Prudential Plc Q2 FY2020 earnings call

• Discussion on Jackson's separation: Considering IPO as a route to provide more capital for reinvestment in Asia, with Jackson's capital levels adjusted to be appropriate for standalone status and no anticipated need for additional capital. • Asia regulatory structure: Hong Kong's LCSM (308%) not affected by Jackson's standalone status. • Hong Kong business: Domestic sales had a slowdown in Q2 due to social distancing and containment measures, but agency force grew 7%, and Pulse platform has 400,000 members with 12,500 conversions to full premium. • Pulse platform: Continues to expand with more services, integration with ecosystems, and plans to broaden geographical reach. • Indonesia: Investing heavily in automation, agency force, and product launches, with sales impacted by COVID but underlying business improving.

No detailed segment financial performance with absolute terms and revenue contribution % provided in the transcript.

• Intention to proceed with Jackson's IPO in the first half of next year, maintaining optionality for demerger if market conditions require. • Expectation of organic capital generation in Jackson and continued investment in Asia for growth, with no anticipated need for additional capital injection into Jackson for the transaction.

• Regulatory uncertainties: Uncertainty regarding Hong Kong group-wide supervisory regime. • Market volatility: Impact on embedded value and RBC ratios due to interest rate drops and equity market fluctuations. • COVID-19 impact: Restrictions and reduced customer engagement affecting sales and operations across markets.

Q: What made you think the full separation of Jackson is best achieved through an IPO?

A: Mike Wells stated IPO provides more capital for reinvestment in Asia over time, while demerger is faster but less capital.

Q: Do you foresee the need to inject any additional capital into Jackson to facilitate this transaction?

A: Mike Wells said no, Jackson's capital levels are appropriate for standalone entity, no anticipated need for additional capital.

Q: How should we think about changes to hedge strategy within Jackson?

A: Mike Wells and Axel Andre discussed futures-based approach, counterparty risk focus, and rebalancing based on market conditions.

Q: What's your base case for Hong Kong's border reopening?

A: Nic Nicandrou said no specific forecast due to fluid COVID situation, but PRU is faster at responding to opportunities.

Q: Can you comment on Asian new business strain?

A: Raghu Hariharan said it reflects product mix shift and lower rates.

Q: When are we likely to get visibility on Hong Kong group-wide supervisory regime?

A: James Turner said expected to come into force in Q1 2021.

Q: What's the level of organic RBC build at Jackson now not paying a dividend back to group?

A: Mark FitzPatrick mentioned organic capital creation around $1 billion, with adjustments post Athene reinsurance.

Q: Comment on Indonesia's IFRS profits growth?

A: Nic Nicandrou said lag effect from past years, investment in automation and agency force, with improvement expected once normalized.