“can emerging markets generate superior returns?”
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This presentation 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 and results. 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, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which Prudential and its affiliates operate. 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.
“CAN EMERGING MARKETS GENERATE SUPERIOR RETURNS?”
Goldman Sachs European Financials Conference, 11 June 2002
JONATHAN BLOOMERGROUP CHIEF EXECUTIVEPRUDENTIAL PLC
PRUDENTIAL PLC: A STRATEGIC OVERVIEW
A leading international retail financial services player
Focus on medium and long term savings
A market leader in our chosen territories- UK- US- Asia
Diversified products and distribution channels
Scale and resources for future growth, internationally
Balancing short-term and long-term strategies to deliver value to our shareholders
GROWTH FROM INTERNATIONAL DIVERSIFICATION
0
5000
10000
15000
20000
25000
1996 1997 1998 1999 2000 2001
UK & Europe US Asia
New business sales by region 1996- 2001
£m
New business sales FY2001
ASIA: POTENTIAL FOR SUSTAINED GROWTH
The most densely-populated region in the world:
China and India each have more than 3x US population
Indonesia has higher population than France, UK and Germany combined
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Japan Phil India Indo Thai HK Malay Korea Sing TaiwanChina
3.33.5
4.9
5.96.4
6.7 6.97.5
8.0 8.18.6Average GDP growth % 1971-2000
Asia delivers consistently high GDP growth despite several economic crises in last 30 years
Source: UBSW 30 Aug 01
China 1,266
Indonesia 210
Population (millions)
India 1,007
Japan 127
Vietnam 78
Philippines 81
Thailand 63
S. Korea 47
Malaysia 23
Taiwan 22
Hong Kong 7
Singapore 4
0
50
100
150
200
250
300
350
Asia UK US
MARKET SIZE AND GROWTH: A GLOBAL PERSPECTIVE
Asian Life and retail bank deposits are larger than UK and US and growing rapidly; Asian MF balances are relatively smaller but growing fast
(2000, £bn)
Life Premiums Mutual Funds FUM Retail Bank Deposits
(2000, £bn)
0
1,000
2,000
3,000
4,000
5,000
6,000
Asia UK US
(2000, £bn)
1990-99 Growth (%)
1 Japan11 ROA
7 4 1997-00 Growth (%)
20 Japan14 ROA
17 25 1995-99 Growth (%)
1 Japan10.5%
5 6
0
500
1,000
1,500
2,000
2,500
5,000
Asia UK US
Japan
ROA Japan
Japan
ROA
ROA
Source: Swiss Re; Group Position Assessment; Federal Reserve
LIFE PENETRATION INCREASES AS ECONOMIES DEVELOP: US$10,000 IS INFLECTION POINT
Life Penetration Market GrowthNew Business Premiums, $m Growth
1. Source: Swiss Re; 2. Source: CIA
S KoreaJapan
Taiwan
Hong Kong
ChinaIndia
Philippines IndonesiaThailand
Vietnam
MalaysiaSingapore
0%
2%
4%
6%
8%
10%
12%
1,000 10,000 100,000
Penetration, 19991
Per Capita GDP2, US$ (log scale)
= $1bn in NB Premiums
LIFE INSURANCE MARKETS IN ASIA
JapanKoreaTaiwanChinaIndiaHong KongSingaporeThailandMalaysiaPhilippinesIndonesiaVietnam
16,4137,9664,564
851
1,375850540354380140
21478
2%11%11%22%20%9%9%
12%11%12%
15%22%
ASIA: OPPORTUNITIES FOR FOREIGN PROVIDERS
Domestic Foreign
Foreign players have had difficulties capturing market share
97/98 economic crisis lowered some barriers
US and European companies see scale of opportunity in Asia
But significant hurdles are still in place
Indonesia Japan Korea Thailand
88%
98% 98% 95%
12%
2% 2% 5%
Source: Morgan Stanley Research, Aug 01
RFS BALANCES IN DOMESTIC AND FOREIGN COMPANIES
LONG-TERM VISION FOR DEVELOPMENT OF PRESENCE IN ASIA
Geography
Expand into Asian markets with the largest and most profitable pools of target customers
Distribution Improve efficiency and
effectiveness of current distribution channels
Expand distribution options: – access more customers– give customers choice in
accessing Prudential– maximise “stickiness” and
productivity of each relationship through cross-selling
Products Provide products that continue to
meet customer needs Offer broader range of needs-
based, Retail Financial Services products:
– life and pensions– mutual funds– general insurance– banking
to cement and deepen customer relationship
Target CustomersProfessional/massaffluent segment
ACHIEVE SUSTAINABLE RFS LEADERSHIP WITH LEVELS OF CUSTOMER ACCESS, SHARE OF WALLET, PROFITABILITY, AND SCALE COMPARABLE TO LEADING RETAIL FINANCIAL SERVICES GROUPS
RELATIVE LIFE MARKET POSITION
Market Presences/Licences
No of Markets in Top 5
AIG
Manulife Allianz
Great Eastern NY Life ING
Cathay Life
Aegon CGNU Mass Mutual US Prudential RSA Sun Life
Zurich Axa
4-5
2-3
0-1
1-2 3-6 7-8 9+
6-8Prudential
Source: PCA analysis
PRUDENTIAL’S STRATEGIC PRIORITIES: CAPITALISE ON THEOPPORTUNITIES
Build a scale presence in North Asia and Greater China- largest profit pools and target customer bases
Grow and strengthen tied agency forces
Continue to evolve towards multi-distribution model- building upon recent successes in bank/direct distribution
Build profitable and material regional Mutual Fund business
Migrate to lower-cost operating configuration with multi-country processing
Continue to develop structure and resource pool
ASIA: FINANCIAL HIGHLIGHTS
£m
0
50
100
150
200
250
300
350
400
450
1998 1999 2000 2001Singapore Malaysia Hong KongTaiwan Japan Others
83
124
256
434
£m
56
90
153
255
+61%
+70%
+66%
SALES NEW BUSINESS ACHIEVED PROFIT
CAPITAL FLOWS IN ASIA: UPDATE
Net capital flows
(1) 22 7 11
158
76
144
274
Summary (1994 to 2001)
£m
Acquisitions 533
Working capital 264
Repatriations (106)
Net capital 691
Japan and Korea acquisitions
Increased investment in Indonesia and Taiwan
CONCLUSION: BENEFITS CAN BE REAPED FROM SUCCESSFUL PARTICIPATION IN EMERGING MARKETS
Markets are attractive and will remain so for the foreseeable future
To succeed a participant needs:- strong and capable management team - strong track record of performance delivery- financial strength- profitable business model- ability to leverage pan-regional presence- continued focus on costs- clear view of future opportunities and challenges
Strategy and capabilities must be designed to deliver profitable growth
PRUDENTIAL PLC
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