LONDON, UK -- (MARKET WIRE) -- April 19, 2007 --
Embargo: 07.00am Thursday 19 April 2007
PRUDENTIAL PLC FIRST QUARTER 2007 NEW BUSINESS RESULTS
All figures compared to 2006 at constant exchange rates unless stated
APE Growth PVNBP Growth
Total Group Insurance GBP640 million 8% GBP4,775 million 1%
Total Group Retail GBP592 million 25% GBP4,295 million 22%
Insurance
UK retail GBP181 million 16% GBP1,508 million 13%
Total UK GBP183 million (23)% GBP1,521 million (29)%
US GBP180 million 21% GBP1,796 million 21%
Asia GBP277 million 34% GBP1,458 million 33%
Asia Fund Management Net fund inflows of GBP0.6 billion, up 18%
External funds under management of GBP12.8 billion
M&G Net fund inflows of GBP1.4 billion, down 22%
External funds under management of GBP46.1 billion
Mark Tucker, Group Chief Executive said:
"I am delighted by the excellent start the Group has made to the year, building
on the strong momentum established in 2005 and 2006.
"We have continued to pursue our growth and value agenda and worldwide retail
new business APE increased by 25% to GBP592 million over the same quarter last
year with strong performances in all regions.
"In our asset management businesses M&G had net fund inflows of GBP1.4bn, the
second highest quarter on record, and in Asia we had a record start to the year
with net inflows of GBP0.6 billion ahead 18%.
"We continue to see excellent prospects across the Group and we will pursue
these opportunities aggressively with a clear focus on value creation."
Commentary on First Quarter 2007 New Business Results
UK insurance operations
Prudential's focus in the UK continues to be on those areas of its retail and
wholesale business which can generate attractive returns. Overall retail APE
sales were up 16 per cent year-on-year to GBP181 million driven by growth in
individual annuities, with-profits bonds and corporate pensions.
Within its wholesale business, in the first quarter Prudential announced that it
had reached agreement in principle to acquire Equitable Life's portfolio of
in-force with-profits annuities. The transaction is expected to generate premium
income of approximately GBP180 million on an APE basis and will be recognised once
it completes, which is expected to be in the fourth quarter of 2007.
Total UK APE sales in the first quarter were GBP183 million, a decrease of 23 per
cent on the same period last year. However, the first quarter of 2006 included
a single bulk annuity of APE GBP66 million and GBP15 million of credit life sales
under a contract with Lloyds TSB that has not been renewed for 2007. On a PVNBP
basis, total UK sales for the first quarter of 2007 were GBP1.5 billion, compared
with GBP2.1 billion in the same period last year.
Retail Retirement APE sales of GBP125 million increased 29 per cent on 2006,
reflecting strong growth in individual annuities, corporate pensions, equity
release and with-profit bonds.
Individual annuity sales for the first quarter of 2007 were up 35 per cent on
the first quarter of 2006 to GBP66 million. This growth was driven by the
continued strength of internal vestings, up 32 per cent to GBP33 million, together
with increased partnership sales, up 110 per cent to GBP21 million which reflected
the growing momentum of partnership deals, including Openwork and St James's
Place Capital.
In the first quarter of 2007, sales of with-profit annuities increased by 43 per
cent over the same period last year due to continuing strong demand and sales
from the recently signed single-tie arrangement with Openwork. Prudential
enhanced its with-profits annuity offering in February 2007, adding the facility
to accept Protected Rights monies (those contracted out of the State Earnings
Related Pension Scheme which was replaced by the second state pension), which is
a first in the with-profits annuity market and allows customers to combine 100
per cent of their pension into a with-profits annuity.
Corporate pensions delivered strong sales during the first quarter with APE of
GBP27 million, up 170 per cent on the same period in 2006. These results include
strong sales in the new Fund Delivery Service proposition, which contributed
over GBP10 million in new APE sales.
Currently an estimated GBP1.1 billion of property assets enter the equity release
market each year and this is predicted to grow to GBP2 billion by the end of 2008.
From a standing start in October 2005 the UK business now has over GBP120 million
of mortgage assets. New loans advances for the first quarter of 2007 were GBP34
million, compared with GBP9 million for the first quarter last year.
With-profits bond sales continued the momentum shown throughout last year, with
sales of GBP6 million in the first quarter of 2007 double the first quarter of
2006. This was driven by the continued strong investment returns generated from
the life fund. Prudential also signed a single tie distribution agreement in the
first quarter with Openwork for PruFund, Prudential's unitised and smoothed
investment plan.
Offshore bond sales generated from Europe grew 66 per cent to GBP9 million during
the first quarter, reflecting the continued appetite in Continental Europe for
Prudential's with-profits bond, and its strengthened distribution. This was
offset by lower offshore sales into the UK through intermediaries, which reduced
by 27 per cent to GBP5 million reflecting Prudential's emphasis on value, not
volume in this market.
Prudential also recently launched two multi-asset funds using the with-profits
investment capability into the Collectives market and within offshore bonds.
Prudential launched its Flexible Protection Plan nationally in February 2007.
The product has been introduced to over 2000 advisers and Prudential has secured
panel placements with a number of firms who account for a significant proportion
of the intermediary distribution landscape in the UK. Prudential withdrew from
the commoditised protection market in the first quarter of 2007.
PruHealth's business is not included in total APE sales numbers. It continued to
grow strongly in the first quarter of 2007 with Gross Written Premiums of GBP16
million, 100 per cent up on the GBP8 million achieved in the same period last
year. For the first time the number of lives covered exceeded 100,000 in
February, with 108,000 lives covered at the end of the quarter. PruHealth has
entered into an exclusive arrangement with Boots the Chemist to promote PMI as
part of its Health Club launch from 25th April. PruHealth has also launched new
Trust and Self-Insured scheme products from April to strengthen its position in
the Corporate market.
Within the Mature Life and Pensions business total APE sales of GBP56 million were
5 per cent lower than for the first quarter of 2006 reflecting lower DWP rebates
business, down 19 per cent.
Prudential's progress in this quarter is consistent with the strategy outlined
on 15th March and continues the strong retail growth seen in 2006. Prudential
UK will continue to focus on profitable opportunities which deliver capital
efficient returns in its chosen product areas and distribution channels.
US insurance operations
Jackson, Prudential's US insurance business, delivered APE sales of GBP180 million
in the first three months of 2007, representing a 21 per cent increase over the
same period in 2006, driven by continued growth in sales of variable annuities.
On a PVNBP basis, new business sales were GBP1.8 billion. Retail APE sales of GBP134
million were up 23 per cent.
Jackson delivered record variable annuity sales of GBP1.1 billion in the first
quarter of 2007, up 31 per cent on the corresponding period last year. For the
full year 2006, Jackson increased its variable annuity market share to 4.6 per
cent, up from 3.6 per cent for full year 2005, and maintained its ranking as the
12th leading variable annuity provider during the full year 2006. This
impressive growth trend in variable annuity sales continued in the first quarter
of 2007, 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. In
particular, Jackson's distribution model successfully supports the ability of
Jackson's wholesalers to use a sophisticated sales process in order to forge
productive, long-term relationships with advisers.
Fixed annuity APE sales of GBP13 million were in line with sales in the same
period of 2006 at CER. Entry spreads for fixed annuities continued to be
challenging in the first quarter of 2007 as the current interest rate
environment, characterised by an inverted yield curve, limits the crediting
rates that can be offered on the products and therefore diminishes their
attractiveness to customers.
Fixed index annuity sales continued to be affected by the uncertain regulatory
environment in the US. APE sales of GBP11 million were 8 per cent down on the same
period in 2006.
Institutional APE sales of GBP47 million were up 15 per cent on the same period in
2006, as Jackson continues to participate in this market on an opportunistic
basis.
In the first quarter of 2007, Jackson continued its track record of product
innovation by launching a new line of retail mutual funds and a simplified
variable annuity, and by adding new fund options and features to its existing
variable annuity offering.
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 2007 of GBP1.4 billion ($2.7 billion) compared with GBP1.2 billion at CER
($2.4 billion) at the end of December 2006. Curian generated record deposits in
the first quarter of 2007 of GBP150 million, up 38 per cent on the same period in
2006.
Jackson has made a strong start to the year, focusing on value-driven growth in
its key product offering and it continues to be well positioned to take
advantage of the growing opportunities in the US retirement market.
Asia insurance operations
Prudential's Asian life operations delivered new business APE of GBP277 million
representing growth of 34 per cent over the first quarter 2006 and reflecting
the excellent momentum of the business. On the PVNBP basis sales for first
quarter 2007 of GBP1.5 billion are 33 per cent higher than the same period last
year.
Prudential's focus continues to be investing to strengthen and diversify its
Asian platform to maximise shareholder returns from the existing business and
explore new profitable growth opportunities. Agency growth and productivity
improvements remain core drivers with agent numbers at 31 March 2007 of 335,000.
This was driven primarily by India up 214 per cent on the same quarter last
year, together with China and Indonesia up 43 per cent and 20 per cent
respectively. As our bank and broker distribution channels continue to
strengthen, the proportion of new business from traditional agency distribution
was 67 per cent compared to 71 per cent last year. Unit-linked business
represented 67 per cent of new business for the quarter.
In China, CITIC Prudential is now operating in 16 cities with APE sales of GBP12
million, an increase of 100 per cent compared to the first quarter of 2006.
Guangzhou, Beijing and Shanghai account for 60 per cent of the first quarter
APE.
Prudential's joint venture with ICICI in India continued to perform very
strongly during the first quarter, the final quarter of the Indian fiscal year,
and traditionally the busiest time of year. First quarter APE of GBP57 million
was an increase of 90 per cent on the same quarter in 2006. The operation
continues to lead the private sector by a clear margin and as announced recently
by ICICI, its shareholding will be transferred to an ICICI holding company with
a view to an IPO. This will not affect the operation of the business or
Prudential's 26 per cent stake.
Prudential's life business in Indonesia continues to go from strength to
strength with APE sales of GBP22 million, 69 per cent up on the same period last
year, driven by increased agent numbers. This business is predominantly
unit-linked. Work is progressing with Citibank on establishing bancassurance
distribution in Indonesia.
In Hong Kong, Prudential continues to make excellent progress through both
agency distribution and bancassurance with Standard Chartered Bank. New business
APE at GBP36 million is up 57 per cent on last year. The business mix also
includes a higher proportion of unit-linked products.
Prudential's Singapore life business produced a 19 per cent increase in APE for
the first quarter and finished 2006 with market leading share for APE. In
Malaysia, industry sales remain depressed following regulatory changes last
year. However, our sales were the same as those achieved in the first quarter of
2006. The Takaful joint venture with Bank Simpanan Nasional (BSN) continues to
perform well.
Prudential's Korean life business, with APE of GBP55 million, increased by 6 per
cent compared to the first quarter of 2006. This reflects a market slowdown in
variable unit-linked products, increased competition in the general agent
channel and lower agent recruitment. The outlook remains positive, particularly
with new distribution agreements with Industrial Bank of Korea and Korea Bank
getting underway in the second quarter.
In Taiwan, first quarter APE at GBP37 million is 8 per cent lower than the
equivalent very strong quarter last year. The proportion of higher margin
unit-linked remains high at 61 per cent.
Good progress is being made in Japan where new business APE is GBP10 million. This
is a combination of the award by Fitch of an A- credit rating for PCA Life Japan
in February and an increase in sales ahead of an anticipated change in local tax
regulations, which could reduce the tax benefit provided by the Increasing Term
Life product.
Prudential has an excellent track record of building profitable businesses in
Asia and its focus continues to be on profitable and sustainable long-term
growth.
Asset Management
M&G
M&G made a solid start to the year, delivering gross fund inflows of GBP3.3
billion, a 13 per cent increase on the previous record-breaking first quarter
last year. This reflects the strengths of M&G's diversified product offering in
the areas of retail fund management, institutional fixed income, pooled life and
pension funds, property and private finance.
Net fund inflows were the second highest ever achieved at GBP1.4 billion, but were
22 per cent down on last year. This was mainly due to asset allocation shifts by
retail investors in Europe and lower flows into segregated bond funds, typically
lower margin institutional business. External funds under management grew to GBP46
billion.
Gross inflows into retail funds increased by 20 per cent to GBP1.9 billion during
the first quarter. Net retail fund inflows were down by a third to GBP573 million,
due to increased redemptions in Europe as a result of asset allocation shifts by
investors in the wake of equity market falls in late February.
Strong retail sales momentum continued in the UK, with gross fund inflows
increasing by 56 per cent and net inflows up 49 per cent compared with the same
period last year. Over the past two years, UK net fund inflows have increased
sixfold. Asian markets, where M&G distributes funds in partnership with
Prudential Corporation Asia (PCA), also saw strong growth with net inflows
tripling in the first quarter compared to 2006.
M&G's institutional businesses delivered gross fund inflows of GBP1.3 billion
during the first quarter, in line with the same period last year. Net fund
inflows fell 14 per cent to GBP794 million, largely due to a fall in lower margin
business such as traditional segregated bond funds.
M&G's institutional strategy has been to utilise the skills developed primarily
for internal funds to build new, higher margin business streams and diversify
revenues, and in the first quarter these more profitable areas grew
significantly. Gross fund inflows into higher margin areas, such as leveraged
loans, collateralised debt obligations (CDOs), infrastructure finance and the
Episode global macro hedge fund increased threefold during the first quarter and
represented half of all institutional flows. Net fund inflows into these areas
more than tripled in the first quarter of 2007, compared to the same period last
year, producing a more profitable sales mix.
Asian Fund Management Business
The Asian Fund Management business made a record start to the year, delivering
its highest first quarter third party net inflows since the business was
launched in 1998.
Net inflows of GBP0.6 billion were up 18 per cent against the same period in 2006.
Of the GBP0.6 billion in net flows, 93 per cent were in longer-term equity and
fixed income products with 7 per cent in shorter-term money market funds. India
and Japan recorded the strongest inflows.
Total third party funds under management were GBP12.8 billion, an increase of 5
per cent compared to the fourth quarter in 2006. India, Japan and Korea continue
to be the main drivers of growth due to their innovative product strategy,
expanded distribution channels and good fund performance.
In Taiwan, during the first quarter of 2007, PCA Securities Investment Trust
(PSIT) was selected as a fund manager for The Public Service Pension Fund
mandate.
The Asian Fund Management business continued to grow its institutional business
and during the first quarter of 2007 it was awarded investment mandates of GBP200
million from a number of Asian government related entities.
Prudential remains confident that its fund management businesses in Asia are in
an ideal position 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 Valerie Pariente 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
hosted by Mark Tucker, Group Chief Executive, and Philip Broadley, Group Finance
Director. Dial in telephone number: +44 (0)20 8609 0205. Pin number: 155439#
5. There will be a conference call for investors and analysts at 10:00am
hosted by Mark Tucker, Group Chief Executive, and Philip Broadley, Group Finance
Director. From the UK please call +44 (0)20 8609 0793 and from the US 1 866 793
4279. Pin number 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 169904#.
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
2007 2006 +/- (%) 2007 2006 +/- (%)
GBPm GBPm GBPm GBPm
UK 183 238 (23)% 183 238 (23)%
US 180 167 8% 180 149 21%
Asia 277 226 23% 277 207 34%
______ ______ ______ ______ ______ ______
Total 640 631 1% 640 594 8%
Gross Inflows
Actual Exchange Rates Constant Exchange Rates
2007 2006 +/- (%) 2007 2006 +/- (%)
GBPm GBPm GBPm GBPm
M&G 3,283 2,915 13% 3,283 2,915 13%
US 4 0 4 0
Asia 7,155 4,407 62% 7,155 4,003 79%
______ ______ ______ ______ ______ ______
Total 10,442 7,322 43% 10,442 6,918 51%
Total Insurance and Investment New Business
Actual Exchange Rates Constant Exchange Rates
2007 2006 +/- (%) 2007 2006 +/- (%)
GBPm GBPm GBPm GBPm
Insurance 3,725 4,128 (10)% 3,725 3,921 (5)%
Investment 10,442 7,322 43% 10,442 6,918 51%
______ ______ ______ ______ ______ ______
Total 14,167 11,450 24% 14,167 10,839 31%
8. For Jackson, market share data is provided for the full year of 2006,
being the latest available. Variable annuity data is sourced from VARDS, fixed
annuity data is sourced from LIMRA and fixed index annuities data is sourced
from LIMRA and The Advantage Group.
9. Financial Calendar 2006 - 2007:
AGM 17 May 2007
Interim Results 1 August 2007
Q3 New Business Figures 18 October 2007
*Prudential plc is a company incorporated and with its principal place of
business in England, 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 150 years and has GBP250.7 billion in assets under
management as at 31 December 2006. 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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