Prudential plc (PRU) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Prudential plc conversation with the Prudential Vietnam CEO, Phuong Tien Minh. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions] I will now hand over to your host, Patrick Bowes, CEO of Investor Relations, to begin. Patrick, please go ahead.

Thank you very much, and welcome to you all. Thank you for joining us for this, the third of our series of snapshots webcast sessions designed to further introduce you to some of the leadership teams of our operations. Joining us today in Ho Chi Minh City is Mark FitzPatrick, Group CEO. And he's joined by Minh, the CEO of the Vietnamese operations. We have just put up on the web some slides, which include some background information on the industry. We'll have about 30 minutes of discussion between Mark and Minh. And then following that, we'll have about another 30 minutes where there's a time for questions and answers as we've done before. The conference call host will repeat how you can ask questions via the conference call or on the webcast in much the same way as we've done on previous results calls. So over to you, Mark.

Patrick, thank you. And good day, everyone. Glad to have you join us here in Ho Chi Minh City, it's great to be here. And I'm delighted to be joined by Minh, our CEO of our Vietnamese business. And Minh, maybe just to kick off, maybe just a few words in terms of your background.

Thank you, Mark. Greetings from Ho Chi Minh City to everyone. My name is Minh, I'm the CEO of Prudential Vietnam since June 2020. Before this role, I was the Chief Marketing Officer and Chief Distribution Officer, including agency for Prudential. Prior to that, I have totally more than 13 years' experience in financial services with the expertise in customer value management.

And Minh, you are the first Vietnamese CEO the business has. How does that feel?

I would say I have a great pride to it at the same time with huge responsibility. And that's probably coming from my agenda is to improve the profile and support for the growth path of life insurance in Vietnam, especially for Prudential. And being a local Vietnamese, I have an advantage of understanding the customer behavior and needs. And also I have a feeling and the trend of life insurance in Vietnam, and that helped me to arrive quick decision, responding to the dynamic and [indiscernible] of the situation.

And Minh, it's been a busy few years. Can you talk to us a little bit about what you've seen and what you've done in the first couple of years since you've been in the role.

It's actually a very unique experience for me. My entire 2.5 years as a CEO for directly within the COVID period in Vietnam. I took the role of the CEO in June and then COVID happened in July. The way I look at it is an opportunity rather than a drawback. So me and my team actually used the opportunity to reconnect with our customers and our people. We have rolled out a survey of initiative to call our customers, to check with them to see if they are okay, and we provided support for them. At the end of that initiative, there are 3,000 customers received medical support from our e-doctor program. At the same time, we also used that opportunity to encourage Prudential staff to call our customer just to check in and make sure that they got the support they need. For Prudential employees, we also provide a lot of support for our employees to make sure that they scope with the pandemic well by supplying them the vaccination, food and an effective remote working policy.

Minh, there are very few CEOs who have done that, actually connected with customers. So I'm really pleased that you and your team took the time to do that. Looking forward, post-COVID, what are your priorities for the business?

I think -- thank you for that, Mark. We feel that together with the reconnection with the customer and people, we also -- I also focus on strengthening people capability. Our people element is extremely important, seeing life insurance in Vietnam [indiscernible] early and young industry. So the majority of the priority is focused on people capability and developing a pilot of talents so that we could drive through the challenge and move forward. The second priority is also digitalization because COVID just make digitalization become a must. And the way I look at it is we use digital transformation to enhance customer experience and sales experience. For customer experience, during COVID time, we introduced virtual office during a lockdown to serve customers. We improved our auto loan -- I mean, auto claim to 77%, auto underwriting to 81%. And we also promote cashless payment. For sales experience, we also launched online sales generating room, where we connect our agent from across the country. In one of the event, 16,000 have participated in the call room. We also [indiscernible] more than 9,400 sales through online the way of we do our group sale online.

Now Minh, I've been amazed in my few days here about the volume of cranes that are up and the amount of construction that's going up. Maybe you could spend a minute just talking a little bit about how you're adapting your business to the rapid urbanization that we're seeing in Ho Chi Minh City and the other major cities around Vietnam.

I think what you see is actually happening at the moment already, urbanization is happening in Vietnam, and we see that it's a quick opportunity for us to expand. Just to put into perspective, in 1986, less than 20% of our population equivalent to about 30 million people living in urban areas. At the end of 2021, this number amounted to 36.6 million, which is about 37% of the population, and the government has an agenda to reach 50% of the urbanization rate. So urbanization rate is actually happening. And the opportunity that we see -- because when urbanization happens, then people who live in the urban area become richer, more educated and resulting in higher servicing expectation, yet there's still lack of investment in protection solution. And based on these differences, our strategy continue to expand our network with focus in urban area and diversifying our product suite and solution so that we can cater into the customer segment.

Minh, if we now pivot to the market. It's a very, very competitive market. And I'm delighted to see that you and the team have regained the #2 slot. How did you do that?

And this is actually a lot of hard work from the team, thank you, Mark, for asking that question. I think the key winning strategy for us is to understand the opportunity of urbanization. We strike the right balance between banca and agency mix. We focus on rebuilding the agency component and making them more relevant to urban, but up skew them and helping them to scope better. Both channel, bancassurance and agency, are improving and contributing to the growth trajectory of Prudential Vietnam, and that is actually helping us to have a very fast recovery.

And Minh, what was there, particularly around, for example, the distribution strategy that you brought about in terms of being able to regain the market share and really focus on that urbanization that we're seeing play through at the moment?

For Prudential Vietnam, I would think the agency continues to be our core strategy. Our agency continue to be our core distribution channel. What we did in the past year is that we continued to focus on a top agency producer. And we fostered the success journey, and we want to use that success to influence the other group of agency. And by doing this, we invest a lot into training them, helping them to scope better during the COVID period and also serve customer in urban city better. As the result, which at the end of 2021, we managed to achieve 1,245 MDRTs. We're ranking #2 in Vietnam and other Prudential [ avenues ] as well. Our agent productivity improved [indiscernible] also improved by 11%. And [indiscernible] also grew by 9% due to the focus on the top call agent. Having said that, we also -- we want to try to help the other group of agents to scope better with the changes in the customer segment as well by uplifting agent capabilities. There are actually a few different digital tool that we use. We help them to use social media, social media become a must in now-a-day life. We use social media. We haven't used social media. We haven't [indiscernible] and to manage the sale activity. This gives them the confidence to combine online and off-line sales, so make it become an effective sale process when they meet customer face to face. And by -- a big matter actually work for them because we try not to put the initial agenda but at the same time provide them an additional tool. At the moment, I think we have more than 10,000 agents used in simple force on a monthly basis and that has actually worked very well for us. At the same time, we also want to experiment the new type agent. We recently introduced our PRUVenture. PRUVenture is an initiative for us to actually promoting full-time agents, full-time professional agents. We recruited about 270 agents, young agents, and we put them through an intensive 24-month program. And at the end of that program, we want them to become a new generation of leaders. At the moment, in an early stage of it, we observed the improvement in [ active-growth ] and productivity.

And I had the benefit of being at PRUVentures for a bit yesterday, and I was blown away by the energy and the enthusiasm of these young agents. And then speaking to them, their focus and their commitment to creating a career and the energy they're putting in, not just to kind of learning more about the products, but being able to work with some of the agency leaders who come in and see them every month to be able to provide them real-world support to make the whole thing less theoretical, more practical and give them the selling skills that they'll need for the future.

I think the initial response on the PRUVenture have been positive because the new recruited agent, they're looking at PRUVenture as a new career rather than a short-term solution. PRUVenture for us is a new initiative to address organization. At the same time, we continue to leverage on our banca partner who have a customer base who have the wide network, who have the infrastructure there in order for us to tap into the customer base and improve our penetration in urban as well. But at the end of it, PRUVenture, the new initiative, our agent model and the banca is part of organization focus for us.

Thank you. Minh, when you think about customer and customer segments, how are you looking at that? And how are you looking at it vis-a-vis product and how we enrich our product offering for the changing needs of the consumer here in Vietnam?

Thank you, Mark. The question -- the customer segment in reality, in a nutshell, quite simple for Vietnam. It has 3 different groups. In the provincial area, we have an element of mass customer segment. In a little bit more urban city, we have a middle income and affluent segment. For each of the segment, their needs are different. For mass customer segment, we are looking for a protection need with the affordable solution. And that is where we provide affordable, simple solution. For our middle-income segment, we are more concerned about certain education and protection needs. Then we have protection and certain product for them. For the more affluent customer, they are more interested in investment, managing the asset, managing growth. Then we have an investment-linked product for them. All of this attack with the rider, make it a comprehensive solution. Having said that, the way we look at customer segment is also different in the sense that the urban and non-urban looking at -- the urban and non-urban segment are a little bit different. For example, the higher segment in the urban city, they behave a little bit different than the affluent segment in the non-urban city. They have more social awareness. They're more concerned about their status quo. And because of that, we could offer them an investment link with a very specific additional fund focused on ESG or helping them to reach or explore the investment need to another country by leveraging on our connectivity in Thailand, Singapore or other countries. And that is an opportunity that we are looking at, at the moment in order to create a unique opportunity and a unique proposition for this segment.

Thank you. Now, Minh, Vietnam is a population of about 100 million people. And I think the average age is about 30 years old. So it's a very young, a very vibrant population. What is -- how would you articulate the opportunity for growth that investors should be interested in from a Prudential perspective?

Vietnam, at the moment, we have the third largest population in Asia, with more than 100 million people. And yes, the average age is 30 years old. At the moment, we have -- like half of the population is around 20 to 59 years old. In Vietnam, we call it the golden age, okay? Very fast-growing middle-class population and together with the urbanization, we're looking for a prospect of population which is really a huge potential for us to increase the coverage. At the moment, the life premium are only 1.6% of the GDP. And compared with the EBITDA of 2.1% from emerging Asian market, and that -- the protection gap for the country is also about USD 36 million. And this presented a huge opportunity for us. Recently, the government also are openly promoting and advocating to increase the penetration of life insurance in Vietnam, and that is actually a real opportunity not only for us but for the entire industry.

Now I had the opportunity earlier this morning to spend time with a very senior adviser to the Prime Minister talking about the economy in Vietnam. I just want to get your take on the economic outlook for Vietnam. If I recall correctly, the World Bank has just increased the expected GDP for Vietnam. How do you see that helping? How do you see that supporting? What do you see the key drivers be?

I think Vietnam is among a very few countries to have a positive GDP growth during the 2 consecutive years of COVID. I think 2.9% in 2020 and 2.6% in 2021. Vietnam had a very fast recovery after COVID and we managed COVID really well. And you are right, World Bank has updated the forecast for us to achieve about 7% to 7.5% GDP this year. And I personally feel that it is achievable, believing that Vietnam have a track record of a very good growth GDP in the last few years. And at the same time, in Vietnam, due to seasonality, in the last quarter of the year -- the quarter, a lot of action happened. And that is a good potential for us. And so if we see the economic recovery, [indiscernible] to the government effectiveness in terms of managing inflation, very effectively using controlling [indiscernible] as credit rate and monetary policy. And that's helping us rising through the challenge this year and put us into a very good position to achieve such a massive GDP growth this year. And for us in Prudential, the last quarter of the year is also the quarter that we have a lot of action happen. We have very good results in the first 9 months of this year. We managed to grow 20% compared to last year. And therefore, we feel that this is an opportunity for us to take the growth to the next level.

And Minh, when you talk about looking forward then, what should we expect from 2023? What changes, what additional focus are you going to be encouraging your team, the agents and some of our bancassurance partners who we met earlier today? How are you going to be encouraging all of them to operate in a slightly different way?

I think from a longer-term perspective, Mark, Prudential, we have a lot of advantage of being the third entrant in this market, very strong foundation and very strong brand visibility. In the next few years, I'm going to leverage on that strength, improve the brand visibility, particularly in the urban city. We're going to invest in urban cities in the sense that we will open a lot more outlet to serve customers and are engaged with the customer. And that investment, I think it's [indiscernible] for next year to focus on urban. We also focus on capitalize the agency digital transformation because a lot of good work and valuation have been done through the field force and police with the engagement rate from the agent are very positive. So I think it's going to be capitalized in the next few years. That give us the organic growth of the business. From bank and partner perspective, we continue to deepen our relationship with bank partner. At the moment, the level of customer penetration with the bank customer profile is still very low. And that is actually open up an opportunity for us. So we want to strengthen our relationship with bank. At the same time, we continue to looking for a new partnership with that available next year and the year onward. While we're doing all of that, I'm always trying to experiment a few new things in the market. I think last year, we did a experiment with the buy-side product which [indiscernible] very positive response from the consumer. And now we're going to continue to explore that by building an omnichannel approach. A lot of good work has been done. And next year, we're going to focus on working with e-commerce sites like Shopee. The Shopee is the #1 e-commerce platform in Vietnam. We work with them and try to explore new things, introduce buy-side products so that we can reach customers faster. And we're also working on our partner at the moment is Viettel the #1 telecom company in Vietnam with 23 million customers. I think that there is still a potential there for us to tap into. So those are the few things that we're going to focus in order for us to prepare our longer-term.

Minh, thank you. And I think off the back of this trip and off the back of this conversation and from some of the interactions over the course of the last few days, whether it's with the Chair and the Head of Retail of the largest retail bank in Vietnam and also meeting with some of our most senior agents, it's clear they have a massive enthusiasm, a massive passion and a massive desire to do more with us. And they believe that there is a lot more to be done and a lot more that we can do collectively. So I think this feels like a very, very promising market, very exciting prospects, delighted that we are -- we've regained the #2 position and look forward to reclaiming #1 in due course. But we'll talk about that at next year's objective setting. Patrick, with that, why don't we open up for Q&A? Thank you.

Thank you very much and -- for that session. Just to flag that the slides are up on the business presentation tab of the IR site. I know they've just recently gone up. So as we go through the process of Q&A, you've got some time to have a look at the materials and we could also bring them up on the screen if you've got any particular questions on those. Let me hand back to Nadia to give the instructions as to how to submit your questions, both on the webcast and on the phone.

[Operator Instructions] And our first question today comes from Andrew Crean of Autonomous.

I was just going to ask really a couple of questions. One, on the urbanization theme, is there an element to which Prudential is not represented in all the cities in Vietnam? Therefore, you need to develop and expand by [indiscernible] some agents into new cities? Or is it just deepening penetration in all cities? And secondly, just to get a sense of it, could you give us a split of your new business by banca versus agents? Could you give us a sense as to what you think the long-term growth rate in new business sales is for the industry over, say, a 5-year period?

Andrew, thank you for those questions. So Minh, the first question, urbanization. Given urbanization, are we in all the major cities in Vietnam. Or there -- or is it just a question of going deeper into the cities that we have the elements? So maybe we start with that one, please.

And thank you for that question. At the moment, Prudential presence is spread across the country. We have our presence across the country. The only thing different is because the strategy that we used in Vietnam in the previous year is to -- to access to the customer in each of the city as soon as possible and as far as possible and provide them the right consultancy so that they can have a protection policy. However, that approach, due to the fast urbanization, it's required us to have a different approach to target on the urban city. And that is the area where we are focusing at the moment. And the way we target in urbanization is in different ways. And number one is improve our presence and upskill our agent in the urban cities so that we are more relevant for urban customer. And secondly, through the partnership with bank, we also help to tap into the urban customer segment as well. And thirdly, we explore a new agent model at the Prudential, which I briefly explained earlier, by introducing a full-time professional agent which is more suitable for the urban customer segment.

So the second of Andrew's questions was around new business. Andrew, we don't disclose NBP component. But I think in terms of the slides, you'll see the breakdown between the banca and the agency. I think it's about 50-50 from last year in terms of APE. And Andrew's last question, Minh, was around thoughts around long-term growth rate for the industry over the next 5 years, whether you have a sense of where the industry broadly is going and what the industry is setting out for itself.

Actually, the Ministry of Finance has predicted that in the next 5 years, the life insurance industry in Vietnam continue to enjoy a double-digit growth. And that actually is a good opportunity for us to focus on urban and reach customer in different segments.

Okay. Great. Minh, thank you very much. And thank you for those questions, Andrew.

Our next question goes to Greig Paterson of KBW.

Everybody, can you hear me?

We can, Greig. Thank you.

Yes.

All right. Excellent. I see on the slide you've given the agent numbers, 25,000. I was just wondering if you could tell us what the year-on-year growth rate in agents. And the second question is, if I understand correctly, your traditional product is a with-profit 60-40 rule product. I was wondering -- I see that you've given the percentage. I was wondering how that percentage has changed year-on-year? And what -- is that a higher or lower margin relative to the other products you sell within Vietnam? And the third thing is I'm trying to get a feel for how far Pulse has been rolled out in the market. So I wonder if you could sort of give us a feel for what percentage of your APE in the first half of this year was a consequence of leads that were generated via Pulse.

Greig, thank you. All right. So let's start on the first one. Minh, in terms of the element of agency numbers, 25,000 and a sense of the scale of growth that we've had or scale that's changed over the last year.

I think in terms of number of agents, we are now -- in the previous sharing, we focused a lot more on the highly productive agents. And therefore, we are more selective in terms of recruiting the right agent for us rather than looking at a mass recruitment strategy. Having said that, the focusing on better quality agents, it had a certain challenge. But at the same time, through the experiment of different segments, particularly in the key city and provincial, we expect to continue to enjoy the growth in the next few years. But we don't think that we're going to go to the mass recruitment strategy.

And Greig, unless I'm mistaken, I think about 2/3 of our agents are effectively -- kind of effectively urban agents. And that's the area, I think, we're going forward, you're going to see our greatest focus. And as Minh said, with PRUVenture, it really is about getting a greater number of agents where it is a full-time career, it's a full-time role. And actually, therefore, and from the experiments at the pilot that we've done so far, we've seen quite a material uptick common terms of productivity through both case size and number of cases per agent. And then, Minh, the second question was in terms of the traditional product, the with-profits type product, the margins, the profitability on that vis-a-vis the other products in the suite. Any comments that you can give, any color you can give.

I don't think we should.

So at this stage, I don't think there's anything particular we've got out in the public on that element, Greig. I think, overall, the element of the business has been pivoting more towards a ILP type of business. We're seeing huge demand from customers in that particular piece. With-profit style, and it was kind of an old U.K. style with-profit style, but it wasn't a 90-10. I think it was more like a 70-30, yes, rather than the 60-40. So it was a -- it is a very important backbone to the business. That being said, the ILP is where the consumer interest is, and that's where we're sending a little a bit more product. And then the final question from Greig...

I'm just trying to -- sorry, Mark, I'm just trying to get a feel, I'm aware of that trend. I'm just trying to feel -- get a feel if that's a headwind or a tailwind in terms of margin.

So I think in terms of margin, the ILP business is producing a good margin. I'm not expecting the mix of business per se to give rise to a major increase in terms of the margin. I think we're going -- the guys are going to continue to keep very close in terms of customer demand. And therefore, I think and I would expect the element of the margin to be pretty in line with where we're at. I think if you look at the overall picture in terms of the growth segment as a whole, we had reported margins of about 38%. And you can see just the size and scale of the Vietnamese business, that would say were a meaningful contributor to the element of an aspect of that margin. But at this stage, we haven't disclosed any of the particulars. But the shift in the mix between the with-profits because it was 70-30 and the ILP, I don't think you're going to see a major shift in terms of the margins coming through from that. And then the last question was in terms of the Pulse rollout and just a sense of how pervasive is that and how well is that going.

In Prudential Vietnam, we have about 2.5 million registered user of Pulse. And the way we embrace Pulse is slightly different. We use Pulse as a way to engage with customers which their agent -- our agent are very much receptive of the idea. At the same time, our Pulse is used by the agent to engage with the customer and as well as to help a customer to perform self-service in that. We have been doing a lot of enhancing in the feature, allowing customers to use Pulse as a one platform to serve the policy and maintain the policy. And we continue to use Pulse as a way to actually improving the buying experience, the customer service element of it and also trying to get the more data insight of the customer so that we can serve every [indiscernible] customer better. And in a sense, it's well received by our agents.

Okay. Great. Greig, thank you very much for those questions.