Prudential PLC (PUK) 2008 Q1 法說會逐字稿

Hello. And welcome to today's quarter one, 2008, new business figures call with Mark Tucker. During this call, all participants will be in listen-only mode. And afterwards there'll be question and answer session. Mark, over to you.

Thanks very much and good morning, everyone. Let me say that I'm delighted to be joined this morning for the first time on one of our calls by Tidjane Thiam, who, as I'm sure you know, joined the Group as Chief Financial Officer at the end of March, just three weeks ago. So Tidjane will take all the difficult and immensely complex technical questions. And I'll make a few comments first and then we're happy to take your questions between us.

As you've seen, we've made a very positive start to the year, with overall Life new business increasing by 13%. And net inflows of our Asset Management businesses of over GBP1b. This strong start continues our momentum against a background of economic uncertainty and high volatility. And, to my mind, the performance confirms the resilience of the Group. That resilience is derived from our geographic spread across three regions. And, in particular, the role of Asia as our leading force of new business.

In Asia, new business increased by 30%, compared to Q1' 07, as we continue to see the benefit from our broad regional presence and the scale of our unique multi-distribution and product capabilities. Demand for our unit-linked products across the region remained strong, accounting for some 69% of sales in the quarter, compared to 67% in Q1' 07. We've been putting emphasis on health products in the region. And sales grew by 79% in the quarter, following strong growth in 2007. This is very encouraging.

Looking at some of the individual markets in Asia, in India and Indonesia, where benefits of our continuing investment to build the agency force and distribution footprint is coming through with new business growth of 41% and 90% respectively. In Indonesia, we're also expanding the addressable market with the introduction of Takaful products, the Islamic-compliant, the Shariah-compliant products. And these products accounted for 20% of sales. Similarly in Malaysia, we are achieving, have achieved, strong growth in Takaful products, representing some 28% of sales.

We took further action to develop our position in the retirement market in Hong Kong, with the launch of a new PRUlink Wealth Builder product. Overall sales in Hong Kong were up 50%. There was also strong performance in China, up 50% on a like-for-like basis. While Japan was up 100%, driven by Term Life sales. However, as we've noted, the tax benefits on this particular product have now being reduced. In Korea, sales were up 11% in a competitive market. In Taiwan, we saw some impact of market conditions on single premium products in the quarter overall. And, in the quarter overall, sales were slightly down on Q1'07. And I think you will remember the launch of the VA product in Q1 last year would have caused that effect.

We are very much looking forward to showing much more of our big Asian business on the visit to Hong Kong and Jakarta and those attending we think will really benefit from seeing the operations on the ground. And we intend to -- we intend to give some in depth disclosure on a number of different elements which you will see next week. There's enormous headroom for continued and further expansion in Asia. I think as we've said today, and as we will demonstrate going forward, we have an immensely advantaged platform and we intend to build, grow and develop from that.

Turning to the U.S., overall sales are down 7% against a very tough comparator, Q1 last year. As expected, the market has been affected by both continuing equity market volatility and the impact of economic uncertainty on investor confidence. These factors, coupled with intensified price competition, which I think with price competition we saw particularly in January, I think less so in February and March, and that sort of justifies what we said about it being unsustainable, led to a decline in variable annuities.

I think you know the VA product, which, as we said before, provides equity exposure with the underpinning of guarantees, remains central to the growing retirement income market in the U.S. Our approach, as elsewhere, is to ensure we create sustainable value. And we will not react to short-term pricing pressure. We are continuing to innovate. And, during the quarter, Jackson produced two new GMWB's and also increased the number of investment options. We're also continuing to expand our VA wholesaling capability.

I think, very importantly, you also saw the benefit of the strength of Jackson's positioning across the entire range of annuity products, as the expected shift to fixed annuities under current market conditions, saw our FA sales, our fixed annuity sales, increase by 46%. Jackson has an advantaged business model, and I remain very confident that we will out-perform over the cycle and over the longer term.

Following our extensive disclosure on coming to the year end, we provided, we thought it would be valuable to provide an update on the position on the end of March. And I think, let me remind you, that we came to this cycle in a relatively defensive position. Our credit exposure is tightly controlled. It's well within our risk parameters and is managed proactively. Our debt securities are used to back long-term liabilities. And we have both the intent and the ability to hold these debt securities to maturity. Our sub-prime and Alt A exposure, as you see, is stable.

In the first quarter, Jackson recorded GBP24m of [other than] temporary impaired losses against a normalized risk margin of around GBP12m. And, as with 2007, we have experienced no defaults in the direct investment portfolio in the quarter. We've seen some -- there are a few downgrades but nothing of any significance.

Then unrealized losses, losses at the end of March, were GBP451m, compared to GBP136m at the end of 2007. And this increase, as we've discussed before, reflects exceptional market conditions. Jackson, and the team here, remain entirely confident of the quality of the overall portfolio. I think it's 90%, is, over 90% of its gross unrealized loss is on investment grade securities. And I think, of the GBP257m of gross unrealized losses on securities, with a fair value of less than 80% of book value, only GBP28m is on securities rated as non-investment grade.

In the U.K., retail sales increased by 4%, with continuing success in cautious managed products. And, in particular, with-profits finance continuing the trend from the second half of 2007. The strength of our fund of market-leading investment performance leaves us in a very strong position in volatile markets. Offshore products also made a strong quarter, up 36%. Lifetime mortgage up 50%, 51%. PruHealth up 27% or so, and also continued to make good progress. Individual annuity sales were slightly down, pretty much in line actually with last year. And internal vestings, again, accounted for 50% of total sales. So this is a stable and strong base. We have continued to see good growth also from our with-profit annuity, where we are the clear market leader.

Price competition in the wholesale market, in our view, remained intense. And, as a consequence, we wrote minimal volume. We're very much in that business, but I think, as we've said on a number of occasions, we'll only do it when the economics are right. And the economics are still, to us, in what we're seeing, not right.

Moving on to asset management, and, despite the market volatility, both M&G and our businesses in Asia saw net inflows in the quarter. I think that's a terrific performance. The diversity and resilience of M&G can be seen from the fact that although the FTSE All-Share fell by 11% in the period, M&G's external fund only fell by 2%.

Continuing excellent investment performance. And I think the two facts that I think are worth -- excuse me -- the two facts worth bringing out are that 25% of M&G's funds are top decile performance funds over the last three years, and 40% are top quartile. That sort of strong, strong performance underlies the net inflows, underlies the profitability and we're seeing some excellent flows into that business. On the institutional side, we captured a new global equity mandate for (inaudible). And, overall, net inflows were just over GBP500m.

In Asia, though we are seeing some impact of market volatility, overall net inflows of were GBP500m, GBP0.5b. And three quarters of these flows were into longer-term equity and fixed income products. The majority of those, three quarters, were into equity products. Overall, in Asia, with the effects of market movements, external funds an 8% for the end of 2007. But I think, importantly, with remains 25% above the end of Q1'07

In summary, I think you've heard much of this before. Although the current macroeconomic environment is challenging, I am confident that our geographic diversity, advantaged distribution, product expertise and management capability, position us well for future growth. And our prospects in 2008 remain positive.

Thank you for listening to that. I'm not sure you had much of a choice, given it was it's no [lever]. Thank you for listening anyway. And Tidjane and I are very happy to take any questions.

Okay. If you have any questions (OPERATOR INSTRUCTIONS). And the first of six questions so far is from Jon Hocking of Morgan Stanley. Jon, over to you.

Morning, everyone.

Hi, Jon.

I've just got two questions. Could you comment a little bit more on the U.S., what you think your market share did in VA in the first quarter, and how you think the market's trending as we go into the second quarter.

And, then, on Asia, ICICI put out a statement I think the evening before last. And they break down the sales I think by month, and you can see that March was quite a lot weaker than January and February. Just wanting to understand, given the extra distribution put on there, how you expect that to track in the second quarter. Thanks.

Jon, thanks for that. It sounds like both questions are suspiciously like forecasts. Both mention how we expect to track in the second quarter. But I'll, without making a forecast, let me give you some directional help.

I think in the U.S. in market share in the first quarter, I think the general sense, I think in January there was some exceptional offerings from a couple of competitors that may have -- that were withdrawn effectively at the end of January. I think we've -- we pretty much feel we're back taking market share in February and March, and in January we felt we may have lost a little, but I think when some of this competitive behavior to us wasn't economically justified, as I think I've indicated. And I think certainly tracking February, March, and we think going into April, we're back, we'll be back on track again in terms of market share. We still expect for that business to continue to grow.

In terms of India, and I think, clearly, much has been written here. I think let me just give you some context to that, which is I think we are seeing a rapidly increasing mass affluent sector in India. And the numbers are moving from a middle and high income into, for 2006, to, going to 2007, we saw 35% growth in -- the population moving into the GDP 1,000 level of now population of around 350m. The higher proportion of the population is now working.

I think, contrary to I think what has been written in some of the more entertaining analysts' notes that I've read over the last few days, only a third of the target population is insured, the penetration levels are still vastly low to compared to anything that you would see in the Koreas, the Singapores and most other parts of Asia, let alone the -- some of the more developed economies of -- in the West. Protection levels also are low and that's, I think those are the levels of sum assured to GDP, compared to almost any country that I can find, India is, India remains one of the lowest.

So, in a sense, I think we saw very good growth in January and February. We saw the market come off in March. We saw ourselves gain significant market share in March, we grew materially faster than the market. We remain confident in the Indian growth story.

Just as a follow-up, what proportion of the sales in India are unit-linked to the underlying equity funds and what proportion are traditional, what proportion are unit-linked with other links other than equity?

It's around 80% plus, Jon.

Yes. Okay. Thanks very much.

Thanks you.

Okay. We now go on to Andy Hughes of JP Morgan. Andy, over to you.

Hi, hello.

Hi Andy.

Hi. Obviously Hong Kong is a large component of the Asia business, 14% of APE and 17% on PVNBP terms. I just saw this comment in the press release that said you launched a new product in Hong Kong which was (inaudible) as operation's first regular premium back-end loaded index linked product for pensions saving.

Yes.

And, obviously, regular premium back-end loaded unit-linked pensions products have a particularly bad connotation in the U.K., particularly given the recent experience of Friends Provident. Could you just tell us exactly what you're doing here in terms of cash flow, lapse risk and why you think this is a particularly strong product to be launching?

And does this represent a trend to other regions as well, because you've obviously said this is the first of these products that you're going to launch?

I think again, Andy, as you probably know, this is -- this product pretty much dominates the Hong Kong market as it is. Number one and number two in the Hong Kong market, it's the majority of their sales. So this is, let me be very clear, as -- without getting sensational about it, I think as is Andy's intending to do, this is not -- this is very much how the Hong Kong market operates. And I think it's something like 75%, 80% of AIG, AIA. [70%] per cent of HSBC is on this basis. So this is not unusual stuff.

It's a market, it's a product particularly we aim at the bank market, the bancassurance market. And the profitability of it is very much in line with our calculations. The return on shareholder capital, again, look to the minimum rates that we've set out, payback is strong. It's about a third of the business in Hong Kong in the first quarter. As I say, I think this is mainly aimed at the bank marketplace. It's a strong product. It's -- but, as I say, we are slow in getting into this market. And [not that is now] the reason that I think this is what some of you wanted to develop in the bank channel, but there's no other sort of messages there.

What is the payback period in this contract, out of interest?

It's seven years.

Seven years.

Yes.

Yes.

Okay.

Can I also add just on the lapse point, there are very high surrender charges on the product. And after the end of the surrender charges there are loyalty bonuses. So it's quite well designed.

Okay. Thank you very much.

Okay. The next question is from Greig Paterson of KBW. Over to you.

Yes, good day. Three questions. One is just in terms of the Asian OP targets, I wonder if you can give us specific issues that you're thinking are drivers here? Which regions, productivity or distribution or products that you're going to launch in the next three quarters? And also the risks that you think, in what they are and what regions, where, which could cause you missing your targets? That's point -- question one.

Second one is just an update on the inherited estate reattribution.

And the third one is I wonder if you could just say, give us an idea, since the beginning of April to what extent the below 80% fixed interest securities have increased?

Okay. I think with regard to the latter, Greig, we've seen no material increase in that since the end of April.

In terms of the inherited estate, what we said is we'll get back to the market before the end of June. We're on track to do that. There's no sort of news today.

In terms of your first question, which was again suspiciously like a forecast. I know it may be my cynical nature, but I think we -- the position we, with regard to Asia, I think you saw in the first quarter, Indonesia 90%, China and Hong Kong up 50%, Singapore and India up 40%. You can see actually a mix of different territories doing different things. And I think that what we've said, what we've always said, is that this is the power of the portfolio. We have 13 countries. We have different businesses performing differently and different factors affecting each of those businesses in the different markets. To look at it as a homogenous position, I think is -- doesn't give you a true picture. You've got to look at the individual drivers in their marketplaces.

Overall, in Asia, I think as I've said before, we're not seeing the same impacts I think we are seeing in the Western world. They were -- they're less -- they're more reliant in Asian countries on U.S. GDP or on capital or cash or currency flows. There is a proportionality effect there. But I think in some of the countries they welcome the slowdown. But this is a slowdown in positive growth. This is not anything that causes any -- us any concerns or issues. But underlying all of this is our confidence in being able to achieve the new business profit doubling a year early, which should give you an underlying comfort in directionally where we're going.

But you've got no specific product launches or something that we don't know about or anything like that?

Greig, we've got many initiatives, product launches you don't know about. But I think that's -- you'll find out about them, and I'm sure you'll find out about some of them even next week.

All right. Thanks.

Pleasure.

The next question is from Blair Stewart in Merrill Lynch. Blair, over to you.

Good morning. It's Blair Stewart here from Merrill Lynch. Three quick questions, one on each of the regions, to be fair. First one is on the U.S. Could you perhaps give us an indication as to where you think the VA market was in Q1? You are down 13%. It sounds from your comments like the, that your assessment of the market would be down high-single digit or so? Just could you confirm that?

And also just remind us the difference in margin between fixed annuities and variable.

Secondly, on Asia, just give us a bit more detail if you can on the one-off factors that you mentioned in Singapore. And how significant the Term Life products have been in Japan?

And, thirdly, on the U.K., the bulk purchase annuity market, just again if you can give us some feeling for how far off the pace you are on winning these deals, it would help us think about how the future is going to go.

Yes, I think with the VA market, Blair, I think it's -- there's no point in guessing at this point. The figures will come out later this month and we'll get a better sense. As I say, I think January was the, January was the outlier. I think it normalized again in February and then March. And it was an outlier because of some exceptional behavior, we think uneconomic by some of the competitors. So I think I don't want to hazard a guess at something that I think you'll get the figures on. This is just my sense directionally of where it's going.

In terms of margin, little difference I think we've said before, between the fixed and -- fixed annuity and variable annuity in margin terms. Roughly around the same level, maybe slightly -- I think it's roughly round the same level.

One-off factors in Asia, CPF, the CPF changes are being made for as long as I can remember since CPF first came in 1989, 1990, my guess would -- 18, 19 years ago, there have been changes every one, two, three years in either limits or authorized vehicles or authorized investments or different products. This is a continuing basis and will continue to change. So I think rather than it being a once -- it's a fact that we thought worth bringing to your attention, but it's, to my mind, it's a recurring one-off as opposed to anything that's totally unique. And I think we saw very good growth in Singapore, particularly in the single premium market in the first quarter.

In Japan, again some factors, advantages on the Term Life side. The percentages figures in Japan you know are large. The actual, absolute numbers are not particularly material at this point. Hopefully, they'll continue to get bigger. But I think we're continuing to grow the business there comfortably and the growth rate in Japan over the last two or three years in the business has got materially bigger.

Purchase annuities, I think we -- we're still very much in -- excuse me -- very much in the market on the BPA side. As I say, we're seeing a number of deals that are being done either with, in our view, inadequate information to be able to price properly, or prices being made off assumptions on the investment side, which, in these markets, we would view as beyond heroic. And I think that factor is -- means that we -- we're quoting, we're active, we still intend to do deals in that marketplace, but we will not sacrifice value for volume.

Okay, that's fantastic. Beyond heroic, I might quote you on that. Thank you.

No, don't quote me on that, Blair.

Only kidding.

Okay. Next is James Pearce of Cazenove. Please go ahead.

Morning everybody. Just to follow up on bulk annuity pricing, if pricing's so irrational, why don't you just take advantage of it with your own pension fund and allow them to take the risk for you at uneconomic prices?

Secondly, can you give us any feel for how active the sort of superbowl of core annuity and payment market is please?

James, what was the second question?

Any sign of activity in the annuity and payment market, a son of Equitable Life for this year please?

I think that -- I think there's plenty of conversations in that sector. That sector remains alive. Clearly, James, you wouldn't expect us to comment on any specific transactions.

I think with regard to the pension fund, thank you for that suggestion. I will certainly suggest to the trustees to look into that. But I think the -- I think we still believe that the position in our marketplace, we can -- we have opportunities to make money, and that will continue.

Thanks very much.

Thanks.

Okay. We now go over to Raghu Hariharan of Fox-Pitt Kelton. Raghu, please go ahead.

Morning, gentlemen. Two questions for me, if I may. The first one was on the U.K., being obviously the profit bonds and offshore bonds have shown strong growth. I was wondering if you can give us some -- give us a flavor of what the underlying products are, i.e. are they provided M&G, and the kind of products itself, equity, fixed income, cash, etc.?

And the second question was on India. Now, your margins halved year-over-year last year. I was just wondering whether the substantial growth that you've seen in this quarter, how have you managed the volume and price mix? And give us a sense of what's driving volume, is it distribution or is it price? Thank you.

Thanks. I think in terms of the offshore element, it is open architecture so it's going to be a mix of both our own and other product providers in there. But I think, underlying it, you know the underlying performance of the with-profits fund, I think we're number one under the WM survey over one, three, five, 10 and I think 20 years. So that is a phenomenal track record in terms of performance there. Underlying that, as I've given you on the retail side, M&G you know manage all our U.K. and European assets there, investment performance is almost unparalleled.

In terms of India, again I think was a different disclosure. I think you've said margins have halved. I think that's -- I think we've just, we've taken -- you can take two views on this. You can keep margins as they are, or go for large expense overruns, or you can do get margins down and expect those overruns to be eliminated and the margins to build back. We're not seeing any material changes in the pricing or the profitability of the Indian product mix over the first quarter of this year. I think it's pretty much in line with how it's been.

Okay, thank you.

Thank you.

Okay. Go over to Youssef Ziai of ABN Amro. Youssef, please go ahead.

Yes, good morning. I'm just wondering if you could please put a bit more flesh on your comment about adding nearly 70 internal wholesalers at Jackson. This is on top of how many? Can I just get a better understanding of the scale? And is this going to be nationwide or with geographic specific areas?

The other point vis-a-vis Jackson I guess is your comments about price competition in VA market remain intense, would you care to mention which competitors you are seeing making it particularly intensely competitive? Or at least say whether they are the domestic or the foreign players in your view? Thanks.

Hi. Morning Youssef. I think you know in terms of our wholesaling strategy, we have 200, 200 plus wholesalers. So adding 70 to that number is quite a considerable amount. And what we look at doing is dividing the U.S. into different geographic segments. And I think as we subdivide those geographic segments, we put greater focus and concentration on those areas where we think we can generate economic value. So these 70 wholesalers will be in smaller areas, focused on particular elements where we think there is a very attractive marketplace. And the ability to be able to do this and focus the distribution model is one of the great, great strengths of Jackson.

In terms of price competition, I think -- let me just sort of stay there as a background, I think [J] and Alan have been doing a number of different things in terms of new products, new developments, two more GMWB products coming out. I think there will be a lot of investment funds coming out. We've seen the Curian platform grow, etc., etc. That's my very unsubtle way of saying that I have no intention of mentioning specific competitors which I think is pretty -- will be pretty obvious to -- I'd rather you find that out through somebody else.

Mark, you're not saying -- Mark, not even saying if they are, in your view, foreign or domestic players?

Youssef, it's definitely one of the two.

Thank you.

Okay. We go back to Greig Paterson of KBW. Greig, over to you.

Greig, you've had your three questions.

Yes, I've got to add one. I think you might be pleased with this one then. The -- I was thinking the other day, you guys are completely dominant in the with-profit bulk area and have no competition at all, I think, in that area. I wonder if you could give me a stab of what the actual size of the outstanding with-profit annuity books in the various life licenses across the U.K. Is it GBP10b, GBP20b, GBP100b? Just wondering long term what you could potentially bring back and bring onto your book.

Yes, my sense is, Greig, it's -- and I don't have detailed figures at hand, it may be up to the GBP5b, GBP10b range. But I'm not even sure of that. I think let us do some more work on that and come back to you.

Alright. Thank you.

Okay. We go over to Tony Silverman of Standard & Poor's Equity Research. Please go ahead.

Good morning. I was just going to ask, looking at the M&G funds under management, it shows that 59% of it institutional. And it's remarkable that the market movement was actually positive on that over the quarter to March 31. I was wondering if you could give us any clue as to what the driver's of that were.

And the second question, if I can, was is there anything you can say about the VA reserves total, how that moved, and what the net sales were over the quarter? Thank you.

Tony, sorry, I didn't get the second part of that question.

I was wondering if there's anything you can say about the variable annuity reserve total in JNL and what the net sales were over the quarter.

Okay. I think we need to see the -- maybe Tidjane can come back to that in a couple of seconds.

I think on the M&G, the answer remains pretty simply on this sector, the investment performance. I think that clearly has, in these marketplaces, the both wholesale and retail investment performance is strong and there is still enormous demand for investment products, both wholesale and retail. And as well as the performance we've got the track record and I think that gives you the basis, that's all the basis you need.

There obviously is quite a difference between the retail and institutional, with a good but negative market movement in retail, but this positive in institutional.

Yes, I think -- Tony, let me do some more work on that and maybe get James to get back to you. I think the institutional, as I know it, is mostly fixed interest anyway. So I think that's probably the reason why it hasn't been hit to the same degree.

Okay.

Hello Tony. I assume that you're thinking about the separate account balances regarding VA. I have a position at end February and it has decreased marginally, really not significantly at all.

Okay.

Okay. We now go over to [Barry Corns] of Panmure Gordon. Please go ahead.

Good morning. I just wondered if you'd comment on how far the performance in lifetime mortgages was due to market-leading rates that you had in Q4 last year.

And perhaps also gives some thoughts on the outlook for that particular equity release market, bearing in mind the slowdown in the housing market.

Yes, I think, Barry, I think the rates were competitive, remain competitive and, I think, will continue to remain competitive. I think we view this as an important and exciting market going forward. I think equity release as a supplier of -- helps with the pensions gap that is clearly there and I think is a material product going forward.

As I say, I think the housing market, I think, has little impact, in terms of the housing market, we think it will have little impact. People do want to release earlier. They do want to get the funds. We have a drawdown facility to do that as one lump sum and therefore the ability to be able to do that successfully I think we believe will continue.

Great. Thanks.

Thank you.

And the last question in the queue at the moment is Andy Hughes from JP Morgan. Andy, over to you.

Thank you very much. It's just a follow-up question on a previous question. I think you guys said that there was, in Hong Kong, on these back-end-loaded contracts there was high surrender charges. I just wanted to check why, presumably the risk is there if you stop paying rather than actually surrender these contracts. Is that correct?

Yes, there's -- I think, yes.

There's a (inaudible) feature on the product, so that's not a problem. It's been taken into account.

But in terms of the difference -- I'm just wondering why they are back-end loaded if they have such high surrender charges because obviously if they have high surrender charges and a regular fee income stream then they wouldn't normally be described as back-end loaded because those charges could be brought forward. I'm wondering what feature of the contracts mean that they are actually back-end loaded. Is it because you can stop payment at any time without penalty?

Yes, you can.

And that's similar to the U.K., which is the real issue in the U.K. isn't really surrender penalties but more to do with people stopping payments because they change jobs.

Right. I think there's nothing further to add on that, Andy. I think that could all well be the case. It's a normalized product within that marketplace.

Okay. Thanks very much. Thank you.

No problem.

Okay. One question has jumped in from Andrew Crean of Citigroup.

Morning. Just one thing in the U.K., you talked, I think, when you launched your strategic review of the U.K. quite a lot about the pre-retirement savings market, the sort of feeder business into the annuity business. Where's the evidence in these sales figures of what you're doing in the pre-retirement savings market?

I think in terms of the growth there, I think the main growth, I think, as we said, has been on the -- probably very significant on the corporate pensions side, as it were, where we've seen growth in that marketplace. And that as a feeder into the annuity market, I think probably the most material of the accumulation side.

I think, again, what we've said before is on the individual annuities side, the back book of pensions that we're investing doesn't peak for another 25 years, and that continues to grow. So the combination of that will -- I think it moves them in absolutely in the right direction.

I understood that you were going to try and develop new products to try and mine this market of people, I suppose, 55 to 65, and try and capture. Is there any evidence in these numbers of that, or are they products which are waiting to be launched or have you turned your back on this market?

No, we are still very much in the market. I think we have launched some. We intend to launch others. It's a slow start.

Okay, thank you.

Andrew, does that conclude your question?

Sorry, that's fine. Thanks.

(OPERATOR INSTRUCTIONS). Okay. There are two questions. First is Manish Bakhda of Barclays Capital. Manish, over to you.

Good morning. Manish Bakhda from Barclays Capital. Quick question for Mark. Just saw on Bloomberg some headlines around acquisitions and plans for the next 12 months. Would you be able to give some more details on possible scale and nature of those acquisitions which you're thinking about at the moment?

Sure, Manish. I think, again, consistent with what we said, I think it's in the U.S., on the life side, on bolt-ons, on life books. I think what we seeing, and I think this is what Clark said a month or so ago, is that securitizations on the life side could be more expensive than in the recent past. I think we're seeing companies looking at their asset base and deciding the life insurance side is not growing particularly quickly. It hasn't been and the prospects for that are such that they are looking to divest some of those assets. Pricing is becoming more reasonable. All of those elements dictate to, I think, as I've said, it's more likely that for us that now something could come on the horizon in the next six to 12 months than there has been over the last 12 months.

In terms of scale of that, again, we've said that we've got excess capital in the level of around $1b. And we can use that to -- we can leverage that up, but we can use that fundamentally to make acquisitions.

When you talk about leveraging up, does it mean more debt funding?

No. I think it's using other vehicles, I think, which we've mentioned before, like our vehicles and other reinsurance vehicles that help the funding side there.

Okay. Alright. Thank you very much.

Sure.

Okay. The final question in the queue at the moment is from Marcus Barnard of Pali International. Please go ahead.

Yes. Morning gents. Two questions, if I may. In Taiwan you talk about a slowdown in single premium sales due to investment volatility. I just wonder if you see that improving this year. Obviously it's very hard, but I wonder if you'd got any other products lined up like, I don't know, investing in the attractive bond rates available in Taiwan, for example.

And secondly, in your Asian asset management business you say that Japan with significant of their funds invested in India. I just wondered how significant that is. Is that 40% or is it 80% plus, or nearly all of it? I'm just wondering how much of your businesses in Japan is just dependent on selling mutual funds in India. Okay. Thanks.

Marcus, thank you for both questions. The first was clearly more mischievous than the second. The simple answer is 40% of the funds are Indian funds out of Japan. So that number is -- the answer to that is very straightforward.

In terms of Taiwan, thank you for your suggestions as to what we should be thinking about investing in.

It wasn't a serious comment.

Sorry?

It wasn't necessarily a serious comment.

I understand. I understand. Neither was mine. But I think the opportunities -- we see greater volatility in Taiwan. I think you've seen a new government, a new president come in there. I think you've seen probably grater stability in the country. And I think the basis of -- good basis of performance there. We saw exceptional first half there last year, particularly with the VA products. We intend to launch new products in the second quarter of this year to make sure that we push hard.

Japan had (inaudible) had a great year last year. We're set to grow and move that business this year. We are looking again more seriously across the spectrum of what products to launch. And we have some pretty good ideas for what we want to do next month.

Okay.

Thanks for that.

Do you want to comment further on your statement on Bloomberg that you're going to buy a U.S. life insurer?

I didn't say that -- and I think again I said the companies we're interested in, we're looking at life insurance assets, whether they're closed or open. That is entirely consistent with the Life of Georgia type transaction which we said before. And this is exactly along those lines and I -- the only guidance I'm giving, it's exactly nothing more than what we said before. As I say, it's Life of Georgia, or Life of Georgia plus.

Okay. That's brilliant. Thanks.

Okay. At this stage there are no further queued questions. One has just jumped in from [David Jittaware] of [Accountancy Agent Magazine]. David, please go ahead.

Hello. I hope you don't mind me asking media questions, but I'd just like to put this to Mr. Thiam. IAS39 has caused significant swings in the value of your Jackson's arm. And I'm just wondering if you had any views of the standard, if you had any issues with it or any other kind of accounting standard that you'd like to put out there.

I couldn't really hear you very well, but I think the question was about the volatility introduced by VA effects available for sale portfolio in Jackson and the IAS39.

Yes. Have you got any issues with this standard, or any views on it at all?

We are fair valuing -- we fair valuing the securities. And I think my products are pretty broadly based. A number of public statements on that with which I'm very comfortable.

Right. Okay. Any other account standards you might have any problems with or any issues with, perhaps IFRS 4 to do with insurance contracts?

I think, to be fair, I think we've pretty much given our views on -- across the accounting standards and we clearly support and follow them.

Okay. Thanks very much.

Okay. With that final question, Mark, can I pass it back to you?

Okay. Thanks. I think just to end, I think we've seen continuing strong momentum in Asia, leading to the 30% growth. The U.S. clearly the strong FA sales, up 46%, an decrease in VA. We remain confident on VA through this cycle and I think -- and Jackson. I think the other thing I think it's worth bearing in mind is that the quarter one '07 comparison was Jackson's best ever. Quarter one '08 is the second best in history, so, again, it is still, and that's on the VA side, is still a strong quarter historically.

In the U.K. I think the sales of the internal vestings remains strong. 50% of individual annuity sales in line with prior year, what we've been saying. And this pipeline, this 25-year pipeline we view as being, plus our partnership business, puts us in a very strong position.

With-profit sales have been, again, excellent upward trend and we saw the end of last year those continued. It's a business that you know is focused on value over volume. Even having said that, the growth -- we saw good growth in the U.K. pretty much in line with guidance in the first three months.

Asset management, I think a flight to quality here in terms of investment performance, M&G and Asia. Our credit position remains stable and I think we've got good proactive management, as we've said, and it remains within our risk appetite. And the outlook for the Group remains positive. So all in all, we continue on the direction that we set out earlier this year and we set out for a number of years.

Thank you for listening this morning and we hope to see many of you in Asia next week.

This now concludes today's call. Thank you all very much for attending.