Prudential PLC (PUK) 2004 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to today’s Prudential Interim Results conference call. May I just remind participants that they are in a listen-only mode. However, there will be an opportunity to ask questions later on during the call, at which time instructions will follow. Now, I’d like to hand you over to your chairperson today, Ms. Rebecca Burrows. Please go ahead, madam, and I shall be standing by.

Great. Thanks very much. Good morning, and good afternoon. Thanks for dialing in to the Interim Results call. I’m here with Jonathan Bloomer and Philip Broadley. I’ll hand over to Jonathan, who’ll just talk for a minute or two about the key messages coming out of today. And then we’ll open the call up to Q&A to make best use of your time. Thanks.

Alright. Thanks, Rebecca. And yes, hello, good morning or afternoon -- whichever is relevant. I hope you’ve all had the chance to read our statement from this morning, because I will just pick on a few key points before we go to Q&A.

We have had a good start to the year across all our businesses. The environment is more favorable this year. And across each of our businesses, you can see that we’re capitalizing on that. But before I talk very briefly about each, let me just say, I have nothing to add to our statement about Egg. The sales process continues, and we’ll make an announcement when we have something to say.

In the UK, the first half sales show good success in starting the deliver the strategy that we outlined in April. Very well positioned as we produce new products. The new version of the investment bond, the PruFund, will be available to customers in September. Our new health product, in joint venture with Discovery, later on in the year. It’s a good pipeline in the products we’ve launched successfully recently, and also then as we gain new distribution agreements. We’ve talked before about [almost certainly]. We’re in a number of other conversations, and I hope we’ll be able to announce other agreements –- multi-tie agreements –- as we go through the rest of the year. But certainly, the UK is well positioned.

M&G produced a very strong result. Very much again, we’re focused on the cost base to ensure that improvements in markets and revenues drop through to the bottom line, which they have done.

In the US, we saw a very solid first half. Good growth prospects for the rest of the year, very much using our distribution strengths and the product range for the right profitable variable annuity business, which is up 25%, while building capital, helped by GAAP statutory profits of 50% and improving returns.

In Asia, new business achieved profits up 23%, absolutely on track to deliver value and sales growth in the high teens for the full year. That’s for the full year. We’ve taken steps to improve margins by not chasing unprofitable business in Taiwan and by repositioning our Japanese business. And we’ve built the sales momentum for the remainder of the year.

So, a very strong set of results. And looking forward, we’re strategically well-placed to continue the momentum from the first half. We did express some caution about the UK and the UK market at the time of the preliminary results in February, as a result of the degree of uncertainty in the environment – pricing for [standard] products, shape of distribution and so on. Although we’re still cautious, we are more optimistic for the second half of the year.

At M&G, while they continue their focus on costs, their participation in businesses where they have scale and competitive advantage, I [have seen that] M&G will remain a significant contributor of profits and [indiscernible] to the Group.

In the first half, Jackson produced annualized growth in assets of 9.3%, a key indicator of their profitability going forward. And as they build on the good performance of last year, they are strongly positioned.

The platform is in place for continued strong value growth in Asia in both the Life Insurance and Mutual Funds. And as I say, the momentum we’re building leads me to say that we will see high teens growth for the full year overall.

So, we enter the second half of the year with a strong mix of complementary businesses, well-placed to meet the growing needs of our now some 16m customers around the world, and in doing that to continue to deliver good returns to shareholders.

With that introduction, let me throw it open for questions.

Thank you, sir. [OPERATOR INSTRUCTIONS] Your first question comes from Tim [Moval]. Please go ahead, announcing your company name and location.

Good morning, Jonathan. I’m actually a private investor based in Hereford in South Wales. A quick question regarding [existing] customers of Egg’s direct sales force. I was wondering what your plans are for [marketing] obtaining value from those customers for further sales in the future.

We’ve built up a direct-to-customer unit telephone-based, at the moment, which is working very effectively. Although, as I’ve said in some more detailed comments earlier this morning, it’s primarily selling annuities to maturing pension customers [indiscernible] at the moment. We are, with the introduction of a number of new products, planning to expand the product range we’ll tackle through that channel. And we may-- And the shift to multi-ties may change some of this.

[We’ll] look at whether we broaden the distribution reach to the ex-DSF customers in different ways. But I think we’ll see a very fundamental shift in distribution and the distribution pattern in the UK over the next 12 to 18 months. We’ll see how that changes to see just how best we capture the value from that customer base.

That’s great. Thank you.

[OPERATOR INSTRUCTIONS] Thank you. It appears we have no further questions at this time-- Sorry, we have a last question coming from Chelsea Upson. Please go ahead, announcing your company name.

Hello. Can you hear me?

Yes. Fine, thanks.

Yes. This is Chelsea Upson. I have just a comment on your feel for the second half in the UK. Can you talk a little bit about what has changed and what looks a little bit better, when you mention that you’re more optimistic?

The key thing is we’ve now got the government having confirmed what the price cap is for some of the products. And at 1.5%, that’s sufficient to make it economic to sell products, that we can get on launching new products within that price [indiscernible]. The way that depolarization will work and the way that the market will move to multi-ties is clearer, because [it will run] one of two ways, either sort of panels with very narrow provision from product providers or with broad provision from product providers. It’s gone that way. And we’re seeing a lot of movement there now. So, that’s clearer.

And I think the competitive landscape is changing, probably for the better. And, so I-- Just a number of things that were uncertain at the beginning of the year are just clearer now.

A follow-up on the Asian side. The commentary that the second half growth rate will improve. Can you just talk a little bit about, you know, the degree of confidence that you have there and, you know, what kind of competitive pressures you’re seeing from some players in the market? Because this is the second quarter in a row where, I guess, I was expecting better momentum.

No. I think for the half-year, if I strip out the discontinued business in Japan, we have sales growth of around about 22%. So, leaving that aside, the momentum and growth in the rest of the Asian business is very good. And what we’ve done in Japan and Taiwan is very much to focus on the value we’re getting. So, sales in Taiwan are pretty flat, but margins over the last year have increased significantly, as we sell more unit-linked business. The whole thing has pushed the Asian margins a whole 4 percentage points to 60% from 54%.

And some countries -- India, Korea -- around about 200% growth. China, 50%. A third city, Suzhou will come on stream in September, hope we’ll get a fourth license before the end of the year. Malaysia, slow first quarter, good growth into the second quarter, partly as a result of changing the head of the agency, bringing in the chap who’s building India for us so successfully, [indiscernible] successfully for us.

So, when I look at the underlying trend, actually I’m very positive about the business. It’s the right thing to do to drive margins up and step back from business that’s -- not chase anything that’s marginally profitable or loss-making. And, as I say, without the discontinued business in Japan, we’ve had 22% growth for the first half of the year anyway, which, given the scale and size of the business now, would be extremely good.

And last question -- I apologize -- with regards to cash and capital, I mean, we’ve heard from some people that you’ve made a comment that you’re not interested in acquiring-- I guess the phrase was ‘little prospect of acquisition in the medium term for the US’. But you know, maybe you could just talk about use of capital, especially given your, you know, upcoming, hopefully soon-to-be-announced plans regarding Egg.

I’ve said before, with Egg we haven’t sort of spent money we don’t have and let it burn a hole in our pocket. You know, we’ve got growing businesses around the world. We’ve got growth opportunities around the world. At the moment, we’ve repeated the view that Asia will go cash-positive on our current plans in 2006, net. Jackson has built its capital base over the last year to 18 months, and the [Regal] capital base significantly, but is growing very well. And I said the sort of thing we’d look at would be bolt-ons that Jackson could do within its own capital in the Life area to balance up the spread fee life underwriting income of the US business. And the UK is growing well. So, as I look around, I can see opportunities as we go forward for the capital, but we’re fine with it, with the capital [indiscernible] plans at the present.

Thank you.

Thank you, sir. That appears to be our last question. I’d like to hand back to you.

Well, thank you very much. Again, as I say, the best summary is I think business is around the world firing on all cylinders. And we look forward with confidence to the second half.

With that, thank you very much for your time.

Thanks. Bye.