Prudential PLC (PUK) 2007 Q1 法說會逐字稿

Good morning and welcome to today's Prudential Q1 new business figures call. Today I'm pleased to present Mr. Mark Tucker. For the first part of this call all participants will in listen-only mode and afterwards there will be a question and answer session. Mark, please begin.

Jerry, thank you. Good morning everyone and welcome to our first quarter new business teleconference. I'm joined today by Philip Broadley, our Group Finance Director. Philip and I are very happy at the end of my few comments to answer any questions you have.

If you look at the figures that came out this morning, we started 2007 with retail new business in total across the Group growing by 25% and that's compared to the same quarter last year. What we've seen is strong retail numbers in all regions, in the U.K. up 16, in the U.S. up 21%, in Asia up 34%. So -- and again all in all a strong first quarter.

In total, and that includes the wholesale business in the U.K., insurance new business across the Group was up 8% reflecting the retail growth I've just mentioned. But I think also reflecting the first quarter of 2006 which I think is worth mentioning in the sense of both the large wholesale transaction we did worth GBP56m APE, [inaudible], and of course the Credit Life through Lloyds TSB. Neither were, clearly, repeated in this first quarter.

I think the other thing to note before I go on to the individual businesses is that you remember that we did announce the GBP1.8b Equitable transaction on March 16 at our prelims. And we anticipate this coming through the 2007 numbers later this year, probably in quarter four. But other than the Equitable transaction the bulk market in the U.K. has been relatively quiet in the first quarter. But that's not to say there is not a pipeline out there. There is a pipeline out there and we are clearly involved in discussions. But I think our remit and Nick's remit remains the same, which is only looking at transactions where we see an acceptable return.

Let me take you through just briefly each of the businesses. In the U.K., as I have mentioned before, overall retail growth was 16% on an APE basis. We've seen growth in individual annuities, strong in all channels I think, particularly individual annuities up 35% on the first quarter, with internal vestings up 32% and increased partnership sales up 110%. As I think we continue to see increased demand for with profit annuities and we see that through, particularly through some of our ties, single-tie relationships, and Openwork would be a good example of that.

Corporate pension volumes were also strong and we've, through the introduction of our new fund delivery proposition where we effectively operate as an investor of pension scheme assets of third parties and not the administrator. And that side of the business grew in the first quarter. As I say, just to repeat again that we said at the prelims that Lloyds TSB had decided to take their Credit Life business back in house and that effectively accounts for almost all the decline in that line in the first quarter.

Although we've not reported numbers today, I think the other significant thing before I move out of the U.K. is that we announced that Pru Health has entered into an exclusive agreement with Boots Alliance to promote PMI in Boots stores. I think it's important here, we see this partnership enabling us to make private health insurance more acceptable and affordable on the high street and to move towards our target of 200,000 lives by the end of 2007. I think you'll remember that we had at the end of the first quarter, we had about 108,000 lives. Our target is to double that effectively to get to 200,000 by the year end by entering into this exclusive arrangement with Boots into their 1,500 stores. They're on sale in their stores on April 25. We think this is an exciting initiative.

Moving to the U.S., just a few things there. I think it's the Jackson model continues to deliver and outperform both against the market and its previous own records. Variable annuity sales up 31% in the quarter and we believe that will outstrip market growth by some region -- by some margin. Again the figures we've seen, advance figures for first two months indicate about 10% market growth on VAs, and you clearly see we've outperformed that in the quarter. We haven't had the quarter figures through at this point.

Conditions for fixed annuities and fixed index annuities continues to be challenging and difficult in the market. I think sales there have not been -- for the market have been pretty slow and I think you'd expect that in light of the inverted yield curve. But overall I think the important thing is that our retail sales in the U.S. were ahead by 23%, which continues the strong growth and we don't see reasons for not continuing that growth. We remain excited about the opportunity.

Alongside that, Curian which I think you know is our separately managed account platform, showed record growth in the first quarter, GBP150m as that business grew scale. Again as you know, that scale, and as Clark has said, will move into profitability we hope next year. So that's where we are with Curian, the U.S.

In Asia an excellent performance on a really, on a very powerful first quarter last year. So comparatives were tough last year. But in Asia growth was 34% and we saw unit-linked products accounting for around two thirds of all sales. We've seen increases both in agency and in productivity. And the distribution model continues to work well, the balance between agents and non-agency distribution continues to give us a great diversification.

If you look at some of the individual countries, strong progress in India, which is our largest market in the quarter as we would expect given this is the seasonality here with the end of the fiscal year. In March in India, the March month is always the largest month of the year. But our business there remains number one in the private sector and a clear leader in all elements of the business.

Growth in China was also excellent. We've seen it's doubled on, basically on Q1 2006. Indonesia up almost 70% and Hong Kong up 57%. And we've seen in Hong Kong the reason it's up is both because of increased sales and productivity on the agency sales and recruitment on the agency side. But also clearly the bancassurance relationships we have there.

Southern Korea was up 6%. There was a quarter one fiscal year seasonality which was tempered a little bit by various speculation in the press about the industry and variable unit-linked products. We think that that is, that has died down and we've given -- we [as we've lost less than] the industry have given a number of media briefings and interviews to deal with the situation. And our outlook for Korea remains encouraging, particularly we have two new banks coming on-stream in Korea. The number one and the number five banks in the country coming on-stream over the second quarter, so we remain excited about opportunities there.

In Malaysia the market has remained slow. I think we've -- our sales levels are holding up at similar levels to Quarter One last year. The Takaful business, the Sharia compliance business has got off to a very good start there.

In Japan we saw a significant jump in Quarter One to 10m sterling APE. This was clearly much higher than in -- than last year and the -- our business in Japan is moving forward, tempered again by there was high levels of term sales ahead of an anticipated reduction in tax benefits on these products. I think there was some level of effect there.

Finally a few comments on Asset Management. I think we've seen M&G's net inflows of GBP1.4b being the second highest quarter ever. So continued excellent performance from M&G and from Michael and his team. And external funds under management grew to GBP46b. We saw, I think importantly, retail net flows at GBP600m remain particularly strong in the U.K., which was up 49% on the same quarter last year. We also saw not only on the retail net flows up, but the institutional net flows were close to GBP800m. And we've seen increasing flows into profitable areas for us such as leveraged loans, CDOs, infrastructure finance and our global macro hedge fund, all of those have been -- and we've seen good flows into.

And Asia, I think Asia continues. You saw Asia hit GBP50m profitability at the end of last year, saw record flows during the year. And certainly the flows have continued in the first quarter of this year with net inflows of GBP0.6b or GPB600m up 18%, and external funds under management approaching GBP13b. So they've made a tremendous job within the asset management business in Asia.

India, Japan, Korea were the significant drivers of that growth and in India we gained our number one position, Pru ICICI became the largest asset management company in India, overtaking the Unit Trust of India again, and Reliance during the first quarter. So continued good progress all through there.

And I think in Taiwan we were selected as a fund manager for the public service pension fund and across the region we've also been awarded a number of other mandates worth around GBP200m from a number of Asia government-related entities. So I think that is an indication, a signal of the success of our business and the brand and performance record.

And in summary we continue with excellent prospects across the Group and I think we will continue to focus on building here. We've seen the U.K. in very good working order. The private income business is up 29%. I think the Equitable deal does provide indications of the ongoing profits. I think in terms of Asia, U.S. fund management we've seen an extraordinary growth profile. But that's even relative to a very strong first quarter in 2006. And really I think to say we believe that we have wonderful exposure to attractive geographic regions and growth demographics and we intend to take significant advantage of that.

So on that basis let me pass back to Jerry, and Philip and I are happy to answer any questions.

Thank you very much. We will now begin our question and answer session. [OPERATOR INSTRUCTIONS]. And our first question comes from Jon Hocking of Morgan Stanley. Go ahead Jon.

Morning everyone. I have two questions. Firstly on India, the JV is being IPOd at the moment and some local reports of that suggest there's some very chunky valuation potentially attached to that. And I was just wondering what your thoughts are if your option becomes available at some point to take up the 49%? Clearly it's a little bit of a luxury problem, but what would your willingness be to subscribe if there's maybe sort of a very frothy valuation for the extra stake in ICICI JVs.

And then secondly on the annuity business in the U.K., can you give us some idea of the underlying distribution capacity building up in the partnership annuity space? Because obviously you the [100%] year on year growth over the first quarter. How do you think about that for the rest of the year basically please?

I think -- let me take the second question first if I can Jon. I think in terms of the underlying distribution capability, I think we expect it to be a good year for partnership sales. We've got a number of new partnerships coming onstream during the year. I think clearly 110% growth, while we're very happy with it and while I'd like to really see it keeps at those levels, I think it's probably too high. But I think it's -- I think as the -- it should be a very good year for us on the basis of new partnerships and excellent products.

In terms of India, I think just to be clear it's not the JV that's being IPOd, it's ICICI are IPOing a holding company of all of their joint venture financial companies. So that's companies that we're not involved in as well and General Insurance will clearly be one of those. ICICI Pru and Pru ICICI Life and AMC Ventures will be included in that.

I think the valuations in India clearly are exciting at this point in time. And I think the likelihood of us being, through legislation, being able to increase that option we don't see as anything in the short term. We don't see it, we don't see it certainly in the next 12 and possibly 18 months. So I think it would be highly speculative if I gave any estimate of that. And I think whatever time we do look at it Jon, we'll look at it on a basis of value. And if we think there's value and we think there's potential then we'll look to increase that stake.

Excellent. Thank you.

Our next question comes from Farooq Hanif. Go ahead please. Please go ahead Farooq.

Hi there. If I may just follow up on two points actually. Firstly on the IPO again, I just would like to understand your psychology about this because you could potentially end up in a situation where there'd be a lot of interest from other investors in that holding company. What would your ability be to -- I don't understand how this will be structured but what will your ability be to protect your ability to take a higher stake later on? And isn't this just going to complicate the whole proposition there because you're doing all the work and other people are taking all the benefit? So that's question area number one.

And question area number two is on agent growth in Asia. It's been really impressive and it's clearly been one of the key drivers I guess in India and other countries that you mentioned. Obviously you've been on a drive to grow agent numbers. What are your plans and what do you foresee the strategy being there? Is it still an upwards trajectory and can you give us a bit more information on that please?

Well I think we're doing this [inaudible]. Can we take the second question first? On agent numbers, I think the simple answer there is in those territories, and I think let me name three, which would be China, India and Indonesia, in those territories where agency dominates the life insurance distribution and I think you'll continue to see agency growth at reasonably high levels. And I think that's not, clearly, going to be the case across the region. And I think the focus on those countries as we get more licenses and we increase our geographical penetration in all of those countries including at 200m population and 1.2, 1.1b population of India and China, almost half the world's population between those three countries, the opportunities there remain significant.

On the other, do we expect as rapid growth in the other countries? The answer is probably no. We expect the focus in the more established countries as you know is more on productivity than on agency growth. But we're seeing again agency growth in places like Hong Kong where the quality of the brand, the quality of the agency is attracting agents. So the agents are coming to us even though there's probably net falls in the market and Malaysia would not be dissimilar. So I think there, in those three markets, particularly growth, in others as they become more mature then we increasingly focus on productivity.

Okay.

In terms of the IPO, just let me go back. The holding company ICICI are IPOing the potential holding company which holds shares in the [inaudible] their own shares in these businesses. It won't prevent us from taking more of the company if at the right time under the right conditions. So there's nothing that's being done that prejudices our own position going forward, which I think is further underlying your question. But it comes back to the question that Jon asked is the timing of this and we can't say. We will do it on the basis of decisions we make at the time, at the appropriate time when legislation is passed on the basis of value.

Just to be completely clear, once the holding company is listed, if it becomes listed, then you will automatically have a market valuation for what you might pay? So it is the same thing isn't it?

No not really because this big holding company as IPO it depends on how that's valued. But it's clearly -- it's a life insurance JV, it's a general insurance JV, it's an asset management JV etc. etc.

Right.

But it's not a simple -- it's not just life. It's a whole series of investments and joint ventures at ICICI. They're non-bank financial companies that they intend to list.

Okay. Thank you.

Our next question comes from James Pearce of Cazenove. Please go ahead James.

Morning everybody. Just to clear up on this Indian thing, are you being grandfathered into the previous [grand] returns when you -- if you do eventually get the opportunity to go from 26 to 49 or whatever under the IPO rules, with the IPO terms and conditions?

There's nothing that prevents us James from increasing the stake under the right circumstances.

And again to be clear James, the holding company that is being established is above -- in the corporate structure is above our own insurance JV. And therefore nothing changes in the ownership or structure of our insurance joint venture as it's structured today.

Okay. My question actually was, well two questions. First of all on Japan. It looks like Japan had a good first quarter but is it enough to change the view that you've been expressing until now, that -- you've got a strategic review underway it feels like you might either buy or sell in Japan. Or is this quarter enough to make you think that actually you're satisfied with what you've got?

And then secondly on productivity, Asian -- Indian sales doubled but agent numbers actually trebled. Can we expect any further growth in Indian sales as the productivity gets back to the old level or are you selling through part-time agents? So are the new agents part-time or less productive for some other reason and therefore it's actually just headcount growth from here in India that we should look out for? Thanks.

I think James for the rest of my life I will never mention the two words strategic review, so just to be clear about that. In terms of Japan, I think we -- Barry clearly has a tremendous understanding of the North Asian markets. We've seen good growth, very good growth in the last 18 months or so in Japan. But there's still substantial opportunity there and I think what we're looking at doing is positioning ourselves to be able to take advantage of that. And as soon as we've got something worth talking about we'll definitely come back. But at the moment we're just understanding what the opportunities are and ensuring that we're well-positioned to take advantage of those. But there's nothing, there's really nothing new on Japan other than more thinking on our side.

On the India agent numbers, I think it's the state of the market. We've grown the number of branches and have increased significantly in India over the last 12 months. I think we took 120,000 agents on board over the last 12 months or so. But that's -- I think we've seen more than a doubling of the number of the branches and the geographical coverage so you would expect in this growth phase when you go into new regions, new areas, new branches, you expect agents numbers to increase faster than productivity. Clearly over time that will come back in line and our focus -- we never lose the impact of productivity and -- or importance of productivity and that will come back in line. So this is the normal basis that we've seen almost in every other country. This is the normal cycle, nothing abnormal there at all.

Okay. Thanks very much.

Our next question comes from Greig Paterson at KBW. Please go ahead Greig.

Good morning gentlemen. Just three questions. One is -- I just wanted some clarity. You mentioned -- I noticed the corporate pensions U.K. line was ahead of expectations. Did you say that it's -- you're just doing investing and not the administration and investing? Is it fair to assume that that's lower margin than the corporate pension business before? That's question one.

The second one is, I notice that Taiwan was ahead of expectations. Can you just confirm that the Taiwanese unit-linked business is generally lower margin than the rest of the region? I think you said something about that last year. Just to confirm that that's still the case.

And the third question, and this is to do with your target of doubling new business contribution, both [inaudible]. Last year Korea made up 23% of sales and the year on year growth in that line was [62%]. The growth is flat this year, I know you've mentioned there's some new bancassurance coming online etc. But doesn't this -- your biggest line or this very large line of business there's a dramatic slowdown. Isn't it bringing your targets into jeopardy from an organic perspective and does it -- should we not read across it that you would need some acquisitive growth in order to reach those targets that you set for 2009?

Okay let me deal with for once in order Greig if I can. Corporate pensions, we said a part of the business, around about a third of the business is the business we spoke about, and it is -- so it is slightly lower margin business. The fund delivery service proposition is going to be lower margin than the ordinary business but it's a small amount overall.

In terms of the Taiwan, I have never said to my knowledge that Taiwan is, that [unit-linked] returns are lower than the rest of the [region]. It's in line with our [unit-linked] products across the region.

I think what you may be, you may be getting confused about is the comment that we made that the Taiwanese unit-linked business is lower margin than the participating business in Taiwan.

Oh right. Alright.

So it was a comment I made relative -- about relative margins within the country rather than across the region.

Sure.

And I think are our targets in jeopardy, no they're not in jeopardy. We remain very confident about Korea the new business profit. I think Korea, with a slower start, it's still positive. And I think March was an excellent month for us in Korea. I think you need to remember that it is one of the lower margins in the region anyway so with these levels of growth we remain entirely comfortable with our targets of doubling new business profit by 2009.

Alright. Thank you.

Our next question comes from Andrew Crean of Citigroup. Please go ahead Andrew.

Good morning. I wanted to explore three things really. Firstly in Asia your growth in the first quarter was 34%. Do you think you can sustain that rate of growth through the year?

Secondly coming back onto the Japanese question, can you give us some sense of the potential scale of the investment which you may consider making in Japan? Is it likely to need shareholder support, or if it's not, if it's coming from internal resources, is it likely to destabilize the amount of cash coming back from Asia to Pru?

Then the third quarter on the U.K. annuities, both your own vestings and for the partnership vestings, what proportion of the total annuity business is actually coming to you as opposed to going out into the market?

I think the first part is, the first part of the question, Andrew, was regarding sustainable growth in Asia, 34%. I think the basis is we'll continue to push the Asia business on and as rapidly as possible and as profitably as possible. It's been a very good first quarter. Is there any logical reason why it's going to fall significantly lower? The answer's no. But I think that's a high level, high first quarter growth. But I think it's one that I think, particularly on the back of a high quarter last year, is very strong.

And I think you see, if you look quarter on quarter over two years, our growth in Asia is basically 100%. They give 96%. So it's been continued strong growth there. I think the focus, as you know anyway, is -- and referring to Greig's previous question -- is effectively looking at new business profit and our target is to double that. And that, as I say, that remains on track.

In Japan, I think nothing has changed, and we're not giving any information today that I have over the last year in terms of Japan. We're looking at opportunities. It's, I think, there's nothing at this point in time that looks as though it will destabilize or concern us in terms of our Asian cash flows.

The U.K. annuities, I think the levels that Nick gave are round about 60 to 70%, we're taking of that, of our own vestings. So that level remains in place.

And just going back to that, and it comes back to Jon Hocking's question, is it's very difficult for us on the partnerships to know of the partnerships that you have announced, how mature those partnerships are. Have you mined the full growth? And at what point will you come to those being relatively steady-state positions as opposed to building up into that position?

I think it's a good question, Andrew. I think most of the partnerships are at an earlier stage. They're not -- they haven't reached mid stage or certainly late stage yet. So we think there remains great opportunity there. And I think if you look at the trends in the last year or so, it's been strong. But I think we're not -- we haven't given an indication of the maturity. But I think, and if Philip has anything to add, I think we're early stages in that rather than --.

So in your partnerships, you're not getting a 60 to 70% conversion, I would assume?

We're at -- I would say that the -- we get higher level of take up of our own internal vestings than we do from partnerships at the moment. There is potential there in my view.

Thanks.

Our next question comes from Raghu Hariharan from Fox-Pitt. Please go ahead.

Hi there. Morning all. Three questions. The first one was on Korea. Can you give us a sense of -- you mentioned -- you alluded in your call that variable unit-linked products are seeing somewhat of a slowdown. Are you looking at a change in product strategy? And, if not, how do you see this market panning out for the rest of the year?

And just in terms of distribution, if you can clarify for us whether the cap in Korea in terms of bancassurance has actually been removed and whether that can help you expand for the distribution. So that's question number one.

Question number two was just for the U.K., I was wondering whether you'd given thought to including the PMI sales within the APE numbers.

And the third one was on the U.S. Can you give us a sense of what proportion of the variable annuity sales in the U.S. came from new product introductions or new features that you might have introduced into the market in the first quarter? Thank you.

Thanks for the questions. In terms of -- actually Korea was your first question and what's going on in Korea. I think the -- I think this is a bancassurance question and the capping of the -- for bancassurers I think are limited to 25%. The banks are limited to using insurance companies up to 25% of their sales. There is no indication that that limit is changing. And I think that's -- and I've had personal discussions with the regulators there recently. So there's nothing there that is likely to change in Korea. That's why getting the number one and number five company on the bancassurance side and those figures coming through hopefully in the second quarter and onwards is good.

I think there was some negative sentiment towards the industry overall on the variable unit-linked product. We saw about 30% off on that product. But I think the basis of the industry and I think certainly from what we're seeing in the -- we saw that particularly the first couple of months, the market was 30% off. The first couple of months -- the first couple of months we saw it slowing down. I think we saw it certainly coming back a bit in the third month. And we are pretty flattish in terms of variable unit-linked with the market being off.

The PMI sales in the U.K., I think it's a consideration in terms of whether we're going to include PMI in APE. I think there will be a separate -- we'll look to continue to disclose that. And certainly as that venture becomes more significant and material, we'll certainly keep you informed of progress there.

At the moment, we disclose the gross written premium as a separate paragraph in the release. They're not included in the APE numbers. Arguably, as the product develops, we get a better understanding of bulk and the retention of the business through the bulk annuity program, we may include it in APE. But we'll obviously tell you when we make -- if and when we make that change.

And the third question was regarding the portion of VA coming from new products. And I think there's nothing to indicate that the same sort of rate in the past is continuing. And that's -- so we've had a number of innovations in the first quarter. We haven't got those figures. We haven't put those figures down. But we'll certainly come back with those in the half year.

Okay.

Our next question comes from Roger Hill of UBS. Please go ahead, Roger.

Morning. Only one question from me. I just wondered if you could fill out a bit more about your ambitions for taking market share in VAs in the States. What percentage of the broker dealer market are you at? And what do you need to do to get bigger market shares in the other areas?

Again, I think we're roughly at about 10.5% market share in the independent broker dealers in the States at this point in time. I think we are number two in that channel and we're rapidly catching up number one, which is through Skandia. So I think we've seen then with these figures for the first quarter that would look like it would increase our market share further in that channel. So I think we've made very good progress in that channel.

We're making good progress in the bank channel as well. We've got new wholesaling team and structure in place there and we're seeing progress being made on the VA side which were traditionally more FA focused on the bank channel. It's now, with the restructuring, that has changed. And again, on the regional broker dealers, again we've seen some increases there as well as we've seen on the wire houses, particularly on the [UBS] side.

So I think we're continually across the channels, we play in the U.S. on the VA side to take market share. And there's nothing that we see at this point in time that will slow that down other than any major issues or corrections in the market.

Okay. Thank you.

Our next question comes from Marcus Barnard from Societe Generale. Please go ahead, Marcus.

Thanks. Morning chaps. Three questions, if I may. Firstly on the VA market. Clearly that's very healthy at the moment, but it's also very competitive. A lot of your competitors are trying to get into that broker dealer area. So what sort of competition are you seeing there? More to the point, are you maintaining prices or are you giving away a bit more on comp? And what can we expect to see on margin if you are?

And secondly, on equity indexed annuities, or whatever they're called, have you given up selling those because -- or is it just very tough? Or are you seeing stiff competition from the boys up the road?

And thirdly, just going back to Greig and Andrew's questions on your targets in Asia, when you set those targets I didn't think they looked very ambitious given the rate you were growing at. And since you've set them, you've been growing even faster than that. So are you going to review them upwards to like a tripling or something that's a bit more challenging? Thanks.

Marcus, thank you for all of those. I think they all had a special flavor to them. I think in terms of the latter point, I think you're right on the money in terms of the targets and the growth there has been strong. But I think there is -- my love of targets is not strong and therefore there will be no revisions to those targets that you will see coming through. But are we comfortable given the growth that we are seeing and the high levels of growth and possible growth we're seeing that we can meet those, yes we are.

You're very comfortable?

We're comfortable. But thank you for that extra word.

Actually, Mark, I think you should clarify you mean external targets just in case anyone thought for a moment there were not internal targets here that we're all performing to.

Thank you for that.

Are you going to share those with us?

I think in our next lifetime we can do that, but not at the moment.

In terms of the fixed index annuities, equity index annuities, I think they can be called both, the answer is no, we have not given up selling them. And we always enjoy competition in whatever form, from whatever geography, even if it's down the road. And I think the basis there is we are top-ten equity index player as we are top-ten fixed annuity player.

And it's -- genuinely the market is flattish on both of those, the market for both those products is flattish, not just in our own position. We're top ten. We're able to move between those products pretty easily and pretty smoothly. And if these conditions change then clearly we will be able -- we will sell more. But, at this point in time, given the inverted yield curve, that's, in our view, highly unlikely. VAs are definitely the product to be going for.

In terms of prices, the last question on competition on the VA market, what we've seen in the last couple of months, the last two or three months is that we, on the guaranteed products -- guarantee -- we've got some feedback here on the call, I think. On the additional benefits, we're seeing pricing in our view in the market move a little bit out of line. Our pricing has not changed and we believe in pricing for risk on the markets on a consistent basis in the U.S. And I think we have valued and we believe the margins and then the pricing is, at the moment, for the market, and what some of our competitors are doing, I think, is pricing risk at levels that I don't think -- we don't think are, if we price on a market-consistent basis, we think are profitable. We remain comfortable with the levels of pricing.

And I think, as we said all along, I think it was Clark who has said on a number of occasions, we're not -- our model is not about price. Our model is about -- the wholesaling distribution is about product, it's about flexibility, it's about different sales practices, about a strong administration base, etc., etc. And prices -- our prices have not changed.

Your share always raises a question.

Sorry, I missed that.

I'm just saying, you're maintaining pricing but you're taking market share and that always seems odd.

Yes, but I think to say if you look at the areas that we play, and particularly on the broker dealer side where we're taking profitable market share because of the nature of that market and the nature of our wholesaling and selling skills, which are unique in that marketplace.

Okay. Thank you.

[OPERATOR INSTRUCTIONS]. We have a question now from Bruno Paulson at Sanford Bernstein. Please go ahead.

Hi. Hi. Two questions. Firstly on the individual annuities, there was very strong -- in the U.K., very strong growth year on year but the sales were down on -- quite a bit on Q4. Is this just the A day -- post A day -- the delayed sales in '06 not being repeated, or is there a share thing going on there?

And secondly, the institutional products in the U.S. had a very strong quarter. Can you just confirm that that is just a lumpy quarter and that your policy of flat to slightly up sales year on year is still continuing?

The latter is -- the latter question, I think we, as we say, we see opportunities in the institutional market in the U.S. and at pricing we think is attractive, we'll take them. It is lumpy. I think you're point is right. It is lumpy business by nature. But we do see opportunities that we'll continue to take.

Is this an indication of -- a first quarter indication of the entire year? It's too early to say, Bruno. It depends on how market conditions, how market conditions go forward.

On individual annuity side, I think the combination of internal vestings and increased partnership sales clearly has pushed up 35%. Is there an A day effect to this? We think there may be a slight A day effect, but we don't think it's a significant one.

Our next question comes from Farooq Hanif of Credit Suisse. Please go ahead, Farooq.

Hello again. Just to ask a very quick question on the VA product again. Just following up actually on an earlier question, can you just talk about how your GMAB is selling because I think you said earlier that you were introducing that feature and whether that's been a strong driver of sales? And can you just talk about how you're hedging that if that's the case?

Yes. I think it's -- we're fully hedging, fully hedging that. And sales are, our sales are reasonable. It's not, it's certainly not driving the growth. The growth is being driven by the -- through the sales of the basic product, plus GMWB more than GMAB.

Thank you.

Our next question comes from Matt Lilley of Lehman Brothers. Please go ahead.

Morning all. Quick question on Hong Kong. You've grown very strongly in Hong Kong in the last three quarters. It's always thought of as a very profitable market. Could you tell us how much of your business now comes through the Standard Chartered agreement and what are Standard Chartered's plans to -- as to the exclusivity of that agreement?

I think we haven't given that figure and we don't intend to at this point in terms of any individual relationships. I think what we've seen is sales growth in Hong Kong as a 57% increase. And it's not just -- it's clearly through good a bancassurance result, but we've had increased agency numbers, we've had increased productivity from new link funds, we've had new incentives, we've had a new retirement campaign, we've had first-class results in top ups. All of those indicate that it was -- that it's been strong throughout.

As for the relationship, the ongoing relationship with Standard Chartered, it's a strong relationship and I think we both hope that will continue. And there's -- I think getting more detailed questions, we haven't given any more information than that. It is -- the relationship has been working for a number of years and we expect it to continue to do so.

Thanks.

[OPERATOR INSTRUCTIONS]. We have no further questions, if you would like to begin your closing comments.

Thanks, Jerry. I think I say thanks again for listening. I think the -- we feel we've delivered strong figures in all businesses. We hope it's becoming increasingly predictable and consistent. So all of the extraordinary growth in Asia, U.S. fund management continues even relative to the first quarter last year.

The U.K., as you can see on the retail side, and particularly the retirement -- retail retirement income, is in very strong shape. And we see that going forward -- we see that particularly going forward. Nothing is indicating that we're not going to have a year that is -- that we should be proud of.

We said the market growth would be 5 to 10% in 2007 and we, at this point in time, look to be taking market share from that, and profitable market share from that.

And the third message is the message that I think we continue to talk about is that I think the exposure that we have, the positioning we have to both geographic regions and growth demographics, whether it's the U.K., the U.S. or Asia in our businesses and clearly the investment management operations as well puts the portfolio in a very powerful position. And we're continuing to look forward to an exciting year ahead.

So thank you for listening and we look forward to seeing you all at some point in the future.

This concludes our call. Thank you for attending.