Pierre Fenech

Good afternoon again. Thanks Ed and Kevin. I will take you through a better understanding of our partnerships distribution model and our achievements to date, so that we're very clear when we talk about partnership distribution, it covers all sales activities and marketing activities where we're accessing the customers of our partners. Whether we're doing this with our own distribution, or whether we're leveraging the distribution of our partnership. Some of the relationships we have with partners are exclusive, they're captive relationships, where we're the exclusive partner with them, or supplier of a specific product lines, and others are open architecture partnerships, where we are competing with other suppliers through that partner.

Those of you who were here four years ago would have heard Mike Bishop, who will talk to you later on, talking about our very successful bancassurance model in 2000. Since then, we have not only rolled out that bancassurance model to new markets, but we have also increased the breadth of reach in some of the key markets by increasing the number of partnerships through which we operate in that market. And another change that happened since 2000 is that we have moved on from just pure bank partners even into the space of non-bank partners.

What I am going to present are conceptual maps, and they are for -... It's simply to get the concept. Why do we pursue partnership? Although we believe, as Ed and Kevin said, that the agency model will continue to prevail, and will be one of the, if you want, more successful models in Asia, we also know that the agency model will not give us full reach of the market. We talked about also the deposits sitting in banks, and we want to access those deposits. Therefore we see that partnerships will actually help us cover a lot of the white space that's left, creating greater distribution reach across the market and into the market. We see this trend emerging in developed markets like Hong Kong, and Singapore, where bancassurance now is delivering a significant portion of the new business generated over there. From our point of view, these are all good signs, because our experience has been that as you grow these channels, the market expands, and in reality, you're not replacing bits of the market with other bits. Therefore it generates more business.

Today, our direct marketing and non-bank independent broker channels are actually delivering a sizeable chunk of our business, as I will show you in future charts. We believe also that there is further expansion in these channels to come in Asia, and we also believe that work-site marketing will be an emergent distribution in Asia, especially where retirement pensions would become indited, especially where they would be also funded by employers. This chart actually shows the impressive growth we have achieved through these channels since 2000. We have delivered a compound average growth rate of 123% per annum; the contribution has moved from 2% of the total APE to 25% of the APE, and apart from the major growth that you see in the blue bar, which is Hong Kong, we have added new markets, particularly Korea, Taiwan and India - the red bar. India, on the chart, is represented only by 26%. If you were to size it up to 100%, its contribution would be somewhere in between that of Hong Kong and Korea. You will also notice emerging that you have other markets like the black line at the top, which is Thailand. And in fact you heard Dan talk before about the model that we use in Thailand of multiple distribution, non-agency based distribution, and that's the contribution you have over there. You know, apart from achieving this fantastic result, we believe that there is room for further growth, especially as we continue to add quality bancassurance partners to our portfolio, and supplement these further with non-bank partners.

So to what do we attribute our success? I think there are some factors that really drive the success. Firstly, there is no doubt in my mind that the strong commitment the organisation has to multi channel distribution is a major driver. Usually you have to shift your paradigm, usually you have to get over the paradigm of channel conflict to push this through, and the businesses committed to it. Another contributor to our success is our focus on quality long-term partners, and I repeat that: quality long-term partners, and there's a reason: because we want our partners to be committed as much as we are to building the appropriate infrastructure and capabilities. So we're looking to generate value in the medium to long term, not the flash in a pan approach. And that's why we focus on quality long-term partners.
Thirdly, we know how to do this stuff. We have a proven track record. We have been successful in implementing it across the region, we have the advantage of proven operational models that today we have modularised, so these models are flexible, adaptable and transferable. Over the years, we also have built a bank of talented people, both in our operational teams and in our management teams. We have the advantage now of being able to move this talent around the region, so that we can support start-ups, we can support expansions, we can support trials, we can support (incomprehensible). With so many partnerships, we can provide development opportunities and even career paths for our people, who actually remain within these channels. And this creates a pipeline of future leaders, so that we can actually accelerate the growth. More importantly, as you'll see in later presentations, we are keen and continue to be ahead of the game by investing in innovation. We seek new ways of reaching appropriate target customers, and later on, some of my colleagues would be sharing what they have achieved in their businesses.

Since most of you have been here in 2000, we have expanded and more than tripled the number of bank partnerships where we have a strategic alliance or a significant relationship. And apart from the partnerships that we put up there, we also have a number of other bank partners where we conduct campaign-based initiatives. Our most significant multi-country relationship remains with Standard Chartered Bank, where today we operate partnerships in Hong Kong, in Singapore, in Taiwan, in Malaysia and even in Thailand. The focus on the current relationships that we have is to continue to develop and expand the existing businesses. We believe that growth will continue as the partnerships mature and as the regulators bring down a number of inhibiting barriers. Our operating model has also become more and more sophisticated. We continue to evolve the bancassurance model, we expand the bandwidth of channels through which we reach the customers. We have added mobile channels to our in-branch financial services consultants, because we found that there is a large proportion of bank customers that today don't walk through the branch, and this way we can access them at their home or their place of work. We also use these mobile financial consultants, who are our own staff, to service existing bancassurance customers. We have expanded the sales capability of the branch staff. They now sell simple medium-long term savings products, and we have also added our own specialists, insurance specialists, who work side by side with banks now, servicing priority customers and small to medium employer customers. At the same time we started joining forces with our bank partners to establish work site marketing initiatives that leverage both the bank product base and our product base and targets the staff of their commercial customers. In a mature market like Hong Kong, we apply a sophisticated operating model with a broad spectrum of channels, however when you look at emerging markets like Viet Nam, the model that we apply is very simplistic. It's our FSC's, or Financial Services Consultants, who are actually working on the walk-in customers at the branch of our bank partners. The good thing is that as the markets emerge and mature, we are able to evolve that simple model into something that's complex and sophisticated as the one you see on the screen.

This slide shows the break up of -... from where we're generating the new business. You have seen the slide on the left hand side, which shows the 25% of this years new business is coming from the partnerships distribution. You take that, and break it out into what I call channel clusters - you can't go channel by channel, otherwise it becomes too small, but basically the green bits show bank based channels, 25% is coming out of sales by bank staff, 24% is coming out of sales by our own financial services consultants operating in bank branches, 19% is generated out of direct marketing to the banks own customer bases. In the lilac-coloured part of the chart, they are the non-bank segments, 11% coming from direct marketing to affinity partners, non-bank affinity partners, and 21% coming out of the independent non-bank brokers or financial agents. So what we have achieved today is a complete de-risking of this side of the business, by having geographical spread, having multiple partners, having bank and non-bank partners and even a balance between the channels inside both the banking and non-banking bits of the business.

This success actually confirms our commitment to further expand the multi distribution strategy, and to focus on the partnership distribution. We continue to expand the business with existing partners, improving the productivity of the existing channels and expanding the number of channels to reach more customers. We also continue in our active pursuit of new long term relationships with quality bancassurance partners. In fact, this year we secured two exclusive relationships, one with E. Sun bank in January in Taiwan, and E. Sun since then has acquired Kaohsiung Business Bank, which basically doubles their branch network in Taiwan and also spreads their access to the southern part of the geography of that country. And more recently, in August, we announced an exclusive partnership with Maybank in Singapore. We have also demonstrated our appetite and capability to identify and develop innovative non-bank channels. We see this as an area for major growth. Today, we are keen to leverage our direct marketing successes, and we will expanding this capability further across the region to gain access to more affinity customer bases for both insurance and even retail funds management. We also believe that there is the opportunity to take the learnings from our successful work-site marketing experience in the UK, and apply it to selected markets out here in Asia. We maintain strong management commitment to build on this experience and to develop a pipeline of talent that will drive and support the future growth.

In conclusion, if there's one key message I would like to give you at the end of this presentation. it is that apart from having achieved tremendous success in partnerships distribution in Asia, we still believe that there are tremendous opportunities for much further growth in the future. We believe that Prudential is well placed to continue to be a major participant in this sector. Thank you.

I will now pass on to my colleague, James Wong, who is the chief executive officer of our Hong Kong insurance business. The partnership distribution team in Hong Kong manages one of the most successful bancassurance operations. So James will give us an insight into the successes of his team. James?

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