Legal & General Group Plc

Good morning, and a warm welcome, both to those of you in the room and to those joining online. I'm Michelle Moore, Group Strategy and Investor Relations Director. To start, a few housekeeping points. To those of you in the room, please make sure you've turned your devices to silent. And in the event the fire alarm sounds, colleagues will guide you to the nearest exit, and the normal forward-looking statements apply. So our running order for today will be as follows. Antonio will open with a summary of our first half results and an update on the progress we are making in delivering against our strategy. Jeff will cover the financial results in more detail, and then Antonio will make closing comments before opening to Q&A, at which point he will be joined on stage by Jeff and the CEOs of our free businesses to take your questions. Antonio, over to you.

Thank you, Michelle. Good morning. So welcome, everyone. It's great to have you here with us. We've had a great first half of the year with strong, good earnings and growth and continued momentum in the execution of our strategy. So let me first take you through the headline numbers. Our core operating EPS is up 9%. That's at the top end of our 6% to 9% range. Our core operating profit is up 6% at £859 million. Our OSG is up 3% to £279 million. And we continue to have a very strong balance sheet with a solvency to coverage ratio of 217%. We are delivering more to shareholders with a 2% increase in our interim dividend per share, and our 500 million share buyback is now nearly complete. Look, these are great numbers, but the progress on our strategy is even more encouraging. Last year, we outlined a strategy to be a growing, simpler, better connected LNG, which becomes more capital light over time. We've been busy executing that strategy to deliver sustainable growth across our three businesses, sharper strategic focus, and enhanced returns for shareholders. I'm particularly positive about the growth potential for each of our businesses. Last December, Andrew Cahill presented a deep dive on our largest business, institutional retirement. A month and a half ago, Eric Adler presented his vision to grow our asset management business. And today, we are announcing that our next deep dive into retail with Laura Mason will be on the 23rd of October. So now looking at the past six months, here are the highlights. First, sustainable growth. In institutional retirement, we have had good volumes at low strain and we have a very good pipeline. In asset management, we have seen a step change with positive revenue momentum and a further increase in our average revenue margin. In retail, we've had strong workplace DC flows, up more than 20% compared to last year. Then we have a sharper strategic focus with the sale of the U.S. protection business and partnership with Meiji Asuda. And we're getting on with the disposals in our corporate investments units. We have announced, as you've seen, the acquisition of Proprium Capital Partners and a new partnership with Blackstone. And earlier this year, Katie Worgen joined us as the group COO, and she's already driving operational improvements and cost discipline across the group. And finally, we are on track to deliver our three-year targets and return more than $5 billion to shareholders through a combination of dividends and share buybacks. So now let me give you a bit more detail on each one of the businesses, starting with institutional retirement. As you can see, PRT continues to grow strongly with over 5 billion written in the first half of the year. You can see there the 5.2 billion. Here in the UK, we have written new business at attractive margins with a new business strain of 1%, continuing basically the capital light investment strategy that we deployed last year. Our international business is down on the prior year, given a slower start to the US market. But in any case, this business tends to be weighted towards the second half. Actually, in fact, since the 30th of June, we have won three US PRT deals, including a $285 million transaction, which we won just last night, and which, therefore, is not included on the $5.2 billion. So well done, Andrew and the US team. Looking forward, I'm extremely optimistic about the prospects for our PRT business. Client demand remains high with 42 billion of an active pipeline here in the UK and you can see they're including nine schemes that are over 1 billion pounds. So now thinking of the markets, look, we continue to see significant interest as you've seen in the sector, which for me validates its attractiveness. PRT will continue to be a key driver of our growth and deliver reliable earnings for many decades to come. You can see on the chart, but from now to 2028, we are confident we can write volumes in line with the guidance that we gave you. If you remember, that was 10 to 13 billion per year, or basically 50 to 65 billion over five years. I said that this can be lumpy, and we will continue to be disciplined on pricing and profitability. And then beyond 2028, the market will continue to grow with more than 500 billion of inflows over the following 15 years as the percentage of insured DB assets continues to increase. I showed you that chart before where more and more of the total DB assets in the market continue to, the percentage continues to come to insurance companies and increase. What does that mean for us? This means that our profits will continue to grow for more than two decades as the volume that we write outpaces annuity outflows, and importantly, we have greater capacity for portfolio optimization. And this picture here is only the UK. We anticipate even higher volumes in the US and potentially further opportunities in new PRT markets like Japan. And finally, as the DC market matures and the demand for guaranteed retirement income increases, the retail annuities market will continue to grow for decades and decades. So that's a healthy market. Why do we win in this market? Here are the five competitive advantages that we have in this business. By the way, this is the same slide that Andrew presented last December at our institutional retirement investor deep dive. There are five key areas. First, our scale and origination capabilities allow us to price competitively. And we do this in two ways, through our own asset management capabilities and also through partnerships like the one we announced with Blackstone. Second, we have a strong brand and a track record built over 35 years of writing PRT. Third, we have the strength of our asset management relationships as the largest asset manager in the UK. Over 80% of our PRT volumes come from our own asset management clients. Fourth, we offer bespoke solutions for the whole market, both large clients and small schemes. And lastly, we support these clients through high-quality service. There are a series of live deals right now where the trustees are visiting our client service teams in Hove to see this in action. So over more than three decades, we have experienced major swings in the global economy and market changes, but we have consistently written PRT business and made money in all market conditions. So I'm confident we will continue to be a leader in this space. In asset management, this last six months were a clear turning point with real revenue momentum. Our annualized net new revenue, you can see it there, at 15 million is really encouraging and higher than what we have generated over the past two years combined. This is consistent, by the way, with the run rate required for our 100 to 150 million cumulative four-year target. One particular highlight for me is the growth of UKDC. For the first time, our UKDC revenue generates more revenues than our UKDB business. So UKDC is now bigger than UKDB from an asset management perspective. We have continued to grow our average revenue margin, if you remember what I've said to you before, now from eight to nine basis points, which is now close to double digits, which we announced, our target we announced just in June. An important part of that margin improvement in the six months is the growth in private markets, now at 65 billion pounds and on track to exceed 85 billion by 2028. This growth is on the back of good fundraising in private markets. One year on, our private markets access fund has grown to 1.6 billion pounds. And we've also had a series of other private market launches you can see there. I'm actually particularly excited of the last, the one before last, bullet point there, which is our new digital infrastructure fund. So good growth, we've turned a corner. How are we doing this? This growth is the result of deliberate investments that we've made in the business. As Eric said at the Asset Management Deep Dive, we are doing this in one of three ways. Either we build or we buy or we partner. You can see the specific examples of that momentum on the slide. So in terms of build, we have been growing our active fixed income and climate transition strategies organically in addition to the digital infrastructure fund I had just mentioned. In terms of buy, over there in the middle, our investments in Taurus and Proprium Capital Partners complement our existing UK real estate capabilities. In the space of just 12 months, we've gone from a primarily UK real estate manager to having now a global real estate platform that we can grow and leverage. And finally, we are partnering with Blackstone to create public and private hybrid products. It's worth actually spending a minute more on Blackstone because this is a broader relationship. It cuts across all of LNG, not just asset management. Before I do that, I'd like to say that our thoughts are with the Blackstone team following the devastating news that one of their partners was killed last week, as you saw in their New York office. I spoke to both Steve Schwarzman and John Gray, and I know this was the darkest day in their history. We've got to know the Blackstone team really well over this last year and have really enjoyed the interactions that led to the announcement. We are extremely positive about the potential for the partnership, which covers two main areas which you can see on the slide. So on the left hand side, first in asset management, as I've just mentioned, we will create hybrid products for our clients, bringing together LNG's active fixed income, multi-asset and UK private credit capabilities with the best in class market capabilities of Blackstone. So we bring all of this together and we will then distribute this hybrid products to our existing clients, but also target new geographies and new segments like wealth. then on the right hand side for our annuity businesses, this partnership gives us access to Blackstone scale and therefore to an attractive pipeline of matching adjustment eligible assets predominantly in US private credit. These assets complement our own existing asset origination capabilities and basically they increase our price competitiveness and profitability. If you put the two opportunities together, we have an ambition to generate $20 billion of business, and I'm looking forward to what we will deliver for many years to come, starting in the second half of this year. And finally, retail. Jeff will cover the performance of our different retail businesses shortly. But I wanted to focus particularly on workplace, which, as you know, is one of the most exciting growth areas in the market and of our strategy. We now have more than 100 billion pounds of assets under administration. This was driven by 4 billion, you can see in the slide, 4 billion of net flows in the first half, which is a 21% increase compared to 2024. Overall, this means that we have close to 200 billion of DC assets. This is across asset management and retail, not just the part that you see here, but across both businesses. And that's circa 25% of the total DC market in the UK. As you also know, the DC market is projected to grow. It will be $1.4 trillion by 2033. And we are really well positioned to take advantage of that growth. We were one of the first to provide access to private markets as part of our DC default funds, and we were the first provider early in the year to connect to the government's pension dashboard, which is a tool that increases transparency for DC members and therefore improves engagement with the members. I'm very positive about this, and we will tell you more about the prospects for this business and its profitability at the investor deep dive on the 23rd of October. So stepping back, all of this means that we are on track to return more than £5 billion to shareholders through a combination of dividends and share buybacks. Here are the different components on the slide. First, our dividend, which is growing at 2%, accounts for £3.6 billion of the total over the next three years. Second, the 500 million share buyback I announced back in March at our full year results is now 90% complete. And third, after the major student transaction completes, we intend to return 1 billion of the 1.8 billion pounds of proceeds. If you add all of that together, you get to 5.1 billion. And then on top of that, you have the ongoing buybacks, which is that last little box. So overall, we are doing exactly what we said we would do, which is to return more to shareholders. I will now hand over to Jeff. We'll walk you through the financial highlights. And then I'll come back for some closing remarks and to answer your questions. Jeff.

Thank you, Antonio, and good morning, everyone. Our businesses continue to grow and deliver increased earnings and enhanced value creation for shareholders. Core operating profit is up 6% to £859, driven by the predictable release from our growing store of future profit and the benefit of increased back book optimization on our annuity portfolio. Growth in core operating EPS is 9%. And as Antonio mentioned earlier, this is at the top end of our three-year target range. And capital generation is up 3% against the prior year, with the expectation of higher growth for the full year. The solvency coverage ratio of 217% remains strong and reflects the impact of the dividends and buyback in the first half of the year. So now moving on to the performance of our businesses. Institutional retirement operating profit is up 11% to £618 million. Our growing and maturing annuity book is driving a larger release from the CSM and risk adjustment, resulting in increasing and predictable profits. Back book optimisation has generated over £150 million of profit across our annuity portfolio, which we believe is sustainable level for the medium term. This reflects greater capacity to rotate into direct investments as we continue to write new business using a gilt-based investment strategy, as well as taking advantage of volatility in the market to switch out of those gilts. Investment variance largely reflects modeling improvements and an action to optimize our reinsurance. This has added 139 million pounds to our store of future profits, but generated day one adverse investment variance in the same way as longevity releases. This effect will unwind as the CSM and risk adjustment release into profit over time. As Antonio mentioned earlier, we have made a strong start to the year, with 3.4 billion pounds of total new business completed and a further 1.7 billion in exclusivity. In the UK, we continue to optimize pricing with new business investment strategies that adapt to current market conditions, delivering a high return on capital deployed and a new business strain of around 1%. New business margins remain attractive at 7.1%. And the greater capacity for back book optimization increases the future upside potential, as we've already demonstrated this year. In asset management, fee revenues were up 2% in the year, despite lower average AUM, as our conscious shift to higher revenue margin business takes effect. The 15 million pounds of annualized net new revenue demonstrates the significant progress we have made. Total asset management operating profit includes 79 million from our balance sheet investments. This is broadly flat on the prior year. A lower valuation uplift on Pemberton is offset by higher returns from a growing portfolio, as we warehouse assets to support future growth strategies and seed commitments to catalyse new funding. Over the past five years, on average, valuation uplifts on Pemberton have contributed less than £50 million per annum to operating profit, and Pemberton currently makes up less than 30% of the £1.4 billion portfolio. Around 50% of the £124 million investment variance reflect unrealised mark-to-market impacts versus the expected return in operating profit. The remainder is from exceptional items related to organisational restructuring and the write-down of a small number of assets which did not meet the criteria to continue funding. Across the group, we're taking a disciplined approach to both cost management and investment, and this can be seen in asset management. We continue to keep underlying growth below inflation, demonstrating cost control. In turn, we are considered about our investment spend as we focus on opportunities that we are confident can generate higher revenues and support our growth strategy. Our cost-income ratio has marginally increased from 74% as at the end of last year to 75%, as we have chosen to deploy £13 million of incremental investment spend despite market volatility. We remain confident that, with continued cost discipline and revenue growth from the investment we are making, we can reduce our cost-income ratio to below 70% by 2028. And now in retail, operating profit increased by 3% to 237 million pounds, with predictable earnings from our store of future profit and the benefit of back book optimization. Lower volumes in retail annuities follow exceptional performance in 2024, where we materially increased our market share, resulting in record volumes. However, we do expect continued growth and we are confident in our ability to maintain a leading market share. Protection gross written premiums are up 4%, driven by a particularly strong first half for our group protection business. And our retail protection margins continue to grow. Our workplace DC net flows are up 21% to 4 billion pounds. And as Antonio said, our total assets have now passed 100 billion pounds, generating revenue in both retail and asset management. we will continue to invest in our DC proposition to ensure we maintain our competitive position and gain operational leverage as we scale. The compounding effect of winning DC New Business today will be a sustainable source of future growth. Our Solvency II coverage ratio remains strong, with surplus of 8 billion pounds. Notwithstanding the payments of the largest part of the full dividend and allowing for the 500 million pound buyback, The coverage ratio of 217% excludes 6% in respect of temporary impacts from non-retained US business that will unwind when the transaction with Meiji Yasuda completes. This is predominantly new business strain on US protection and US dollar hedges on the proceeds of the transaction. The transaction remains on track to close in 2025. And as a reminder, when we announced the sale back in February, we said we would generate a further 1.2 billion of capital, and it would increase the solvency ratio by around 7 percentage points after the anticipated share buyback. This is on top of today's 217%. Now, this slide looks at OSG in a bit more detail. In the first half, we generated £729 million, growing by 3%. We anticipate this growth to be higher for the full year, reflecting the timing of some items in 2024 being more weighted to the first half. This includes management actions of greater than £300 million, which are sustainable in the medium term, following increased confidence in back book optimisation. In 2025, we expect full year OSG to broadly cover the cost of the dividend and new business strain. At the same time, the OSG per share will be growing at greater than 5%, creating headroom over the 2% DPS growth. This will be further enhanced by the additional buyback we intend to complete next year. This buyback would increase OSG per share by over 9%, and in absolute terms, reduce the cost of the dividend by around £100 million. As our core businesses continue to grow and we execute our management actions, this gap will widen further, providing greater capacity for investment for future growth or greater returns to shareholders. Our strong balance sheet and growing surplus generation makes us well positioned to capitalize on the opportunities in each of our core markets as we move into what we expect will be a busy second half. I will now hand back to Antonio for closing comments.

Thank you, Jeff. So we have delivered great financial performance this first six months, and I'm pleased with the execution of our strategy. We have a clear vision to become a growing, simpler, better connected business. And as we deliver that strategy, we will become more capital light. We have good growth momentum, as we've just discussed, in each one of our businesses. And on the 23rd of October, we will run the last of our three deep dives on retail with Laura Mason. So what will we cover in October? You can see it here on the slide. First, the growth potential for each of our retail businesses, particularly given the growing market opportunity across DC and savings. Second, that we have a series of well-positioned businesses with clear propositions to address growing customer needs. And finally, make the case that we can generate good economic returns that improve as we scale and leverage the synergies with the rest of LNG. Now, in terms of outlook, look, we all know we are living through complex geopolitical and macroeconomic environments, and we all need to navigate that. I'm sure you do that in your businesses as well. But against that backdrop, I am confident in the immediate prospects for the business and their long-term growth trajectories. If you look at each one of our three businesses, you have them on the slide. In institutional retirement, we have an active pipeline that I described earlier, which we expect this to convert over the coming months. And importantly, we have increased capacity for back book optimization, as Jeff just mentioned. In asset management, the recent client wins, the fund launches, the revenue momentum will continue to come through in our financials. And I'm looking forward to the results of the partnership with Blackstone and the first co-investment with Meiji Asuda. And finally, in retail, we have growing retail annuity sales and therefore expect a stronger second half, and we will continue to grow our workplace business and its profitability. So in summary, we have high confidence in achieving our overall targets, including the full year core operating EPS growth of 6% to 9%. So with that, I'd like now to invite Andrew, Laura, and Eric onto the stage to take your questions together with me and Jeff. Andrew, Laura, Eric. So yes, I will start. You all sit at the end. It's well done. Please state your name and your company. And if you can, limit your questions to three, please.

Thank you for taking my question. It's from . The first question is on asset management and net flow. So firstly, good to see the revenue margins tick up there to 9 bps and trending in the right direction. But just wondering on the net flows, obviously still negative, when do you think they might turn positive? I know you've got a number of initiatives across the private markets and elsewhere, so just net flows, when do you think they might turn positive? And then the second question is on PRT, just wondering if you're seeing any evidence of increased competition or indeed trustees looking to delay their transactions in the hope of possibly accessing any pension surplus they might have in their schemes. And then the final question is on the management actions. How would you define the management actions? Is it just back book optimization? Is it anything else? And can you help us understand why they are repeatable and why is the 300 million the right level? And then sort of subpart to that is how did you increase your capacity? I think you called out that you've increased your capacity to do more. So just any color on that, please.

Great. So I think that's pretty straightforward in terms of the net flows. If I can ask Eric to do this, I think, Andrew, if you can give some color on the PRT, and then Jeff, management actions. So maybe just two quick comments. Just on management actions, we did the guilt strategy, and therefore that's providing more capacity. Jeff will give you the actual answer in terms of the management actions. Just on PRT for a second, I've had many discussions over the last weeks and months. As you see, we feel pretty good about the $5.2 billion that we have written. And the $42 billion of active pipeline gives you confidence that the trustees are coming to the market, right? So I alluded to it on my slide, but we see actually new entrants coming in and that competitive dynamic. Actually, I feel very good. I've talked in the past about a trillion opportunity globally over the next decade and another trillion opportunity after that. So I feel pretty good about that. It's always been a competitive market. But we're not seeing that dynamic of trustees themselves holding back because of the surplus point. We see much less of that. There was a bit of chatter six months ago around that. Andrew will give you more. But why don't you start with the net flows first?

Yeah, no, thanks for that question. This is a really key point. ANNR is a net flow number. We have to think about that. It's weighted by revenues, and that's why we're so focused on it. So very excited. Obviously, it speaks for itself in the inversion of that tendency, and you mentioned that. And I think we're in a unique position. The reason why in a market where you are seeing fee compression, that's a market phenomenon, we're actually targeting a growth over time in our fee revenue, and all that is linked to the importance of us thinking about this revenue weighted, because if we're just thinking about what is a very important leveler, so I will add, the net flow is a number. It matters. It's the way you can kind of look at the industry in a quick way. So it is an important number, but we need to focus on the ANR because if we were just chasing net flows, we wouldn't be as focused on that change of product niche, which is a unique opportunity we have. That said, I'm actually quite pleased with where the net flows are given where it's been in the past. First half was one of our best net flow numbers. We all know we have a tailwind in what has historically been our largest market, right, from an asset management perspective. We are the absolute leader in UK LDI, and as Antonio mentioned, that is shifting. Now, DC is symbolically now above the LDI number. But two things. It shows that in our non-LDI businesses, we're in a really good space, even in that more generic net flow number. But importantly, we're still winning in the LDI space. We're a leader in that space. And what we're seeing is in the smaller mandates, there's still a lot of movement. And we're not vacating that market. We're actually getting wins there. which, again, is going to have a marginal positive impact on the A and R number that's so positive. But it does kind of keep that net flow number, which is a benchmark. Everybody looks at it. I don't want to predict when that could go positive, but the first half is extremely encouraging in terms of our overall momentum. So even the net flow number, I think, is a positive development. And what's really key to keep our eye on the ball on is that A and R, which is our weighted net flow number.

Yeah, and we mentioned the run rates. The run rate of 15, you multiply the 15, right? And so you do the math, right? So 30, 30 times 4, 120. So we're within the 100, 150 million target of cumulative ANNR. And that's really good to see because this is the first six months for for that specific target. Thank you. Andrew, PRT. Yeah, sure.

Well, what I say, we've been in this market for nearly 40 years. We are definitely used to new entrants entering the market. It's always been the way. And as Antonio says, that's a huge vote of confidence in the market. And of course, the recent transactions will change the competitive dynamic again, for sure. So we're well used to that. Why do I remain very confident for two reasons. One, the market continues to grow. The market expands, and Antonio gave some data earlier about just the size of the market that we can expect to see in the near term and then going out into many years. So the market strength and the continued growth, that's hugely empowering. But also then, why do we win? The reason we continue to have record results in in the years as competition increases because of the strength of our asset origination, our asset management relationships, the propositions that we deliver to clients, and the service levels we give both to trustees and to individual members. So I remain really confident that despite the competition, those capabilities and the growing market means that we're in a strong position. Specifically to your trustee question and their options, we have seen no evidence of any of our transactions or any of our pipelines, if you like, pivoting away from moving to buyout and reverting. So there's been no evidence of that. I think for sure there'll be trustees out there thinking about their options and their strategies, particularly around surplus. I mean, I have a personal view that actually using the calculation around a buyout value is a catalyst to crystallising what that surplus might be. So we are aware of trustees who are thinking exactly along those lines as to what's really under my sort of funding level, the options I have around surplus distribution and buyout as well.

Effectively doing both, right? So doing the PRT transaction as Andrew says and doing the surplus extraction at the same time. Management actions, Jeff.

Yes, so before we come on to the latter half, yeah, I mean, there's a range of actions within management actions. As you know, some of the more material are reinsurance, both internal and external. We've talked before about, for example, warehousing some deferred lives, especially where we're not using too much capital at the moment. So we can take on a few of those. That gives us a lot of optionality around reinsurance in the future, for example. There's structure in that we do assets and just generally the whole structure of the group. Even some hedging can have significant impacts if you effectively optimize that under Solvency 2. But then the largest with the reinsurance is the back book optimization. that we've talked about, which takes a number of forms. There is the capacity that we're creating by bringing on so many liquid assets to simply put more direct investments in the back book. So that's just a straight through benefit, if you like. We then can trade around things like the shape and along the curve, et cetera. And we're definitely more active around that. And then there is the sort of volatility or even hopefully maybe a long-term shift to slightly wider credit spreads where you simply move the gilts into credit and capitalize on that. And that was something that we did post-liberation day during April and made some of the additional profit. We still have the option then to move that credit into direct investments in due course as well. And so that sort of never ends, if you like, and you keep optimizing. It is a bigger part of the business now, and Andrew's world has been put in a sort of framework around this. We executed very easily in April. Antonio and I were both at the office, actually. I mean, it was all done very easily. We had a framework. How do we optimize this? What do we do? There are processes being built around it, which makes it all easier.

much more part of business and you as usual and sustainable than it was previously yeah and a bit the upgrade on the management actions i really like this point that jeff is making which is more of it is on the back book optimization which is also high quality management actions if you think about it that that way thank you a bit mandip

Hey, morning, everyone. Thank you for taking my questions. Mandeep Jagpal, RBC Capital Markets. Three from me, please. Two on asset management and one on PRT. The £15 million ANR, you've given a breakdown of that, but can you provide a simpler split between internal versus external? Also, confirm if the ANR includes M&A, as the waterfall chart you showed, showed the deep dive, didn't have a column for M&A, but presumably this adds to revenue. Second question on asset management on the private markets fundraising pipeline. You mentioned the digital infra fund. What is the target fund size and when will you be raising? Are there any other new funds which we're thinking about contributing to privates in the near term? And then on PRT margins, Can you help build a bridge from the 7.1% that you reported as the new margin compared to the accretion to the CSM and risk adjustment, which was closer to 3.5%? And on the optimization that you include in here, does it include items that have actually already occurred between contract initiation and the period end? Or is it, I think you mentioned, an element of expected optimization that you might be able to do in the future? Yeah.

How much of that is in the 7.1%? Is that what you're asking? Yeah. So I think, Jeff, you should take that. Unless Andrew really wants to jump in, but I think you should do that. And then come to you first, Eric, on the two S management questions. So the 15 million internal and external M&A, and then the digital infrastructure fund, and other exciting new funds.

Yeah, so $15 million, and again, rough breakdown. In terms of the synergistic business model, it's less than half. So it is a big part of what we do well, whether that's moving some of our LDI business into PRT. Of the 15 million, less than half of that is really internally driven. There's a big chunk of it that's part of the synergistic model because it's working in partnership with our retail business. So our DC part of that is quite significant as well. But that's true third party money. And then the remainder, which again, I think is extremely, it bodes very well. It's a bit in keeping with the first question. We are positive on all the rest of the business. So I think we've got some good momentum across All aspects, if you were to break down our business really simplistically, and I think the way you asked the question is a good way of doing that, we have the truly internal synergistic business model, which is our competitive advantage. So that's humming. That's doing really well. I think specifically the third party business that's linked to the synergies, which again, DC is a big part of it, that's going really well. And when you take all the rest, we've got positive A and R in the first half. On the back of... a pretty different picture we've had over the last few years, as Antonio said. So it's quite broad-based. Not surprisingly, in the near term, we're seeing our real strengths come to the fore, our real synergistic model strengths, our real third party, what makes us a leader in the UK, and what makes us able to go after certain channels in a way that's pretty unparalleled, like in DC. So not surprisingly, that's driving most of it. But I'm extremely encouraged by it. You take that out, we're positive on the rest. So it's a really good start. Second question, and the second question's still coming.

There was a 1B, which is, is M&A included? So at the moment, M&A hasn't made a big difference, because actually, what did we do from an M&A perspective? An investment in Taurus, which provides, and the acquisition of proprium capital partners, that's not included in those numbers. The second question was on the Digital Infrastructure Fund.

Yeah. So again, this is pretty hot off the press. So I think we're to the point where we can talk about it. I think it's not unfair to say that an ideal target is is somewhere well above the half a billion pound mark. And I feel really good that if that were a low target, we're going to be largely there in the short term. I really can't say more. But the fact that I'm saying that should give you some confidence. And these fundraisers, as you know, these fundraisers, they happen in multiple series. And they can last. In today's world, because it is a challenging equity private markets environment, these can drag out over 18 months to two years. So I'm feeling really good, A, that we were able to get this off in this environment. I think that is quite rare. There's the big names that are still hitting headlines with equity privates funds, but everyone else has been struggling. So I think this really shows a competitive advantage. And I feel pretty good that in the near term, we're going to be announcing initial numbers that are very much in keeping with what I just said. So that's really strong. continued momentum on the on some of our existing products Antonio mentioned PMAF in the private space frankly every time we talk about it the numbers a little higher because flows are just coming in continuously so that is a very strong best-in-class product we have we're taking full advantage of it I think the living sectors that we've been talking about for a while they continue to show momentum UK living sectors we are a leader in that space and we are soon going to launch the latest in our Clean Power Energy Fund in partnership with NTR. So we're in the process of marketing that. On the back of a final close that was above expectations, we hit almost 600 million euros to close the last fund. We had a good pipeline, so we should be back in the market by the end of the year because a lot of that money is already earmarked. So those are the near-term ones. And that's before we talk about some of the M&A that you can imagine. We're going to be very focused on proprium. We're very focused right now on Taurus. So the whole theme of irons in the fire we talked about at the CME, I think we're starting to show the beginnings of that. We have multiple routes we can go through. And that's before talking about our private credit business, which I'm very pleased with momentum on separate accounts. in that. Insurance, going after insurance. We've had the Admiral win, but we have a very good pipeline of continuing to grow that third party business and investment grade private credit.

The series of client wins is very impressive, I'd say. Eric has just arrived, but it's amazing what the momentum is in the business. We've included some of those here in the pack, and you can expect more of that to come. On the first question, we talked last time about an underpin, and that's how I think about it exactly as Eric said. There's an underpin, which is the strength of the two business sitting to his left. So the underpin of the PRT business and the underpin of the amazing DC business we have. But actually, the excitement bit comes then with the third party money. So I think you can see that. That's why I'm saying it's a turning point. In this six months, you see that working properly for the first time. Jeff, the 7.1% and what's included.

Yeah, that's right. And we recognize, I know the teams can help you guys on this, we recognize you can't calculate that number from it. We gave some of the information. So the biggest element that's not happened is the reinsurance that is not yet signed at the half year. And so we're using funded RE for some of that new business. We say that we have allowed for 511 million of funded RE in that 7.1. That is because we can't allow for it in the IFRS because we haven't signed it. Accounting doesn't let you do that. But this is the realistic view of the profitability of this business. We do the same on the substitute strain because this is what we will execute, how we price the deals, et cetera. And then the other part on the back book optimization is, as I talked about earlier, the fact we're using the GILT strategy means we can deploy direct investments, private assets immediately to the back book. And I'll use some made up numbers just to illustrate. Let's say we're targeting 40% of private assets. The fact that maybe on a deal we might put 20% private assets make it up completely. 80% for the rest is gilts, et cetera, and liquid assets. What we do is we say, well, that means we've brought on so much liquidity that we can deploy 20%, the leftover 20% of direct investments immediately in the back book. And we are doing that on an ongoing basis. So we've effectively done it straight away. And so this is extra capacity that we've got that we immediately do as Eric's business simply flows through. We tell them how much we need for the year, and it simply flows through. And again, we have rules around that about are we up to speed, have we got the assets, the amount that we're using, et cetera. And the split is not quite 50-50, but it's roughly that. I mean, they can take you through the calculation with the fund degree, and then you can see how it comes through.

I think there are two reassuring points on these numbers, which is the 7.1%. There's been lots of chatter of the business being less profitable. It continues to be as profitable as it was last time we showed you the numbers. And second, exactly to Jeff's point, there's all of the back book optimization. We're not including that in the margin upfront. We are including the bits you described, but that's from a pricing discipline perspective. talking with my team, we tend to price it between the three of us. There is an element of we don't want to give that pricing away. Like the back book optimization that we do later on, that's not in the upfront margin, which is really important. Tom.

Hi, good morning. I'm Thomas Bateman from Mediabanker. Could you just update us on the outlook for US PRT, given the litigation in that market? And in particular, I'm interested in, does the sale of your US entity and having to write out a Bermudan entity impact your ability to do business or could impact your ability to do business there? The second question is just on the DTC transition, so towards your 15% target in private markets. How much of your 100 billion has transferred already? I remember you talk about trustees having to sign off on the new allocation. And then finally, it was just on slide 24 and how you were talking about OSG and the dividend. how the OSG would broadly cover the dividend. But I guess I'm thinking there's new business strain and I assumed at the capital markets that you committed to some level of recurring buybacks when you changed the dividend policy. So should I think about it as NSG versus total capital return or should I think about it as OSG versus the dividend?

Yeah, perfect. So, Andrew, on the outlook for USPRT, I'll say a word on DC transition. Maybe actually it's an opportunity for Laura for you to talk a bit more about DC from a workplace perspective. And then, Jeff, can you come back on slide 24, which I feel very good about that slide. We worked a lot on it. So just on DC transition, so Tom, the overall, so we are a signatory to the Mansion House Accord. This is putting the default fund into a 15% investment in the private markets access fund. But if this is a simplistic way of putting it, each one of the funds, so you have the master trust, you have the different scheme arrangements, they are progressively, that's why Eric was saying that each time we talk about the number, it kind of is exponentially going up because each one of the schemes is moving to that default. But the simple answer is the fund is 1.6 billion. So the bit that we have that is in the fund is the 1.6 billion. But you can expect more and more of that of the overall DC, so think about it, we have 200 billion of DC at the moment, and we are 25% of the market. You just do simple maths, the DC market's going to be 1.4 trillion by 2033. We hope, and in October we'll talk to you about the ambition that we have in DC, we hope to be a quarter of that market. So there's much more to come. Not all of the schemes will allocate to the Private Markets Access Fund. Because in some cases, you have some employers that immediately have decided that they want to move because they feel this is the right thing for their employees and their members. Some other schemes, they themselves don't want to move into private markets. And so we are doing what the clients want. I think the good thing about from a private, from a mansion house accord perspective is there's a momentum in the market, whereas the employers themselves, you probably saw this, there was an employer's pledge where the employers themselves are committing to allocating more to private markets. So you wouldn't expect the full $200 billion for 15% of that to go into private markets. But you can see, just do a simple math, there's a lot of upside. That's why the private market access fund and the fact that we were one of the first in the market to have that, we feel really, really good about that. So Andrew, US PRT, then maybe Laura, you can say a bit more about the DC market and how excited we are about that, and then Jeff.

Yeah, a few comments on the US PRT market. Generally weighted to the second half anyway, so that's structurally where that market's been for many years. We definitely, though, sensed a slowing down in the first half from a pipeline perspective at an overall market level, I think for two reasons. the general US economic environment means that, and don't forget in the US you don't have the trustee interface, it's corporate sponsors doing it directly and therefore I suspect boards had other things on their minds than a pension transaction. So there were less jumbo deals in the first half than you might have seen typically. That said, that's not our typical market. We would write at a smaller end of that, so sub the 1 billion deals. Litigation comes up in certain conversations, but again, it's typically at the big jumbo end of the market, not at the sub 1 billion where we play in that market. And as Antonio said, we've had good pickup literally overnight on the US market with transactions coming through in the last few days. So I think we're feeling feeling very good about that. To your point about Bermuda, not really a huge change for us. I think that the sale of Banner to Meiji means that we become a reinsurer, not a direct insurer. So Banner will be under Meiji control. We've actually, even our own structure though, used a Bermuda reinsurer as part of that structure. So we're just, in many ways, just replicating the structure we have already, and so are Meiji. So I think structurally, the way that team are being set up is in a partnership where Magia will write the direct business and we will ensure 80% of that, but the team are effectively working as one and will use a very similar Bermuda structure to what we've had in place already.

Thank you. Laura, DC.

Yeah. I mean, a couple of things to say, really. You'll have seen that our net flows into our workplace business significantly picked up over the first half of the year. A number of reasons for that. We have very deliberately put a new leadership structure in place, which reaches across both asset management and retail. And we think this is a real differentiator in the market compared to our competitors. Even just thinking about the investment side of things, we're seeing the people that we sell to, effectively the employers of these schemes, increasingly interested in the investment solutions that we're able to offer to their end members. We've also made significant investments in the front end, the digital side of things, which we will talk a little bit more about in October. really, I think, from having launched some of our digital applications, we've seen incredible uptake from members. And I think, I suppose just finishing, and again, we'll talk a little bit more about this in October, the pensions reviews have really played, I think, to the strengths of LNG in terms of really encouraging scale members. And again, linking back to your private markets question, all providers of default scheme arrangements will need to have 25 billion of assets under management by 2030. We are already there with our defaults, and our defaults are now having quite a significant part of the private markets access fund as part of those defaults. So as Eric says... as well as the sort of new money coming into those the sort of contributions from the current defaults just each month the amount is ticking up great thank you and slide 24 maybe we can put it up actually if uh over there can put it up so uh jeff

Yeah, so I can tell you how we think about it. We very much look at the OSG that's being thrown off, what's being generated over the planned period. And we look at that OSG against the dividend first and foremost. So clearly, there's coverage over that. What is left is for us to deploy across the business, put into our capital allocation framework, make sure the businesses are meeting the hurdles, et cetera. And so we then use what is left for new business strain, but don't feel constrained by that. So in any year, in particular, PRT could be quite lumpy. We are happy to eat into our surplus capital position for that new business strain. because we're starting from a very strong position. And we've always said part of that is to allow us to write significant volumes should they arise in any particular period. As we get more clarity over that, we'd be comfortable running down those solvency levels. So we have always said that. And it's not dissimilar on the buybacks. Again, we've never said that it's covered from the flow necessarily. It's a capital allocation decision with the added benefit of reducing the cost of the dividend. And so we will always look at that and assess against it. We clearly have modeled out that we believe it's sustainable given a starting capital level, given expectations for, in particular, PRT volumes and strain. that those are sustainable, and that's why we made the statement, but not from flow necessarily in any given period and comfortable that we can, again, eat into a very strong surplus position. We have the same happening with the Meiji transaction, which significantly reduces the cost of the dividend, gives us more flexibility around that. and increases that solvency position by another 7%. And so it gives us more capital allocation decisions to make in the future. So that's the waterfall we go through in the way we think about it. It just so happens that because of the very low strain, it'll be there or thereabouts covering, NSG will cover the dividend in this period and improve from there. But we wouldn't guarantee it to the point where if there are larger volumes or we decide to deploy a bit more on strain. But I don't think we're ever returning either to the 4% strain days. We've never actually been there. We say less than 4%. We haven't been there for many, many years, even when credit spreads were wider and we weren't using gilt strategies.

And we are very comfortable, actually. As Jeff says, we do this ourselves. We do this with our board. We do this with the PRA. They approve our share buybacks. So pretty comfortable with that. Thank you, Tom. Larissa, and then I'm going to do a question online because we have Farouk online. So after Larissa, please.

Thank you. from Barclays. Three questions, one on bulks and then two on shareholders' equity. On UK bulk annuities, what needs to be in place to maintain your current margins? They were similar now to FY24. What needs to stay in place for that to continue? And then on shareholders' equity, it declined from just over 3 billion to about 1.9 from FY24 into 1H. Can you help us understand the main reasons for the component parts for the decline and how much of that you expect to unwind due to market overtime? Thank you.

Thank you. Andrew, on the margins and PRT and bulk annuities, and then Jeff, clearly on equity.

So thanks. I think on margins, as you say, we've maintained them in a competitive market. That's partly because, as Antonio said before, we stay very focused on pricing discipline. It's not about chasing volumes and where we don't see the margins we want in deals, and then obviously we wouldn't compete. It really comes down to... you know asset origination including funded re as well to make sure that we can competitively price you know the price the price in the market is often set by by the competition and we need to make sure that we're originating assets that can generate as the margin at the capital return we do so it it tends to be a you know a decision that we take transaction by transaction looking at the available asset sourcing the nature of like duration, et cetera, of the transaction, because that could influence our decision about funded reinsurance and coming up with a strategy on a transaction basis that gives us the margin that we're looking to preserve and not chasing the market down and margins that aren't attractive to us. Thank you.

Jeff. Yeah, thanks. Yeah, I mean, to some extent, looking at it is the same, a bit like the Solvency II waterfall that I showed. Looking in a half is a bit skewed. We paid out the largest part of the dividend. We paid out $500 million buyback, all in a single period. So clearly, that in itself has an impact. There is, of course, the items I mentioned where we're effectively transferring some of the equity to CSM and risk adjustment, which comes back as profit, like happens with the longevity. And that was $150 million or so of the investment variance that we had. And so that's one of those things from accounting. And then broadly, I mentioned the exceptional items in Eric's business with him coming on board, but also the half of it then of the investment is really just flat markets as much as anything. We have an assumption for returns, equities at 6%, 7%, as it would. And the private markets, which a lot of our investments, were broadly flat. There weren't many transactions. There wasn't much market to market. And so the assumption in Europe profit is a negative. Over time, you obviously assume that that should trend to a zero over time. You should have offset in items. And so we're very confident and happy with the position, very confident with the modeling we've done around all my answers to the previous question. And so we're happy with that, happy with the portfolio. We've done some trimming. We did set up the corporate investments. Eric himself has looked at some of the assets that we hold on the balance sheet and whether they're for the future and will actually ever go into funds. So we're being honest about those where we take the write-downs. The rest is just a mark to market, which has broadly been flat, to be honest, over the period. But because you're assuming returns above the line, you get a negative that goes with it.

And if you want, Larry, so we can give you some more details. As I've said to some of you when we were meeting outside, we've tried to get as much feedback from you and tried to improve disclosure. Hopefully, as you've seen, we're trying to be more transparent. And each time you ask us a question, next time we try to give you information on that. Let me answer the question from Farouk, and then I'll come here to the middle section. What concerns, if any, do you have around increased competition from private market players and others in the UK PRT market? And this is from Farouk, as you know, from JP Morgan. So look, any concerns? Look, I'm not concerned. I mean, if we think about it from an overall perspective, it's good to have a healthy market. So that's the first thing to say. Second, it does validate the fact that this is an attractive market that continues to grow with good returns. And it is a validation of that that very sophisticated investors want to come into the market. In some cases, and it's different, the two transactions we've seen, we have one new entrance, if you think about it that way, that bought PIC. And therefore, from that perspective, PIC is already a great competitor of ours, already writes a lot of business and so one situation. In the other case, we already had Brookfield as an organic new entrant and they've just bought just as you've seen or about to buy it and therefore we have one less competitor if you think about it that way. So when we think about what are we here to do to execute our strategy, we are the leader in the market as I said earlier. We feel that we have the right competitive advantages. We are the largest asset manager in the UK, which is different from any other player in this market, where 80% of our volume comes from our asset management clients and then goes back to asset management, where Eric is originating the assets for the PRT business. And then on top of that, the partnership we did with Blackstone complements that, particularly in matching adjustment eligible US private credit. So we believe that we already had all the, it's a competitive market, it's always been as Andrew said earlier, but we believe we have all the levers and now we have one additional lever which is the partnership with Blackstone. Good. Andrew. Andrew in the second row rather than the ones in the first row.

Yes. Yeah, Andrew Baker, Goldman Sachs. So, yeah, the first one, just on the Blackstone partnership, the asset management benefit is pretty clear. On the annuity side, you made a comment that improves your pricing power. I guess I'm just struggling to see how you get that because it feels like you're giving away some margin there. So any comments around that would be really helpful. The second one, again, sorry to come back to these investment variances. So I appreciate the market dynamic that you mentioned. A decent amount was on modeling improvements. Do you have any line of sight into that for the second half? Is there anything you can flag ahead of time on that? That would be helpful. And then thirdly, just a clarification question. So the 7.1%, I don't think you're saying that we just stick 7.1%. Well, if market conditions stay as they are today, we don't just stick 7.1% as a normalized margin into the CSM roll forward because essentially that's split between back book and front book. So we just need to take a view of how much of that goes in the CSM versus how much is in the back book. Is that a correct way of looking at it?

100%, yeah. And whether it's exactly 50-50 or not, Not 100%. It'll depend on the amount of fund degree at any point. But yes, if you split the difference in 7.1 and whatever, then 3.5, then the bigger, the 5-ish, 6, whatever the number would be, would go to CSM. But there's always going to be some left over, which is the DI to BackBook, which then will come through. It has to come through the P&L somewhere. So if that comes through in our BackBook optimization, it's the only place it can appear, because it doesn't go in the CSM.

Thank you. Were those the three? So first, margin and Blackstone. I think we should give that one to you, Andrew. We're very excited about the Blackstone deal, as you see. You made the point that asset management is very obvious. We could touch on that. But on the institutional retirement part, which actually is our full annuity book, which, by the way, is retail and and PRT, how does this give us pricing? That was the first point I made, Andrew, right in the slide. It gives us additional pricing competitiveness.

Yeah, we've talked about putting up to 10% of our new business assets into Blackstone. Unsurprisingly, they want paying for originating assets for us. That's a perfectly reasonable request of theirs. And so when we've looked at the mandate, we've agreed with them on the commitment Of course, we've factored in those charges to the effect of the net yield we need to accrue from originating those assets. And again, they've got a fantastic reputation, as Antonio said, in originating MA assets at scale, particularly in markets that are complemented to what Eric already originates for us. So if you like, the commitment they've given to us up to the value of the partnership is is post-charges, it's hitting our hurdles and giving us the assets we need, reflecting the fact that, of course, they weren't compensating for doing that. I'm very excited.

We were months discussing this, and I think why Blackstone is probably worth just rehearsing that for a second. Yes, we have lots of capabilities ourselves to do lots of things, but the scale of originating that private credit in the U.S. at scale so that the sliver of it that is matching adjustment eligible from a U.K. perspective, you need to have that scale. There's very few, less than one hand, players that could do that, and clearly we felt very strongly, and we also felt very strongly that that came with a partnership on the asset management side that helps us get into new channels and to new products. There's a really growing client demand for hybrid public and private markets. Investment variants?

Yeah. So the simple on the modeling is hopefully not. The teams tell me. But there's always work ongoing. And in a $90 billion portfolio, you don't have to change much to get an improved change in the CSM. But we're not looking at big changes for modeling in the second half. we're aware of today. There are investigations on an ongoing basis in a model that complex, which can go either way, of course. There is, of course, potential for longevity releases. We do look at that in the second half, and so that will The impacts of that will depend where the longevity kicks in. If it's very old individual annuities, it has more of an impact than if it was more recent PRT at higher discount rates, it would have less of an impact. So there is scope for that. But we've not landed on that. We don't know is it a modest number or a more material number at this stage. But it shouldn't be huge. But it would naturally flow in the same way. Either way, it shouldn't be many hundreds of millions or anything.

Thank you. Andy, Andrew, and Dom.

Thanks. Andy Sinclair from Bank of America. So first was just on buybacks. You did a bigger buyback this year at full year 24 results because PRT was incurring less strain with the gilts-based strategy. Should we be expecting similar for full year 25's buyback given that you're still using that strategy? Second, you generally gave me a cash generation figure for private assets at full year results. I couldn't find that today. So what are you getting for cash generation year to date on private assets? I think it was 850 million for the full year last year. and third was just apologies for missing the asset management day but one thing that you said quite a few times during that day was asset management is a higher ROE business compared to the rest of LNG maybe a pretty simple question but what are the ROEs across your different business units because I can't really see that

Good. Thank you. You're excused. You were getting married, so it's OK. So it was a great event for everybody else. So look, on the buyback, I've been pretty clear about this, which is we will look at the full year results with our board. I have here one of my board members. We will look at what are the opportunities in front of us in terms of additional business, what has been the strain that we have incurred, what is our solvency position, and with the growth opportunities and and our position, we will determine what's the right buyback. That's absolutely the framework. It will continue to be the framework. As you know, and Jeff put it on one of his slides, we have a billion earmarked for the transaction with Meiji Yasuda, and we have the 200 million ongoing share buyback. So we need to think about what is the right quantum and how many shares you can actually buy back. So that is something we will do, and Andy, I couldn't tell you today, meaning that is a decision we'll take in March, and it will depend on the rest of the pipeline for PRT and how much strain we will see continuing going forward. My commitment, though, is exactly what I said to you over a year and a half ago, which is every single pound that we cannot deploy internally and where we have that excess, we will return that to shareholders. And when I said it the first time, it was a bit of a theoretical thing. We did the first 200 million last year, and we've just done 90% of the 500 million. So hopefully by now you trust us that this is what we will do. In terms of cash... General, I think both questions for you, Jeff, really.

Yeah, cash generation, obviously we had the CARLA proceeds in the previous period. So of the 850 or so, 500 of that was CARLA and a few other disposals as well. So there actually hasn't been as many disposals, hardly any activity in the first very small number in corporate investments in quantum. So it's more in the 100 to 150 range, which is basically half of what's left over when you take the collar out and some of the other disposals. We would expect that to be higher in the second half. We said we think the majority of the value from the corporate investments will be gone in the 12 to 18 months. And so we are hopeful of things under offer, et cetera, in the second half. But there's no chicken counting going on at this stage.

Yeah, so we have 0.7 left of the corporate investments unit, 0.7 billion. We should both answer on the return on equity. I think, yeah, we did make that comment, of course, a month and a half ago, that asset management is a really profitable business. But it's in the context of we have a disciplined approach. Return on cash and return on capital needs to be above 14%. And the reason why we say capital and cash is because The return on equity, if you think about it that way, Andy, from an asset management perspective, is extraordinarily high because it consumes almost no capital. I think the bigger point from a profitability perspective is what is always in my strapline of the strategy, which is we become more capital light over time. Becoming more capital light over time is growing the asset management earnings. And so I think you should add, Jeff, you had a slide at the deep dive where you why do we really like these earnings? We like these earnings because they are capital efficient from that perspective, really high return, but they make the entire company more capital light of a time, which is a pretty tall order when our PRT business continues to grow very strongly over decades to come, as I said an hour ago. So Jeff.

Yeah, there isn't a huge amount to add, to be honest. The vast majority of our businesses don't have any capital or equity of note to them, so have very high returns. It's actually about return on cash. It's really the annuity businesses where we monitor for a pure return on capital to make sure that we are for each portfolio over the year, really almost every deal hitting those hurdles. But obviously with the low strain at the moment, those hurdles are not an issue for us. So they're all going to be high returns, very high returns for the vast majority of business because they don't have capital. And then it's more like sensible numbers, but still high at the moment because of the low capital that's strain that's in those businesses.

But at the moment, the binding constraint is what the previous question from Andrew was, which is, well, your question as well on the buybacks, which is, how do we think about, we're not trading off a pound in each one of the three businesses. We're saying we have a hurdle for all the businesses, and they all need to meet that 14% return on capital and return on cash. And therefore, if we can't then hit those hurdles, the rest we're returning to shareholders. Andrew?

Good morning. It's Andrew Crean at Autonomous. Can I go back to slide nine and just get some of the modeling which lies behind it? I think you're using the LCP models. LCP has sales peaking in 28 and then drifting down. So by 2033, what sort of market share are you looking at? and what sort of net flows to start your assets are you looking at? Because by that stage, I would think you're moving more towards a neutral position. That's the first question. The second question is, on the retail annuities, what are the outflows per annum relative to the sales? And then thirdly, on management actions, Clearly, you've upped the asset optimization, and you're looking for management actions of over 300 million. In terms of asset optimization, what yield improvement on the portfolio, how many basis points does that compute to? And how long can you just keep? I think it's about three points, but how long can you just keep lifting the yield basis for, i.e., what does medium term mean?

Let me start on this slide nine. I think, Laura, you should talk about retail annuities, outflows, and we are in a position where we're actually writing more than the outflows, but Laura will go into that. And then... Jeff, can you talk about management actions? Thank you for not asking the Pemberton question. It was one of those we ask as a question and we had it, we put it on the slide also for you earlier in terms of disclosure. So we're, no, no, but seriously, we're listening to all of you and your questions and we're trying to reflect that at results. So in terms of this slide, you're right, we are looking at, so we are using industry assumptions, so we have LCP, so that is the underlying We actually have a version of this, which we don't have here, with the flows themselves. This is our own book from a UK perspective. This is the 64 billion. As I said, this includes international PRT or the retail annuity. We wanted to focus this specifically on UK PRT. And the net flows do continue to increase. Of course, the total 1.4 trillion keeps on – the number keeps on coming down in terms of overall DB. But on the percentages, we get to 50 percent of the assets being insured within – and then it continues to grow. We can give you the underlying assumption. We can give all of you the underlying assumptions. We feel that there's two things happening. the new business, and when do we cross that point where the annuity outflows are bigger than the new business. Our view, if you looked at some of the numbers you did for us, that's later. We continue to write. And then you have this chart, which that's why we wanted to show this up to 2023. Our actual book will be growing between 6% and 8%. And the difference between the 6% and 8% is 6% is the lower assumption of LCP, 8% is the higher assumption of LCP. What are we assuming in terms of market share? We are assuming a consistent market share to what we have. So historically, we've had a higher market share up to 24. We're typically around 20. So we're not assuming that our market share increases. looking at putting some pressure on Andrew. We're definitely not assuming that our market share decreases. But there's an important point there, which is we target the profitability of the business. And therefore, to some questions that were asked earlier, if the market moved in a position where we felt the profitability of the business wasn't right, I don't have a volume target. This is what we're assuming. If the market gets tougher and there's lower profitability, we're very happy to walk away from transactions as we have over the years and including in my tenure over the last year and a half. But Andrew, this is assuming the same as maintaining that same rough market share. Retail annuities, Laura, and then come to Jeff.

Yeah, so a couple of comments. I can't remember what slide it's on, but we wrote 2 billion of retail annuities last year. So you can see the increase over the year from that slide. So you'll be able to work out That will give you some indication of what's sort of rolled off. I think the other thing to say is that the majority of... Sorry?

It's slide 22.

So the majority of our... We can give you a bit more information on this afterwards, but just to give you some high-level numbers, if you see where we've gone from 17.4 to 19.8, we wrote about 2 billion of new business last year. The majority of our business is lifetime annuity, so the longer duration. And we can follow up with a bit more information on that afterwards. But that should give you a good high-level picture.

But what's happening in our case, Andrew, is we're looking at that number. We continue to write more new business than what rolls off because we can see from the stock perspective. We can give you the inflows and outflows. But the dynamic for us... different than from other players is that we are, with the amount of retail annuities that we're writing, the book keeps on growing. So the 19.8 billion, we expect that book to continue to grow. Whereas without commenting on competitors, but in many of our competitors, they are in actual structural outflows of there because the book is much bigger. You know, we're a very large retail annuities player. The first half of the year was a lot of people woke up to the fact that we kept on gaining market share. The market has been more competitive. The pipeline that Laura has for now actually is really helpful, so is really encouraging. So in the second half of the year, we're expecting a better second half compared to the first half in terms of retail annuities, which means that definitely by the end of the year, our book will be bigger again. So it keeps on going. That's exactly right. Management actions?

Yeah, I mean, I went through. There are a number of different Backpack Optimization options that we're deploying. So there isn't a single answer to them. But they will all be giving greater than 50 bps uplift. But some of those could be hundreds. Because if we sell a gilt and move into a direct investment, you're going to get a very large uplift on yield. We have areas where we've been selling corporate bonds and putting gilts in because of the relative spreads at the moment, the amount of profit we've made on corporate bonds. And of course, if we're selling the gilts, just simply, sorry, on that one, we've always said we can get 50 to 150. I mean, we wouldn't trade if it's below 50. It just doesn't make sense. And then you've got the selling of gilts to go to corporate bonds when you get volatility in that, which is the sort of optionality that we've saved up. And clearly, you get quite an advantage from that. But we do need to look at those in the round around the gilt strategy. We certainly think that's very sustainable over the medium term. We call it a planning period, whatever. So we are comfortable that we can continue to execute on a book our size. The 300 million back book optimization set up with processes and a structure in Andrew's team is very sustainable. We talked it through with the board what's in the plan, what we're planning to do over that period. we're very comfortable for across $90 billion that we can trade and we will trade with the optionality from the GIL strategy to get to that $300 million plus.

Thank you. Dom, and then I will come to Farouk again because I guess online he gets one question at a time, so I'll come to that, which I think it's for you, Jeff, so you can look at it. Dom.

Thanks. Hello. Hi. Dom O'Mahony, BNP Paribas. I'm afraid I've only got techie capital generation questions remaining, so apologies in advance. One hopefully simple one, really encouraging to see the guidance on the OSG growth greater than 3% for the full year. What's the baseline? The full year 24 number normalized for the disposals? If you could give us that, that would be very helpful. Help me not get too excited on the asset trading. Your guidance here is set in an environment where public spreads are as tight as they've ever been, more or less. If they normalize, presumably you're very, very geared into that. One of your peers is extremely ambitious on the asset trading opportunity. Is there any reason I shouldn't be thinking actually this could be a very large source of capital generation for you as you think more about, you talked earlier about some of the processes that you put in place around taking advantage of spread dislocation. Then, so the flip side, if I go back to that slide where you have the 6% to 8% growth in the size of the book, my hypothesis is that the book that is running off, A, is more capital requirement rich because you have more longevity risk, and B, is more spread and risk margin rich because you have more credit risk than the stuff you're putting in. So I would hypothesize that the OSG coming out of that book is not growing at 6 to 8. It's probably growing lower if we exclude management actions. Does that make any sense, or is that wrong?

I'm judging from your reaction. I'll give you one second, Jeff, to think about that. Just on OSG, yes, we can give you the normalized number. Jeff may have it. But just on the... I think... when it normalizes. Actually, Andrew made this point. The first half of this year is a good example because as much as I talked about geopolitical and economic uncertainty, we haven't had that much volatility. We had it very concentrated around Liberation Day. And so most of the back book optimization for the first half was done around those days, those those days that we were both out of the office and coordinating. But it's a good thing because we have a very disciplined framework that allowed us to very quickly act on that. You're right that the bigger upside is if and when the markets normalize, whereas here it was just the volatility we had for a week and then it went back. But, Jeff, you should comment on that and also on the 6% to 8% on that slide 9.

Yes, so the OSG growth, you were basically after the full year number. It is exactly what you said. It's the removal of the US protection and the 20% of the US PRT. I don't have the number off the top of my head, but I'm pretty sure we published it in the March results. and compare what that would have been with and without it. Pretty sure it's in there. If it isn't, we do need to tell people, because if you don't know what the number is, you can't do the growth of it. So we'll find a way of getting that out, if that's the case. But I'm pretty sure, I know in February we only give guidance of it was X million would be taken off, and then we said what the exact number was. In the full year results.

I remember that. So in the full year results, we normalize it. But if not, we'll send it to everybody.

Yeah. But for the taking off the non-retained business. Agreed. Yes. Yeah. And as Antonio covered, we don't want people to get carried away with the you do need some market volatility. We are sourcing assets. We'll keep the strategies going. But we believe it's a very strong underpin to the OSG. But yes, there is clearly upside for the back book trading in a situation where you get a prolonged period of wider spreads. it would equally change the way that we price new business, which we think would probably be beneficial to everyone, make a lot more sense. But your assessment of that is right. It's just a case, when will that happen? What will that look like? What will happen to other markets at the same time? And DI, of course, in those situations tends to lag and take a bit longer to come through. And so we almost certainly would be moving into credit at that point in time.

On that, Jeff and I debated this a lot. We actually said explicitly more than 300 million on management actions, uncapped to some extent, rather than giving, because we have numbers that could be much higher, but again, we want, and hopefully trust us that way, we want to be realistic. We're doing effectively an upgrade to the guidance, but in a way that is thoughtful. I don't think we're in the game of giving you very big numbers, but I think there is substantial upside. That's what we said, more than 300 million. And we'll keep on updating you as we do it. That's the logic. The 6% to 8%?

So the OSG capital runoff, really, was the question. I mean, the capital itself takes a very long time to run off on annuity business. It's very, very long. And especially with the amount of deferreds that we have written, over the last, well, probably five years at least, as those have been more and more coming to market in PRT. And so there is actually quite slow runoff of the book, if you think of pure capital runoff and what's happened in that. There's been more of an impact to some extent with some of the discount rate changes and higher yields and what's happened around that as anything else, because it is very, very long and only accelerates towards the end. It's even longer than I think the first 17, because that has accelerated a bit more with the higher interest rates. And so there isn't anything particularly funny going on in any of that, I would say. It's very predictable.

It's not fundamentally different than an older book versus the more recent book. Thank you. Let me go to Farouk online. So it says, your CSM new business margins in institutional retirement and retail are low, even taking into account your guilt-based strategy. What is the outlook for this, and how do we balance what appears to be A low level of CSM grows against higher guidance for asset optimization in terms of net earnings impact. Jeff.

Yeah, well, I think this pulls together everything we've been talking about.

You probably wrote it a few minutes ago before we said this.

To be honest, yes. So I think we've covered a lot of this. I mean, some of it is the new business margins that we state are actually in line with what we said would happen under the GIL strategy, in line with what we had last year. We think there's probably some improvement we can make around the retail new business margins on annuities with some of the investment strategy things we talked look at and deploy more of the gilts type strategies in that. We're improving the retail protection margins as well. That market got very, very competitive a couple of years ago, as we said. And it's good to see the improvement coming through on that. But certainly then in terms of earnings growth, our guidance, we're very comfortable with that. We're seeing the back book optimization come through, which to some extent is either embedded in what we assume in new business, as we discussed earlier, or is upside that is giving us more and more confidence in the earnings projections that we've given, if you like, and the targets that we're looking at. So I think it is everything coming together around that. Great. Thank you. Other questions? Nasim.

So this is similar to what Farouk just asked. On the new business CSM, if I look at just PRT, it's about 3% of PRT volumes in the first half. Jeff, when you presented IFRS 17, I think you got it to 0.8 to 0.9 billion for 10 billion of PRT. That included risk adjustment, I think. But that's eight to nine percent including risk adjustment versus three percent now. It can't just be guilt-based. There's something else going on, I think. Can you kind of, if you go back, try and explain what's happened on the new business CSM relative to volumes? Secondly, on investment variances, it seems like you're not of the view that you need to change the assumptions within operating profit. I mean, you've had negative variances for a few halves already. And real estate has not been returning returns. So when do you change it or have you already changed it for 2025? And then finally on the 300 million management actions for 2025, how much have you done in the first half?

Jeff, squarely, would you?

Yeah, so actually the 8% to 9% is more comparable to the 7.1%, I would say, the actual IFRS new business margin that we're talking about. That's the way we think of the business, the way we're looking at it. Because some of it is just you make less pounds through the gilt strategy. That is obvious. And so you're simply not adding as much CSM as you were. But we make up for some of that with the DI tobacco. We don't then allow for some of the future surplus. Some of it is it was quite hard to predict when we were just moving into IFRS 17 as well. I wouldn't say there's anything more fundamental happened there overall. IV, actually, it's interesting you say. We constantly look at this, part of our accounting policy, et cetera, and we are looking and will continue to look at this. It won't be wholesale across the piece because it is supposed to be through cycles, et cetera. You look at 150 years data to decide what equity returns are and you don't change them because they've been different for even five years. similar for property as an asset class. But we will look at, is it segmented? Are other asset classes suitably segmented? Is there something fundamental going on? And we do that on an ongoing basis, and we will continue. So we have a couple in mind that we may do that for. but nothing that's material that we need to tell everyone about that impacts the results, et cetera. And the $300 million, well, we talked about the management action, sorry, the Backpack Optimization IFRS greater than $150 million. Quite a lot of that flows straight through into management action. Of course, net of tax, a slightly different number. Some of those don't because they're in the new business strain as part of what we've assumed. And then we have executed some of the type of reinsurance, et cetera, in the first half as well. But generally, it's better to look over the whole year that we are safely going to be in that 300 plus for the year for management actions. And I think given what we've stated, the targets will give more breakdowns of some of these. But it's a million miles off halfway of what we need, to be honest.

And going forward, we're giving the same guidance, that they'll be consistently above 300 million. So sometimes it's more skewed to 1.5 than the other. Any other questions? Also no questions online. So thank you. Thank you for coming today. As I said, I'm very happy with the performance of the first six months. But I'm particularly pleased with the momentum on the execution of our strategy. Thank you for coming today. And I'll see you on the 23rd of October with Laura, if not before, for the final of the deep dive onto the tree business. In the meantime, if you're having a break, I know that there's lots of insurance people reporting, so apologies for that. But if you are having a break, I hope you enjoy the summer holidays. I know that I will. Thank you.