Where are you seeing the strongest sales this year both in terms of region and products?
We have had a very good start to the year in both the UK and across Europe. In the UK, the beginning of the year was dominated by pre-Retail Distribution Review (RDR) pipeline business, but we are now seeing very strong demand for our RDR propositions.
In our chosen European markets, which include Belgium, Malta, Cyprus, Gibraltar the Isle of Man and the Channel Islands, we have had a strong start to the year, although it has been particularly strong in France and Spain. Investors remain cautious and our multi-asset proposition and the strength of our brand are proving to be very attractive.
In particular investors are attracted to the International Prudence Bond, the non-UK version of our with-profits proposition
Are there any areas where sales have fallen this year?
The increase in insurance premium tax in Belgium, which represents a relatively small proportion of our overall business, has disturbed the market and slowed sales for now.
Traditionally there has been a tax on life insurance premiums in Belgium – I believe it is one of very few European countries which has one – which had stood at 1.1%. This was increased at the beginning of this financial year to 2% and this has had an impact on sales, with a surge at the back end of the last financial year and it slowing this year.
Many life companies reported having a difficult period last year, particularly towards the end of the year, because advisers were distracted by preparations for the implementation of the RDR on 31 Dec 2012. Was this also the case for Prudential International Assurance?
No. I think we are quite an outlier in that regard, we had quite a good finish to last year – overall we had a very positive 2012, with sales up 15% on 2011. We also saw quite a lot of activity coming into the end of last year which has carried on.
I think the reason we have not suffered the same drop-off as other life companies is because we are operating in a slightly different market to those in the open architecture space, where it can be more ‘commoditised’.
What impact is RDR having on your areas of the business now that we are six months into the new regime?
There has not been a noticeable difference in that the core of the business is still there. We are still seeing good, strong steady flows from advisers and they seem to have made the transition to taking ongoing adviser charges and initial adviser charging well – it does not seem to have been as disruptive as we would have first thought.
What has been very interesting from our perspective is the new business opportunities it has presented. Because the contracts are ‘clean’ this has made it more attractive to different types of client. So we are seeing business coming in from SIPP providers, for example, as they are looking for a clean investment contract. It has made our bond very attractive in that type of market – so far in Q1 we were up around about 6% on the previous year and things have been getting much better since then. We have been very pleasantly surprised about how RDR has gone for us.
In April, PIA international sales director Andrew Wallace said Prudential was exploring the idea of introducing an Irish-domiciled QROPS, a first for a life company. How are plans progressing?
We have linked up with a company called Davy Stockbrokers in Dublin very well. Davy are one of only a small number of very big stockbroking and wealth management firms in Dublin – they are also a pension provider and they can offer Irish pensions. So they can offer a QROPS solution which is based out of Dublin and which falls under the Irish pensions regime.
We believe in QROPS – we think it’s a good market to be in, and we think offering another jurisdiction with different ways of doing things can only be beneficial for the market as a whole. Malta will give them something, Gibraltar and the Isle of Man will give them something, but Dublin will give them something else.
What type of client does the company target?
Our client base is quite diverse but typically our clients are mass affluent investors looking for a strong multi-asset investment capability. In addition to that, UK investors are obviously attracted by the tax planning opportunities associated with offshore bonds while, in Europe, the strength of the brand is key in appealing to expat clients in a number of markets.
Have you noticed any significant trends in terms of underlying fund selection by investors in recent months?
The key trend we have noticed is that clients are continuing to look for cautious multi-asset investment solutions. There’s definitely less demand for more esoteric investment solutions and clients and advisers have refocused on developing a core multi-asset proposition to sit at the heart of their portfolio.
Do you expect any changes to your distribution model in the next few years?
We remain focused on the financial adviser market and have been reassured by the advisers response to RDR with the majority making the successful transition to new business models with the minimum of disruption to their business. We believe advisers are key to ensuring that clients are maximising the investment and tax planning opportunities open to them and we remain focused on that market.
How are the growing regulations in the financial services industry shaping your company’s sales trends?
RDR has been a positive for us and we are seeing strong demand from investors who may have been wary of commission-paying solutions in the past, but who are attracted by the clean product design associated with RDR.
Our main concern is the continuing evolution of different regulations across Europe, which inhibits the working of the single market. We would like to spend our time delivering innovative solutions which assist clients with the issues they face today rather than delivering multiple product solutions to meet individual countries’ requirements. So, for example, a single disclosure regime across Europe would aid competition which would ultimately be good for advisers and their clients.
How does your company differentiate from its competitors?
We believe in offering more than just a “tax wrapper” and have a number of key differentiators from our brand to the size and financial strength of the Prudential With-Profit Fund, and in particularly PruFund, a unique proposition that only Prudential can provide.
What regions of the world have the most potential?
We are focused on UK and Europe and we continue to believe there is still plenty of growth to be had in these markets. It’s where we see the greatest potential for us and we are quite excited that there are multiple niche opportunities that we’ll be able to exploit in the coming years.
Does the company plan to target any new markets geographically?
We are focused on incremental growth in existing markets. We think there is plenty of room to grow our presence in existing markets and develop new propositions which expand our product portfolio.
Looking ahead, what are Prudential International’s priorities?
Our priority is to maintain the strong profitable sales growth we have seen in the past couple of years. Now that RDR has been successfully implemented we are looking to develop new propositions over the next couple of years which we expect will help us to maintain momentum in growing profitable sales and allow us to target new opportunities in existing markets.
John Donachie is head of product (UK) for Prudential International Assurance
