Prudential plc

Good morning everybody and thank you for joining us on today's Prudential Half Year Results 2025. My name is Drew and I'll be the operator on today's call. During the call, after our prepared remarks, we will have a Q&A session. If you would like to register a question on today's call, please press star followed by one on your telephone keypad and to withdraw your question, it's star followed by two. It's now my pleasure to hand over to Patrick Bowles to begin. Please go ahead when you're ready.

Thank you, Drew, and good afternoon and good morning to everyone. Welcome to Prudential PLC's half-year 2025 results analyst and investor call. Before I turn the call over to Anil, our CEO, and Ben, our CFO, a couple of housekeeping points. A recording of today's call will be available from Tuesday next week, and our full results package is available on our website. Anil and Ben will start the call with opening remarks followed by a Q&A, as you've just heard. And just a quick word on recent developments we have shared with the market already regarding the potential listing of our shares in ICI Prudential Asset Management Company. We published the draft prospectus on the 9th of July. However, we remain under a number of restrictions as to what we can say about this given the next stage of the process is to undergo a series of regulatory reviews. We will provide you with further updates in due course. With that, let me pass over to Anil, our CEO, to start us off. Anil.

Thank you, Patrick. Good morning, good afternoon, and good evening, everyone. Thank you for joining us today for our 2025 first half results and capital management update. I'm very pleased with our financial performance in the first half of 2025, during which we delivered both high-quality growth and enhanced shareholder returns. We achieved double-digit growth across a key financial matrix in line with the guidance we gave earlier in the year. we have reached an inflection point in our operating fee surplus generation, enabling us to update our capital management program and increase shareholder returns. This demonstrates the strength of our business model and its ability to generate sustainable cash returns. New business profit and adjusted operating profit per share, both grew 12%, Close operating free surplus generation grew 14%, and dividends per share increased 13%. These results reflect strong momentum across our core markets, the sharpness of our execution, and our relentless focus on driving high-quality new business, effectively managing in force, and improving our variances. I'm also very pleased that we have now settled the dividend claim in Malaysia. Having reached the infection point in our capital generation and reflecting our confidence in the future, we have announced today a capital management update alongside an enhanced capital allocation framework, including the completion by the end of this year of our existing share repurchase program we expect to return in total more than $5 billion to shareholders between 2024 and 2027. Any initial net proceeds from the potential IPO of the asset management business in India will be in addition to this. Ben will cover our capital management update in more detail. We are now halfway through our strategic transformation, launched in August 2023, and are making good progress across our key priorities. We continue to invest to accelerate value creation across our markets, actively pursuing structural growth opportunities as well as addressing areas that need improvement. We have invested $400 million in targeted initiatives, including modernizing our technology, processes, and capabilities. Through these investments, we are accelerating our platform improvements, enhancing customer engagement, and driving operational effectiveness at scale. They are underpinned by an increased focus on the use of data, predictive analytics, and AI across the business. We are investing to make Prudential a stronger future-ready business. While the macro environment remains volatile, we are very well positioned given our multi-channel and our multi-market franchise. This is demonstrated by our broad-based new business profit growth, including 16% growth in our Hong Kong market and 34% growth in Indonesia. We have clear plans to continue to strengthen our performance, including in distribution and addressing areas of underperformance. Our multi-channel distribution model is one of our greatest strengths, and we have a good balance between agency and bank assurance. Agency is our primary distribution channel, and we have one of the largest forces in the Asian insurance industry. We see significant value in further strengthening it. Our agency strategy focuses on driving high-quality, profitable growth through quality recruitment, career progression towards MDRT, and digital capabilities that boost both productivity and activation. Further developing our agency capabilities and accelerating our performance is a top priority for us, and we are activating bespoke change management programs in our markets. In bank assurance, the continued focus on strategic relationships and training has underpinned our strong performance with 14 markets delivering double-digit growth in new business profit. We have also recently successfully activated a new partnership with Banksharia Indonesia. We are also building on the foundation of our health transformation efforts to further accelerate growth in health and protection sales. These efforts will be instrumental in unlocking the next phase of sustainable, high-quality growth. Reflecting on our strategic progress and investments in the growth drivers of our business, we are confident we will carry the momentum in the second half and beyond. This keeps us firmly on track to achieve our 2027 financial objectives. Today, I'm delighted to be joined on the call by the leadership team responsible for our businesses and would now like to hand it over to Ben Balmer, our CFO, to walk through the financial highlights.

Thanks, Anil, and hello, everyone. Our first half 2025 financial performance reflects a positive start to the year as we continue to focus on accelerating growth in value and capital generation in line with our strategy. We delivered double-digit growth across our primary financial KPIs. We're on track for our 2025 guidance, and we remain confident in achieving our 2027 financial objectives. Growth in our in-force profit and the ongoing capital return improved our return on embedded value to 15%, and there's more to come. Net of the dividend payment embedded value per share, excluding goodwill at the end of the period, was $13.24, equivalent to £9.66. We've reached the inflection point in our capital generation trajectory, with gross operating free surplus generation, or OFSG, up 14% year-on-year, whilst our net OFSG is up 20%. As we indicated in March, we've updated our capital allocation framework, reflecting both our strong capitalization and our confidence in the strategic progress we're making, which is driving improved organic capital generation. Let me spend a couple of moments on our capital management update. Our enhanced capital allocation framework reflects a move to a total return orientation in respect of the distribution of our holding company free cash flow. We've updated our guidance for ordinary dividend per share growth rates and announced that from 2026, shareholders will also benefit from additional capital returns. This framework is intended to set a recurring and sustainable basis for returns going forward. In terms of ordinary dividends, our policy is unchanged. We've given guidance of greater than 10% dividend per share growth each year from 2025 to 2027, building on the 13% dividend per share growth in 2024. We will commence additional recurring capital returns in 2026, and we expect a buyback of $500 million in 2026 and a further return of $600 million in 2027. And as we previously said, capital above our established 175% to 200% operating range will be assessed regularly, and if deemed excess, then capital will be returned to shareholders. Lastly, we expect to complete our current $2 billion share buyback by the end of this year. Overall, this means we're planning to return to shareholders over $5 billion between 2024 and 2027, and this is before assuming any initial net proceeds of the proposed IPO of India Asset Management Business. In terms of financial performance in the period, we remain focused on writing quality new business with strong underlying capital generation. Our product IRRs remain above 25%, and our shareholder payback periods are less than four years. The $1.3 billion in new business profit added over the period, up 12%, reflects our continued focus on quality, driven by our actions to reprice products and improve mix. The MVP margin expanded two percentage points to 38%, compared with the first half of last year. As a result, the addition to 2027 capital emergence from first half 2025 new business increased by 27% year-on-year, much faster than APE growth during the same period. Management of our in-force book continues to improve, with variances between actual and expected cash flows before investing in capabilities continuing to meaningfully reduce. Underlying this improvement are a range of ongoing actions, including repricing, enhanced claims management, cost containment, and the benefits of a return to higher margin new business growth. We expect our core operating variances to return to our historic positive levels in 2027. In summary, as a result of the financial performance and execution to date of our strategy, we remain confident in achieving our 2027 financial objectives. With that, I'll pass back to Patrick to open the Q&A.

Thank you to Ben and Anil. I'll hand over to our conference call moderator, Drew, who will provide instructions and then open the line for questions. Over to you, Drew.

Perfect, thank you. With that, we'll start today's Q&A session. If you would like to register a question, please press star followed by one on your telephone keypad. And if you wish to withdraw your question, then it is star followed by two. Our first question today comes from Michael Chang from CTSI. Your line is now open. Please proceed with your question.

Thanks a lot. Thanks for giving me the opportunity to ask the first question. I'd like to say congrats on a very solid set of results. I primarily have two questions. The first question relates to the agency business. I really liked the chart on page 10 of the slide pack because it gave an idea in terms of areas of strength as well as areas of improvement. And areas of improvement typically means that you do have plans for improving those areas. So if I can just focus on maybe the two major markets, say, China, areas for improvement, what's the outlook on that front? Because I think it was flagged in the results release that there are a number of regulatory changes which are occurring right now. But then it was also flagged that in terms of agent numbers, agent growth was actually quite strong in terms of new agency recruits, up 45%. So maybe you can elaborate a bit more on the mainland China business. And then in terms of areas of strength, Hong Kong clearly stands out. Agency new business value growth is very solid. And in terms of agency recruitment, it's been strong for a number of years. So maybe you can shed some light on the profile of these recruits. and how sustainable is the strong agent growth. Then my second question would relate to capital management. So capital management, then I appreciate that the detail given on the capital management framework, the buyback amounts for 2026 and 2027, but maybe you can shed some light on how these amounts are determined because um investors uh they do focus on sustainability they actually might like to understand if we were to project going forward because uh the free surplus generation the value of impulse monetization um that's that is all this growth how should we think about the framework for future buybacks uh is it something like one of your peers whereby the 75 of net fsg or other other considerations and maybe also related to that on page six uh info file that there's a chart on the total capital returns in 2026 and 2027 does that mean that the indian amc ipo should it go ahead the capital would be returned over two years thanks a lot

Thanks, Michael. Let me start with the agency question and I will then flip it to Ben to answer the capital management one. So, firstly, at a high level, we, as you know, have a significantly strong balance between agency and bank assurance. And within that, we clearly understand that agency is an area of key focus for us, given the fact that it continues to be our primary acquisition channel, contributing to 55% of new business profit growth. Specifically to your question on mainland China, we have a change management program that we have instituted in China. You rightly pointed out that our new recruits are up 45%, very much in line with the focus that we've employed on quality recruitment. And we have launched our ProVenture program, which is our flagship quality recruitment program in China. I think we are starting to now see some early evidence of that change management program come through with our active agents. up 6%. And I believe based on the measures that we are putting in, the agency channel in China will start to complement the strong bank assurance performance that we continue to see in China mainland. And that's on account of our strong relationships both with Citic Bank as well as with Standard Chartered. With respect to regulatory changes, and again, this is very much in line with what we had expected. I think the regulatory changes are very much focused on ensuring greater retention of agents. ensuring that the agents have a decent source of income, which is kind of spread over a period of time. And again, this is not at, it's pretty much in sync with what we are trying to do, which is drive quality resulting into greater activation and greater productivity. In terms of your Hong Kong question on agency, very pleased, by the way, firstly, with the Hong Kong performance. I like the shape. of our hong kong performance uh good balance between agency and bank assurance good balance between domestic and uh mcv and if you remember when i got into my role two and a half years back i had flagged off that we would like to strengthen our performance in domestic to complement our mcv and towards that uh our active agents are up 11 percent our productivity MVP per active agent is up 4%, and our recruitment continues to be on track to deliver greater than 4,000 new recruits in 2025. So very much like the shape of our Hong Kong business and the measures that we are taking and remain highly confident that we will carry the trajectory that we set for ourselves in First Star into the second. I'm now going to flip it to Ben for the capital management question.

Yeah, thanks, Anil. And hi, Michael. So in terms of capital management, the update reflects our confidence in our business model. Really, the strength of our balance sheet and also the progress we've made in our strategy means we've reached the capital inflection point. That's enabled us to then pivot to a total return proposition. As I mentioned in my opening remarks, that's funded by sustained annual net capital generation. And you need to remember to apply the 70% remittance to the holding company. There's a few slides in my deck, Michael, that set out the building blocks to enable you to project that. But to keep things simple, we've given numerical guidance to the end of 2027. I think the important point is we provided a durable framework. Sustainability has been very important to us when thinking about this. We're a double-digit growth company, not just in value, but also in the conversion of that value to cash and capital generation. So we expect growing capital generation. The board will regularly review the quantum and form of the additional returns to ensure that's in the best interests of all of our shareholders. And as we've said, they'll additionally review any residual capital over and above that 200% free surplus ratio. And if that's deemed excess, that too will be returned to shareholders.

Thank you.

Our next question today. I think I missed Michael's third question, India AMC returns. So Michael, as you heard at the top of the call, we're under regulatory restrictions as to what we can say about the timing and quantum of those returns. You're right, they've been included on our slides. You should take that as indicative.

Thank you, Drew. Shall we go to the next question?

Thank you. Our next question comes from Larissa Van Deventer from Barclays. Your line is now open. Please go ahead. Thank you very much and good morning.

Two quick questions from my side, please. The first one on Outlook and the second one on Margin, which relates to the Outlook. You said that you have reached an inflection point in capital generation, which gives you confidence in your ability to generate sustainable cash returns. What is the key driver of that confidence? And then also, what are the main risks to not reaching your 2027 objectives? Related to that, your margin expanded by 2.3 percentage points, but it is still over 19 percentage points lower than that of one of your competitors. Recognizing that the geographic distribution would impact the margin, but how much scope for margin improvement do you consider possible that will be derived from scale benefits, product mix, cost cutting, and the like, please? Thank you.

Thanks. Let me take the first question on outlook and then I will flip it to Ben for the for the margin question. So as I mentioned in my opening comments, that we remain highly confident to carry the trajectory of the first half into the second. And the results that we were able to deliver in first half underscores the strength of our business model, double-digit pretty much across all the matrices. Our results are obviously driven by the relentless focus that we are employing on writing quality business as well as the focus on converting that quality business to cash. And we like the balance between bank assurance and agency. I did mention earlier that bank assurance continues to perform quite well. I am not satisfied on agency performance in a few of our markets. Hong Kong, Singapore, Indonesia are stable to growing on agency, but I think we have a potential in markets like Malaysia and Vietnam where industry-related challenges are not only impacting potential, it's impacting the whole sector. And we have a very clear line of sight in terms of actions to be able to change the momentum in these couple of markets. I've already spoken to the opportunity in China. And again, we have a specific change management program on agency in China that, again, I'm confident will start to show some demonstrable results. And Again, a combination of this plus the investments, Larissa, that we are making in the growth drivers of our business, be it expansion of our distribution. Just to give you one example there, we are yet to fully activate the Banksharia Indonesia partnership. That's a significant partnership for us in a critical market. And we're just kind of getting started there, focusing on customer experience, growing our health and protection business. And that kind of gives us the confidence that not only will we be able to deliver the 2025 guidance, but it firmly keeps us on track to delivering the 2027 objectives, both on new business profit and on cash. Thank you.

Thanks, Anil. Hi, Larissa. So on margins, we continue to see the opportunity to improve medium term. I was pleased to see another two points of margin improvement come through at the half year. That's on top of the two points you saw last year. And in short, the way we look at this is a fourfold opportunity. Firstly, repricing, and you've seen considerable activity here. And that's benefiting the cash flows and their contribution to 2027 quite visibly. Secondly, I think to your point, operating leverage and building scale. I'm pleased in the first half of the year to see renewal premiums up 11%. And so there's a scalability in growing expense allowables coming back into the platform. And then finally, improved health contribution, health and protection contribution in the mix, and an improved agency contribution. So I think plenty of opportunity medium term for us to continue improving trajectory margins-wise.

Okay. Thank you. We can go to the next question.

Thank you. Our next question comes from Farouk Hamish from JP Morgan. Your line is now open. Please proceed.

Hi, everybody. Thanks very much. I'm looking at a slide which shows your capital generation value to free cash flow. Obviously, you're not giving a payout ratio guidance here. You're looking at your situation every year to look at what your recurring buyback will be. But it seems to me that you're going to have a big jump, obviously, in 2027 in your net free service generation. Because you get to a target, you don't have investment costs anymore, which will then drive very high or a big jump in free cash flow, I'm hoping, to the holdco. Does that mean in 2028 there's a potential here for a leap in what you are able to pay in your buybacks? My second question is, I mean, looking overall, correct me if I'm wrong, but it looks like your active agents are sort of flattish to down, but your productivity of the agents is up a lot at 10%. Can you give us kind of a guide to where that's going, those two metrics in the future, and what's driving those? And then very quickly, what's driving your banker margin improvement and is there scope for further margin improvements in bankers?

Thanks for your question. I'll flip it to Ben to start with the first question on OFSC conversion, and then I'll come to active agents and banker margins, if that's all right. Ben?

Yeah, thanks. Hi, Farouk. So you're right. I mean, growing capital generation translates into a materially higher growing holding company free cash flow. As I mentioned in my video, that acceleration in growth surface G between 24 and 27 means we're broadly doubling holding company free cash flow over the period. The total returns we set out are funded by sustained annual net capital generation, and we are paying out the majority of the flow. As I mentioned earlier, you know, we've not given numbers beyond 2027, but I think provided an enduring framework of the building blocks to help get that.

Thanks, Ben. Farouk, if I may go to your question on active agents. So the way we think about growing our agency new business profit is through two levels, right? One is to drive active agents, and the second one is to drive productivity. And you're actually right in pointing out that the 10% new business profit per active agent gain that we saw the decline that we saw in active agents. Now, I did refer to some of the measures that we are putting in place to energize our active agents, and specifically in the ASEAN markets like Malaysia, like Vietnam, like Philippines, I think these are large agency markets that require and have the opportunity for us to drive greater activity. Again, the focus areas are very much what we had referred to earlier, which is quality recruitment, ensuring that we are investing in our technology platform both to drive activity and productivity, as well as up-dealing our agents to MDRT. We are the second largest MDRT force globally, and our MDRTs increased by 3%. So we will press both the levers, active agents, and as I said, I am confident that the measures will start to show an improvement on active agents. But we also, on the other hand, have the productivity lever increased. to be able to, as I said, drive both these to the goals that we have for 2027. Banker margins, again, yes. Banker, again, doing very well. And in my view, banker targets probably will be achieved well in advance of the 2027 guidance that we've given. So that in many ways kind of creates a little bit of a headroom and an opportunity for us. The margins were driven by a few factors. One, product mix. Second is we have referred to some of the pricing actions. So they were applicable both on agency and bank assurance. So that obviously translates to a better outcome. And then the geography mix, right? Hong Kong obviously had a bigger share or a bigger contribution in the first half.

so a combination of these factors for who led to the banker margins being higher okay uh true should we get to the next question please sure our next question comes from nasib ahmed from ubs your lines now open please proceed with your question hi thanks for taking my questions so firstly on the perimeter of the business um you had the exits in africa Is there anything more in terms of the geographies that you would like to exit in Africa or elsewhere? And then related to the perimeter, you've got the Malaysian dividend issue resolved, but you still don't own 50% of the business, roughly 50%. Is there a way to get that back onto the books and pay the third party? That's kind of around the perimeter. Second question around variances. Ben, you mentioned you want to get back to the historical positive levels. In 2020, I think it was more than 200 million US dollars. Is that kind of the level that we're thinking of in 2027? And then finally, on the 1 billion capability investment, you're halfway through the plan and you've only invested 400 million. I think I know you mentioned in the past you want, if you don't need to, you want to spend the full 1 billion, but it seems like the run rate is a little bit lower than the billion. Is that the right way of thinking about that one? Thank you.

Thanks, Naseeb. Why don't we take the variances question first, and then I'll come back to the parameter question as well as the Malaysia one. Ben, do you want to get us started on the – Yeah, happy to do that.

Hi, Naseeb. So you will have seen in our results that setting aside investment in capabilities are business-as-usual variances of more than halved. And as I said earlier, I'm expecting to return to that historic pre-COVID norm of positive variances within our objective period. You're broadly right in terms of your quantum. I'm confident we're going to get there. We're continuing to focus on driving underwriting profitability across the business. We're now seeing much improved claims experience thanks to a lot of management actions. We're continuing to invest, as you know, in capabilities to drive both growth and scale. And to that end, renewal premiums are growing very strongly. And finally, we have opportunities around cost containment and operating leverage. And one example of that, if you like, is the the positive jaws between net of FSG growth rates and growth of FSG growth rates because we are containing central costs and we'll continue to do that going forward. So I think we've got plenty of opportunity, confident we're going to get back to our historic strong positives in 2027.

Thanks, Ben. Naseef, coming to your exits in Africa, in terms of the francophone market, yes. So that is also a good illustration of the focus that we are employing on deploying shareholder capital, where we believe we have a more than fair chance to win and scale. And we didn't see that opportunity in the francophone markets. The anglophone markets are doing well. In fact, in the first half, those markets still continue to grow north of 20%. And as I said, that as the businesses evolve and get more matured in Africa, they provide us the potential to complement the growth profile of the markets that we have in Asia. And that is something that, again, the management team is quite focused on in driving forward. To your Malaysian question, yes, so we are happy with the settlement of the claim. We will look at opportunities, but I can't speak too much to it. Needless to say, they have to be commercially viable and in the interest of shareholders. But as I said, I can't comment further on that topic.

OK, Drew, we can go to the next question. Maybe you should just remind the audience how to send questions online in case they've got a bad connection or anything. I've got a couple of questions that have come in already, but perhaps you could just explain to people how they should submit questions online.

Of course, if you have joined the webcast, please click the Q&A button and type out your question. The tab is located above the slides. Additionally, if you have joined us via the conference call, press start followed by one on your telephone keypad. Our next question comes from Dominic O'Mahy from B&B Paribas. Your line is now open. Please go ahead.

Oh, hello. Thank you for taking questions. I've got three, if that's all right. The first is just on new business and any impact you're seeing at all on appetite for US dollar denominated products. I had thought maybe there would be some disruption from some of the geopolitics and the currency movements. Actually, the MCV business has been very strong. Just any reflections on what you're seeing in terms of . The second is thank you for the disclosure on the 2027 contribution from the new business. The top 27% is super strong. I wonder if you might just unpack it a little bit. It's pretty well ahead of the new business profit growth. We're running forward a year, which gives you a small positive as well. But what else is going on in there? Is it that the shape of the surface emergence is coming forward in time? Anything else you could do to unpack that would be great. And then the last question is – Just a clarification really on dividend policy specifically. You've been very clear that it's unchanged, but maybe I misunderstood it before. If you just flow through the OFSG net of strain and central items, you have a very, very large increase through to 2027. And I think ConsenSys and I have DPS growth in excess of 20% last time I checked. Should I be a bit more nuanced in the way I think about this? So, for instance, a big contributor is the change in the variances from negative to positive. Should I be looking through that? Or actually, would you say, no, no, go back to the headline at FSG, and that's a good guide for the dividend? Thank you.

Thanks, Dominic. Let me start with the new business question specifically on MCV and whether the attraction has faded away in terms of US dollar products. The short answer is no. and we continue to see strong demand. The traffic flows on MCV in the first half grew 10% as compared to same period last year. I think the core demand drivers continue to be intact, whether that's the propositions that we offer in Hong Kong, the multi-currency options including the U.S. dollar, as well as there is a natural attraction for the health and protection infrastructure that Hong Kong has to offer. So we continue to see that demand continue and haven't kind of seen any of the volatility that you alluded to impact the customer demand coming through in the MCV segment. To your second question, I will flip it in a moment to Ben. So, yes, the 27% improvement in terms of cash contribution to 2027 objectives for the cohort of business that we wrote in 24, again, underscores the focus that we are employing on quality new business that accelerates to cash. And I think that's an important differentiator. And this comes on the back of the improvement that we saw last year of 36%. I'm going to stop there and kind of, you know, flip it to Ben to see whether he has any further comments to give you a little bit of color on that and then to the dividend policy.

Yeah, thanks, Anil. Hi, Don. So, Pleased really to see the 27% increase on the back of the 36% increase a year ago. This is driven by repricing. It's driven by repricing of some health products, but largely savings products. And the importance of repricing savings products essentially makes this channel agnostic, if you like. It benefits both channels. And it's repricing that's driven a lot of margin improvements last year and this year. And as Anil touched on earlier, is driving margin improvements on the banker channel. There's a little bit, Dom, in terms of the changing of the timing of cash flows, but also the absolute level of profits to the shareholder from some of these products. Clearly, we need to look at things carefully to balance shareholder returns and policyholder returns. But thus far, I'm pleased with the progress we've made. And we'll continue to look for opportunities for repricing. I think one of the key things, Don, to take away is, you know, the confidence the repricing has given me in terms of our 2027 OFSG objective. And in short, that means whilst there's opportunities looking forward to continue to improve our business mix, more H&P, more agency, I'm not reliant upon that as a result of the savings repricing that we've done. So your question on dividend policy, I think the short answer is yes in terms of the look through to your specific point. Really, you should view that guidance in the context of the total return proposition that we've set out. So, you know, in short, growing annual net capital generation supports is a minimum level of growth in total ordinary dividend per share across 25, 26, and 27, and then the 1.1 billion of additional returns over and above that. There is no change to the group's dividend policy. And in a nutshell, that's to grow broadly in line with net OFSG over the median term. So we've looked through the upswing, if you like, you get in the acceleration of capital generation as a result of variance switching to positive in the interest of a prudent and sustainable dividend path. That guidance we've given in terms of growth rate is intended to build on the 13% the board declared last year.

Okay, thanks. Drew, should we go to the next question, please?

Thank you. Our next question comes from Andrew Crean from Autominus. Your line is now open. Please go ahead.

Thanks, Liz. Coming back to a question which I don't think you answered, which was what is the timing of the remaining 0.6 billion of investment in the business as to how that hits 25, 26 and 27 was one question. The second question is around the active agents. Could you say what the fall in the active agent numbers was in the first half of 25? Also, what you expect the growth rate in active agents to be in 26 and 27, please?

Thanks, Andrew. So let me give you a little bit of color on the billion-dollar investment program that we announced two years back when we announced a new strategy. So as I mentioned previously, we've invested $400 million to expand our distribution, to enhance our customer experience capabilities. to modernize our technology platform as well as we successfully have now been able to stand up the health business and that's kind of putting us in a position of strength, both in terms of growing our health business, Andrew, but also being able to successfully mitigate some of the challenges that we are seeing on account of the regulatory changes that are impacting the health business. You could expect another $100 to $120 million by the end of this year. And for 2026, we are expecting to invest another about $200 to $250. And that is really what we wanted to aim for because the majority of the investments are We wanted to bookend by 2026 so that you then kind of start to see the flow-through impact in 27 and beyond 27. As we get into 27, you will see some reductions kind of come through. But as I said, at all times, we are very conscious of the fact that we are building capabilities that are going to give us enduring returns over a period of time. And to the extent that we can meet our 2027 objectives more efficiently, then that kind of opens up optionalities for us. In terms of your active agents, our active agents was down 7% year on year. As I look to 26 and 27, we are looking at a growth rate of about 7 to 10%. It is what we would kind of gun for on a year on year basis. And by the way, as I said, based on the measures that we have taken, we expect that to improve in the second half. of this year, going into 26 and then further going into 27.

Okay, Drew, I'm going to go to the online questions I've had, and it's from William Hawkins at KBW, who has two questions. One has got two parts to it. The first part is, is there any seasonality in terms of the split between agency and banker that we expect for 2025, given that there was some seasonality in 2024? And therefore, will the 2025 H1 figure change in any way as you go through to the rest of the year? And then secondly, are there any particular key drivers by market or product or distribution channel that will influence the growth momentum from now until the end of the target period? And then the finance question, which is how do you think about the remittance ratio and are there any ways that you feel that you can affect the remittance ratio? Are there any particular actions that you're imagining that you're going to be able to undertake? So those are the two questions from William.

Thanks for those questions. And let me start with the seasonality question. So, again, the short answer is yes. We typically kind of see first half skewed towards bank assurance. And as we kind of transition to the second, the skew kind of changes more towards agency. We saw that last year. Don't believe you're going to kind of see a different trend this year. And again, as I said, to my mind, that's kind of unique about us because we have scaled both on bank assurance and on agency. And importantly, we have been able to demonstrate that we can deliver respectable margins on bank assurance, including the six percentage points that we saw in terms of margin improvements on bank assurance in the first half of this year. Key drivers, yes, there is both distribution as well as new product ideas. Just to kind of illustrate one example of that, I did refer earlier that we still have We haven't still activated the Bank Sharia Indonesia partnership fully. Bank Sharia Indonesia is one of the largest banks and the largest Sharia bank in Indonesia. 230 million Muslims clearly under-penetrated. We see that as a significant opportunity. to drive sustained momentum in an important market and a strategic market like Indonesia. Likewise, I did make reference on the fact that we are focused on driving quality agency recruitment. And we are again seeing some good traction under approved venture program, which now contributes to 7% of the total new recruits. And as we keep rolling out these two different markets, I believe there is an opportunity for us to improve. the mix of the quality recruits. And I think that's important for us because the productivity of these agents are to the tune of about 4 to 5x as compared to agents that don't come through this program. And I think that's, again, going to be an important driver of growth as we kind of think about the second half as well as 26 and 27. And again, on product ideas, I again made a reference specifically in Singapore. We did launch multiple products focused on health and protection and high net worth. We did see the traction as we kind of closed out the second quarter. And we believe that that traction will continue into the third quarter. And that's why my confidence that Singapore will come back in the second half of this year. And likewise, we have new products in Indonesia. We have new products in Hong Kong. And again, as I said, it takes a little bit of time to get to maturity, but remain confident that both on distribution and product, we have enough ideas to be able to drive our momentum forward.

I'm going to go to Ben on remittance ratio. So in terms of how we think about the total return proposition and, you know, the key levers to drive that, I mean, ultimately it comes back to focus on shareholder value creation and accelerating holding company free cash flows. So the building blocks being, of course, quality new business, management of the in-force book, and capital discipline, exactly the same building blocks that I expect to accelerate our return on embedded value. Once you've used those building blocks and allowing for that operating range, as we've said, 70% of that capital generation comes to Holdco. the returns are then the majority of this flow. And as I said earlier, you know, this is an enduring framework. We're a double-digit business. Sustainability is important to us.

So I think really they're the key drivers.

Thanks, Drew. Should we go to the next question? Thank you.

Thank you. Our next question comes from Michelle Ma from Citi. Your line is now open. Please go ahead.

Thank you, management, for giving me this opportunity. This is Michelle Ma from Citibank. um um so congratulations on the very solid set of results um so um uh my first question is uh about hong kong so hong kong in the first half growth rate about 15 and it's already achieved the you know double digit in the first quarter uh so you know we try to back out the second quarter trend it seems like it's uh around like uh 20 something uh it's a little bit against you know our uh observation on the ground because the whole uh hong kong life insurance industry uh is really booming in the second quarter so um just want to understand uh is there any like technical uh reasons reasons behind this a little bit slower than my expectation growth for Hong Kong. Is that because the underwriting process takes time and then some of the June policies maybe will be completed in July? So yes, the first question is I want to check on the Hong Kong second quarter trend. And also after the change of illustrative rate cap, how's the momentum in the third quarter? So have we experienced some notable drop in the demand, especially for MCV business? and how the new product margin versus the pre-changed version. This is the first question. The second question is to John. So Mr. John joined the company, I think, about three months of time. So I just want to get your initial thoughts on your view, how you compare pool with your previous industry experiences, and according to your observation, what's the strength of Poole, and what are the areas you believe you will particularly focus on? Thank you.

Thanks, Michelle. Allow me to first answer the Hong Kong question. And you had multiple questions within the Hong Kong question. And then I'll go to John and ask him to provide his perspective and his observations. So, going back to where I started on Hong Kong, I like the shape of a Hong Kong business. I like the balance between agency and bank assurance. And remember, Michelle, 90% of the mix on new business profit in Hong Kong is delivered through agency and bank assurance. And that's important for us. Why? Because it allows us to control the customer experience. Importantly, it allows us to control the margins, which improve by one percentage point. And as I said, I also like the balance between the domestic and MCV, which was one of the key objectives that I had to be able to provide, you know, the counterbalance on the strengths that we have on MCV by boosting our volumes in the domestic segment. You're right to point out, and your math is correct, that according to new business profit improved to 20%. And there is one important factor that I would like to leave with you, and we mentioned that previously, is that our focus continues to remain on quality new business that converts to cash on an accelerated basis. And towards that overall, the cohort of the business that we wrote in 25 contributed to greater than 27% as compared to the cohort of business that we wrote in the first half of 2024. So I think that balance is important for us and something that we intend to keep as we go into the second half as well as into 2026. The illustration caps, you're right. I think it's a healthy step and a step in the right direction by the regulators. And, again, we haven't kind of seen impact of that come through as we've kind of transitioned to quarter three. And on product margins, as I mentioned earlier, we don't see an impact as well. In the second half, our product margins continue to be quite robust. And, as I said, it improved by one percentage point in the first half of this year. I'm going to kind of quickly turn to John. John, any comments that you might have?

Thanks, Anil. First of all, I won't comment on our competitor, but I want to come to potential. I think, first of all, we have very strong brands in Asia. We have one of the largest agencies in Asia, second largest MDRT. So that's the three foundations we're going to build up. But as you know, for agency, we are not looking for magic. We're looking for basics. So what we're going to continue to drive is driving further productivity and further activation ratio. We're going to continue to drive our MDRTs, and then we're going to continue to drive our quality recruitment. So I'm very, very excited in the market now. Very low penetration, so it means a lot of opportunity for us to grow. In the meantime, our customers still prefer a face-to-face agency as a choice of purchasing. So that's a huge opportunity for us.

Michelle, just one additional comment to your earlier question on Hong Kong. I should have mentioned that while we have significant strengths in bank assurance and agency, we are also looking at building our relationship with quality set of brokers. But at the same time, also being very watchful of some of the regulatory changes that are likely to impact the broker channel. So, for example, the referral fee cap that's likely to get enforced as of October 1, as well as the spreading of commission that's likely to come in force in January. I thought I would probably add that to just give you a little bit of extra color.

Thank you, Anna. Drew, I'm just conscious of time. We've got a few more questions to come. Maybe we'll go to the next one online, please. Sorry, on the conference call.

Sure. Our next question on the conference call comes from Andrew Sinclair from Bank of America. Your line's now open. Please proceed.

Thank you. Three from me, please. First on capital management. You talked about the potential additional returns in excess of 200%, but It looks to me that even with what you've announced today, even if the dividend grows well in excess of 10%, you're still going to be miles above the 200% top end of that range for the foreseeable future. So what is the timescale and plan to get into that 175 to 200% range that you said is the right place to operate? Second, just on the new business margin seasonality, I think you said it should improve quarter on quarter through the year. Just any colour in any particular regions where you think there should be material changes in margins where we shouldn't expect any margin improvement through the rest of 2025 or just any colour there. And third was just on mainland China. Good to see the mix evolving towards par products. Just can you give us a little bit of a reminder of where we are kind of on the back book of, I guess, non-par? Where is the error in yield? Where's the reinvestment rate? And what's the average guarantee on that book today would be helpful. Thank you very much.

Thanks, Andy. I'm going to kind of flip it to Ben. And then if there are any additional comments that I might have, I'll come on the back of that, Ben.

Maybe I'll go in reverse order, if you like. I think your third question was on China. Actually, CPL used to sell a lot of power business in China many, many years ago. So when you look at the general account assets, and there's that snapshot slide in the appendix to my own slides on that, About 40% of that actually backs par business. In terms of cost of liabilities, you know, and where we are today, both actual and expected returns are sufficient to cover cost of liabilities. As you'll appreciate, because it's par, you can vary that cost of liability through time. The business has done a lot of repricing over the years. And I think backing up from a capital management perspective, again, confident that there'll be no need to put any further contributions into CPL in 2025. They are continuing to look at actions to drive further resilience on the balance sheet on top of de-risking and repricing. And we were pleased that they've been recently awarded status to enable them to issue perpetual debt locally. And that will count to their core and comprehensive solvency. On margins and ability to drive margins going forwards, it's basically the four points I alluded to earlier. There is, I think, to your point, a seasonality thing. You know, we typically see a greater proportion of bank assurance in the mix, bank assurance having a very healthy margin and improving year on year. but still lower than agency. So as we progress through the year, I think you'll start to see a more positive channel mix come through that will benefit margins on top of the repricing actions we've taken. And, you know, of course, as I said, there's opportunity on the health and protection side as well. You know, we've been pleased with growth in the health space, 16% compound 2024 through 2027. So we'll continue to focus strongly on that. In terms of, I think your first question then was capital management and potential returns in excess of 200%. I mean, as you're seeing, we've not changed that target corridor of 175 to 200. That reflects both risk appetite and the nature of our business. I'm expecting to operate slightly above the upper end of that on the back of today's announcement. And there will be a practicality element to this as well, Andy, in terms of, you know, needing to earn stress and remit surplus up to group to fund then shareholder commitment. So there's always an element of timing. In terms of the 200%, Pre-surface ratio review trigger, and that's something the board will regularly review. And what they do there is to look at sort of capital over and above that ratio over the medium term and will think to opportunities to reinvest, but look to market conditions as well. I think, you know, today was about returns from flow. In terms of returns from stock, the most obvious example will of course be the IPO, a corporate event. But the board will review capital over and above that 200% ratio, as I say, on a regular basis.

Thank you, Drew. We've just got two more questions, I think. If you just bring them in.

Sure. Our next question comes from Abid Hussain from Palm Mill Liberum. Your line is now open. Please go ahead.

Oh, hello, everyone. I've still got three questions left, I think. The first one is on management actions. So really good to see that the new business profit growth margins are improving. And it feels like you've delivered that despite all the businesses yet to fire on all cylinders. I think you called out some of the actions that are left to take, but I'm just wondering if you can sort of call out the actions or any additional action that you're yet to take, but specifically the impact that that will have on the margin improvement or scale or both of new business going forward. So that's the first question on management actions. And the second question is on the net OFSG. Good to see that the cash conversion from new business is improving. And so I think we should expect faster growth in the net operating free surplus generation number relative to the gross number. But I'm just wondering what sort of delta are you expecting between the gross and the net growth? Is it sort of a material delta or is there something else that we need to consider in that mix? And then the final question is on capital distributions. I suppose, what share price would you stop a share buyback? At the current share price, it makes sense to me that you continue with a share buyback. I think you're still trading below embedded value and whichever other metrics you're focusing on. But if the stock moves up another 50%, it's moved up from 50% yesterday, but if it moves up over your timeframe another 50%, does that shift the thinking?

Thanks, Abid. So, Abid, let me start with the first question, and I'll flip it to Ben for the second and the third one. So, on management actions, clearly, please, right? And as you can tell, this is a big focus area for the global executive team to be able to drive the right quality. And towards that, I mentioned it, Ben referred that as well, that some of the repricing actions that we have taken both across savings and health and protection products are starting to flow through, interestingly, both in the agency channel as well as in the bank assurance channel. I think if you look forward, just to kind of keep things simple, as we see greater traction on agency, and agency being higher margin than bank assurance, that would be a good driver. And if we get a better balance between, or I should say a higher proportion of agency versus bank assurance, that will have a knock-on impact on health and protection mix as well. So there is where... the engines or margin improvements lie. And that's really what we are trying to kind of focus on in addition to some of the repricing actions that we alluded to in the previous part of the conversation.

Then net OFSG and capital distribution. So in terms of net OFSG, Vince, Yeah, I'm pleased with the geared effect that you see coming through. In short, that represents lower growth rates and central costs. And as I mentioned earlier, we're going to continue to contain central costs. Of course, you've got in this period a lower growth in terms of new business strain versus that growth surface G. You know, when you project forwards, I guess, in terms of the building blocks, You know, there's obviously the acceleration of the gross number to our objective. Required capital, I'd guide you to early double-digit growth. On strain, giving you the other components, that's going to increase broadly in proportion to our new business volumes. And I'd guide you to H125 strain as a percent of APE to being, you know, a pretty sensible jumping-off point. And then, as I say, central costs remaining fairly flat. The third question on capital distribution. I think we're a long way, not far off that.

Thank you, Drew. Let's go to the last question for this afternoon.

Thank you. Our final question comes from Thomas Wong from Goldman Sachs. Your line is now open. Please go ahead.

Thank you. Thank you for accommodating me for this. A couple of questions, hopefully short ones. Firstly, sort of first half, agency MBP, I think, is up 4%. So, growth was really mainly driven from bank assurance. I think Hong Kong agency is up double digits. So, I just want to understand which market is kind of showing kind of weakness in agency China in the first half. The second point, On the, I think I'm looking at page 52 of the presentation, the required capital actually up about, looks like about 10% in the first half. Just want to understand how you, how we should think about this required capital growth over the next couple of years. If it's 10%, just, you know, six months here looks relatively fast, which might put some constraint to your free surplus. given the 200% ratio. So any color here will be helpful. Thanks.

Thanks, Thomas. So going back to the agency point, and as I mentioned earlier, you can't kind of paint agency performance with a single brush. We believe that Hong Kong, Indonesia, Singapore is stable to growing. And, again, you can see the quality of that business as well as some of the actions kind of result into some high-quality outputs for us on agency. I think the markets that have been challenging for us have been Malaysia and Vietnam on account of some of the industry-led changes that's impacting the entire sector. And you can see that more broadly reflected in their entire industry. And we have, again, action plans and feel confident that we will be able to convert that momentum. It will take us a couple of quarters, specifically in these two markets of Malaysia and Vietnam. In China, we have a change management program that I alluded to. We are striving very hard to make agency complement the strong growth that we continue to witness on the bank assurance channel. We are starting to see some green shoots. So, for example, our active agents in China was up 6%. Our recruitment was up by not the 40%. And that kind of gives us the confidence that we are on the right track because, again, China continues to be an important focus area as we manage the balance between quality growth and prudent risk management. I'm going to stop there and go to Ben for the last question.

Yeah, thanks, Sunil. Hi, Thomas. So on required capital growth, When you think about modeling going forward, I suggest you use very early double-digit growth rates.

Okay. I think that takes all the questions. Do you want to just do a closing comment, and then we'll call the call.

No, firstly, thank you for joining us, and thank you for the questions. Ben and I are going to be on the road shortly, so we will be seeing many of you in person, and we look forward to continuing the conversations. But thank you very much for joining us today.

Thanks very much, Drew. You can close the call.

Thank you all. That concludes today's call. You may now disconnect your lines.