Insurance Overview

Mark Norbom

Next I'd like to invite Dan up. Some of you have met Dan four years ago. He was Managing Director of our Emerging Markets. He now manages all of our Insurance operations, not a small task with 127,000 agents across 12 diverse markets. But I'd like to invite Dan to take you through an overview of the Insurance business and then his team, over the next couple of days, will take you through more detail. Dan...

Dan Bardin

Okay. Today I'll take you through the current insurance model of our organisation, provide you with an overview of our strategy, as well as key themes that will be covered during the course of your visit.
It's been 4 years since our last meeting. At our last meeting I was fairly new to Prudential, I was the MD of Emerging Markets as Mark already mentioned. At that time I took you through the growth plans for Vietnam, for the newly to open India operation, Thailand, Philippines, Indonesia. Since that last meeting we now have three new companies: India, Korea and Japan, as well as expanded in two new branches in China, that being Beijing and our newest opening in Suzhou. We've expanded our team from 27,000 agents to 127,000. In fact at the last meeting I think I made a bold statement and said we would have 100,000 by the end of our planning 5-year period. So, I guess we've exceeded that. Same our year on year growth – I've taken maybe a different time, I guess, from the November of 2000 – our APE has grown 31%, compound MBAP 29%, and just as important, we brought to Prudential additional leadership to support our growth. And you'll be meeting some of the executives we've brought it strengthen our teams to support our growth in the future, over the course of this meeting.

Four trends continue to redefine the markets in Asia.
Deregulation and liberalisation, and that allowed for the new markets in China, India and Vietnam openings; it allowed for the emergence of bancassurance and direct marketing across many countries and it allowed us to introduce UnitLink in be a market leader along that product line.
The greater sophistication of the consumer, which-... with that comes an expectation for a broader range of product, and the need for new sales models, such as the financial advisor, also the emergence of needs-based selling across Asia.
The competition. Our competition have attempted to imitate our model and our success throughout Asia.
And then a greater emphasis as well on compliance across Asia. And having scale across the 12 operations that we do as a significant number of resources committed to (inaudible) compliance. We, as Mark has mentioned, we take this very seriously and we work very closely with the Regulator and we really will not compromise in this area.

Our position in Asia: 12 Life companies, each company with a unique strategy that was adapted to fit the respective market, and that's a very important point. We have not taken a cookie cutter approach to the 12 markets. We are very unique across our 12 Life companies. Our expansion has been a team effort and our growth has been supported by using resources across the region and primarily from those 3 founding companies of Singapore, Malaysia and Hong Kong. And that has given us a very firm start in the new places.

Our pre-1998 markets. A flexible model that allows Prudential to adapt to each market. Our pre-1988 Group of Hong-Singapore-Malaysia are efficient market leaders. They focus on developing multiple distribution channels with a variety of product to meet the growing consumer sophistication. As well they are in the process of introducing sales for (southern Asia?) which has been developed in-house in Singapore and this is a point-of-sale tool that will enhance productivity of our agency force, but allow them to give better service to our customer.

In Indonesia, Thailand and the Philippines we are focused on being a market innovator. Prudential was the first to market and remains a market leader in both Indonesia and the Philippines with Unit Linked product. In Thailand we've taken a bit of a different approach. We have become a very multi-channel approach with agents, bancassurance, credit life and direct marketing. Those post-1998 companies are market makers or they are newly de-regulated companies of China, Vietnam and India. Or focus was on building scale quickly and we have. Vietnam created a nation-wide network of 30,000 in just the first 4 years by using a combination of the branch and our general agent model.
India, in the first 3 years, and just recently I was there to celebrate after 4 years, their 1 millionth customer.
China, number 3 foreign player, as we expand across China next year, I think we'll see some significant growth.
In the differentiated markets of Taiwan, Korea and Japan: in Korea we moved quickly to a non-tied agency bancassurance and direct marketing. In Japan the focus has been on building tied financial advisor network, whereas Taiwan, which has a very productive agency force of over 10,000 along with an innovative bancassurance, have become the market leader in direct marketing, as well they were the pioneer for Unit Linked in Taiwan.

Prudential's success can be recognised by our results. Eight of our twelve companies are top-5 or better. I think you've seen that a few times and we're very proud of that. As well we continue to be recognised across the region by winning numerous awards. In fact, we've shown this slide in our leadership meeting in January and we had to kind of scale it back, because the awards are numerous across the region.

The evolution of our model – two very important points. Our distribution has evolved. By building an agency force of over 127,000 at the same time 20% of our APE coming from non-agent multi channel distribution. And we've moved the product portfolio, which to a predominantly linked, which is 44% and a good balance between A&H and traditional Life Insurance policies.

Mark spoke a bit about the new organisation structure. Earlier this year, we created a new organisation with a structure of all twelve companies reporting to myself. Given our scale and the need to develop a regional view and a consistent approach across the region, as well a more-... more than ever the need for synergies across our
Life companies in creating support. This move- it really is one that all the twelve Life companies come under myself, but I do have a team that helps us support all twelve Life companies.

The regional team – a small team of sixteen with a large base of experience. We have a deep understanding of Prudential best practise and we can drive initiatives across the region. The support of our Life companies and a strategic planning process and insured delivery, results through our quarterly dialogue, our distribution dialogue process.
The local team's outstanding leadership throughout our twelve companies – (they throw?) understanding of the local markets, generate local initiatives and drive day to day results. A very important point of this whole structure, is that the regional approach is not a top-down approach. We have chief executives running our company, and I think as you see James Wong and Ken Hooi and Captain Chia and Chikha, what you'll see is all these chief executives and my job, and my regional team's job, is to support them in growing the companies.

The evolving model includes channel innovation. I showed you earlier the Prudential model of 80% of the APE coming from agency. As you can see on this slide, at the very top you have China and Vietnam. A single channel, tied agency and significant agencies. Then we move down to Indonesia and Philippines, which has a tied agency, but also have gone to a single channel bancassurance, going down the evolutionary scale to the bulk of our companies, basically being, where the greatest of our Life companies reside, where they have multi-channel bancassurance, large tied agency and doing some direct marketing as well. Now going down this further, what you see is Korea, under Mike Bishop as a CEO, we have evolved the model that is moving our company to scale very quickly. This is through a tied FA and multi-channel bancassurance, direct marketing and a non-tied as well. The move to a Korea model of a multi-channel depends upon the state of de-regulation, but at the same time the market sophistication. My last point on this is that channel evolution does drive additional growth opportunities.

Pierre talked a bit about the life cycle relationship. This is product and customer focused that allows us to move from a single transaction to a life cycle relationship with our customer, which is good for us as well as good for the customer. How does Prudential provide this life cycle relationship? Continuing to move needs-based selling across all of our agents and distributors, as also by having a broad range of linked as well as NH products, and by innovation. And that is -once again- our point of sale initiative with the sales force automation. And Kevin Holmgren and Edward Navarro about that a little further.

Genesis. Mark covered that briefly this morning. This comes under the Prudential Services agent. And this is a hub-and-spoke model that we're taking forward. What you will see with Prudential Services Asia, it resides here is (Saberjia?). It will take us to a single IT platform; it will allow for step-change in customer service in both speed and flexibility and a consistent operating model across all 12 Life companies in Prudential. And this is quite a task. Most of all, it gives us operating expenses efficiency, which translates to costs. And Chris and (name?) I believe are here later on this afternoon and they will take you through this strategy.

In summary, the last 4 years you've seen rapid change of our markets across Asia. Managing these changes have required our businesses to have a vision to see the opportunities, when they arise and the capabilities to design and implement strategy to respond. We have demonstrated that we have the capabilities to respond and we built a leadership position across Asia to prove it. There remain significant opportunities across Asia to drive further growth by evolving our model going forward. And we have the experience and the management team in place to continue this evolution ahead of our competition and maintain a market leading position.

Now, I guess as I wrap this thing up, I may just touch a little bit... I think in some of the questions, the fact that we have 127,000 agents- that's a lot of agents. If you put that in a UK context, or a US context, that is a large number of agents. But if you look to the fact that we're serving a population of 3 billion, as China opens and we continue to expand across India, you're going to see exponential growth. And so, I guess, as we do this in 5 years, as I plan to see a significantly large multi-channel, but also an agency force. But what we have proven at Prudential is that we have the tools to grow this channel and grow their productivity as well as the scale.

With that, thank you very much, I think Mark is going to back-up.

Mark Norbom

Thanks Dan.
You know, you may be getting a thread of thought that is running through all of these presentations, and I want you to think about this, as you listen to the other speakers. Think about how difficult it is to develop an agency force of 127,000 and to keep that growing, which we have; think about the other distribution channels, developing a multi-channel distribution capability that is now delivering 25% of our business and continuing to grow even faster than the tied agency channel; think about the licenses and how hard it is to get the licenses across the markets that we have, that allow us to operate our 24 operations in 12 countries; think about the brand presence and the brand strength that we've been able to build up over our decades in Asia; think about the partnership structures that we've created, over 40 distribution partners that we currently have; think about our understanding of the customer and the customer centricity and how that understanding is continuing to grow and how it helps develop our business; think about the complexity of building all of these positions in the markets where we are in Asia; and then think about how difficult it is to replicate. And then you really start to get a sense of our competitive advantage and that it is very strong. And then think about further integrating the model, so that you get better cost synergies, better use of best practises, better spread of the expertise that you've developed over decades. You know, this is the strength that Prudential has and this is the strength that we are building on to build our competitive advantage even stronger as we go forward.

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