20 Apr 2001

Prudential plc First Quarter 2001 New Business Results

• Record Group total insurance and investment sales of £5.0 billion, up 29 per cent on prior year. On an annual premium equivalent (APE) basis, sales were £642 million, up 29 per cent.
• UK insurance operations sales of £226 million, an increase on first quarter 2000 of 10 per cent on APE basis.
• Egg customer numbers reach 1.57 million. Credit card balances grow to £1.3 billion, up 36 per cent on year end 2000.
• Fixed Annuities sales grow by 35 per cent in the United States, but sales of equity-based products decline reflecting adverse market conditions.
• Asia insurance sales total £373 million, up 285 per cent on first quarter 2000, and investment sales at £1.6 billion, 264 per cent up on first quarter 2000.

Jonathan Bloomer, group chief executive, Prudential plc, commented:

"First quarter 2001 sales have reached £5 billion for the first time, an impressive group performance. Our strategy to grow internationally, broaden our distribution reach and diversify our product range has been a key factor in this achievement.

"We saw continuing strong growth in Asia, in both our existing and new operations. Our UK insurance operations delivered a 10 per cent increase in sales, driven by strong growth in corporate pensions and annuities. The benefits of our policy of product diversification are particularly apparent in the US, where the strong growth in fixed annuities partially offset the industry-wide decline in the sale of equity-backed products."

UNITED KINGDOM

UK Insurance Operations

The UK insurance operations have delivered sales of £226 million, 10 per cent higher than the same period last year, on an APE basis.

Intermediated Sales
APE sales via intermediary channels (ie through Independent Financial Advisers, Consulting Actuaries and Appointed Representatives), in the first quarter were £109 million, 14 per cent above prior year.

The positive first quarter results are due in particular to sales of annuities and individual pensions. £25 million (APE) of annuities were sold via the intermediary channel, 108 per cent up on first quarter 2000, and sales of individual pensions products are 67 per cent above prior year at £20 million, largely as a result of the successful launch of the Premier Group Personal Pension Product.

Within annuity sales, total bulk annuity sales accounted for £144 million, in the first quarter 2001, a significant improvement on the prior year level of £20 million. These bulk annuity sales were written by the shareholder-backed entity Prudential Retirement Income Limited (PRIL).

Life sales through intermediaries, of £48 million (APE) in the first quarter 2001, were 16 per cent lower than the first quarter 2000. This reflects reduced sales of house purchase endowment policies, down 50 per cent on first quarter last year at £3.5 million, and reduced sales of Prudence Bond, down 21 per cent on prior year at £33.7 million.

Prudential will announce separately today that, due to the shift within the marketplace towards repayment mortgages over the past two years, and the consequent significant fall in demand for endowment products, Scottish Amicable will withdraw from the mortgage endowment sales market.

Direct Sales
APE sales by direct channels, including the direct sales force, work site marketing and remote channels, for first quarter 2001 were £117 million, 5 per cent above prior year.

Sales of corporate pensions were £54 million, 42 per cent ahead of first quarter 2000. This increase is predominantly due to the new corporate pensions mandates won by Prudential and reflects the quality of our pensions administration platform.

Annuity sales via direct channels were £16 million, in line with first quarter 2000.

We are well positioned in the stakeholder market. Our schemes were open for business at launch on 6 April 2001, in addition to the two own-branded affinity schemes that we developed for the Trades Union Congress and the British Chambers of Commerce.

M&G

M&G achieved total investment sales of £249 million in the first quarter 2001 and increased its ISA market share, particularly in the IFA channel.

Total investment sales of £249 million were 18 per cent down on sales of £303 million last year, reflecting an industry-wide decline in ISA sales from the exceptional levels achieved in the first quarter of 2000. M&G's ISA sales reduced by 25 per cent, which compared well with the broader market.

Net sales for each month were well above levels achieved last year, reflecting falling redemptions.

Due to its strong product offering, M&G continues to be the market leader in fixed interest products and has achieved growing recognition of the strong performance of its equity funds over the past year.

EGG

In the first quarter 2001, Egg's customer base reached 1.57 million from the previous quarter of 1.35 million. Credit cards continue to deliver the majority of the growth, with quarter end balances of £1.26 billion, up £330 million since the year end.

Egg personal loans have grown by 14% since the year end to a quarter end balance of £485 million. Overall mortgage balances grew 3% net in the quarter, with steady growth from the Egg branded portfolio, which saw sales of £90 million in the period.

Egg continues to see some shift in the profile of its deposit account base. There was a net increase of 7,000 in customer numbers in the quarter, albeit with smaller average balances, leading to an overall decrease in deposit balances of £394 million in the Egg book, which reflects seasonality plus the repricing of the book in February.

Egg Invest, its fund supermarket, doubled its customer base to almost 22,000 customers at 31 March 2001, and had £65 million of funds under administration at quarter end.

EUROPE

Prudential Europe made a positive start to the year with total sales of £15 million, 7 per cent higher than in the first quarter 2000.

In France, sales of Prudential Europe Vie, an innovative equity-backed single premium savings product, launched on 18 January 2001, have reached £7 million. This is being marketed through Centre Français du Patrimoine, the largest multi-product broking network in France. Sales are now running at around £1 million each week, with the with-profit option being chosen for 90 per cent of invested funds.

UNITED STATES

The volatility of the equity markets in the United States has affected sales at Jackson National Life. New insurance premiums at Jackson were down 20 per cent from last year at £1.2 billion. This decrease is attributable to significant market corrections experienced in US equity markets in recent months. This correction has had a universal adverse impact on the sales of equity-based products throughout the US.

Against this background, however, Jackson achieved a 35 per cent growth in sales of individual fixed annuities, reflecting its strength in distribution, its ability to offer high-quality, competitive products, its diversified product portfolio, and its reputation for industry-leading client service.

Persistency numbers have continued to improve. Recent turmoil in equity markets combined with an aggressive business-retention programme have contributed to a dramatic fall in the number of surrenders of fixed annuity policies, which are now running well within our assumptions.

Sales of Stable Value products were strong during the quarter at £565 million. Although sales are down from 2000 levels, the decrease is primarily a function of the timing of the 2000 sales, with almost 40 per cent of total sales having occurred during the first quarter of 2000.

The sharp drop in equity prices during recent months has translated into a slowdown in the flow of funds into equity based products across the industry. Within Jackson, variable annuity sales of £239 million were 51 per cent lower than 2000, and sales of equity linked annuities were down 45 per cent to £72 million. Given the extremely favourable demographic trends in the US, we expect long-term sales of equity products to return to previous levels and continue to grow.

ASIA

Total insurance and investment sales in Asia of £2.0 billion have increased by 267 per cent on the first quarter 2000, with a strong performance from all operations. Insurance sales continued to grow strongly, increasing by 285 per cent to £373 million.

Total funds under management in the Asian mutual fund business grew strongly, exceeding £1.9 billion as at 31 March 2001, compared to £0.6 billion at the end of first quarter 2000, and £1.6 billion as at 31 December 2000.

Regular premium insurance sales increased by 86 per cent and single premium insurance sales were more than five times higher than first quarter 2000. APE sales grew strongly by 131 per cent. Significant growth in Taiwan and Hong Kong reflects our strength in building and managing high quality agency forces. Sales for the quarter also include new business from Japan written in the period since our Japanese acquisition on 13 February 2001. These results include exceptional single premium sales in Singapore (more than five times higher than first quarter 2000), resulting from recent further liberalisation of the Central Provident Fund, which are at lower margins and are not expected to recur.

In April 2001 we became the first international company operating in China to receive approval from the regulatory authorities to market unit-linked products.

Gross investment sales in India, Taiwan and Japan amounted to almost £1.6 billion, an increase of 258 per cent on first quarter 2000, reflecting particularly strong sales in Taiwan. Core Pacific Investment Trust Enterprise in Taiwan was acquired by Prudential in October 2000. Net mutual fund inflows in first quarter 2001 were £136 million.

During first quarter 2001 our joint venture with Bank of China in Hong Kong received £68 million of contributions in respect of the Mandatory Provident Fund launched in December last year. We recorded £25 million of sales reflecting our 36 per cent interest in the joint venture.

Enquiries:

1.Annual premium equivalent sales comprise regular premium sales plus one tenth of single premium sales.

2.Financial Calendar for 2001:
Annual General Meeting - 10 May 2001
Payment of Final Dividend - 30 May 2001
Interim Results: Includes Quarter 2 2001 New Business Results - 26 July 2001
Quarter 3 New Business Results - 18 October 2001

Notes to Schedules:

1. Sales for overseas operations have been calculated using average exchange rates. The applicable rate for Jackson National Life is 1.46 (March 2000 - 1.61). Balance sheet figures have been calculated using closing exchange rates.
   
   
2. In Asia, 'Other' Insurance Products include Thailand, Indonesia, The Philippines, Vietnam, India (26% interest) and China.
   
   
3. Insurance sales for Japan are included from 13 February 2001, the date of acquisition of Orico Life Insurance Company Limited.
   
   
4. Mandatory Provident Fund product sales in Hong Kong are included at Prudential's 36% interest of the Hong Kong MPF operation.
   
   
5. APE subject to rounding differences.