General insurance: transaction structure Reinsurance of existing portfolio Payment of reserves £ Upfront £ Winterthur/ Click to edit Master title style Prudential Churchill Release of Value £m Sale of solvency £ assets Upfront consideration 350 for renewal and new Prudential GI business rights Sale of assets 3 Reinsurance - Net profit in UPR 21 NPV future commissions c236 Capital release c200 Future commission payments £ Total value 810
General Insurance: transaction value � £810m realised value which comprises: – £353m upfront payment for renewal and new business rights – c£200m release of solvency capital* – c£21m release of net profit in UPR* Click to edit Master title style – £236m conservatively estimated NPV of future commissions and profits over term of the agreement � Winterthur to reinsure in-force portfolio � c£370m profit on disposal to be recorded upon completion � Completion expected in January 2002 * Final amounts determined by closing balance sheet
Brand strategy � Increased marketing orientation � Growth through effective marketing Click to edit Master title style � Invest in this key asset − additional £20m spend in 2002 − discontinue use of Scottish Amicable brand − simplified marketing approach following DSF closure
Brand strategy: IFA perspective � Scottish Amicable seen as small, low profile and lacking identity* � Middle market: was a mortgage endowment franchise Click to edit Master title style � Prudential is seen as a stronger consumer brand � Vital while direct sales force was operational Decision to pursue single brand strategy *Source: ORC International Feb 2001
Brand strategy: consumer perspective � Consumers are ‘More Aware’ and ‘Happy to Deal With’ Prudential than Scottish Amicable Spontaneous Awareness Happy to Deal with (prompted) Click to edit Master title style 27% 25% 25% Prudential Prudential Scottish Amicable 17% Scottish Amicable 10% 13% 12% 3% 1% 7% Life & Unit Trusts Pensions Overall Life & Unit Trusts IPSOS-RSL 2001 Analysed Tracking Pensions Base: 6500
A single brand: capital efficiency � All business will be branded ‘Prudential’ – Scottish Amicable in-force business will be re-branded – Scottish Amicable pre-acquisition in-force ring-fenced Click to edit Master title style � Business written since acquisition will be transferred to other Prudential companies by 2c transfer (subject to Court and FSA approval) � Transfer will allow – release of shareholder solvency capital of c£100m – ongoing shareholder capital requirements reduced by £25m pa
Areas of focus � Brand: aggressive marketing of this key asset � Product: focus on profitability Click to edit Master title style � Distribution: targeted approach � Scale: extract advantages of size � Costs: step reduction
Roger Ramsden Brand
Brand is a key asset � Brand analysis Click to edit Master title style � Approach to revitalisation � Key actions
Large and attractive potential audience within Prudential... Prudential Customer Base � Total customer base of 7 million: 25% 250% - present in 1 in 5 UK households � >2m marketable and attractive Click to edit Master title style 20% 200% Relative propensity to own bond product Proportion of population 16-75 yrs ‘direct’ (ex-DSF) customers 15% 150% � Biased towards older age groups � Increasing scope for acquiring 10% 100% customers in high-value 5% 50% segments, given ‘flight to quality’ 0% 0% 16-20 21-24 25-34 35-44 45-54 55-64 65+ UK population (lhs) Prudential customer base (lhs) Relative propensity to own bond product (rhs) Source: MORI Financial survey March 2001
…as well as outside Prudential � Those earning over £30k account for 55% of UK’s savings market � Those over 45 account for over 70% Click to edit Master title style � Prudential brand is spontaneously No 1 in life and pensions � Almost perfect prompted brand awareness at 97% in 45+ age group � Majority of consumers are seeking reassurance from well known brands they can trust Source: Financial Consumers Panel “Consumers in the financial market”; ONS, Social Trends 2001; Prudential/MORI FBP Survey
Six key segments in the 40-70 year old market Three segments: Achievers, Worriers, and Secure Traditionalists account for almost 70% of this population Achievers (1.5m) Worrier Click to edit Master title style Blissfully Ignorant 13% (2.8m) (0.7m) 24% 6% Live for the Day 12% (1.4m) 13% Make Life Easy 32% Secure Traditionalists (1.5m) (3.8m) Qualitatively a 7 th segment was found: “Couldn’t care less” - not identified in the quantitative survey, probably due to the sample definition and restrictions (i.e. higher incomes) Note: Segmentation based on survey of consumers aged 40-70 years, and therefore does not represent the UK population as a whole. Social class D&E were excluded as these are less attractive market segments Silver market (45-75yrs) = 19m people. Source : Incite - Consumer research among higher earning 40-70 year olds April/May 2001, 607 sample
A strong, positive image of Prudential Prudential branding – elements for those who would choose Prudential Click to edit Master title style Achievers Secure Traditionalists Worriers (13%) (32%) (24%) 47 37 49 Prudential is a strong brand 42 54 33 I am comfortable with Prudential 40 38 33 I trust Prudential Source : Incite - Consumer research among higher earning 40-70 year olds April/May 2001, 607 sample
Maintain essence, but change engine of delivery Purpose • security Click to edit Master title style Values Change • revised • personal customer emphasis • flexibility • communications • identity
Refocus on profitable customers and channels Affinity, Direct to Business to Intermediaries Bancassurance, consumer business Brandassurance Click to edit Master title style Partners with Focus on Customers aged Large corporates >45 (>2,000 nationwide brand/ mutually- TARGETING Assets £10k-100k employees) branch presence profitable Existing customer National affinity products and relationships base groups
Action in 2002: increased brand investment Click to edit Master title style
Action in 2002: increased brand investment Click to edit Master title style Significant increase in marketing spend of c£20m in 2002
Andy Briggs Products
Products - agenda � Current market size, shares and growth � Target markets - where we’re placing our bets Click to edit Master title style � Margins � Product plans – annuities – bonds – group pensions – ISAs We are creating PruLab, a single product development centre of excellence We are creating PruLab, a single product development centre of excellence
Market sizes, shares and growth 18% 16% Annuities 14% £1300m Prudential Share RP 12% Individual Bonds Pensions £2400m Click to edit Master title style £800m 10% Group Pensions 8% £1700m Other 6% £1200m 4% ISAs 2% £1600m 0 0% 2% 4% 6% 8% 10% 12% 14% Market Growth The biggest and most rapidly-growing markets are Bonds, Group Pensions, Annuities and ISAs. For 3 of these we already have a strong market position. Size of circle represents new business market size in APE in 2000 Market growth is estimate for next 10 years. Source: ABI, Prudential. *Annuities includes Single Premium Individual Pensions
Participation strategy - where we’re placing our bets 18% 16% Annuities 14% Prudential Share RP 12% Individual Bonds Pensions Click to edit Master title style 10% Group 8% Pensions 6% Other 4% ISAs 2% 0 2% 4% 6% 8% 10% 12% 14% Market Growth We’re focusing on investments (bonds and ISAs), annuities and large group pensions Size of circle represents new business market size in APE in 2000 Blue circles represent Prudential’s target markets Market growth is estimate for next 10 years. Source: ABI, Prudential. Annuities includes Single Premium Individual Pensions
Future impact of this strategy - 2005 18% Annuities 16% Prudential Share 14% Why This Focus? Click to edit Master title style 12% • largest markets Group Bonds • biggest growth 10% Pensions rates RP 8% • fits our brand Individual Pensions Other • fits existing 6% customers 4% • fits our expertise ISAs 2% 0% 0% 2% 4% 6% 8% 10% 12% 14% Market Growth Revenues grow strongly through increased share of growing markets Size of circle represents new business market size in APE in 2005 Blue circles represent Prudential’s target markets Market growth is estimate for next 10 years, Source: ABI, Prudential. Annuities includes Single Premium Individual Pensions
Margins maintained UKIO New Business Profitability � Overall profit margins broadly (Extract) 70% stable 60% � Pension margin stabilising Click to edit Master title style NBAP as % of APE 50% – effect of 1% repricing and shift from 40% with profit to unit linked – group pensions significantly better 30% than individual pensions 20% � Annuities margins increasingly 10% shareholder-backed 0% 1996 1997 1998 1999 2000 2001 Forecast Total Individual and Corporate Pensions Annuities Based on 2001 Q2 forecast
Individual annuities � Prudential Retirement Income Limited - getting the benefits to shareholders � Internal vestings - retain 80% of individual book Click to edit Master title style � Launched impaired life annuity - already a market leader � Launched Flexible Retirement Income Account - a major product innovation � Build further to 45-55 year olds
Bulk annuities - market size and opportunity � £700bn funds under management in defined benefit schemes � Up to half of liabilities are fixed � Fixed liabilities with equity assets = huge risk Click to edit Master title style � Volatility in P&L account - FRS17 � Major shift to bulk buyouts A very large market, which is sustainable for the long-term Source: NAPF, Prudential
With-profits bond - value to consumer Value of £10k invested over last 10 years Customer Benefits £ � Customers who invest in 30,000 with-profit bonds rather Click to edit Master title style 25,000 than building society accounts are much better 20,000 off 15,000 � In volatile markets, with- profits has significant 10,000 benefits over unit-linked 5,000 1991 1996 2001 Deposit Account Industry Average Balanced Managed With-Profits Bond Source: Prudential
With-profits bond - our performance and plans Re-establishing our market-leading position. We have the financial strength and capital to stay the course. £m � 10th anniversary of our most 600 successful product ever 534 Click to edit Master title style – high reversionary bonus version 500 – top-up focus – campaign 400 354 356 336 � New product for early 2002 - 300 no initial charge and clear 200 projected return � Sandler 100 – work closely with review and regulators 0 – Sandler direction appears in line with Q4 Q1 Q2 Q3 existing Prudential practice 2000 2001 2001 2001 Source: Prudential
Group Pensions - successes We have benefited from a flight to quality, and will continue to do so � New business up 50% on 2000 � Joint provider of NHS stakeholder and AVC - access to Click to edit Master title style 1.1m people � Teachers AVC now has over £1bn of assets with access to 600k people � Local government AVCs market share of 50%, won 23 new schemes from Equitable this year � TUC and BCC give us access to over 10m potential customers: employers representing 3.5m have already designated with us
Group Pensions - future plans We have benefited from a flight to quality, and will continue to do so Click to edit Master title style � Repricing/migration - maximise value of in force book � Take advantage of “flight to quality” for new schemes � Defined benefit opportunity � Worksite marketing
ISAs � Existing Prudential customers are regular ISA buyers � Target over 45s in this base Click to edit Master title style � Attack maturing policies for retention of funds � M&G continue to focus on new customer acquisition � A growing sector in which we will take market share A series of marketing campaigns planned
Products - summary � Bonds, annuities, group pensions and ISAs are the largest and most rapidly-growing markets Click to edit Master title style � We will build on our strengths in these growing markets to - increase our share - significantly increase our revenues � We have clear product plans to deliver growth in revenues � Margins will remain among the highest in the industry
Chris Evans Distribution
The distribution landscape One of several potential scenarios ... Distribution in 2000 Distribution in 2005 1% Tied agents 6% 1% Other 2% 6% Direct 3% Click to edit Master title style 3% 22% DSF 31% Ex-DSF multi-tie 17% 7% Bancassurers Ex-IFA multi-tie 15% Intermediaries IFAs 51% 35% Significant growth in intermediaries and in bancassurance
Prudential’s response: internet - telephone - workplace - bank - retail brand - adviser Click to edit Master title style Direct to Business to Consumer Business Affinity Intermediaries
Direct to consumer Prudential’s direct marketing expertise: � For high net worth individuals � High propensity to deal direct Click to edit Master title style – significant internal vestings opportunity � Products – investments – pensions – banking products – protection � Highly trained internet and telephone-based introducers and advisers � Security, longevity, responsiveness and relationship management
Business to business B2B sales team activity Increase Retain greater penetration percentage of Cross- Click to edit Master title style vesting customers Reprice Selling Existing Existing Potential for ISA sales Customers Reduce Book costs Other product Improve opportunities service With-profit investment only for self-invested schemes Larger employer- New sponsored stakeholder Customers Shift from DB to DC leads schemes to bulk annuity opportunities
The power of partnership: affinity; bancassurance; brandassurance � Banks and Building Societies: Gap-filling opportunities: with- - Vertically integrated profits and annuity products Click to edit Master title style A major current and future - Independents provider Opportunities for key - Small/Medium Building Societies relationships Supermarkets, non-financial � Brands retailers Work with aggregators � Non-regulated market
Philip Rose Wentworth Rose
Intermediaries Combining the heritage of Scottish Amicable’s IFA expertise with the power of Prudential’s brand Click to edit Master title style Exploit Aligning the infrastructure Investing in high Opportunities to support a focused grade account For attack in the IFA channel management Growth Introducing new products and services for the new environment
Intermediaries 550 Focused Account 2002 projected market sales (million APE) 500 Management 450 400 350 Click to edit Master title style � Harnessing the 300 250 concentration of 200 distribution 150 100 � Bringing relevant 50 solutions to our 0 1-250 251-500 501-750 751-1,000 segments Top accounts in each product line With Profit Bonds Investments Single Premium Pensions Post-retirement Source - Touchstone Concentration of IFAs plays to Prudential’s market strengths
Actions under way � Launched focus strategy on key accounts � Investing in sales support and customer relationship management Click to edit Master title style � Closure of Appointed Representatives channel � Withdrawn front end commissions on GPP � Taken out superfluous resources � Closed business centres � Upgrading account management
Distribution summary M U Proven success in direct marketing L T Click to edit Master title style I Technical expertise in corporate business C Leveraging our H capability for new A distribution partners N Strength through N focus and value E for advisors L Flexibility to respond to the changing landscape
Richard Field Costs
Agenda � The cost challenge in perspective � Immediate benefits from rationalisation of support services Click to edit Master title style � Medium-term initiatives; customer services, property and IT infrastructure � Impact summary
Commitment to a step change in costs � Annual costs will fall by £175m � Savings will not detract from revenue growth or service to customers Click to edit Master title style � 1,000 compulsory redundancies between now and 2004 � Positive impacts on 2004 Achieved Profit of c£55m and MSB profit of c£40m � Savings are in addition to the impact of the DSF closure � Transition costs will total c£170m We will report on progress against our key targets
Size to scale 3.0% 2.5% Total expense ratio 2.0% Click to edit Master title style 1.5% 1.0% 0.5% 0.0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Actual Pru Projection 30 top life assurers Source:FSA returns and business plans. Total expense ratio defined as total gross OB & IB (form 41) expenses / total admissible assets. Projections assume 7% annual growth in FUM
Our new organisation is more efficient £m* � More efficient organisation 1000 – operational integration of Scottish Amicable 800 – eliminate duplication in support Click to edit Master title style activities 600 Investment projects – reorganise customer services Distribution � Resources concentrated on 400 high value-added activities 200 – £25m reduction in IFA-driven Customer & support services acquisition costs 0 2004 2003 2001 2002 plan � Centrally-managed change programme * Excludes GI and DSF restructuring
Changes to support services yield rapid savings, with no impact on revenue Cost savings £55m � Rationalisation of support services through 3:1 model Margin Reinvestment Improvement in Prudential – HR brand Click to edit Master title style – Finance – Marketing – Risk and Compliance � Eliminate duplication but retain capability � Procurement benefits from scale and consistency c35% of support services c35% of support services savings will be reinvested savings will be reinvested in the Prudential brand in the Prudential brand
Realignment of IT brings large savings Lower running costs: – merging 3 into 1 £m 25 – replacement of contractors 40 Refocused IT investment: Investment Click to edit Master title style – strategic prioritisation of Projects development projects – eliminating duplication – improved project control – outsourcing of non-core activities Business as usual Total savings £65m 2004 2001 Plan Lower Refocused running costs investment
Customer services will be integrated � Scale benefits where it matters Prudential Prudential � Benefits flow from: Financial Financial Services Services – best practice sharing Click to edit Master title style Prudential Prudential – flexibility of resources Life & Life & Single – property rationalisation Single Pensions Pensions Customer Customer – securing optimum value from Services Services Scottish Scottish Organisation investment spend Organisation Amicable Amicable � Efficiency and service levels raised simultaneously Prudential Prudential Annuities Annuities � Cost savings £30m from 2004
Current activities cover 16 locations � 3 major locations (85% of total headcount) Click to edit Master title style � Majority in higher cost areas (London & Reading) � Similar activities spread across different locations (Excludes GI)
Three key locations � Location review principles: – retain and develop core skills – create centres of excellence – eliminate unnecessary duplication Click to edit Master title style but facilitate load sharing – recognise cost differentials � Conclusions: – key locations in Reading and Craigforth (Scotland) – London Head Office plus transitional IT location – continued presence in Belfast
Product and systems rationalisation will be managed selectively Affinity � Value-based product Affinity Customer Direct to Business to Bancassurance Intermediaries Bancassurance Consumer Business interface Brandassurance platform decisions Brandassurance � Presentation layer: Click to edit Master title style – integrates legacy Single presentation layer systems without extensive migration – facilitates consistent approach to servicing � Accommodates EMU product rationalisation product rationalisation selective line extension selective line extension tactical migration tactical migration align products with align products with Back office best strategic platform best strategic platform selective outsourcing selective outsourcing Lower value products High value products
Savings total £175m Distribution £25m Support services £55m Click to edit Master title style IT £25m Investment projects £40m Customer services £30m Total £175m
Headcount reduced by almost two-thirds between 1995 and 2003 FTEs* 20000 18000 16800 16300 16000 Click to edit Master title style 14000 12600 12000 10000 8300 8000 7100 6200 6000 4000 2000 0 1995 1997 1999 Today 2002 2003 *Excludes GI headcount
We expect to be measured against these targets 2004 2001 2002 2003 £m* 200 175 � Total savings £175m pa 150 145 Click to edit Master title style � Full run-rate of savings achieved from 2004 100 85 � One-off cost c£170m 50 0 (50) (40) (40) (90) (100) Transition costs *Measured in 2001 £
Positive earnings impact from 2002 2001 2002 2003 2004 Click to edit Master title style Savings - Achieved Profits Basis 45 55 20 - Modified Statutory 35 40 15 Basis Transition costs: - Achieved Profits Basis (15) (40) (15) -- - Modified Statutory (35) (10) (10) -- Basis
Mark Wood Conclusion
Major areas of focus Brand � – spend increased by £20m per annum commencing 3Q 2001 – move to single UK brand: £100m one-off and £25m pa capital release Product � – outsourcing and manufacturing capability where creates value-added Click to edit Master title style – General Insurance partnership – PruLab Distribution � – closed AR channel – develop IFA business – building new distribution particularly through banks and affinities Scale � – significantly simplifying the organisational structure and avoiding duplication of effort Costs � – £175m cost reduction (2004)
Conclusion � Brand: customer orientation � Product: focus on profitability � Distribution: targeted approach Click to edit Master title style � Scale: extract advantages of size � Costs: step reduction to be achieved Deliver sustainable profitable growth
Appendix
Experienced and innovative UK management team Chief Executive, UK & Europe Mark Wood AXA 4yrs AA 3yrs Combined experience MAI 4 yrs • Prudential 145 years Barclays 5 yrs • Other financial services 57 years Commercial Union 5 yrs • Other sectors 49 years Sales Click to edit Master title style Corporate Direct IFA Distribution/ Individual Direct Human Resources Finance Marketing Appointed Bank&Affinity/ Europe Gary Hitchens Andy Briggs Mike Moores Actuary (UK) Russell Martin Roger Ramsden Chris Evans Prudential 3 yrs Prudential 14 yrs David Belsham Prudential 14 yrs Thomson Financial Safeway 7yrs Martin Dawes 3 yrs Prudential 20 yrs Prudential 18 yrs Conoco 5yrs 5yrs BCG 9 yrs M&S Fin Svs 3 yrs HSBC 2 yrs Imperial 2yrs N&P Bldg Soc 4 yrs Hill Samuel 3 yrs Osprey Communications 5 yrs Product Management (Pru Lab) Kim Lerche Thomsen Prudential 26 yrs Information Technology Rapid Response Unit Chief Operating Officer Roger Kemp + Rosie Harris + Alan Cook Prudential 3 yrs Prudential 16 yrs Prudential 26 yrs BBC 5yrs Deloittes 6 yrs Jackson National Life 5yrs Coopers & Lybrand 10yrs + reporting to Alan Cook: PR Investment Management Risk & Compliance James Murray Richard Field Mark FitzPatrick * National Savings 2 yrs NAB 8 yrs Natwest 2yrs TSB 7yrs * interim
Previous organisation structure � Business units accountable for end-to-end profitability Fund Fund Click to edit Master title style UK Insurance Businesses UK Insurance Businesses Banking Banking Management Management egg:| & egg:| & Prudential Group Prudential Group Annuities Retail IFA PM&GAM PM&GAM Prudential Annuities Retail IFA Prudential RFS RFS Pensions Pensions Banking Banking Retail Insurance Retail Insurance Retail Retail Operations Operations Extract: Prudential UK presentation, November 1999
Key performance indicator framework: definitions Financial � Shareholder cash flow : gross cash generation for shareholders, broadly – MSB adjusted for non-cash items and shareholder transfer Economic Value Added: operating profit to align with external reporting, – Click to edit Master title style plus subsidiary 100% view measures Market capitalisation: UK appraisal value – People : index combining staff satisfaction, staff turnover, skill inventories � Customer : index combining long-term retention, lifetime profitability, � acquisition cost, cross-sales rate, brand affinity and salience ratings; complaints Regulatory : combination of internal measures, for example contents of � regulatory and risk audit reports; and external verification, for example periodic monitoring and inspection reports
The growing population of over 45s and those with incomes over £30k buy more UK Distribution of Savings, 1999, % (by income) UK Distribution of Savings, 1999, % (by age) 7.0% 75+ > £50,000 6% 11.7% £30,000-£46,999 5% 8.5% 65-74 Click to edit Master title style £20,000-£29,000 6% 55-64 17.3% 10.0% 42% 10% £10,000-£19,000 45-54 13.0% 16% £5,000-£9,999 21.9% 35-44 14.5% 13% 25-34 31% 15.5% 19.4% 13% £500- £4,999 16-24 11.0% 16% 13.6% 7% 26% Under 16 9.4% 20.5% < £500 5% 6.7% 5% Percentage of population Percentage of total market Percentage of population Percentage of total market Source: Financial Consumers Panel “Consumers in the financial market”; ONS, Social Trends 2001; Prudential/MORI FBP Survey
They account for c75% of personal assets Most attractive segments, using total savings (excluding property and pension assets) Average Average savings savings Click to edit Master title style Ach ST ST Ach 1.5m No. of Total £28bn people 3.8m savings* £74bn 8.1m BI BI £134bn MLE MLE W W £9bn 0.7m LftD £20bn LftD 1.5m 2.8m £15bn 1.4m £32bn Likely to buy** Likely to buy** Note: Silver market (45-75yrs) = 19m. Of which 12m are in socio-economic groups ABC1C2, 9.6m are in target segments. * Total savings, excluding pension and property (Numbers are based on Incite survey data and are indicative only ) ** Likely to buy - based on concern and involvement in financial planning Source : Incite - Consumer research among higher earning 40-70 year olds April/May 2001, 607 sample
Prudential seen to have what people want - image MONITOR MAINTAIN 7 Trusted with money Trustful 6 Friends/Family endorsed Helpfu Comfortable with l Act fairly Click to edit Master title style Listens to you Performance Treat as Individual Knows your needs Responsive to needs Warm/Responsive Adaptable Interests at Heart Anticipates needs 5 Good Memories 4 3 QUESTION IMPROVE 0.0 0.1 0.2 0.3 0.4 Influence on Preference
Prudential seen to have what people want - product MONITOR MAINTAIN 7 Broad Financial experience Easy to get in touch with Good Financial Advice Excellent Products Products meet needs 6 /Easy to deal with Click to edit Master title style Communicates clearly and simply Helps Understand what Buying Competitive Deals Value for Money Performance Keep customers up-to-date Produce new products First to develop new products Meet all financial needs Gives Freedom to be in Control 5 Cheaper 4 3 QUESTION IMPROVE 0.0 0.1 0.2 0.3 0.4 Influence on Preference
Prudential seen to have what people want - corporate standing MONITOR MAINTAIN 7 Financially stable Traditional Professional Been Leader in Industry Reliable Prestigious Efficient Will Lead Financial services 6 Click to edit Master title style Approved Performance Not faceless 5 Set in ways 4 3 QUESTION IMPROVE 0.0 0.1 0.2 0.3 0.4 Influence on Preference
The “man from the Pru” is officially retired Well-known phrase, 82% total awareness increasing to 92% in the 45+ market � However, “Prudential” name more appealing to target customers than “Man from the Pru” � 37% 33% Click to edit Master title style 28% 26% 27% 25% 24% 22% 20% 19% 19% 19% 15% 16% AB C1 C2 35-44 45-54 55-64 65+ Prudential Man from the Pru The concept of Man from the Pru seen as comical, old-fashioned and regressive � Reminds of what Prudential was, not what Prudential is � New approach to be developed
Our product range has diversified, focusing on value-adding products for the grey market 1991 2001 Individual Pensions Annuities Group Pensions - Non-Linked -Fixed -MPPs inc Lifestyle Switching - FSAVC -RPI -AVCs -Bulks -EPPs / TIP -with-profits Group Pensions Click to edit Master title style -SSAS -Flexible Lifetime Annuity / FRIA - Defined Benefit -Income Drawdown - MPPs -Enhanced Annuity - AVCs Individual Pensions -Non-Linked Single Premium Life -Unit-Linked Single Premium Life -Prudence Bond -Stakeholder - Prudence Bond initial charge -FSAVC no initial charge Annuities high RB - Fixed Other traditional - RPI -Unit Linked Bond -Protection -Distribution Bond -Other Regular Life Other -Capital Investment Bond -Plan Prudence (France) - Endowments - Protection -Offshore Bonds -Guaranteed Equity Bond - Other Regular Life
Product mix New business APE* New business APE 3Q 2001 Full year 1996 4% 2% 3% 15% 16% 11% Click to edit Master title style 22% 21% 18% 26% 31% 31% Individual pensions Corporate pensions Individual pensions Corporate pensions Life Annuities Life Annuities Investment products DSS contributions Investment products DSS contributions *Excludes M&G
General Insurance Overview � Over 2.1 million policies, premium income of £196m in 1H 2001 Click to edit Master title style � Combined operating ratio of 87% at 30 June 2001 � 5th largest household insurer, 19th largest motor insurer � 1.7 million household customers, No 5 in UK market with 5% share � Very strong general insurance brand, second only to Direct Line for household � Around 200,000 new Prudential customers in 2001
General Insurance: overview Very strong general insurance brand, � Operating Profit & Return on Capital especially in household No 2 in UK household brand awareness 80 50% � (ranked by MORI) 40% 60 1.7 million household customers, No 5 in £ million 30% � 40 market with 5% share Click to edit Master title style 20% 20 The household portfolio has consistently 10% � generated underwriting profits although 0 0% 1996 1997 1998 1999 2000 2001F these have fluctuated with the volatility Pre tax operating profit Return on capital of the general insurance cycle 2001 Gross Written Premium Forecast Market leading retention rates and � Creditor claims experience on “DSF-acquired” 10.5% portfolio Motor (New) 7.6% Above average returns on capital � Motor Strong telesales operation in Nottingham (Renewals) � 14.5% Low expense ratio Household � (Renewals) Attracts circa 200,000 new Prudential 62.3% Household (New) � 5.1% customers per annum
General Insurance: new business and portfolio retention Direct Marketing Spend & Efficiency Advertising efficiency has improved � significantly Advertising Spend / Telesales (%) 80% 14 Advertising Spend ( £ million ) Prudential brand can carry further 12 � 60% 10 increases in spend while remaining 8 40% viable Click to edit Master title style 6 4 Consistently high retention rates - we 20% � 2 believe retention rates to be best 0% 0 amongst peers 1996 1997 1998 1999 2000 2001 Advertising Spend Advertising Spend / Telesales Customer profile not price sensitive � Retention Passive direct debit renewal process � DSF not involved in renewal process 7,000 100% � 6,000 – decline in sales force has had no 90% DSF Headcount 5,000 Retention noticeable impact on retention 80% 4,000 3,000 70% Management recognise the � 2,000 60% importance of retention and have 1,000 0 50% taken proactive steps to maintain 1996 1997 1998 1999 2000 2001F current exceptional levels DSF Headcount Household retention Motor retention
David Belsham David joined Prudential as an actuarial trainee in 1983 and qualified as a Fellow of the Institute of Actuaries in 1988. He then worked for Prudential in a range of actuarial jobs covering valuation, product development, systems development, general insurance, and mergers and acquisitions, and was the actuary responsible for Home Service Division 1992-1995. From 1995-1998 David was Prudential’s UK actuary and he has been Appointed Actuary of Prudential Assurance Company and Prudential Annuities Limited since July 1998. David has a Maths degree from Merton College Oxford (1978) and an MSc in statistics from University College London (1981) and taught for a year. Andy Briggs Andy joined the Prudential from University in 1987 and has spent a number of years working in various departments through the company such as Actuarial, Customer Services, Marketing and Sales. He qualified as an Actuary in 1990. Andy is currently Business to Business Director, his previous role being Director of Annuity and Bonds. Alan Cook Alan joined Prudential in 1970 from school. He started his career working in General Insurance (claims, product design, process design and IT). From 1976 to 1978, Alan was seconded to the Association of British Insurers to work in the Press Office. Between 1993 and 1996, Alan was seconded to Jackson National Life in Michigan as Senior Vice President, Operations. In 1996 Alan returned to the UK as one of two Acquisition Directors and worked with the team that acquired Scottish Amicable. In April 1997 he was appointed Director of General Insurance and was subsequently made Managing Director in February 1998. November 1999, Alan became Managing Director of Retail Insurance Operations. He was appointed Chief Executive of Insurance Services in September 2000 and has recently been made Chief Operating Officer of UK & Europe. Chris Evans Chris Evans joined Prudential in 1981, having spent 3 years with Lloyds broker Hartley Cooper in personal financial planning and group pensions. At Prudential, after managing a number of operations within IFA distribution, Chris became a Managing Director of Prudential Holborn (Prudential’s intermediary business) in 1993. In 1995, Chris was appointed Managing Director of Prudential TS Life (in Thailand), and in September 1999, he was appointed Managing Director, Prudential Europe.
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