Good morning, and welcome to Prudential PLC Q1 IMS Analyst and Investor Call. [Operator Instructions] Just to remind you that this conference call is being recorded. Today, I'm please to present the Group Chief Executive, Cheick Thiam.

Hello, good morning. I am joined today by Nic Nicandrou, group CFO. And as for Q3 [ph], by Barry Stowe, CEO of Asia and Mike Wells, CEO of Jackson. I am pleased to report that Prudential has made a positive start to the year. In Asia, new business profits, our primary measure of growth, increased by 18% to GBP 308 million [ph], while APE grew by 12% to GBP 495 million. We saw double-digit sales growth in local currency. In Asia businesses, namely China, up 50%; Vietnam, up 43%; Korea, up 36%; Philippines, up 27%; Hong Kong, up 24%; Indonesia, up 22%; India, up 18%; and our Takaful business in Malaysia, up 14%. Our asset management businesses have continued to perform very well and achieved record net flows of GBP 3.5 billion, up 66% year-over-year, with strong performance from both M&G, particularly in Continental Europe and from Eastspring, our Asian asset management business where funds under management exceeded GBP 60 billion for the first time. And still on funds under management, in our asset management business, we're up 27% to GBP 139 billion, reflecting positive flows and higher market levels. And in 2009, they have grown 2.4x in 4 years, underpinning the profitability of our cash relative capital efficient asset management business. In the U.S., new business profits were GBP 192 million. In the U.K., new business profits were up 2% to GBP 63 million, in line with our value over volume strategy. Overall, we are on track to deliver our 2013 group and cash objectives. Let's now take a closer look at each of our 4 businesses in turn, starting with Asia. One our stated group objectives it to double 2009 NBP in the current year, against this objective at the end of the first quarter, we are pleased…

[Operator Instructions] And our first question comes from the line of Blair Stewart of Bank of America.

I've got 2 questions. Firstly, on the U.S., where you're seeing a slowdown in VA sales with guarantees and obviously a pickup in Elite Access. I just wonder what -- how that changes your thinking in terms of cash flow coming out of the U.S. in the coming year or so? And how you weigh that up against possible strategic opportunities there? And secondly, I guess, this is the first time publicly you've been able to -- or you've had the opportunity to talk about the change you see in your U.K. business. I wonder if that signals any change to the direction of the business?

Okay, thank you, Blair. Maybe I'll let Mike take the slowdown in VA sales and the impact on cash flow. I'll say then a few words about the strategic opportunities in the U.S. And then we'll take the U.K. question. So, Mike?

Yes. I think the Elite Access has, call it, 150 basis points of total fees coming to us on the product. So from a profitability cash flow point of view, it doesn't change the strategic model a whole lot. We're, obviously, very pleased with the efforts on our folks to launch that product. I think it's doing exceptionally well. If you add it and carry them together, they did a $1.5 billion last quarter of sales with no guarantees, which, as we've talked before, historically, has created some concerns, but we like the traditional product we're selling. We like the new products we're selling and the direction we're going. Everything actually looks really good.

Yes. On strategic opportunities, there's really nothing new at this stage. I think, on the full year, we said that we were pleased with the shape of the group that we believe optionality has value, and our position doesn't change. We think that the U.S. is doing exactly what we want it to do from a shoulder perspective. So we're pleased with that. On the U.K., no international transition really. Robert has done 4 years. And again, I think he's done a really good job. We're very pleased with the shape of the business in the U.K. and what he's done. He expressed the desire to move on, and I think we did our job, which is to find him a very good replacement. I think Jackie is an outstanding professional, and she will be a very good leader for that business, but no, no change in strategy expected.

Just if I may, coming back to the first point on the U.S., the question was more really concerned with what the change in the mix of the business does to your free cash flow opportunity.

Do you want to take that?

Go ahead and I'll complete it, go ahead.

I was just going to say, Blair, not a lot. I mean, again, there -- there's a lot of different -- I think we're up to 6 different accounting methodologies we look at the business. But from a just pure economics point of view, EA is another good diversifier, another good source of operating income. We talked a lot in New York about profitable vintages. Every vintage of EA is profitable and it's just diversifies, and I think improves the quality of earnings and doesn't put any strain, given there's almost no capital deployed, it doesn't put any strain on capital as it relates to cash flow. So I think -- I know you're a big fan of dividends and cash flow out of the U.S. and I don't think it changes anything in a negative way.

Blair, if I could, I mean, I think in the short-term, I agree with everything. Just to reiterate what Tidjane said, there's USD 88 billion of separate account balances, USD 2 billion of that is the contribution from the sales that we've had in Elite Access over the last year or so. So it's great how well the product has done to get the traction that it has. But it's still modest in the overall scheme, in terms of asset under management.

It's a fair question. We've emphasized cash a lot in all our communication, et cetera. So it's a fair question. But I think what you're hearing from our office is no material change and we're pleased with growth in assets. The $88 billion is really the foundation of the cash flow generation of profitability with the fees we were able to collect on those amounts. So we're quite pleased with that.

Our next question comes from the line of James Pearce of UBS.

Another question about U.S. Talk about market conditions being highly competitive. Is that intended to -- suggest things are getting tougher because I think last year, you were experiencing a race to the bottom in terms of policy benefits and it felt like it wasn't a market where competition was a big problem. And also, on the U.S., could you comment on the relative margins of Elite Access compared to the with-guarantee variable annuity product, please?

Okay, sure. Mike, you want to paint a little bit the competitive landscape in the U.S.?

Yes, I think -- James, it's uneven right now would be fair. I think you have some of our competitors that -- and I think that they're very public about defining an appetite for what they will or won't take on their VA products. We've had others that are increasing the competitiveness and attractiveness of their VA products. Overall, the industry numbers quarter-over-quarter are flat or a little down. So I think as we've talked about in the past, the concentration among 3 of us for a few years there post crisis was probably unique in market structure and you're seeing a little broadening of that. I think you'll end up -- this is not any news, but I think we'll end up with a half dozen competitors fighting for the space, we're seeing a lot of the firms that were 3 to 7 sort of coming up in the rankings in their product offerings. Again, some of them are pricing more aggressively. But it's for individual firm reasons, I don't think anybody is looking at the space right now and saying it's not a place where you can profitably provide good product to clients. I think just the opposite. I think, the consensus here both with the insurers and even now, it's in private equity, looking at somebody's deals as if there's money to be made here and still offer good product to consumers.

Yes. And I think your next question was margins, James, really EV and NBP is not necessarily a great way to look at those products. The way we really run the business is on IRR. And that's how we compare the product on that basis. We think Elite Access is quite attractive and, Mike, if you could give more color.

Yes, I think, James, on the -- you're -- if you think about that fee levels you have, they're lower but, you put them -- but you're putting up less capital, you're not providing the withdraw benefits, you're not providing a debt benefit. So net on a cash flow basis, on an earnings basis, it's a 20-plus percent IRR kind of product. And again, it's sort of impossible to create an unprofitable vintage of it. The solution that it's -- just to remind everybody, the reason the product works so well is it's a really strong alternative for retail consumers to some of the total return bond funds and U.S. interest rate exposure. And that's a primary concern of advisors that the consumers aren't 100% aware of the risks embedded at these low interest rates and being in a total return bond fund. It's a good product, but consumers probably have a bit too much of it here in the U.S. So we're hitting a need there, and they like the diversification from equities as well we're finding. They think it's a good alternative to just core U.S. equity strategies, as part of their retirement plan. So we like the shape of the trades that are coming in. They're very well diversified. The advisors are getting to know the product. The subadvisors more, the average trade size is going -- coming up. All of the sort of maturity of a new product metrics you'd expect to see we're seeing pretty quickly, a number of new producers, transaction size, number of firms coming on board, all of that tracking extremely well.

Our next question comes from the line of Ashik Musaddi of JPMorgan. Ashik Musaddi - JP Morgan Chase & Co, Research Division: Three questions, I have 2 on U.S. and 1 on M&G. On U.S., can you give us charging structure of Elite Access? You mentioned 150 basis points. Can you split that in terms of what comes to the company and what goes to the advisors or the brokers that you have? And secondly, same on Elite Access, what sort of investments you'll make? I mean, where does the money go? Is it in bond funds? Or does it go in equities? Can you give us some color on that? And then M&G, any color on the high net outflow -- I mean, the gross high redemptions in fourth quarter relative to last 4 quarters? It has seen in higher redemption in the third-party space, can you give us some color on what's driving that?

Okay, thank you, Ashik. Mike, will you take the first 2, charging structure of EA and how see the money getting allocated.

Okay. Ashik, what you're seeing is a slightly -- it's on top of my head, higher M&A -- I'm sorry, lower M&A than P2, but lower commission. We participate in the fund fees as we would on the -- any of our other VA products, shorter surrender charges, we can get to the product specs in detail, it's quite a -- we can take the balance of the call, walk you through the detail. But shorter surrender charge, lower commission and what you're seeing in the funds is by nature, it's an alternative asset-focused retirement product. So you have a wide range of alternative asset classes represented in it, as well as some traditional funds which, in this case, are for diversification. And we haven't distributed where the funds are going yet. For competitive reasons, we know a couple of competitors -- rumor is a couple of competitors are trying to tee up Elite Access competition. So we're not looking to make that easier for them than we need to. So but it's a long list of alt-class, everything from real state to long/short, and these are portfolios that you wouldn't traditionally put into a VA with the debt benefit or with a withdrawal benefit because you'd be hedging a hedge in some cases, or hedging vehicles that are extremely difficult, if not impossible, to hedge but are great diversifiers from core U.S. equity, core U.S. total return debt.

Okay. And last question was the M&G. First thing I'd tell you about that is we've been very, very pleased with the performance in the context of the asset management sector both in Q4 last year and in Q1 this year, profit has been very good. And we, as you know, Ashik, we focused on net flows, growth inflows and growth outflows can vary for all kinds of reasons and what drives profitability of the business, approximately net flows. And more particularly about that quarter, it's -- actually a good portion of the flows was about 2 funds that we've closed basically. As you know, we also announced the soft close of a number of our funds in the U.K. and that explains some of the numbers.

[Operator Instructions] And our next question comes from the line of Andrew Hughes of BNP Paribas.

The first question is on the U.S. same spread margin. I know it's come down for the fixed annuity from 1.4% to 1.2%. But in the context of these, could you give me background about what closing rate you're paying and how you get to the 1.2%? Because it just seems quite high given that in the U.S. you're talking about the crediting rate being roughly 3% for fixed annuities, suggesting that you're expecting to make 4.2% at least on the assets to get to that 1.2% spread margin. And just going back on point on the M&G net flows. So is what you're saying in terms of the institutional versus the retail, that the retail money is still going into the kind of soft closed funds, if you like, but this institutional money has been completely stopped from this soft close funds, and that's what's driving the inflows down that fund.

Okay on the, maybe on the crediting rates...

I can take that.

Okay, Nic, you can take that.

The 3% that you're referring on the in-force business, new business attracts much -- new business that we're writing now attracts much lower crediting rate. Just to take the FA, if new FA business, the crediting rate has been set at 1.5% And if you access the general account through an allocation or your VA, then the crediting rate is at 1%. So in that sense, the crediting rates in the new business that we're at are a lot lower, yet the yields are down, but the net of those 2 effects are the numbers that we used in calculating the NBP and candidly, it's a feature of the market and we're reacting to that with a reduction in the rates.

So I'm just wondering what you're earning on new money going into that fund?

Well, I think it's the crediting rates. I mean, the structure is to thing plus the spread that we have published. And then a 25 odd bps for the RMR reduction. So those are the components as you see it will be the sum of those 3 components.

3.5%?

On the inventory, really, what I was trying to say if you're going to Q4, the number was quite high, but some of it was one big institutional contract. From memory, it was something like 3.9% for institutional, total was 5.5%. So you talk about 1.6%, 1.7% retail. So a 2.4% retail in Q1 is to compare to 1.6%, 1.7% retail in Q4. So there is no decrease there, fundamentally, back to Ashik's question. In fact, we have movement upwards Q4.

No, no. I was asking more about the institutional one. I mean, is the institutional net flows going to come back? Or as you point out, a one-off?

The institutional net flows tend to be quite lovely.

It's very volatile.

The team will work on effectively manufacturing opportunities that we'll then market them. They have commitments. And then there is a time lag in when those effectively commitments are fulfilled. So you will see them be relatively lumpy. The soft close is not -- it doesn't affect the institutional business. That is simply on the retail front side.

That's correct, correct. So again, the institutional is quite volatile in the [indiscernible] from quarter-to-quarter.

[Operator Instructions] And there are no further questions at this time.

Well, I think this is a first. I think probably our most boring results, we have to apologize. But thank you for your questions. Clearly, the global macro environment remains uncertain and persistently low government bond yields continue to post challenges to our industry as this discussion illustrated. However, our presence in the growing and profitable markets of Asia, our discipline in the U.S. and our selective participation in the U.K., together with our strongly performing asset management business, will give us, we believe, the flexibility and the resilience to continue to produce relative out performance. We're very confident in the outlook for this year and we look forward with confidence for the rest of 2013 as we remain on track to achieving our 2014 objective. So thank you very much, and have a good day.

That concludes our call. Thank you for attending. Participants, you may disconnect your lines.