lower variable annuity sales. APE retail sales in the first quarter of 2008 were GBP124 million, down six per cent over the same period in 2007. On a PVNBP basis, new business sales were GBP1.6 billion.

Total APE sales of GBP165 million and total retail APE sales of GBP124 million both represent the second-highest level of sales during the first quarter in the Company's history. This achievement demonstrates the resilience of Jackson's business model despite volatile equity markets and a deteriorating macroeconomic environment experienced in the first three months of 2008.

Variable annuity APE sales of GBP90 million in the first quarter of 2008 were 13 per cent down on the same period in 2007. During the first three months of 2008, the S&P 500 index reduced by 10 per cent as the significant volatility experienced by US equity markets during the second half of 2007 continued into 2008. Price competition in the variable annuity market has remained intense.

In the first quarter of 2008, Jackson maintained its track record for product innovation by enhancing its variable annuity offering, launching two new guaranteed minimum withdrawal benefits (GMWB) and two new portfolio investment options subadvised by PPM America, Inc. As announced in the fourth quarter of 2007, Jackson is expanding its wholesaling force by adding nearly 70 internal wholesalers and seven sales desk directors by 2009. The initiative is designed to increase Jackson's presence among independent advisers and strengthen relationships with the Company's top producers.

Fixed annuity APE sales of GBP19 million were 46 per cent up on the same period of 2007 reflecting a higher customer propensity towards fixed-rate products in a period of declining equity markets.

Fixed index annuity sales continue to be affected by difficult market conditions. Jackson's APE sales of GBP10 million in the first three months of 2008 were nine per cent down on the same period of 2007.

Institutional APE sales of GBP41 million in the first quarter of 2008 were down 11 per cent on the same period of 2007. Jackson continues to participate in this market on an opportunistic basis when margins are attractive.

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 March 2008 of GBP1.7 billion, stable from the end of December 2007 at CER. Curian generated deposits of GBP157 million in the first quarter of 2008, up six per cent on the same period of 2007.

Following the additional disclosure provided with the 2007 Results Announcement, Jackson's overall credit exposure remains tightly controlled. The exposure is well within Group risk parameters and Jackson continues to manage it proactively. For securities classified as available-for-sale under IAS39, at 31 March there was an increase in the net unrealised loss position to GBP459 million from GBP136 million at 31 December 2007. This increase reflects exceptional market conditions.

Jackson remains confident of the quality of its overall portfolio of GBP19 billion of debt securities. 90 per cent of its gross unrealised loss is on investment grade securities. Of the GBP257 million of gross unrealised losses on securities with a fair value of less than 80 per cent of book value, only GBP28 million is on securities rated as non-investment grade. In addition, there were no credit defaults in the direct investment portfolio in the quarter and downgrades were minimal. As stated with our 2007 results announcement, Jackson holds its debt securities with the intent and ability to hold them for the longer-term. Further details are provided in Schedule 7.

Overall, we remain confident that Jackson's strengths - its efficient operating platform, the quality of its distribution, its ability to innovate and the quality of its management - will allow it to continue to outperform the market over the longer-term.

UK insurance operations

Prudential UK delivered total APE sales of GBP189 million in the first quarter of 2008, a four per cent increase on the same quarter last year. This sales growth was driven principally by strong performances in with-profits and offshore bonds as well as equity release completions. Sales on a PVNBP basis were up six per cent at GBP1.6 billion.

Individual annuity sales in the first quarter of APE GBP64 million were three per cent lower than the first quarter of 2007. Internal vestings of APE GBP32 million were in line with the first quarter of 2007 and contributed 50 per cent of total annuity sales. Sales through partnerships fell slightly from last year's first quarter performance. With-profits annuity sales continued to grow strongly, with sales of APE GBP12 million up 13 per cent on the first quarter of 2007. As consumers focus increasingly on the need for inflation protection in retirement, this is a growing market and one in which Prudential is the market leader.

Prudential's lifetime mortgage sales continued their upward trend with mortgage drawdowns of GBP51 million making this the highest quarter to date, up 50 per cent on the first quarter last year. Performance in the first quarter was underpinned by continued strong sales through intermediaries up 43 per cent to GBP33 million, complemented by sales through Prudential's face-to-face specialist consultants increasing by 61 per cent over the same period.

Corporate pension sales of GBP61 million were in line with the same period last year, principally due to continued growth in member uptake and increments on existing schemes. Prudential now administers corporate pensions on behalf of approximately 640,000 members.

Prudential's retail with-profits business performed very strongly across a range of products with total sales of GBP86 million up 17 per cent. Sales of with-profits bonds continued the strong growth seen in 2007, with first quarter APE sales of GBP18 million up 112 per cent on the first quarter of 2007. Sales of PruFund (Prudential's unitised and smoothed investment plan with an optional guarantee) were particularly strong at GBP11 million APE, with cumulative single premiums since launch in 2005 now exceeding GBP400 million. With consumers in the UK seeking to protect themselves from market down-turns, Prudential has seen a significant increase in with-profits sales as more investors choose its with-profits products to protect themselves during volatile and uncertain conditions as well as during market growth.

Sales of offshore products (sold within the UK and Europe) were up 36 per cent on 2007 at GBP19 million APE. There was a particularly strong performance in the UK market where sales increased by 124 per cent. This reflected increased demand for Prudential's open architecture portfolio bond product, with an increasing number of advisers recognising the flexibility, choice and potential tax effectiveness this sort of product can offer to their higher net worth clients. To build on this opportunity further, Prudential International launched a new enhanced offering in March - the Portfolio Account, a single premium offshore portfolio bond.

In the wholesale bulk and insurer back-book market Prudential wrote a minimal amount of business in the first quarter of 2008, reflecting Prudential's stance that it will only write annuity business at rates that are sufficient to meet its return on capital requirements based on its view of future longevity improvements. There continues to be a significant pipeline of potential wholesale deals but competition remains intense with a number of market participants competing for business.

PruHealth sales are not included in the total APE sales numbers. During the first quarter of 2008, PruHealth continued to grow strongly with gross written premiums of GBP20 million up 25 per cent on the same quarter of 2007. This business now covers over 150,000 lives.

These first quarter results reflect the UK strategy as we maintain our value-driven focus on writing only the business that meets our profitability criteria.

Asset Management

M&G

M&G is an investment-led business with a demonstrable focus on performance delivery which aims to offer attractive products in a variety of macro-economic environments. Despite the significant deterioration in market conditions since the first quarter last year, M&G delivered increased gross fund inflows during the first three months of 2008 and ended the quarter in a positive position, with net inflows of GBP0.6 billion. This reflects M&G's excellent investment performance and the strength of its diversified business across different asset classes and across retail and wholesale markets, both in the UK and internationally.

M&G's total gross fund inflows for the first three months of this year were GBP3.3 billion, an increase of two per cent on the first quarter last year. Net fund inflows of GBP558 million, while down 59 per cent on the same period of 2007, are a strongly net positive result in market conditions which are dramatically different from the comparable period last year. During the first three months of this year, the FTSE All Share fell 11 per cent. In spite of the market volatility seen over the last quarter, M&G's total funds under management fell just five per cent to GBP159.8 billion, demonstrating the diverse spread of M&G's business.

Gross fund inflows into M&G's retail business were GBP1.9 billion, a fall of four per cent compared with the first quarter of last year. Net fund inflows were GBP25 million for the quarter. Retail fund performance has continued to be strong, despite the deterioration in markets, with 24 per cent of retail funds in the top decile over three years and 39 per cent of funds delivering top quartile performance. This continued excellent fund performance places M&G in a strong position to gain market share.

M&G's institutional businesses saw gross fund inflows increase 11 per cent during the quarter to GBP1.5 billion. Net inflows decreased by 33 per cent to GBP533 million. In its higher margin businesses, M&G's Infrastructure Finance business saw steady inflows and while market activity in structured credit and leveraged loans has remained quiet, M&G's excellent reputation and continued good performance has seen it continue to pick up business.

Asian Asset Management Business

The Asian Asset Management business recorded GBP0.5 billion of net inflows in the first three months of 2008. These were 17 per cent lower compared to the same period in 2007. Of the GBP0.5 billion of net inflows, 74 per cent were in longer-term equity and fixed income products with 26 per cent in shorter-term money market funds.

Total third party funds under management were GBP16.0 billion, a decrease of 11 per cent compared to the fourth quarter of 2007. Japan, Korea and India were the largest contributors to the reduction due to equity market volatility with these countries falling by 20 per cent, 11 per cent and nine per cent respectively. Japan, with a significant percentage of their funds invested in India, was affected by the equity downturn in India, in addition to that in its own market.

Our innovative product strategy continues to be a key focus for the business, an example being PCA Asset Management in Korea which recently launched an innovative fund called PCA Emerging Asia Equity Fund, which invests into China, India, Indonesia, Thailand, Malaysia, Philippines, Vietnam and other emerging Asia countries.

In terms of institutional business, Taiwan obtained three institutional mandates with funds under management of GBP116 million during the first quarter. This includes a domestic equity investment mandate from Taiwan's New Labour Pension Fund.

Prudential remains confident that its asset management businesses in Asia are well positioned 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  Jessica Stalley   020 7548 3511



Notes to Editor:

1.  Annual premium equivalent (APE) sales comprise regular premium
    sales plus one-tenth of single premium insurance sales and are
    subject to rounding.

2.  Present Value of New Business Premiums (PVNBP) are calculated as
    equalling single premiums plus the present value of expected new
    business premiums of regular premium business, allowing for lapses
    and other assumptions made in determining the EEV new business
    contribution.

3.  UK Retail sales include all products except bulk annuities and credit
    life sales.

4.  There will be a conference call today for wire services at 7.30am
    (BST) hosted by Mark Tucker, Group Chief Executive, and Tidjane Thiam,
    Chief Financial Officer. Dial in telephone number: +44 (0)20 8609
    0793.  Passcode: 155439#.

5.  There will be a conference call for investors and analysts at 9:30am
    (BST) hosted by Mark Tucker, Group Chief Executive, and Tidjane
    Thiam, Chief Financial Officer. From the UK please call +44 (0)20
    8609 0793. Passcode  487687#. A recording of this call will be
    available for replay for one week by dialling: +44 (0)20 8609 0289
    from the UK or +1 866 676 5865 from  the US. The conference reference
    number is 212764#.

6.  High resolution photographs are available to the media free of charge
    at www.newscast.co.uk (+44 (0) 207 608 1000).

7.  Sales for overseas operations have been reported using average
    exchange rates as shown in the attached schedules. Commentary is
    given on the results on a constant exchange rate basis. The two bases
    are compared in the table below.

                        Annual Premium Equivalent Sales
            Actual Exchange Rates        Constant Exchange Rates
            2008 Q1  2007 Q1  +/- (%)    2008 Q1   2007 Q1   +/- (%)
                YTD      YTD                 YTD       YTD
               GBPm     GBPm                GBPm      GBPm
UK              189      182      4%         189       182        4%
US              165      180     (8%)        165       178       (7%)
Asia            375      277     35%         375       288       30%
             ______   ______   ______     ______    ______    ______
Total           729      639     14%         729       648       13%
             ______   ______   ______     ______    ______    ______

             Gross Inflows
            Actual Exchange Rates        Constant Exchange Rates
            2008 Q1  2007 Q1  +/- (%)    2008 Q1   2007 Q1    +/- (%)
                YTD      YTD                 YTD       YTD
               GBPm     GBPm                GBPm      GBPm
M&G           3,340    3,283      2%       3,340     3,283        2%
US               17        4    325%          17         4      325%
Asia         11,411    7,155     59%      11,411     7,625       50%
             ______   ______   ______     ______    ______    ______
Total        14,768   10,442     41%      14,768    10,912       35%
             ______   ______   ______     ______    ______    ______

            Total Insurance and Investment New Business
            Actual Exchange Rates        Constant Exchange Rates
            2008 Q1  2007 Q1  +/- (%)    2008 Q1   2007 Q1   +/- (%)
                YTD      YTD                 YTD       YTD
               GBPm     GBPm                GBPm      GBPm
Insurance     3,853    3,685      5%       3,853     3,686        5%
Investment   14,768   10,442     41%      14,768    10,912       35%
             ______   ______   ______     ______    ______     ______
Total        18,621   14,127     32%      18,621    14,598       28%
             ______   ______   ______     ______    ______     ______



8.      Financial Calendar:


Annual General Meeting                                     15 May 2008
Interim Results 2008                                       31 July 2008
Third Quarter 2008 Interim Management Statement            21 October 2008

9. About Prudential plc

*Prudential plc, a company incorporated and with its principal place of business in the United Kingdom, and its affiliated companies constitute one of the world's leading financial services groups. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world. It has been in existence for over 160 years and has GBP267 billion in assets under management (as at 31 December 2007). Prudential plc is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America.

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', '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.

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