Prudential PLC ADR Executive Insights: Indonesia Manpower, Solvency II

On Wednesday, Prudential (NYSE:PUK) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared…

Indonesia Manpower

Blair Stewart – Bank of America Merrill Lynch: Two questions please, firstly in Indonesia you talked about a 23% increase in average active manpower. Just to clarify what period is that over that year-on-year. Could you maybe comment on how you see that particular measure moving forwards? Secondly, with regards to Singapore and bancassurance more generally, clearly seeing strong increase in penetration through the banking partners, I wonder if you can just share perhaps very generally information about how far you’ve already penetrated into the banking customer base and what the outlook there is, I mean are we starting to reach saturation point in any of these banking channels?

Tidjane Thiam – Group Chief Executive: On the first question the 23% is Q1-to-Q1 year-on-year. I think what we indicate there we’ve often talked about this whole topic. It will give you a sense of the quality. The emphasis on quality in Indonesia because we realize the numbers are large, it’s a young market but we want to show that we are not just hiring agents, we are really focused on activating them, and that is something on which the management is very focused and is incentivized. So it’s quality growth. Real reward of cushion on these numbers is that the – especially on the region, you’ve always heard me say that they don’t mean a lot when you take them to regional level because you’re mixing some a bit of Vietnam, a bit of Hong Kong, a bit of Singapore, Indonesia and Korea. So, I think over a longer period of time, they are meaningful but I wouldn’t have also read too much into the quarter-by-quarter evolution. Second question, (bancassurance) is important, the UOB deal for us was a fantastic opportunity. We are thrilled to get it. We knew that it was an under exploited franchise, that was a big part of why we paid the price we paid and its performed beyond our expectations. What I can say is getting (indiscernible) teams under field talking to UOB as a partner, there is a still a lot of headroom there. We only started really working with franchise, so we are very comfortable that there is still a lot of cost available within UOB particularly in Singapore, where we have very historic base and a very strong brand and strong presence. Very good relationship with our customers. So we have started putting raiders on the power products that we sell and that’s going to drive the progression in both volume and margins in the coming years that we expect to be strong.

Blair Stewart – Bank of America Merrill Lynch: Just a follow-up on that presumably it’s not just a question on penetration as well as it’s a question of the type of product that you’re selling and could you maybe not for today, but it would be interesting to compare the penetration and the product type that you’re getting through UOB compared to more established bancassurance relationships like Standard Chartered, I don’t if anything you see on that at the moment?

Tidjane Thiam – Group Chief Executive: We can give you a sense of that. As I said, we sell a lot of power to meet restructure of the market in Singapore with the (same in our) agency, in our agency business but probably not for today, we can give you more color, but directionally it’s really driving more health than protection through that channel. The prospects are good again on the back of the good banking relationship. UOBs are really old established franchise in Singapore and that’s why we are very keen to have them. We have a very good customer base also.

Solvency II

Jon Hocking – Morgan Stanley: I have got two regulatory questions if I may. First of all, Solvency II, Tidjane I see you are quite on the tape talking about the Solvency II negotiations. So wonder if you could just give us an update of your discussions with regulators and politicians and what you think the progress has been particularly with regards to the equivalence issue. And then second, in Singapore I wondered if you could comment on the Monetary Authority’s review into the advisor industry and what your thoughts are there, what engagements you have to-date with the MAS?

Tidjane Thiam – Group Chief Executive: On Solvency II, as you know, on matching premium now called matching adjustment, there has been progress. There is still quite to discuss there, but it’s there, and I must say the engagement is very good. As you know, Mark Hoban is leading things on the government side. We also have (indiscernible) who is in Brussels and coincidently he was with U.K. (indiscernible). So I knew him from there and he’s a detail oriented man, he is a finance man, he understands the numbers and the issues. It has been great to have him in (indiscernible) by the U.K. and he has made a big difference. He just gets it. He comes from Treasury. It’s great to have a Treasury man leading the charge there. It has got a huge impact. So on U.S. equivalence, frankly I think that’s probably the an area of greatest concern. There is some progress. There was talk of five years plus one, there is now talk of five plus five, in fact always been our position, our request as an industry, so (indiscernible). But frankly there is no clarity yet on the process going forward and how the U.S. and EU are going to resolve this. So that’s something on which we push very hard. We’re very keen. I think the U.K. government is very aware and will be nice that I think trying to use some direct access to the U.S. also to progress. We need to continue to work in that space.

Jon Hocking – Morgan Stanley: Did you think we have clarity this year?

Tidjane Thiam – Group Chief Executive: I can’t guess. Jon, I wish I could give you a clear answer. So I just – frankly, I just don’t know. We’re working towards that goal. We’re still sort of (indiscernible). It’s completely outside my control.

Nic Nicandrou – CFO: I mean not equivalent. We know it’s going to be in one into 2013, so that subject alone will get us through to the middle of next year.

Tidjane Thiam – Group Chief Executive: I think with sooner or better but really we’re pushing hard. That’s all I can say. On single pool, I’ve read personally carefully the speech given. Directionally we’re very supportive of what MAS is trying to do. I think it’s good for the industry. Our focus on the customer is consistent with what we want to do. It’s a very sophisticated market. We have a very sophisticated regulator. It’s very comforting. I looked at the list of the people on the panel and the commission that’s going to drive this. It’s a very broad range of people from all works of life, so you can expect that it’s going to be a sensible process and certainly they are very, very keen to engage with us. Well, the Deputy Prime Minister will be in London soon. He has to see me. He is in my (dairy). He is also Chairman of the MAS. (These are) sense of importance I gives to this, so it’s positive. Engagement is positive. We are involved from the start. Our business there would be a big contributor. So we think it’s good, it’s – the aim is to professionalize the agency force, one of the key things, and that’s something we support. We have very well trained agents. We mostly sell insurance and it’s to make all the sales process commissioning, et cetera, more transparent and these all things we are supporting off.

Jon Hocking – Morgan Stanley: Do you have any idea of the unlikely times, (indiscernible) in the consultation period or the asia consultation period plays recently?

Tidjane Thiam – Group Chief Executive: No, not yet. I don’t think we have clarity on that, but we can give you more granularity on that offline.