13 Feb 2001

Prudential announces restructuring of direct sales force and customer service channels in the UK

Prudential plc announced today changes to its direct sales channels and customer service operations in the UK. These changes include:

• An expanded customer service offering through the telephone, the internet and the workplace;
• Greater accessibility for customers to a comprehensive product range;
• A smaller face-to-face sales force focusing on financial planning services; and
• Rationalisation of back-office administration and support functions.

The changes, which are being implemented in order to continue to meet changing customer needs and to ensure Prudential operates cost-effectively as a scale player in the UK marketplace, represent a further evolution of the group's business model in the UK to improve its service offering to over six million customers.

Prudential is shifting its focus from a large direct sales force to alternative distribution channels. The current direct sales model of 1400 sales consultants will be replaced by a smaller specialist force of qualified advisers providing a face-to-face financial planning service. This team is expected to grow to around 250 advisers. In addition, a team of 100 consultants will provide information and advice on pensions and other products to customer groups within corporate business clients, small and medium enterprises (SMEs) and affinity groups.

Prudential also has considerable experience of delivering customer services and generating new sales through remote channels and the group will continue to invest significantly in enhancing its telephone and internet services. Prudential's current integrated advertising, website and telephone help line campaign, publicising the group's stakeholder pension offering, received 3000 contacts from SMEs in the first week, 40 per cent of which were through the website. In its General Insurance business, all customer service needs and the handling of claims, as well as over 70 per cent of its current general insurance sales, are conducted over the telephone.

As a result of these changes, Prudential anticipates that after allowing for a number of redeployment opportunities, 2000 jobs will become redundant within the sales force, sales support operations and in central back-office and administration support functions. These job reductions will take effect over a 12 month period following which, Prudential's UK insurance operations (including Scottish Amicable) will employ 9,500 staff in the UK, down from today's figure of 11,500.

The group expects to incur a restructuring charge of £110 million from these changes, of which £13 million will impact directly on shareholders. However, from 2002, Prudential expects to achieve annual gross cost savings of around £135 million, of which £15 million will be directly attributable to shareholders.

Jonathan Bloomer, Prudential's Group Chief Executive, said: "The UK marketplace is experiencing dramatic change which presents enormous opportunities and long-term potential for Prudential. I am confident that by transforming our business model we are well placed to take advantage of these opportunities going forward. The changes we have announced today will help us to deliver exceptional customer service and long-term value creation as a profitable player of scale in the UK.

"Following last year's restructuring of our UK operations, this refocusing of our face-to-face channel and enhancement of our remote operations will enable us to better meet the changing needs of our customers and build upon our advantages of scale, financial strength and our strong brand."

In the future, customers will benefit through lower costs and simpler ways to purchase products. They will be able to reach Prudential through a range of channels which offer greater transparency with enhanced customer service, in particular:

• Prudential is accelerating developments in remote communication channels such as telephone services, the internet and direct mail campaigns to increase contributions and the number of products owned by each customer.
• A team of specialist financial planners, expected to grow to 250 advisers, will provide a personalised face-to-face financial planning service for customers with more complex financial needs.
• Customer groups within corporate business clients, SMEs and affinity groups will be able to access Prudential products and services through its expanded worksite marketing service. This will grow to 100 advisers conducting face-to-face presentations to groups, supported by remote services.
• A simple financial healthcheck service will be available on-line or over the telephone from 2002. This will provide financial decision-making tools to help customers assess their individual needs, supported by a customer helpline and an adviser line.
• The recent selection of Prudential as the preferred supplier for the British Chambers of Commerce (BCC) and the Trades Union Congress (TUC) stakeholder pension schemes demonstrates that the company is well positioned to benefit from the opportunities presented by the introduction of stakeholder pensions. Over 50 of the 61 Approved or Accredited BCC Chambers plus 12 Associate Chambers, representing 90,000 employers, have indicated that they will be supporting the Chambers' Stakeholder Scheme.
• Trade unions representing over 4.7 million individuals have expressed their support for the TUC Stakeholder Scheme which has a potential market reach of over 10 million individuals.
• Distribution of products to IFAs will be increased through the setting up of a new company, Scottish Amicable Financial Services, that will distribute through a combined sales force, both Scottish Amicable and Prudential-branded products, including new products from Prudential Annuities.

Prudential anticipates that, by 2003, the revenue levels previously generated by the direct sales force will be replaced by a number of the initiatives outlined above.

John Elbourne, Chief Executive of Prudential UK Operations, added: "The drive for lower pricing in the UK means that it is no longer economic for us to maintain a large salaried face-to-face sales force. Technology is revolutionising our industry and customers are accessing financial products and financial advice in different ways.

"Research tells us that face-to-face contact still plays a role in our communication with customers where more complex transactions are involved but there is an increasing trend for customers to seek alternative channels where their needs are more straightforward.

"We will take every step to minimise the number of reductions through natural turnover and redeployment and to ensure the best possible transition and support for everyone affected. We have started a consultation process with employee representatives over these proposals."

For further information, please contact:

Media
Geraldine Davies
020 7548 3911

Steve Colton/Tina Christou
020 548 3721/3719

Analysts
Rebecca Burrows
020 7548 3537

Notes to Editors:

There will be conference calls today for:

1. Wire services at 9.30 GMT on 020 8240 8241
2. Analysts at 10.15 GMT on 020 8240 8242
(a recording of this call will be available for the next 14 days on 020 8288 4459, access code: 623822)
3. Media at 11.45 GMT on 020 8240 8243
   
   These calls will be hosted by Jonathan Bloomer, Group Chief Executive and John Elbourne, Chief Executive, UK Operations.

• Prudential's UK insurance operations currently have 11,500 employees within three business units: Prudential Financial Services, Prudential Intermediary Business and Prudential Insurance Services. Prudential Financial Services is responsible for all direct distribution of Prudential-branded products; Prudential Intermediary Business for all distribution of products via the Independent Financial Adviser market; and Prudential Insurance Services, for all administration and legacy products under the Prudential brand and the General Insurance business.
• In 2000, the new premiums generated by the direct sales force in the UK were £115 million on an APE* basis (excludes DSS rebates, internal vestings and pension top-ups). This represents 6 per cent of Prudential group's sales in that year.
  
  *Annual Premium Equivalent (APE) sales comprise regular premium sales plus one tenth of single premium sales.
• This announcement affects the direct sales force of 1,800 financial consultants, managers and branch and sales support positions in addition to 700 positions in central back-office administration and support functions. Prudential will minimise the number of reductions through natural turnover and approximately 500 redeployment opportunities in the alternative channels and expanded remote services. The positions affected are spread across the country and will not therefore have a significant impact on any one geographic area.
• Headcount of Prudential Direct Sales Force since 1991 (year average):



1991	- 9,296	1998	- 3,728
1994	- 6,485	1999	- 2,675
1997	- 4,904	2000	- 1,641

• The direct sales force currently provides financial advice and a Prudential product range that includes general insurance, mortgages, savings, investment protection products such as life cover, with profit bonds and distribution bonds, pensions and pension top-ups, unit trusts and ISAs. All these products will continue to be made available through the financial planning service, and remote channels such as the telephone and through information on the internet.
• Prudential already undertakes a significant part of its customer service offering through its remote operations. In the UK, Prudential handles an average of one million calls from new and existing customers per month through its telephone centres.
• At least half of Prudential Annuities' business is transacted over the telephone. The establishment of a combined IFA sales force distributing both Scottish Amicable and Prudential branded products will provide further opportunities to the Annuities business.
• Customers can find out more information about Prudential's stakeholder pension by visiting www.pru-stakeholder.co.uk or calling 0845 070 3333.
• Prudential's Life Fund is ranked AAA by Standard and Poors.
• Prudential customers who have questions relating to these changes should call Prudential on 0845 075 33 44.