Building the Integrated Operating Model

Clive Baker

Goodmorning, Ladies and Gentleman. My name is Clive Baker.

Krishnan Narayanan

I'm Krishnan Narayanan.

Clive Baker

It's my pleasure to be here today to talk about to you about Prudential's strategy on building the integrated operating model, with a particular focus on a common IT platform and standardised processes.

Four years ago, we talked to you about our IT strategy and at that point it was very functional to meet our business growth. We talked about our strategy supporting distribution, geography, products and customers. This strategy has served us very well and it has enabled our local markets to meet its local needs. You can see from the disadvantages side here, we do see a fair amount of duplication on this strategy, where we do have 12 IT teams in those 12 countries; we do have multiple back-up sides and we potentially have enhancements done many times, restricting the amount of synergy that we can get from that current model. Also, our local management by having to grapple with operation and IT issues at the same time as looking at more of value facing initiatives on distribution and sales.

Today, our 12 companies have grown and issued 160,000 new policies every month. And this figure is growing. This scale has lead us to look increasingly at synergy going forward on our operating model. In addition we saw triggers supporting our change for a more integrated model. Some of the systems in our more established markets are nearing a stage that they may need to be upgraded, or indeed over time replaced. Our combined businesses, as I've said, have reached a significant scale that is now increasingly important to look at operating efficiencies. In addition we see value, I think you've heard from Pierre about customer centric strategy and solutions from systems, as opposed to a policy based solution where we are today and typical for Life companies.

With this background we went on to review options for an integrated model and solutions therefore. We did an comprehensive evaluation, really covering the criteria of the solution you see on the right hand side, both for the model and the system. We did a financial evaluation of moving to an integrated operating model and this was strongly viable. The financial viability is really based around doing things once as opposed to 12 times. The cost of building an integrated model is in the region of £20 million and we see a return on capital of approximately 30%. This amount has been funded within Prudential Corporation Asia, and has been and continues to be within the plans that we have set out.

I will now pass you to Krish, who will now tell you we took this forward.

Krishnan Narayanan

Thanks, Clive. (If you?) are likely to meet the needs of our Asian businesses, we have to be in vanguard of change, not the rear. With this view, we embarked on the creation of an integrated hub-and-spoke operating model, to standardise all our operational processes, develop a single common business platform and supporting them in regional shared hubs. And to facilitate the implementation we established Prudential Services Asia, a new shared services company, that will roll out this model across the region. The vision of Prudential Services Asia, ladies and gentlemen, is to deliver service excellence, through the use of innovative technology. Let me explain the hub-and-spoke operating model in more detail.

This is how the model works. At Prudential Services, the hub, we have a highly integrated (suit?) of front-to-back systems. All the systems components have been built using best of grade next generation technology, leveraging on the expertise in the region and sharing all our best practises. By introducing further automation through a point of sale, (data capture?) and workflow based routing techniques, we have created a straight-through processing environment. The use of customer based, as opposed to policy based solutions, provides single customer view to our businesses, enhancing their cross-selling and customer servicing capabilities. Specifically, we are upgrading our sales force automation systems to provide seamless integration across the entire sales cycle.

Currently we have imaging and workflow solutions in four of our businesses. This will be rolled out consistently across the region, enabling paperless processing and an efficient workflow. Automated underwriting, which (modified over?) business is used, will also be consistently rolled out across the region. Ultimately the hub provides a strong operating platform, offering valuable IT systems and processes to the businesses, while our Life operations are the 'spoke countries' focus on the core areas of sales and marketing and customer servicing.

...to operate efficiently and focus more on the customer. We'll have best practises in the operations and IT, rolled out to all the countries. We'll have improved and (incomprehensible) customer service across the region. And we will be quicker to market the products and services sharing on our common platform. The benefits from leveraging an a regional scale and expertise, will offer significant value and a clear competitive advantage to Prudential Asia and the Group.

Clive Baker

Ladies and Gentlemen, I believe you just came from Malaysia, where we've been in business for 8 years. Our success in Malaysia and particularly the skill sets of the staff that we have there was one of the key factors in us choosing Malaysia as our first hub. Malaysia does have a very strong infrastructure to support IT, it also has a very good natural language pool, where people speak Mandarin -Putonghua- for China and Taiwan; Cantonese for Hong Kong; Bahasa, which serves as Malaysia and Indonesia; and also English for a lot of south-east Asian countries. Also of particular note, the government in Malaysia encourages development in technology. It has set up enterprise zones and it gives tax incentives for locating in those zones. Incentives are: tax exemption for 5 years, extendable for another 5 years, and Prudential Asia has availed of these incentives.

We are located in one of these enterprise zones. This is Cyberjaya. You can see we're at home with many other multi-national corporations; you'll recognise HSBC and Shell, they are two of the bigger employers in Cyberjaya. We would have loved taking you to Cyberjaya on your trip, but it's a 3-hour return trip from Kuala Lumpur on a dry day and I think there has been a bit of rain recently; so forgive us for you not taking you there.

Where we are today – we have a team of 100 skilled people working for Prudential Services Asia. These are a blend of technology experts and life insurance experts from Prudential's regional businesses. The suit of systems that Krish outlined have been developed and now they are in a stage of comprehensive testing. These systems will go live early into next year. We will start by going live with Malaysia, our first business, and followed very closely by Singapore. We are also at the stage of planning for the second hub, the China hub; this work will be undertaken in 2005 into 2006.

So, in summary, ladies and gentlemen, I hope that this brief presentation has shown you that the integrated operating model is the right strategy for Prudential to maximise synergy across all of its 12 existing and that by leveraging our regional scale and expertise in Asia we will have a continuing competitive advantage. I'm certainly exited where we are today and the opportunities that this gives us, and I do believe that is will give tremendous potential, increased value to Prudential going forward.

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