Aviva PLC

Okay good morning everyone and thank you for joining us today for our half-year results presentation. I'm going to start by sharing a few key highlights before Charlotte takes you through the results in more detail. Then we'll cover why we are so confident in Aviva's long-term potential and as always we will open for questions. So let me begin with the key messages. Aviva has delivered another excellent performance in our first half of 2026, once again extending our track record of strong profitable growth. We continue to accelerate towards 75% capital light, unlocking the potential of direct line and building further momentum in our number one wealth business. All of this underpins our confidence in delivering the ambitious three-year targets. and our diversified model is a key enabler for long term success, which is why I am equally confident in our ability to sustain strong earnings growth well beyond 2028. Now let's get to the results. As you can see, it's been a great first half. Operating profit is up 24% with strong double digit growth in operating earnings per share. and we are driving higher returns with IFRS return on equity above 20%. For shareholders we completed the latest share buyback last month and today we are announcing an interim dividend of 14 pence per share up 7%. We are also stepping up for our 25 million customers. We're serving more of their needs than ever and delivering a fantastic customer experience. These results reflect strong delivery right across our business and our excellent progress on direct line. Behind every number in these results is a colleague making a difference for customers. I've been really fortunate to work with many talented teams throughout my career. And I genuinely believe that Aviva has the best people in the industry. Because we are the leading player, we attract and retain some of the best talent and I'd like to thank the team for their commitment, skill and hard work and for everything that they do to deliver for our customers and shareholders every single day. Turning now to our track record, over the last few years we have transformed Aviva. Year after year we have delivered consistent growth, stronger profitability and higher returns. and we have exceeded two full sets of targets along the way. Today's results build on that track record and keep us firmly on course to deliver our three-year targets and create value well beyond them. So before I hand over to Charlotte, let me pause on why we are so confident about Aviva's potential. The answer is simple. It's the strength of our model. We have a diversified range of businesses with leading positions in attractive markets. That gives us earnings resilience and plenty of growth opportunities, which no other UK insurer can match. And as we continue to shift towards capital light, we are generating even stronger returns. We have a real customer advantage with a leading franchise in UK financial services, the number one trusted brand and a broad range of products that meet customer needs. That means we have a real opportunity to do more for our customers who already choose Aviva. We have scale with game changing amounts of proprietary data and strong technology and digital foundations. And this means we have a significant AI opportunity where we are already making progress. These are powerful strengths in their own right. But what really matters is how they come together. That's why we are so confident in Aviva's opportunity ahead. And I'll come back to share more on how we are thinking about that a bit later. But first, let me hand over to Charlotte to take you through the results in more detail.

Thanks, Amanda, and good morning, everyone. The first half of 2026 was strong for Aviva once again as we continue our growth momentum. Operating profit was up 24% to £1.3 billion which translates to an operating EPS growth of 10% and an IFRS return on equity of 20.3%. Cash remittances were up 47% to £1.5 billion. Our solvency ratio of 176% is towards the top end of our working range and we expect it to be in the high 180s by the end of the year. Underlying operating capital generation increased 14% to £812 million and within the businesses our general insurance combined ratio improved 1.3 points to 93.3% and wealth net flows were up 32% to £7.6 billion. I'll now unpack the results in a bit more detail business by business, starting with general insurance. In the UK and Ireland premiums grew 42% to £5.9 billion. Now a large component of this was the addition of direct line reported as part of UK personal lines where we saw premiums nearly double in size. And we've made great progress on the integration and performance turnaround of direct line. Written margins are improving and we have returned to policy growth in motor PCW. Commercial lines trading in Q2 was a clear improvement on Q1. We traded well in a tough environment with strong April renewals. Premiums were down just 1% in the discrete quarter. Now let me give you a little more colour. Mid-market is up 1% year to date benefiting from high retention which is close to 90% and strong new business. Digital improved on Q1 but is still a little lower than last year and we continue to take deliberate portfolio actions on certain MGAs. Probitas which we are rebranding to Aviva Syndicates continues to grow largely driven by the nine new classes that we have launched in Lloyds since the acquisition. and in GCS more broadly, Q3 trading was significantly improved, though as expected, year to date premiums are lower as conditions remain competitive. In terms of profitability, the UK and Ireland combined ratio is a strong 93.4%. This is a 1.1 point improvement, reflecting the earn through of pricing discipline, along with some favourable weather and prior year development. Overall, operating profit for the UK and Ireland grew 50% to £643 million. Premiums in Canada were up 3% in constant currency. Within this, personal lines were up 4% as we secured pricing increases across property and auto, despite lower volumes due to the impact of portfolio actions taken in Alberta during the second half of 2025. We also continue to make good progress with the partnership that we announced last year with President's Choice Insurance. Commercial lines grew 2% due to some scheme wins within GCS which more than offset the softer rating environment. and the Undiscounted Core was almost two points better, reflecting better weather experience compared with the elevated CAT activity in the previous year. So first half operating profit was up 22% to £262 million. And we continue to invest in our technology and our supply chain through a combination of insourcing and deepening partnerships to increase performance. Now, while first half weather experience was favourable, you'll have seen in the news since the end of June, there have been a number of weather events across Canada. And although it's still early days, we now expect to be above our weather budget for the quarter. That said, Q3 is typically the more active cat season, and so it's built into our expectations. Now looking at the group overall we've made fantastic progress improving our headline undiscounted core by more than two points over the last two years and we're on track for our full year 2026 guidance. Now I want to take a moment to unpack our core development and outlook for you. Structurally we expect favourable PYD going forward. Driven by the IFRS risk adjustment and maintaining balance sheet strength. So taking these in turn, firstly the risk adjustment increases the reserve amount through underlying core and subsequently unwinds through PYD. Now while these effects largely net off in the headline core, they contribute both to a favourable PYD and a structurally higher underlying core by around one to two points. Secondly, in terms of balance sheet strength, we reserve to best estimate, but that is still a range. So given ongoing uncertainty from inflationary dynamics to geopolitical tensions and of course the addition of direct line, we are reserving towards the upper end of this best estimate range. And we have maintained this strength over the period. But by maintaining balance sheet strength, favourable PYD is expected to come. On top of these recycling effects, in the first half of 2026 there has also been some favourable experience on prior year claims and weather, benefiting the headline core. And the underlying core was negatively impacted by some large losses and other one-off effects. Our strong pricing, growing operating leverage, significant direct line opportunities and robust balance sheet give us confidence in the outlook. Now moving to insurance, wealth and retirement, starting with wealth, where we are the largest player in the UK and have reached over £260 billion of assets. Net flows increased by an excellent 32% to £7.6 billion, representing 7% of opening AUM on an annual basis. This was driven by strong performance across the board. Workplace net flows up 36%, with continued regular contributions of more than £1 billion each month. We're also onboarding new schemes, including £1.5 billion from the first of the Mercer schemes. Our advisor platform performs strongly with net flows up 17% including high demand for the onshore bond that we launched last year. And in direct wealth, our customer base grew by almost a third to nearly 120,000 customers with strong growth coming from across Aviva's existing customer base. AUM in our direct business is up 14% to 5 billion and we continue to invest in developing this proposition to drive organic growth. Overall, wealth operating profit was up 34% with our operating margin improving by 0.7 basis points as the business grows. We have the benefit of a leading scale, sorry, leading scale, lifetime offerings and customer opportunities and we are fully on track to meet our ambition of £280 million of operating profit by 2027. Now moving to our insurance businesses, starting with health. Enforced premiums up 5% and we maintained a low 90s core. Operating profit was up 28% to 37 million pounds. Now the market has been affected by slowing growth driven by the SME and consumer challenge channels. Life's growth is down from about 6.5% back in 2023 to less than 2% in the first quarter of this year. And as a result of this, we now expect operating profit to be around £90 million for 2026. So despite continued double digit profit growth over the last three years, this will fall slightly short of our aim to reach £100 million this year. We continue to see health as a critical part of our customer proposition with long-term growth drivers. In protection, sales up 1% with stronger performance in group protection. Margins have also improved by 40 basis points as we focus on delivering value. Protection operating profit was 14% lower, driven by adverse experience variances and investment in the business. And lastly, we're making further investments across both these businesses. For example, we were pleased to launch our new wellbeing proposition, which is a combined health and protection solution for large corporates with SME to come later this year. In retirement, we wrote £1.1 billion of BPA in a less active and more competitive market. Trading has been positive since the end of June and year-to-date volumes are now £1.9 billion. In the half year, we achieved an IRR of 18%, well above our low-teens guidance, supported by our pricing discipline and mix of smaller schemes with higher returns. This business has also been written at relatively low capital strain and we have provided some colour on the IRR calculations in the appendix to the slides. Individual annuity sales up 11% to £865 million supported by the launch of our new guaranteed fixed income plan last year. Operating profit was up 2% as we benefited from higher CSM releases and asset optimisation. We remain active in retirement and will continue to be disciplined in the competitive environment. Now turning to costs and efficiency. The ratios have improved across the group due to acquisitions, growth in the business and our focus on efficiency. For example, our cost asset ratio in IWR has improved by more than four basis points over the last 12 months alone, demonstrating strong operating leverage. We are seeing benefits from the modernisation programmes as well as greater use of digital customer service. and we continue to invest in growth and productivity initiatives that will deliver real impact across the group including of course the use of AI and automation. We expect this investment to improve operating leverage and unlock significant long-term value from our existing customer base and extensive data assets. Now our consistent capital allocation framework is a critical part of what we do to optimise our diversified group. This slide I come back to at each result as it summarises how we think about our performance and financial strength and what that means for how we use capital. We are continuing to build sustainable growth in earnings and cash and maintain balance sheet strength. This is allowing us to grow the regular dividends and invest in the business for growth and efficiency. And we are returning capital to shareholders with our latest share buyback recently completed. Nothing's new here, but it's important that you can see we do this exceptionally well. Now one of the advantages of the model we have built is proactive balance sheet management. At full year 2025, our shareholder cover ratio was 180%. In the first half, operating capital generation added nine points, a little higher than normal because of the lower capital strain on BPA, some benign weather, and of course the benefits from direct line. It also includes about one point of management actions. Non-operating items reduced solvency by around three points, comprising one point from integration and restructuring, and two from market movements. After debt actions, the dividend and buyback, our half year cover ratio is 176%. Now looking forward, we're confident in reaching high 180s by the end of the year, subject of course to market movements. And this guidance includes the benefit of at least seven additional points or £350 million from the expected direct line capital synergies. Now Amanda will speak about AI again shortly, but I wanted to talk briefly about this in the context of investing in the business. Our business as usual change investment is £450 million each year across the group for growth, customer and efficiency. and we're allocating increasing amounts of this budget towards AI, taking a disciplined approach by applying strict return thresholds, monitoring costs and focusing on the opportunities that can be scaled across the group. We aim to unlock benefits quickly in key areas and deploy these savings by either reinvesting them in new opportunities, factoring them into trading decisions, or realizing them in the bottom line. There's significant potential here, which we are really well placed to unlock. So before I hand back to Amanda, let me close with the outlook. I've already shared some of the details, so let me just pick up on a few points here. The Direct Line integration is going really well and we expect cost synergies to reach £130 million this year which will flow through fully next year. Wealth's momentum continues with the next material transfer of Mercer Master Trust assets expected in Q4. Now group operating profit in the first half was strong and the second half will continue to benefit from many of the same drivers. But of course that needs to be balanced against some of the other effects including the CAT impacts in Canada. So as a result we expect full year operating EPS to be around 11% slightly above the 2026 guidance we gave you last year and broadly in line with current market estimates. So to conclude, This is a business that is performing strongly. Our people are engaged and focused, giving me great confidence in the trajectory towards our 2028 targets. And with the opportunities that Amanda will cover now, I am equally confident in our sustained longer-term growth. And with that, back to you, Amanda.

OK. Thanks, Charlotte. So these results are testament to everything that we have delivered over the last six years. Executing our clear strategy, delivering year on year and accelerating with targeted M&A. And that is why we are on such a strong trajectory and why I want to focus now on where we go from here. So we think about Aviva's future across two horizons. The first is our three year targets. We have real confidence in these as we unlock material benefits from direct line and drive strong organic growth across the group. The second horizon is over the longer term. Here we see clear upside from serving even more customer needs, Aviva's AI opportunity and our material growth platforms. So let me take you through each of these horizons in turn, starting with our three year targets. Realising the benefits from DirectLine is a critical part of our plans. For customers, we continue to deliver excellent service and we are pleased with the retention levels that we are seeing. On the people front, we officially welcomed 8,000 DirectLine employees as Aviva colleagues as we completed the TUPE process. And we continue to right-size and strengthen the combined business as the integration progresses. We have transferred almost £5 billion of assets to Aviva Investors, improving the investment returns and reducing external fees. And we have moved to a single claims function, realising the benefits of shared capabilities, data and scale. So we are well on track for all of our Synergy ambitions. We have already delivered £100 million of run rate cost synergies and £150 million of capital synergies and £40 million of annual claims cost savings. And there is more to come in the second half. Turning now to direct line motor performance. Beyond the integration, Owen and the team are doing a fantastic job here. We were not happy with margins on day one, so we took immediate action on rate. We also rolled out Aviva's pricing models and combined data sets, and the results are clear. Written combined ratios have improved by more than 10 points, and direct line is an important contributor to the strength of today's personal lines result. We have accelerated the rollout of DirectLine Motorbrand on all four major comparison websites. Policies here have increased almost tenfold over the last 12 months to around half a million without weakening the broader book. Overall PCW new business share is now at the highest ever level. Aviva already had first class capabilities across pricing, underwriting, distribution and claims. This turnaround is all about embedding that experience at scale. So DirectLine is supporting our capital light strategy, strengthening our position in a key market and delivering material shareholder value. It's a great example of how we are taking a disciplined approach to M&A. But it's not just about direct line. Organic growth is another driver of our current three year targets. And wealth is a great example here. Doug and the team have doubled the profits since 2019. And as you heard earlier from Charlotte, momentum is stronger than ever. We delivered £7.6 billion of net flows, which is up more than 30% driven by all parts of the business. To put that into perspective, it's almost as much as our full year net flows in 2023. And over the last 12 months, we have grown by almost 300,000 customers across workplace, advice and direct. All of this is down to our strategic progress and targeted investment across the board. Enhancing our master trust proposition in workplace is why we are now the exclusive partner for Mercer. This will bring £8 billion worth of assets. In Advisor Platform, our onshore bond has attracted £700 million of flows since its launch. Indirect Wealth, over 70% of sales are to our existing customers. and in succession wealth over £3 billion of advice assets are now on Aviva's platform and even more value coming through referrals. So we are well set to deliver continued strong profitable growth on track for our £280 million profit ambition in 2027 and we will tell you a lot more about our organic opportunity in wealth at our In Focus session in October. Now let's conclude the first horizon by looking at the progression of our portfolio. Four years ago our earnings mix was evenly split. Today we are 70% capital light and returns have doubled over the same period. By capturing the benefits of direct line and continuing to grow organically we are on track to reach 75% by the end of 2028. That means faster growth, less capital deployed and better returns. Now let me move to the second horizon, our longer-term growth beyond 2028. There is still so much more potential to unlock at Aviva. First, our customer advantage is unique and we can serve more of our customers' lifetime financial needs than any other insurer. Second, we are transforming with AI and with our scale and data we have a material opportunity. And third, our capital light focus is unchanged. We have attractive long-term growth platforms with significant headroom to go after. and with our scale and customer reach, range of growth options and disciplined capital allocation, the value of these three opportunities is amplified by our diversified model. Now, let me take you through each opportunity in more detail, starting with our customer advantage. We have more than 25 million customers with a leading franchise in UK financial services and products to meet needs across a lifetime. That enables us to deepen relationships and create more value over the longer term. We also have strong presence across corporate and SMEs. In fact, one in three large UK corporates already hold a policy with Aviva. So we have the customers, the products, the brand, and the experience. And together, that creates a customer opportunity that no one else can match. And we are already unlocking that opportunity. Back in 22, we had 4.7 million multi-product customers. Today we have over 7 million. Nearly half of all the new policies sold today are to existing customers. That is up 6 percentage points and well above the natural share that we would expect from scale alone. This is not cross-selling for the sake of it. It is about offering the right products to the right customers at the right time. And the benefits are clear. Multi-product customers have lower acquisition costs and higher retention and engagement so they are a powerful driver of future growth. Now let me touch on how we are serving even more customer needs. Customer expectations are rising so we are accelerating to stay ahead. We are meeting customers wherever they want across any channel. We already have a clear advantage as the leading PCW insurer and we believe that AI-led distribution will be an important channel in the future. And that is why we are an early mover here. We are enhancing our ability to target and predict our customer needs. With our single view of customer data and our AI capabilities, we can do this even more effectively than ever. And we are using Maya Viva as the front door to everything that we offer, leveraging AI to provide a seamless experience and more meaningful engagement with our customers. Getting this right means we can genuinely be a lifetime partner for our customers. Turning now to the second opportunity of transforming with artificial intelligence. Our opportunity here is greater than for most insurers and the reasons are clear. As you just heard, we have millions of customers, a trusted brand and a breadth of distribution. Our scale means that we can invest, innovate and redeploy across the group. We have huge volumes of proprietary data. which is the most critical asset to actually transform with AI. This is an advantage that cannot be replicated and one that will widen over time. We have also been investing in technology. So our IT and digital estates are in a good place and we have been using AI and machine learning to drive commercial impact for over a decade now. UK Personal Lines is a great example. We have used AI in our pricing models to deliver over £200 million of run rate benefits here. That is on top of £100 million of claims cost savings previously mentioned. And we can rapidly build on our expertise as we move into the next phase of AI, now with generative and agentic. So these are all important moats and competitive advantages when it comes to transforming with AI. And we have clear plans to capture the opportunity across the full value chain. We are building on years of investment. Now it is about embedding AI within our journeys, decision making and day to day activities. And this is the next step towards our vision for Aviva. As Charlotte said, we are taking a disciplined approach with four opportunities that catch across the whole group. and as you can see the transformation is already well underway aiming to drive material revenue and efficiency benefits and better customer outcomes. Every year we have over 15 million customer inquiries and most of them are handled by our people. So later this year we are launching our AI virtual assistant to help customers with many of their queries. In protection, we have halved the amount of time it takes to review each case in medical underwriting with near perfect accuracy. This is improving response time for customers, but helping also our teams to handle more cases. In claims, we are building a voice-enabled AI claims agent that will automatically route more than half of our protocols in personal lines. And it will always be on, serving customers 24 seven. And all colleagues have AI productivity tools. We are now rolling out Claude co-work to our most senior leaders because we know that we need to lead from the top. and in wealth, we're using a Gentic AI to automatically, sorry, to automate quality assurance. This will save 50% of time for our back office teams. Most importantly, it's a capability that we can reuse across IWR and beyond. And it's not just individual customers. We are using AI in commercial lines to reduce the time it takes to generate quotes from days to hours, which is driving higher conversion. So whilst it's still early days, our momentum is clear. These benefits are a strong indicator of the value that we will create for our customers, our colleagues and our shareholders. Now, before I talk through our long term growth platforms, which is the third opportunity, let me explain why we are so confident in the underlying growth of the UK market. I haven't been in business here for over 325 years. We do know the UK very well. Put simply, our markets are underpinned by clear structural growth drivers that give us real confidence in the longer term. Let me give you an example. Almost 1 million people will retire every year over the next decade, yet many are not financially prepared. That creates a huge need for retirement guidance, advice and income. And we are seeing supportive regulatory developments here too. Potential reforms to pensions and auto-enrolment would be a further set of tailwinds for workplace. These are just a couple of examples in wealth and retirement. It's the same story on the protection gap, healthcare needs and under insurance. These customer needs are significant and they are only set to grow. And when you look at the broader markets, the scale of what lies ahead is compelling. We have material growth platforms in our portfolio. Take wealth. Today the market profit pool is around 3 billion pounds, shown by the white line on the chart. That is already significant, but in 10 years time it will more than triple to 10 billion pounds, shown by the blue bar. That is exactly the kind of opportunity that we are going after. Across our five growth platforms, the profit pool will grow to more than £100 billion over the next decade. This is a huge opportunity to drive profitable growth for years to come and we are well positioned to capitalise. So let me bring this to life with a few examples across UK Wealth, UK General Insurance, GCS and Canada. Beyond 2028, wealth remains a highly attractive, fast growing market. There are nearly 3 trillion pounds worth of assets today, growing at double digits. We are already the number one player with 260 billion pounds in assets, almost 6 million customers and leading positions in workplace and advisor platform. and our competitive advantages of scale, corporate relationships, lifetime offerings and in-house investment solutions set us apart. Not to mention our mass affluent opportunity with over £1 trillion worth of investable assets held by Aviva customers. And there is plenty of growth headroom with opportunities such as master trust, targeted support and direct wealth. So our organic growth opportunity is substantial and that is exactly what we are going after. Turning to UK General Insurance where we are the clear market leader. With the addition of Direct Line, we now have standout positions in personal lines and we are a top commercial lines player. With our scale, diversified product and distribution mix and unique data advantage, we are well positioned to outperform through the cycle. Yet there are still clear opportunities across the portfolio. And we have the leadership and talent to capitalise on these. Take the new specialty businesses, PET, Rescue and SME Direct. Collectively, they are equivalent to the size of the home market. Yet our share is only mid single digits. Now, with Aviva's capabilities and the capacity to invest, we can take all three to the next level. At the same time, we are staying ahead of emerging trends with a strong innovation track record. We are a first mover on AI distribution. And as autonomous vehicles roll out over the longer term, our in-house repair network and leading commercial proposition will be key differentiators. So our strategy here is simple. Extend the leadership in our core positions while doubling down on the new growth avenues. Turning to global corporate and specialty. This market covers over 500 billion pounds of premiums globally. And we are a relatively small player today, which means our headroom is significant. What excites me most is not simply the market opportunity, it's the model that we have built. We combine strong businesses in the UK and Canada with our growing Lloyds platform. Together, they help us serve more clients, deepen the broker relationships and leverage Aviva's brand and shared capabilities. And this model is already in action. We are expanding in Lloyds under our new Aviva Syndicates brand and using our dual platform to create capabilities to share those one Aviva growth opportunities. More recently, we strengthened our access to the US commercial lines market with onshore presence. And we are doing this in a controlled manner, focused only on areas where we have strong underwriting expertise. For us, GCS is not just about participating in a growing market. It's about actively scaling our differentiated platform. and finally on our opportunity in Canada. The fundamentals of the economy are attractive and we are one of just two players with a truly national presence which gives us significant potential. In personal lines we already have partnerships with two top Canadian brands and our most recent partnership with President's Choice gives us direct access to over 20 million customers. In commercial lines, we are still underweight in small business, so we are now deploying first class digital trading capabilities from our UK business. We have also benefited from shared learnings and claims, saving almost $600 per repair across 50 auto centres. And we continue to expand our regional presence, particularly in attractive areas like Quebec. Canada is an essential part of the group, an attractive market, a fantastic business and it has an exciting future. So I hope that has given you a sense of just how much lies ahead. Let me conclude with Aviva's compelling investment case. We are unlocking the full potential of the Direct Line acquisition. We have unrivalled customer reach with our leading franchise. Our AI opportunity is significant given our scale and game-changing amounts of data. We have capital-like growth platforms in attractive markets with strong momentum and a clear right to win. and our diverse range of businesses delivers high quality and resilient earnings and it's for all these reasons that we have absolute confidence in our current targets and full conviction in sustaining strong earnings growth beyond them. Thank you for listening and let's move to your questions.

Thank you for joining us on a Friday for the Q&A. If you can state your name and the company that you work for that would be great. So we'll start with Andrew Baker.

Hi, thank you for taking my questions. This is Andrew Baker for Goldman Sachs. First one, just on UK personal lines, are you able to give an update on the pricing versus claimed inflation trends you're seeing in motor and home? And can I just confirm the comment on, I think it's slide 10 on policy count growth, is that for direct line only or is that sort of Aviva personal lines as a total? And then secondly, on the forward-looking PYD guidance, Are you able to give a sense of whether the 26 combined ratio targets included a PYD assumption? And it feels like this is a bit of change in messaging versus the past. I guess what led to this change in messaging and why now? Thank you.

OK, thanks, Andrew. So first of all, the usual update, I guess, on personal lines rating. So inflation is sort of mid single digits, which I think is sort of unchanged since where we were at the end of the first quarter. As we did last year, we are pricing, you know, we have been pricing ahead. So if we take you back to the end of 2025, when you had the Pearson Ham data was showing that the market was down on new business rates by 11% and we were up one. If you take it to the half year, the market was saying about 3.6 on rate up on motor and we were up six. So, you know, I think what you're seeing here is our strong rating discipline, but also we are very, very confident about the technical rating strength within the book on the basis of the Solus repair network. The rates are starting to harden, but also the benefit of all the different distribution and the brands that we have. I don't know whether you want the home numbers as well. I mean, on home, To the end of last year, Pearson Ham data was showing minus 12 for the market. Aviva was flat. To the half year, the market is flat and Aviva is up four. Again, same strength. One thing I would add here, and Owen talks about this way more articulately than I do, is what we are really seeing is the benefit now of the huge amount of data that we have. So when you've got twice the amount of data, the insights, the sophistication that you can put into the pricing, the benefit is really there. So we're able to make, you know, really good pricing decisions and exposure decisions around the vehicles that we want to write, where we want to write. So that I think that that is also we are also starting to see is sort of unquantifiable, I guess, in the numbers. But we're definitely starting to see that as an advantage. I think on slide 10, we were talking about direct line, but Charlotte will clarify that. on the forward-looking PYD.

Yeah so I suppose when we set the targets or the guidance for combined ratio for 2026 we very much set it at the overall level so you know with all components in it and at that point I suppose I think you know we're clear that within that we made no Fundamental assumptions on PYD. However, what's important to understand is what I explained in my remarks earlier is the interaction between the underlying and the overall caused by both the risk adjustment effect and the fact that our reserving is towards the top end of a best estimate range. So those do offset. So as we build risk adjustment, which is one to two points, let's call it one and a half, something like that, that unwinds then through current. So you've got to look at the two together. It's somewhat of a wash, but it is a structural positive to PYD if you're only applying your lens to Pyd and then if you're only applying your lens to underlying you say well why is it you know it's got a bit of that rebuild in it and it's the same with the balance sheet resilience we are we are Constantly making sure that the best estimate is, because of the uncertainty that I explained earlier, around the world and with Direct Line, it's at the sort of cautious end of that best estimate. And that is being replenished. So what I don't want you to think is that the private year development that we're seeing this time is a release of reserves. there is an element of that coming through but at the same time we're rebuilding the resilience now on top of that you actually get claims experience can be different to what you reserve at and that I you know I can't predict what that is going to be so there's an element of PYD that is completely you know it comes when it comes depending on the actual experience So I suppose I would say I'm keen for you to understand that properly and keen for you to understand an element of it as recycling and therefore a wash. And if the risk adjustment is one to two points and you sort of take that as a point and a half, there's probably another bit, as much as a point, but there's another bit that is that build and recycle coming through as well. On top of that then there can always be PYD that's up or down that you don't predict and then of course there's weather.

Farouk, just behind you, Andrew.

Hi, sorry, Andrew. Farouk Henney from JP Morgan. Just wanted to clarify something on a comment you made on large losses in the underlying loss ratio. Are you able to sort of quantify that? Obviously there was a bit of deterioration in loss ratio in Ireland and Canada and in the UK on top of the direct line effect. So I just wanted to understand whether we can model that going forward. Secondly, you don't mention international in your long term view. in the slides and I think we're all aware there's quite a lot of SCR invested in international so I'm wondering if you're able to or willing to comment on you know what you view as the future of that and I know there's something going on potentially in India so I was wondering whether you can talk about that a little bit and then kind of very last point you know asset optimization you mentioned it in the bulk annuity line. I mean, other companies are mentioning it a lot more and making a big thing out of it. What do you think of that? What can you tell us about your view on that as a source of investment margin? Thank you.

Okay so look I think on large losses as you rightly picked up I referred to it so if we unpack that a little bit in Canada we saw large losses in SMA mostly property and we saw some in GCS that were property I would say that they are specific, idiosyncratic. When we see large losses we always go back and look at the underwriting quality but we are here for our customers and when large losses come they come. So they were quite a lot higher In the UK, there are a couple of things going on. So there are large losses again that were a little higher than long-term averages. a little bit higher than long-term averages last year though so the turnaround is is less marked i think it's it's you know maybe just a bit fraction of points um again though you know they are idiosyncratic in nature um and and they were both commercial lines and personal lines so there's quite a well publicized fire at a steel factory for example so again they are Idiosyncratic in nature and no particular concerns. I also referred to a one-off, so there is an intangible asset that we've written off from the balance sheet following a project that we discontinued and that's about 0.6 points. So those are kind of like the drivers of what's happening in the underlying, that is large loss or specific balance sheet write-off items. and other movement in underlying is trading and managing margin, obviously. That was the first question. The second question on international. Look, we classify outside of the Thank you very much. foreign participation at 100%. We took advantage of that. That gives us clearly more strategic optionality, but there's no other update to say on that or on China at this point. And then on asset optimization, we did have, we see very much Our job to get the right assets in place at the beginning and we see it as being an underlying activity to continue to work on the back book and look at asset opportunities as they come up. So yes there was a relatively modest but important piece of asset optimisation that came through this time but we don't classify that as management action, it is what we do and it's about getting the right mix at the beginning and then managing it on an ongoing basis. So we don't have the same sort of headlines that some present but that doesn't say we're not all over the asset optimisation, it's just a different treatment.

And we go to Andrew.

Good morning. It's Andrew Crean from Autonomous. Could you do a couple of things? Firstly, fill us in on what's happening in rates in UK commercial and then Canada personal and commercial. And then secondly, you seem very bullish on wealth, both near term and long term. Can you give us a sense of well on track? Is that a euphemism for likely to beat 280? And longer term, if you do feel there's that much of an opportunity, can you catch up in direct DTC platforms or does that take M&A?

OK, thanks, Andrew. So rates in commercial lines. So what we're seeing here is that, let me just try to find the right page here. So it obviously depends by line of business. So what we have seen in the mid-market, which is around sort of 60% of the SME segment, that's up by about 1%. That's benefited by higher retention. So I guess what you're seeing here is The inflationary provisions within the commercial lines portfolio basically meeting, you know, flattening, offsetting the flat rates. So it's sort of flat rate. There is some decrease in SME where we have traded better than, sorry, not traded as well. Sorry, I'm all over the place. I'm just trying to find the right page so I give you the actual right numbers. but but but actually the inflation is mid single digits inflation provisions are covering that for the vast majority of the products in terms of the rating strengths the rating strengths are strong across virtually all of the product lines so we're seeing price effect in mid market is about minus three but the the rate strength is you know over a hundred we're seeing pricing pricing in motor and digital down by sort of mid single digits Again, you know, we are covering that, covering inflation in the rating on that. And then on the GCS, I mean, there's about 20 different product lines, so hard to give it all. in essence every product line apart from property and professional indemnity the rate strength is over 100% I've made a right pig's ear of that but hopefully you've managed to get the broad sense of that because there's so many different numbers and I'm not looking at Jason to make sure I haven't misrepresented anything there but that's pretty much the case in terms of Canada So on Canada we are, personal lines is, we're still carrying good rate in Canada on personal lines so that is sort of about 10% in the first half and on, yeah 10% in the first half on motor and not, team can you just help me here, which page is this on?

Is it 82?

Yeah, okay, got it. Right, so on personal lines, it's that 10% in motor. I'll come back to home in a second. In SME in Canada, the rate is about 5% down on SME, 3% on GCS, and in total down about 4%. But again, most of those product lines are covered by the inflation-linked provisions. So on home, the rate outlook is 7%. is what we are carrying on rate for 7%, and that includes indexation. Does that make sense? Six in auto, sorry, and seven in property. If you've got any of that, you'll have done really well. Because that is so complicated. But if you want any clarification, I can clarify. I've now got it in front of me. Oh, sorry, yeah, there's another question. Wealth profit. Yes, IWR. So we are very bullish on wealth. And why is so is because in workplace, if we think about there's a billion pounds of regular contributions coming through on workplace, which is just sort of standard, the retention levels on the scheme is about 95, on existing schemes is 95%. and we're continuing to win business on a regular basis and we've got the Moosa the Moosa stuff coming through so when we say we're likely to beat I'm looking at the team and saying you know we are we we can see the line to the 280 million and you know we've put a lot of investment obviously into this business over the last the last number of years and that that investment does has peaked and now we we're looking to see how we how we take that forward from there Post 2028, more to follow in the session that we do in October. On the catch up on direct wealth. So look, I think here, the way that we're looking at this is that the information that's come from targeted support, the early days that we've sought the approval of the FCA to do pension in the early stages of targeted support. So people who are in old pension products, putting them into new pension products, and then people who are under-saving into their pension, how do we target them? The early days, and it is very, very early days because we only started that in May, are really, really encouraging, with more people responding to that than they would do through the normal marketing campaign. So we feel very confident in our ability to be able to connect our existing businesses, our workplace customers, through to our direct wealth proposition. And we talked about the direct wealth sales coming primarily from Aviva customers. That's not just from IWR customers, it's coming from motor customers, it's coming from home customers, and it's also obviously coming from other wealth customers. So we believe that through using targeted support, using Maya Viva, using the technology and using AI and the opportunities that we have there, we believe that we can continue to organically grow that business without the need to do M&A.

Abed?

Hi, hi morning, it's Abed Hussain from Pemulie, I've got three questions I think. The first one is on GI margins. If I normalise the margins for the reserve releases and the weather impacts for this year and last year, I think there's almost a two percentage points deterioration in the margin and outside of large losses, I think that might be the the mix effect the impact of direct line which I think was on a lower margin business so to sort of check that is the case or are you doing something else in terms of optimizing for the bottom line and perhaps relaxing your criteria on the margin side so just any color on that and then the second one just coming back to the BPA IRRs thanks for the new disclosure it's helpful to see the 18% IRR but just on the lifetime IRR I suspect it's higher than that and and peers are now quantifying management actions of sort of four to five hundred million I think I used to put in around sort of 100 to 200 million for yourself so there is a big delta opening up between yourselves and peers so just wondering if you have plans to to address that over the medium to long term and then just finally on AI it looks like it's now more deeply embedded in the business I'm just wondering what sort of guardrails do you have in place? I've heard of teams burning through tokens over a weekend relative to the annual budget, burning the annual budget in a weekend. So just wondering how do you ensure that this is a net positive to the bottom line and what sort of guardrails do you have?

Okay, let me start with the first two, yeah. So look, on GI margin, I mean, if I take UK, which I think is where your focus is, underlying core changed by about 1.6 points. If I don't repeat all the stuff I talked about in terms of the assets and the large losses, then there's probably a residual of that 1.6 is probably a little under a point of movement. I would say that is manageable margin compression as you would expect as we trade sensibly in softer markets and because we've got good rate adequacy we can afford to do that. I think you know the the direct line business improvement I mean this time last year we had no direct line in the half year and we we it came on to the books we were clear that we weren't totally happy with it and we've been taking action so some of that is earning through but you know compared to a year ago when we had no direct line with a business that we're still working on you can you can imagine that that's had a little effect on the margin as well So all of that is actively managed underwriting discipline but you've got to trade in the market and where we are in the cycle you're going to see a little bit of margin compression but we can afford that so that's that one. On the BPA metric and the rationale we've given here we just wanted to be completely clear on how we do it. It is 18% that we've given for the half year number. It's a lifetime IRR. It has no management actions assumed. So if we do have management actions, that will give us some potential upside. And I suppose given that this year we talk I think in the walk on the solvency I talk about there probably being about three points still to come from management actions and we've got about you know 100 million already in the first half so management actions are expected to come but they're not reflected within in the methodology I'd also say that and I think I said it in the opening remarks but just just for emphasis the first half was characterized by you know small Deals, which have higher margin. The strain was lower as well. As we look at what's moved us to the 1.9 where we are now, there's some bigger deals in there. So you'd expect that IRR to come back down as we head towards the year because that's the nature of the trading we're doing, but still above the low teens. 18 coming down a bit but still above the hurdle and we just wanted to be really transparent on how we do it and give you an illustration because it came up quite a lot before and you know there's a lot of different types of numbers out there in the market so now armed with our transparency maybe you can ask others about it.

On the AI being deeply embedded, I mean, yes, obviously it is and has been for a very, very long time. I think you were specifically talking about token usage and apart obviously from having to restrict Charlotte's usage of Claude, which she's become slightly obsessed with. We are monitoring the costs in exactly the same way as we are monitoring all of the other costs within the business. We definitely see this. You're absolutely right. There is a definite benefit from AI in terms of revenue and also efficiency, but there's also a cost to AI. and you know everybody talks about the first two and not about not about the third one we are very very actively looking at all of those three levers and hopefully with what we've shown you you've seen that you know all the projects of everything that we're doing we're looking at the ROI we're looking at when the returns and then we're seeing okay well what will be the future cost for us to be able to run these models and you know we've already got that in many respects with the machine learning models that the teams are using for pricing.

I'm sorry, did you actually ask for guidance on the management actions as well?

Yeah, so for this year, we've done about 100 at the half year.

I've guided to the three points for the second year. That translates to about another yeah another 150 or so so it's going to be a bit more than the 200 guidance as you go forward I would still slot into the model 200 for the moment obviously some years are higher last year was particularly high for instance and but you know that that order of magnitude as we work through and balance your opportunities Naseeb

Hi, Naseeb Ahmed from UBS. So firstly, on the 11% EPS CAGR, excluding dark line and share buybacks is about 7%. I just wanted to unpack that on where that's coming from in terms of the businesses. And the background for the question is, I feel like BPAs, health, retirement is seeing headwinds. So about 50% of your business is seeing headwinds. So where do you get the underlying 7% over the plan period, if you can break that down? Secondly coming back to the risk adjustment I was looking at the disclosure in the in the pack where over the first half I think it's only 20 million of release net of reinsurance and you're guiding to one to two points which is 70 to 140 so is the first half kind of a one-off low release and then finally on the best estimate range can you give us a percentage range on is it kind of five percent above the midpoint of the range that you're talking about Charlotte any color on that that'll be helpful

Okay, so look, the guidance that we've given on the 11% towards the target, as you say, is split two from the share count reduction, two from the direct line synergies, and another seven from underlying growth. And, you know, we would expect as we I think, sorry, am I glitching? I think in terms of this half year, you've got higher share count coming in after we issued for the direct line. You've then got a little bit of movement coming from the buyback that we've done. So it's hard to show the same split in this first half. you know as over the second half the share count will remain stable and and and that that effect will be smoother but but what what I mean I've got a bunch of different analysis that show exactly where the EPS development is coming from in this period and you know it is coming from the benefits of turning around direct line it's coming from you know the benefits of of the the improved performance in in health and wealth so it is across across the group and so I suppose I'm not going to give you a specific breakdown but it has got all those components.

But if you think about the opportunity, so I think you mentioned there that there were headwinds in BPA, health and retirement. Don't confuse the fact that we're not going to hit the 100 million on health as the sort of headwinds. The actual profit trading performance is really strong in health, and we see real opportunity for health. to continue to grow. So, you know, I think health is still a growth engine within the business. On retirement, it's really strong growth in individual annuities, really strong growth in equity release, less capital strain on the on the bulks business, but still the opportunity to write business. And that is not going to be an impact for the three year targets, you know, the amount of bulks volume that we write. and as Charlotte said there's really strong momentum in wealth and even post the 2028 period we feel really confident that with GCS, with Health, with Canada, with UKGI, with the turnaround of Direct Line and layer on top of that the benefit of the customer advantage and the AI opportunity like we are very confident that that was the reason that we wanted to talk today about the post 2028 because we could see that you know investors were asking us okay we get the app after 2028 but post 2028 what what what is there and we think there's lots right so we we are very very confident about that sorry yeah no that's all right but but you know and i would say combination of margin expansion and top line growth and and you know that's across the different areas so margin expansion is definitely direct line it's definitely you know all of the work we're doing in operational leverage

and then top line examples would be Wealth, GCS, those areas. So I think it's a good quality mix but we don't button it all because it's a diversified group and we're looking for the opportunities and we move accordingly. I think your risk adjustment number is just wrong so why don't we take that offline it's about a point and a half for this first half so you must be reading the disclosures so if they're not clear then we'll help you through that so maybe talk about that afterwards and then I think best estimate Again, it's a best estimate, so I'm certainly not going to give you another percentage other than a sort of best estimate. However, what I said earlier was if you think about how it's going to build and unwind, if it's between one to two points for the risk adjustment, let's call that one and a half. Let's say it's just under a point for the build of reserve and unwind of that. But I'm not going to give you another confidence level statistics like the one we have for risk adjustment for the best estimate.

Kailash. Hi, morning. Kailash Mistry, Bank of America. Two questions. Just on slide 16, you talk about improvement in the distribution ratio. Obviously, we can sort of factor in the improvement from the direct line synergies, et cetera. But can you talk a little bit about Are you thinking about the benefits from AI, etc., and how we should think about building that into the distribution ratio? The second question is on Amanda's point about multi-holding, multi-product holding customers. I think you said there were 7 million at the moment. Number one, I guess, where do you expect that to go over a couple of years? And what is the average number of products each of those customers hold currently? And again, what is realistic going forward there? And again, how does that then factor into the sort of distribution ratio, given your comments about lower acquisition costs, etc?

Do you want to pick up the first one, Charlotte? I'll pick up the second one.

Yeah, I mean, I'm not going to give you a specific number. I mean, I think that the reality of it is all the work that we're doing on that are helping, you know, whether it's the claims activity or the virtual assistant type, they're all helping with the acquisition cost and enabling, you know, the cost base we have today to go further and, you know, Owen in particular is completely relentlessly focused on that ratio in the personal line side and if you take the commercial line side some of that work we're doing on AI that is really connecting us brilliantly with the broker really spotting which brokers give us the business and really working through that all of that combined is going to eat away at that cost of acquisition and so you know internally we're measuring that but I'm not going to give you a specific guidance but those will be the the drivers of what improves that.

Okay and then on the multi-product holding so If we think about the UK, 22 million customers. So we've got 4.7, we had 4.7 million multi-product customers in 2022. That's increased to 7.2 million today, which does include the impact of the direct line acquisition. And so it would have moved from 4.7 million to 5.6 million excluding direct line, so to just give you that number. 46% of new sales are to existing customers so I think that sort of stresses the importance and just to give you the flavour here so for a multi-product holding customer the cost per acquisition is 30% lower. So I guess that shows just how efficient the marketing spend is there because obviously we know a lot about those customers and therefore it's very targeted in the way that we speak to them. We also have better retention rates, so the retention rate is about 1.7 points higher than if you're a non-multiproduct holding customer. and then they engage more so they're 2.8 times more engaged on the MyAviva app than a single product customer I mean I literally could go on all day because there are lots of these brilliant customer stuff but if I you know go back to the example of the 70% of direct wealth sales coming from existing customers just imagine and we haven't really turned that on massively yet if we when we turn up the dial on that It's all there and there are things today like in the PCW motor rating, even if that customer doesn't say that they hold a pension with us, Owen is able, he knows that because of our single view of customer and he's able to give a pricing benefit to that customer because we know that that customer will be more loyal. In terms of the outlook, I think setting an outlook is not the right thing to do because what you're not seeing in these numbers is actually the number of customers that are moving from two to three and three to four, which is actually quite something. So the number of customers with three plus products has moved from 1.6 million in the half one of 25 to 2.4 million in the half million of 26. Some of that is direct line, obviously. And the customers with three plus more products over that same period has grown by 4% from 1.6 million to 1.7 million. so we're definitely seeing that it's not just customers moving from one to two you know that's nice it's when they start moving from two to three and three to four and this is the power of the model and you know that is something which i would say we're only in the foothills of like it's so exciting and AI opens up that opportunity even more. And I think your point was where you're gonna see that coming through in the expense ratio. Well, I think you'll see it coming through in retention. You'll definitely see it coming through in the cost to serve. So because that acquisition cost will reduce. But I think there's the benefit here of what do we trade, what do we take into the bottom line, and what do we reinvest to be able to underwrite more business. And I think those are the opportunities. We've got optionality, right? I mean, that's the benefit of the diverse model. So very excited about that. I think I answered all the points there.

James?

Thanks, it's James Shuck from Citi. I had three questions please. Just on the PYD point, I understand the recycling between the risk adjustment in the sort of attritional and then the PYD, but sort of at a steady state level there's kind of nothing really to see there on that kind of view. On the 11% target you have across the whole of the three years, therefore is the kind of expectations, if now we're going to be looking at two to three points of total, PYD. Is that incremental or was that already in that 11% target across the three years? Secondly, the walk on the UK GI was really helpful. The underlying commemoration. Could you just repeat the same thing for Canada as well, please? And then finally, just anything you can give on very, very most recent motor pricing in the UK. Very helpful. Thank you.

Okay. The EPS development of 11% is... So to the extent that the risk adjustment recycles, it's a wash. To the extent that the reserve strength is retained, it's also a wash. So those two are neutral. So they're not driving growth in EPS. I'm not assuming that in that cycle I'm going to do something different and start releasing more reserves than I'm building. So there isn't an assumption built into the EPS development that is from PYD because those two things are a wash. there will be natural PYD and there will be natural weather and we have to manage that in the round in order to because those are volatile items that I don't know how they're going to emerge now clearly we have weather loadings and we have large loss expectations all based on long-term averages but to the extent that things move outside of the range then that is something that because we've got the diversified business that we would be expect to manage but there isn't an assumption that there is a PYD kicker to drive that 11% development because I'm intending to keep the balance sheet resilience Stable and beyond that PYD could emerge in either direction. What we're trying to get across is just that you can structurally allow for the PYD because it is there and it's offsetting in current and when you kind of go through one lens or the other you need to keep in mind the natural offset that appears in the other lens.

What was the second question? It was about the walk-on GIC call for Canada. Shall I do the motor pricing? Yeah, do that one. So I think I answered Andrew's question just around, we are, I think it was, yeah, it was Andrew, 6%, we are rating 6% up on motor today and 3%. I think you were asking what's the most recent data. So look, I think we don't have like the actual pounders for the market. We know that we're continuing to be disciplined. But I think what you've seen is that the ONS and the ABI data is showing that the market is, you know is steadily steadily walking up and I think you've heard others say that in their in their results and we are clearly you know using our data advantage our approved repair and network advantage and the fact that we have got very strong technical strength to be able to trade our way through that so you know hopefully that that answers that but I don't have any more absolute actual data than that James.

Yeah, so in Canada, it's 2.6 points underlying worse this time than last time. I'm sure that's the same numbers you've got. The large losses though are a good portion of that. So the reserving movement's relatively neutral but the large losses are bigger quite considerably than they were this time last year. And then below that there'll be a little bit of that margin movement but it's relatively minor.

Looks like that's it.

We've exhausted you. Have we? I think it was my answer on rate that did it. That's never been known. It must be Friday. Literally, everybody's head must be spinning. Hopefully, you did get everything you needed there. So look, thank you very, very much for coming in on a Friday morning. It's air conditioned. That's got to be a good thing. We really, really appreciate that. And obviously, follow up with any other questions with the IR team or with Charlotte and I. Thank you very much. Thank you.