M&G (LSE:MNG) Q2 2026 Earnings Call

0:00 Perfect, so we're live and welcome to M&G's 2026 half-year results. Welcome back after the summer is a very good set of results. So without further ado, I'll hand over to Andrea Rossi, our group chief executive officer.

0:16 Thank you, thank you. Good morning and welcome to M&G's 2026 half-year results. It is a pleasure to be here with you today. In the first six months of the year, we have made great progress on our strategy. Despite a volatile macro environment, we delivered good net inflows from open business and strong profit growth. I am excited to see how, day by day, our vision for M&G is translating into operational and financial delivery. So let me share with you the main highlights of the year so far. In 2023, we set three strategic priorities for M&G. First, we focused on financial strength and simplification to set up M&G for the long-term success.

1:08 Now, we are delivering growth. 2025 was a good year for us, and this strong momentum continued into 2026. Operating profit of 435 million is our best half result since listing in 2019. It is up 15% year on year thanks to a 24% increase in asset management and double digit growth in proof fund. Our strategic pivot is paying off. with high quality capital light earnings now representing 80% of total earnings. And they will continue to grow thanks to the success of our with profits offering.

1:53 Our new with profits BPA called BPA Plus is a prime example of this. Since its launch in February, we have completed 1.7 billion of sales already improving on last year's total annuity volumes. And whilst driving innovation in life, we continue to deliver strong asset management performance, with 2.2 billion net inflows in high-value solutions across public and private markets. As we have grown the business, we have also improved our profitability. In the first six months of the year, our asset management cost-to-income ratio reduced by two percentage points to 73%. and we expect further improvements in operating leverage as we continue to transform M&G.

2:43 We have delivered over 250 million in savings since 2023 and will go further. We continue to simplify our business and free up capacity that we reinvest in products and services supporting long-term growth. Let's now review our financial targets. Here we continue to make steady progress as we reach the halfway point to our 2027 targets. Our commitment to shareholders is clear. To deliver strong capital generation, to improve the efficiency of our business and to drive sustainable earnings growth. And we are delivering.

3:28 Capital generation is on track to achieve the 2.7 billion cumulative target. Our cost to income ratio improved to 73% and we achieved record operating profit of 435 million, up 15% year on year. In March, I told you that 2025 was a year of foundation building for M&G as we added distribution, product and investment capabilities. Now we are seeing the benefits come through. We are on track to deliver low double-digit profit growth this year as we continue to experience strong momentum with clients across the group.

4:13 And the reason that I am confident we will continue to deliver is because we have a clear strategy and the right business model to win. Our ambition is to be Europe's leading integrated asset manager. To achieve it, we will scale across both asset management and life, with the growth of one segment reinforcing and compounding the growth of the other. Life gives asset management the scale and long-term capital it needs to develop high quality investment capabilities. In return, life benefits from this expertise, with access to alternative assets that are essential to back its core propositions, including proof fund and bulk purchase annuities.

5:03 The balanced and synergistic nature of this model is reinforced by the With Profits Fund, which attracts insurance assets in a capital-light way, with limited shareholder balance sheet exposure. A real competitive advantage. Another important differentiator for M&G is our strategic partnership with Daiichi Life, one that builds on and leverages our business model. Like us, Daiichi also believes in the powerful combination of asset management and life. Fully understanding the value of M&G, Daiichi decided to invest in our group. Over the past year they have become our largest shareholder with a 15.7% position.

5:53 I am delighted by the strength of our partnership and to announce that senior Daiichi executive Hitoshi Yamaguchi has joined our board of directors effective today. He brings more than three decades of leadership experience spanning international insurance and finance. By becoming Daiichi's preferred asset manager for Europe, we have gained access to a second large balance sheet, which has already allocated over one billion to our investment solutions. At the same time, we are actively exploring a number of joint business opportunities across asset management and life, including product co-development and distribution. Having covered the group highlights, I will now move on to our segments, starting with asset management.

6:46 I am very proud of the progress we have made in our asset management business. Over the last three years, assets under management have grown steadily, increasing by 17% to $356 billion. and we have improved our diversification becoming less reliant on our internal clients and on the UK market. Over the same period external assets have increased by 29% to 189 billion with our international business increasing even faster by more than 40% and now accounting for nearly 60% of total external assets. We also remain disciplined on costs, translating higher volumes into better operating leverage.

7:32 The cost-to-income ratio reduced to 73%, and fee-related earnings increased by 45%. And the outlook is bright. New business momentum remains strong, with net inflows of one billion in July alone. With good client demand, a 7.8 billion capital queue in private markets and new business from Daiichi, we are confident that we will continue to drive profitable growth in asset management. Another reason that supports my confidence is the quality of our flows. Net inflows of 2.2 billion in H1 correspond to 13 million in annualized net new revenues.

8:22 This proves that our focus on high margin and high value solutions is delivering. Both our private and public markets team achieved good results. Within private markets, client appetite for structured credit remained very strong and we saw renewed interest in real estate. Infrastructure is another priority area for our clients, where we have strengthened our leadership team. Within public markets, equities continued to outperform thanks to great investment performance and a compelling offering across global, European and Asian strategies. When looking at flows from a client perspective, you see a similarly positive picture.

9:08 Firstly, we delivered 1.1 billion of net inflows in high margin wholesale solutions. Secondly, we achieved net inflows in the UK institutional market for the second consecutive period. An important milestone as we turn around this segment. And while the UK remains a mature market, we continue to innovate. Later this month, we will launch our new CDI plus proposition, an innovative insurance backed solution designed to optimize the investment and hedging strategy of DB pension schemes in run on. Finally, we achieved net inflows with international institutional clients for a fourth year in a row.

9:56 Europe has historically been the primary driver of our expansion, but now we have added new engines for growth. Establishing strategic partnership with high caliber institutions across Asia and North America, as you can see on this page. As mentioned earlier, I am very pleased with the quality of the performance of our asset management business, which gives me real confidence in its future. Let's now move to our life segment. Here, I want to start by reiterating why life is now a core driver of M&G's capital light growth. From this year, nearly all our new business in life is being written by the With Profits Fund.

10:44 This means that we are gathering assets in a way that is capital light for shareholders and that carries limited risk and balance sheet exposure. We expect to attract at least 50 billion to the group by 2030 through these With Profits solutions. The chart in the middle of this slide gives you a rough indication of the breakdown, with Proof Fund and the recently launched BPA Plus driving the bulk of the volumes. These assets will generate at least 100 million of annual operating profit by 2030, emerging across life and asset management. While offering great shareholder outcomes, the With Profits Fund also delivers superior client outcomes. Our new BPA Plus has been a great success since its launch six months ago, and with good reason.

11:36 Entering into a BPA transaction is the most important decision that pension trustees can make. It influences the lives of thousands of people for decades to come. When dealing with the With Profits Fund, trustees know that their members are protected by one of the best capitalized insurance companies in Europe. A mutual that has put client interest at the heart of everything it does for over 175 years. And they are getting a great deal too. The low cost of capital of the with profits fund makes its pricing attractive. And if the fund achieves good investment returns, it shares them with customers, declaring a bonus on top of their guaranteed income.

12:22 You can see why our BPA Plus has a real edge in the UK BPA market. And we expect to scale our sales at least by 50% this year, remaining disciplined on pricing and to achieve our target volumes of 3 to 4 billion in 2027. And as we scale, we support our growth in asset management, in particular thanks to the significant allocation of BPAs to private markets. Within life, we are also making good progress on our retail strategy. Here we have two core objectives to drive sales. First, to improve the distribution of Proof Fund. And secondly, to broaden our proposition with other investments.

13:09 Solutions. From a distribution perspective, we are pleased to have launched Proof Fund on Scottish Widows platform. We will add a second FNZ platform later this year. From a product perspective, last summer we launched our retail fixed-term annuity, which has generated over 100 million of net inflows in the first 12 months. A good start. In February, we declared our first bonus for this product, giving customers an uplift of an extra 45 basis points to their investments, on top of their guaranteed returns. Again, clear evidence of the value delivered by our with-profits solutions. Our sales in the first half reflect this positive momentum. When combining proof fund and fixed term annuities, our retail net flows improved by over 500 million year on year.

14:01 And looking ahead, we expect proof fund to deliver improved inflows in the second half and are encouraged by the positive market reaction to our launch on the Scottish Widows platform. Before handing over to Katrin, I will briefly cover our group transformation. In March, we completed the first phase of our transformation program, achieving 250 million of savings. But there continue to be exciting opportunities ahead as we explore ways to make our business simpler and more scalable to deliver improved customer outcomes and long-term growth. AI plays a key role on this journey, improving personal productivity and transforming end-to-end processes.

14:48 It changes how we serve our clients, how we operate and how we grow. On this slide, you can see some of the initiatives we are working on. Our advisors are now spending less time on admin and more time with the customers. We are faster and more accurate when pricing BPA new business, answering RFPs from institutional clients or addressing customer needs. Our research and asset sourcing teams have reduced their cycle times without compromising on quality. The core objective is always the same. To deliver a better customer experience, improve process efficiency, and free up resources which are redeployed on high-value activities that drive growth.

15:37 So, to sum up. We have had a good first half with record operating profits, strong flows in asset management and new product launches in life. And as we grow, we are making M&G more diversified, resilient and capital light. Through cost discipline and business transformation, we are also freeing up resources to support our long-term ambition. We are delivering on our targets and are confident we will sustain this positive momentum in the second half. And with that, I will hand over to Kathryn who will take you through the financial results. Thanks Andrea and good morning everyone.

16:38 I'll now take you through the details of our H1 results which show steady momentum across the group and good progress against our targets. Covering first the key highlights. We delivered 2.4 billion of net flows from open business, an increase of 300 million pounds year on year. In asset management, we continue to grow across both our wholesale and institutional channels despite the volatile macro environment. In life, flows improved meaningfully on the back of higher annuities and pre-fund sales. Group adjusted operating profit increased by 15% year on year to £435 million, our best first half results since listing.

17:27 And within it, asset management earnings increased by 24% thanks to higher recurring revenues and improved operating leverage. In life, a higher contribution from the capital light with profits business led to a 9% increase in profits. A 372 million pounds operating capital generation was 36 million pounds lower largely due to movements in our capital requirements in asset management and the corporate center. New business strain of 20 million pounds was 15 million pounds better year on year despite us delivering twice the volume of BPAs reflecting the capitalite nature of our new with profits BPA plus.

18:14 So thanks to this good result, we remain on track to achieve our 2.7 billion capital generation cumulative target. Finally, supported by our strong operating performance, the Solvency II ratio reached 247%. So let's now turn to our flows. Closing AUMA stood at £387 billion, supported by £2.4 billion of net inflows from open business and £13 billion of positive market movements. With £2.2 billion, asset management accounted for the majority of net flows equally split across our wholesale and institutional channels. and this equates to 2.4% of opening AUMA from external clients on an annualized basis.

19:07 And as you've heard from Andrew, we delivered another £1 billion of net inflows in July with good momentum across a range of public and private strategies. While we continue to grow internationally, supported by our strategic partnership with Daiichi Life, we're very pleased with the continued turnaround of our UK institutional segment, where we delivered net inflows of 800 million pounds. And thanks to our business model, we're very well-placed to support UK pension schemes along their entire de-risking journey, leveraging the capabilities of both asset management and life. Our new CDI Plus solution, which Andrea just mentioned, is an example of our product innovation for these clients.

19:55 In wholesale, our strong investment performance, particularly in public equities, remained a key attraction for clients. Life net flows from open business of £200 million was a £700 million improvement year on year. and this reflects 500 million increase improved fund year on year and continued growth in the BPA market where we recorded 600 million in sales in the first half and activity has picked up over the summer as we completed a further 1.1 billion in BPA transactions across July and August. We're very pleased with our continued positive growth in net flows across M&G despite a volatile external environment as we deliver the products and solutions our clients want.

20:45 Moving on now to profit. At £435 million, our operating profit in the first six months was up 15%, with the key features being firstly 24% higher earnings and improving operating leverage in asset management, supporting a steady reduction in our cost-to-income ratio. Secondly, a 9% increase in life profits to £375 million with double digit growth in both proof fund and traditional with profits more than offsetting an £8 million reduction in annuities due to lower returns on excess assets, which we flagged in March. And finally, the corporate centre outcome was adverse by £5 million, impacted by lower investment income and slightly higher head office expenses.

21:35 Our operating profit is not just growing, it's also improving in quality as we increase the diversification of our business and pivot it to capital light sources. and today 80% of our operating profit comes from asset management and with profits capital light business and this proportion is up meaningfully from 73% last year and we expect it to rise further over time as we now write the vast majority of our annuity business through the with profits fund. So let us now look at each of our businesses in turn and starting with asset management. Our asset management business delivered a strong result with adjusted operating profit up 24% to 159 million pounds. This was driven by a higher asset base and resilient margins, generating much improved recurring revenues.

22:34 At 356 billion, assets under management were up by 32 billion compared to last year, supported by sustained net inflows and favorable markets. Our average fee margin remained resilient at 32 basis points as we continue to expand our business with external clients focusing on high value solutions particularly in private markets. We're very pleased with the quality of our flows which generated 13 million pounds of annualized net new revenues. Together with a growing asset base, this contributed to revenue growth in the first six months of 10%. Costs of 417 million pounds increased by 7% year on year, but remained flat compared to the second half of last year.

23:27 And this cost base reflects our investments to support long-term growth in asset management, as we added distribution and investment capabilities, including our acquisition of P Capital Partners. and as we grow we continue to improve our operating leverage. In H1 the cost income ratio reduced by two percentage points for the third straight year reaching 73% and we are confident that we can continue to improve our efficiency in the second half of the year and remain firmly committed to our 70% target by the end of 2027. Fee-related earnings, which are a key metric for us, were up by an encouraging 17%.

24:13 Finally, the operating profit also benefited from a £13 million increase in investment income, mainly due to improved impact from FX revaluation given the stronger dollar. Given the business momentum we are seeing and by continuing to be disciplined on costs and reinvesting capacity into growth initiatives, we are confident that we will further deliver top line expansion and operating leverage. Let us now turn to our life business. Here, Profund's operating profit increased by 15% to £129 million, reinforcing its role as a growth engine within the group. And the main driver of this positive result was the higher opening CSM, which grew strongly in 2025, and a broadly stable amortization rate.

25:10 The result of our traditional with-profits business was up by 14% year-on-year to 137 million, reflecting similar positive dynamics. We're encouraged by this performance, particularly what was achieved against the backdrop of lower expected returns and risk-free rates, which we previously highlighted. Both Profund and Traditional with Profits continue to provide resilient long-term earnings for the group underpinned by a combined 4.2 billion of CSM supporting the sustainability of our future profits. As you know, we switched two Profund products to a 100-0 charges less expenses approach from the 1st of April, which will accelerate profit recognition on your business.

26:01 Let's now turn to annuities. Here, annuities profit was down 7% year on year to 105 million, reflecting the guidance given in March. Specifically, the lower expected returns on surplus assets, which reduced to 4.5 from 5.2% last year. And these headwinds were partly offset by a higher CSM release, supported by the longevity benefit we recognised in the second half of 2025 and improved experience variances due to the non-repeat of the £8 million headwind we flagged last year. This year, all annuity business was ridden by the With Profits Fund through our BPA Plus solution.

26:46 The With Profit Fund retains roughly 80% of the economic interest after reinsuring around 20% to the shareholder balance sheet. In due course, as BPA Plus volumes grow, we will evolve our disclosures to share more details on the different contributions from each book of business. Turning to other life, where we generated a profit of £4 million, a turnaround on last year, primarily thanks to lower losses in our platform and advice business. Here we continue to reduce costs and improve the efficiency of our digital platform, including the outsourcing of our back office functions. Before moving on to capital generation, I would highlight the strength of our CSM, the details of which you can find in the appendix.

27:38 Our group CSM of £7 billion was up 6% since the start of the year and represents a large and growing store of future value for our shareholders. Turning now to capital generation. In the first half, we generated £392 million of operating capital before new business train, keeping us firmly on track to achieving our three-year target of £2.7 billion. The underlying capital generation of £304 million was £27 million lower than the prior year. Within it, asset management capital generation reduced by £7 million despite the higher owned funds as we experienced a £14 million increase in capital requirements compared to a £12 million reduction last year.

28:32 and we experienced a similar dynamic in the corporate center where last year we benefited from an 18 million pound SCR reduction. In life, the in-force contribution reduced by 10 million pounds to 314 million, driven by a 15 million pound lower return on annuity surplus assets, which we flagged in March. Importantly, Life's New Business train improved by £15 million to £20 million despite higher BPA sales as we shifted our Life's New Business to a capital light model. Management actions contributed £68 million, primarily reflecting equity hedging activities, and we remain on track towards our annual guidance of £1 to £200 million.

29:22 Thanks to our good operating performance, our balance sheet continued to strengthen. The Solvency II ratio closed the period at 247% with a £5 billion capital surplus. Owned funds of £8.4 billion include £4.8 billion of PVSD, the present value of future shareholder transfers from our With Profits Fund. And this is a unique feature of M&G, reflecting the scale and profitability of our With Profits business. The PVSD is a store of future value that has grown tremendously in recent years thanks to the success of proof fund and supportive markets and this growth has been a key driver of our improved financial performance and underpins the long-term cash earnings and capital generation of the group.

30:11 We will realize this asset gradually over time and thus expect to continue to operate above our target Solvency II range over the medium term. You'll also see on this page that we've updated the definition of our leverage ratio to reflect the solvency to value of our debt instead of the nominal value. And on this basis, the leverage ratio stood at 29% at the end of June. We made this change to ensure consistency between the numerator and denominator of the metric and to better align our approach to industry standards. This is still a more conservative approach than peers as we use shareholder-owned funds, not regulatory-owned funds. We're pleased with the continued strength of our balance sheet as it represents a key competitive advantage for M&G in what remains a volatile and uncertain macro environment.

31:04 I will finish by briefly covering costs. Our managed cost base at the 30th of June of £744 million reflects the investments that we made last year to support growth, which underpin the strong new business momentum we are now seeing. In life, we built out our BPA team focusing on pricing and commercial capabilities. and in asset management we added private markets expertise such as the acquisitions of P Capital Partners and Beaumont and scaled our distribution platform to support our international expansion. These initiatives drove a 7% increase in costs in the second half of last year. Since then, costs have stabilized, remaining flat over the last six months.

31:54 Looking to the remainder of H2, we expect asset management costs to stay in line with the first six months of the year, while corporate center costs will be roughly 10 million pounds higher due to the seasonality of our head office expenses. Our approach to cost management remains the same. We will continue to create capacity by streamlining our operating model, re-engineering our processes, optimizing third-party spend, and better leveraging technology such as AI, as you heard earlier from Andrea. These savings will offset inflationary pressures and free up resources to be reinvested into growth. By investing for long-term growth and remaining disciplined on costs, we will further improve our operating leverage and achieve our target cost-income ratio by the end of next year.

32:49 And with that, I'll hand back to Andrea.

33:00 Thank you, Kathryn. Before concluding, I want to summarize the key elements of M&G's investment case. Our message is simple. We are becoming Europe's leading integrated asset manager. Our synergistic business model underpins our growth. We operate in attractive markets with clear competitive strength, including our unique with-profits fund. And by delivering a balanced combination of yield, growth and quality, We offer consistently strong outcomes to our shareholders. Life underpins our attractive dividend yield.

33:47 Asset management and with profits drive the group's growth. And as they do that, the quality of our profits improve. 2026 has been a strong year so far, with record profits and real business momentum. That reflects the hard work of colleagues across M&G and I want to thank everyone for their contribution to these half-year results. We will build on this track record, maintain our momentum and continue delivering for our clients and shareholders. I am proud of what we have achieved and I am energized by the opportunity ahead as we enter this new phase of growth.

34:36 Thank you. And now we're going to do Q&A. You have to move. So how do we? Oh, you move that one? OK, I'll take my water. Thank you, Luca. I always like to see you working. Good. So thank you very much, Andrea and Kathryn. We can move to the Q&A. As usual, for those that are following us online, when you ask question, please pull out the microphone from the seats, push down and hold down the button, state your name, the firm you're working for, and then go with your three questions or more nested into one. We'll later take questions online. A couple of analysts couldn't make it in the room, but they've already submitted questions. But we'll keep them for last.

35:45 So, David, Andrew, Farouk, and Tom, in that order.

35:50 Hi, thank you for taking my question. David Pick, RBC Capital Markets. I will kick over only two questions, actually, just for a good start. The first one on dividend and excess capital. I suppose with the shareholder solvency ratio of 247, it sits materially above the top end of your stated operating range. and just wondering how do you think about shareholder returns going forward especially in light of the strong capital position is there maybe a specific point of which you would consider a more meaningful step up in those returns and then second question on asset management the private markets AUM continues to grow which is very good to see however the the blended margin stays flat and also the private markets margin actually decrease one basis point year over year So just if you could share more color on what drove the contraction there and how do you think about the trajectory going forward?

36:48 Thank you. Perfect. So if you want, you've got a bonus question later if you want to come back to it. In terms of the first question, I guess there were two questions in one. One was around dividend and one is around maybe more capital returns. So maybe we'll split them a little bit.

37:03 I don't know, Andrea, if you want to... Yeah, I mean, and this time I didn't show our clear capital management framework, which every time we show, I hope you remember what the four different things. But as you know, we have a clear capital management framework in place and we've been on a journey in the last three, four years. If you remember in the beginning, we were focusing on financial strength and we have been strengthening the balance sheet. We have been improving our leverage, improving liquidity. And then it was about making sure we, when the business was doing better, to actually pay out attractive dividends and we came out with a growing dividend policy 18 months ago. Let's not forget that our investors, and I meet many of them, they're very pleased with what we're doing. We have been returning back to our investor over 4.4 billion since we listed in 2019.

37:52 and also a double digit annual total shareholder return. So our investors are very, very pleased with what we're doing in terms of capital returns. Now it's time for growth. We are focusing on growth. That's our focus. Those results that you see there is thanks to a relentless focus on growth and investing for growth. And that's our focus. And we will do so by making sure we realize double digit IRRs above our cost of capital. So that's our focus. I don't know, Kathryn, if you want to add on something. Well I guess only that we also think that at 247% today is quite an uncertain volatile time and it is a competitive advantage to have a very strong balance sheet and one of the points I made also was we've got a great asset with the PVST at 4.8 billion we've got quite a unique own funds because of the strength of proof fund but this really does underpin today's results It will flow through into earnings cash and capital generation over time and we've got strong financial flexibility to do the growth investments that you heard Andrea talk about. So know very comfortable where we are and we're already delivering good returns back to our shareholders.

39:08 And Andrea, maybe do you want to tackle separately the dividend question, so in terms of the dividend trajectory?

39:13 Yes, well on the dividend question, and as you all know, dividend is a matter for the board, but if you look at our results today, obviously we're very, very pleased with the AOP growth, but you should not Thank you very much. Thank you very much. Next year. But I feel comfortable with the market expectations in terms of DPS growth. I'm sure you know what the market expectations are and obviously it's a discussion for the board in February next year.

40:12 Perfect. And moving on to the asset management point. So it was around private markets and the impact on markets.

40:18 I'd like to say one thing here. I'm sure if you look at some of our peers, they must be very jealous about our trajectory because we have resilience on average BIPs. Yes, some peers might move up, but they move up from such a low BIPs that it doesn't really matter. Look at our average BIP at 32. I mean, that's a good average BIP. And of course, that is driven by strong flows in our wholesale solution at an average of 55 BIPs. and private markets is important for us i mean i it's it's it went down by one bips i think 37 38 but that's that's a that's mix mix of whatever private assets we have but if you look at our private assets um The quality and our performance is very, very positive.

41:07 We had 1.3 billion of net inflows in the first six months. Of that, we had 1.2 billion in private credit and structured credit, and we see good momentum here. And let's not forget, when we talk about private and structured credit, this is nearly 100% Europe. I know that there are issues with private credit. It's mainly in the US. We have no exposure to the US, no real exposure to tech and software either. So we're very, very pleased with what we're doing there. And the interesting thing here as well is that we have a capital Q of 7.8 billion in our private assets for our private franchise. So you should see resilience in that I would say for private markets and of course I took the institutional one it's also fixed income in institutions not only about private assets we have fixed income mandates buy maintain mandates we have equity mandates so it's a mixture but you should see resilience in our average margin in terms of bips which I think is a great result thank you very much Andrea Andrew Baker from Goldman Sachs. So I've done the introduction for you.

42:17 Great. Thanks, Luca. Appreciate the intro. Three questions, please. Three questions. So first one, I guess if I look at slide 11, you're guiding, or at least soft guiding, to three to four billion... Can you speak up a little bit because we struggle to hear you? Okay, hopefully. So if I look at slide 11, it looks like you're guiding at least soft guiding three to 4 billion of BPA flows of 27 to 30. Given, I guess the advantages that you've outlined versus peers, I guess post 2027, when you hit your three to 4 billion target, why shouldn't we expect a material increase in flows after that? Is there any constraint to volume growth that's maybe not obvious? that's stopping being a bit more aggressive there and then secondly just on the asset management underlying capital generation you're able to give a bit more detail on the SCR increase and if there's anything we need to be thinking about going forward there and then thirdly hopefully a quick one on the leverage change in methodology is there any change to the 30 target level thank you so probably I'd say the first one Andrea if you want to take it while the other two for Kathryn

43:23 Yes, I think we have to remember where we come from. Four years ago, we were not growing in our life business in the BPA market. We re-entered it, and when you look at our track record, we've been consistently growing by 50% on average every year. And of course, the 1.7 billion that we have done the first eight months this year for me is very, very strong performance. And We have a unique feature, which is true. I mean, I said it today about the BPA+. I mean, I think the with profit fund gives us a competitive advantage. You have all the, I'm not going to repeat them again, the key features here. But it gives me that confidence that we can continue to grow.

44:10 We will grow, as I said, this year at least 50% year on year, and we will continue to grow next year. And if you look at the markets, it's roughly 40 to 50 billion. That means that we have in three years, three or four years, moved from zero to six to 8% market share, which I think is a very relevant performance. Now, beyond that, we will see what we can do. We will see whether that can continue. Of course, we have, in my view, strong competitive advantage with the BPA+, but it's not only about BPA+. It's also about other innovation that we have brought to this market. You saw last year when we presented results, BPA value share where we share the economics with the scheme sponsors and now of course we also launched the CDI plus for run-on so we have what it takes in order to provide a solution across whatever requirements that pension schemes are looking for and last but not least and I think this is a critical element because we see a lot of partnerships out there we have the unique combination of having a very strong asset manager supporting our life balance sheet we're very very strong in private assets in private credit and as you know and there's a significant allocation into private credit and of course also public fixed income so we have all the elements to grow and that's why we're growing let us get to 2027 three to four billion and then we will talk about the future growth

45:40 And maybe, Kathryn, on the BPA, do you want to add anything on kind of pricing discipline and capital constraints or lack of in the With Profit Fund? Yes, so obviously one of the real advantages is the lower cost of capital of the With Profit Fund. And we're very much focused on obviously delivering the schemes and their members, you know, superior outcomes with the possibility of this bonus and the very strong backing and we're delivering double-digit IRRs, that's what we remain very focused on and the earnings profitability will improve over time, we're still in sort of scale-up mode, we'll get more operating leverage as we go into 2027 and the second half should also improve versus the first half. So we're very disciplined and that's why also to Andrea's point we're really comfortable with the guidance of three to four billion given what that means where we'll be in the market. and obviously importantly it delivers the AUM and fees for our asset management business.

46:36 Should I cover? So we expected this. It does look quite unusual. Asset management profits are up 24% and yet you've got a reduction in underlying cap gen and own funds is up obviously so there's nothing there. We had a difficult comparator so we had quite an unusually low impact last year. Seeding numbers were pretty low compared to normal. There was an FX element as well. and that is more normalized so it just happened to be unusually low last year which meant we had a bigger swing in capital requirements year on year and again another FX element this year but nothing in particular I would call out just a notable year-on-year delta in the capital requirements of the business. And I think on leverage, yeah, so leverage, we've been wanting to do this for some time.

47:24 We have now completely aligned the numerator and denominator. And so we've seen a movement, obviously, reflecting the Solvency II value of debt. And that's meant we're now at 29%. We do still have a range, a guidance range, or a target guidance of around 30%. And so we're obviously at 29%, so really comfortable where we are. So Farouk, from JP Morgan, while you pull out the microphone. Thank you for the introduction. So two straight three questions. So firstly, on the BPA, the $3 to $4 billion that you're writing, can you tell us a little bit about what size of scheme you're targeting and what size of scheme you're allowed to target by distribution?

48:13 So I mean, is it more profitable to go for middle size or small size? So just some detail around that. Secondly, on the CDI+, can you just explain a little bit what you see as the opportunity there, the margin, how that's going to work? Is it going to be a big market run on, or do you think it's just a supplement? And my very last question is on operating leverage. So is 70% the right number for you? I mean I know you can't give us guidance on where you're going to be in 28, 29, 30 but it feels like you're saying AI is generating efficiency which you then reinvest in the business and remain efficient rather than AI is a overall cost reduction you know operating leverage measure just want to understand qualitatively at least what you meant by that thank you okay why don't I do the cost to income ratio and then you can do the EPA

49:09 is 70 the right number it's a target we have for for the end of next year i mean when you look at our track record remember we were at 79 three years ago uh and now we're at 73 and we have gotten there by also investing in the business we've been investing in Distribution, we've been investing in product capabilities, we've been doing some bolt-ons. All that are what I call the good costs, but we've also been very disciplined on costs because when you go and look at the last H2 of last year with H1 of this year in asset management, costs have been flat. And of course, then there is the top line, there is market effect, but it's the quality of the flows which I think are critical. I mean, there's a number you should remember of today is the 13 million of annualized net new revenues.

49:57 This is a key KPI because making flows with negative net new revenue, it's not that great. What you want is you want positive. So that shows that we have flows in the right higher margin investment solution, private assets, public equities, et cetera. And also of course, see strong momentum on wholesale. So when I am looking for end of the year and 2027, We have the operating draws in order to deliver that 70%, which is without performance fees. Remember, we do not put the performance fees because of the, I would say, the volatility or lumpiness of the performance fees. Let us get to the 70% end of next year. I think that is a target I'm confident we will deliver, given the strength of our investment capabilities.

50:49 The strength of the investment performance, capital Q of 7.8 billion in private assets and also Daiichi obviously putting in more money as well. So let us get there and then we will see after 2027 what targets we will put but at the moment I think 70% is a good target and as you can see from the track record we have been consistently improving this cost to income ratio by two percentage points per year. And Andrea, on AI, is it like a key driver of cost reduction?

51:20 AI is an interesting one. For those who know me a little bit, I did Six Sigma in end of the 90s. I wish we had AI then. It would have made my life much easier because we were transforming processes in order to improve customer outcomes. It took us like four or five months to get to improve from 3 Sigma to 3.5. With AI, all this can be done, I'm not saying instantly, but it can help you substantially to improve your processes and improve, I would say, client outcomes and quality that you deliver to your clients. So it's something that we are implementing in a very smart way. We're very careful how we implement it because, as Kathryn says, we do it only if it covers our cost of capital it needs to deliver.

52:09 Double-digit IRR. But we've been doing it in several processes in our business. We've been doing it, and you can show the slide if you don't mind, in order to grow our business. So for example, When we do now our BPA pricing, we utilize AI and that has significantly improved the speed of pricing. When we do RFPs for institutional clients, the same thing, you're taking it down by a substantial number. But it's also about how we service our clients. Very, very important. For example, I was up in Scotland, we have a big customer service center there. Well, the way now we resolve issues or even how we do policy management has significantly reduced the time and our operators can now work on added, more value-add activities. The good news in all this is, yes, it takes down costs or it creates efficiency and productivity, but if you're growing your business, this means that I can support my growth.

53:10 So yes, there should be an improvement in the, I would say, numbers moving forward. It's a bit too early to start talking about what the returns are, but surely this will support your growth, there's no doubt about it, and it will support your growth at lower unit costs. and we're a growing business as you can see so this is supporting our growth, profitable growth I should say. Going to the other questions around the BPA volumes that we're seeing. So I would and you've obviously seen a number of other market players give their results already and I'm really pleased that we have been obviously delivering the 1.7 billion above the one and a half for the whole of last year and we're comfortable with our guidance of 50% up this year and next year so over the I guess eight months of the year we've seen both a small and slightly larger scheme so we've been really pleased to be able to participate at the smaller end but also larger schemes as well and that's important for us as we clearly are a new player we've got great credibility with a team Kerrigan who leads the business is here in the room today but given our size ambitions we're not going to be at the large end of of the market that some of the bigger players who are in the market participate in and just going back to discipline on pricing and double digit IRRs.

54:32 On CDI+, so this is a product we will be launching. We haven't launched it yet. And it's designed, and this is one of the benefits of our business model because we call this an insurance enabled product because we benefit from all the asset management capabilities fixed income credit cash flow matching as well as the insurance balance sheet that gives the schemes who want to run on and not yet ready to do buy-in or buy-out the ability to manage their cash flows they've got liquidity that's available for payouts or whenever they might need it and also the advantage of a strong balance sheet with strong collateral flexibility which is a real plus for some of these schemes so slightly better economics for them also more flexibility and again it's the combination of an insurance business and an asset management capability which is really really strong in the key areas of cash flow matching so we'll share a little bit more on the economics it will be fee based when we launch the product I think there was first Tom Bateman from BNP Exxon then let's go to Andrew and we could do Thanks Luca.

55:44 Morning all. Could I just ask on the profitability of PACL? I think we had the numbers over the past few months. I guess the profitability on the UK GAAP is quite different to what you report at a group level, so it looks like the equity position is still falling. Can you just help me understand that, if that's a concern at all? The second question is just on the tax outlook. Another positive one off on capital generation. What's the outlook for four year? And then finally, I just want to understand the kind of the economics from writing all of the life business on the with profits balance sheet. You're gaining 100 million of operating profit there, but presumably you're giving something up.

56:32 Could you just help me kind of put those pieces of the puzzle together? Thank you. I think the first question was on Prudential, the subsidiary profits, is that right? Yes, I think looking at, you'll probably have seen the full year 2025 numbers, got the CFO in the room. and so they had profits the UK GAAP basis 971 million. You might have seen we did a capital reserve release from Scottish Amicable Reserve into retained earnings so that's looking really really strong in terms of PAC. There have been like you see in our IFRS numbers you'll have seen some moves in terms of interest rate rises impacting statutory numbers which affect many of our peers that you cover and so that will have impacted their statutory numbers and obviously in the first half also will have had a grand rents impact but they'd be sitting at around just under a billion pounds in terms of balance sheet equity which is a really strong position so and also obviously Pac May's more profits than it also dividends up as you can see from their numbers and so we again what we look at in terms of obviously the strong capital strong liquidity position of the group we've got 2.7 billion of equity at the holding company 2.2 billion of retained earnings and we obviously dividend up to the whole curve 700 million to keep that stable it was a bit lower this year we had a slightly higher share employee

58:04 share scheme payment at the holding company does that help

58:11 Yeah, I think we might be talking about slightly different numbers, but I can pick it up again offline. But I think the key points is almost like, think about returning equity impact was one billion last year. We've done half a billion of, you know, reserves shift. So it went up to one and a half billion. Clearly in each one you've got the impact of ground rent, but we are still sitting at around one billion. And on a normalized basis, PAC generates more earnings. Then what it upstreams to the parent company so that balance should grow naturally over time then obviously over the last couple of years you've had interest rates rising which does impact as a market movement.

58:45 Let's follow up because the equity position did fall again but I'll pick it up. We can go through those numbers. And then the other one is tax outlook for the full year. Yes, so I think it's more, again, it's another one that perhaps we can pick up off our line. You've seen historically we had obviously the benefits in the last two full year results into the tax numbers. We still have some impact coming from the loss absorbency which impacted capital actually more than the tax numbers. so I don't think there's anything unusual in today's numbers. The statutory losses obviously have a tax impact that you see but apart from that there's just no major impact on the numbers and nothing that we guide to at this stage either for full year because obviously the dynamics that impact that depend on clearly the IFRS results the capital numbers that you see and the loss absorbency that we might need or have under stress when we do all our modeling so no nothing unusual to call out here or nothing yet either for a full year And so I think the final question was on the economics.

59:53 Yes, so I guess this is something that we've shown before in terms of the profitability of the products because we are clearly writing quite a different profit signature from the products that we put on the with profits balance sheet. And so what we've said is that we'll have 10 to 15 basis points of profit on AUM that we put on the books. When we think about where that will come from, you've got three to four billion of BPAs that we've guided to. Typically pre-fund is about six billion. We did 3.3 billion gross in the first half, which is good, and we're obviously writing new business from some of the other smaller individual products. So that's the sort of numbers where you get to the 50-odd billion that you can see over the next five years.

1:00:42 and of course we also have the asset management revenues also which would be a similar margin that you're currently seeing in the financials on the internal AUM that we manage which is about 20 basis points of revenue margin. So the guidance, I mean this comes through over the years to 2030 and the important Point to me also is that clearly we've become more profitable, we've got greater operating leverage, we're really comfortable with our guidance and this is very high quality earnings, very transparent alongside also this switch that we've talked about from 90-10 to 100-0 for the pre-fund products which only started on the 1st of April so they'll feature more next year and the years after.

1:01:28 And in terms of what are we giving up, in many ways, look, we were not in BPAs and there's a question of whether would we be big and growing as much in BPAs if we wouldn't have the Wealth Profit Fund. So I wouldn't see that portion as we're giving up something. It's generally a new stream of business from a new product that is growing very nicely. On the Proof Fund side, you're right that we have always been writing Proof Fund and the volumes are, you know, we're not getting to dramatically different products, volumes. We're just simply suggesting that the profit signature will change slightly it from a value perspective on that portion of the book it is meant to be a zero-sum game because we don't want to take advantage of the with profit fund and the with profit fund doesn't want to take advantage of the shareholder it's just coming through in a more predictable transparent fee-based nature which we think is helpful from our public market perspective so we had Andrew Crean and then if I remember correctly there was a bid Sandra Crean Autonomous.

1:02:30 Can we stay on that slide? I mean, I think what Tom Thomas is trying to get to is the counterfactual. You know, you set a target of annuities of three to four billion. That was before this. Clearly, that three to four billion is going to be written largely out of the with profit fund 20% still on the shelf. That means that the shareholder annuity profits are going to be less than they were. So when we look at that 100 million, you're going to get the asset management profits at any rate. That's not an additional. Then you've got the 10 to 15 basis points on the new, which is 50 to 75 million by 2030. What we're after is the counterfactual of what you lose in the annuity profits there.

1:03:20 And I think expanding the question from there, I mean, you've got a very strong solvency ratio. You say you've got to invest in the business, but you're increasingly investing in the business through the with profit fund as opposed to the shareholder. So it does come back to this question, and it's difficult to understand why there's a slightly curmudgeonly approach around dividends and buybacks. And you say you're on a journey. At what point do you think you can come back to us with a different strategy? And then finally, the last question is you've given us very helpfully the sales, BPA sales in July and August. You only gave the net flows into the asset management business in July.

1:04:07 How's August gone? maybe on the last one is simply because BPA sales are big chunky so you see them right away it's hard to get them wrong in asset management it takes a few days after the period close to actually get the data so it's purely due to the lumpiness of BPAs that allows them to identify them very easily in the MI while for typically we get asset management flows you know five ten days after a period and so we don't have them yet and would be inappropriate to guide on all those asset management flows at this point in time But Kathryn, on that bigger and longer question. Or Kathryn. No, so on the counterfactual, on the profitability of the Inforce book versus the new book, I think in terms of clearly what we're trying to do for our shareholders and not just the shareholder balance sheet of PAC, but is to really improve the quality of the earnings. And it is doing capital light business because we obviously and so on. And so over time, and it is an over time to 2030, we will deliver those profit numbers and with those volume growth for our shareholders.

1:05:10 So the quality is clearly Thank you very much. they are very very meaningful it's seven billion it's not that common to see CSM up six percent so we're very pleased and it's 4.2 billion across the with profit fund so that will underpin really strong profits every year at one depending on where CSM clearly finishes some of the drivers of that and the amortization rate but that that really will underpin a core part of our annual profits and then on top of that we've got the new flow that's coming in that's got the guidance we've given that will deliver this additional 100 million in 2030 and obviously with the benefit also from asset management revenues with the 20 bps margin on that.

1:06:27 and again just to repeat on the counterfactual when we first presented the three to four billion target in terms of annuity sales the very first time that we presented it we also clearly stated that we were confident to getting there because we would have also launched the with profit fund which has been in the making for the last 18 years 18 months before launch right so we would have not put out that target without the confidence of the with profit fund so on that i totally get the counterfactual that you're asking on the proof and side but on the bpa volume we would not be where we are and we wouldn't have this ambition and this target if we wouldn't have this very distinctive and competitive proposition which does allow us to have confidence in reaching those volumes so was this second question was around the capital ratio and distributions do you want to kick that off and i can do it so um we Yes, we're operating above our range at 247%.

1:07:25 And when Andrea talks about the capital framework, the four quadrants that we've used consistently over the last three and a half years, we also have a given our focus is very much around investing in the business because we want to continue the growth that we're seeing. We want to continue delivering the momentum and flows and obviously hit our profit and our capital generation target. We have got a strong balance sheet at the moment in terms of the stock of CSM, 7 billion. I talk about underpins earnings. The PVSD of 4.8 billion underpins earnings, capital and cash generation over the next few years. We've got real financial flexibility, which is very good for us because it allows us to continue to invest in the business. So what we've said is we've done the 4.4 billion of returns we've given back to shareholders. We only moved to a progressive dividend 18 months ago.

1:08:18 We kept it at 2% last year despite flat earnings. Profits are up strongly this year. We've guided double digit for full year. And one of the elements around what might trigger an increase in shareholder distributions would be sustainable earnings growth. We're only 18 months into progressive dividend. It's a really and so on. So we have an incredibly different strategy that we're now pursuing with great success in today's numbers. We do value absolutely delivering good returns to shareholders for this year. We're comfortable with expectations, as Andrea said, and it's very much a decision for the board. And so we've also said we would expect to be at this sort of solvency range for the medium term. So shareholder returns are important to us.

1:09:07 So over to Abid from Palmier. Thank you. I've got three questions. The first one is on fees on the new mandates. Just wondering what the fee rate is on the Daichi mandates that are coming in and on the 7.8 billion private markets, capital Q. And then the second one is on the equity release disposal. I'm not sure if I've read that right in the release, but it looks like there is a disposal there. So just wondering What was the driver behind that and what are you going to do with any capital released? And then the final one is on capital itself. I'm still trying to understand, just following on from Andrew's question, How do you assess the excess capital position?

1:09:58 Is it on the regulatory balance sheet or the shareholder view of that? And I think at the moment on the regulatory basis, you're running at 180,181. Where do you want to operate on that basis? So just trying to triangulate, where do you actually want to operate at? Sure. Do you want to start on Daiichi?

1:10:19 No, I'm afraid it's on fees. Well, I mean, on fees you have to talk. But, I mean, Daiichi, it's obviously we're very pleased with the partnership. And, you know, when I look at what we have been delivering since we signed the partnership in May, 1.1 billion of inflows. And it's been 50-50 between public and private, so I don't think we're giving out on fee what we do. I mean, we're obviously treating them as a large institutional client and therefore obviously higher fees in private assets, lower fees in fixed income. but it's a partnership which for us is important not only because access to the balance sheet you should not forget Daiichi co-owns Asset Management One in Japan with Mizuho a big distribution in Japan and we're looking to do things with with them but they also are significant in Asia with a large footprint and we're looking to see opportunities for for working with them as well in Asia so it goes beyond just access to the balance sheet but when you think about our model you know we live balance sheets asset management and in particular private assets we now have access to a significant second balance sheet which by the way today also did an acquisition in New Zealand so their balance sheet is increasing even further so very very important partnership for us and you know that the commitment they had of doing six billion of US dollar over five years. We're at 1.1 billion sterling after little more than one years.

1:11:48 I mean, I'm confident that that will grow significantly in the coming months and years. So very, very pleased with the relationship. And having on board Yamaguchi-san will also help to engage further and create an even stronger relationship. So more to come with Daiichi. And obviously we've got the 7.8 billion of private markets capital queue that we've talked about. We answered the question on I think what happened in the first half, which is a bit of a mixed effect in terms of the private markets margin. So given the strength that we talk about in structured credit, some good demand in real estate, but overall feeling really confident about the private markets interest that we've got with that size capital queue, and obviously the success of our public equities market in the wholesale channels supports the 55 basis points that you see in wholesale and actually I would say record revenues in wholesale in the first half as well.

1:12:49 but obviously that's in other markets as well so on the equity release mortgage transaction which was a post balance sheet event you will see some notes in the financial statements about that transaction which was actually you might have seen one of our peers did something similar but it was just to make a more optimal Thank you very much. and so I guess back to the solvency ratio what we've said is that we have got quite a unique balance sheet because we have such a successful with profit fund and the proof fund has grown to 73 billion and the PVSD asset has also grown to 4.8 billion and that's driven a lot of the you know growth also in the ratio to 247 percent so we're saying that we expect to operate at about this level or above the target Thank you very much.

1:14:24 and yeah continuing also to deliver good outcomes for our shareholders so it is a high ratio reflecting the shape of our balance sheet but very importantly this asset this PVST asset underpins today's numbers that you're seeing the great results the answer to the earlier question around this you know size of earnings from our with profits business it also underpins the future earnings the future capital and cash generation so it's a great position to be in and we're very pleased with this asset and it just means that our solvency ratio will be a little bit higher for some you know for the medium term. Kathryn we actually there are a couple of questions online we'll come back we'll make sure we ask all the questions. Alejandra Chavez Valencia from Citi asked regarding to the ground rent or the leasehold reform bill whether you can remind us of you know is all the impact taken I guess there's an element of one-off impact upon announcement and then back in February you might recall we did talk about an ongoing impact on AOP and capital generation we quoted the number of 50 million pounds so she just wanted to understand what has taken place what will take place and are the numbers broadly in line yep so the impact in our balance sheet and our financials from ground rents that you see today are identical to what we put out in March so it reflects the government announcement around a 40 year transition in the 250 pound cap so there's nothing new in today's numbers we obviously

1:15:58 will look at the October 28 budget we're clearly engaging as you'd expect with the government We're not expecting any changes really to this position. We were prudent anyway leading up to it. We took a very conservative position on the balance sheet. I think we did guide to a modest 10 million AOP impact at the end of 2028 as a result of this. So that's just the key guidance, which again today we're not changing it. So it's very consistent. It's completely consistent with what we've given to the market before. And just for clarity, that is an impact across AOP and capital generation roughly similar from the end of 2028 only onwards. And another question line from Nazib at UBS. He's asking whether, you know, can you do more 100-null products?

1:16:49 You know, basically, can't you just write everything, everything on a 100-null basis on the with profit fund? Because we referenced that two of our proof fund flavors are on 100-0. So I guess that's also what prompted the question. Yes so we will be moving the other final large product or sleeve or for proof fund onto a 100 zero charges less expenses approach which is really transparent it accelerates the profit recognitions you'll see it earlier in the CSM slightly earlier recognition also in terms of underlying cap gen and we're very comfortable that that is the right thing to do for proof fund No changes to other products. And it was really important for us also with the BPA Plus to have the 20% reinsurance with the shareholders so that they are completely aligned in terms of the economics and motivations and financial metrics for BPA Plus. So it will just be on pre-fund, but all pre-fund.

1:17:50 Perfect. So those were the questions online. We can come back to Farouk, JP Morgan. Hi, Farouk from JP Morgan. I want to explore the counterfactuals type question again. When you first talked about capital light or with profits BPAs, the implication was that you would be able to accept a slightly lower hurdle rate than your peers. But given that you're aligned, you have this 20% share, are you actually just writing the same kind of IRRs that you would have? and associated with that is this 20% reassurance and annual kind of arrangement. So, for example, are you able to say, okay, right, we can adjust that reassurance rate if we feel like we want to invest capital in this because either shareholders like it again or we feel like we're getting good margins or there's a big opportunity coming. So I'm just kind of wandering around the counterfactual to the counterfactual.

1:18:51 Thank you. I can take that perhaps and it's a really good question because we have got this new exciting product which is definitely capital light for the shareholder. If you look at the numbers and you'll spend some time I'm sure after today's call to look at some of the detail in our disclosures and what we said is we had 20 million strain down from 35 last year, that's across the whole of the business. So it does reflect a threefold increase in BPA volumes. So obviously we have strain across the whole 600 million of premiums. And also you can look at the shareholder component. Now, just as a reminder, we do not reinsure longevity at point of pricing for these transactions. It remains a management tool that we can use at some point. We have a lot of flexibility given the strength of the balance sheet and our appetite for longevity risk as well. So that's an element that will impact strain.

1:19:45 What we've talked about is obviously just making sure that we get the shareholder double-digit IRRs. That's absolutely key for us. So yeah, essentially the key benefit for and other trustees and clients is that we can deliver superior pricing. So we can have the ability to deliver better economics. They have this bonus. You've already seen a 45 basis point bonus on fixed-term annuities. It's obviously a different product, but it has got a lower cost of capital in the with-profit fund. I think in a previous call we talked about the regulations and the with-profit committee and how they think about profitability. and what we need to do in terms of their hurdle rates for this business that Luca actually also covered earlier on the call. Happy to pick it up later.

1:20:32 But that means that we can speak to these trustees and the consultants. And we know that we've got, and Andrea talked about having this essentially mutual on the balance sheet. We have got the ability to be really competitive and also with the attractive prospect of a potential bonus at some point. So yeah, those are essentially how we think about the hurdle rates. And on the 20%, we're guiding to 20%. I think we said approximately 20%. I think we're not encouraged, technically we could of course change and put something on the shareholder balance sheet with a greater number, but we're really comfortable at that level. And I think we're encouraging people to assume that it will stay close to 20%. And again, we can be quite flexible around how and when we do that, but that's a sort of annual number.

1:21:21 Farouk, what might help on the hurdle rates is that you have to think about the transaction as a transaction between the DB pension scheme and the with profit fund. The with profit fund will price to achieve this IRR and that's the transaction, right? And then after that, there's a reinsurance between the with profit fund and MG plc and MG plc will achieve its target IRRs, right? So it's very transparent, but it's almost you see the outcome as a one transaction but it's really a two-step and that's why different parties can achieve the the thresholds that they're targeting cool i don't think i don't see any raised end so i think this brings the results to an end thank you very much for being here with us today thank you thanks everyone thank you thank you