Phoenix Group Holdings plc

Thank you, Claire, and good morning, everyone, and welcome. Thank you for those who've joined in the room, and also to those who've joined us on the webcam. It gives me great pleasure to be sharing Phoenix Group's 2024 four-year results with you today. I'm joined on stage by Nick Nicandrew, our new group CFO, who started back in December. Like myself, Nick has worked in the industry for over 30 years, and I'm delighted to have a CFO of his caliber working alongside me. Looking at today's agenda, I'll start with a summary of the progress we've made one year into the three-year strategy we announced last March. I'll hand over to Nick to take you through the 2024 financial performance, and then I will close with an overview of our priorities across 2025 and 2026. 2024 has been a year of strong financial performance. This performance, along with our increasing confidence, has driven an upgrade to a number of the targets we set back in March across our financial framework of cash, capital and earnings. From a cash perspective, we've outperformed in our key metric operating cash generation, or OCG, and achieved our 2026 target of 1.4 billion two years early, and supporting total cash generation of 1.8 billion. This over delivery of OCG and Outlook has driven an upgrade to our three year 2024 to 2026 total cash generation target from 4.4 billion to 5.1 billion. I will talk more about the importance of OCG shortly. In terms of capital, we're reaffirming our targets. Solvency capital coverage ratio of 172% is in the top half of our target operating range and an improvement on the half year. We remain firmly committed to achieving a 30% target leverage ratio by 2026 and I'm disappointed that it has remained flat at 36% this year despite repaying debt because owned funds has been lower than I would have liked. Going forward, delivering owned funds growth is a critical focus for us. Also, the increased cash target means we now have substantial excess cash which creates the capacity to pay down debt De-leveraging is a key priority of the group over the next two years, and Nick will outline our plans there. Recognising the importance of IFRS earnings to investors, we've added earnings to our financial framework last year. It was pleasing to see a 31% year-on-year increase in IFRS adjusted operating profit to £825 million. Combined with our confidence in achieving our £250 million cost-saving target, this has driven the increase to our 2026 target from £900 million to £1.1 billion. This is a key milestone for the group, and since £1.1 billion of operating profit exceeds recurring uses on an IFRS basis, it will support getting upward trajectory on shareholders' equity. The strong financial performance we're delivering as we execute our strategy supports our progressive and sustainable dividend policy. And the board has recommended a 2.6% increase in the final dividend. There are many ways to look at the financials of a life insurer, but we believe operating cash generation is the most important because it's the sustainable surplus generation in the life operating companies that's also remitted dividends up to the hold code. Hence, it's the primary driver of shareholder dividends. The 22% year-on-year increase in OCG reflects not only the growth in our pensions and savings and retirement solutions businesses, but also a step up in contribution from the Phoenix asset management team. There are three key messages here. The first is that our dividend is well covered and very secure. all the more so as we hedge the major financial risks to protect cash generation and hence the dividend. Second is that at £1.4 billion, OCG generates £300 million of excess cash per annum to deploy in accordance with our capital allocation framework. Our immediate focus for this excess cash will be deleveraging to achieve our 30% leverage ratio target. And the third is is that the growth in our underlying businesses means we now expect OCG to grow at mid-single digits going forwards. With free cash of over £800 million generated, Phoenix is currently trading, or was when we opened this morning, trading at a 17% free cash flow yield, which highlights the value opportunity. Our vision is to become the UK's leading retirement savings and income business, serving customers at all stages of their life cycle from 18 plus to 80 plus. Our pensions and savings and retirement solutions businesses are focused on meeting customer needs as they save for, transition to and secure income in retirement with innovative retirement income solutions at our core. To win in these markets, we need to offer a compelling customer experience. That means offering a full range of retirement savings and income solutions through a slick digital interface with a range of fund investment options supported by excellent customer service and which is sold at a competitive price that is enabled by an efficient group-wide operating model. And this will be delivered through our strategic priorities of grow, optimise and enhance. We are passionate about our purpose of helping people secure a life of possibilities. We continue to advocate for the change that will help our customers achieve the financial future they expect. As only one in seven UK adults are saving enough and only 10% are getting advice. Our market is huge and structurally growing, and each segment represents an opportunity for Phoenix to succeed in different ways. Starting on the left-hand side, the workplace pensions market is growing rapidly, driven by auto-enrolment, and is our primary customer acquisition vehicle. We've built a leading proposition and are poised to be a winner from the move to master trust schemes and from the government's plans to drive consolidation to super funds in this market. We often talk about workplace as a flywheel business where scale is critical to driving operating leverage. So our strategy in this market is simple, to retain existing schemes and win new schemes and hence maintain our top three position as this market grows rapidly. Moving to retail, this market is split between direct and intermediated channels. As the responsibility for retirement planning has shifted towards individuals, people are seeking an increasingly broad range of innovative retirement savings and income products. With only one in ten people paying for financial advice, we think the introduction of targeted support could be a game changer and will stimulate the retail direct market further. We're investing here to move from being a top ten to a top five player. by better supporting engaging the one in five adults who are already Phoenix Group customers as they make retirement decisions to stay and consolidate with us. And to attract new customers through intermediaries by building out innovative propositions that better help them meet their clients' needs. Lastly, in annuities, we've seen higher interest rates drive resurgence in the individual annuity market as well as the continuation of a strong bulk purchase annuity market. We've been a top five participant in the BPA market over recent years and I'm also particularly pleased that Tom Ground and his team have rapidly built a 12% share of the individual annuity market having only just re-entered in 2023. We continue to be disciplined in the deployment of capital annuities alongside developing propositions suited to customer needs. So let me take you through our divisions. Our pensions and savings propositions help customers journey to and through retirement. This is our capital-light, fee-based business, where growing assets and expanding operating margins are key to strong financial performance. Our workplace business delivered net inflows of £5.3 billion in 2024, 13% higher than prior year, as we are successfully executing our strategy of retaining existing schemes and winning new schemes. The success is driven by the leading employer proposition we built under the trusted Standard Life brand with our strong Master Trust offering. And the sustainable fund solutions with the SCA's new sustainability labelling. And the strength of our proposition is consistently recognised by independent industry awards. We are passionate about providing excellent customer service and offering a leading digital interface that enables members to track and engage with their pensions and promotes financial wellness. Finally, we offer competitive pricing underpinned by our ongoing migrations to a cost efficient admin platform. In retail, new business retail flows are up 60% year on year, but we have more to do to really capture the opportunity here. Standard Life is a brand that have been trusted to look after people's savings and retirement needs for 200 years and resonates strongly with the one in five people who are already Phoenix Root customers. Retaining customers is an important focus for our business and we are exploring personalised engagement. Still in early days, but testing indicates this is creating improved retention and consolidation. Customer needs are changing. And I'm delighted that we are innovating in response through both the launch of new products like the Standard Life Smooth Managed Fund and through the launch of new fund solutions like Future Growth Capital, our new private markets investment management joint venture. And key to success in these markets is a great digital experience, creating tools to help customers plan for and manage retirement income. For example, partnering with Raindrop to support customers consolidating lost pensions. The progress of this business has translated into really strong financial performance in 2024. This is a simple business that we run on an IFRS basis. We make money by growing assets up 11% year on year and driving cost discipline, leading to margin expansion up five basis points to 17 basis points, which in turn drives 66% growth in operating profit to £316 million. I'm delighted with the progress Colin Williams and his team are making here. And with strong market growth, increasing our share of retail, and further cost reductions, there is much more to come. I've been suffering with a cough for a while. A sip of water if you don't mind. Our retirement solutions businesses help customers secure income certainty in retirement. This is a capital-utilising spread-based business. We maintain a disciplined deployment of capital in this business to preserve a diversified balance sheet and limit shareholder credit risk. We win in BPAs through our excellent member experience. Our digital self-service allows customers to understand their annuity position online, real-time, and is supported by other communication channels with a focus on clarity of customer messaging. Our success in this market is also driven by the leading employer proposition we've built with comprehensive buy-in and buy-out capabilities available. Finally, we're able to offer competitive pricing driven by our asset management and balance sheet optimisation capabilities and an expanding panel of reinsurance partnerships. In individual annuities, fast guaranteed pricing is a differentiator as well as timely execution. I'm particularly proud that we launched our new digital quote capability this year, where over 90% of our quotations are underwritten and returned within seconds. We've also expanded our product range, including the standard life guaranteed fixed-term income product, and underpin our offering with a great digital experience for annuity customers. This business has also performed well this year, writing similar volumes of business year on year, despite a one-third reduction in capital. This is due to the improvement in the annuity capital strain to 3%. Under IFRS, we recognise a future store of profits on insurance business called the contractual service margin, and it was pleasing to see this grow 14% in the year. The high releases of CSM into profits contributed to the 25% year-on-year increase in operating profits. Over the last four years, we've invested in building strong in-house expertise in Phoenix asset management to deliver better outcomes for customers and enhance risk-adjusted returns. We see this value creation emerge in cash and capital as recurring management actions. We've put significant investment into our people capabilities under Mike Eakin's leadership, expanding the team from less than 50 colleagues in 2020 to over 400 today, from investment professionals to credit risk experts. The in-house team drive all strategic asset allocation decisions and select best-in-class partners to work with in each asset class, with Aberdeen, of course, remaining our key strategic growth partner. Our investment in capabilities mean that our in-house team is now managing increasing parts of the shareholder fixed income portfolio. On top of the talent we've developed, we've invested in leading-edge technology using platforms such as Aladdin and AWS, which support our robust credit risk management framework. So how does this benefit our business units? For pensions and savings, it enables us to develop new products, get better customer returns by accessing pockets of value in specialisms such as private assets, and deliver fund efficiencies by negotiating asset management agreements. For retirement solutions, it allows us to directly source annuity backing assets and broaden the investable universe, enabling us to price BPA portfolios more dynamically and competitively in the market. These actions allow us to continually re-optimise the portfolio within the matching adjustment rules and deliver recurring management actions. Scanning these capabilities and achieving half a billion pounds of recurring management actions this year has given us the confidence that this type of activity is replicable year in, year out. as firstly, the team is set up with both the technology and expertise to deliver, and secondly, the portfolio will grow as we continue to win business. Last March, I set out clear strategic priorities that will enable us to deliver our vision of becoming the UK's leading retirement, savings and income business. We're only one year into our three-year strategic journey to build a sustainably growing business. You will have seen that in 2024, we've delivered excellent growth in profits in both pensions and savings and retirement solutions. We've upgraded or reaffirmed our financial targets across our financial framework of cash, capital and earnings. The target upgrades are a key unlock to further strengthen the balance sheet in two ways as we grow. Firstly, the upgraded OCG creates substantial excess cash, providing financial flexibility to reach our 30% leverage ratio target by 2026. Secondly, the upgraded IFRS operating profit target demonstrates a path to deliver profit in excess of recurring uses and support future growth in shareholders' equity. Delivering on our strategy supports strong shareholder returns enabled by a progressive and sustainable dividend policy which is well covered and secure. And with that, I'll hand over to Nick who will cover some of his initial reflections and then talk in more detail about the financial performance. Nick.

Thank you, Andy. Okay. Thank you, Andy. Good morning, everyone. And let me start by saying how pleased I am to be in the seat of CFO here at Phoenix and to be presenting the group's 2024 full year results. As Andy mentioned, I would like to share my initial views on the business, starting by how good a job he and the team have done in strategically and operationally pivoting Phoenix from a closed book consolidator into an open book player. The business has developed real strengths in workplace and annuities, both of which are market segments with a phenomenal growth runway. These strengths are transferable to retail and can be deployed to help many of our 12 million customers journey to and through retirement. On the flip side, the balance sheet pivot has lagged the strategic pivot. As we stand here today, Phoenix is highly leveraged, and is only now getting into a position where its recurring sources of funds exceed recurring uses. Finally, our business does not screen well under IFRS 17, due in part to the intricacies of the new accounting rules, which in combination with the heading strategy mean that the reported IFRS shareholders' equity underplays the intrinsic value of the business. The best way of addressing these challenges is through repeatable operational delivery. By growing the recurring flow of capital year after year, we will improve the quality and in time the quantity of the stock of our capital. To this end, it is great to see the step up in operating performance in 2024, which creates the momentum needed to address the balance sheet picture, starting with leverage. So this is an exciting time to be joining Phoenix, and I can see many ways in which I can bring my experience to bear. Starting with the financial highlights, in 2024, Phoenix grew operating cash generation by 22% to 1.4 billion, delivered total cash generation ahead of guidance at 1.8 billion, closed the year with a shareholder solvency cover ratio in the top half of our operating range at 172%, and increased IFRS adjusted operating profit by 31% to 825 million. Conversely, the solvency leverage ratio proved harder to shift, remaining unchanged at 36%. IFRS loss after tax was 1.1 billion, and I will come back to this later. But the impact of this loss on IFRS equity was cushioned by the strong growth in CSM, up 14%, to deliver IFRS-adjusted shareholders' equity of $3.7 billion. The strong cash, capital, and operating performance of the group led the board to recommend a 2.6% increase in the final dividend to 27.35 pence per share. Our confidence in sustaining this high level of performance going forward has led us to upgrade the cumulative total cash generation target from 4.4 to 5.1 billion and the 2026 IFRS operating profit target from 0.9 to 1.1 billion. The remaining targets are unchanged. As Andy has already outlined, Delivering these upgraded targets would create further financial capacity, which allows us to undertake the deleveraging needed to hit our 30% goal, while continuing to support a growing dividend. The greatest step up in operational performance has come through operating cash generation, which represents the recurring solvency surplus generated by our life companies in excess of our capital management policy set at 135% of SCR. OCG grew 22% year-on-year, supported by two factors. Firstly, new business growth and cost efficiencies, which have more than offset the natural runoff of our in-force business. And secondly, the higher contribution from recurring management actions at 537 million, ahead of our 400 million target and the 313 million posted in the prior year. The outperformance here is attributed to the in-house asset management capabilities coming on stream faster than planned. I will provide you with more colour on recurring management actions on the next slide, but before doing so, I would like to make two further points. The first is that the capabilities that have underpinned this result, being our strong performance focus and cost discipline, are now firmly in place, and this reinforces our confidence that OCG can grow at a mid-single-digit percentage rate going forward. The second is that in 2025, we will provide you with analysis of OCG components by business. By way of an early look, I share on this slide the indicative contribution to OCG from our two largest businesses. Approximately 0.85 billion comes from retirement solutions. The size of the contribution here reflects the capital intensity of this business with large cash releases each year supported by recurring management actions. Of the balance, approximately 0.35 billion comes from pensions and savings lower in size due to the capital light nature of this business. The OCG contribution here will increase as the asset base grows and as the planned cost savings are delivered. There are three sources of recurring management actions as set out on this slide, being annuity portfolio re-optimization, capital improvements, and fund simplifications. While the respective contribution from each component will vary year on year, we're confident that in aggregate, the recurring management actions will continue to be of this order of magnitude going forward. The largest contribution relates to portfolio re-optimization on assets backing the retirement solutions annuity book. And this is where we saw the greatest year on year increase. A key element here, is sourcing assets with high yield than those assumed in the pricing of a six billion annual new annuity flows, alongside delivering value from re-optimization of the annuity back book. These actions unlock value without taking more risk, always ensuring that assets and liabilities are cash flow and duration matched. Examples include credit relative trades, where we can lock into an improved risk adjusted spread, public credit to guilt rotation and vice versa, allowing us to take advantage of the risk reward balance at any given time and restructuring of private credit. Within the matching adjustment requirements, these individual actions are not of any significance and represent the summation of a steady flow of small actions to tweak the portfolio, which allow us to recognize incremental gains while always staying cashflow and duration matched. For example, in 2024, there was an average of 50 or so actions per week up from the 2023 levels in sync with the build out of our capabilities. Some actions simply capture additional profit Others allow us to increase the risk-adjusted yield on our assets and capitalize this into lower liability values. By way of illustration, delivering 323 million of OCG is equivalent to a yield pickup of around 70, sorry, of around seven basis points on our 40 billion annuity portfolio with a 12.5 average liability duration. 12 and a half year average liability duration. So you can see that only small impacts on yield can result in meaningful contribution to management actions. The second component is capital improvements, which represents a longstanding Phoenix capability of extracting recurring value from model and data improvements, primarily on a capital heavy business. This delivered 92 million of value in 2024, a similar level to the previous year. The third component relates to fund simplification, and this is another way in which the asset management team supports OCG, with pension and savings the main benefactor. We interact with over 20 external asset managers, paying a total of 300 million of fees annually, under 60 IMAs that are typically negotiated on three-year cycles, covering 5,500 funds. With two IMAs renegotiated and 250 funds rationalized in 2024, we secured a 12 million post-tax annual fee saving, generating the capitalized effect shown. With further fund rationalization in train, we're confident that there are several years of opportunity ahead. At 1.4 billion, our operating cash generation now comfortably exceeds our recurring uses of dividend, debt interest, and operating costs, as well as the 200 million annual capital allocation to annuities. The 300 million annual excess cash is available to deploy in line with our capital allocation framework with a focus on deleveraging. More on this shortly. Moving to total cash generation, you can see on the left the 1.8 billion remitted by life companies in 2024. In addition to the OCG, this includes 0.4 billion of non-operating cash generation representing non-recurring management actions and the remittance of a small component of life company surplus stock. On the right of the slide, we move from looking at the one year TCG picture to the three year picture covered by our targets. The OCG step up achieved in 2024 and our confidence in growing it from here has led us to upgrade the cumulative three year TCG target to 5.1 billion, comprising an increased operating component of 4.4 billion and an unchanged non-operating component of 0.7 billion. With the upgraded 5.1 billion representing our expected sources of cash, this next slide illustrates the expected uses of this cash over the three year period covered by our targets. Working across the slide, you can see on the left that the 0.7 billion non-operating cash generation is intended to fund the 0.7 billion total non-operating investment in our strategic priorities. As you move to the middle of the slide, you see how the cumulative OCG component of 4.4 billion is expected to cover cumulative recurring uses, being the 2.7 billion for dividend operating costs and debt interest, and the 0.6 billion for annuity new business capital. Over this three-year period, we now expect to generate around 1.1 billion of excess cash shown on the right. In 2024, some 250 million of this excess has been used to retire debt. The remaining 850 million represents excess cash capacity available to be deployed in line with our capital allocation framework with a focus on deleveraging. I now want to turn to capital and cover the solvency surplus walk depicted in the chart with a corresponding on fund and SCR components shown in the table below the chart. I will draw your attention to the items grouped on the left of the chart being the net recurring capital generation post dividend of 0.2 billion equivalent to five points of coverage ratio and the items grouped in the table below being the recurring owned funds generation of 0.3 billion. These recurring amounts are at higher levels than in previous years, demonstrating the step-up in operating performance that I referenced earlier. Moving to the right-hand side of the walk, the grouped non-recurring components represented a net drag in 2024 on both surplus and owned funds this drag will diminish going forward with non-recurring management actions expected to offset the remaining investment spent over the next two years. We closed 2024 with a capital coverage ratio of 172%. The 200 million debt repayment made in February 2025 has a minus 4% pro forma impact on the coverage ratio. As a reminder, our leverage ratio represents debt divided by solvency to regulatory owned funds. At end 2024, this ratio stood at 36% flat year on year, despite the 250 million debt repayment. This reflects two offsetting effects, which you can see in the chart. The first being a 2% benefit from retiring this debt and the second being an equivalent 2% drag from the decline observed in both the shareholders' own funds covered in the previous slide and the decline in with-profit funds due to the gradual runoff of the book. In the rest of the chart, I set out an illustrated path to achieving the target, factoring the various moving parts. The expected 850 million excess cash I covered earlier, provides us with ample capacity to pay down debt. The drivers of the denominator, in other words, the drivers of owned funds, are illustrated next in the chart. Delivering 0.3 billion annual recurring shareholder owned fund generation will reduce the ratio by 2%, and we expect the owned funds generated by non-recurring management actions to offset the remaining investment spent. The with profits own fund runoff will continue to provide a small drag to the denominator. I would add that the path to 30% will not be linear as we will need to refinance part of the circa 1 billion debt instruments that fall due in 2025 and 2026. Finally, as you would expect, we have modeled in our plans the interplay between debt reduction and the shareholders solvency surplus and are confident that we can deliver the 30% target while remaining in the top half of our solvency cover range. Let me now spend a few minutes on the objectives and importance of our hedging program and I will cover later the known consequences on IFRS. In our business, we carry many market risks which we regard as unrewarded, risks like interest rates, inflation, currency, and equity. In downside scenarios, these risks depress both solvency surplus and cash generation. Alongside many of our peers, we hedge these risks, with equities and rates being the most significant given our business mix. When it comes to hedging interest rate risk, the key question is one of reference benchmarks. Phoenix has opted to hedge liabilities and SCR using swaps to lengthen asset duration so as to match the one in 200 liability duration. While the approach is both common and logical, in my view, the reference benchmark should have been managed more dynamically as rates moved up, and this is something that we can improve on going forward. Today, Phoenix hedges around 80%. of the equity exposure in own funds and SCR through futures and other instruments. Having spent time looking at this aspect of the hedging, I'm comfortable with the approach that Phoenix has taken. My assessment is that while it is appropriate to hedge the equity risk of the closed book of business in runoff, we should not give up the benefit that comes from the growth in equity values that relates to the open book of new business. So I view the 80% equity risk hedge coverage as broadly representing the proportion attributable to the runoff book and expect this percentage to naturally drift downwards as the respective weight of the closed book declines. By hedging these risks, Phoenix protects both the solvency surplus and the annual cash generation. The sensitivities shown in the middle of the slide demonstrate how solvency surplus is cushioned against market movements, proving that the hedging is serving its intended purpose. The pie chart on the right shows the breakdown of our undiversified SCR, which incorporates the protection offered by the hedging program for unrewarded risks. These risk categories account for a relatively small percentage of our overall risk capital. While by hedging we forego the upside the downward protection afforded is of paramount importance to us as it provides certainty of cash which in turn secures dividend payments. My summary assessment is that what we do here is logical and I'm comfortable with the role that hedging plays in our financial framework. Aspects of the hedging can be tweaked as the business and markets evolve and this is something that we will look at going forward. As regards the unhedged components of our SCR, I see multiple levers to improve efficiency, some of which can be executed relatively quickly, while others will take longer. Turning next to earnings, our performance step-up is also evident in the IFRS operating profit metric, which is 31% higher at 825 million. Both of our key businesses reported healthy increases, with pension and savings result supported by growth in AUA and operating leverage, while the retirement solutions result improved due to higher CSM releases from strong new business flows and higher value added by asset management. Our cost efficiency program is bearing fruit with 63 million run rate savings delivered in 2024. One point to note is that we have included new disclosures in our appendix slides, which show the IFRS adjusted operating profit drivers of our two main businesses. Turning to costs, having spent time reviewing the cost savings program, I am content that the 250 million run rate target is creditable, albeit too back-end phased, as illustrated in the chart on the left. This is one aspect of the savings program that I will continue to look at for opportunities to accelerate. Of the 63 million run rate savings delivered in 2024, 28 million was earned in year, primarily benefiting the pensions and savings business result. I can confirm that the majority of the 250 million savings will come through the IFRS operating profit, while about half will benefit OCG and Solvency Capital. Moving to our planned investment of circa 700 million post-tax, some $350 million was incurred last year, in line with prior guidance that the spend would be front-end loaded. The remaining spend profile is shown on the right, and you can rest assured that the appropriate rigor will be applied in ensuring that the benefits of this investment are delivered in full. Once we get beyond 2026, non-recurring investment spend is expected to more than half from the 2026 deadline. level shown. Moving next to our key business unit performances under IFRS, around 90% of the pensions and savings business is classified as IFRS 9 investment contracts where the reported profit represents fee revenues less costs. As Andy mentioned, we're really encouraged by our trading performance last year. we saw a 13% increase in workplace net inflows to 5.3 billion, boosted by all-time high gross inflows of 9.3 billion. We also saw an improved gross inflow picture from retail, up 34% to 5.1 billion, reflecting our greater focus in engaging with our existing customers. Supported by market movements, AUA grew by 7%, to 186.5 billion. This business reported a 66% increase in operating profit, reflecting higher revenues from the 11% increase in average AUA and benefiting from expense efficiency initiatives. The overall profit is equivalent to a 17 basis point margin on AUA. Going forward, future cost deficiencies will continue to provide a strong underpin to this margin and will counteract the revenue pressures created by the runoff of the legacy book. Retirement Solutions is classified as an insurance contract business and is accounted on a spread basis under IFRS 17. New business flows remain robust despite the one-third reduction in capital deployed, written on attractive economics and supported by growing individual flows, individual annuity flows up 81% to 1 billion. This segment recorded a 25% increase in operating profit driven by the highest CSM and risk adjustment releases up 18% year on year, reflecting the onboarding of sizable annual vintages of profitable annuity business. It is also driven by higher investment profits, reflecting both the growth in the excess assets backing this business and increases in the contribution of the annuity portfolio re-optimization management actions that I described earlier. The increase in our future store of insurance contract value in the CSM is a lead indicator for the growth of our profitability under IFRS. The 14% increase in pre-tax CSM to 3257 million represents an encouraging result. New business contributed 248 million to the increase with annuities accounting for 203 million of this amount. A further 212 million came from assumption changes, experience and economics. We have upgraded the 2026 IFRS operating profit target to 1.1 billion, reflecting our improved performance and our increased confidence in the underlying drivers of IFRS profitability. The increase will be driven by underlying business growth, pushing investment contract AUA and insurance contract CSM higher, by the continued leveraging of our asset management capabilities and by the contribution of the 250 million of cost savings. The progression towards the 2026 target will therefore not be linear and will be broadly in line with the backend phasing of the cost savings. We expect that over half of the increase from the 2024 levels will come through the capital light pension and savings business with the balance in the retirement solutions business and to a lesser extent in reductions to corporate center costs. At the 1.1 billion level, our 2026 IFRS operating profitability will be sufficient to fully cover our recurring uses and create an access to fund our non-recurring uses. The amounts illustrated on the slide on the uses represent 2024 values with debt interest reducing as we deliver and amortization of acquired VIF declining as this runs off. With non-recurring uses normalizing post-2026, the point at which the IFRS net profit ex-economics turns positive will soon follow. Our aim is for IFRS shareholders' equity excluding economics to grow. Our aim is for that to grow in 2027. The next slide shows the movement in IFRS shareholders' equity or the 2024. On the left, you can see the progress that we made last year to close the gap between recurring sources and uses down to a negative 182 million, a much improved picture compared to 2023. In the center, you can see the pre-tax 520 million of non-operating expenses, which includes the pre-tax planned investment spend. You also see the 1297 million pre-tax lost from economic movements driven primarily by the effects of the hedging program, specifically the negative marks associated with both the 80 basis points increase in 15 year rates and the 13% rise in equities. I will illustrate on the next slide why this represents an accounting mismatch. Our closing shareholders equity position declined to 1.2 billion while adjusted shareholders equity stood at 3.7 billion. Let me now turn to the impact of hedging on IFRS reporting and explain why a program that serves its purpose of protecting solvency surplus so well gives rise to known accounting volatility under IFRS 17. I will do this with the help of a bridge between IFRS shareholders' equity and solvency to surplus, which we are disclosing for the first time. The reconciling items should be familiar to many of you on the sales side from equivalent analysis produced by other firms. What this bridge shows is that the IFRS and Solvency II balance sheets are not comparable as they treat investment contracts differently and adopt different valuation approaches for insurance contracts. For example, in relation to insurance contracts such as annuities, The future store of value under IFRS is carried as a liability within CSM and is valued using locked in economic assumptions. This contrasts with Solvency II where it is treated as capital and revalued at each balance sheet date in line with the change in rates. Another example is in relation to investment contracts where IFRS does not capture the 3.6 billion future value of these contracts beyond the yet to be amortized 1.3 billion of acquired value in force, which itself is carried at cost. Again, this contrasts with Solvency II, which recognizes this component in full and marks it to market at each balance sheet date. The third example is that IFRS does not capture risk capital requirements which are factored in the CSR under Solvency II when calculating surplus. In seeking to provide stability to our 3.5 billion surplus from market volatility, the hedging program has all of the above components in scope with a movement in the value of the hedges of setting related value changes in these various components. However, as the walk illustrates, The IFRS balance sheet does not feature many of these components and also prohibits the revaluation of annuity future profits warehoused in the CSM from movements in rates. Therefore, on the IFRS reporting basis, the hedge appears naked, hence the 0.9 billion post-tax loss recorded in 2024, which is shown above the first bar in the bridge. The hedge offset effect comes through the value movements in the remaining own fund components, totaling plus 0.8 billion post tax in 2024, shown above the own fund bars in the bridge, and the value movements in the SCR, which in 2024 rounded to zero, also shown above the SCR bar in the bridge. So you can see how the IFRS loss on the left is reduced to a considerably smaller net 0.1 billion loss at the solvency surplus level on the right. The sensitivities shown on the slide also bring this contrast to life, with more material impacts under IFRS, but relatively modest ones under solvency too. So in summary, having looked closely at Phoenix's approach to this, I am comfortable with the way hedging is protecting cash and capital, and I am satisfied that the known consequences under IFRS give rise to no practical limitations. This includes dividend, which I will come to next. Phoenix is a highly cash generative business, and it therefore rightly returns cash to shareholders through a progressive dividend. In line with what I have seen in other groups, the board's annual dividend assessment is carried out by reference to the three measures shown on this slide. The first being operating cash generation, which at 1.4 billion represented a healthy source of cash, recurring cash, covering recurring uses. The second being the shareholder solvency level, which at 172% represents an appropriately robust coverage ratio. And the third being the quantum of legal distributable reserves recorded in the group's holding company solo accounts, which remain healthy at 5.6 billion. In 2024, these reserves were replenished by sizable remittances from our life subsidiaries, which report under UK GAAP, representing a less punitive basis than IFRS 17, and one under which they generated higher net profits in 2024 than 2023, even after the effects of hedging. At end 2024, this subsidiary has maintained substantial distributable reserves. So the consolidated IFRS 17 reporting basis does not reflect the remittance capacity of the group. In this overall context and consistent with previous guidance, the Board considers that the group's consolidated IFRS shareholders' equity is not a constraint on the payment of our dividend. To conclude, We have made a positive start in executing against our three year strategy and financial targets and have built good momentum, which we're carrying into 2025. Specifically, we have positioned the business to generate 1.4 billion of OCG, which we aim to grow at a mid single digit percentage rate going forward, more than covering our recurring uses. The cumulative excess cash from our upgraded targets puts us firmly in control to reduce our leverage ratio to the 30% level. An achievement of the 1.1 billion IFRS operating profitability level will mean that in 2026, we will cover recurring uses on this reporting basis as well. Our performance step up improves our ability to support the execution of our strategy and underpins our dividend. Thank you for your attention. I'll now hand you back to Andy.

Thank you, Nick. So looking ahead, I wanted to share the priorities of Phoenix over the next two years as we continue to execute on our strategic plan. We will grow by continuing to develop our propositions, meet more of our existing customer needs, and acquire new customers. This will grow our operating cash generation at mid single digit percentage going forward and deliver the 1.1 billion of adjusted operating profit in 2026. We will optimise our enforced business and balance sheet. Hitting our 30% target leverage ratio is a major focus here, as well as improving our asset management and balance sheet efficiency capabilities to deliver recurring management actions year in, year out. and we will enhance by transforming our operating model and culture. Central to this strategic priority is the completion of our policy migrations, with over 1.3 million policies migrated since January 2024. We're also on track to simplify our business to underlock £250 million of annual run rate cost savings by the end of 2026. I'm conscious we've spoken a lot this morning, about the underlying operating performance, our upgraded targets, and the capabilities we've built. And we spent some time on our approach to hedging, our plans to redouble our efforts to deliver the balance sheet, and the progress we've made on the trajectory of shareholder equity before economics, and how the board does not consider this to be a constraint on the dividend. We've generated significant free cash flow year in, year out, currently delivering a free cash flow yield of 17%, as I mentioned earlier, and pay a progressive and sustainable dividend to shareholders. To sum up, we are pleased with the progress made in 2024, our strategic priorities are clear, and we are optimistic about what comes next. And with that, we move to questions. So we're going to start with questions in the room. If you can raise your hand if you have a question and we'll get one of the roaming mics to you. Please can you start by introducing yourself and the institution you represent. And then for those watching on the webcast, please use the Q&A facility and we will come to your question after we've answered those in the room. So why don't we start this side. I can see Abid. I think the first hand up there, Abid, so you get to go first. Very quick.