29th Jan 2007 11:09
Prudential PLC29 January 2007 Embargo: 10.46am Monday 29 January 2007 PRUDENTIAL PLC FULL YEAR 2006 NEW BUSINESS RESULTS All figures compared to 2005 at constant exchange rates unless stated New business for the full year 2006: APE Growth PVNBP Growth Total Group Insurance £2,470 million 16% £18,947 million 12% Prudential UK retail £689 million 14% £5,594 million 15% Total UK £900 million 1% £7,712 million 0% Jackson £613 million 21% £6,103 million 20% Prudential Corporation Asia £956 million 30% £5,132 million 26% Asia Fund Management Record net fund inflows of £2.5 billion, up 91% M&G Record net fund inflows of £6.1 billion, up 58% Mark Tucker, Group Chief Executive said: "I am delighted by our full year new business figures: the Group's insurance newbusiness has increased by 16 per cent year on year, on an APE basis, and ourasset management businesses saw net inflows increase by 66% to £8.6 billion. "We have seen a 25 per cent increase in the Group's insurance new business, onan APE basis, for the fourth quarter of 2006 compared to the same quarter in2005 and an encouraging 21 per cent rise in new business for the fourth quarterof 2006 over the third. Overall the Group is in robust health. "A 14 per cent increase in UK retail insurance operations APE sales was drivenprimarily by the growth in individual annuities and corporate pensions. Inwholesale, we have chosen not to write business at unattractive pricing andtherefore sales are down year on year. "We have continued to reassess in depth the prospects for all sectors of the UKlife and pensions market and are confident that there are profitable organicopportunities in the retirement savings and income market. We shall provide anupdate with further details by 15th March. "Jackson, Prudential's US insurance business, achieved record new business of£613 million APE in 2006, representing a 21 per cent increase on 2005, driven bystrong growth in sales of variable annuities, up 48 per cent on last year. "Prudential's Asian life operations delivered new business APE of £956million,up 30 per cent in 2006 including a 25 per cent rise over the third quarter andreflecting the momentum of the business seen throughout the year. We have seenstrong growth in a number of country markets including India up 95 per cent,China up 56 per cent and Korea up 54 per cent. "Asset management continues to perform exceptionally well with M&G achievingrecord net fund inflows of £6.1 billion, an increase of 58 per cent, reflectingM&G's leading position in retail fund management, institutional fixed income,pooled life and pension funds, property and private finance. "In Asia, PCA Fund Management also achieved record net inflows of £2.5 billion,almost double the 2005 figure. This reflects the product strength and increasinggeographic diversification of our Asian fund management business. "Trading conditions at Egg, our UK banking business, have seen furtherdeterioration since we updated the market in October as a result of worseningcredit experience and lower levels of lending than anticipated. Separatelytoday, Prudential has announced that it has entered into a binding agreement tosell Egg to Citigroup for a consideration of £575 million subject to adjustmentto reflect any change in net asset value between 31 December 2006 andcompletion. "Going forward, the Group expects to maintain both its momentum in sales volumeand its focus on value." Commentary on Full Year 2006 New Business Results UK Insurance and Banking operations Prudential's UK insurance operations delivered total APE sales for the year of£900 million, 1 per cent higher than those achieved in 2005. Sales on a PVNBPbasis are in line with 2005 at £7,712 million. The UK retail insurance operations performed well with APE sales up 14 per centon 2005 to £689 million driven primarily by the growth in corporate pensions andindividual annuity sales. In the wholesale business, Prudential has chosen notto write business at unattractive pricing and therefore sales are downyear-on-year. Individual annuity sales grew by 22 per cent to £271 million as the annuitymarket experienced increased activity in the second half of 2006 following theremoval of uncertainty around A-Day pension changes. In total 110,000 newannuity policies were written. Sales volume has been driven by the continuedstrength of internal vestings (APE £135 million) together with the cumulativebenefit of partnership deals signed in previous years. With-profit annuitiessales from all distribution channels more than doubled to £37 million comparedwith 2005. In relation to externally sourced annuity business, Prudential signed furtherpartnership agreements in 2006 including the Royal London transaction that cameinto effect in September. In addition, Prudential signed an exclusive 5-yearagreement with Threadneedle as their supplier of annuities for their Stakeholderscheme as well as any future defined contribution schemes that Threadneedleacquires. This is a new area for Prudential that builds on its experience inproviding annuities to customers of life insurance companies. With the futuregrowth in DC schemes within the UK Prudential expects more agreements of thistype. Sales of with-profit bonds increased by 44 per cent during 2006. Much of thisreflects Prudential's financial strength and continuing outstanding life fundinvestment returns that have been well received by both customers and advisers.PruFund, Prudential's unitised and smoothed investment plan, secured a newdistribution agreement in the fourth quarter with National Australia Bank Group. Corporate pension APE sales increased by 23 per cent to £224 million with thecapture of a number of new scheme wins during 2006, including Debenhams andRoyal & SunAlliance with 4,100 and 4,500 members respectively. This is due inpart to the continuing shift from defined-benefit to defined-contributionschemes and also due to the impact of A-day and the growth in Prudential's newFund Delivery Service. This contributed £25 million of APE sales in its firstyear of operation. Prudential has continued to pursue its focus on value, not volume, in the unitlinked bond market. A large percentage of this market is financiallyunattractive with high up-front commission costs and poor forward-lookingpersistency due to high churn. For this reason we have been targeting highervalue intermediaries. Prudential has recruited a team of 20 face-to-face specialist consultants tosell its Lifetime Mortgage product, the Property Value Release Plan, and arelooking to grow this team further in 2007. APE sales in 2006 were £9 million andresulted in Prudential achieving an 8 per cent share of the lifetime mortgagemarket. PruHealth continues to develop well, with full-year Gross Written Premiums up300 per cent at £36 million (£9 million in 2005). It now has around 100,000individuals covered. As previously announced, we believe it would be beneficial if there was greaterclarity as to the status of the Inherited Estate and we continue to keep thesituation under review. A reattribution will only be undertaken if there areclear benefits for both policyholders and shareholders and we will provide anupdate as to whether we intend to proceed in due course. Jackson Jackson, Prudential's US insurance business, achieved record APE sales of £613million in 2006, representing a 21 per cent increase on 2005, driven by stronggrowth in sales of variable annuities. On a PVNBP basis, new business sales were£6.1 billion. Retail APE sales in 2006 of £524 million were up 27 per cent. APEsales in the fourth quarter of 2006 were £147 million, up 43 per cent CERcompared to the fourth quarter of 2005. Jackson delivered record variable annuity sales in 2006 of £3.8 billion, up 48per cent on last year. This reflects its distinct competitive advantages of aninnovative product offering, an efficient and flexible technology platform, arelationship-driven distribution model and award-winning service. Jackson's sales result was achieved in a market that grew 18 per centyear-on-year through the first three quarters of 2006. Jackson increased itsvariable annuity market share to 4.5 per cent as at the end of the third quarterof 2006, up from 3.6 per cent at the same point in 2005, and maintained itsranking of 12th in total variable annuity sales. In the independent brokerdealer distribution channel, Jackson's variable annuity sales during the firstnine months of 2006 increased 52 per cent over the same period in 2005, whileindustry sales grew 27 per cent. This took Jackson's ranking in the channel from5th at the end of September 2005 to 2nd at the end of September 2006 andincreased its market share from 8.8 per cent to 10.6 per cent. Innovation in product design and speed to market continue to be key drivers ofJackson's competitiveness as 81 per cent of retail sales during 2006 wererelated to products and product features launched since the beginning of 2005.In January, Jackson added a 5 per cent annual benefit increase option to itspopular lifetime guaranteed minimum withdrawal benefits (GMWBs). In May, Jacksonadded five new GMWB options that offer contract holders a guaranteed return ofpremium and lifetime income. Additionally, Jackson expanded its variable annuityfund offering during the year. In February, the company launched two new fixedindex annuity (FIA) contracts, which expanded the number of FIA products Jacksonoffers to five. Entry spreads for fixed annuities continued to be challenging during 2006, whichlimited the attractiveness of the market to Jackson. APE sales of £69 millionwere down 12 per cent on the same period of 2005. Fixed index annuity sales continued to be impacted by the uncertain regulatoryenvironment in the US. APE sales of £55 million were 10 per cent down on 2005.Jackson's market share through the end of the third quarter of 2006 was 3.8 percent, unchanged from the same period in the prior year. Curian Capital, a specialised asset management company that provides innovativeseparately managed accounts, is building its position in the US retail assetmanagement market with total assets under management at the end of 2006 of $2.4billion compared with $1.7 billion at the end of 2005. Institutional APE sales of £90 million were down 8 per cent from 2005. Jacksonparticipates in this market on an opportunistic basis. Jackson's focus is to expand its share of the US annuity and retail assetmanagement markets. This will be achieved through continued expansion ofexisting product offerings, additional growth in new and existing distributionchannels and opportunistic acquisition activity. Jackson's product development strategy includes further enhancement of itsvariable annuity offerings and the introduction of new guarantees, including aguaranteed minimum accumulation benefit (GMAB). Jackson has launched asimplified retirement annuity that will serve as a low cost option for financialadvisors who are currently not participating in the variable annuity market.Additionally, Jackson has rolled out its first set of retail mutual funds fordistribution by existing wholesalers. Jackson's new mutual funds will bemarketed as an additional option for financial advisors currently sellingvariable annuity products. Jackson will continue to build its relationship-based distribution advantage inthe advice-based channels, including a particular focus on increasing annuitysales in the bank and regional broker-dealer channels. Jackson will also exploreadditional distribution opportunities, including further expansion into thewirehouse channel, as evidenced by the company's recent distribution agreementwith UBS. Jackson continues to deliver growth in the attractive US market and has furtherenhanced its competitive advantages in the variable annuity market, offering theproduct and service solutions that both customers and advisors desire. With acontinued focus on product innovation, a proven relationship-based distributionmodel, award-winning service and excellence in execution, Jackson is wellpositioned to take advantage of the changing demographics and resultingopportunities in the US market. Prudential Corporation Asia Prudential's Asian life operations delivered new business APE of £956 millionrepresenting growth of 30 per cent in 2006 and reflecting the sustained momentumof the business seen throughout the year. The fourth quarter of 2006, with APEof £282 million, showed an increase of 29 per cent relative to the same quarterin 2005 and 25 per cent relative to the third quarter of 2006. On the PVNBPbasis sales for 2006 of £5.1 billion are 26 per cent higher than in 2005. Prudential's focus continues to be on sustainable and profitable growth and thenew business results reflect the continuing success of this strategy. Theproportion of unit linked business for the year is 65 per cent, in line with the63 per cent reported for last year and demonstrates the sustained appeal ofthese products to consumers across the region. The proportion of new businessfrom traditional agency distribution is 70 per cent compared to 74 per cent lastyear, as our bank and broker distribution continues to strengthen. Prudential's joint venture with ICICI in India is a market leading operation andhas rapidly achieved material scale since launch in 2000. APE for 2006 increasedby 95 per cent over the same period last year with Prudential's 26 per centbeing £107 million. This was driven by a significant increase in agent numbersas the operation continues to open up new branches across India, and higheraverage premiums per policy, as well as growth from the bancassurance channel. Prudential's Korean life business with APE of £218 million, which is a growth of54 per cent from 2005, continues to benefit from the expansion of the tiedfinancial adviser channel in 2006 partially offset by slower growth in thebroker channel where some brokers have been restructuring. Bancassurance growthcontinues to be constrained by regulatory individual company production caps andPrudential continues to explore opportunities to work with more banks. Sinceacquisition this operation has outperformed the industry and is well on track tobecome a major player. In Taiwan, Prudential's focus continues to be on value rather than volume.Whilst full year APE at £148 million is 6 per cent lower than last year, theproportion of higher margin unit linked remains high relative to the industry at58 per cent. Prudential's life business in Indonesia continues to go from strength tostrength with APE sales of £74 million, 54 per cent up on last year driven byincreased agent numbers. This business has a high proportion of unit linkedsales and is the well established market leader in this product. Although growth in Prudential's Singapore life business slowed in the thirdquarter as equity market volatility impacted single premium linked business, ithad a strong fourth quarter and full year APE of £108 million is up a healthy 23per cent on 2005. Prudential's Hong Kong life business, at £139 million for2006, is up 26 per cent over 2005 driven due to a successful retirementorientated savings product launch and strong results from Standard CharteredBank. In Malaysia sales across the industry remain depressed followingregulatory changes last year; however in the fourth quarter sales growthrecovered and Prudential's new business was up 15 per cent compared to the samequarter in 2005. Full year APE in Malaysia for Prudential was £72 million, up 6per cent on 2005. The Takaful joint venture with Bank Simpanan Nasional (BSN)commenced sales in November. In China, CITIC Prudential APE for 2006 of £39 million is an increase of 56 percent compared to 2005, reflecting an increasing contribution from the new citiesas well as the continued growth from the longer established operations such asGuangzhou and Bejing. The Vietnamese market continues to be challenging and Prudential's APE year todate has declined by 14 per cent, however the long term potential of this marketremains excellent. Prudential's other smaller operations of Japan, Thailand and Philippines grew at133 per cent, 83 per cent and 14 per cent respectively year to date. Prudential has an excellent track record of building a profitable business inAsia and its focus continues to be on long term, profitable and sustainablegrowth. Asset Management M&G Outstanding fund performance led to record fund inflows into M&G's retail andinstitutional businesses during 2006. Gross fund inflows were £13.5 billion, anincrease of 70 per cent on the previous year. Net fund inflows were theirhighest ever, increasing by 58 per cent to £6.1 billion, reflecting M&G'sleading position in retail fund management, institutional fixed income, pooledlife and pension funds, property and private finance. External funds undermanagement grew significantly, up 24 per cent to £45 billion, and at this levelrepresents over a quarter of M&G's total funds under management. Fund inflows into M&G's retail business continued to perform very strongly.Whilst gross fund inflows increased by 75 per cent to £6.7 billion, net fundinflows more than doubled to £3.1 billion. Fund performance across M&G's rangeof equity, bond and property funds was excellent, which was recognised by M&Gbeing named Best Equity Group (Large) and Best Non UK Equity Group (Large) atthe Lipper Citywire All Stars Awards 2006. Demand remained strong for M&G'shigh alpha equity and competitive fixed income and property offerings and M&Gcontinued to innovate during the year with the launch of two new funds, the M&GOptimal Income Fund and M&G European Property Fund. Retail sales were strong inthe UK and South Africa, and across the European markets of Germany, Austria,Switzerland, Luxembourg, Italy and Spain, where M&G is maximising theopportunity created by the continued opening up of these markets to foreignplayers. M&G's institutional business also saw substantial growth with gross fund inflowsincreasing by 66 per cent to £6.8 billion and net inflows rising 19 per cent to£3 billion. M&G's scale and market reputation in fixed income continued toposition it very favourably in both traditional areas of the market, such assegregated funds, and more alternative areas such as structured credit. Fundinflows into segregated funds was strong on the back of good fund performancewhich saw 86 per cent of funds above benchmark over one year and 90 per centover three years. M&G consolidated its market leading position in structuredcredit with the launch of seven new Collateralised Debt Obligations (CDOs)during the year and was named CDO manager of the year by IFR magazine.Significant fund inflows were generated into M&G's Episode global macro fund,with the fund reaching $1.5 billion assets under management within 17 months oflaunch. Asian Fund Management Business The Asian Fund Management Business continues to deliver record net inflows inthe fourth quarter in 2006. Net inflows of £0.9 billion, were up 155 per centfor the same period in 2005, reflecting the strengths of the Asian FundManagement's geographic and product diversification. Full year record net inflows of £2.5 billion were up 91% from 2005. Of theannual net inflows of £2.5 billion, £2.3 billion or 94 per cent have been fromnon-MMF products. Equity and non-MMF assets grew by £2.0 billion in 2006. Total third party funds under management were £12.3 billion, an increase of 21per cent compared to the fourth quarter in 2005. India and Korea were the maincontributors to this growth with funds under management increasing by 36 percent, and 27 per cent respectively. India growth was largely driven by strongequity and money market inflows. Korea growth was attributable to positivemarket sentiment, expanded distribution channels and good fund performance whichled to a high level of equity and structured product inflows. During the fourth quarter, Prudential Vietnam Fund Management Company launched aCayman structured closed ended fund targeted at sophisticated investors anddistributed for the first time actively to high net worth individuals throughprivate banking channels. This fund raised close to £160 million and is listedon the Irish Stock Exchange. Prudential Vietnam Fund Management Company has nowbecome the largest domestic mutual fund company in Vietnam in terms of fundsunder management. CITIC Prudential Fund Management launched its second fund inthe fourth quarter and raised £220 million. Launched only last October, CITICPrudential Fund Management has already raised over £420 million from its twofund launches in 2006. Prudential Asset Management (HK) Limited has been awardeda US$200 million quota by China's State Administration for Foreign Exchangeunder the Qualified Foreign Institutional Investor ("QFII") scheme. Introducedin May 2002, the QFII scheme allows qualified foreign institutional investorsdirect participation in China's domestic "A" share equity and fixed incomemarkets. PCA Securities Investment Trust in Taiwan launched the Asia PacificREITs Fund in the fourth quarter and achieved its FUM cap of £157 million. Prudential remains confident that its fund management businesses in Asia are inan ideal position to achieve strong and profitable growth as it has put in placea distinctive and advantaged platform. ENDS Enquiries: Media Investors/Analysts Jon Bunn 020 7548 3559 James Matthews 020 7548 3561William Baldwin-Charles 020 7548 3719 Valerie Pariente 020 7548 3511 Notes to Editor: 1. Annual premium equivalent (APE) sales comprise regular premium sales plus one-tenth of single premium insurance sales and are subject to rounding. 2. Present Value of New Business Premiums (PVNBP) are calculated as equalling single premiums plus the present value of expected new business premiums of regular premium business, allowing for lapses and other assumptions made in determining the EEV new business contribution. 3. UK Retail sales include all products except bulk annuities and credit life sales. 4. There will be a conference call today for wire services at 11.30am (BST) hosted by Mark Tucker, Group Chief Executive, and Philip Broadley, Group Finance Director. Dial in telephone number: +44 (0)20 8609 0205. Passcode: 155439# 5. There will be a conference call for investors and analysts at 12.00am (BST) hosted by Mark Tucker, Group Chief Executive, and Philip Broadley, Group Finance Director. From the UK please call +44 (0)20 8609 0205 and from the US 1866 793 4279. Pin number 487687#. A recording of this call will be available for replay for one week by dialling: +44 (0)20 8609 0289 from the UK or 1 866 676 5865 from the US. The conference reference number is 160468. 6. High resolution photographs are available to the media free of charge at www.newscast.co.uk (+44 (0) 207 608 1000). 7. Sales for overseas operations have been reported using average exchange rates as shown in the attached schedules. Commentary is given on the results on a constant exchange rate basis. The two bases are compared in the table below. Annual Premium Equivalent Sales Actual Exchange Rates Constant Exchange Rates 2006 2005 +/- (%) 2006 2005 +/- (%) £m £m £m £m UK 900 891 1% 900 891 1%US 613 515 19% 613 508 21%Asia 956 731 31% 956 734 30% ______ ______ ______ ______ ______ ______Total 2,470 2,137 16% 2,470 2,134 16% Gross Inflows Actual Exchange Rates Constant Exchange Rates 2006 2005 +/- (%) 2006 2005 +/- (%) £m £m £m £m M&G 13,486 7,916 70% 13,486 7,916 70%Asia 20,408 18,457 11% 20,408 18,049 13% ______ ______ ______ ______ ______ ______Total 33,894 26,373 29% 33,894 25,965 31% Total Insurance and Investment New Business Actual Exchange Rates Constant Exchange Rates 2006 2005 +/- (%) 2006 2005 +/- (%) £m £m £m £m Insurance 15,094 13,700 10% 15,094 13,641 11%Investment 33,894 26,373 29% 33,894 25,965 31% ______ ______ ______ ______ ______ ______Total 48,988 40,073 22% 48,988 39,606 24% 8. For Jackson, market share data is provided for the first nine months of 2006, being the latest available. Variable annuity data is sourced from VARDS, fixed annuity data is sourced from LIMRA and fixed index annuities data is sourced from LIMRA and The Advantage Group. 9. Total number of Prudential plc shares in issue as at 31st December 2006 was 2,444,312,425. This number will be reported monthly to the stock exchange going forward. 10. Financial Calendar 2006 - 2007: Full year 2006 Results 15th March 2007 Q1 New Business Figures 19th April 2007 AGM 17th May 2007 Interim Results 1st August 2007 Q3 New Business Figures 18th October 2007 *Prudential plc, a company incorporated and with its principal place of business in the United Kingdom, and its affiliated companies constitute one of the world's leading financial services groups. It provides insurance and financial services directly and through its subsidiaries and affiliates throughout the world. It has been in existence for over 150 years and has £237.5 billion in assets under management, (as at 30 June 2006) Prudential plc is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America. Forward-Looking Statements This statement may contain certain "forward-looking statements" with respect tocertain of Prudential's plans and its current goals and expectations relating toits 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. Bytheir nature, all forward-looking statements involve risk and uncertaintybecause they relate to future events and circumstances which are beyondPrudential's control including among other things, UK domestic and globaleconomic and business conditions, market related risks such as fluctuations ininterest rates and exchange rates, and the performance of financial marketsgenerally; the policies and actions of regulatory authorities, the impact ofcompetition, inflation, and deflation; experience in particular with regard tomortality and morbidity trends, lapse rates and policy renewal rates; thetiming, impact and other uncertainties of future acquisitions or combinationswithin relevant industries; and the impact of changes in capital, solvency oraccounting standards, and tax and other legislation and regulations in thejurisdictions in which Prudential and its affiliates operate. This may forexample result in changes to assumptions used for determining results ofoperations or re-estimations of reserves for future policy benefits. As aresult, Prudential's actual future financial condition, performance and resultsmay differ materially from the plans, goals, and expectations set forth inPrudential's forward-looking statements. Prudential undertakes no obligation toupdate the forward-looking statements contained in this statement or any otherforward-looking statements it may make. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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