M&G plc Aktie

Perfect. So we're live and welcome to M&G's 2026 Half Year Results. Welcome back after the summer. It is a very good set of results.

So without further ado, I'll hand over to Andrea Rossi, our Group Chief Executive Officer.

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 6 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 3 strategic priorities for M&G. First, we focus on financial strength and simplification to set up M&G for the long-term success. Now we are delivering growth. 2025 was a good year for us. And this strong momentum continued into 2026. Operating profit of GBP 435 million is our best half results since listing in 2019. It is up 15% year-on-year, thanks to a 24% increase in asset management and double-digit growth in PruFund. 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. Our new With-Profit BPA called BPA Plus is a prime example of this.

Since its launch in February, we have completed GBP 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 GBP 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 6 months of the year, our asset management cost-to-income ratio reduced by 2 percentage points to 73%, and we expect further improvements in operating leverage as we continue to transform M&G. We have delivered over GBP 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. Capital generation is on track to achieve the GBP 2.7 billion cumulative target. Our cost-to-income ratio improved to 73%, and we achieved record operating profit of GBP 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, products and investment capabilities. Now we're 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. And the reason that I'm 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. Live gives asset management the scale and long-term capital it needs to develop high-quality investment capabilities. In return, like benefits from this expertise with access to alternative assets that are essential to back its core propositions, including PruFund and bulk purchase annuities. The balanced and synergistic nature of this model is reinforced by the With-Profits Fund, which attracts insurance assets in a capitalized way with limited shareholder balance sheet exposure. A real competitive advantage.

Another important differentiator for M&G is our strategic partnership with Dai-ichi Life, one that builds on and leverages our business model. Like us, Dai-ichi also believes in the powerful combination of asset management and life, fully understanding the value of M&G Dai-ichi decided to invest in our group. Over the past year, they have become our largest shareholder with a 15.7% position. I'm delighted by the strength of our partnership, and to announce that senior Dai-ichi executive, Hitoshi Yamaguchi, has joined our Board of Directors effective today. He brings more than 3 decades of leadership experience spanning international insurance and finance. By becoming Dai-ichi's preferred asset manager for Europe, we have gained access to the second large balance sheet, which has already allocated over GBP 1 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. I am very proud of the progress we have made in our asset management business. Over the last 3 years, assets under management have grown steadily, increasing by 17% to GBP 356 billion. And we have improved our diversification, becoming less reliant on our internal clients and on the U.K. market. Over the same period, external assets have increased by 29% to GBP 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. 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 GBP 1 billion in July alone.

With good client demand, the GBP 7.8 billion capital queue in private markets and new business from Dai-ichi, 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 GBP 2.2 billion in H1 corresponds to GBP 13 million in annualized net new revenues. 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. Firstly, we delivered GBP 1.1 billion of net inflows in high-margin wholesale solutions. Secondly, we achieved net inflows in the U.K. institutional market for the second consecutive period, an important milestone as we turn around this segment. And while the U.K. remains a mature market, we continue to innovate. Later this month, we will launch our new CDIs proposition, an innovative insurance-backed solution designed to optimize the investment and hedging strategy of DB pension schemes in [indiscernible].

Finally, we achieved net inflows with international institutional clients for a fourth year in a row. 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. And 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 while 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-Profit Fund. 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 GBP 50 billion to the group by 2030 through these With-Profit solutions. The chart in the middle of this slide gives you a rough indication of the breakdown with PruFund and the recently launched BPA Plus driving the bulk of the volumes. These assets will generate at least GBP 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 launched 6 months ago and with good reason.

Entering into 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-Profit Fund, trustees know that their members are protected by one of the best capitalized insurance companies in Europe. So 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 on the With-Profit Fund makes its pricing attractive. And if the fund achieves good investment returns, it shares them with customers, declaring a bonus on top of the guaranteed income. You can see why our BPA Plus has a real edge in the U.K. 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 GBP 3 billion to GBP 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 2 core objectives to drive sales. First, to improve the distribution of PruFund and secondly, to broaden our proposition with other investments solutions. From a distributor perspective, we are pleased to have launched PruFund on Scottish Widows platform. We will add a second FNZ platform later this year. From a product perspective, last summer, we launched our retail time annuity, which has generated over GBP 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. So again, clear evidence of the value delivered by our With-Profit solutions. Our sales in the first half reflect this positive momentum. When combining PruFund and fixed term annuities, our retail net flows improved by over GBP 500 million year-on-year. And looking ahead, we expect PruFund 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 Kathryn, I will briefly cover our group transformation. In March, we completed the first phase of our transformation program, achieving GBP 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. 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 advisers 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. So to sum up. We have had a good first half with record operating profit, 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. I'll now take you through the details of our H1 results, which showed steady momentum across the group and good progress against our targets.

Covering first, the key highlights. We delivered GBP 2.4 billion of net flows from open business, an increase of GBP 300 million 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 PruFund sales. Group adjusted operating profit increased by 15% year-on-year to GBP 435 million, our guest first half results since listing. And within it, asset management earnings increased by 24%, thanks to higher recurring revenues and improved operating leverage. In Life, by higher contribution from the capital-light with-profits business led to a 9% increase in profits. At GBP 372 million, operating capital generation was GBP 36 million lower, largely due to movements in our capital requirements in asset management and the Corporate Center. New business strain of GBP 20 million was GBP 15 million better year-on-year, despite us delivering twice the volume of BPAs, reflecting the capital-light nature of our new With-Profit BPA Plus. So thanks to this good result, we remain on track to achieve our GBP 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 GBP 387 billion supported by GBP 2.4 billion of net inflows from open business and GBP 13 billion of positive market movements. With GBP 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. And as you've heard from [indiscernible], we delivered another GBP 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 Dai-ichi Life, we're very pleased with the continued turnaround of our U.K. institutional segment, where we delivered net inflows of GBP 800 million. And thanks to our business model, we're very well placed to support U.K. pension schemes along their entire derisking journey, leveraging the capabilities of both asset management and Life. Our new CDIs solution, which Andrea just mentioned, is an example of our product innovation for these clients.

In wholesale, our strong investment performance, particularly in public equities, remained a key attraction for clients. Life net flows from open business of GBP 200 million was a GBP 700 million improvement year-on-year. And this reflects GBP 500 million increase improvement year-on-year and continued growth in the BPA market, where we recorded GBP 600 million in sales in the first half. And activity has picked up over the summer as we completed a further GBP 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.

Moving on now to profit. At GBP 435 million of operating profit in the first 6 months was up 15%, with the key beaches 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 GBP 375 million with double-digit growth in both PruFund and traditional with profits more than offsetting an GBP 8 million reduction in annuities due to lower returns on excess assets, which we flagged in March. And finally, the corporate center outcome was adverse by GBP 5 million, impacted by lower investment income and slightly higher head office expenses.

Our operating profit is not just growing, it's also improving in quality as we increase the diversification of our business and pivoted 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 funds. 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 GBP 159 million. This was driven by a higher asset base and resilient margins, generating much improved recurring revenues.

At GBP 356 billion, assets under management were up by GBP 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 GBP 13 million of annualized net new revenues. Together with a growing asset base, this contributed to revenue growth in the first 6 months of 10%.

Costs of GBP 417 million increased by 7% year-on-year but remained flat compared to the second half of last year. 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 Key Capital Partners. And as we grow, we continue to improve our operating leverage. In H1, the cost income ratio reduced by 2 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%.

Finally, the operating profit also benefited from a GBP 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. So let us now turn to our life business. Here, PruFund's operating profit increased by 15% to GBP 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. The result of our traditional With-Profits business was up by 14% year-on-year to GBP 137 million, reflecting similar positive dynamics.

We're encouraged by this performance, particularly with achieved against a backdrop of lower expected returns and risk-free rates, which we previously highlighted. Both PruFund and traditional With-Profits continue to provide resilient long-term earnings for the group, underpinned by a combined GBP 4.2 billion of CSM supporting the sustainability of our future profits. As you know, we switched 2 PruFund products to a 100 charges less expenses approach from the 1st of April, which will accelerate profit recognition on new business.

Let's now turn to annuities. Here, annuities profit was down 7% year-on-year to GBP 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 recognized in the second half of 2025 and improved experience variances due to the non-repeat of the GBP 8 million headwind we flagged last year. This year, all annuity business was redone With-Profit Funds through our BPA Plus solution. 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 GBP 4 million of 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. Our group CFM of GBP 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 GBP 392 million of operating capital before new business strain, keeping us firmly on track to achieving our 3-year target of GBP 2.7 billion. Underlying capital generation of GBP 304 million was GBP 27 million lower than the prior year. Within it, asset management capital generation reduced by GBP 7 million, despite the higher owned funds as we experienced a GBP 14 million increase in capital requirements compared to a GBP 12 million reduction last year. And we experienced a similar dynamic in the Corporate Center, where last year, we benefited from an GBP 18 million SCR reduction. In Life, the in-force contribution reduced by GBP 10 million to GBP 340 million driven by a GBP 15 million lower return on annuity surplus assets, which we flagged in March. Importantly, Life new business gain improved by GBP 15 million to GBP 20 million despite higher BPA sales as we shifted our Life new business to a capital-light model.

Management actions contributed GBP 68 million, primarily reflecting equity hedging activities, and we remain on track towards our annual guidance of GBP 100 million to GBP 200 million. Thanks to our good operating performance, our balance sheet continued to strengthen. The Solvency II ratio closed the period at 247% with a GBP 5 billion capital surplus. On bond of GBP 8.4 billion include GBP 4.8 billion of PVST. The present value of future shareholder transfers from our With-Profit Fund. And this is a unique feature of M&G, reflecting the scale and profitability of our With-Profit business. The PVST is a store of future value that has grown tremendously in recent years, thanks to the success of proband and supported 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.

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 will also see on this page that we've updated the definition of our leverage ratio to reflect the Solvency II 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 brands, not regulatory own funds. We're pleased with the continued strength of our balance sheet that it represents a key competitive advantage for M&G in what remains a volatile and uncertain macro environment. I will finish by briefly covering costs.

Our managed cost base at the 30th of June of GBP 744 million reflects the investments that we made last year to support growth, which underpins a strong new business momentum we are now seeing. In Life, we built out our BPA team on pricing, 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 by 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 6 months.

Looking to the remainder of H2, we expect asset management costs to stay in line with the first 6 months of the year, while corporate tender costs will be roughly GBP 10 million 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, reengineering our processes, optimizing third-party spend and better leveraging technology such as AI, as you had 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-to-income ratio for the end of next year.

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

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. 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 this 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'm energized by the opportunity ahead as we enter this new phase of growth. Thank you. And now we'll move that I'll take my water. Thank you. And now we're going to do Q&A.

Thank you very much, Andrea. And Kathryn, we can move to the Q&A. [Operator Instructions] We'll later take questions online. A couple of analysts could have make it in the room, but they've already submitted questions, but we'll give them for last.

So Andrew, Farooq and Tom in that order.

[indiscernible], RBC Capital Markets. I will kick over only 2 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 at 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 blended margin stays flat and also the private markets margin actually decreased 1 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?

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 2 questions in one. One was around dividend and one is around maybe more capital return. So maybe we'll split them a little bit. I don't know, Andrea, if you want to.

Yes. 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 4 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 3, 4 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 GBP 4.4 billion since we listed in 2019 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 have we realized 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 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 GBP 4.8 billion. We've got quite a unique own funds because of the strength of PruFund, 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 no very comfortable where we are, and we're already delivering good returns back to our shareholders.

And Andrea, maybe you want to tackle separately the dividend question. So in terms of the dividend projector.

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 see a one-to-one relationship in the short term between AOP and DPS. I mean there are other elements you should take into account. There is capital generation. There are the state of the business. So all these things means more you should look at it from a more longer-term perspective. Obviously, we're very, very pleased that we have a growing dividend policy, as I said before. And it's a matter for the Board. It will be discussed in February 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.

Perfect. And moving on to the asset management point. So it was around private market cares and the impact.

Well, I'd like to say one thing here. I mean I 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 bits. Yes, some peers might move up, but they move up from such a low bits that it doesn't really matter. Look at our average bp at 32. I mean that's a good average bit. And of course, that is driven by strong flows in our wholesale solution at an average of 55 bps.

And private markets is important for us. I mean it went down by 1 bps, I think, 37, 38, but that's mix, mix of whatever private assets we have. But if you look at our private assets, the quality and our performance, it's very, very positive. We had GBP 1.3 billion of net inflows in the first 6 months. Of that, we had GBP 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 U.S. We have no exposure to the U.S., 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 queue of GBP 7.8 billion in our private assets for our private asset 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. It's not only about private assets, we have fixed income mandates, by maintain mandates. We have equity mandates. So it's a mixture. But you should see resilience in our average margin in terms of bps, which I think is a great result.

Andrew Baker from Goldman Sachs. So I've done the introduction for you.

Three questions, please. So first one, I guess, if I look at Slide 11, you're guiding at least soft guiding to GBP 3 billion to GBP 4 billion -- okay. Hopefully. So if I look at Slide 11, it looks like you're guiding or at least soft guiding to GBP 3 billion to GBP 4 billion of BPA flows of GBP 27 billion to GBP 30 billion. Given, I guess, the advantages that you've outlined versus peers, I guess, post 2027, when you hit your GBP 3 billion to GBP 4 billion target, why shouldn't we expect a material increase in flows after that? Is there any constraints 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, can you just 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?

So probably I'd say the first one, Andrea, if you want to take it, while the other 2 for Kathryn?

Yes. I think we have to remember where we come from. 4 years ago, we were not growing in our Life business in the BPA market. We reentered it. And when you look at our track record, we've been consistently growing by 50% on average every year. And of course, the GBP 1.7 billion that we have done in the first 8 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 Plus. 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. 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 market, it's roughly GBP 40 billion to GBP 50 billion. That means that we have in 3 years or 4 years, moved from 0 to 6% to 8% market share, which I think is a very relevant performance.

Now beyond that, we will see what we can do. And we'll see whether that can continue. Of course, we have, in my view, strong competitive advantage with the BPA Plus, but it's not only about BPA Plus. It's also about other innovation that we have brought to this market. You saw last year when we presented results, our BPA value share, where we share the economics with the scheme sponsors. And now, of course, we also launched the CDI+ 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, 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, GBP 3 billion to GBP 4 billion, and then we will talk about the future growth.

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 these schemes and their members superior outcomes with the possibility of this bonus and the very strong backing capital ratio behind it. 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 GBP 3 billion to GBP 4 billion, given what that means where we'll be in the market. And obviously, importantly, it delivers to AUM and fees for our asset management business.

So 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 capture. And own funds is up, obviously. So there's nothing there. We had a difficult comparator. So we had quite an unusual low impact last year. Seating 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, yes. So leverage, we've been wanting to do this for some time. 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 we're now at 29%. We do still have a range, a guidance range or a target -- not a target guidance of around 30%. And so we at 29%, so really comfortable where we are.

So Farooq from JPMorgan. While you pull out the microphone.

So 2 straight 3 questions. So firstly, on the BPA, the GBP 3 billion to GBP 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? So I mean, is it more profitable to go for middle size or small size? So just some detail around that.

And then 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 an overall cost reduction, operating leverage. I just want to understand qualitatively at least what you meant by that.

Why don't I do the cost-to-income ratio and then you can do the EPA. Is 70% the right number? It's a target we have for the end of next year. I mean when you look at our track record, remember, we were at 79% 3 years ago. 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 cost because when you go and look at the last -- H2 of last year with H1 of this year in Asset Management, costs a bit flat. Of course, then there is the top line. There is market aspect, but it's the quality of the flows, which I think are critical. I mean there is a number you should remember of today is the GBP 13 million of annualized net new revenue. 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 jaws 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, the strength of the investment performance, capital queue of GBP 7.8 billion in private assets. and also Dai-ichi, obviously putting in more money as well. So let us get there and then we will see after 2027, what targets we go to it. 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 2 percentage points per year.

And Andrea, on AI, is it like kind of a key driver of cost reduction or...

Well, AI is an interesting one. I mean I -- and I -- for those who know me a little bit, I did Six Sigma in end of the '90s. I wish we had AI then, would have made my life much easier because we were transforming processes in order to improve customer outcomes. It took us like 4, 5 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 live to the quality to our 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 said, we do it only if we cover our cost of capital. It needs to deliver double-digit IRR. But we've been doing it in several, I would say, 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, we do -- 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 is 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. So yes, there should be in 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 our growth at lower unit cost. And we're a growing business, as you can see. So this is supporting our growth, profitable growth, I would 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 GBP 1.7 billion above the GBP 1.5 billion 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, 8 months of the year, we've seen both a small and slightly larger schemes. 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 the 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 the market that some of the bigger players who are in the market participated. And just going back to discipline on pricing and double-digit IRRs.

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 caught this an insurance enabled product. because the 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 buying or buy out the ability to manage their cash flows, they've got liquidity that's available for payout or whatever 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 economic other 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 based when we launched the product.

I think there was first Tom Bateman from BNP Exane. Then let's go to Andrew and we could do...

Can I just ask on the profitability of PACL I think we have the numbers over the past few months. And I guess the profitability on the U.K. 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 the full 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 GBP 100 million of operating profit there. But presumably, you're giving something up. Could you just help me kind of put those pieces of the puzzle together?

So I think the first question was on Prudential, the subsidiary profits. Is that right? Yes. So yes, I think looking at -- you'll probably have seen the full year 2025 numbers, but the CFO in the room. And so they had profits U.K. GAAP basis, GBP 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 the statutory numbers.

And obviously, in the first half also we'll have had a ground rent impact. But they'd be sitting at around just under GBP 1 billion in terms of balance sheet equity, which is a really strong position. So -- and also, obviously, PA made 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 GBP 2.7 billion of equity at the holding company, GBP 2.2 billion of retained earnings, and we obviously dividend up to the holdco of GBP 700 million to keep that stable. It was a bit lower this year. We had a slightly higher employee share scheme payment at the holding company.

Yes. I think we might be talking about slightly different numbers, but I can pick up again offline.

But I think the key points is almost like think about return on equity impact was GBP 1 billion last year. We have done GBP 0.5 billion of reserves shift. So it went up to GBP 1.5 billion. Clearly, in H1, you've got the impact of going rent, but we are still sitting at around GBP 1 billion. And on a normalized basis, PA generates more earnings than 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.

Let's follow up because the equity position did fall again. I'll pick it up. Yes.

We can go through those numbers. Yes. So I think it's more -- again, there's another one that perhaps we can pick up offline. You've seen historically, we had obviously the benefits in the last 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 into those 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 nothing unusual to call out here or nothing yet either for full year. And so I think the final question was on the economics.

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 these -- from the products that we put into the -- 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 GBP 3 billion to GBP 4 billion of BPAs that we've guided to. Typically, PruFund is about GBP 6 billion. We did GBP 3.3 billion growth 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 GBP 50-odd billion that you can see over the next 5 years.

And of course, we also have the asset management revenues also, which will 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 make also is that clearly, we've become more profitable. We got greater operating leverage. We're really comfortable with our guidance. And this is very high-quality earnings, very transparent alongside also the switch that we've talked about from 90-10 to 1000 for the PruFund products, which will -- which only started on the 1st of April. So they will feature more next year and the years after..

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 with-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 PruFund side, you're right that we have always been writing PruFund and the volumes are -- we're not guiding to dramatically different products volumes. We are just simply suggesting that the profit signature will change slightly. 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 a public market perspective. So we had Endocrine and then if I remember correctly, there was a bid...

Andrew Crean of Autonomous. Can we stay on that slide? I mean I think what Thomas is trying to get to is the counterfactual. You set a target of annuities of GBP 3 billion to GBP 4 billion. That was before this. Clearly, that GBP 3 billion to GBP 4 billion is going to be written largely out of the with-profit fund, 20% still on the shareholder fund. That means that the shareholder annuity profits are going to be less than they were. So when we look at that GBP 100 million, you're going to get the asset management profits generate. That's not an additional. Then you've got the 10 to 15 basis points on the new with-profit fund, which is GBP 50 million to GBP 75 million by 2030.

What we're after is the counterfactual of what you lose in the annuity profits there. 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 funds as opposed to the shareholder. So it does come back to this question, and it's difficult to understand why there's a slightly commuden 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. How has 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 their mind, while for typically, we get asset management flows 5, 10 days after period end. So we don't have them yet and would be inappropriate to guide on all those asset management flows at this point in time.

No. So on the counterfactual on the profitability of the in-force 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, is to really improve the quality of the earnings. And it is doing capital-light business because we obviously focus on the 20% that we have in the shareholder balance sheet, which aligns interest with profit fund and the shareholder. And so over time, and it isn't over time to 2030, we will deliver those profit numbers and with those volume growth for our shareholders.

So the quality is clearly coming through because it's nice and visible. It will expand in quality. We're disciplined on the capital hurdle rates that we've talked about. And the key thing is we're going to grow profits, and we've got very clear guidance out for profit growth over the next few years. And so you'll see that given that also the scale of CSM and the profits that we already have sort of locked in that flow into profits, they are very, very meaningful. It's GBP 7 billion. It's not that common to see CSM up 6%. So we're very pleased and it's GBP 4.2 billion across the with-profit fund. So that will underpin really strong profits every year depending on where CSM clearly finishes, some of the drivers of that and the amortization rate. But 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 GBP 100 million in 2030. And obviously, with the benefit also from asset management revenues with a 20 bps margin on that.

And again, just to repeat on the counterfactual. When we first presented the GBP 3 billion to GBP 4 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. It's 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 PruFund 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 the second question was around the capital ratio and distributions. Do you want to kick that off and I can -- so we -- yes, we're operating above our range at 247%. And when Andrea talks about the capital framework, the 4 quadrants that we've used consistently over the last 3.5 years, we also have -- and 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 in 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, GBP 7 billion. I talk about underpins earnings. The PST of GBP 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 GBP 4.4 billion of returns we've given back to shareholders. We only moved to a progressive dividend 18 months ago. We kept it at 2% last year despite flat earnings. Profits are up strongly this year. We've guided to 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 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 Andreas 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 -- but shareholder returns are important to us.

So over to Abid from Panmure.

It's from Pan Lum. I've got 3 questions. The first one is on fees on the new mandates. Just wondering what the fee rate is on the Dai-ichi mandates that are coming in and on the GBP 7.8 billion private capital. private markets capital queue? 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 release?

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? Is it on the regulatory balance sheet or the shareholder view of that. And I think at the moment on the regulatory -- 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 that.

Sure. Do you want to start on Dai-ichi?

No, I'm afraid it's on fees -- well, I mean, on fees, you have to talk. I mean, Dai-ichi in Asia. So it's -- obviously, we're very pleased with the partnership. And when I look at what we have been delivering since we signed the partnership in May, GBP 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 Dai-ichi co-owns Asset Management in Japan with Mizuho, a big distribution in Japan, and we are looking to do things with them.

But they also are significant in Asia with a large footprint, and we're looking to see opportunities 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, we -- the life balance sheet, 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 the balance sheet is increasing even further. So very, very important partnership for us. And the commitment they had of doing USD 6 billion over 5 years. We're at GBP 1.1 billion after a little more than 1 year. 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 the [indiscernible] will also help to engage further and create an even stronger relationship. So more to come with Dai-ichi.

And obviously, we've got the GBP 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 mix effect in terms of 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. So -- 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 do something similar, but it was just to make a more optimal balance sheet structure in our matching adjustment, delivering a superior outcome across the key financial metrics that we look at. So I think we gave some disclosures around the size of the book, and there might be a little bit more at full year. But it was just basically optimizing the position there.

Nothing meaningful that I would call out in terms of capital or any other benefits that we get. 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 PruFund has grown to GBP 73 billion, and the PVC asset has also grown to GBP 4.8 billion. And that's driven a lot of the growth also in the ratio to 247%. So we're saying that we expect to operate at about this level or above the target, the top of our target range for some time because of the success of PruFund. And obviously, we've said that this strong financial position is giving us flexibility to continue to invest in the business to drive growth, which is coming through in today's numbers and yes, continuing also to deliver good outcomes for our shareholders.

So it is a higher 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 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 -- 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 question. Alejandra Chavez Valencia from Citi asked regarding to the ground rent or the legal reform bill, whether you can remind us of -- 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 a number of GBP 50 million. So I just wanted to understand what has taken place, what will take place and are the numbers broadly in line?

Yes. 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 GBP 250 cap. So there's nothing new in today's numbers. We obviously 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 GBP 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 -- 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 Nasib at UBS. He is asking whether can you do more 100 products? Basically, can't you just write everything, everything on a 100 basis on the with-profit fund? Because we referenced that 2 of our PruFund flavors are on 100. So I guess that's also what prompted the question.

Yes. So we will be moving the other final large products or sleeve for PruFund onto a 1000 charges less expensive approach, which is really transparent. It accelerates the profit recognition. 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 PruFund. 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 would just be unproven but all prefund.

Perfect. So those were the questions online. We can come back to Farooq, JPMorgan.

Farooq from JPMorgan. I want to explore that counterfactual type question again. When you first talked about capital-light or with-profits BPA, 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 that you would have? And associated with that, is this 20% reinsurance an annual kind of arrangement? So for example, are you able to say, okay, right, we can adjust that reinsurance rate. 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 was just kind of wondering around the counter to the counter.

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 GBP 20 million strain down from GBP 35 million 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 GBP 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. What we've talked about is obviously just making sure that we get the shareholder double-digit IRRs. That's absolutely key for us. That's absolutely key for us.

So yes, essentially, the key benefit for trustees and clients is that we can deliver superior pricing -- so that's the -- 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 than a 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. 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 neutral 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 yes, 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.

And Farooq, what might help on the hurdle rates that you have to think about the transaction as a transaction between the BPA 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 M&G plc and M&G will achieve its target IRRs, right? So it's very transparent, but it's almost you see the outcome as a transaction, but it's really a 2 step, and that's why different parties can achieve the thresholds that they're targeting.

Cool. I don't think -- I don't see any raise then. So I think this brings the results to an end. Thank you very much for being here with us today.

Thank you.

Thank you.

Hello. I am delighted to share our 2026 half year results, which demonstrate that our strategy is working. M&G is growing, and we're delivering positive outcomes for our clients, customers and shareholders. In the first 6 months, we have achieved record operating profits, attracted strong net inflows and continued to make progress across the group. This reflects M&G's continued shift towards high-quality, capital-light earnings, which now account for 80% of the total.

Operating profit rose 15% year-on-year to a record GBP 435 million, our strongest first half result since listing in 2019. Despite market volatility, group net flows from open business increased to GBP 2.4 billion. Capital generation reached GBP 392 million before new business strain, keeping us firmly on track to meet our 3-year target. Our balance sheet remains strong with a Solvency II ratio of 247%, and we announced an interim dividend of 6.8p per share. In Asset Management, international growth continues to accelerate, reflecting the quality of our investment capabilities. We delivered GBP 2.2 billion of new business across public and private markets while continuing to deepen relationships with clients globally.

Over the last 3 years, international clients have increased by more than 40%, helping external assets to grow to GBP 189 billion today. Importantly, our focus on efficiency is delivering results with the cost-to-income ratio improving to 73% as we progress towards our 70% target. In Life, we're helping more people save, invest and plan for retirement with confidence. Our compelling new product, BPA Plus, has made excellent progress, generating GBP 1.7 billion of deals so far in 2026. In a competitive BPA market, it offers the potential for additional member bonuses on top of guaranteed income.

More financial advisers and their clients are accessing our flagship investment product, PruFund, as we make it available on third-party platforms. Alongside our new fixed-term annuity, this has improved U.K. retail net flows by more than GBP 500 million year-on-year, reflecting the growing reach of our long-term retirement and savings solutions. There is real momentum across M&G, driven by our ambition to become Europe's leading integrated asset manager. We are becoming a more capital-light business, making our earnings more resilient, more sustainable and better positioned for long-term growth.

Thanks to the hard work and commitment of our colleagues, I am confident in the opportunities ahead and our ability to continue delivering for shareholders, clients and customers. Thank you.

Good morning, and welcome to M&G's Full Year 2025 results. I'm Luca Gagliardi, Group Director of Strategy and Investor Relations. And if you don't know me, this is not my real voice. I just chosen the right day to be sick, but I'm going to keep a safe distance between me and all of you today. I'm joined today by Andrea Rossi and Kathryn McLeland, our CEO and CFO. As usual, we'll go through a short presentation, and then we'll open up for questions from the analysts. So with that, thank you very much, Andrea.

I hope my voice holds because I spent too much time with you.

Good morning, and welcome to M&G's 2025 Full Year Results. It is a great pleasure to be here with you today. 12 months ago, we announced new targets and moved to a progressive dividend policy, underscoring our confidence in the outlook for the group. Over the course of last year, that confidence has been matched by solid progress against our strategy.

Our investment for growth has paid off with excellent momentum on sales and record net inflows across both asset management and life annuities. Now we are translating this success into profitable growth. which will be our main focus in 2026. Today, I will cover our operational progress and explain what gives me confidence in our growth trajectory. Kathryn will then take you through our financial results before I conclude by recapping our investment case.

So let's start by reviewing the main highlights from last year. We are committed to 3 strategic priorities: financial strength, simplification and growth. Of this, growth is where we made the most significant progress in 2025. The GBP 7 billion net inflows from external clients in asset management is an outstanding result. It represents nearly 4.5% of opening assets, a remarkable achievement as we won business in high-quality and high-margin propositions.

M&G has also become more international as we welcomed Dai-ichi Life as our strategic partner and largest shareholder. Our work together is off to a great start and has already generated GBP 400 million of net inflows in 2025. Momentum in our Life business was also good. We scaled our presence in the BPA market, achieving sales of GBP 1.5 billion and returned PruFund to consistent net inflows in the second half of the year. And finally, we moved all with profits new business to a fee-based model, accelerating our shift to capital-light growth, which we will cover later.

I am in no doubt that our synergistic business model continues to be our main competitive advantage. With the support of our life business, we have built a first-class asset manager which delivers superior investment performance and which is scaling through external clients. In 2025, assets under management grew to GBP 345 billion of which GBP 81 billion is in private markets, and we won high-value external business.

Third-party clients now account for over half of total assets. testament to the quality of our proposition. We also continue to expand internationally and to improve our profitability with more to come in 2026. At the same time, we are growing again in life with PruFund net inflows over GBP 400 million in the second half of the year and good BPA volumes, doubling our market share. We also expanded our proposition and distribution channels, launching a retail fixed term annuity solution and are with profits BPA here in the U.K.

Let's now take a closer look at our asset management results. In the second half, net inflows from external clients accelerated further. We had continued success in wholesale and internationally, but the most notable change was the GBP 1.4 billion of net inflows from U.K. institutional clients. Headwinds from U.K. DB pension schemes have reduced since 2023, with more clients considering run-on options. And while we remain cautious about the long-term prospects for this segment, we don't expect it to be a material drag going forward.

With our U.K. business in a stronger position and continued momentum abroad, we will deliver sustained net inflows from external clients. Our continued international expansion is a real success story for M&G. Over the last 6 years, we have nearly doubled our assets outside the U.K. to GBP 107 billion. This equates to a consistent double-digit growth rate. With nearly 60% of external assets from international clients, we are becoming a leader in European and Asian asset management.

And our partnership with Dai-ichi Life will further support this progress. Partnering with our clients remain key to our success. On this slide, you can see some of the partners that are powering our international growth. When I joined 3 years ago, we had around 800 institutional clients globally. Now this number has grown to over 1,000. There are some of the most sophisticated allocators in the world who have chosen M&G for our compelling offering and commitment to investment excellence.

The strong relationship between our asset management and life business is a crucial advantage to win in this space. We understand the needs of these institutions and can deploy capital at scale. We think like them, coinvest with them and develop innovative solutions for them. It is exactly for these reasons that Daiichi, now M&G's largest shareholder, has chosen us as a long-term strategic partner and preferred asset manager in Europe.

But they are not the only ones who value our investment expertise. Last year, we completed large transactions with CVC and PGDM while also entering into an agreement with Guotai Haitong for the distribution of our fixed income funds in China and Hong Kong. The quality of the business won in 2025 also makes me confident in our revenue outlook. The GBP 7 billion of net inflows came mainly from private markets and public equity mandates, which are of high quality and high value. The net new revenues from these flows equates to GBP 23 million annually, a fantastic outcome that helped us increase our overall asset management revenue margin by 1 basis point.

Net inflows of GBP 3.9 billion in private assets lifted total assets in this area to GBP 81 billion. We are extremely confident in the quality of our private markets capabilities. thanks to our focus on Europe and Asia and discipline in asset sourcing. With strong client demand in structured credit, and GBP 8.2 billion capital queue and a healthy new business pipeline, we are well positioned for the year ahead.

Within public markets, our equities team delivered GBP 5.6 billion of net inflows, a stellar achievement. Their investment performance is second to none in Europe with a scaled offering which is diversified across geographies and strategies. Active asset management is still very much in demand, and our public equities team have again delivered a superb performance with investment returns exceeding client expectations.

Let's zoom in on our public equities business. We have excellent research capabilities. a rigorous investment process and seeding from our life business. Through this, we have built a diversified proposition with a remarkable performance. 90% of our assets ranked in the top 2 quartiles on a 5-year basis. Demand for sustainable strategies remains strong. And as investors increase their allocations to Europe and Asia, our high alpha solutions are well aligned to our client needs.

As you can see on the right-hand side of this slide, over the last 5 years, this team has delivered nearly GBP 12 billion of cumulative net inflows with a positive contribution in every single year, despite extremely volatile market conditions.

Let's now turn to life. Starting with the retail market. PruFund is our flagship proposition here, and I'm pleased to report that it has been back in positive territory since last June with 7 consecutive months of net inflows totaling just over GBP 400 million. This trend is encouraging, and we expect to see continued progress as PruFund's smoothing mechanism remain very much in demand, given the volatile market environment.

But improving PruFund sales is only part of the solution as we build a holistic retirement position around this unique product. In doing so, we continue to expand both client access and our product offering. To expand client access, last year, we integrated PruFund on FNZ technology. We will launch PruFund on the first FNZ platform in Q2 this year.

It is our first step to access the large and growing digital platform markets. From a product perspective, we added retail fixed term annuity solution, which will be followed by a lifetime version later this year. We also signed an agreement with Zurich Group for the distribution of a PruFund-like proposition in the UAE. All this activity will attract more assets to do with profit funds and channel them to our asset manager.

Moving on to the corporate segment. Here, we continue to invest in our BPA capabilities, a market we are targeting annual sales of GBP 3 billion to GBP 4 billion by the end of 2027. In 2025, we completed the build-out of our team, adding resources across origination, proposition and pricing. As a result, we closed 11 deals totaling GBP 1.5 billion, a 65% increase in sales and doubling our market share.

This business was written at attractive return levels, delivering double-digit IRRs above our cost of capital. We have a good pipeline for 2026 and are on track to achieve our 2027 target. Importantly, we can now leverage our with-profits BPA, which we have recently launched. This proposition is very competitive, benefiting from the with-profits fund lower cost of capital and its GBP 7.1 billion surplus.

We executed our first with-profit BPA transaction a few weeks ago, and more will follow, fueling our growth and attracting flows to the group with a meaningful allocation to private markets. From this year, nearly all new business in life will be written by the with-profits fund with a simpler and more transparent profit signature. All with-profit solutions, such as the with-profits BPA, PruFund, fixed term and lifetime retail annuities, will operate on a fee-based model. We expect that these products will grow to at least GBP 50 billion in assets by 2030.

M&G will service this business, providing customer admin and investment services in exchange for fees to both life and asset management. Through this innovation, we are transforming traditional insurance into a capital-light business that generates 2 streams of fee-related earnings with minimal balance sheet risk and shareholder capital requirements. Over time, this will improve the quality of our earnings, making them more transparent and predictable.

From a strong financial position, we will deliver attractive dividends and business growth. This is a focus of our capital framework. Taking into account our business momentum and earnings trajectory, we are declaring a total dividend of 20.5p per share for 2025, a 2% increase year-on-year. To support our profitable growth, we will consider targeted investments to drive further simplification efforts and potential bolt-on acquisitions.

AI will be a key enabler for business growth, and we are focused on increasing AI adoption across M&G with a clear strategy to transform our processes, improve productivity and drive better customer outcomes. Focused capital deployment will be instrumental to deliver on our ambition. And while we remain committed to return any excess capital over time, we are prioritizing disciplined investments that can deliver attractive returns above our cost of capital.

Our commitment to investors is clear. Yields and growth. And our capital allocation in 2025 closely aligned with our stated framework. More than half of operating capital was distributed to shareholders as dividends. This was complemented by simplification and growth investments targeting double-digit IRRs. This includes GBP 90 million for the acquisition of P Capital Partners and GBP 163 million to support Life new business.

Going forward, we will maintain this disciplined capital allocation, underpinning long-term growth and attractive progressive dividends. Now let's turn to our financial targets. Here, our commitment remains unchanged, to be highly capital generative, improve the efficiency of our business and deliver sustainable earnings growth. Over the course of 2025, we have moved forward on our targets, but more work is needed. The GBP 928 million of capital generated before new business strain is a good start to our 3-year ambition.

I'm also pleased by the progress on our transformation program. as we once again beat our cost target by delivering cumulative savings of GBP 250 million, a great result, but progress on the cost-to-income ratio and group profit was marginal. Here, I expect a significant improvement supported by the strong momentum I see across the group.

Over the last 12 months, we have invested for growth. adding distribution and investment capabilities. Now we will realize the benefits of these investments. We remain firmly committed to delivering profit growth of at least 5% on average between 2025 and 2027. Therefore, you should expect a meaningful acceleration in our operating profit for 2026 and beyond.

Profitability will improve in asset management. where we will achieve a cost-to-income ratio of 70% by 2027. We are confident we will meet this target, thanks to strong top line growth and cost control that Kathryn will cover in more detail. By generating capital, being disciplined on costs and growing profits we have set in motion a positive cycle. This means we can invest in the business, secure its long-term success and deliver attractive returns.

With that, I will hand over to Kathryn, who will take you through the financial results.

Thanks. Good morning, everyone. I'll now take you through our results, which highlights steady momentum across the group and disciplined execution. Covering first the key pillars. We delivered GBP 7.8 billion of net flows from open business, reflecting the strength of our asset management performance, the progress we continue to make on our international expansion and improved sales in life.

Group adjusted operating profit of GBP 838 million highlights the resilience and balance of our business model. In Asset Management, fee-related earnings increased by 12% year-on-year, while in Life, higher contributions from PruFund and traditional with profits more than offset lower earnings in annuities leading to a 2% increase in profits.

The Corporate Center result deteriorated by GBP 8 million, impacted by lower investment income. Operating capital generation of GBP 765 million reflected the higher strain from our strong BPA volumes. And excluding new business strain, capital generation was GBP 928 million, in line with our GBP 2.7 billion target.

Supported by this strong operating performance, the Solvency II ratio reached 242%. So let's now turn to our flows. Closing AUMA stood at GBP 376 billion, and this reflected the GBP 7.8 billion of net inflows from open business, which improved by nearly GBP 10 billion year-on-year. favorable market movements and the acquisition of P Capital Partners.

You've just heard from Andrea about our very pleasing asset management flows, with our institutional franchise recording net inflows of GBP 4 billion supported by the continued international expansion and easing headwinds here in the U.K. The wholesale franchise also contributed meaningfully, delivering GBP 3 billion of net inflows underpinned by excellent investment performance. And importantly, the continued growth in our international AUM further improves our diversification and resilience.

Life open business also made a positive contribution of GBP 0.8 billion, and this reflects the strong growth in the BPA market, where we recorded the first net inflows since 2016 when the business was closed. And we also saw improved momentum in PruFund with gross inflows in the second half up nearly 28% versus the first half at GBP 3.6 billion and with GBP 400 million of net inflows.

Moving on now to profits. At GBP 838 million, operating profit was stable year-on-year with the key features being, first, higher revenues and improving operating leverage in asset management, continuing to support a gradual reduction in the cost income ratio. Second, an increase of 2% in life profits to GBP 764 million with a stronger contribution from both PruFund and traditional with-profits, offsetting a GBP 25 million reduction in annuities due to lower returns on excess assets, which we previously flagged.

And finally, the Corporate Center outcome was impacted by lower investment income, which was down by GBP 17 million, more than offsetting a reduction in debt interest costs of GBP 12 million following our 2024 deleveraging actions.

One important feature of our results is the quality of our earnings. And today, 73% of operating profit comes from capital-light businesses, and this proportion will continue to rise over time. You'll hear from Andrea shortly on how we also expect to grow the proportion of fee-related earnings across the group.

And finally, it's important to note that in 2025, we delivered after-tax profit of GBP 314 million compared to GBP 347 million loss in 2024. So let's now look at each of our businesses, starting with Asset Management.

Our Asset Management business delivered a 12% or GBP 27 million growth in fee-related earnings driven by higher average assets and resilient margins. Looking ahead, the GBP 23 million of net new revenues delivered last year will provide a solid underpin to top line growth. At GBP 345 billion, assets under management ended the year up by GBP 30 billion supported by strong net inflows and favorable markets.

Our average fee margin remained resilient at 33 basis points as we continue to prioritize high-value solutions for our clients. Higher average assets and stable margins resulted in revenue growth of 6%. On costs, we continue to exercise discipline while making targeted investments to support our long-term growth. And most of the 4% increase in cost was driven by a broader perimeter of our asset management operations. And in fact, GBP 28 million of the GBP 31 million increase relate to the acquisitions of BauMont and PCP, together with the reclassification of our direct book into life, which we had previously highlighted.

And PCP and BauMont bring new capabilities to the group, further improving the quality of our earnings. Our cost transformation program facilitated these and other targeted investments, strengthened our operational efficiency and helped us lower the cost income ratio to 75%.

The operating profit was down GBP 9 million year-on-year due to lower performance fees and investment income. Before moving on to Life, I want to address our cost-income ratio target. Over the past 3 years, we have reshaped the cost base, demonstrating that we can continue to invest for growth while improving our fee-related earnings. And that gives us confidence that further progress is achievable as revenue scale.

We are absolutely committed to our 70% cost-income ratio target and achieving this does not depend on a single initiative or assumption, but on continued execution across a number of levers that we are already acting on. Our focus is firmly on delivery and on demonstrating steady, repeatable improvements over time.

Let us now turn to Life and starting with PruFund. Here, operating profit increased by 17% to GBP 265 million, reinforcing its role as a growth engine within the group, supported by a higher opening CSM and slightly higher amortization rates. Profits from our traditional with-profits business of GBP 258 million were up 16% year-on-year, reflecting the same positive dynamics. And we're encouraged by this performance, particularly as it was achieved against the backdrop of lower expected returns and risk-free rates, which we previously highlighted.

Both PruFund and traditional with-profits continue to provide resilient earnings for the group, underpinning the sustainability of our profits.

Let's now turn to shareholder annuities. Our annuities profits were down 8% year-on-year to GBP 283 million, which reflected the guidance we gave last March, specifically the combination of a smaller pool of surplus assets and lower expected returns of 5.2%, down from 5.6%. These headwinds were partly offset by a higher CSM release supported by the large longevity benefit we recognized in 2024 and a modest increase in the amortization rate.

Turning to other life. The loss of GBP 42 million was primarily driven by a GBP 26 million provision in relation to our Polish business, which we do not expect to repeat. Before moving on to capital generation, I would highlight the strength of our CSM, the details of which you can find in the appendix.

Total CSM ended the year at GBP 6.6 billion, representing a meaningful store of future value and benefiting from GBP 144 million of new business generated from PruFund and annuities. I'll now cover capital generation, which supports the strong outcomes we continue to deliver for our shareholders.

Our operating capital generation, excluding new business strain, was GBP 928 million, and this represents a solid start towards our cumulative GBP 2.7 billion target by 2027. The underlying result was GBP 529 million, GBP 115 million lower than last year, which largely reflects capital deployment to support the strong growth in our BPA volumes.

Asset Management contributed GBP 14 million more year-on-year, supported by the stronger fee-related earnings, together with a small SCR reduction, driven primarily by lower market risk requirements. In Life, both PruFund and traditional with-profits benefited from a higher opening PBSD which partly offset the anticipated impact of lower expected returns. And as noted earlier, the annuities contribution declined due to the GBP 134 million we deployed to support the GBP 1.5 billion of new BPAs and due to the lower return on surplus assets in the in-force book.

The Corporate Center benefited from a GBP 12 million SCR reduction, largely driven by reduced treasury lending activities. Management actions totaled GBP 236 million, just above our recurring long-term target of GBP 100 million to GBP 200 million per annum. And so thanks to our strong operating performance, the Solvency II ratio closed the year at 242% and our surplus increased to GBP 5 billion.

Owned funds remained stable at GBP 8.5 billion, including GBP 4.6 billion attributable to the with-profits PBSD. The SCR improved largely due to management actions, including model and data enhancements and a higher level of deferred tax loss absorbency capital reflecting more favorable stress outcomes.

And after refining our estimates, we expect only a modest impact of less than 3% on our solvency ratio from the government's proposed changes to ground rents. And this reflects the benefit of our prudent reserving approach. You can find more details on this in the appendix and also in our annual report.

I'm very pleased with the continued strength of our balance sheet, underpinned by disciplined risk management in what remains a volatile and uncertain geopolitical and macroeconomic environment. And I'll briefly cover the successful delivery of our cost transformation program.

And this slide shows the tangible progress we've made in delivering strategic operational efficiencies while continuing to invest for growth. And since 2022, we have delivered GBP 250 million of cost capacity, exceeding our upgraded target of GBP 230 million. And you can see here on this slide an update on the types of savings together with the targeted growth investments they have enabled while holding the cost base stable over time and materially improving the scalability of the group.

As we look ahead, we see significant opportunities to create more capacity led by a new Chief Transformation Officer. For example, with further refinement of our organizational structure, including greater integration of our recent acquisitions, more functional centralization and optimizing our partnerships with outsourced suppliers.

We are also continuing to refine our location strategy while driving AI adoption. And just a few words on our AI strategy, which is focused on 3 primary objectives: firstly, enhancing our engagement with our clients; secondly, improving our productivity; and thirdly, transforming our end-to-end processes.

By increasing AI adoption, we're giving our clients more time to focus on what really matters to our clients. Examples of where we see AI driving a step change in efficiency include across our research teams, our financial advisers and the staff in our contact centers. Thanks to AI tooling, almost 40% of our code is now generated by AI, meaningfully increasing the productivity of our engineering team.

I want to reiterate that we are firmly focused on maintaining a disciplined approach to operating efficiency and on achieving a 70% cost-income ratio target for the asset manager.

Looking ahead now to 2026. While, of course, we remain mindful of the volatile external environment, our focus for 2026 remains consistent, delivering strong outcomes for our clients; executing our plans with discipline; and sustaining the growth momentum we have established.

Asset management is set to deliver a meaningful improvement in its operating leverage, underpinned by a robust GBP 30 billion increase in opening AUMA, resilient fee margins and our unwavering commitment to cost efficiency. These factors combine to give us confidence in achieving a step change in our cost-income ratio target and in unlocking further profitability.

Life is similarly well positioned with a substantial 9% increase in our opening CSM balance, which will drive improved operating profits more than offsetting lower expected investment returns. These strong foundations taken together with disciplined cost management means we're confident of achieving strong profit growth in 2026 and an average growth over '25 to '27 of at least 5%.

And so finally, on capital generation. Here, we expect to deliver an improving underlying result, new business strain of up to GBP 150 million and management actions returning to our usual long-term range of GBP 100 million to GBP 200 million per year. This means we are well on track to deliver on our GBP 2.7 billion cumulative target by 2027 as we support new business growth, while maintaining a strong balance sheet. These strong tailwinds, supported by the strategic building blocks we have put in place give us the confidence that we are well positioned to deliver sustainable values to our shareholders.

With that, I'll now hand back to Andrea. Thank you.

Thank you, Kathryn. So before concluding, I want to summarize the key elements of M&G's investment case. Today, we are a growing and diversified savings and investment business. We leverage our unique with-profits fund to gather insurance assets in a capital-light way. And we grow in asset management by externalizing funds that we seed with internal capital.

This combination gives us scale and resilience. We operate in markets supported by strong client demand and are well placed to capitalize on this growth, thanks to the strength of our franchises. The way they work together, our synergistic business model sits at the core of our right to win. And the outcome is strong financial returns.

Life underpins our attractive dividend. And we are driving growth in fee-related earnings across asset management and with profits. By combining an attractive yield, growth and improving quality of earnings, we will deliver consistent returns to our shareholders. And we will continue to do so as we unlock opportunities across several attractive markets.

We have an GBP 81 billion private markets business and have raised GBP 107 billion from international clients. In both these areas, we have grown at double-digit rates. In the U.K. PruFund has now reached GBP 70 billion, and we continue to scale in the BPA market, with sales increasing by 65% year-on-year. This scale matters as it drives relevance with our clients and improve our operating leverage.

Our businesses work together and will grow together. Over 80% of our life assets are managed in-house with around 30% of new business being allocated to private markets. And we attract this new business deploying surplus capital from the with-profits fund. We also have the partnership with Dai-ichi Life, which supports our continued expansion in Europe and Asia. This integrated model gives us greater control, stronger economics and a more resilient earnings profile.

Since listing in 2019, M&G has delivered annual shareholder returns of over 15%, a remarkable achievement with GBP 4.2 billion returned to investors through dividends buybacks and deleveraging. We have achieved a double-digit returns through a mix of yields, growth and quality.

Looking ahead, we will extend this track record. The stable and predictable contribution from life underpins our attractive yield. Asset management and fee related with profits will drive the group's growth. And the quality of our profit mix will improve as we shift to a greater share of fee-related earnings.

So our message to investors is simple. We are operating in growing markets. We have the right business model to win and we will deliver attractive returns. To conclude, 2025 was a strong year for M&G as we laid the foundations for profitable growth. New business momentum was fantastic, and we continued to expand internationally.

We are now focused on translating this growth into higher operating profits in 2026. And as we deliver profitable growth, we also shift life new business to an innovative fee-based model. Finally, we will achieve our capital generation target and remain disciplined as we invest in the business.

We have started 2026 with good momentum. We are in the right markets, investment in the right asset classes with industry-leading investment performance. I am energized by our strong performance and want to thank all our colleagues for their hard work. And I am confident that we will continue to deliver, generating value for our clients and shareholders.

Thank you. It's Q&A, right?

So before we start with the question, and Larissa and Michael at first. I've already seen your hands. I think Larissa beat Michael by about half a second. [Operator Instructions].

Larissa Deventer from Barclays. Two questions, please, from my side. The first one, you mentioned that a very strong capital position that you have for growth. Kathryn also mentioned that you would like to your earnings on capital light businesses. Can you give us a little more color on which areas you would like to grow and if there are any areas within you believe would benefit from enhancements.

The second question appreciate that there's a sensitive topic but to give any more color with the directional thinking. And could you please help us understand what is included in your provision and what remains?

Thank you, So probably, Andrew, do you want to start with kind of where are we focusing on our growth efforts and if there's any area where you -- if I read the question, whether we think we should invest a little bit more heavily and then maybe, Kathryn, if you want to go on the ground rent side of things.

Yes. Obviously, you've seen in 2025, we have been investing for growth. We both have invested in the asset management business, in distribution and investment capabilities and hence, also, I would say, the good momentum that we saw in terms of net new money and net new revenue.

Same thing, of course, in the life business where we invested in order to support that growth, both on the corporate side because we strengthen our team, proposition, pricing and origination for writing BPAs but also to support our PruFund. Obviously, we are going to put PruFund on third-party platforms in the second quarter of this year. given that we have integrated with FNZ technology, very, very pleased with that.

But more importantly, we also have supported PruFund in terms of marketing. Let's not forget that PruFund during the Liberation Day month in April performed as it was supposed to perform. We smoothed the volatility. Clients, unfortunately, they took out their money and then they came back, of course, afterwards. They should just have trusted us more.

So clearly, we want to continue to make sure that we support all the capital light business, in particular, on the asset management side. But I mean I remember when I arrived 3 years ago, our investment performance was still very, very strong. And I said, listen, the way we're going to grow the Asset Management business is by investing in distribution capabilities. That's what we have done. And that's why you see the stellar net new money that we have delivered.

I mean delivering 4.5% of external net new money over opening assets under management, I've been in the industry for decades, that's a stellar achievement. And that's not money market, that's not passive. This is true active asset management. I mean I look at peers, this is top decile, if not top percent up. So we will continue to support, I would say, the capital light businesses moving forward. But I would say most of the investment has been done already in 2025.

And I think just, obviously, there's going to be some more spend as we continue on the simplification program as well. Just to add that as well as these capabilities that Andrea talked about. And so Larissa, on ground rents, obviously, the announcement of the government came out at the end of January, and you saw the RNS that we put out on the morning of it. .

Now clearly, there's a lot that needs to happen as it goes through committee stages and through the whole legislative process. And that's still quite uncertain and will take over the next couple of quarters. I think the most important thing is you see an update today is on -- it's in the appendix, and it gives an update of all the numbers. which are very much aligned to what you saw at the end of January.

So this is also in the results and you can get a bit more detail. But you can see that I mentioned in my script that the solvency ratio is up to a 3% impact on the ratio you see the day 1 IFRS impact and the own funds impact, which obviously impacts leverage. And so we guided also in the RNS that the AOP impact is very modest, GBP 10 million to GBP 15 million in 2028.

And Larissa, just on the provision side, these numbers are net of the provision. So after you take into account the provision that was already in the balance sheet, this is the residual impact. And I don't know in your question on capabilities, maybe Andrea, do you want to talk from an asset class perspective after BauMont, PCP, do we feel that we are in the right places?

Well, I mean, we have -- obviously, when we're looking at investment capabilities, and I said this already in previous full year results, we want to expand our private asset franchise. We see significant demand, of course, in Europe, in private assets. And by doing both BauMont and PCP, we strengthened already a very strong franchise, both on the private credit side, where we have GBP 27 billion franchise, but also on the real estate side, where we have a GBP 35 billion franchise. So we think we're well placed there.

But I think there's going to be another asset class where there's going to be a lot of demand in Europe in the coming years. Given also what is happening, I would say, in the Middle East, I think Europe is going to have to rely a bit less maybe on fossil fuel and accelerate on renewable energy. And therefore, there's going to be more infrastructure projects into this sense. And so there will be more interest here.

So if we had to look at additional capabilities, probably that's where we would look to expand. But overall, you look at our private assets franchise, it's doing extremely well, GBP 4 billion -- GBP 3.9 billion of net inflows in 2025. A lot of that was private credit and structured credit. Private credit still continues to be a very strong asset class in Europe, where there's strong demand. I'm sure we're going to talk about private credit in general, but Europe still remains very much in demand in private credit.

So Michael and then David, Dom and Tom.

Michael Huttner from Berenberg. Just 2 questions. You said so I wondered if you -- I'm particularly interested in PruFund. If you could say the new platform, what that could bring. But also on the growth, if I'm right, new business last year it was 160 and you're saying 150, so that doesn't sound like more growth. But I'm asking this.

And then the other question I was interested in is you're leveraging your with-profit surplus presumably that has a cost of capital, but I'd be interested to understand what the benefit is. Is there a number here, you could say, well, we're paying them 5% or 2% or nothing? Just to get a feel of that.

Okay. So maybe, Andrew, do you want to take PruFund and Kathryn more on the new business stream for annuities and with profit funds side.

So PruFund, you know I'm passionate about PruFund I'm very pleased that it has become a GBP 70 billion franchise here in the U.K. We had positive net inflows in the last 7 months in 2025. And you should continue to see positive net inflows in 2026. I mean the product is delivering what it should be.

We see demand here in the U.K. on it. And more importantly, as I anticipated before, we are going to put it on a third-party platform in Q2. And that's just going to be the first one. So by having done the integration with FNZ technology, we are covering roughly 40% of the GBP 700 billion digital platform market size here in the U.K. So we will put it on more platforms before the end of the year, and that will, of course, increase flows coming in.

So very, very pleased with what we do in the U.K. Let's not forget also that we have international as well. And you saw that we finally signed an agreement with Zurich Group in the UAE. So this is sort of a blueprint where we are the default option for on the DC scheme there, where Zurich is managing it. And that will also bring flows and potentially also other clients.

So we see PruFund being one of our main growth engine going forward. And let's not forget, it's not only about access, but it's also about expanding the product offering. We launched a fixed term annuity in 2025, and we will launch a lifetime annuity this year as well. So more to come from PruFund. You should expect positive net inflows in PruFund moving forward.

And so covering capital and how we see cost of capital and hurdle rates for the with-profit funds. So yes, it was GBP 163 million of strain across all products last year, GBP 134 million for BPAs. The key thing for us, as you know, is always looking at hitting our cost of capital.

So double-digit IRRs is what really matters for us. And I think as you also all know, we've not reinsured longevity on these deals, and we look at everything on a case-by-case basis. Now the exciting opportunities for us that you've heard us talk about today with the GBP 7.1 billion surplus is that we can essentially grow life with the diversification of these new products that we are talking about today.

And this is also in the interest of the with-profit fund. We have a very strict with-profit committee. We know all the requirements and rules that they need to follow. And it is a different cost of capital, but they absolutely have to do profitable, good quality business for current and future policyholders. So it is very exciting for us to be able to do BPAs and these other products used in with-profit fund capital. We have the 2 fee streams that you see coming into the life and into the asset manager, which will build over time.

So it is really exciting for us to have the with-profit fund to be able to be the main insurance writer of risk going forward. And so yes, they have slightly different hurdle rates. But for the shareholder balance sheet, we remain very focused on double digit.

And Michael, clearly, while the capital strain that we've indicated is up 250 from a shareholder balance sheet, the idea is that the more you do with profit, the more you can leverage up the volumes with -- while keeping that same level of capital.

And to be clear, we are committed to write GBP 3 billion to GBP 4 billion of BPA by 2027. We have not changed our targets. If you remember, we presented. So that's -- that gives you some sort of growth trajectory.

Then we said David, Tom, Andrew, Dom and Nasib, just in order of who has the hand -- or maybe just I looked the wrong way, but we'll get there. [Operator Instructions].

from RBC. The first one on the GBP 27 billion structure in private credit AUM, Can you tell what proportion is open to retail investors? And are you expecting taking any actions to NAV of those portfolios?

Second, on the business CSL profit. It was only GBP 23 million from GBP 1.5 billion of annuities to the margins 2%. How should we think about any context of all net profit margin? And are your return on capital and will your return on capital for the deals? As a follow-up, there is -- what is M&G doing with reinsuring the risk? If all deals were reinsured, would this have a meaningful impact on and therefore the leverage?

And just lastly, on the market capital deployment. Can you just tell us how will we deploy it between private equity, structured credit and infrastructure? And more broadly, what are the characteristics of fund raising and employment environment in 2026 so far?

Perfect. So we've got 4 in there. Let's split them between 2 in asset management and 2 in life. So asset management was around the retail exposure in our private credit franchise and the capital queue while in life, we've got the new business, CSM margin and the use of reinsurance.

So can I use -- I mean, I can -- maybe just on your first question, and I want you to talk -- Joseph, do you want to take both? The first one is I guess.

I hope you can hear me. So exposure we are having credit. We have about less than GBP 1 billion in LTIF, which is the European long-term investment fund. It's a private credit strategy. The regulation in Europe is extremely strict. No leverage is allowed which is extremely different from what you can read in the press on what's going on in the U.S.

So indeed, we are probably on a much safer side in Europe than what's happening in the U.S. I think that's a massive difference. And we've been extremely cautious when it comes to private credit. You didn't ask the question, but I want also to add that when you look at what we read in the press in private credit, default rates, some expected for the rate to increase. our default rate has been significantly below the average of the market, which is already at 2%.

We are way below that level. We are extremely cautious across asset classes, the quality of research, we know how to deal with those deals. We are extremely selective and we don't leverage. And we have high quality of selection ultimately that help us have a very low, let's say, level of default compared to the industry.

And again, I invite you to always make a difference between Europe and U.S. in that private credit segment. So I'm sorry, I forgot the second question.

In case you haven't met him, he is Joseph Pinto, the CEO of our Asset Management business. And the second question was around the capital queue of GBP 2 billion, high growth since half year, how do we think about deployment and in what asset classes is a focused.

So it has grown pretty much everywhere in private credit, including strategic credit. In the real estate, I just want go out to real estate because this is an asset class that was probably on the negative side across the industry 2 years ago. We've been rebounding extremely well on a lot of business in that space with our flagship fund, the European real estate fund, but also with Asian strategies in Asian clients, mandates and also in the U.K.

Very pleased to see how international clients are now interested more and more into U.K. real estate. That has been the second one where we've seen effectively a bigger and bigger capital queue. Also, I remind you that at the end of June, we will not integrating the capital queue of PCP and BauMont, that has brought also GBP 1 billion of capital into it. We are extremely disciplined in deploying that money. We are very well organized into it.

Each team has -- each investment team has a specific team to work on deployment but we are cautious on how we want to deploy it because at the end of the day, clients matter first. We want to deliver the best performance. That's why we do it very diligently in terms of deployment.

Thanks a lot, Joseph. And the other point on the LTIP and retail exposure, what we have less than GBP 1 billion of assets there, a large proportion comes from our internal client. Actually, the majority which is a very, very stable investor.

87%.

87%. So I think while it is a vehicle that is open also to retail investors, nearly 90% is in the end of our internal clients. So it gives great stability to that vehicle as well on top of all the good things that Joseph mentioned. Kathryn, do you want to take the...

Just a couple of comments around last year's CSO margin, which you quoted, which you can see in today's numbers. There are probably 2 comments I'd make around the level. First of all, as we said, we're delighted to have done GBP 1.5 billion and a really pleasing end to last year. .

We have invested meaningfully to get that platform reopen, and we've got all the capabilities to compete. We've got a lot of conversations happening at the moment. So obviously, as we scale, we become more profitable. So I think that's -- and I called out the cost, I think, in one of the slides around how the whole purpose of this simplification program is to invest and supporting that BPA business is one of them.

And secondly, we haven't reinsured longevity. That's your second question. That obviously means we also have a higher risk margin, which clearly will flow into profits over time. but it will also affect the actual CSO margin that we deliver. So there is a real meaningful element coming to from our decision.

And obviously, we're lucky on longevity that we can be very selective. We can be very disciplined. We've got capital, we've got a very strong -- also using the with-profit balance sheet in the future. So we have deployed it in the past as a management action, and we'll be very thoughtful and it's likely that we've got the options around longevity reinsurance.

And it could be one of those management actions that we use to deliver the GBP 100 million to GBP 200 million to support operating capital generation. And so in terms of the impact of longevity, obviously, the relationship between the shareholder and the profit fund changes with these new fee-related products. Again, how we use that balance sheet, the respective balance sheets will determine on a case-by-case basis. And we have always, as we said, got the flexibility of longevity.

Now I don't think of any impact -- meaningful impact on own funds or on leverage, which you've seen our leverage ratio today and the progress we've made over the last couple of years. So it's more a question of delivering the strong IRRs and importantly, now improving our profitability. We've given clear guidance around 2026 and building over time these fee-related earnings.

Perfect. I think, Dom, you were next, and then Tom or did I say Dom and Tom. First Tom?

So as usual 3 questions, if that's all right. Thank you for the color on the private asset side. I guess just more broadly, it's been an interesting sort of 3 months in the market. What is the mood amongst capital allocators? What are your conversations like? And more broadly, do you think you can deliver the stellar level of flows you saw in '25 again in '26?

Second sort of related question. Just on the asset management revenue margins, Luca, you seem to have given me your cold already. On the revenue margins them going up. Clearly, the mix is in your favor coming into next year. How much can revenue margins go up in '26 in asset management?

And then the third, this is a technical point. I think the CSM amortization rate improved in all 3 of your major life segments. Can you just walk us through why the organization rates increased? Is that assumption change? Do you see different customer behaviors, anything going on?

Okay. So I'll take the first 2. So capital allocator and what's the mood of our clients, that's what you're asking. Obviously, we've only been 10 days into the Middle East crisis. But overall, if you look at the beginning of the year, the strong momentum we had in 2025, we continue with strong momentum in 2026.

Let's not forget, strong capital queue that Joseph talked about. More importantly, Dai-ichi Life continues to be a very strong partner with us. We did GBP 400 million in 2025, and we're continuing strong momentum with them as well. And then I think it's really a question about institutions are looking to diversify a bit out of the U.S. And therefore, Europe and Asia is where they're looking at.

And obviously, we are both strong on the public side. I showed the amazing numbers on equities. We actually see mandates, institutional mandates on equities in where we are very, very strong. So European, Asian, emerging markets, et cetera. And then, of course, on the private asset side, Joseph said, real estate is very much in demand again, but private credits, and this is an important point, continues to be attractive in Europe, and we see appetite to invest in private credit in Europe.

This is not the situation in the U.S. And let me be very clear here because I get this question very often. I got it also this morning at Bloomberg, We are -- it's a very, very different market in Europe versus the U.S. U.S. has much larger market, much more in the hands of capital markets, less so banks therefore, much more mature, more competitive, overcrowded, more exposure to software.

Europe is in a very different place. And the point -- the key point here is we've been in this market over 25 years. We have a GBP 27 billion private credit franchise. It's not that we started 5 years ago. So we know how to underwrite. It's extremely vigilant, strong guidance, strong risk management very low default rates. So we see strong momentum here and a lot of clients want to invest alongside ourselves.

Let's not forget we have Prudential Assurance Company, our own balance sheet, very often investing in our strategy. Now we also have another balance sheet, the GBP 390 billion Dai-ichi Life balance sheet. And of course, big institutions want to be together with those 2 balance sheets.

So we continue to see strong momentum for the first half of the year, but obviously, it's only been 10 days into the crisis and I mean, you've all seen the volatility. I mean no one can predict is it going to be a week, it's going to be 2 months, this can all have different consequences.

What I can tell you is we have a strong diversified business model. I mean, obviously, the life business, as I said before, providing strong underpin for the dividends. And of course, the with profit that is growing asset management, all this is capital light and well diversified. So I'm relatively confident in the future.

And 30 seconds on the asset management fee margins.

That's a very simple one. I mean I wish every year, we had margins going up like that. You correctly said, of course, it can be mixed. But the reality is things about food pressures out there, most peers, it goes down like this. I think you should -- for sort of guidance, you should see it more like resilience. I mean I don't expect it going up. I mean that will be -- but already at 33 bps, I think it's a very good number.

And on the...

And so on amortization rates, I think they were up by 20 and 30 basis points. So very modest. We've not guided to anything changing in 2026. We gave some other guidance which is about opening CSM. There were actually -- there weren't any methodology changes. It was just more at the book.

There has been some changes to what we're using for expected returns. I remember you asked about the shape of the curve in 1 year and 10 years. So we've made a few refinements to that, but that's also reflected in the guidance we've given today.

We'll do Tom and then we'll come across.

Thomas Bateman from Mediobanca. profits from the with-profit fees. And I think you said there was GBP 50 billion that you're targeting in assets there. What is the fee margin that you're expecting on that GBP 50 billion? And it really would be great if you could give cost of equity for the with profits? You're saying it's the main risk area going forward. So that is important.

And just a second question, I think you've had another positive tax impact on the capital generation. Can you just explain what's happening there? How likely is that to recur?

Kathryn, all for you.

Okay. Yes, I'll take those. So what you see here is our expectations over the years to 2030 around these new fee-related earnings that we're going to be delivering from this year. And obviously, you still have the bulk of life earnings with the GBP 6.6 billion of CSM, supporting the confidence in our AOP for '26 obviously, with the strong performing asset management also contributing. So these numbers are guidance for you.

We've given a 10 to 15 basis points of profit for these new products. So that's profit and we've given the GBP 50 billion. And that's essentially, if you think about the rough volumes that we're doing on a gross basis of about GBP 6 billion improved fund, GBP 4 billion BPAs maybe by the end of '27, so that's ballpark, we always got our plan to 2030, but that can tell you why that GBP 50 billion number makes sense.

And so it's 10 to 15 basis points on profit plus the fees that the asset manager gets, which we've given a guidance to what we're currently seeing of around 20 basis points. And we said also before 30% to 40% obviously goes into a private market. Now really importantly, you asked about cost of capital, but this is very, very, very little capital.

So the quality of these, it's not just very transparent, very high quality, very recurring, but it is on very limited capital.

And Kathryn, I think the cost of capital was more the cost of capital for the with-profit fund as opposed to the...

Yes. So sorry. I mean obviously, their book and the capital that they take on for these transactions, we've -- in previous discussion, we said, we've not given an exact number. It's not the double-digit shareholder cost of capital that we need to deliver for all of the business that we're writing. .

It is lower. There's no precise number, Clive is here, and he's had a lot of conversations with the with-profit Committee. It's really important that all of these products have got very robust governance and they have to deliver good, profitable business. but it will be at a lower cost of capital.

The way to think about it, which is always I find both fascinating and interesting is that the with profit fund has got 2 objectives: serve clients as well as you can and deliver the greatest value that you can and if you want to deliver great value, you want to bring down your price towards the clients to give them better outcome.

But at the same time, the other objective is that you want to show by forever, and if the with-profit fund is a business, you want to make profits. Otherwise, you're not going to exist in 200 years where the with profit fund is built to exist for another 200 years. So that's why there is a cost of capital. It needs to be a positive number before someone have jokingly said, is it 0? It's definitely not 0. It needs to be a profit, but you take down that profit from the double-digit rates that a publicly listed company like us would require to a rate that is more amenable to your end clients effectively.

And the other question...

The other question was you saw that it was a very similar number to last year, you probably noticed around the loss absorbency of our deferred tax asset. And this obviously came from the statutory losses when rates backed up massively in '22. So we created a number of DTAs. And essentially, what we've seen, and it is -- it's an interesting condition of the balance sheet and profits at year-end '24 and year-end '25, that we've been able to use more of this in the solvency stress due to higher future profits and also some movements in the SER.

We really wouldn't expect anything to repeat of the scale. It will depend a little bit on this time next year, but you should treat these as largely one-offs impacted by that original DTA that we put on back in '22 and '23.

And we do Andrew, Andrew and Nasib.

It's Andrew Crean, Autonomous. A couple of questions. on that sort of GBP 50 billion of with profit going through can you tell us what the counter factor is, i.e. you're with profit fund is 90-10. What rate of shrinkage in profitability would you anticipate over the next 5 years is that goes into a runoff situation? And then secondly, I know it's been asked before, the PruFund opportunity within the platform market with FNZ. Clearly, I think you said in the second quarter, you do you first position.

Can you give us an idea longer term as to how big this opportunity is? How much do you expect PruFund to be able to sell through the platform market when you -- for the in money?

We pass the second question to Clive.

I want my CEO to speak. So Clive, maybe you want to take the second question. Then Kathryn, you take the first, right?

Clive Bolton, CEO of Life business. So what we do is following the trend of clients and their advisers wanting to transact on technology, which people platforms and therefore, we're moving and making it available. I see it as the equivalent of making sure that our brand is in all the supermarkets and probably the platform in this example are the biggest versions of the supermarkets.

I think specifically what that will allow us to do is move further into the affluent market for investors we're very strong on the mass market side. We're actually surprisingly strong in the high net worth wealth preservation market where people enjoy the stable returns. So it will enable us to push more strongly into the -- into that mass affluent market, which is probably the core market for the adviser market. And as I say, at the moment, PruFund remains an advise proposition.

Well, I think you've seen we've got some on the So there'll be a gradual shift. We think into the platform market. I don't have a number for you today on the precise one.

But Clive, you can say, obviously, that market is a GBP 700 billion market with roughly 10% of gross flows a year, so GBP 70 billion. we will cover with FNZ technology roughly 50% of those gross flows. Of course, you need to be on the different platforms, first platform, Clive, and more to come by the end of the year. So I mean it should be accretive for us. There's no doubt about it. But obviously, we cannot give you more guidance than that.

And we are looking to almost all the main platforms. So when we talk about the first one, the first one is very important, not to -- we have some experience of that because of our own IFGL platform is already PruFund enabled from that perspective. And just -- and it's a strength of the PruFund franchise that we distribute to those advisers already, but they go through our own proprietary platform rather than their platform they built their business around. So we think it will be from that basis, a significant uplift in the amount of PruFund.

And covering the direction around the CSM and I guess the impact on profits. So as we've given the guidance around the AOP margin of 10 to 15 basis points for the GBP 50-odd billion to 2030. And clearly, what we have is confidence in hitting the AOP growth target. So whilst we are seeing fees that will contribute to profits, that will build meaningfully over time, we have already got the 6.69% higher CSM, which will grow with interest accretion and expected returns.

There'll be a small element of new business contribution, but that really does underpin a large part, clearly, a majority of our earnings. And our confidence in hitting '26. And obviously, we obviously want to grow CSM and have a strong contribution in '27 which will deliver the 5% on average. It's really important this will take time for these fee-related earnings to build, but we will still deliver meaningful AOP growth. We will still hit our 5% AOP target and over time, you saw the sort of shaded bar. We know what our fee-related earnings are now. They will move up quite meaningfully by 2030 because we have the additional also fees generated into the asset manager as well.

So we're confident clearly that, yes, this will build over time, and we've already got the real stock of 6.6 supporting profits this year and the next few years.

In terms of runoff, I think it's important to underline how slow the runoff is and how valuable this book is for an extremely long period of time. If you take the traditional with-profit book, which has been closed to new business for, I don't know, 10 years, 15 years, a long time. the contribution to profit in 2023 was GBP 263 million, and this year was GBP 258 million. So only GBP 5 million lower. So in percentage terms is what, 2% lower over 2 years.

So it's just that because there's that big expected returns, as you know, PruFund traditional with profit, or the with profit products have got this very strong component from the annual expected return. Well, in annuities, you would only have the interest accretion piece, right? So that's really something that extends the life of the product for a really long period of time.

Finally, Andrew, Nasib, apologies. There always needs to be someone last. so that's going to be you.

It's Andrew Baker, Goldman Sachs. So the first one just on can you just be a bit more explicit on your 2026 BPA expectations and then the mix between traditional with-profit and I guess also your Dai-ichi Life flow expectations in 2026. And just curious, no mention of future plus anywhere today. Any update there?

Second one on ratings migration. So I think the appendix shows 4.5% of ratings migration, which is a little higher I would have thought. And it looks like some of it's related to ground rents that came in '25. And then just is there anything we should be thinking about in '26 related to ratings migration?

And then just a quick one. M&A, we've obviously got on U.K. in the market. Is that something you guys are looking at or have any interest in?

Okay. Should we start with M&A?

Yes, I think why don't you start there and then...

So let's be clear. I mean you've seen we have -- we presented a clear strategy 3 years ago. We're delivering on the strategy. And I think we have a very clear path of what we want to deliver moving forward. So we are very much focused on that.

When I see some of the M&A activities around us, what is it that they're trying to achieve. It's either significant scale. So you're talking GBP 2 trillion, GBP 3 trillion, GBP 4 trillion, passive, active, everything. And then you have another activity, which is alternative asset managers looking for permanent capital, particularly here in the U.K., we've seen 2 transactions.

Well, when I look at that, that is exactly what we are doing already since a long time with a big difference that we have also do with profit funds, which is a competitive advantage. So I think we have a very clear competitive advantage. And given that we're delivering on our strategic drivers, given also that we have come out now with using the with-profit fund in a smarter way, we have a very strong independent future in front of us.

So we are focused on continuing to deliver what you would like, which is growing profitable earnings.

And we are not looking at it U.K.

No, no. And we're not looking at U.K. that we can say, no, no, we have what it takes. Now then on -- maybe on flows. So you asked, first of all, on BPAs. Well, I said it before, we are committed to the GBP 3 billion to GBP 4 billion of BPAs by 2027. We did GBP 1.5 billion in 2025. Of course, now, whether with profit BPA, we can do more. We have a competitive advantage from the cost of capital. But let's not forget also, we also have a diversified offering because we also do what we call the value share BPA.

You remember, we presented this where we are sharing the economics with the scheme sponsor. So we will see more momentum this year. And yes, we will write most with profit BPAs. But of course, there will be also alignment from a shareholder, and we will align ourselves and write some alongside those deals. And then there might be also cases where we would like to take all on our own balance sheet, right, from a return perspective.

So the guidance that we gave you already when we presented, I think it was last year, where we were saying 75% BPA , 25% that sort of remains the guidance you should think.

25% our capital and 75% either value share or with profit capital.

Then on -- you asked about flows on...

Dai-ichi.

On Dai-ichi, exactly. On Daiichi. So I said it before, once again, partnership is going extremely well. Obviously, they decided to be our partner because they went through all the possible partnerships in Europe and said, okay, who is the strongest asset manager. Well, I think our numbers probably said that we are in terms of investment performance and reach.

And then they wanted also to understand more about the BPA market since that's a possibility at a certain stage in Japan as well. So we are really working extremely well with them and not only did we see the GBP 400 million of flows in 2025, but we see continued momentum in 2026 as well. Let's not forget that they had a commitment of $6 billion over 5 years. And we said that it will be good to have $1 billion the first year, first year anniversary is in May. I think we will do more than that number by May with Daiichi. But obviously, we will have to see, there's still a couple of months to go.

But good momentum with Dai-ichi and a very, very strong partnership. Then what was...

Futures plus.

I know, Futures plus. So future plus, by the way, we can say future Plus sort of what we're doing in UAE is a bit of future plastic. Maybe it's not Europe. So remember what I said before here, Future plus continues to be -- so future plus for everyone is proof in Europe, continues to be a very relevant opportunity but you need to have the right distribution partner. And I always said that the right distribution partner for us is probably a strong insurance group. We had done a partnership with a strong insurance group in the UAE. There are others, of course. There are several strong large pan-European ones. That's what we were working on. So it will come. It will come.

And for you, Kathryn.

The question on the annuity book credit quality, yes, you've seen that in the appendix. It's the typical slide we give. And it still remains, obviously, 96% investment-grade, 74% single and above, and we anticipated there'd be a question on this given the external environment at the moment. And so the 4.5% net downgrades was driven by that ground rent asset class.

As you said, there were just 1 or 2 other small impacts as well on the book, but it overall remains very high quality. And I suppose, given I think you said because the announcement was in January, what we had -- what we do and is essentially look at the valuation of that and when we see either a situation changing, perhaps with where the government was in terms of potential imminent announcement coming as we entered 2025, there were some ratings moves. So that's what it was.

Nasib Ahmed from UBS. Firstly, on private assets. More than GBP 80 billion, I think most asset managers out there would want a piece of the pie. Do you think that there's going to be margin pressure as a result of other guys coming in and trying to access more of the private assets on the asset Management side? That's 1 part of it.

And then do you see commoditization of that product as well kind of impacting revenue margins as well? Second question, a technical one for Kathryn. I'm trying to square the OCG growth versus the AOP growth. So if you take the 928, keep it flat. We get to the GBP 2.7 billion target, whereas AOP growth implied for the next 2 years is about 8% to get to the 5%, right? So there's flat on OCG implied by the guidance and 8% on AOP. So what's the difference? Any color on that?

Okay. So private assets and what you're saying is are there any pressure on fees in private assets. Now let's remember where our focus of private assets is. It's mainly Europe. And of course, in real estate, we also have roughly GBP 10 billion in Asia on the real estate side. Our franchises are leading franchises. Let's not forget, GBP 35 billion in real estate, GBP 27 billion in private structured credits and then we have GBP 6 billion in Infra and another GBP 14 billion in impact in private equity. So we have strong franchises there.

But I think the key message here is Europe is still underpenetrated when it comes down to private assets. There is still opportunities in Europe. I said before on private credit, roughly 70% still of loans are with the banks. Banks are retrenching, as you all know here in Europe. So that's an opportunity. not too many players playing in this field, either because Europe is not the United States of Europe. Every country has its own rules and laws.

So you need to have had that track record and knowledge which we have. We've been in 25 years doing private credit and the same is with the other asset classes. So I don't see too much pressure there. Then we have some uniqueness as well. I mean we are -- with the PCP acquisition, we are the leader in the non-sponsored private credit space. We are clear leaders there, and we see significant appetite into that space.

So I don't see any key pressure on margins on the private asset side, given our focus in Europe. And in particular, also on private credit, I really see still significant demand here coming, by the way, from everyone, not only European clients, but also Asian and North American clients as well. So very, very important point.

That was the first question. Second one was on...

Well, maybe in the first one on the whether it is becoming a more commoditized product. Is it fair to say that we are moving also more the higher-margin part of the spectrum, the value add, core plus type.

Yes, You're right, We used to be more core, given also that we had a large internal client that was looking for let's say, less -- that's not called exotic, but less value add. So yes, we're moving more towards that. PCP is a good example. is another one. So no, I think we're in a good place. And we should see thanks also to the proximity and I would say, the life business growing but also having access to Daiichi Life, we should see strong momentum here because remember the slide I showed before, on institutional clients. We had 800 institutional clients 3 years ago.

Now we have 1,000. Now it's not because we're lucky. This is we have invested in distribution people. Joseph and myself were out there seeing big, relevant big asset allocators and they want to invest alongside other big balance sheet. And now we have 2 balance sheets. So no, you should see strong momentum on the private asset side going forward.

And so I think that answer to the technical OCG versus AOP growth, as you average to get to the 5%. I think if you look at underlying capgen where we did guide to it growing over time, there will be a similarity. And clearly, what you've seen is us try to align our approach for both CSM and PBST. So you get a broadly similar approach, but that will be on an underlying basis, and they'll be similar.

And then we've given the reiteration obviously, of the management actions of GBP 100 million to GBP 200 million and obviously, we exceeded that a bit last year. But that, I think, will bring you closer into line. And clearly, it will evolve addressing the question we got today around the CSM contributing to a meaningful proportion of profits whilst we see this really exciting fee earnings growth over time, which will change that equation again.

And importantly, the GBP 2.7 billion, it's a target that we just issued 12 months ago. So we all have our incentives to do as well as we can. It's not a cap.

I've got 2 questions. The first one on margins. So thank you for the color on the fee business margins that you've given so far. I just wondering if you could give us a sense of the margin versus life time value on the basis that you've recent last year and sort of perhaps with the business that you hope to run. I'm trying to dimension the sort of 10 to 15 bps of profit margin on fee-based business versus I think, sort of 100 bps of profit margin on the traditional BPAs, which, of course, comes with a higher business strength. So just trying to sort of square all of that?

And then the second question is on private credit. Just wondering if you are indeed expecting a tick up in the default rates across any of the private asset classes. And if you could help us with quantifying what you're seeing perhaps at the industry level in default rates across Europe versus U.S.? And any color on that would be helpful.

Okay. I mean I can take the first one, and I think I explained before. We are talking 2 very difficult markets between U.S. and Europe. And I know there's a lot of focus on private credit lately. Most of the problems we see are mainly in the U.S. And it's linked to for underwriting, overcrowding, but also the lot is linked to software exposure. We know the U.K. market -- U.S. market is a larger one than Europe. Europe is less mature, smaller, less players. And then it comes down also to the quality of the players. I mean I don't want to speak about peers, but we've been in this business since over 25 years.

We start as a credit house. Let's not forget about that. And then we moved into private credit 25 years ago into private credit. And if you look at our default rates, I think the European loan fund, we have looked, yes, it's less than -- yes, 1% exactly, less than 1%. So that shows the quality of how we are underwriting this. So I'm not overly concerned. And Joe, I mean, I don't -- we have not seen any trend in Europe of more defaults lately. Yes, of course, there are cases where we have seen MFS and others, by the way, we have no exposure to MFS to be very clear.

So once again, it shows how good we are and also saying, I said that number, we turn away 2/3 of the businesses that are offered to us. So I would be -- well, cautious, let's call it cautiously optimistic. It's a good word I always have to use, on Europe, given our focus on Europe. And we have no real exposure to the U.S. So you should not be overly concerned on this.

Of course, I don't know what's going to happen in the Middle East. Maybe it goes on for another 6 months, and we will see, but these are all things that we cannot...

And exposure to software for us...

Yes. Very good. And exposure to software for us is extremely limited. So if you look at our private credit book, it's less than 2% in the asset management business. So very, very, very low. I'm sure you can see some of our peers came out with much, much higher numbers there.

And Kathryn, do you want to...

Yes, just you'll probably get more color as we start to write more of these products. We've obviously -- we talked about the CSM margin and the strain for the BPAs we did last year, and we're really pleased with the start of fixed time annuity and with individual annuities coming. For now, we've grouped all of these products together in that 10 to 15 basis points of profit. And obviously, as volumes grow, we'll give more color to support the products that we're writing, but we're not going to give individual product by product.

But clearly, what we've said very clearly is that we need to meet our cost of capital hurdle rates for shareholder business, the with-profit fund has got a different objective for the business that they write. But look, we see this as very high-quality earnings, very transparent, very repeatable, that will build over time.

Perfect. I think everyone asked the question. So thank you very much. and see you at our half year results. Thank you.

Thank you.

Thank you very much.

[Audio Gap] half year results. Thanks a lot to those joining in the room and those following us online. We are here with Andrea Rossi, our CEO; and Kathryn McLeland, CFO. As usual, we're going to go through a short presentation, briefer than at full year, and then we'll have all the time needed for Q&A.

So without further ado, thank you very much. And over to you, Andrea.

So good morning, and welcome to M&G's half year results. It is a pleasure to be here with you today. In March, we announced a new set of targets and dividend policy for the group aligned to our long-term ambition. Today, Kathryn and I will cover the operational and financial progress we have achieved since then as we position M&G for long-term profitable growth, which is diversified across business units, products and geographies.

I'm pleased to say that we continue to drive positive momentum in both Asset Management and Life and to deliver strong client outcomes. It's been a busy first half, so let's review the main highlights of the year so far.

You notice we have three priorities for the group: Financial strength, simplification and growth, and we are relentlessly focused on execution. We strengthened the balance sheet and reduced our leverage. We simplified our organizational structure and tackled costs. And now we are growing the business. In the first half of the year, we attracted GBP 2.6 billion of net inflows in Asset Management. This is a strong result powered by a market-leading investment performance and the continued success of our European and Asian operations.

Every day, M&G becomes a more international, resilient and diversified business. Today, 58% of our external assets come from international clients, up from just 37% in 2019. While growing in Asset Management, we are also becoming more efficient and more profitable. In H1, Asset Management fee-related earnings increased by 14% year-on-year, reducing the cost-to-income ratio to 75%. This is the third consecutive improvement since launching our transformation program in 2023 when it stood at 79%. And while we have already made significant progress, we know there is more to do.

We will remain disciplined on costs and drive top line growth. Our new strategic partnership with Dai-ichi Life will support this growth by giving us a strong platform to expand in Asia and to attract flows into our private market solutions. In Life, we continue to broaden the distribution of PruFund. Here in the U.K., we have successfully integrated PruFund onto FNZ technology, opening up digital platforms as new potential distribution channels. Tapping into this market of nearly GBP 700 billion will further support PruFund sales next year and beyond.

Finally, we continue to make meaningful progress on the development of our With-Profits BPA solution, which we expect to launch in the first quarter of next year. This will give us a unique proposition and a competitive advantage to win business in an increasingly crowded market.

Delivering on our strategic priorities means we're also making good progress on our targets. First, the GBP 443 million of capital generated in H1 is a good start to our GBP 2.7 billion 3-year ambition, underpinned by an 11% increase in the underlying results. Second, the cost-to-income ratio improved by 2 percentage points year-on-year, and we have achieved nearly 95% of the cost savings targeted by the transformation program. On both these areas, we expect further improvements in H2.

And finally, we continue to drive positive momentum in adjusted profit. The headline result is up 1% year-on-year despite GBP 16 million of unexpected headwinds, which we do not expect to recur. Without this, our growth is already in line with our targets. We expect the growth in profits to accelerate over time as we remain firmly committed to our 5% average annual target. Kathryn will provide more details on this later.

By continuing to generate capital, tackle costs and grow profits, we underpin our new progressive dividend policy and deliver strong outcomes to our shareholders. M&G's integrated, balanced and synergistic business model continues to give me confidence in M&G's future. It remains our competitive advantage to serve clients across their different investment needs. With the support of our Life operations, we have built a first-class asset manager, delivering superior investment performance and consistently winning external business. And thanks to the insurance balance sheet, we continue to see innovative investment solutions, particularly in private markets.

This year, we have seen a renaissance of active asset management with a reviewed focus on Europe. This plays to our strengths and to what we do well. Our strong credentials are what has attracted leading financial institutions of the caliber of Dai-ichi Life to partner with us and invest in M&G shares. Every day, we're making our asset manager stronger, more profitable and more international. And by bringing together Asset Management and Life, public and private assets, we offer clients what they need at each step of their savings journey.

For U.K. retail customers, we're building a holistic retirement proposition with PruFund at its core. And for corporate clients, we continue to strengthen our BPA capabilities and offering.

Let me now tell you why I'm confident about the future of our asset manager. Our investment performance is consistently excellent. The UBS analysis on this page shows that for the third year in a row, we were ranked as a top performing publicly listed asset manager in Europe. Furthermore, at GBP 2.6 billion, net flows are the highest since listing, and we continue to improve the profitability of this business. I am very pleased of how we have turned around our Asset Management operations. Since launching our transformation program, we have remained focused on improving the quality of our cost base. We absorbed inflationary pressures, freed up resources and reinvested them to support our growth agenda, expanding our investment and distribution capabilities. In under 2 years, our cost-to-income ratio has reduced from 79% to 75%, a meaningful improvement in a short period of time. And we are not done yet.

The flow data also shows three positive trends. First, the headwinds in the U.K. Institutional segment are gradually reducing. Defined benefit schemes continue to derisk but the pace at which they do so has slowed, and we are less exposed to these segments than in the past. Secondly, we're achieving strong net flows in wholesale, thanks to the outstanding investment performance we deliver to clients across both equity and public fixed income. And finally, we continue to grow at pace internationally across a number of different countries.

The international growth of M&G is a compelling story. Since 2019, we have consistently grown at double-digit rates. Having invested in and strengthened our distribution teams, our hard work is now paying off. Today, 58% of our third-party assets come from clients based outside the U.K., up from just 37% 5 years ago. We are now a leading international manager with an established footprint in Europe and growing access to attractive Asian markets. And this means that our asset manager is more resilient, thanks to a broader client base and has greater access to more growth opportunities.

On this page, you can see our progress country by country. The Netherlands, Germany and the Nordics are key institutional markets for us. In Italy and Spain, we have outstanding relationships with local banks and wholesale distributors. And in Asia, we have a good footprint that we will build on, also thanks to the partnership with Dai-ichi. We are very pleased with our international expansion so far and the opportunities ahead. This is a top priority for M&G, and we are committed to build on this strong track record.

Our other priority in Asset Management remains private markets. After completing the acquisition of P Capital Partners, our private markets franchise stands at GBP 77 billion with an additional GBP 6.5 billion in the capital queue. These are committed client funds that will start to generate fees as soon as they are deployed. It is a healthy pipeline that gives us confidence in the outlook of this franchise. You can see on this page the breadth of our proposition. We have a strong 20-year track record and all the key components for a holistic private markets offering. With critical mass across asset classes, we continue to broaden our fund range. Given the needs of our insurance balance sheet, we first focused on core strategies, which are on the conservative end of the risk/reward spectrum. We have since launched a number of successful high offer strategies, as you can see on the slide, across all asset verticals and in line with client appetites.

One client that is keen to allocate capital to our high alpha solutions is Dai-ichi Life. In May, we announced a long-term strategic partnership with them, which we expect to be a key driver of Asset Management growth, both in Asia and in private markets. By becoming their preferred asset manager for Europe, we expect to generate at least $6 billion of new business over the next 5 years, of which $3 billion will be allocated to high alpha strategies. We expect the first mandates to be awarded before the end of the year with detailed fund level due diligence already underway.

In July, I spent a week in Tokyo with the Dai-ichi leadership team. I returned energized and optimistic about the prospects of this partnership, which has significantly increased the profile of M&G in Japan and Asia. This collaboration proves that institutional investors are looking to increase their exposure to European assets. And when they do that, they want to partner with strong active managers like ourselves. The presence of our large insurance balance sheet is another key attraction for Dai-ichi as it proves we have real skin in the game. Once more, this is clear evidence of the value of our unique business model. And as you know, Dai-ichi is acquiring a 15% stake in M&G, aligning our interest in making this relationship a strong success.

Let me just drink a little bit because my voice is going away. Good time to move to Life. PruFund flows were soft in H1 with the April events impacting retail sentiment. Nonetheless, sales rapidly improved in May, June and July as PruFund continued to deliver strong outcomes and to protect customers from market volatility. This recent trend is encouraging and we expect to see continued progress. Improving PruFund sales is only part of the solution as we build a holistic retirement proposition around this unique product. In doing so, we are broadening both client access and our product offering.

From an access perspective, we hit a major milestone this year, integrating PruFund on FNZ technology. This gives us better access to the large and rapidly growing digital platform markets. From a new product perspective, we have launched our fixed-term retail annuity, and we remain on track to launch a lifetime retail annuity next year.

Within Life, we also continue to invest in our BPA capabilities. Having reentered this market 2 years ago, we aim to generate annual sales of GBP 3 billion to GBP 4 billion by 2027. To do that, we have been scaling our capabilities across our origination proposition and pricing teams, investing in the talent needed to achieve our ambition. In a short period of time, we have improved our chances of success, scaling our ability to quote deals and implementing new longevity reinsurance capabilities. And in what is becoming an increasingly competitive space, we are building a truly differentiated offering.

Last year, we launched a value share BPA, an innovative solution where capital requirements and rewards are shared with our clients. Early next year, we will launch our With-Profits BPA. The product development is progressing well and is on track for Q1 delivery. Benefiting from the With-Profits Fund lower cost of capital, this solution will be extremely competitive and will be a powerful tool to attract flows to the group.

Having a differentiated offering also means we can remain disciplined on [ deal ] pricing and not compromise our financial returns. While market activity has been relatively subdued this year, we have closed GBP 300 million of new business so far with a further GBP 200 million in exclusivity and a healthy pipeline for the remainder of the year.

So to conclude, M&G has financial strength. We continue to simplify our business and we are growing again. In the first half of the year, on the back of consistently strong investment performance, we have delivered fantastic Asset Management net flows (sic) [ net inflows ] of GBP 2.6 billion. And we continue to expand internationally, improving the diversification and resilience of our business. The partnership with Dai-ichi will take our international journey to the next level. We also continue to broaden our proposition both in Asset Management and in Life, including the launch of our With-Profits BPA early next year.

All this work opens up additional avenues of growth for the group. In parallel, we remain absolutely focused on simplification and we'll continue to deliver meaningful progress on the transformation program and the cost-to-income ratio. We have now set the group up for long-term profitable growth across products, segments and markets.

And with that, I will hand over to Kathryn, who will take you through our financial results in detail. Thank you.

Thanks, Andrea, and good morning, everyone. I'll now go through the details of our first half results, which I'm pleased to say reflect the continued delivery against our priorities.

Covering first the key highlights. Net flows from open business of GBP 2.1 billion improved by GBP 3.2 billion year-on-year. This is a great result, underpinned by GBP 2.6 billion of net inflows from external clients in our Asset Management business. And this achievement is particularly noteworthy given the volatile external environment we saw in the first half of this year, and it was made possible by the market-leading investment performance and by the continued international expansion that Andrea talked about. In our Life business, PruFund saw net outflows of GBP 600 million. However, we are encouraged by the improvement we've seen recently with flows turning positive in the months of June and July.

Group adjusted profit of GBP 378 million reflects the positive momentum across our business. Asset Management fee-related earnings were up 14% during the first 6 months of this year. While in Life, growth improved [indiscernible] Traditional With-Profits more than offset lower earnings in annuities. At GBP 408 million, the operating capital generation benefited from a growing underlying result of GBP 331 million. And with both Asset Management and Life contributing strongly, this result demonstrates once again the value of our diversified business model.

And finally, management actions of GBP 77 million in the first 6 months of this year are in line with our guidance of GBP 100 million to GBP 200 million for the year. So thanks to this strong operating performance, the Solvency II ratio reached 230% as at the 30th of June.

Turning now to flows. Closing AUMA of GBP 355 billion was GBP 9 billion higher than the opening balance, supported by the GBP 2.1 billion of net inflows from our open businesses and by GBP 11 billion of impact from markets and other items, which does include the GBP 2.7 billion from the acquisition of P Capital Partners. As I mentioned, net flows from our open business improved by GBP 3.2 billion year-on-year. Asset Management net inflows were driven by GBP 1.9 billion from the institutional segment, where continued strong international growth more than offset U.K. headwinds, which I'm pleased to say are gradually abating. And also contributing to the positive picture, we achieved GBP 700 million of net inflows in our wholesale business as we continue to deliver excellent client outcomes with over 70% of our assets ranking in the top 2 performance quartiles. Life flows remain broadly unchanged year-on-year. However, we are confident that there will be a stronger second half as PruFund flows have gradually improved since April and as activity in the annuity market picks up after a quieter first half.

At GBP 378 million, our group operating profit was up by 1% year-on-year. And the key features of this result are, first, higher revenues and stable costs in Asset Management leading to a 2 percentage point reduction in the cost-to-income ratio year-on-year; secondly, an increase of GBP 40 million in PruFund and GBP 12 million in Traditional With-Profits, mainly driven by higher opening CSM balances; third, reduced annuity earnings of GBP 130 million driven by lower returns on excess assets, as we flagged at our 2024 full year results, along with an GBP 8 million headwind from a legacy contract; and finally, a stable Corporate Centre result as lower debt interest costs offset reduced investment income and with head office expenses remaining stable.

Not on this page but worth noting, our statutory result increased meaningfully year-on-year from a GBP 56 million loss to GBP 248 million profit after tax. And this turnaround was driven by the strong operating result and by significant improvements in short-term investment returns and IFRS 17 mismatches. Let us now look at the Asset Management result in a little bit more detail. At GBP 324 billion, AUM ended the period up by GBP 11 billion reflecting strong flows in favorable markets and the acquisition of P Capital Partners. Our average fee margin continued to be resilient at 32 basis points despite a competitive environment as we continue to focus on high value-add solutions for our clients. So thanks to higher assets and stable margins, our revenues were up by 3% year-on-year. We also kept a tight control on costs and improved the operational efficiency of our business, leading to a 2 percentage point reduction in our cost-to-income ratio to 75%,or 74% when including performance fees. And I'm very pleased with the continued improvement in the cost-to-income ratio as it demonstrates our relentless focus on delivering positive operating jaws. But we know we have more work to do and we remain committed to maintaining strong cost discipline and to drive sustainable, profitable growth.

Performance fees of GBP 7 million were down GBP 6 million from last year due to lower carried interest, and the GBP 5 million loss in investment income is largely attributable to an GBP 8 million FX revaluation loss due to the weaker U.S. dollar. So in summary, high-quality fee-related earnings rose by GBP 15 million year-on-year, offset by a lower contribution from performance fees and investment income. And this led to the stable operating result of GBP 128 million.

Let's now turn to our Life business. PruFund operating profit increased by 14% to GBP 112 million due to higher opening CSM balance, marginally higher attrition rates and a much improved new business strain. Profits from Traditional With-Profits were up by 11% year-on-year, also benefiting from the same dynamics of a higher opening CSM and attrition rates. We are pleased with this growth as it occurred despite the lower expected returns and risk free rates that we've previously flagged at our full year results in March. We expect this new and improved level of profitability to be sustainable for the second half of this year.

Let's now turn to shareholder annuities. Our annuities result was down 14% year-on-year, and this was driven by a lower opening level of annuity surplus assets and lower rates of expected return, which we guided to in March. This was partly offset by a higher CSM release due to higher opening balances, supported by last year's large longevity benefit. The results also include an GBP 8 million headwind from a legacy book, excluding which the annuity results would have been broadly in line with expectations.

Other Life was a small GBP 1 million loss compared to a GBP 2 million profit in the previous period, impacted by sterling-euro FX headwinds and slightly higher losses in our Advice business.

Before turning to underlying capital generation, I wanted to remind you of the meaningful size of our CSM balances, which ended the half year period at a strong GBP 6 billion. And you can find more detail on the operating change in CSM in the appendix.

Our underlying capital generation in these 6 months of GBP 331 million was up 11% or GBP 34 million year-on-year, though with some SCR impacts that may not repeat. The Asset Management contribution was GBP 18 million higher, thanks to an improved fee-related earnings and a GBP 12 million SCR reduction due to lower market risk requirements. Life delivered a GBP 6 million increase to GBP 289 million. And within it, both PruFund and Traditional With-Profits benefited from a higher opening PVST balance of GBP 4.3 billion and lower new business expense overruns in PruFund. This more than offset the headwind from a lower rate of expected returns on the PVST of 7.8% versus 8.2% in the prior period.

Annuities result saw a modest increase versus the prior period, thanks to a lower strain of GBP 30 million from new BPAs, which more than offset the lower return on surplus assets. Our Corporate Centre benefited from an GBP 18 million SCR release, primarily relating to lower treasury lending activities.

I'll now turn to operating capital generation. Our operating capital result was a resilient GBP 408 million or GBP 443 million excluding new business strain, which is a good start to achieving our GBP 2.7 billion cumulative target by 2027. Management actions of GBP 77 million were lower year-on-year as the first half of 2024 benefited from GBP 62 million of one-offs from excess surplus distributions in our With-Profits business. However, they are in line with our guidance for the full year.

And the main components of the management actions we saw were GBP 118 million primarily reflecting equity hedging activities, GBP 35 million of adverse experience and assumption changes on expenses and investment management costs and a small GBP 6 million adverse impact from model refinements with our Traditional With-Profits products. So thanks to the strong operating result, our Solvency II ratio improved by 7 percentage points to 230%, and the solvency surplus remains stable at GBP 4.7 billion despite the payment of the final dividend for 2024 in May.

Own funds of GBP 8.3 billion, of which GBP 4.2 billion relates to the With-Profits PVST are slightly lower than the opening balance of GBP 8.5 billion, predominantly reflecting the dividend payment. I am pleased with the strength of our balance sheet as we continue to carefully manage our risk exposures in the volatile macroeconomic environment.

I'll now cover the progress we've been making in our cost transformation program. So as at the end of June, we've achieved GBP 230 million of savings under our transformation program, which means we've already overdelivered on the original GBP 200 million target we set in March 2023. And given our strong progress, we're confident that we will meet our upgraded target of GBP 230 million by the end of the year. And I would like to reiterate that when we do achieve this target, our efforts to drive further cost transformation and simplification will continue. We will remain focused on improving the quality of our cost base, freeing up resources to invest in and grow our business.

The strong progress achieved to date reflects the actions taken to create additional capacity and enhance our operational efficiency, as shown on this slide. And for example, since the start of the program, we have transformed the operating model of our private markets teams, delivering GBP 20 million of savings. And with similar levers, we've achieved another GBP 18 million of cost reductions in our Life business. And we've also improved the efficiency of our tech environment by decommissioning over 500 applications and outsourcing IT services for further cost opportunities.

Through these actions, we were able to fully offset inflation, invest to grow our businesses and end the period with a cost base that was GBP 8 million lower and of a better quality. We will continue to focus on improving our operational efficiency over the second half of this year and beyond as we transform the cost base of the group, deliver better customer outcomes and, of course, drive profitable growth.

So in summary, the first half of 2025 reflects a period of disciplined execution, strategic progress and financial resilience. We will continue to deliver for our clients and our shareholders with our diversified business model positioned for long-term success. I'm pleased with the results in the first 6 months of the year, which showed record net inflows in Asset Management and encouraging trends recently for PruFund, strong operating profits despite nearly GBP 16 million of adverse headwinds, positive operating jaws in Asset Management, a resilient contribution from Life with a double-digit growth in PruFund and, finally, a good start on our GBP 2.7 billion operating capital generation target.

Thank you very much. Andrea and I will now take your questions.

I'll take my water. Thank you, Kathryn.

Thanks, Andrea.

Where do I stand?

Somewhere in the middle.

Always with this slide. It grills my head.

Just in front in the screen behind you. Good. So just -- so Larissa will definitely be first because she's the fastest end. [Operator Instructions] Please introduce yourself with name and firm you work for.

So Larissa, over to you.

Larissa Van Deventer from Barclays. Two questions, please. The first one, congratulations on your Solvency II capital ratio, extremely robust. If you can please give us some color on how would you think about the strength of the ratio versus your capital allocation preference and how you keep the strong ratio from negatively impacting ROEs, please?

And then second, on your bulk annuities. We know that it's a seasonally slow start to the year. But how should we think -- now that you're gaining momentum, how should we think about margin and new business strain, please?

So Andrea, do you want to take the first one? I can answer the second one.

Yes. As you -- thank you for reminding everyone that we have a capital management framework. Generally, we always put it back, but this time we didn't put it in the slides. And indeed, as you all know, we have been following this capital management framework, and it's been a journey for us really. If you remember well, our first priority was making sure financial strength and that we strengthen our balance sheet. And we did deleveraging, and we are now in a much better place. But more importantly, we continue to deliver on our capital generation.

And then at the same time, we wanted to deliver attractive dividends to our shareholders. And we came up with a progressive dividend policy, as you know, in March this year. But to do so, we need to underpin it by a growing business in terms of profitability. And to do so, we have been doing the transformation program and we have been selectively also investing in the business to grow and also doing some selected acquisitions. So what we want to focus on moving forward is making sure we deliver that sustainable profitable growth to underpin the progressive dividend policy that we've come up with.

I mean we do not see at the moment the Solvency II ratio as an opportunity to do any capital returns. By the way, I think that if you do capital return, you should never do it from a stock. You should do it from a business that is doing much better. So we're very much focused improving and continuing the momentum of our business. And as you saw today, when I look at some of the underlying KPIs, the fact that our fee-related earnings in Asset Management are improving by 14%, you saw the underlying capital generation growing by 11%, PruFund and Traditional With-Profits, also up, all that gives me confidence that we will continue on this journey and deliver on the progressive dividend policy.

Great. And I think your second question, Larissa, was on BPAs and strain and margins. So as we said, we've written GBP 300 million so far this year, GBP 200 million in the first half. You can see that the capital strain we had was more than GBP 13 million, where we delivered a margin on CSM of about 3.5%. Now what we've said is that we always have a double-digit IRR hurdle rate, which we want to do, and that's genuinely how we think about the economics for these transactions. It's very pleasing that we are participating in a lot of the transactions that come to the market, but we are going to remain very disciplined in terms of the deals that we will do.

We've not used reinsurance yet. We've said we've got the capability to do that. But obviously, it makes sometimes more sense when we do on larger transactions than smaller transactions. So we like having the flexibility to reinsure, but that's partly reflected in the economics that you can see. So we will remain very focused on delivering the double-digit IRRs. And obviously, having the ability to do a BPAs now with profit fund in 2026, that's a very exciting opportunity for us. And we gave some guidance around the proportion of both With-Profit BPAs and the value share BPAs for '27 in March of about 3 quarters and 1 quarter. So that also gives us confidence around the ability to participate in the expected volumes in the BPA market.

So the next one would be Dom and then we've got the row here on the right.

Dom O'Mahony, BNP Paribas Exane. So three, if that's all right for me. First on institutional flows, really very strong indeed. I wonder if you could give us maybe the next layer down in terms of detail on where it's going, what you're seeing in the second half and also whether the margin on the new business coming into the book is lower or higher or in line with the margin on the [ in-force ]?

Second point, I mean, just picking up again on the very strong solvency. It's nice to see the tax plan generously contribute to that. Could you think about -- what have you thought about using that more aggressively to take risk? So if you're not thinking -- you don't use it for capital return, but could you be more aggressive about seed capital? Could you be more aggressive about underwriting risk maybe on the annuity side? I mean, why bother doing longevity reinsurance? Your thoughts on that would be very interesting.

And then the third question. Over the last few years, we've got used to thinking through the impact of higher bond deals, but the curve has changed quite interestingly. What does that mean to your business? I don't really have a good feel at all actually for what that means for capital cash and, indeed, earnings.

I guess I'll take the first one and the two other ones are for the CFO. So indeed, we're very pleased with the momentum. And indeed, you saw the institutional flows were very, very strong, particularly international. And you want to know where -- in which asset classes that went. And what we saw, we saw a renaissance and an interest again into Europe. There's no doubt, the first half of the year, many investors have sort of allocated more into Europe. I think that also helped in our partnership with Dai-ichi Life because they clearly wanted to increase their allocation to Europe as well.

And in particular, when you look into Europe, we have seen both in public and on the private side flows, but in particular, on public equities. Yes, there are still asset managers managing public equities. If they do so well, well, thank God, I mean, it's true. And if they do so well, they get mandates and they get also flows in the wholesale side. So on the institutional side, we saw significant interest into European equities but also Article 9 listed equities, which, of course, if you think of what is happening on the other side of the Atlantic, some American asset managers who have sort of, let's say, softened their stance on ESG probably was also helpful.

So we've seen a lot of momentum on equities. Japanese equities, by the way, also continued to see inflows. And then on the private asset side, there was interest in particular on real estate, given where in the cycle valuations are. And more importantly, on the private credit and structured credit, in particular structured credit, where we have a strong franchise, been in that market since a long time on, for example, SRT. And we had significant interest from pension funds from Asia but also from North America, in particular Canada, into these strategies. So I would say, well diversified.

And if you look at this number, you think -- you asked me about H2. We have continued to have strong momentum. Of course, we also have Dai-ichi Life. There were no flows from Dai-ichi Life in the first half. They are doing due diligence on several strategies at the moment. We expect a mandate before the end of the year. So that will come. But we continue to have a very strong capital -- strong capital queue as you saw, GBP 6.5 billion, but also a strong pipeline. So you should expect positive net flows in the second half as well.

But don't take the 2-point -- sorry, the GBP 3.2 billion institutional number as a baseline. I think first half was rather unique in the sense that many people increase their allocation to Europe. I'm not saying that they are going to decrease. But I don't think we're going to see the same increase in the second half.

And so back to the choices around capital deployment across the group. And as you rightly said, we've got a meaningful stock of capital at 230%. We've got the capital management framework that Andrea talked about more generally. And you'll remember at the full year results, we also talked about the GBP 2.7 billion and how we'd choose to use it, and we have the option if we want to continue to simplify the business, so investing in improving the operating leverage in the business and supporting the capabilities in Life, for example. And also, there was an allocation certainly towards traditional shareholder strains.

So your point around automatically reinsuring or not, no, not necessarily. We will have a view. It really is about delivering the right returns on that capital, and so being thoughtful around where we use it. But we do look at it group wide. And we've got the tremendous GBP 6.8 billion of surplus capital also in the With-Profit Funds that clearly go through a very robust governance, but it's another source of capital for the With-Profit BPAs. So we look at and evaluate options to deploy that capital, but it really is all around making the right choices around that capital. And you've seen the guidance we've given around how we want to use it. And it was pleasing to get the tax benefit, as you said, in the half, which is great that we've got stronger earnings, and we can use the DTA on a solvency basis, which is really good.

And now we did expect a question on rates and the steepening that we've seen this year. So it's about 110 basis points between very short rates and long rates over the course of the year. And obviously, the numbers in our financials are for June 30, and there's been pretty big moves in parts of the curve since June 30. And one of the answers we gave actually this morning was we're lucky as a group that we do have a business model and a business mix that is successful through all interest rate cycles. And so when you think about -- let's start, perhaps, with the insurance business, and you've seen our sensitivities more generally around interest rates, so we would expect obviously a benefit on the solvency ratio when rates go up.

The duration that we think about in terms of the balance sheet is not right at the long end. I mean parts of the assets might be very long duration, but in overall, because our annuities book was only reopened in the last couple of years, we do look at the 10-year part of the curve, which actually hasn't been as volatile this year. And we have seen a reduction at the short term, which I mentioned. And obviously, that may have plateaued now given inflation moves that we've seen in the U.K. and expectations for further rates. And that was part of the reason we guided at full year around lower interest accretion and expect returns because of the 1 year.

So generally higher rates would benefit some of the earnings metrics for flow in the insurance business. And of course, we monitor what it does to our statutory shareholders' equity as well. So we'd look at that.

And on the Asset Management side, it depends on where in the curve it is, again, because a large part of our Asset Management duration on the fixed income side won't be super long. It will be sort of short, medium term. And so we think about impacts on AUM and the business. But again, we benefit fortunately, as a group throughout different interest rate cycles.

And maybe, Dom, just to clarify for everyone's benefit the tax impact. Clearly, we pay taxes and in the IFRS results, you can see that there's "tax bills" there. On our capital side, it is a SCR benefit because having made statutory profit, we've got more capacity to use deferred tax assets in a stress scenario, which reduces the SCR. So it's a little bit technical. But taxes have been paid. They're there on the IFRS side of things. It's just a quirk of Solvency II in the 1 in 200 stress case.

Let's go to the row left right. So Andrew, Andrew and Mandeep. And then I think there's also Nasib and Andy.

Okay. It's Andrew Crean, Autonomous. Can I ask three questions? Firstly, in terms of the BPAs, could you give us the margins on premiums as opposed to IRRs for your current BPAs versus the value-based ones and the With-Profit ones?

Secondly, for clarity, I think your excess capital over GBP 190 million is about GBP 1.4 billion. Are you absolutely clear that you will never pay that out from stock buybacks, and so we'll need to go for regular buybacks from flow?

And then thirdly, I think on an annualized basis, the operating capital generation impact on the SCR was minus 8%. What is that likely to be long term? Do you continue to see, as your business grows, the SCR reducing?

I think, yes...

The first question on margins. I think I mentioned that on the GBP 200 million, we had 3.5% in terms of the CSM on premiums. So we haven't given any guidance. And also, what we've said is as we write more of these transactions and bigger ones, you will see more of the earnings or CSM margin and also more of the capital strain around the transaction. So we've not given any more guidance. But what's quite important is that when obviously we think about BPAs in the With-Profit Fund and we think about hurdle rates, it's obviously a very different capital base that's being deployed for those BPAs.

We will have criteria around the profitability of those transactions and the sorts of risk and sorts of transactions we want to do. But it won't be the same hurdle rates as we have or cost of capital as it is on the shareholder side. And that's a really interesting piece of work that we're doing now as we get ready to write With-Profit BPAs in early 2026. And so yes, I can see...

But I mean, given the fact you're going to try and write GBP 3 billion to GBP 4 billion a year with a quite large chunk, does it matter to us to know what kind of margins relative to that 3.5% you're talking about?

Yes. And of course, Andrew, when we start writing more, and we're hopeful around a better second half or an exclusivity an additional GBP 200 million, so that's about GBP 0.5 billion so far this year. Fully appreciate, we are equally focused on margins for our shareholders, on shareholder capital. I mentioned that with profit. And we're focused -- so we think about the CSM, and that's very important to us. But also around the returns on the shareholder capital that we're delivering. So absolutely, we understand that and we agree. And when we give more -- do more transactions, we'll give more color around that.

So the excess capital, I think, Andrea's comment around distributions to shareholders from stock versus flow, the really critical thing for us is to drive sustainable earnings growth. And we've got strong capital, strong capital generation, strong cash generation. We want to deliver earnings growth, and then that's what will unlock any higher potential DPS growth. But we've guided to progressive. We've done 2%. So being able to increase that further will depend on sustainable, consistent earnings growth. I think it was less a comment about share buybacks, which are not on the horizon for us at the moment. And so that it was more around the DPS than actual share buybacks, I think.

And then on the SCR, we have called out about GBP 30 million of one-off benefits this year. And obviously, we do continue to look to improve the efficiency of our capital base and look to optimize their capital requirements. But of course, we also -- and there's market impacts on that, that we have at the moment given the rate moves that we're seeing. But we also do want to deploy the business. So that's, hence, the question earlier around strain, around using capital in the business. And we also benefited, as you saw on the PruFund side by some improvements and changes we made around pricing last year, which reduced some of the PruFund as well. So more efficient writing back business, which is great.

So yes, it will depend, but we're being very disciplined around shareholder capital management and capital across the group and got sufficient budgets absolutely to write profitable business with the right margins in terms of CSM and earnings as well as capital.

Andrew Baker, Goldman Sachs. So the first one, apologies, I'm going to go back to it, but excess capital. We're all looking at sort of Solvency II shareholder ratio to form the view on excess capital. Is that the right lens? Is it -- so just trying to get a sense of is there another constraint on deployment of stock, whether that's the regulatory solvency ratio, local GAAP, equity, anything else? I hear you on you're not looking to deploy it right now, but anything that could prevent you from deploying it going forward?

Then secondly, just a technical one, the GBP 8 million charge that you called out related to the legacy annuity plan and the adjusted operating profit, what is that?

And then thirdly, just on the underlying capital generation, the lower treasury lending that you mentioned that gave the strong result at the center. Should we expect treasury lending to normalize going forward? Or are these levels sort of sustainable?

So when we think about capital and what we're using that capital for, I go back to some of the guidance we gave with the capital management framework and then the GBP 2.7 billion over the next few years where we talked -- where in the group, we'd obviously use some of that capital that we do generate. And so we know that we've got a very strong solvency which we're quite -- which we do have. We also look at leverage. And that was one of the other questions, I think, we answered at the full year results around using that capital to buy back shares which would impact own funds. We know our leverage is very conservative versus peers.

I would also say that we've done already the deleveraging last year on the holdco debt. That's quite a meaningful amount of debt that we've redeemed. We've got a call date coming up in 2028, a dollar bond. But I also -- we need to think about the capital structure and the cost of it, and our debt is very cheap compared to you've seen where rates are at the moment, so 5.5% to 6.5% coupons for our holdco debt. So we look at the quality of the capital. We look at the ability to generate strong capital, strong cash earnings and make sure that we've got a disciplined allocation framework with the right hurdle rates across the company. So 230% solvency is absolutely one of the metrics that we look at.

In terms of the balance sheet equity, that will be another lens. We look at -- and both at the holdco, where I think we're at GBP 3.3 billion in terms of shareholders' equity. We've got strong retained earnings in the subsidiary, strong capital, strong liquidity, pretty much at the holdco and at the subsidiaries. So it's one thing we'll look at and we talked before about impacts on rates. But we're very strongly positioned at the moment. But we do look at a range of things. And we value financial flexibility, and we want to have the capacity to write business, we want to have the capacity to deploy that capital across the group and to continue to deliver strong results for our customers and our policyholders.

In terms of the one-off annuities impact of GBP 8 million, it's just a one-off. And it's a legacy scheme and it's really as simple as that. So it's an old scheme that we had, a payment that we made. So nothing more to read into that.

And then, yes, it's a really good question on the benefit we saw in holding -- in the Corporate Centre in terms of capital. We do have treasury activities where we can do very vanilla but optimize the balance sheet. And so at the period end, it just happened to be lower market risk and rates and credit. And so that could definitely normalize at some point in time, and we're just thoughtful around, obviously, the longer-term expectations for that. But it's very conservative and it just happened to benefit that June 30 moment from a lower position.

Mandeep Jagpal, RBC Capital Markets. Three questions as well, please. First, on Asset Management. You've been able to keep absolute costs relatively flat over the last 2.5 years. And you spoke about a continued improvement in the cost-to-income ratio in the second half. But how should we think about the absolute growth in the cost base from here as you balance investment in growth versus operating efficiency? And how much flexibility do you have there?

And then on BPA, you've reopened the BPA portfolio with the aim of doing more value share and With-Profits BPA over time. But what are you observing in terms of the level of competition in the traditional BPA market since you wrote your first deal in 2023? And how do you expect to develop here following some M&A in the sector?

And then finally, on DC pensions, how are you accessing the structural opportunity in the DC Master Trust space given M&G's wide-ranging asset management proposition, including private assets? Could it be a particularly attractive option for you to have your own Master Trust?

So Andrea, I don't know if you want to -- well, probably, I guess, you could go all the 3 of them if you want, certainly the top two.

So on the cost-to-income ratio, obviously, we're very pleased with how we have delivered improvement over the last 18 months. Let's not forget that we moved from 79% to 75%, and this was delivered thanks to both an improvement in the revenue and, of course, managing costs in inflationary environment, keeping it flat. So pleased with that. But we had a target. We have a target of 70%. We are committed to that target. We will not deliver it by the end of the year. If not, we will be super people, but we're not. In that sense, we're doing well. But -- so we are committed to continue in that sense.

When I look at how the business is doing and how we have momentum both in terms of pipeline in both private assets and public assets, when I see how we have been able to keep also the margin, we're probably one of the few asset managers would have kept margin flat. I always like to show this. This is rather unique. I mean, I -- there are not too many other asset managers who can show fee margins remaining flat as we have done. That is also thanks to a mix. I talked before where we see momentum. We see momentum in equities. Equities have higher bps. We see momentum a lot in private assets, higher bps as well. So that will help.

So we are committed to continue to improve our cost-to-income ratio. We will do so, and we will continue to invest, but we will be careful also taking out costs. And you should expect that you should see a similar momentum as you have seen so far in the last 2 years moving forward.

And then the second one on BPA?

So on the BPA, as you have seen, we have a good -- we launched a value share last year. What we wrote in the first half was plain vanilla BPAs. We've had interest in value share BPAs. They are actually larger in terms of size, and we are in discussion with several schemes to see if we can arrive to a conclusion on them. I think what is key here is that you should look at what we can offer to schemes out there because, of course, we can be plain vanilla. That's supported, of course, by a strong private assets franchise. But more importantly, the value share, of course, gives share the rewards with the pension scheme. And when we'll get With-Profit BPA, then we will have a significant competitive advantage because we will have a lower cost of capital.

And once again, when you look at competition, as you said, I'm not concerned about competition. I'm not even concerned that there are new entrants. Frankly, when I see the new entrants, they sort of have the similar business model to us because there are two alternative asset managers and they want that permanent capital side. So it is effectively playing into our strength. Look at what we're doing. We reentered this market 2 years ago. We have written GBP 1.7 billion of BPAs so far. We have significantly improved our capacity in order to originate, to price, to propose. And we are very much committed to the GBP 3 billion to GBP 4 billion number by 2027. I think we will do so, thanks to excellent asset manager. I mean it is performing extremely well but, more importantly also, thanks to the innovation that we bring.

I mean, the With-Profit BPA will be something very, very unique and the value share BPA still remains the only solution in the market.

And last question on U.K. DC and Master Trust.

Yes. Would you -- do you want to take that? I don't know who wants to....

I was going to say -- well, Clive is getting the mic. The other fortunate ability we have around delivering the right returns and in the market where there are a large number of players, it's also just having that private assets capability internally to make sure we optimize our asset returns, which is good for us.

And you have met Clive before, but Clive is the CEO of our Life business.

Just a brief word on workplace. I mean we do have a substantial workplace business. Master Trust would be a step when we're currently under review. Also, obviously, we're in conversation with the government around their proposed legislation. We actually think if we did do it, it would be a heavily With-Profit sponsored and finance initiatives because it has a long view. And in actual fact, the piece that's missing in the workplace market is a convincing transition to retirement and retirement journey for those organizations.

There's been a lot of really good work in the U.K. around accumulation. Actually, some of those particularly post auto-enrollments are coming to try and use their pension, which is actually a different set of skills where we have the #1 drawdown product. We're entering into a guaranteed income, which is particularly relevant, and also how we have one of the largest advice businesses in the industry as well. I think that's all we'll say for now. So thank you for that.

So we've got Nasib and Andy.

It's Nasib Ahmed from UBS. Just two questions from me, both on Slide 9. You have a target of GBP 100 billion of private assets by the end of the year. I know rates have gone up. So what's that target looking like if you allow for higher rates? Are you tracking ahead of that target today on the GBP 77 billion already? Or do you still have a bit of catch-up to do?

Second question on the same slide, the GBP 6.5 billion. Does that have anything for Dai-ichi in it? Or is that on top?

Okay. So I don't think we have a target of GBP 100 billion of private assets by the end of the year.

It was an ambition.

I think it was an ambition that we stated, but we don't have a strong target to it. I think what is important is you look at this slide and you look at the strength of our franchise. First of all, this is one of the largest private asset player in Europe. And both real estate, private and structured credit and infrastructure have been around for a very, very long time. We haven't just entered this. This was developed thanks to the support of the balance sheet. And we have -- when you look here, we have actually moved into, I would say, more yielding strategies by doing acquisitions where we believe that we can grow significantly the business.

So when we did BauMont, the value-add real estate acquisition, this was to complement our already strong offering but, more importantly, also supported by the balance sheet. And I think that's the way we're going to grow. We're going to grow our existing franchises organically, and we might look at potential bolt-on acquisition in order to grow this business going forward. Same thing with P Capital Partners. We had a commitment of GBP 500 million for our balance sheet to grow that business.

On the capital queue, no, there is no Dai-ichi Life in that capital queue. Capital queue is when you have won the business and obviously you need to deploy it. Maybe an important point on the capital queue because we're showing this for the first time, I think.

We used to 3, 4 years ago, but yes.

But what you just see on the capital queue is, of course, there will always be a capital queue. As a private asset manager, you always have a capital queue. Then what is important is that you need to make sure that, that capital queue comes in with new flows and you deploy it. What is the range? I would say the range is between [ GBP 5 billion to GBP 7 billion ]. And in this case, this increase of capital queue is because we have received new -- we have won new business, not because we have not been able to deploy. So I think that's the positive news also you should take from here.

But no, Dai-ichi is not in there. I think I said it in the presentation. They're doing due diligence. We expect to get a mandate from them before the end of the year. And as you all know, they have a commitment of $6 billion, not sterling, over the first 5 years.

And bolt-ons on those verticals, where else would you think of adding capability?

I think one has to be careful. And we have done two small bolt-ons, and I think you need to see those develop. We have always had a way of saying, okay, we utilize part of our own balance sheet and then we grow them even further. But if I had to look, I would say, I would look at private and structured credit, which still is something which we will see Europe as being a very interesting. There are great opportunities. And I probably would also look potentially at some on the infrastructure side. But overall, we have what we need at the moment. I mean we want to grow organically, and we want to make sure that those two bolt-ons that we have been integrating, that they take off as well.

It's Andy Sinclair from Bank of America. First, just circling back to leverage. I get the point you made on leverage, that conservative methodology, et cetera. But you do have a target for under 30% leverage. We're at 33% now, I guess, that targets for the end of the year. Are we saying that this might take longer? Or what's the thoughts on that progress to under 30%?

Second is on the annuity one-off. Sorry to come back to it, but I still don't understand it. This GBP 8 million payment. I get you're saying it's one-off. But why is this payment being made? And why should we have confidence that it is just a one-off and that there's no other schemes that is coming through for?

And third was just on the FNZ platforms for PruFund. How many FNZ platforms have committed to offer PruFund so far?

Why don't I start with the end and then you can take the two first. So obviously, we're pleased to have done this agreement with FNZ. As you all know, FNZ roughly covers 40% of the platform markets. So we're talking GBP 280 billion of AUMA and roughly 50% of the flows. So we're talking GBP 35 billion per year here. So we're very pleased to have done this agreement. And we are in discussion with some of the platform utilizing that technology. I would say, we will probably -- it's for 2026, we will see something happening there. But obviously, we're very, very excited to get there because this will substantially increase volumes on PruFund. Okay?

So if I take leverage, perhaps, yes, we are not at 30%. But we also know that, as you said, we have got the most conservative. We'd be at 27%, I think, on an IFRS equity basis and 22% on using some of the approaches by some of our peers. And we obviously want to get there through own funds growth because, as I said, the holdco debt, we're comfortable with. We also think, I mean, it's good quality, very long term and cheap capital and funding. So we have got a call of the dollar bond in 2028. But we do still -- we have no concerns on that, but we're very comfortable with it and we get no feedback either from shareholders. So we know that we are conservative. So we will get there, but we will get there through own funds growth. But obviously, we don't think we'll get there by the end of -- we can do the math in terms of what's needed.

I was just going to say with bond yields going higher, I guess, that target gets a little bit harder. Is that still under 30% though?

So absolutely. So in the first question around rates and, obviously, one of the things we saw when we did have movements in rates is we get a benefit on the PVST, which is very good. But there can be an impact, a negative impact on own funds. So that's why the key thing for us is delivering the own funds generation through consistent earnings growth and to be able to withstand market volatility. But yes, you're right. The increase in rates would impact own funds as well. But I go back to just very comfortable in the leverage ratio, in the stock of holdco debt. And we've got another exit -- well, we've got this opportunity in 2028, which we're mindful of. And as I said, we're very, very conservative compared to peers.

Now we have very unusually had a one-off payment to a very, very old contract that we've remedied, had zero impact on policyholders and we've got no concerns. It's just a one-off. You answered FNZ?

Yes.

Okay. So any -- I think we have taken all the questions from the analysts in the room. So with that, let's say, thank you very much for being with us today. Yes, sorry, apologies. We received -- so let me read, Tom from Mediobanca.

He would like to know if you could elaborate on why the cost of capital is lower for With-Profits customer when writing With-Profit BPAs. So that's his first question. And then on the proof on FNZ, he's asking whether it's going to come through next year, which I think we answered. And what -- we talked about next year and the impact. So maybe without taking that question on the cost of capital with profit fund, I don't know if, Clive, you want to say two words on the With-Profit Fund and the cost of capital in the With-Profit Fund as opposed to what other peers would have in the market.

It's a question of different regulations and governance and environment. So on a strict level, With-Profit Fund doesn't actually have to make a profit because it's written in the context of the trust. However, it does have an expectation not to write to loss. So therefore, there would be a level of margin creation above 0. Without going into too much of the numbers, that means that there would be a lower return on capital in order to make sure in most cases, the fund isn't writing with the expectation of a loss, but it would be nowhere near the level that a shareholder-based capital provision would be of double digits, 14%, or certainly lower than a [ PAE-backed ] organization be looking to return there.

So that gives you a different quality of capital. Also, it has no dividends to pay. So it's length -- it can deploy that capital before it needs to cycle back to the owner, which in this instance, the with-profit estate is much longer than you might see in a normal shareholder-based organization. So I hope that gives you a feel of how the different dynamics work in the With-Profit Fund balance sheet deployed compared to the shareholder balance sheet.

Very helpful. And Farooq from JPMorgan, he asked whether we are still expecting to write GBP 3 billion to GBP 4 billion in this market in BPA, which I think we did address. And we are still committed to that because of the diversified proposition that we aim to launch. Update on the 75% cost-to-income ratio and ambition, which we said we remain committed to 70% is the right number, not by the end of the year.

And thirdly, well, this one, we haven't explicitly tackled. So if we can talk a little bit more about 60% of our AUM being international, and that's the AUM side. But what's the contribution to revenue and profits? And I think very briefly, let's say that it's probably -- it's all external money. So while in the U.K., we've got a very big internal client that tends to have a lower fee margin attached to it, so it would be less profitable, ceteris paribus. So you'd expect this international business to be slightly more profitable, both from a revenue and bottom line perspective than what you would have in the U.K. So it is good quality growth.

And I think someone earlier had asked, what are the margins on this business that we're winning, is it similar or not to what we already have? And I think you say it's brought in line with what we have. It's not money market, it's not passive. As Andrea said, there's a lot of interest in equities and structured credit, real estate debt. So the margins that we're winning on this business are comparable to the stock of existing institutional business.

And Tom submitted another one, from Mediobanca, so he's following us live. That's good. So almost why do we set the leverage target at 30% under our own calculations given that it's so much more conservative vis-a-vis peers? I don't know, Kathryn, if you want to...

We have -- we did set that target on a Solvency II basis. We evaluate what rating agencies use, what our peers use. We have to have the right one that we think is relevant for us and our business mix. But we get feedback. We always reevaluate if a metric is the right one. It was set quite some time ago. So that's not to say we'll never reconsider it, but it is the one for now, but we also obviously look at other methodologies as well.

Perfect. So I think that now we are through all the questions. So thank you very much. Thank you very for joining.

Thank you.

Thank you very much.