positioned to outperformfiles.investis.com/prudential/pdfs/20042005/20042005.pdf · 2 this...

POSITIONED TO OUTPERFORM

2

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.

INTRODUCTION

SIR DAVID CLEMENTI

www.pru.co.uk

OVERVIEW

MARK WOOD

www.pru.co.uk

Source: ABI, Prudential analysis.5

IN AN UNCERTAIN WORLD WE MAKE IT POSSIBLE FOR EVERYONE TO ENJOY A SECURE FUTURE

POSITIONED TO OUTPERFORM• Unrivalled combination of brand,

financial strength and investment performance

• Product mix biased to high margin products with high barriers to entry

• Well balanced multi-channel capability

• Operational growth capacity

• 10% growth in 2005 (assuming 5% market growth)

• 14% IRR by 2007

IMPROVING UK MARKET• Stable economic environment

• Signs of savings market regaining confidence

• Regulatory environment favours scale players

• Pension market set to become attractive

• Prospect of market concentration

6

TRANSFORMATION OF THE UK BUSINESSA profitable platform for growth

DISTRIBUTION: SALES BY CHANNEL1 PRODUCT: SALES BY TYPE2

0%

25%

50%

75%

100%

2000 2001 2002 2003 2004

Prop

ortio

n %

Shareholder Policyholder

IFA

B2B

DSF IFA

B2B

Partner-ships

D2C

20042000

0.0%0.2%0.4%0.6%0.8%1.0%1.2%1.4%

1995 1998 2001 2004

HEADCOUNT & EXPENSE RATIO

2468

1012141618

1995 1998 2001 2004

Expe

nses

exc

l com

mis

sion

/F

unds

und

er M

gt

Empl

oyee

s (0

00s

FTE)

SALES & NEW BUSINESS ACHIEVED PROFIT

-40%

-20%

0%

20%

40%

2001 2002 2003 2004-40%

-20%

0%

20%

40%

Year

-on-

Year

Pe

rcen

tage

Cha

nge

Pru Sales,APE

PruNBAP

ABI MarketSales, APE

Pru NBAPMargin Pru N

BA

P Margin

.Note: 1. Includes DWP rebates. 2. Sales relates to new policies set-up in stated year.

7

DEVELOPING THE SHAREHOLDER BUSINESS

1

2

3

4

5

6

7

8

9

10

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Discontinued products On-going Products

Total In Force Policies

Pol

icie

s (m

illio

ns)

Source: Prudential analysis and indicative projections.

8

WE WILL DELIVER ON OUR COMMITMENTSToday’s focus

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

9

CAPITALUKIO Net Flow of Funds to/from Group - 2001 to 2005

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

(1)

-400

-200

0

200

400

600

800

2001 2002 2003 2004 2005 Plan 2007Indicative

£m

Proceeds from GI DisposalPAC - Shareholder TransferWP & Dividends (indicative)Capital Injections (indicative)

PAC Special Dividend2003-05 only Net Funds FlowPAC - Shareholder

Transfer WP & DividendsCapital Injections(2)

Prudential Analysis. (1) UK Insurance Operations (2) Prudential Assurance Company

10

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRDIVERSIFIED DISTRIBUTION REACHSales by distributor type

THE MARKET, 2004 PRUDENTIAL, 2004

Direct10%

Single Tie26%

Retail IFAs55%

EBCs9%

Direct13%

Single Tie25%

Retail IFAs34%

EBCs28%

Prudential Analysis. Market & Prudential sales include DWP rebates.Prudential sales exclude Europe.

11

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRTHE SAVINGS RATIO DOES NOT ALONE DRIVE THE SIZEOF PRUDENTIAL’S NEW BUSINESS

REPORTED NEW BUSINESS

Prudential Analysis. 1. RP - Regular Premium. 2. SP - Single Premium. Note: UK Sales 2004, excludes European Insurance Operations.

£232m29%

‘NEW’ NEW BUSINESS

PROTECTION

NEW SAVINGS, PENSIONS, BONDS, ISAs

£211m26%

‘INCREMENTAL’ NEW BUSINESS

AVCs

RP PENSION TOP-UPS1

SP PENSION TOP-UPS2

NEW MEMBERS TO EXISTING GROUP SCHEMES

£363m45%

‘INTRA-MARKET’ NEW BUSINESS

WITH PROFIT SWITCHING

PENSION TRANSFERS

VESTING PENSION ANNUITIES

BULK PURCHASE ANNUITIES

= £806m

12

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRACCESSING DISTRIBUTION Selectively manufacturing product

DIRECT WHOLE OF MARKETSINGLE-TIE MULTI-TIE EBC3

Prudential Analysis. 1. RP - Regular Premium. 2. SP - Single Premium. 3. EBC -Employee Benefit Consultant.

‘NEW’ NEW BUSINESS

PROTECTION

NEW SAVINGS, PENSIONS, BONDS, ISAs

‘INCREMENTAL’ NEW BUSINESS

AVCs

RP PENSION TOP-UPS1

SP PENSION TOP-UPS2

NEW MEMBERS TO EXISTING GROUP SCHEMES

‘INTRA-MARKET’ NEW BUSINESS

WITH PROFIT SWITCHING

PENSION TRANSFERS

VESTING PENSION ANNUITIES

BULK PURCHASE ANNUITIES

Directmarketing costs Commission based Fee based

Source:13

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRDEPOLARISATION WILL RESHAPE THE UK L&P MARKETSales by channel

THE MARKET BY CHANNEL2004 ACTUAL 2007 FORECAST

CAGR5% p a

Direct

Single Tie

IFAs

EBCs Direct

Single Tie

WOMAdvisers

EBCs

Multi Tie

NO MATERIAL CHANGE TO DISTRIBUTION MIX IN 2005

EBCs36%

Direct 13%

SingleTie 25%

IFAs34%

EBCs28%

Direct 10%

SingleTie 19%

WOMAdvisers 19% Multi Tie 19%

PRUDENTIAL BY CHANNEL2004 ACTUAL 2007 TARGETED

Source: ABI, Prudential Analysis.

14

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRMARGINManaging mix

PRUDENTIAL SALES BY PRODUCT

2004 ACTUAL 2007 TARGETED

Prudential Analysis. 2007 product order has been presented in line with 2004 NBAP margins.

4%

19%

27%

17%

8%

11%

14%

Protection

Group Pensions(fee based)

Other Pensions Bulks

IndividualAnnuities

Bonds

DWPRebates

REDUCINGMARGIN

3%13%

22%15%

10%

14%

23%


Other PensionsBulks

IndividualAnnuitiesBonds

DWPRebates

Protection

REDUCINGMARGIN

15

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRWE HAVE INVESTED £100M P.A. IN INFRASTRUCTUREUsing technology to support the business

Customer & Policy Aggregation

Scanning & Imaging

Workflow

Single Address

4Front Single Call Centre

Application

Single Number0800 000000

pruadvisor.co.ukpru.co.uk

Contract EngineBonds

Contract EnginePensions

Contract EngineProtection

Contract EngineAnnuities

Single Customer Database

Single Contact

Database

Prudential Analysis.

16

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRANNUITIESIndividual and bulks

0

200

400

600

800

1,000

1,200

1,400

1,600

2001 2002 2003 2004 20070%

5%

10%

15%

20%

25%

30%

35%

Mar

ket S

ize,

APE

, £m

(Bar

)

MarketCAGR 2004-07

8%

EBCs 19%Fee based

(bulks and some internal vestings)

Intermediaries 31%Commission based

(mostly OMOs)Direct 17%

Marketing Costs(internal vestings, some OMOs)

Single Tied 33%Fee & Commission

(bulks & external vestings)

THE MARKET

PRUDENTIAL’S ANNUITIES BUSINESS

PRU FOCUS• Low commission to premium ratio

• Volume & scale

• Mortality expertise

• Efficient quotation, acceptance & payments system

• Investment expertise

• Brand

MARKET DRIVERS• Retirement age population

• Fund Growth

• DB to DC shift

• Pension scheme solvency & risk appetite

ABI, Prudential Analysis.

PruM

arket Share (line)

2004 ACTUAL

17

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2001 2002 2003 2004 20070%

1%

2%

3%

4%

5%

6%MarketCAGR 2004-07

0%

Mar

ket S

ize,

APE

, £m

(Bar

) PruM

arket Share (line)

PRUDENTIAL’S PROTECTION BUSINESS

PROTECTION


MARKET DRIVERS• Housing market performance

• IHT planning

• Loan protection demand

THE MARKET

PRU FOCUS• Efficient, low cost processing

• Volume & scale

• Capital efficiency

• Simplified bulk administration for loan books


Direct 1%Marketing Costs

Single Tied93%

Commission based

2004 ACTUAL

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

18

0

1,000

2,000

3,000

4,000

5,000

2001 2002 2003 2004 20070%

1%

2%

3%

4%

5%

6%

7%

8%Market

CAGR 2004-076%

Mar

ket S

ize,

APE

, £m

(Bar

) PruM

arket Share (line)

PRUDENTIAL’S PENSIONS BUSINESS

PENSIONS


MARKET DRIVERS• A-day

• Pensions Commission

• Investment performance

• DB to DC shift

• Advisers shifting from fee to commission

THE MARKET

EBCs 63%Fee based

(mostly DC & AVCs)


(top-ups only)

Direct 15%Marketing Costs (top-ups only)

2004 ACTUAL

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

PRU FOCUS• Persistency

• SP vs RP

• Premium size

• Commission rationality

• Auto-enrolment/take-up on group schemes

19

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2001 2002 2003 2004 20070%2%4%6%8%10%12%14%16%18%20%Market

CAGR 2004-078%

With ProfitBonds

Unit LinkedBonds

Mar

ket S

ize,

APE

, £m

(Bar

) PruM

arket Share (line)

PRUDENTIAL’S INVESTMENT BOND BUSINESS

INVESTMENT BONDS


MARKET DRIVERS• Investment market performance

• With-profit to Unit linked shift

• Retirement age population

• Tax-free lump-sums

THE MARKET

Intermediaries 23%With Profit Bonds

Commission based

Direct 2%Marketing Costs

Intermediaries 75%Unit Linked Bonds

Commission based

2004 ACTUAL

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

PRU FOCUS• Volume & scale

• Commission levels

• Persistency

• Efficient low cost processing

20

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRTHE TRANSFORMED BUSINESS PLATFORM DELIVERED PROFITABLE GROWTH IN 2004

2003 2004

15% YoY Growth

9% YoYGrowth

40% YoY Growth

16% YoY Growth

Week

Pru

UK

IO S

ales

, Cum

ulat

ive

APE

, £m

0

100

200

300

400

500

600

700

800

900

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51


21

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRTHE TRANSFORMED BUSINESS PLATFORM CONTINUESTO DELIVER PROFITABLE GROWTH IN 2005

9% YoYGrowth

16% YoY Growth

15% YoY Growth

0

100

200

300

400

500

600

700

800

900

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

2003 2004

40% YoY Growth

Week

Pru

UK

IO S

ales

, Cum

ulat

ive

APE

, £m

2005

0

50

100

150

200

250

1 2 3 4 5 6 7 8 9 10 11 12 13

12% YoY Growth


22

AGENDA

• Financial Review Tim TookeyBREAK

• Distribution and Service - Overview Andy Briggs• Customer Services Jan McNish• The Intermediary Perspective Patrick Gale, CEO, Sesame• Prudential’s Multi-Channel Distribution

– Intermediaries Andy Briggs

– Corporate Partnerships Isabel Hudson

– Business to Business (B2B) Andy Briggs• Conclusion and Q&A Mark Wood

FINANCIAL REVIEW

TIM TOOKEY

www.pru.co.uk

24

FINANCIAL REVIEW CONTENT

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

• Recent performance highlights

• IRR

• Margin

• Expenses

• Cashflows

• Annuities

25

Q1 2005 HIGHLIGHTS

UKI 64 31 8

B2B 63 30 17

Partnerships 27 13 42

D2C 19 9 6

Europe 4 2 100

DWP Rebates 31 15 (9)

TOTAL 208 100 12

Sales Proportion by Growth on Channel Q1 04

(APE, £m) (%) (%)


26

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRIRR: UK AND EUROPE 12% IRR achieved in 2004 with strong new business growth

2004 (%) Target 2007 (%)

Unit-linked bonds 7 8Corporate pensions 3 15Protection1 1 15Annuities 20 20OVERALL POST-TAX IRR 12 14

• Strong progress towards 2007 target, but mix is critical

• Unit-linked bonds: benefits of scale coming through

• Annuity: barriers to entry and low commission facilitate strong returns

• Corporate pensions (unit-linked): focusing on efficient customer acquisition and servicing

• Protection: price sensitive product, as volume grows we gain efficiencies

IRR ANALYSIS

Source: Prudential Analysis. Note 1: does not include Credit Life.

Source:27

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRMARGIN: VARIES BY PRODUCTOverall margins sustained in 2004

2003 2004

NEW BUSINESS ACHIEVED PROFITS £157m £220m

TOTAL MARGIN 27% 27%

NBAP MARGINS, selected product lines2003 2004

B2B Corporate Pensions 16% 9%Bulks 56% 46%Individual Annuities 43% 43%WP Bonds 41% 41%UL Bonds (12)% 0%

• Expect a few percent reduction in 2005 margins

• Commitment to managing mix

Source: Prudential Analysis.

Source:28

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRMARGIN: DEVELOPMENT IN 2004Product mix and annuity profitability are key

0%

5%

10%

15%

20%

25%

30%

35%

Actual 2003 FinancialAssumption

Changes

Transferinternal

vestings toPRIL

Annuities,including

lower yieldmargins

UL specialoffer

Shift to ULpensions

Otherincluding

lowerexpenses

Actual 2004


29

MARGIN

CAPITAL SERVICE

DISTRIBUTION

EXPENSESContinued focus on costs and cost efficiency

14% IRR

2

4

6

8

10

12

14

16

18

20

Employees, 000s FTE (B

ar)

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Expe

nses

exc

l. C

omm

issi

on

/Fun

ds u

nder

Mgt

(Lin

e)

Prudential employeesPrudential expense ratio

Prudential Analysis, FSA returns.Total expense ratio defined as total gross OB & IB (form 41) expenses / total admissible assets.

30

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRDEVELOPING THE SHAREHOLDER BUSINESS

1

2

3

4

5

6

7

8

9

10

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total In Force Policies

Pol

icie

s (m

illio

ns) Discontinued products On-going Products

.Source: Prudential analysis and indicative projections.

31

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRGROUP CAPITAL AND CASH FLOWSActive management of capital

CAPITALCONTRIBUTION

CAPITALCONSUMPTION

UK shareholder-backed

businessUK life fund

Reinvestment Reinvestment

2006

PrudentialCorporation

AsiaM&G


JNL EggShareholder dividendand interest on debt


32

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRUKIO CAPITAL AND CASH FLOWSActive management of capital

PACShareholder-

backedProducts

Reinvestment

UK life fundPAC With-Profits

Reinvestment

CAPITALCONSUMPTION

CAPITALCONTRIBUTION

UK ShareholderAnnuities (PRIL)

UKIO

£198m Prudential Plc £250m

£100mReinvestment

Reinvestment

£180m

GeneralInsuranceHealthcare

& OtherReinvestment

ServiceCompany

Prudential Analysis. £198m 2005 distribution of 2004 bonuses. £250m UKIO capital consumption is net of in-force release. £100m special dividend is the third and final instalment of the special dividend which commenced in 2003.

33

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRSHAREHOLDER ANNUITY CASHFLOW SIGNATUREAn individual annuity pays back in the 5th year

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Year

CUMULATIVE

IND

ICA

TIV

E C

AS

HFL

OW

0

Prudential Analysis. Note: indicative data 2004.

34

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRINDIVIDUAL ANNUITY - SELF FUNDING FROM 2010

-150

0

150

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Year

New Business Strain In Force Release Net Capital Required

IND

ICA

TIV

E C

AS

HFL

OW

Prudential Analysis. Note: indicative data. Total capital required is net i.e. new business capital less release of in-force.

35

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRA PRUDENT APPROACH TO WRITING ANNUITIESShareholder (PRIL) Individual Immediate Annuities

Price

Realisti

c Liab

ility

YieldDefault

sMism

atchin

gMorta

lityExpen

ses

Contingen

cy

Regulat

ory Lia

bility

Solvency

Marg

in

Total R

egulat

ory Capita

l

Total

Initia

l Exp

ense

s

Tax

Total

New business strainPrice

Prudential Analysis. Note: the waterfall is based on a price with a yield margin of 100bps.

36

MARGIN

CAPITAL SERVICE

DISTRIBUTION


• Business can be sold at different yield margins

• Depending on the yield margin achieved business can be written with little or no capital

Price

Realisti

c Liab

ility

Yield

Defaults

Mismatc

hingMorta

lityExpe

nses

Continge

ncy

Regulatory Liab

ility

Solvency

Marg

in

Total R

egulat

ory C

apita

l

Total Initia

l Exp

ense

s

Tax

Total

Price Net capital released


37

MARGIN

CAPITAL SERVICE

DISTRIBUTION


Price

Realisti

c Liab

ility YieldDefa

ults

Mismatc

hingMorta

lityExp

enses

Contin

gency

Regulator

y Liabili

ty

Solvenc

y Marg

in

Total

Reg

ulator

y Cap

ital

Total

Initia

l Exp

enses Ta

xTo

tal

Solvenc

y Marg

inYiel

dDefault

sMism

atching

Mortality

Expens

esConti

ngen

cy Tax

MSB Res

erves +

Initia

l Exp

ense

s

MSB profit

• Individual annuities generate positive MSB profit in the year of sale

• MSB profit does not represent cash

Price


ANNUITIES: REGULATORY AND ECONOMIC CAPITAL

38

• Annuities require capital to cover new business strain

• The chart is based on the requirements of the Integrated Prudential Sourcebook (IPSB) – Pillar I equates to the statutory liabilities plus regulatory capital requirements (required minimum margin)– Pillar II equates to realistic liabilities plus Individual Capital Assessment (ICA) based on BBB economic capital– The use of AA economic capital does not materially increase the overall Pillar II requirement

0%

20%

40%

60%

80%

100%

Pillar IPillar IITotal Assets

Shareholder Annuities (PRIL) Pillar I vs Pillar II

Per

cent

age

of P

illar I

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

Prudential Analysis. Note: IPSB came into effect on 31 December 2004.

39

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRSUMMARYIn good shape

• Strong financial performance in 2004

• Active mix management results in reduction in overall NBAP margin

• Key Financial Focus– Unit cost pressures and overhead absorption– Clear understanding of annuity dynamics

• On track for 14% IRR by 2007

QUESTIONS & ANSWERS

POSITIONED TO OUTPERFORM

DISTRIBUTION & SERVICE

ANDY BRIGGS

www.pru.co.uk

43

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRCONTENT

• Overview

• Customer Services

• Intermediary Perspective– Patrick Gale, CEO, Sesame

• Prudential’s Multi-Channel Distribution– Intermediaries– Corporate Partnerships– B2B

MARGIN

CAPITAL SERVICE

DISTRIBUTION

IRR

44

2004: HOW DO WE COMPARE TO THE MARKETSales by Distribution Channel & Product,Prudential Vs Market

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

THE MARKET 2004 PRUDENTIAL 2004Direct 13%

SingleTie 25%

IFAs34%

EBCs28%

SALE

S B

Y D

ISTR

IBU

TOR

TYP

E

Direct 10%

SingleTie 26%

IFAs55%

EBCs9%

ABI, Prudential Analysis

10%

10%

26%

17%

31%

3%3%

Protection


Other PensionsBulks

IndividualAnnuities

Bonds

DWP Rebates

4%

19%

27%

17%

8%

11%

14%

Protection


Other Pensions

Bulks

IndividualAnnuities

Bonds

DWP Rebates

SALE

S B

Y PR

OD

UC

T

45

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRWHAT ARE WE AIMING TO ACHIEVE?Maintaining the same strategy

Direct 13%

SingleTie 25%

IFAs34%

EBCs28%

2004 ACTUAL 2007 TARGETED

SALE

S B

Y D

ISTR

IBU

TOR

TYP

E

EBCs36%

Direct 10%

SingleTie 19%

WOMAdvisers 19% Multi Tie 19%

SALE

S B

Y PR

OD

UC

T


4%

19%

27%

17%

8%

11%

14%

Protection


Other Pensions Bulks

IndividualAnnuities

Bonds

DWPRebates

3%13%

22%15%

10%

14%

23%


Other PensionsBulks

IndividualAnnuitiesBonds

DWPRebates

Protection

REDUCINGMARGIN

REDUCINGMARGIN

Source:46

CONTINUED FOCUS ON HIGH MARGIN PRODUCTSAccessing distribution with lower margin products only where needed to unlock volume of high margin products

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

PRUDENTIAL’S PRODUCT FOCUS

Bonds

DIRECT

EMPLOYEE BENEFIT CONSULTANTS


Group Pensions

(fee based)

MARGIN LowHigh

Risk Products Savings Products

IndividualAnnuities Protection Bulk

AnnuitiesOther

Pensions

INTERMEDIARY: MULTI-TIE

D2C

B2B

INTERMEDIARIES

CORPORATE PARTNERSHIPS

MARGIN LowHigh

INTERMEDIARY:WHOLE OF MARKET

SINGLE TIE

CUSTOMER SERVICES

JAN McNISH

www.pru.co.uk

48

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRROVERVIEW

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

• Delivering more for less

• Investment in infrastructure

• Policyholder experience

• Intermediary experience

Source:49

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRDELIVERING MORE FOR LESSProductivity gains and cost reductions

-30

-20

-10

0

10

20

30

40

2002 2004

2004 HIGHLIGHTS

• Productivity- Productivity improved by 55%

- Improved servicing through technology

- Operational efficiency and flexibility through multi-skilling

• Cost

- Average cost per servicing person down by 9%

- 75:25 onshore:offshore ratio

- UK headcount reduced by 34%

Funds managed per servicing persons (£m)

2005 FOCUS

• Process Simplification• Unit cost reduction

Average cost per servicingperson (£000)


50

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRWE HAVE INVESTED £100M P.A. IN INFRASTRUCTUREUsing technology to support the business

Customer & Policy Aggregation

Scanning & Imaging

Workflow

Single Address

4Front Single Call Centre

Application

Single Number0800 000000

pruadvisor.co.ukpru.co.uk

Contract EngineBonds

Contract EnginePensions

Contract EngineProtection

Contract EngineAnnuities

Single Customer Database

Single Contact

Database


51

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRMEETING THE NEEDS OF OUR POLICYHOLDERSFocus on the customer

• One easy to remember freefone number 0800 000 000

• Calls answered by real people, not machines

• 80% of queries answered by first person contacted

• Immediate feedback from customers

• Single postal address for all correspondence

52

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRMEETING THE NEEDS OF INTERMEDIARIESBuilding our adviser franchise

• Dedicated freefone number with callback

• Dedicated and experienced teams

• Single correspondence address

• Dedicated fax and email processing

• Online self-service through our award winning web-site

– Client-specific illustrations– New business submission and tracking– Valuation and top-ups

• Delivering consistent service to agreed service levels

Source : FT Money Marketing ,28th October 2004

53

INDEPENDENT RECOGNITION OF OUR SERVICE IMPROVEMENTS We are committed to delivering quality service

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

INTERMEDIARY MARKET MESSAGE FROM THE TOP 350

NUMBER OF ADVISER FIRMS

PERCENTAGE OF MARKET SALES

84%

16%

TOP 350

NEXT5,150

85%

15%

PERCENTAGE OF PRU SALES

SATISFACTION LEVELS

Satisfied 88%

Dissatisfied 12%

Improved 61%

Same 31%

Worse 8%

SERVICE PERCEPTION

Intermediary commission based market, 2004. Prudential Analysis. HI Europe, independent telephone survey carried out in March 2005. Service perception: Overall, would you say that the service you receive from Prudential has improved, stayed the same or got worse?Satisfaction levels: How satisfied are you with this level of service?

THE INTERMEDIARY PERSPECTIVE

www.pru.co.uk

Patrick GaleChief Executive Officer

20 April 2005

Agenda

The Sesame Model

Market Assessment- Distribution Channels- Why multi-tie sustainable

Why Prudential can win

56

Sesame Network Model

Sesame Services

Propositions

Brand

Research

Compliance

Buying Power

Commission Processing

Technology

Training

Life Companies

Con

sum

er

7,600 RIs

85% <3 RIs

Nationwide

Fund Managers

Lenders

Intermediaries

Cor

pora

te

57

Market Assessment – Population of Distribution Channels

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2003 2004 2005 2006 2007

Multi Tie Intermediaries

WOM Intermediaries

• DSF - Decline DSF creates pool of recruits to IFA sector

• Mortgage Networks stabilise - but consolidate from 80 <20 players

• Multi-tie Network - start in 2005, grow rapidly and dominated <5 players

• WOM Network - on gentle decline due multi-tie

• Banks - progress in certain product segments, but intermediaries remain dominant channel

DSF/Tied

Mortgage Intermediaries

Num

ber o

f RIs

Source: Sesame estimate58

Market Assessment – why multi-tie sustainable model

CONSUMER PRIORITIES (2004 Henley Group Focus Research)Consumers not fooled by “independent tag” – they know advisers are influenced brand, financial strength and commission rates.

Consumers are seeking “objective advice” – advice and service based trusting relationship - product is important, but not top priority.

Consumers do not trust financial service industry – biggest brands have greatest chance to give reassurance.

Consumers want advisers to understand them, not just their money.

MULTI-TIE WORKS AS:Focuses advisers on getting advice proposition right.

If got appropriate panel, can deliver appropriate product and brand strength.

The same town, same club, relationship sales model inherited from IFA tradition fits consumer’s aspiration.

59

Market Assessment – why multi-tie sustainable model

ADVISERS PRIORITIES (Research H2B and NMG)Margin squeeze due cost escalation (PI, regulation) and commission erosion driving focus on profitability

Service standards WOM model weak for adviser/consumer

Regulatory red-tape is becoming evermore burdensome

Want to sell product from brand leaders

MULTI-TIE WORKS AS:Value transfer from provider to intermediary assists profitability

By focusing few providers and changing operating model (e-commerce) can drive up service standards

Multi-tie less complex than WOM from regulatory perspective

Right panel meets brand/product test

60

Why Sesame believe Prudential can win

Pursued multi-tie opportunity early and with clear strategy

Building capability WOM and multi-tie by:– Consolidating traditional strengths:

• Consumer brand• Financial strength• Excellent track record annuities and bonds

– Delivering new capability:• Service• Technology and process• New product (especially protection)• Relationship management

Understand distribution:– Relationships – strong balance corporate and field– Willing to differentiate and truly back partners– Bold in approach market – a leader not follower

• Seek “top 3” in product sectors play• Looking “strong” not at “market” growth

61

PRUDENTIAL’S MULTI-CHANNEL DISTRIBUTIONINTERMEDIARIESANDY BRIGGS

www.pru.co.uk

63

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRTHE RETAIL INTERMEDIARY MARKETHow does the market work?

% OF INTERMEDIARY APE, 2004 MARKET SHARE TOP 10 INTERMEDIARIES

1823.9

26.8 29.232.2

6.57.0

7.87.9

5.3

2000 2001 2002 2003 2004

6 - 10

Top 5

33.8

%

23.3

% 30.4

% 37.0

%

40.1

%

34%

18%

38%

10%

Nationals& Banks

Networks

ProvincialIntermediaries

Regionals

“You've got to get your fee model right if you want to remain independent… …when it comes to the crunch, [advisers] might find they can’t have a workable fee model.”

Steve Petrie, John Joseph Financial Services Director,

3 February 2005

Source: Company data, Prudential Analysis..

64

MARGIN

CAPITAL SERVICE

DISTRIBUTION

INTERMEDIARY: WHOLE OF MARKETMarket Drivers and Pru Focus

14% IRR

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2001 2002 2003 2004 20070%

1%

2%

3%

4%

5%

6%

7%

8%

Mar

ket S

ize,

APE

, £m

(Bar

)

CAGR 2004-07-10%

Protection 2%

Bonds 36%IndividualAnnuities

43%

THE MARKET

PRUDENTIAL’S WOM INTERMEDIARY BUSINESS

PRU FOCUS• Account management - double the salesforce

• Service proposition - intermediary experience

• Product development, mix and profitability- UL Bond volume and IRRs

- Maintaining annuity IRRs

- Sales on WP Bonds

- Launching protection proposition

MARKET DRIVERS• Depolarisation

• Investment market performance relative to other assets

• Intermediary consolidation


PruM

arket Share (line)

Other Pensions19%

Pru Share

Pru Share excl. WP Bonds

2004 ACTUAL

65

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRINTERMEDIARY: MULTI-TIEMarket Drivers and Pru Focus

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2002 2003 2004 2005 2006 2007

Mar

ket S

ize,

APE

, £m

(Bar

)

THE MARKET

PRUDENTIAL’S MULTI-TIE INTERMEDIARY BUSINESS

MARKET DRIVERS• Depolarisation

• Intermediary business economics

• Network growth and consolidation

• Volume concentration

• eCommerce opportunity

PRU FOCUS• Drive volume through securing panels

• Drive eCommerce/low cost

• As Whole of Market- Account management - double the salesforce

- Service proposition - intermediary experience

- Product development, mix and profitability

• Launch pensions proposition 02468

101214161820

Q1 04 Q2 04 Q3 04 Q4 04 Q1 05

Qua

rter

ly s

ales

from

Top

7

pote

ntia

l mul

ti-tie

par

tner

s,

APE

£m


66

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRSTATUS OF REGULATED MULTI-TIE PANELSPrudential is punching its weight

CONFIRMED PANEL MEMBERSNO OF RIS

34%

18%

38%

10%

Bankhall% of Intermediary Channel by APE, 2004 8,500

Networks

ProvincialIntermediaries

Regionals

(1)7,600Sesame

(1)5,500Tenet

Burns Anderson 610

1,890Millfield

Nationals& Banks

940Barclays

ThincDestini 830

Source: Company data, Prudential Analysis.(1) Appointed as multi-tie panel development partner.

67

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRUNIT LINKED BONDSQuickly achieving scale in the Intermediary market

0%

1%

2%

3%

4%

5%

6%

7%

Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05E

INTE

RM

EDIA

RY

MA

RK

ET S

HA

RE,

% • Account management -double the salesforce

• Service proposition -intermediary experience

• Product development, mix and profitability

Source: ABI, Prudential estimates.

68

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRPROTECTIONNew proposition: balancing margin vs volume

• Guaranteed rates

• Competitively priced

• Rapid reprice capability

• Straight through on-line processing

• Teleunderwriting

Source:69

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRPRICING DISCIPLINE IN THE ANNUITY MARKETActive pricing delivers margin & volume

2003

1.

2.3.

4.

Min

imum

targ

etm

argi

n

+15%

+30%

MA

RG

IN

£0

£5

£10SA

LES (4 PERIO

D M

OVIN

G A

VERA

GE) £m

WEEK

£15

1 2 4 53 6 7 8 9 10 11 12 13 14 1615 17 1918 262120 22 23 24 25

Drive up margin on growing sales 1.Sales

Margin

Reduce price to stimulate demand 2.

Develop margin as sales come through 3.

Reduce price as sales start to reduce4.

Source: Prudential Analysis.Note: margin is investment yield less annuity rate.

Source: Prudential.70

NEW PROTECTION PROPOSITIONA range of initiatives aimed at meeting the differingneeds of Intermediaries and their clients

Clean Case5-8 days

Non-Clean Case25-35 days

20-30 days (medical evidence & evaluation)Fax 1 day Post 2-3 days Teleunderwriting

15 mins

Paper based short application

30% less referrals to underwriting

5 days SLA

Clean Case10 minutes


20-30 days (medical evidence & evaluation)

Full electronic lodgement

Smart system10 minutesfor clean cases

Clean Case7-8 days


2-3 daysUnderwriting

Paper full application

5 days SLA20-30 days (medical evidence & evaluation)

Clean Case7-35 hours


Electronic short form application

3-5 mins 20-30 days (medical evidence & evaluation)Teleunderwriting

15 mins

30% less referrals to underwriting

5 days SLA

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

Source:71

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRSUMMARY - INTERMEDIARIESDelivering sales & profit

• Account Management - double the salesforce

• Service Proposition - intermediary experience

• Product development, mix and profitability– Dominate annuities– Grow scale in bonds– Launch protection

• Multi-ties - market leading position


PRUDENTIAL’S MULTI-CHANNEL DISTRIBUTIONCORPORATE PARTNERSHIPSISABEL HUDSON

www.pru.co.uk

73

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRCONTENT

MARGIN

CAPITAL SERVICE

DISTRIBUTION

IRR

• Corporate Partnerships market

• Building critical mass

• Banks

• External vesting annuities

74

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRCORPORATE PARTNERSHIPSMarket Drivers and Pru Focus

0

500

1,000

1,500

2,000

2,500

3,000

2001 2002 2003 2004 20070%

1%

2%

3%

4%

5%

6%

Sing

le-T

ie M

arke

t Siz

e, A

PE,

£m (B

ar)

THE MARKETMARKET DRIVERS

• Depolarisation

• New Markets

– Solvency and ICAs

– Lack of scale and expertise in annuity pricing and reserving

– Closed book consolidation

PruM

arket Share (line)

Market being redefined by

vesting partnerships & back book transactions

ST non banks ST Banks Back books

PRUDENTIAL’S CORPORATE PARTNERSHIPS BUSINESS

PRU FOCUS• Banks - Barclays, LloydsTSB, National Australia Bank

(Clydesdale & Yorkshire Banks), Alliance & Leicester

• Tied Salesforces - Openwork, St James’ Place

• Insurers - Zurich, Pearl, Royal London

• Affinity Channels - future opportunities

Protection 39%

Back BookAnnuities

54% External Vesting

Annuities7%

2004 ACTUAL

Source: ABI, Prudential Analysis.No projection for 2007 due to transactional nature of this channel.

75

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRBUILDING CRITICAL MASS IN PARTNERSHIPSSignificant growth delivered

PARTNERSHIPS SALES

Week

0

50

100

150

200

250

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

2003 2004

Part

ners

hips

Sal

es, C

umul

ativ

e A

PE, £

m

2004

2004

2004

2004

2004

2003


76

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRBUILDING CRITICAL MASS IN PARTNERSHIPSContinuing to deliver growth in 2005

PARTNERSHIPS SALES

Week

0

50

100

150

200

250

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

Part

ners

hips

Sal

es, C

umul

ativ

e A

PE, £

m

0

5

10

15

20

25

30

1 2 3 4 5 6 7 8 9 10 11 12 13

2003 2004 2005

OPENWORK


77

DELIVERING ON OUR BANK STRATEGYSourcing business through seven out of the top eight banks

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

Intermediary sales with Prudential

In-house life assurer

Product Tie with PrudentialBank Branches*

2,290

485

2,070

2,238

1,587

1,105

753

310

Single-tieproduct(s) offering

Multi-tieproduct offering

In-house life assurer

Intermediarysales

Source: Datamonitor, Prudential Analysis.

Source:78

DEVELOPING A NEW MARKET: EXTERNAL VESTINGANNUITY PARTNERSHIPSA steady flow of business from other insurers

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

0

2

4

6

8

10

12

14

16

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

£m A

PE(C

umul

ativ

e)

2003 2004 2005

2005OPENWORK

2005

2005

2003

2004


Source:79

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRSUMMARY - CORPORATE PARTNERSHIPSBuilt-in growth

• A new channel to Prudential

• Growth from £35m in 2003 to £95m in 2004 excluding Royal London

• c15% growth in 2005 already built in on this £95m


PRUDENTIAL’S MULTI-CHANNEL DISTRIBUTIONB2B

ANDY BRIGGS

ANDY BRIGGS www.pru.co.uk

81

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRB2B MARKETHow does the market work?

EMPLOYEES

EMPLOYERS TRUSTEES

DB INSUREDDC

UNINSUREDDC

OTHERCORE

BENEFITS

FLEXIBLE &VOLUNTARY

BENEFITS

EMPLOYEE BENEFIT CONSULTANT (EBC)

EMPLOYEECOMMUNICATIONS

ADMIN & ITCAPABILITY

PRODUCTSOLUTIONS

FEE GENERATINGOPPORTUNITIES

PRU

DEN

TIA

L

82

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRB2B MARKETMarket Drivers and Pru Focus

0

200

400

600

800

1,000

1,200

1,400

1,600

2001 2002 2003 2004 20070%

5%

10%

15%

20%

25%

30%

Mar

ket S

ize,

APE

, £m

(Bar

)

CAGR 2004-076%

THE MARKET

PRUDENTIAL’S EBC BUSINESS

PRU FOCUS• Improve profitability on insured DC schemes

• Target uninsured DC schemes

• Move into flexible and voluntary benefit sector

• Expand market for bulks

MARKET DRIVERS• Maturing market for Group Pensions

• Top 4 EBCs control over 80% of the market

• Uninsured DC market moves to insured

• Emerging flexible and voluntary benefits market

• Closure of DB schemes and risk transfer


PruM

arket Share (line)

Bulk Annuities21%


69%

2004 ACTUALIndividual Annuities

10%

83

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRINSURED DC MARKET Focus on profitability

MARKET LEADING PROPOSITION• Brand and financial strength

• Employee communications

• Employer relationship management

• Service/IT capability

• Product proposition

HENCE

• Premium price

0%

25%

50%

75%

100%

01/01/2004 01/01/2005 01/01/2006Target

Prop

ortio

n fu

lly a

utom

ated

Proportion fully automated

FOCUS ON MARGIN & IRR• Charge premium price

• Focus on fee-based market

• Price schemes individually based on key characteristics

• Efficiency of acquisition

• Automated processing

0 50 100 150

AUTOMATIC ENROLMENT

E-BASED

DIRECT MAIL

TELEPHONY

CRM

Employer’s objectives

GROUP PRESENTATION

Unit cost of acquisition, £

Source: Prudential analysis.

84

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRUNINSURED DC MARKET Target larger schemes

Occupational Pensions Market Size MARKET TRENDS• Historically larger schemes unbundled

• Strength of proposition and pricing on bundled schemes improved

• Move from uninsured to insuredUninsuredDC FUM£147bn

InsuredDC FUM£210bn

AON DC PLUS• Target Aon’s existing uninsured DC clients

and new clients

• Two providers - Prudential is appointed

• Five year partnership

• Fully automated service proposition

Source: Interactive Pension Databook, November 2004, Datamonitor, Prudential analysis.

85

BULK ANNUITIES & RISK MANAGEMENTGenerating a constant stream of business plus occasional one-offs

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRR

BULKS SALES

0

5

10

15

20

25

30

35

40

45

50

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

Bul

ks S

ales

, Cum

ulat

ive

APE

, £m

2003 2004 2005


Source:86

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRSUMMARY - B2BMarket leader in the employee benefits market

• Strong position with EBCs – Group Pensions 20% market share– Bulk Annuities 38% market share

• Targeting uninsured Defined Contribution schemes

• Grow the Bulk Purchase Annuity market from wind-ups into on-going risk management solutions

Source: ABI, Prudential Analysis.

87

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRWELL BALANCED MULTI-CHANNEL CAPABILITY

OPENWORK

CONCLUSIONS

MARK WOOD

www.pru.co.uk

89

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRIRR: UK AND EUROPE 12% IRR achieved in 2004 with strong new business growth

2004 (%) Target 2007 (%)

Unit-linked bonds 7 8Corporate pensions 3 15Protection1 1 15Annuities 20 20OVERALL POST-TAX IRR 12 14

• Strong progress towards 2007 target, but mix is critical

• Unit-linked bonds: benefits of scale coming through

• Annuity: barriers to entry and low commission facilitate strong returns

• Corporate pensions (unit-linked): focusing on efficient customer acquisition and servicing

• Protection: price sensitive product, as volume grows we gain efficiencies

IRR ANALYSIS

Source: Prudential Analysis. Note 1: does not include Credit Life.

90

MARGIN

CAPITAL SERVICE

DISTRIBUTION

14% IRRCONCLUSIONSPOSITIONED TO OUTPERFORM

• Unrivalled combination of brand, financial strength and investment performance

• Product mix biased to high margin products with high barriers to entry

• Well balanced multi-channel capability

• Operational growth capacity

• 10% growth in 2005 (assuming 5% market growth)

• 14% IRR by 2007

QUESTIONS & ANSWERS

APPENDIX: LIFE FUND

LIFE FUND SOLVENCY & INVESTMENT PERFORMANCE

www.pru.co.uk

93

LTICR

REALISTIC

AdmissibleAssets

WPICC

Surplusregulatory

capital

Admissibleassets

Future profits on non-profit

businessInadmissible

assets

Realisticreserves

Risk capitalmargin

Surplus economic capital

REGULATORY

£64.5bn

£4.1bn

£2.1bn

£2.9bn

£52.4bn

£1.1bn

£0.0bn

£64.5bn

£4.1bn

£1.3bn

£60.2bn

Mathematicalreserves

PAC REGULATORY AND REALISTIC BASES SOLVENCY On a realistic basis the RCM of £1.3bn is covered 4.1 times solely from capital in the With-Profits Sub-Fund

Resiliencereserves £3.0bn


94

FREE ASSETS SOLVENCYThe fund is strong on both a regulatory and a realistic basis

Regulatory

£12.1bnInherited

estate (deterministic)

£6.8bnRealistic Capital (Market

Consistent) £5.4bn

Capital is expected to be required to support solvency for the foreseeable future


95

INVESTMENT PERFORMANCEConsistently strong performance

ABSOLUTE CALENDAR YEAR RETURNS 5 YEARS ANNUALISED

12.6

19.8

12.6

19.3

3.0

-3.5

-8.1

16.5

13.4 13.3

9.8

4.2 4.93.8

-10

-5

0

5

10

15

20

1996 1997 1998 1999 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004

%

Prudential - Returns shown are real gross returns. Past performance is not necessarily a guide to future performance. Competition: WM Life Funds Universe returns 1996-2000; WM Life Funds WP Universe returns 2001-3; Prudential estimate 2004.

Source:96

LIFE FUND CAPITAL: FINANCIAL STRENGTHA key competitive advantage

• Maintenance of our financial strength remains a key aim of the business

• We have strong funds on both statutory and realistic bases

• We have consistently delivered excellent investment performance

• Bonus Declarations are important - they directly influence the MSB / shareholder cashflows

• Claim values are at affordable levels in 2005


APPENDIX: PENSIONS

MAJOR A-DAY CHANGES

www.pru.co.uk

98

A-DAYApril 2006

There are many changes occurring with effect from April 2006. These include in broad terms:

• The earliest age at which someone can take a pension will rise from 50 to 55.• Everyone will be able to pay into both a personal pension and occupational pension at the same

time. • The tax relief available for investing in a pension will change to an annual contribution limit called

"The Annual Allowance". The annual allowance will be the lower of annual salary or a contribution limit of £215,000 p.a. across all types of pension arrangements (the cap will increase to £255,000 by 2010). Contributions over the annual allowance will be subject to tax.

• An individual may build up funds, without tax charge, in registered pension schemes up to a lifetime limit called the Lifetime Allowance. This will start at £1.5 million in 2006 and will increase in subsequent years (to £1.8 million by 2010). Some protection is available for those people who have already saved more than this amount before the new rules come into effect.

• Previous methods of restricting contributions into pensions will no longer apply. • The Triviality commutation rules are being changed to enable more people to commute their small

pension funds into cash sums.• A single rule on the amount of Tax Free Cash Sum allowed will be introduced. This will be a

maximum of 25% of the overall pension fund. • People will be able to protect their pre-April 2006 tax-free cash. • Part of Protected Rights benefits can be taken as cash (subject to DWP requirements).• Protected Rights can be taken before age 60. • Trustees will be required by the regulator to have good knowledge of their responsibilities.• Contribution Monitoring rules will change. • Arrangements permit at least one third of the scheme’s Trustees to be member nominated (MNT’s). • There will be more options on purchasing pensions at retirement.• Rules around deferring State benefits will change.

APPENDIX: BRAND

CONSUMER ADVERTS

www.pru.co.uk

100

POSTER ADVERTSInvesting Wisely

101

POSTER ADVERTSInvesting Diversely

102

POSTER ADVERTSInvesting Globally

103

PRESS ADVERTSComplementary campaigns

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