Standard Life Aktie

Good morning, and welcome to the Standard Life presentation focusing on the proposed acquisition of Aegon UK. I will now hand over to Andy Briggs. Andy, over to you.

Thank you, Claire, and good morning, everyone, and thank you very much indeed for joining us at such short notice. I'm very pleased that today, we've announced an agreement to acquire Aegon UK. It's an exciting development for Standard Life for many reasons, not least because it significantly accelerates our vision to become the U.K.'s leading retirement savings and income business. We're bringing together 2 businesses with shared goals and ambitions to create a new leader in one of the U.K.'s -- in one of the world's most attractive markets. Together with Aegon UK, we will not only be stronger, we will be better, advocating for better retirements and helping our customers achieve better outcomes and greater financial security in later life.

We believe that this is both a strategically and financially compelling transaction, and the logic behind that is set out on this slide. First, it gives us increased scale. Standard Life will become the largest retirement savings and income business in the U.K. We will have a #2 position in Workplace and become the #2 player in Retail, and we will serve 16 million customers across the country.

Second, we will be in an even stronger position to meet the evolving needs of our customers with enhanced digital advice and distribution capabilities across workplace and retail. Acquiring Aegon UK also transforms our adviser offering, strengthening our ability to serve our customers across all stages of their retirement journey.

Third, it accelerates making us a more capital-light business with capital-light earnings increasing from 47% to 57% of the enlarged group. The financial metrics for the deal are attractive. We expect to unlock GBP 0.8 billion of net synergies and increase our excess cash by GBP 0.4 billion over the next 5 years. That will give us even greater flexibility to invest or return capital in the future. And finally, the funding structure is efficient, and it enhances our capital strength. We've achieved an attractive valuation of 83% of unrestricted Tier 1 owned funds, and this transaction is consistent with our target leverage ratio of 30%.

So turning to look at the structure and key terms of the transaction. We've agreed a total consideration of GBP 2 billion to acquire 100% of Aegon UK. We will fund this through a combination of cash, debt and 181 million new shares in Standard Life issued directly to Aegon. As already mentioned, the consideration represents 83% of the acquired unrestricted Tier 1 capital, ensuring attractive returns for our investors. While the transaction is subject to customary regulatory approvals, it is not contingent on a shareholder vote, neither our own nor Aegon's. As things stand, we expect it to complete towards the end of 2026. I'm also pleased to say that both of our key strategic shareholders, MS&AD and Aberdeen, have expressed their strong support for this acquisition. And finally, we've entered into a strategic relationship agreement with Aegon, which allows them to participate in the future success of the enlarged group.

Let me first set out what we are buying. Aegon UK is a business that we've always held in very high regard, and we know it well. It is a prominent player in the U.K. savings and retirement market, offering a broad range of Workplace and Retail solutions that complement well with our own. Importantly, it is winning in structurally expanding areas of the market with its assets growing at 9% per annum over the last 2 years. It serves just under 4 million customers across the country. As you can see from both the column in the middle and the pie chart on the right, Workplace is its largest area, followed by retail and its adviser offering. That makes Aegon UK a really neat fit for our business.

As mentioned, this acquisition represents a meaningful step change in terms of our scale and reach in the market. Aegon UK adds GBP 160 billion of assets to our existing GBP 317 billion, giving the combined group assets of GBP 477 billion. On that basis, Standard Life will be the largest player in the U.K. retirement savings and income market. Together, we will serve 16 million customers, leading to more opportunities going forward.

On the right-hand side of this slide, you can see that our Pensions and Savings business becomes by far the largest in the U.K. And within that, we're right up at the top in Workplace as well. Increased scale gives us greater commercial advantage, and it also gives further operating leverage as demonstrated by the synergies. As well as giving us increased scale, this acquisition strengthens our capabilities and what we can offer our customers. Many of you will be very familiar with Standard Life's existing products and solutions, which are set up along the top of this slide in the blue box.

Aegon UK adds a number of areas where we have less of a presence today and regard as being very important to our offer going forward. So in particular, that includes adviser platform capability, extending our adviser reach and relevance significantly. Corporate advisory focused on small and midsized workplace clients; financial advice and planning, extending our customer engagement; managed portfolio solutions, extending us further into the asset management part of the value chain and the replatform, including ISAs and general investment accounts, broadening our product range.

Aegon's expertise in these and other areas, therefore, help us to significantly accelerate our growth ambitions and better meet our customers' needs. The enlarged group will have broad waterfront capabilities, strengthened distribution with an enhanced digital and technology offer.

Let me build on this a bit more by providing more color on Aegon UK's Workplace and Retail offer, starting with Workplace. The slide shows the key focus areas to win in workplace and what Aegon UK adds to Standard Life. In terms of its employer proposition, Aegon brings high-quality trust and contract solutions to both large and smaller employers with a range of innovative accumulation and retirement offerings. Aegon has a customer-centric culture and have invested significantly to meet the evolving needs of customers, evidenced by their technology-enabled administration and telephony to support consistent outcomes. And it adds scale with particular strength in the corporate adviser and adviser-led employer segments to complement Standard Life's strengths with employee benefit consultants. Together, we will have an improved end-to-end workplace offer by more effectively linking savings, engagement and service with downstream retail consolidation and decumulation pathways.

As I've said, together, we become the second largest workplace platform by assets. And as illustrated on the right of the chart, of the GBP 80 billion market annual gross flows, the combination last year accounted for GBP 18 billion.

Turning next to Retail. Again, this slide shows the key focus areas to win in Retail and what Aegon UK adds. The acquisition transforms our offer in this area. Aegon UK will materially strengthen customer engagement through AWS-enabled data capabilities and digital tooling, supporting more informed decision-making and optimized customer experiences.

In terms of products and solutions, the combined business will have a modern, scaled adviser-led retail proposition underpinned by a robust adviser platform. This strengthens defense against outflows and supports sustainable growth. We will gain access to a broader set of tax wrappers through platform technology, extending our relevance to advisers and customers across different wealth and life stages, offering holistic financial planning.

And finally, our combined digital infrastructure will open up new opportunities. We will integrate their Mylo technology platform with our own, enabling consolidation, personalized communication and pre-retirement guidance. On the right, you can see that pro forma gross inflow of GBP 12 billion is a 70% increase in GBP 150 billion per annum gross flow market.

One of the major highlights of this acquisition is that it accelerates the business shift to capital-light earnings, which, as you know, has been a focus for us. The pie chart on the left shows that Standard Life generated 47% of operating profits from capital-light business on a stand-alone basis in 2025. Looking at the combined business on a pro forma basis, including synergies, that number would move to 57%, a material uplift. It is important to highlight that we remain committed to allocating GBP 200 million per annum of capital into annuities. We will also look to capture opportunities to participate further in the pension risk transfer market.

Let me stop there and hand over to Nic to go through some of the key financials in more detail. Nic?

Okay. Thank you, Andy, and good morning, everyone. With Andy having covered how Aegon UK's business complements our core strategy, I will now cover how the transaction is financially attractive. The message I want to leave you with is that this transaction is value, cash flow and earnings accretive, and it is also consistent with our balance sheet ambitions.

Starting with transaction synergies on this next slide. The combination of two scale businesses, offers multiple sources of cost and capital synergies with an estimated value of GBP 0.8 billion post tax. We expect annual cost savings of GBP 110 million. from harmonizing business operations and tech and from the removal of duplicate central function costs. As this is an open book transaction, with an emphasis on maintaining and building customer and distribution partner engagement, the delivery of these savings is phased over 5 years with over half emerging by the end of year 3.

Capital synergies are estimated at GBP 340 million, reflecting diversification benefits and alignment of capital models and methodology. Unlike previous acquisitions, and in line with our philosophy of not hedging open business flows, we will not increase equity hedging beyond Aegon UK's current 40% level. We have planned for model harmonization to take place in year 2 and for a Part VII transfer into PLL in year 3, which means that over 70% of the capital synergies will emerge by 2029. Taken in aggregate, we estimate the undiscounted value of synergies to be GBP 1.2 billion post tax before one-off costs. The cost to achieve the synergies is estimated at GBP 0.3 billion post tax, the phasing of which is broadly equivalent to the phasing of the emergence of the related savings. The relatively high cost to achieve when compared to annual savings primarily reflects the very lengthy nature of property leases.

In addition, we expect to incur a further GBP 0.1 billion post tax to cover the cost of decoupling Aegon UK's operation from those of Aegon Group and the modest level of transaction costs. Overall, we expect the combined undiscounted value of synergies net of one-off costs to be GBP 0.8 billion, demonstrating the value that this transaction unlocks for shareholders when compared to the purchase price.

Our execution plans are underpinned by a long-standing track record of successful integrations from a decade of M&A transactions. We have extensive experience of delivering cost and capital synergies in large and complex life insurance integrations. This transaction requires us to both separate from Aegon's parent and integrate the 2 businesses. We expect this to be a multiyear program, which has been planned so as to complement the timing of existing in-flight transformation and migration priorities and to dovetail with existing major model change and Part VII plans. We will follow the standard 3-phase approach involving streamlining the corporate functions, undertaking the work to deliver capital synergies and integrating customer servicing and tech.

In addition to scale, the transaction delivers attractive financial returns when viewed through our normal lenses of cash, capital and earnings. Starting with cash, on a 2025 pro forma basis, Aegon UK adds an estimated GBP 160 million to OCG. Consistent with the guidance on a stand-alone business, we expect the incremental OCG delivered by the transaction to similarly grow at a mid-single-digit rate. Over the first 5 years, the cumulative OCG net of the incremental dividends and interest, combined with the synergies delivered net of costs is expected to generate an additional GBP 0.4 billion of cash. More of this on the next slide.

On capital, the transaction and its funding structure is consistent with our balance sheet ambition to operate our business in the upper half of the 140% to 180% solvency ratio target range and at a solvency leverage ratio of circa 30%. On a 2025 pro forma basis, the transaction is positive to our solvency coverage ratio, up by single-digit percentage points. And this uplift is expected to endure in the first 5 years after day 1 adjustments and reflecting the delivery of expected synergies net of costs. The transaction will not affect our plans to achieve the circa 30% leverage ratio at the end of 2026 and to maintain leverage at this level thereafter.

Aegon's UK pro forma IFRS adjusted operating profit in 2025 was at GBP 190 million, and its contribution is expected to grow from this level as the cost savings earn through. The transaction is expected to be mid-single-digit percentage points EPS accretive by 2029 on an IFRS adjusted operating profit basis, net of interest. Overall, these transaction financials further underpin our ability to operate a progressive and sustainable dividend policy.

As I discussed at our results presentation in March, Standard Life expects to generate around GBP 500 million of excess cash each year, which after 2026 will be available to be deployed to the highest value opportunities in line with our capital allocation framework. These stand-alone business dynamics remain intact. The waterfall on the left of this slide depicts the incremental excess cash that this transaction will generate over the first 5 years. Cumulative OCG of GBP 0.9 billion is expected over this period, which more than covers the cumulative GBP 0.7 billion of additional interest and dividends. Onetime capital and capitalized cost synergies are expected to add a further GBP 0.6 billion in this period, which more than covers the cumulative onetime cost of GBP 0.4 billion. We, therefore, expect to generate a net cumulative GBP 0.4 billion of excess cash.

So alongside being strategically compelling, this transaction is additive to our stand-alone excess cash generation, thereby affording us further flexibility to both support our growth ambitions and deliver increased return to shareholders. As we have previously indicated, we will come back in Q4 and set out how we plan to use the excess cash post 2026 once our deleveraging program is completed, in line with our capital allocation framework.

I will now hand you back to Andy.

Thank you, Nic. So as I said at the start, we believe that the strategic and financial rationale for this transaction is very compelling. And I hope you have a clear sense of how energized we are of the prospects for the enlarged group. Aegon UK is a great fit for Standard Life in terms of its footprint, capability and size. The acquisition significantly accelerates our ambitions and vision for where we want to take this business. And it comes at a time when the opportunities in the U.K. market have never been as exciting as they are now.

With financial well-being being at the heart of everything it does, Aegon's culture and values are aligned with our own. Together, we will not only be stronger, we will be better. And I look forward to welcoming everyone at Aegon UK to Standard Life in due course and working together to capture the huge potential in front of us.

Let me stop there, and we are happy to answer any questions that you have. I'm going to pass to Oliver, who is going to run the question session for us. Oliver?

[Operator Instructions] Our first question today is going to come from Farooq at JPMorgan.

I hope you can hear me.

Yes, please go ahead.

Okay. So my first question is on the kind of revenue synergies with this Retail business. So I mean, Aegon obviously brings an adviser platform. So how will that interact with your kind of legacy customers but also Aegon has a restricted advice and also an independent IFA firm. So what are your plans for that?

And secondly, could you talk a little bit -- in a little bit more detail about the strategic agreement you have with Aegon and how that will work in future? I'm guessing you're talking about asset management, but just wanted to clarify.

Thanks, Farooq. So I'll take both of those. So in terms of the revenue synergy question, what's particularly attractive about this transaction is how complementary the capabilities are. So for example, in Workplace, Aegon have a real strength through corporate advisers and IFAs with small to midsized corporates, and we have a particular strength to employee benefit consultants with larger corporates.

But particularly on the Retail side. So for example, in the adviser space, we have some excellent propositions such as our international bond and smooth managed funds. But coupling that with a really strong adviser platform, we think there's a huge benefit from bringing those elements together. And then when it comes to Retail Direct, again, it's complementary. So as you rightly say, Aegon have the Origen advice business but also the nationwide advice business, so about 150 advisers altogether. We were already building out our advice capability but that accelerates and scales and complements what we're already doing there. They have a proposition called Mylo, which is a direct-to-consumer platform, which again is complementary to what we have. So we're really excited about the complementary nature of bringing these businesses together. Obviously, the detail -- we already said we were going to do a market update in Q4, and we will stick to that market update in Q4 and say more than about how we're thinking about bringing these different elements together.

In terms of the strategic agreement with Aegon, so I mean, obviously, this was a competitive process. And definitely one of the differentiators of why we were successful was our equity being part of that transaction. Aegon Group are really excited about the potential for the combined business, Standard Life and Aegon UK in the U.K. They were keen on having an equity participation. They've committed to a lockup until into 2028 as part of that. So as part of that relationship, they have that shareholding. They will get a seat on the Board as they're over 10%. And then of the GBP 180 billion of assets -- sorry, the GBP 160 billion of assets that we're bringing on board here, GBP 20 billion of that -- roughly GBP 20 billion of that is managed by Aegon Asset Management, and we have an agreement around that GBP 20 billion as well.

Our next question comes from Mandeep of RBC.

Can you hear me?

Yes, Mandeep.

Firstly, just on thinking about the dividend. In previous large transactions, you had a step-up in the dividend, and it looks like the transition delivers excess cash over 5 years. So just wondering what you -- why you decided against doing anything on the dividend today?

And then secondly, on the -- what will you do on the migration of the U.K. platform you're acquiring? I don't think Aegon UK uses the same platform that you currently use. So just thinking about how that migration will happen.

Sure. So again, I'll take both of those. So basically, no change to our dividend policy. So we still have a progressive and sustainable dividend policy. No change today to the dividend per share. And I think what I'd sort of point you to, Mandeep, is that we'd already set out that -- on a stand-alone basis, our operating cash generation each year is significantly exceeding the costs, including the dividend, and we have -- we expect GBP 0.5 billion of excess cash this year. Obviously, this year, we're looking to use that to delever. That still remains the expectation. But the Aegon UK business basically adds to that. We still expect OCG to grow mid-single digits but the excess cash at OCG above uses post this transaction is greater than the GBP 0.5 billion before. So that's clearly positive for shareholders.

What we had said is that we expected to come back in Q4 with a market update. And as part of that, we would talk about future dividend trajectory in Q4, and also, we talk about what we would plan to use this excess GBP 0.5 billion per annum of cash for. So that's now a bigger number than GBP 0.5 billion. We still expect to come back in Q4. The one observation I would make is obviously of those potential uses in our capital allocation framework, M&A becomes less likely. So it's much more focused around growth and capital returns in terms of that. But we'll come back in Q4 on all of those points.

I mean in terms of the platform, so our platform strategy, again, is unchanged here. It's all focused on simplification, automation and digitization. And that doesn't change here. So we will be bringing on board a number of platforms. Underpinning the synergy numbers, there are a number of assumptions around what we would do. But in practice, the way we run these acquisitions is we make assumptions that underpin the synergies. And then when we actually take control of the business, the combined teams come together and work out what is the best way forward. So we have some assumptions of what we would do consistent with that platform strategy.

But in reality, we would then look in more detail and determine exactly what is the right things to do. And as and when we make those final decisions, we'll obviously communicate that more fully. But I think that the capabilities that this brings. So Aegon UK have very strong capability with AWS, with data and telephony, a lot of digital tooling as well. We think that the suite of kind of tech and digital capability is enhanced as a result of the acquisition, which is exciting for us.

Our next question comes from Nasib at UBS.

Can you guys hear me?

Yes. Please go ahead.

Sorry, the unmute button came up twice. I've got quite a few questions but maybe just following up from that Mandeep's question and your response, Andy, on the uses of the excess cash. You have that GBP 400 million of investment into the business, right? Does that become part of that use of that excess cash as well? And then kind of on the GBP 400 million, does that -- I believe it excludes the Aegon UK stand-alone investment that they're already doing in the business? Or does that drop off -- drop into the GBP 400 million?

I guess second question on kind of where does IFRS leverage land? And what is the free cash flow per share impact? On my numbers, kind of IFRS leverage improves by 10 points, free cash flow per share is neutral. Is that kind of -- if you can check my math here, maybe that's a big question.

And then finally, on kind of the stakes that you have now in your equity...

These are all, Nic, questions, Nasib. I was just joking. So far, they're all Nic questions. I always pass the difficult one to Nic, you know that. So they all are his question.

Final one might be for you or maybe for the companies that have a stake in your equity. Aberdeen and Aegon now. Aberdeen's got some dilution. How does that impact the Board seat, et cetera, if you can comment on that. And Aegon, would you kind of -- if Aegon sell down, I know there's an 18-month lockup, would you kind of participate as share buybacks? I know ASR do that with their Aegon stake.

Sure. Okay. So I'll take the final one of those and ask Nic to take the first 2, and he can add a bit more color around the thinking on the excess -- the uses of excess cash. So first of all, in terms of Aberdeen, so we obviously cross our strategic shareholders in advance. Aberdeen are strongly supportive of the deal. It will mean that their shareholding goes below 10%, and therefore, they would no longer have a Board seat at completion but there's no practical consequence of that in any shape or form. The strategic partnership we have with them is very strong. It's focused on the GBP 140 billion of assets they manage and the shareholding they have. There's no change to their shareholding as a result of this. They have no plans to do anything different with that shareholding. It's an important part of that overall strategic partnership. And there'll be opportunity for Aberdeen here because ultimately, a group that was GBP 320 billion of assets is now GBP 480 billion of assets, and they are our key strategic asset management partner. So there'll be additional opportunity there for them. Jason and I have an excellent relationship. We've known each other a long time, and we will continue to collaborate very strongly strategically in exactly the same way as we have done to date.

In terms of Aegon, I'd say, Nasib, it's too early to speculate. But with the business having in excess of GBP 0.5 billion of excess cash every year, clearly, that would be a potential option. But we're into 2028 before we get to that. So I wouldn't want to speculate ahead of time on that.

Nic, do you want to pick up the first 2 questions?

Yes. So the one-off costs will be funded by the one-off capital benefits. So the timing is such that those benefits, capital synergies and cost synergies will emerge in a way that allows the one-off cost to be paid.

In relation to the IFRS leverage, I can't confirm the numbers. I don't estimate or calculate the leverage based on IFRS. It's not a meaningful way of calculating leverage. We track clearly what it does on a solvency basis. And as I have said in my preprepared remarks, the funding structure is such that it falls within our -- on a combined basis, it falls within the 30% level.

In terms of free cash flow, the average over the 5 years is around -- is GBP 150 million, GBP 750 million in aggregate over the first 5 years. So I guess, on a per share basis, your math is about right.

Sorry, Nasib, I know, you said about the stand-alone investment Aegon are already making. So most of that happens this year, and we've allowed for that in all of the numbers. So most of that stand-alone investment is completed this year. And just to be sort of crystal clear, the GBP 400 million net of tax cost of delivering the synergies is funded by the synergies themselves. So it has no impact on that. The GBP 0.5 billion of excess cash every year we generate, which is available from the end of this year, having completed the deleveraging program, that gets bigger and none of that is needed to fund the delivery of the synergies, just to be crystal clear.

Our next question comes from Abid at Panmure Liberum.

Can you hear me?

Yes, loud and clear.

Great. Okay. I've got a few questions as well. The first one is on the return metrics. I'm just wondering what the deal IRRs pre and post the synergies look like. It clearly looks accretive on the price to UT 1. So well done on that. But it would be helpful to have some IRR metrics just to sort of talk to the generalists, if possible, and perhaps what the payback period looks like. It sort of looks like 3 to 5 years from the outside.

And then the second question is on the margins. Just wondering what the target platforms look like for the business that you're acquiring in terms of the Workplace and Retail pensions business and what the margins are on the Aegon business versus the Standard Life stand-alone business, if you could sort of just compare and contrast that for me?

And then just finally, on the synergies, slightly surprised that the synergies are going to take some 5 years to fully realize. Could you just talk to a little bit more on that, please?

Sure. So I'll take the first and just add a quick comment on the third and then pass to Nic to cover more of the third and the second. So what we don't provide IRR metrics when we do M&A deals, we haven't done in the past. Suffice to say the returns are significantly in excess of our weighted average cost of capital.

In terms of the synergies, I mean, the point I want to make here is the kind of strategic point. So what we're looking to do here is to build a strong growing customer franchise and business. And so from our perspective, that customer retention is really important and critical. And therefore, we are going to take a considered approach to working on the platforms and so on and so forth to make sure we take the market and our customers with us because we think that will be the highest value way forward from a shareholder perspective and from a customer perspective.

Nic, add on the synergies and then the second question.

Yes. Thank you, Andy. I mean you covered the cost in relation to capital. We will need to harmonize their internal model with ours. There is a pathway that we're following with the regulator on major model change. So we needed to dovetail with that. And similarly, once that is completed, we will then move on to a Part VII transfer. So again, we will incorporate -- we'll seek to incorporate transferring Aegon UK's policyholders into PLL alongside those of ReAssure and Sun Life of Canada. So it's linked with the time. We're trying to be efficient in the way we do these things. Now clearly, if we can do it faster, then we will do that.

In relation to margin, the GBP 190 million of operating profit on an IFRS basis is roughly made up of GBP 170 million relating to the P&S equivalent of the business and GBP 20 million relating to annuities. At GBP 170 million on 160 billion asset base, the average profit margin is around 10.5%, rounds to 11% before synergies. So it's lower than our current 19%. But once you incorporate the synergies, which -- all of which will go against the P&S business, then that margin improves to 17.5%, around 18 basis points, so much closer to what we're delivering today.

So as I said, this isn't just about acquiring scale for the sake of it. It does give us the opportunity to transform the economics of that business and to make it look a lot closer to ours.

[Operator Instructions] Our next question comes from Corinne of Autonomous.

Question on the debt leverage. You're talking about continuing the deleveraging for this year. So you've got a couple of issues that are callable in June. Is that what we're referring to there with the continued deleveraging?

And then the timing for the new debt issuance, is there any attempt to sort of dovetail those? Or will you literally just do some opportunistic before the [ deal closes? ]

Sorry, Corinne , it's a very crackly line. Okay. Do you get them?

Yes. So our stand-alone business continues on its trajectory to get to the 30% at the end of this year. There are 2 instruments, as you indicated, as we have indicated previously that come up to maturity in June of this year. And so that affords us the vehicle to achieve the stand-alone target. In relation to the raising of the GBP 650 million debt to support the acquisition, this will be done in the second half of the year in anticipation of completion around the year-end.

Our next question comes from Thomas at Mediobanca.

Thomas Bateman from Mediobanca. Could you just talk about the overall cost base for Aegon UK? I just want to get a sense of how much you're being able to take out of that?

And the second question is kind of linked to that. You alluded to property leases being a key reason why the time line on the synergy realization is quite long. How much of the cost savings are related to property leases?

And the third question is just going back to Nasib's question on free cash flow per share. In your calculation, did you include any of the nonoperating OCG in that calculation? I might get it a little bit better, maybe slightly positive if I include that or maybe I've done the math wrong.

And I'm sorry, the final question, you alluded to the one-off costs being paid for from the capital benefits. I'm assuming that then the capital is complete -- is all cash basically or can convert into cash to pay that. Maybe that was implicit in your answer but any color there would be helpful.

So we'll let you away, Thomas, with 4 questions, and they're all for Nic.

So the overall cost base of Aegon UK is GBP 360 million. So that kind of gives you a sense of how the GBP 110 million compares. But kind of in our own minds, the GBP 110 million is on the combined cost base, which is, I guess, at the point at which we own it will be around the GBP 1.3 billion, GBP 1.4 billion.

In relation to the property leases, the savings are relatively modest. They're less than 5% of the total. It's not -- it's the length of these leases. We have 2 properties in Edinburgh. Both have very elongated lease terms. We haven't yet made a decision, which of the 2 we will keep. But at the point at which we bring one of those to a decision, we will have to provide for the onerous lease costs. It's not a timing issue. It's more of a size issue. And within the GBP 300 million post tax that I indicated will be the one-off costs, around GBP 95 million relate to the -- to providing for those onerous leases.

In relation to the OCG, no, that was on an operating minus the net recurring uses. Yes, you're absolutely right. It will be additive to EPS if you took the one-off capital synergies and spread them over a period. And in relation to the capital benefits, yes, they -- clearly, there is availability of funds to support the funding. So yes, the excess will be cash like to enable the payment of those costs.

Thank you very much for all your questions today. I'm now going to hand back to Andy for your closing comments.

Thanks very much indeed. Thanks, everyone, for joining us. So look, just to summarize, we're very excited to announce this transaction today. It brings together -- it very much moves us further forward on our vision to be the U.K.'s leading retirement savings and income business. It brings together 2 complementary businesses and makes us, by some margin, the market leader in the really exciting and fast-growing U.K. retirement savings and income market.

So thanks very much indeed for joining us. If you have further questions during the day, don't hesitate to reach out to the team, and we'll catch up with all of you soon. Thanks very much indeed. Thank you.

Welcome to Standard Life's Full Year 2025 results presentation. I'd like to introduce the stage, Andy Briggs, Group Chief Executive Officer. Andy, over to you.

Thank you, Claire. Good morning, and welcome. It was a privilege to be here just 2 weeks ago, ringing the opening bell on the London Stock Exchange, and I'm delighted to be here today presenting a Standard Life plc.

For more than 200 years, Standard Life has been standing beside its customers. And today, as real life for customers is less predictable, our role as a retirement specialist is more important than ever.

So to our agenda today. I'll begin with an update on progress on our strategic priorities, and the operating momentum we are building across the group. Nic will take you through the detail of our financial performance. I'll then return to outline the strategic developments to come before taking your questions.

When we set out our 3-year strategy in 2024, we were clear on the scale of the opportunity in front of us. Two years on, I'm delighted with the progress we've made.

First, we are uniquely positioned in our markets. The U.K. market is one of the most attractive globally for retirement savings and income. Second, strong execution means we're driving better customer outcomes and meeting even more of their needs, deepening our relevance. Third, that, in turn, is driving profitable growth, which is translating into a stronger balance sheet. We are firmly on track to deliver our 2026 targets. All of this supports strong shareholder returns and creates financial flexibility that gives us more strategic optionality than ever before.

Our strategy is underpinned by 3 strategic priorities: grow, optimize and enhance. Two years into our 3-year strategy, we delivered material progress across each. To grow, we strengthened our products and engagement capabilities. Following product launches in 2025, we now have a full product suite to support customers across all stages of their retirement journey.

The launch of our advice proposition and our wide range of digital offerings from our family finance hub to our mixed income builder tool are all helping customers navigate their retirement journey, unlocking the ability to further engage and support households with excellent budgeting and planning options.

Within optimize, our in-house asset management expertise continues to enhance returns and deliver better customer outcomes. Deleveraging remains a clear priority, and we're driving progress here. We paid down a further GBP 200 million of debt in December, which was underpinned by business growth, improving our leverage ratio to 33%.

On enhance, we've delivered GBP 180 million of run rate cost savings, ahead of expectations again as we leverage technology to reshape our organization. Lastly, our migrations are progressing well with 75% of customers now on end-state platforms, up from 45% in 2024. To summarize, our colleagues have delivered 2 years of meaningful operational progress across the board. And I know that there's much more to come from Standard Life.

Our strategic progress is translating into strong financial performance across cash, capital and earnings. Operating cash generation has grown at 13% CAGR over the past 2 years, and we remain confident in mid-single-digit percent growth into the long term. Our growing business is generating surplus capital, which we are currently using to strengthen the capital position by paying down debt. Even through our deleveraging program, we remain in the upper half of our solvency range.

Finally, on earnings, we remain firmly on track to achieve our circa GBP 1.1 billion operating profit target in 2026 having delivered another year of strong operational performance. And we continue to grow our dividend up by 2.6%.

Now I've had the privilege of working in this sector for nearly 40 years. And maybe it's just me, but I think the U.K. retirement market has never been this exciting.

The GBP 3.6 trillion market is set to grow by 70% over the next decade, driven by structural long-term demographic trends, including the aging population and the shift to defined contribution. On the top of that, on the right of the slide, we see encouraging regulatory and political proposals to create additional tailwinds to our industry. These will accelerate the existing structural growth drivers in the market, so we see growth potential beyond this 70%.

Through our active role in shaping the market and the strategy we've defined, Standard Life is well positioned to benefit from these tailwinds. And better still, in the fast-growing market, we're the only scale player, solely focused across the full retirement and savings life cycle. And our ambition is to grow faster than the market and gain further market share. On this slide, we can see strong flows in each market.

In Workplace, our ambition is to consolidate our top 3 position as this market grows rapidly and concentrates down to fewer providers. In Retail, we're looking to move from a top 10 to a top 5 position, again, in a rapidly growing market. And in Retirement Solutions, we aim to maintain a top 5 position across individual annuities and PRT combined.

Our success is underpinned by our competitive advantages. I will come on to these in more detail later, but I will highlight here that the diversification of our business model across the capital-light Pensions and Savings and capital utilizing Retirement Solutions brings capital efficiencies and customer benefits. Whether it's joining the Workplace 18 years or staying in consolidating in Retail or securing income in retirement through our annuities business, we are well positioned to serve our customers and their evolving needs at all life stages.

In Workplace, we're a scale player with 3 million and growing customers. Winning in Workplace requires 3 things: a leading employer proposition, excellent customer service and scale-driven cost efficiency, and we are strong on all 3 of these. Employers are the key decision makers here and our leading employer proposition is underpinned by our award-winning Master Trust. And our sustainable multi-asset proposition, one of the U.K.'s largest sustainable default funds supporting millions of Workplace members.

In 2025, we delivered several sector firsts, ranging from new tools to supporting families to FCA-aligned sustainability labeling to Shariah-compliant offerings. Very high on the agenda for employers is excellent customer service. I hear from employers time and again that the quality of our service is a key differentiator here. I'd like to join some of our Workplace pitches and employers consistently highlight that we genuinely care about every client and member, with quality of service their #1 priority and they say this really stands out when they visit Standard Life. This is enabled by our brilliant colleagues and our digital-first member engagement, reflected in our app rating of 4.7 stars, again, with continuous developments.

Thirdly, cost efficiency is delivered by leveraging technology and our ongoing migration program, which in turn means our margins continue to expand and are ahead of peers.

On the right, you will see that our winning Workplace formula is translating through to strong outcomes. An excellent Net Promoter Score of 60. We welcomed 247,000 new Workplace members in 2025, up from 226,000 in 2024, and we won over 200 schemes in 2025. So this market is key for customer acquisition.

Thirdly, Workplace assets are up almost 40% in 3 years, importantly, driven by strong positive net fund flows. With GBP 10 billion of gross flows reached this year, our market share grew well into double digits. So great progress and hugely exciting that this will be further supercharged by market consolidation as minimum fund size is enforced and expected contribution increases.

Turning to Retail. Success in this market is driven by 3 things: effective customer engagement, offering products that meet their evolving needs and using digital infrastructure to do all this proactively. We have the first 2 and a significant opportunity to leverage the third.

On the left, we engage customers through multiple channels, including our award-winning app and telephony guidance. And of course, the rollout of our advice proposition, which launched last year. Here, we're pleased that we can support customers in providing financial advice for a single flat fee regardless of pot size.

Second, our full product suite addresses customer needs and now supports them across their entire savings and retirement journey. Distribution has widened as our products are now on both the Quilter and Fidelity platforms and continue to scale with strong investment performance.

Thirdly, we have a significant opportunity to leverage digital infrastructure. A key area of focus is building out our Salesforce CRM integration. This is improving our outflows, which Nic will come on to. It gives us deeper insight to support customers so we can proactively help by nudging customers to make active decisions to ensure they're doing enough at each stage of their journey to and through retirement.

I was call listening last week and heard a great example. In our new pension consultation service, our CRM system uses propensity modeling to proactively target customers who will benefit from this service. The outcomes of our efforts in Retail are visible on the right of the page. Our customer satisfaction scores are in the 90s, with 93% of customers rating us good or excellent. This is translating to more digital customer engagement with total log-ins up 50% in 2 years.

Lastly, on this slide, we're seeing positive customer outcomes feed through to flows. Gross Retail flows of GBP 7 billion, up nearly GBP 3 billion over the last 3 years. But the bottom line is that we're only scratching the surface, and there is so much more to come here. I'm delighted to have welcomed Angela Byrne as CEO of Pensions and Savings this year as we build the next stage in our journey.

In the Annuity business, which includes both PRT and individual annuities, winning is all about having a leading employer proposition, excellent member experience and competitive pricing. And our strength in all 3 is why we're winning in these markets. Our comprehensive buy-in and buyout capabilities and a full product suite means that we can serve customers however complex their needs may be.

Member experience is critical in this market. Members want clarity, speed and service, all of which we provide. Our digital capabilities allow customers to understand their position in real time. For example, our digital quote platform underwrites and returns over 90% of individual annuity quotes within seconds. Our core service rates are excellent versus peers, and we're also Amazon Web Services largest European insurance client, a testament to our scale.

Our diversified business mix is a huge advantage with most peers effectively undiversified mono lines. We also continue to leverage our in-house asset management capabilities to deliver superior returns, particularly through recurring management actions, all of which means we can price competitively and generate attractive returns.

All these factors are driving strong outcomes. We've nearly doubled our individual annuity market share to 15% from 8% in only 2 years and expect to grow further. We also wrote our largest-ever PRT deal of GBP 1.9 billion. As outlined earlier on this slide, our comprehensive capabilities, which includes our innovative market-leading track record for longevity swap novations was key to winning this deal.

We are disciplined in our approach to Annuities, choosing to deploy up to GBP 200 million of capital and seek value over volume. This is evidenced by the attractive returns generated with lifetime IRRs on our annuity business of more than 20%.

This strong performance across Workplace, Retail and Annuities is driving growth in our key financial metrics operating cash generation. We are confident of mid-single-digit OCG growth going forward. Our GBP 1 billion of free cash flow has doubled from 2023, now comfortably covering our growing dividend of about GBP 550 million. This means dividends and excess cash will both grow as OCG grows, particularly as recurring users are reducing.

2026 is our final year of using this excess cash to delever. So from the end of this year, this financial flexibility will enable us to deploy excess cash to the highest returning opportunities in line with our capital allocation framework.

And I'll now hand you over to Nic, who can run through the numbers in detail. Nic?

Thank you, Andy, and good morning, everyone. When I stood here a year ago, I talked about how our balance sheet pivot had lagged the strategic business pivot and highlighted the key role that operational performance plays in improving our balance sheet quality and enhancing our financial flexibility. The upgraded 2026 financial targets were set with exactly this in mind. One year on, I'm pleased to be reporting a strong set of results for 2025, alongside clear progress on the balance sheet.

Starting my presentation with the financial headlines. Operating cash generation grew by 5% to GBP 1,474 million, with total cash generation at GBP 171 million, both in line with previous guidance.

The solvency leverage ratio improved to 33%, while our solvency cover increased to 176%, remaining in the upper half of our operating range. IFRS operating profit was 15% higher at GBP 945 million, supported by asset growth and cost savings, which reached GBP 180 million on a run rate basis. Adjusted IFRS shareholders' equity was GBP 3.1 billion, benefiting from a strong increase in the CSM, which partly offset the negative hedge market-related impacts.

We have recommended a final dividend of 28.05p per share, up 2.6% year-on-year, bringing the total dividend for the year to 55.4p per share. This performance puts us firmly on track to deliver all of our 2026 targets.

I will now cover the financials in more detail, starting with the performance of our main businesses. Backed by our leading propositions and brand, our Pensions and Savings business continues to grow assets, margin and profitability.

Workplace saw GBP 10 billion of inflows in 2025, GBP 1.5 billion of which were from new scheme wins. We have carried good momentum into 2026 with around GBP 1 billion of wins secured so far this year. Excluding new schemes, gross inflows were GBP 8.5 billion, highlighting the strong flywheel effect of this business. Outflows reflect the higher asset base and the natural attrition from members taking their pensions. Scheme retentions remain high, with only GBP 200 million of scheme losses for the second year running.

In Retail, our gross inflows continued to improve, up 16% to GBP 7.1 billion in 2025, benefiting from a greater take-up of our drawdown product and a 60% rise in international bond sales. Outflows include GBP 5 billion of withdrawals from customers accessing their retirement savings in the form of annuity income, drawdown payments or tax-free lump sums. They also include GBP 2 billion of internal transfers to more modern retail products. While the remaining outflows are sizable, we expect them to improve as a percentage of AUA as we increase our focus on retention.

In the top right, you can see how these flows have combined with positive market effects to lift the overall P&S asset base by 9%. In the bottom half of the slide, I summarize the drivers of the financial performance for this business. We now publish both OCG and IFRS operating profit driver analysis for our main businesses, which enable us to better explain their respective performance and to express the results as a basis points margin on AUA.

Now given the capital-light fee-based nature of the P&S business, we consider IFRS operating profit lens to be the most suitable performance measure here. Average AUA grew by 7% in 2025 to GBP 204.6 billion, which combined with the improved margin of 19 basis points drove operating profit 23% higher to GBP 389 million. This performance highlights our scale advantage and operating leverage with further margin improvement expected near term as the full benefits of our cost savings program come through.

Our Retirement Solutions business also delivered a strong operating performance in 2025. As a reminder, new volumes are not the primary driver of profits here. We run over GBP 40 billion of annuity assets, and it is the management of this large book that drives most of our profitability. We have 2 main product lines in this business, being individual annuities and pension risk transfers.

For individual annuities, product innovation and rising consumer demand saw new premiums grow 20% to GBP 1.2 billion, which is double the 2023 level. PRT premiums were lower at GBP 3.9 billion, reflecting reduced market volumes and our disciplined approach to pricing. In a narrow credit spread environment and competitive market, we took the decision to protect economics and forgo volumes. Our overall capital efficiency improved in 2025, with the reduction in capital invested outpacing the overall decline in new premiums.

As we look forward, our aim is to deploy up to GBP 200 million of capital to annuities this year, provided we secure sufficiently attractive returns. We remain confident in our ability to win in this market with GBP 1.6 billion of PRT transactions completed or at an exclusive stage in 2026 so far.

The bottom half of the slide depicts the drivers of performance for Retirement Solutions. Given the capital-utilizing spread-based nature of this business, we consider OCG to be the most appropriate performance measure. Our effective management of the in-force book compared with our scale, efficiency and expertise in delivering portfolio optimization actions, enabled us to sustain the spread-based margin at 219 basis points. Applied to our growing average AUA of GBP 40.2 billion, produced OCG of GBP 879 million, up 3% year-on-year.

I will now move to the group metrics, starting with operating cash generation. The OCG increased to GBP 1,474 million, was driven by a 6% increase in surplus emergence to GBP 914 million and by another strong performance in delivering GBP 560 million of recurring management actions, driven by our developed asset management capabilities. The contribution of the 3 components that make up these actions are broadly similar year-on-year, with further detail provided in the appendix. We're confident in achieving our guidance of GBP 500 million recurring management actions each year as the capabilities and dynamics that underpin this performance are both differentiated and enduring.

On the right, you can see the business segment analysis of OCG, which we disclosed for the first time as promised. P&S grew its OCG by 13% to GBP 396 million, equivalent to 19 basis points on AUA. Three quarters of this margin reflects the release of in-force profit based on real-world returns and the benefit of actions to reduce operating costs. The balance reflects the uplift from simplifying fund structures.

Retirement Solutions accounted for over half of the group's OCG at GBP 879 million, equivalent to 219 basis points on AUA. This reflects the steady release of capital and spread margins as our liabilities run off, and the benefit from both yield reoptimization and capital improvement actions. Taken together with profits, Europe and other produce a steady level of OCG at around GBP 200 million per annum.

Total cash generation on this next slide combines OCG with cash generated from items that are one-off in nature. As previously stated, we are targeting GBP 5.1 billion of TCG over '24 to '26. Two years into this 3-year period, we have delivered TCG of GBP 3.5 billion, comprising GBP 2.9 billion operating and GBP 0.6 billion nonoperating capital generation. A further GBP 1.6 billion TCG is expected in 2026, primarily from operating sources.

On the right, you can see how the GBP 5.1 billion cumulative TCG is expected to fund our planned recurring uses and the onetime investment to deliver our strategic priorities over this period, generating GBP 1.2 billion of excess cash. This excess is what provides us with the means to reduce our debt stack over the '24 to '26 period.

I would like to spend a moment to take stock of the notable transformation in our ability to generate positive excess cash since 2023. By growing OCG from GBP 1.1 billion to nearly GBP 1.5 billion and by moderating our recurring uses depicted in blue, we have significantly improved our ability to cover the growing dividend shown in orange and generated a rising level of excess cash being GBP 296 million in 2024 and GBP 423 million in 2025. We expect this pattern to repeat in 2026, generating around GBP 0.5 billion of excess cash.

We deploy excess cash in line with our capital allocation framework, which remains unchanged. Our near-term priority is to deleverage to our 30% target. We expect to complete this by the end of '26, after which this excess will be directed to the most attractive return opportunities across growth investment, targeted M&A and increasing returns to shareholders. We're very optimistic about the potential future opportunities for our group.

Turning next to the group's 2025 solvency walk, where I'm pleased to report an improvement in the drivers of solvency capital. After covering recurring uses, we generated GBP 0.4 billion of net recurring capital, mostly in the form of own funds, which added 9 percentage points of solvency cover. Nonrecurring items netted to a small positive amount, which includes a GBP 0.1 billion positive contribution from economics net of hedging. Delivering a broadly neutral nonrecurring component has been one of my key areas of focus since joining the group. As a result, we were able to return GBP 0.4 billion of debt while growing both our solvency surplus to GBP 3.6 billion, and our coverage ratio to 176%.

Turning next to leverage. Our ratio improved to 33%, reflecting the own funds growth and the GBP 0.4 billion of debt redemptions outlined in the previous slide. We remain firmly in control of our path to 30%, which will be managed within the upper half of our solvency operating range. With our capital emerging in a broadly even pattern through 2026 and with 2 debt instruments having June maturity or call date, the in-year leverage and solvency ratio paths will not be linear.

Moving to the IFRS results. Our adjusted operating profit increased by 15% to GBP 945 million. Profits from pensions and savings grew by 23% to GBP 389 million, while those from Retirement Solutions increased by 19% to GBP 563 million. These performance improvements were driven by business expansion, cost savings and higher investment margins, reflecting the successful delivery of our grow, optimize and enhance strategic initiatives.

Turning next to cost savings. Here, we have accelerated delivery from faster progress on migrations and from leveraging technology to enhance our business and adopt a more efficient operating model. On a run rate basis, we have achieved GBP 180 million of savings across '24 and '25, meaningfully ahead of our planned delivery profile.

Savings on an earned basis were GBP 110 million last year, up from the GBP 28 million in 2024. The year-on-year benefit is, therefore, GBP 82 million, with GBP 55 million coming through our segmental results as operating margin improvements or reduced non-attributable expenses. The cost savings that relate to insurance contracts are driving meaningful increases in our CSM.

This next slide completes the IFRS basis picture. As you can see in the dotted box, the improved operating profit performance means that we're now close to covering our recurring uses. The uncovered portion last year was only GBP 29 million, significantly better than the GBP 182 million in the previous year.

The 2026 operating profit target of GBP 1.1 billion will comfortably cover recurring uses. And by 2027, we expect to cover all uses, enabling us to grow our contribution to shareholders' equity before economic variances.

Nonoperating items include GBP 264 million, reflecting the planned investment spend to deliver our strategic priorities. This is expected to normalize to below GBP 100 million after the end of our current investment program.

Adverse economic variances of GBP 604 million were almost entirely driven by negative marks on equity hedges following a 19% blended rise in markets. As I have previously explained, this is a known consequence of our hedging strategy which protects cash and solvency capital, but gives rise to an accounting mismatch volatility under IFRS.

Specifically for 2025, the GBP 604 million represents an accounting timing effect and is not an economic loss. This is because of the negative equity hedge effects from the rising markets is booked in full through earnings, while the related positive effect from higher future fee revenues will come through earnings over time. You can clearly see these future benefits elsewhere in our financials, and I will come back to this on the next slide.

Adjusted shareholders' equity, shown on the right, stood at GBP 3.1 billion at the end of 2025. While this is still a partial picture, it remains the most relevant measure of a life insurance balance sheet under IFRS as it includes the future store of value of insurance contracts. I referred to it as a partial picture because it excludes the investment contract value in-force, which is recognized in our solvency capital.

Let me now demonstrate where the offsets to the GBP 604 million adverse economic variance are evident elsewhere in our financial results. The related benefits are captured within 2 stores of value. The first being the insurance contract CSM and the second being the investment contracts value in-force, which forms part of the Solvency II own funds.

Both of these are significant in size with a combined value of almost GBP 10 billion on a pretax discounted basis. Both have increased at a strong double-digit rate since 2023 driven firstly by our operational actions to drive flows, reduce costs and improve risk-adjusted yields, but also from the equity market appreciation over this period. In 2025, positive market effects accounted for GBP 0.1 billion of the increase in pretax CSM and for GBP 0.5 billion of the increase in the value in-force. These stores of value will come through earnings in future years and provide a strong underpin to our performance trajectory for many years to come.

Turning briefly to dividend where our approach remains unchanged. We're a highly cash-generative business. We operate a sustainable and progressive policy and have a strong track record of consistent dividend growth. The metrics that the Board considers when undertaking the annual dividend assessment are repeated on this slide, being OCG, solvency coverage ratio and parent company distributable reserves, which stood at GBP 5.8 billion at end '25. These metrics remain at very healthy levels.

So to conclude, we have made significant progress last year in growing our operating cash and earnings metric, and we have improved the quality of our balance sheet. This performance puts us firmly on track to deliver all of our 2026 targets. Our business is now tuned to generate sizable recurring excess cash, which will enable us to complete our deleveraging this year and provide us with enhanced strategic and financial flexibility thereafter.

Thank you for your attention. I will now hand you back to Andy.

Thank you, Nic. So we're 2 years into a 3-year strategy. And while I'm encouraged by the progress we've made so far, I'm focused on the year ahead and delivering on our promises for 2026. In Q4, we'll come back and talk to you about what next, but the broad strategic direction will be in line with our current vision.

When we started this strategic plan, we set out a clear vision to be the U.K.'s leading retirement savings and income business. We began building out the capabilities shown here to achieve this vision. The green ticks highlight areas where we've made material progress or are complete. We've streamlined our group structure, optimized asset management, completed the rollout of our full product suite.

The light blue box at the top shows our next area of focus, as I outlined earlier, a digitally enabled and personalized customer interface focused on data, guidance and advice. This is more about building capability rather than material investment. We deliver this strategic vision by executing on our strategic priorities, so let's move on to what that means for 2026.

Under grow, we're further enhancing our technology and customer engagement capabilities. Our Salesforce CRM platform gives us a richer view of customer needs, enabling us to proactively nudge and support them at key life stages when decisions matter most. Targeted support will be a further unlock going forward as we engage more deeply with customers, supporting them in making the right decisions as they journey to retirement.

We're focused on scaling our products and deepening our intermediary partnerships, widening our access to potential customers. While for Workplace and Annuities, it's about continuing to deliver excellent performance. For optimize, we remain firmly on track for our leverage target, and we will bring more assets in-house, which increases certainty of delivering recurring management actions.

Lastly, on enhance, we'll complete our cost savings target, and we'll progress our migrations with only 25% of customers to be transitioned to their end-state platforms. We're also embedding technologies into our culture. We want AI to enhance the human skills, judgment and expertise that make us great.

Let me finish by bringing this all together and reminding you why Standard Life is winning today and why we will continue to win. Across the top of the page, engaging with our customers, combined with our capital and cost efficiencies, uniquely positions us to win in this exciting market.

Starting with customer engagement, we delivered over GBP 15 billion of net fund flows in Workplace over the last 3 years. This was a barely in positive territory when I started 6 years ago. Our group rebrand has brought our strongest brand to the fore. Walking around our offices last week, it's been really energizing to see how enthusiastic colleagues are about the name change and what it means for us. With 12 million U.K. adults, a customer Standard Life Group, we are uniquely positioned to engage them about their futures. Looking ahead, we will proactively support far more of our customers, helping them in further turbocharging our growth.

Moving to capital efficiency. This is particularly important in our capital utilizing annuities business. The fact that we're more diversified than peers is a key driver of our lifetime IRRs of greater than 20%, which is attractive compared to those peers. These IRRs are supported by recurring management actions, driven by the excellent asset management capability that we've built. Looking ahead, we will manage more assets in-house, and we continue to explore strategic partnerships here.

Thirdly, our cost efficiency continues to strengthen as we grow. This is particularly important in our capital-light Pensions and Savings business. Our sector-leading margin expansion from 11 bps in 2023 to 19 bps in 2025 reflects the scale of our business and how we leverage technology. It compares favorably to our major peers who typically report single-digit margins here. And looking ahead, we will utilize technology advancements as we scale and drive operating leverage further. I'm very confident that we will continue to win, given these competitive advantages, which will drive our growing operating cash generation over the long term.

To summarize, we operate in one of the most attractive retirement and savings markets in the world, and our strengthening competitive advantages means we are well placed to benefit. Our strong execution is delivering better customer outcomes. And all of this is translating into shareholder returns and provides attractive financial flexibility.

So with that, we will move to questions. We'll start with questions in the room. We'll then move to questions online. If you have a question in the room, please raise your hand and wait for the microphone and state the organization you're from. We'll do the questions in the room first and then online. And Nic looks like he's staying sat here. You are actually coming up and joining me, Nic. You don't get away without that. So the other thing Nic also offered this time to chair the Q&A, and why am I doing that? Because you ask all your questions, I decide the ones I like the sound of and then pass the rest to him. So let's start with Thomas here, and we'll go across from there.

First question is just on the P&S margin. The 20 bps, I think, in the second half of the year seems pretty good to me. But I'm just trying to gauge that relative to what you assumed in the GBP 1.1 billion guidance that you had. I can't work out if we're running a bit ahead or not. And similarly with the costs because I think we've only earned about GBP 80 million out of the GBP 180 million. So I think you said you're ahead on costs. So I'm just trying to put those 2 things in context, the GBP 1.1 billion.

And then the second question is just on the Lifeco free surplus. A number of my friends on the buy side highlighted Slide 44 to me this morning. Could you explain what the outlook is for the Lifeco free surplus? Because my message that I take away is that capital returns can increase at the end of the year, but that seems different to what the Lifeco free surplus is doing. So can you explain maybe the difference in your message versus what's happening there?

Sure. Yes. I mean I'll make a brief comment on the second and then pass to Nic to give a bit more color, and Nic will pick up the first. So I mean, I would look at the group solvency walk because that's what kind of matters in terms of what the group has overall. The Lifeco free surplus is basically the surplus above the capital management policy. So it's got a higher bar in the first place. And ultimately, having GBP 1.5 billion above the capital management policy means we've got excellent excess cash there. But we run the capital and cash of the group at a group level primarily, and that's our primary focus. But Nic, do you want to add to that and then pick up the first question?

Okay. I guess what I would add to what Andy has said is that we do manage the balance sheet in aggregate, not just at the Lifeco level, there are interaction effects between the Lifeco balance sheet and the rest of the group. To give you an example, we carry a lot of the deferred tax asset in -- at the group level, which the group has losses. They will be recovered from future earnings in the Life business. So that has an interplay as to the location of the capital between Life.

And also, I guess, part of the overall solvency picture is contributed to particularly on the nonrecurring management actions from our Irish business, which completed its work on the partial internal model, but there was some additional mass lapse reinsurance that's kind of contributed to the overall picture. I reinforce what Andy said that the -- at any given point in time, the excess in the Life company is only a partial picture. Our GBP 1.5 billion, it's plenty enough over our capital management policy.

In relation to your question on P&S, when we -- the GBP 250 million, just to give you some guidance around that, roughly 70% of that or 30% of that will relate to insurance contracts and will be accounted through the CSM. The balance will come through earnings, which will be about GBP 170 million. And we expect roughly 2/3 of that, around GBP 110 million to come through onto the P&S result. At the moment, the -- what you've seen so far is a GBP 26 million benefit in the P&S results. So there's another GBP 80 million or so to come through as we complete and as the full costs earn out. So that will correspond to a 3 or 4 further basis point improvement in the margin before any mix effects as that portfolio evolves. So already, we're seeing benefits that are coming through in improving the performance, but more to come as the full GBP 250 million program is completed and earns through in the next year or 2.

Mandeep?

Mandeep Jagpal, RBC Capital Markets. Three questions for me, please. First one is you have significant excess recurring capital generation versus your dividend cost. Nic mentioned the potential to use this for buybacks. I mean what are the largest constraints for buybacks once the leverage target is achieved? For example, is a negative IFRS equity viewed as any kind of constraint by you?

And Andy, you touched on targeted support. Could you provide an update on what Standard Life is doing in respect of targeted support? And could this be a meaningful opportunity for you to retain more of your heritage clients over time?

And then finally, on DC decumulation, some of your peers have recently announced hybrid investment and annuity solutions. What do you think could be the scale of demand for this type of product? And are you working on something similar?

Okay. So thanks, Mandeep. I'll take the second and third of those and then let Nic take the first. So targeted support, we are working on. We've recently had further detail from the FCA on how all that works through. And we definitely think it could be really helpful. The reality is, at the moment, only about 10% of consumers in the U.K. are getting advice as they journey to and through retirement. So 90% really aren't getting the help and support they need, and we see targeted support as being a really helpful way to do that. I think it's a huge opportunity for us. And I'm pleased with how we're going in the annuities market and how we're going in Workplace. We're only scratching the surface of the opportunity in Retail at the moment. And with 1 in 5 adults in the U.K., customers of Phoenix Group for each GBP 1 they have with us, they have GBP 3 elsewhere and only 10% are going to pay for advice. So the opportunity is huge there, and that's why we're building out our capabilities in that space.

On the DC decumulation, what you're seeing roughly at the moment, so last year, about GBP 60 billion went over into retirement income in the U.K. About GBP 20 billion of that was taken as cash, so effectively 25% tax-free cash plus some smaller pots. And the balance of GBP 40 billion, roughly GBP 30 billion went to drawdown and GBP 10 billion went to annuities. That was kind of roughly how that went. But if I sort of roll the clock forward 10 years from now, the GBP 60 billion will be more like GBP 120 billion. I still think maybe GBP 40 billion of that will be cash. But our view would be the residual GBP 80 billion would be much more half and half in terms of annuities and drawdown, particularly as more customers get to sort of age 70 plus, I think more and more will say, with rates being higher, I can turn my accumulated pension pot into a 10% per annum income for life, and I know I've got it for life, and I don't have to worry about it. I think we'll see more and more of that.

We offer -- we already offer a range of hybrid solutions. We offer fixed annuities. We have the smooth managed fund that's now got a 10% per annum performance over the last 2 years. So we have a good range of propositions to feed into this. And I completely agree that -- and we offer this already to customers, a number will want to take some of their income in guaranteed form and some in more variable drawdown form. Nic, do you want to take the first question?

Yes. I mean I'll repeat what I've said before that kind of IFRS is not a good reference point for the economic capital picture of the organization. Solvency II is. So for as long as we generate the cash, which we have been doing over the last few years, for as long as the overall level of solvency is healthy, which it is at 176% and as long as we have healthy distributable reserves, GBP 5.8 billion, there are no constraints to either paying a dividend or indeed undertaking any share buyback should we opt to do that.

Distributable reserves is key. I'll repeat what I said at the half year point. Those are sustained at the group level from the U.K. GAAP basis distributions in our Life companies. On a U.K. GAAP basis, our Life companies delivered GBP 550 million of profit, actually up on last year, notwithstanding the fact that the hedge -- the negative marks on the hedges go through those accounts and retain GBP 1.4 billion of distributable reserves within those Life companies.

So for as long as all these numbers remain healthy, then there's no constraint to the way we think about capital that are no constraint vis-a-vis the IFRS lens. What might prevent us from doing it ultimately is what it competes with. So we will be entirely value rational. And we will undertake any of those 3 options on our financial framework based on value metrics.

We'll keep going across Andrew.

Andrew Baker, Goldman Sachs. So Nic, I appreciate everything you just said on shareholders' equity not being a constraint, but the first one is on shareholders' equity. Just give us a sense of what you're expecting for the nonoperating expenses for 2026? And then anything you've seen in terms of year-to-date mark-to-market impacts would be helpful.

Secondly, just on Europe. I think you did the strategic review here in 2021. I think at the time, obviously, the decision was to replatform and it would take probably 2 to 3 years. Is that now done? And then I guess, how should we think about Europe in the context of your wider vision for the group being U.K.'s leading retirement savings and income business?

And then thirdly, on -- we've seen some press reports on alternative asset manager, BPA partnership. Anything you can say there would be really helpful. And I guess, more generally, just what would you be trying to achieve if you did go down the partnership route there?

Sure. Yes. So I'll take the second and third. So in terms of Europe, the -- basically, we've migrated 75% of customers to target platforms, 25% haven't. Europe is part of the 25%. So that hasn't happened yet. Frankly, we prioritized the U.K. customers in that transition. So our position on Europe remains the same, as I said before. The thing I would say is that one of our strongest propositions is actually our international bond. Nic mentioned that the sales there are up 60% year-on-year. That comes from our Standard Life international operation in Dublin sold back into U.K. advisers with the changes around inheritance tax we're seeing far more customers using international bonds now as a result, and we're keen to have that full and comprehensive suite of products.

On the BPA side, so we're very determined that we want to keep a balanced diversified business mix across capital-light pensions and savings, Workplace and Retail and the Annuities business. And therefore, we're disciplined in the amount of capital we allocate to Annuities. The way that plays out in practice is we basically participate in the market up to about GBP 2 billion premium size. We wrote our largest scheme of GBP 1.9 billion last year. And that's just under half of the total market, just over half the total market that we expect over the next decade is schemes above GBP 2 billion.

So what we're exploring is could we partner with third-party players that want to deploy more capital into this space to use our brand and our origination capability to take origination fees and participate in that larger end of the market and potentially also then get some really differentiated unique private credit capability as well. So that's what we're exploring. We explore lots of things as a business in terms of looking to drive stronger returns for shareholders. As and when -- if and when something comes of that, we'll obviously tell you more at that point in time. Nic, do you want to take the first one?

Okay. So Andrew, on the nonoperating items, I'd expect those to decline in 2026 as the investment on our strategic initiatives tapers off. And as I said in my pre-prepared remarks, once we get to '27, it will be under GBP 100 million. In relation to economic movements so far this year, so what are the kind of the 4 hedged indices? Currencies are flat, so no impact. Equity markets as of Friday blended to a net neutral, just over 0. Again, no impact on IFRS. At the 15-year end of the curve, interest rates were 37 basis points higher. That's negative on IFRS, but inflation was also at the 15-year point, 35, 37 basis points higher and the 2 on the IFRS metric offset.

Net-net, the IFRS impact on all the market movements this year is neutral. And of course, it goes without saying that on a solvency basis, they're also neutral. We've given some additional disclosure on the Solvency II sensitivities this time, if you go to the sensitivity slide on Solvency II. Before we used to give you the impact on the surplus. Now we break that for each one of those between the impact on own funds and the impact on SCR, so that you're better able to model those 2 components separately. And I hope that you find that useful on a go-forward basis.

Farooq?

Farooq Hanif from JPMorgan. Just going back to the Lifeco surplus. Would you be able to tell us what the capital ratios are of your subs just so that we can build comfort around that?

Secondly, on your greater than 20% IRR on annuities, I mean that's really high, I think, compared to what other companies tell us online and offline about what they're targeting. So is that a target? And has that been the main driver of your drop in volume? Or have there been other factors? So it was quite a big drop in bulk annuity volume. I'm just kind of trying to understand where that leaves you going forward. I know that you can offset that with other products and retail, especially.

And the last question is on your ambition to be top 5 in retail. If you wanted to do that organically, how quickly do you get there? And what are your -- what are the things that you will launch that will accelerate that?

Sure. So again, I'll take the second and third and Nic take the first. So on the annuity side, I wouldn't describe over 20% as a target. I mean, ultimately, our cost of capital is materially lower than that. We would consider annuity business at less than 20%. It's more a recognition of what returns we're actually achieving because we are more diversified. I mean we -- I don't sort of view last year as kind of a poorer year for annuity volumes. This is sort of lumpier stuff generally. The market was generally lower. We've already written GBP 1.2 billion so far this year. We've secured a further GBP 0.4 billion. So we kind of look at it in the round over time in terms of what we're doing. We're very confident that we can compete going forward because as I say, most of our competitors are either monolines or effectively monolines. We have a really material advantage in being diversified.

We're also have a real capability on the asset management side that Nuwan sat in the front here and Nuwan Goonetilleke and his team have built out to do these recurring management actions, which creates additional value and is part of that 20% lifetime IRR. So we're confident in our ability to compete going forward for those reasons.

In terms of Retail, the market is actually quite spread. So we sort of talk about the gross flows, and we're up at GBP 7 billion now of gross flows. You need to sort of get north of GBP 10 billion of gross flows to be top 5 in that market. So we're confident we're on a trajectory to do that. What that's all about? I mean, just sort of recapping what I said before. But basically, we've got this huge structural advantage of a large customer base where only 10% will pay fees for advice. So we've got a great opportunity there. We've now built out -- obviously, targeted support is nascent at the moment, but we've built out a really strong app, really strong telephony guidance capability, now have the advice capabilities. So all the ways customers want to engage, we have.

All of the propositions they might want from a product perspective for that journey to and through retirement. Again, we have all those in place. But what's happening is all of that is basically still happening reactively. And what we need to do is to build out that digital infrastructure, the CRM system to be much more proactively targeting customers. And we'll be using AI as part of all of that to really use the propensity modeling to identify what sorts of propositions will be attractive to which segments of customers at which stage of the journey.

I see Angela sit in the front here. So Angela used to run all of this as the interim CEO of the Retail bank at NatWest, where they've got, I think, 94% now of their customer engagements are digital. So we're very focused on building out that capability. This will take a period of time. It's not going to happen overnight because we've made brilliant progress on Annuities and Workplace, but in those markets, you have a small number of professional buyers, the employee benefit consultants and the corporates, so you can move the needle quite quickly. When it comes to the Retail side, you've got thousands of advisers, you've got millions of customers. It will take more time there, but we're really confident over time that we've got, again, structural advantages to compete and win. Do you want to take the first one, Nic?

So the solvency ratio, at least on a shareholder basis of the subsidiaries have typically been in the high 170s, low 180s. There are a handful of points of that. But also relevant to kind of where they land in a particular year is the timing of when we take the dividend out. Clearly, if we take a dividend out in October, then capital will replenish in the 2 months. If we take the dividend out later in the year, that replenishment will be lower. So we're not concerned by the overall solvency level of the subsidiaries.

We go behind to Don, just so we don't miss him out.

Dom O'Mahony, BNP Paribas. So 3 questions, if that's all right. First, just operationally, you spoke at the beginning about the impact of minimum DC fund legislation. Could you just play through what you think is going to happen to the market there? I mean, presumably some funds will set up shop. Is that going to create M&A opportunities? Does it create organic non-M&A opportunities? What do you think will happen to that market? And what does it mean for Standard Life?

And then a couple of sort of financial questions. The nonoperating cash spend, you very helpfully break it down between the sort of the planned restructuring, the FX hedge collateral call and there's GBP 153 million of other. Could you just help us understand what's driving that, that GBP 153 million?

And then the last question is just playing through the financials. I think bond yields started the year lower than they did a year ago. How much, if any, of a headwind is this to the profit or indeed the capital generation?

Okay. So I'll do one. You do 2 and 3, yes. Happy with that?

Yes.

That's good. So minimum DC funds. So I mean, the legislation is still working through. And I think there's still some question in the market about how kind of rigorously it will be driven through by government. Will it be sort of a complete red line? Or will there be an easier sort of comply and explain bar across, if you like. But the overall driver here, so the workplace market is growing really fast because ultimately, sort of 10, 20 years ago, pensions in the U.K. were done in DB. It's set outside of the world of insurance. For 10, 20 years now, it's been inside -- DC has been inside the world of life insurers like ourselves and substantial GBP 80 billion of flows coming into that sector every year. So it's growing really strongly anyway with market growth as well.

We've got the review of auto enrollment contributions with the Independent Pension Commission, and I'm delighted that's been set up as an independent commission because there's no way you can conclude 8% is sufficient for a decent retirement. That has to recommend an increase in contributions. But then you've got the minimum DC default of GBP 25 billion. And what that's going to do is it's going to drive both the smaller players out of the market. M&A-wise, that's possible, although generally, I think what will happen is corporate trustees will move to -- want to move to a bigger provider quite soon as well. So there will be an organic way that will happen. And so M&A is possible, but potentially, it remains to be seen how desirable that is.

What we're seeing a lot of, though, Dom, is you kind of have 3 regimes you can use. You can have your own trust. It used to be just 2 own trust and then a contract-based scheme. The challenge with contract base is it's much less sort of bespoke to you as an employer. But now you have a Master Trust in the middle ground, Standard Life is one of the largest Master Trust in the U.K. That gives you the sort of the benefits of bundling and the efficiencies of bundling, but also gives you a high degree of personalization of what you put in the scheme.

So our pipeline on workplace at the moment is over GBP 10 billion of scheme inquiries because an awful lot of larger own trust schemes are wanting to move to Master Trust. So I think that the regulation is definitely driving that, but you're seeing a market drive in that direction anyway. And that's good news for all of us as the big insurers playing in this workplace pension space because the own trust is unbundled and generally outside of our remit to a degree, and it will come into our world. Nic, do you want to take the second and third?

Okay. So in relation to the nonoperating items, look, the reality is when we announced the program on to the strategic priorities 3 years ago, we plan to spend the money that we said that we will spend, and we're on track with that. But the world doesn't stay still. There are new pronouncements, -- there's new activity that comes on to our work plan. And -- and that's what drives a proportion of those additional costs. Importantly is that we have funded that out of the outperformance that we've delivered in our overall capital generation. So we started our journey at 176% solvency ratio. You've seen us retire about 13 points of debt. And at the end of 2025, we're finishing at 176%. So yes, there is additional spend for that because the world doesn't stay still because additional thing -- additional initiatives that we have in mind, not least some of the additional -- to support some of the additional disclosures that we're providing you, but they're funded by the outperformance. Sorry, I didn't catch your third question. It was in relation to IFRS.

It was basically bond yields being start of the year lower, what impact does that have on operating profit? I mean I know just while Nic thinks about that, the equity markets higher and the AUM in pensions and savings higher is definitely a positive effect for operating profit for the year ahead. But I'll let Nic comment on the rate side. I don't think [indiscernible].

No. On the operating result, no, no, it doesn't.

Yes. So I think the starting year economics is probably positive for IFRS profit outlook for the year. Right. If we come down to Abid. Have I missed anyone on this side of the room? All right. If you come down to Andreas, then we'll go across to Abid, then we can get across.

Andreas van Embden from Peel Hunt. On pension savings, would it be possible to compare the profit margin on the inflows versus the outflows? How much extra margin can you or are you capturing on the inflows versus the book that is flowing out?

Obviously, part of the outflows you're recapturing in individual annuities. So there's a margin uplift there, I suppose. I just want to triangulate that and compare that. And the second question is on your, on the VIF on investment contracts, I just want to test how sticky that is. Obviously, financial markets help, equity markets going up, AUM going up helps. But in terms of your lapse assumptions, what are your current lapse rates?

And what is your target lapse rate once you've gained the scale that you want and address the outflows over time?

Okay. So I'll take the first and Nic will take the second. So the best way to kind of think about that on pensions and savings is that we have a kind of blended revenue margin of 43 basis points. And it's kind of 43.4% or something. And last year, it was 44.6%. So numbers won't be exactly accurate, but it's down just over 1 basis point in a year. And what's basically going on there is that new workplace business is kind of coming on typically in the high 20s of revenue margin. Obviously, the average of the book is around that sort of mid-40s level.

Then some of the older business will be running off at sort of above 50 basis points. So the net effect of all of that is roughly a basis point per annum kind of reduction in the revenue margin. So the revenue margin is GBP 212 billion of assets at 43 basis points gets you around the sort of GBP 900 million level of revenue, yes.

So there's roughly a basis point reduction there. But then when you look at the cost side, we've got growing assets, and we've got the absolute costs reducing. So the cost basis points is coming down more rapidly. And what that means is we still expect the blended margin of pensions and savings, which was 19 -- so 2 years ago, it was 11 basis points then 17 then 19.

As we earn through the rest of the cost reductions and benefit from this operating leverage, we expect that to get up towards mid-20s as all that works through. That just hopefully gives you a kind of sense of it. We don't split it the profits down by the different segments because basically, so much of the cost is fixed, you just end up making bad decisions, yes.

So we look at the -- internally, we look at the variable cost associated with each line of business and the revenue margin because we then make better commercial decisions to optimize value creation for shareholders, yes. Do you want to pick up the second one, Nic?

Maybe if I can add to the I mean the P&S.

This is what I get wrong.

No, no, no, that's entirely right. But just to put it in maybe a slightly different way to frame it in a different way. The P&S result increased by 23%, 17 percentage points of that 23% came from literally the combination of fee income of a bigger -- a higher asset base, less the costs, which benefited from the savings. So yes, nearly 2/3 of that uplift, more than 2/3 of that uplift have come from the operational leverage that you see in the business model with the reducing expenses.

On the VIF, we saw a GBP 1.3 billion increase on the IFRS 9 investment contract VIF. 40.5 billion of that, as I said in my preprepared remarks, 40% of that came from the improvement or the higher markets.

Another 25% of that came from the new business flows that we attracted in the year. A further 25% came from the capitalized effect of the efficiency savings to the extent that they relate to this business. And the final 10% came from experience and other assumption changes.

The biggest component of that was persistency. So actually, on persistency, we're seeing that as a tailwind, not a headwind into our business.

It's Abid Hussain from Panmure Liberum. I've got 3 questions. The first one is on margins. Just coming back to the annuities business. I think it's the first time we've seen a print of more than 20% IRRs -- just wondering, does that assume new business strain after the capital management policy, so holding the sort of 150-ish percentage points on Solvency II capital? And then just more broadly, curious how you're achieving the sort of 20% IRR because I think some of the diversified peers are still in the sort of mid-teens IRRs region. Is it just the -- essentially you're including the recurring management actions? Is that the sort of the missing piece, I think you touched upon earlier. The second question is on...

That was 2 questions.

It was 1 with 2 subparts. On shareholders' equity, so you've said the IFRS adjusted equity will increase from '27 onwards. What's the timing of the own funds, so the regulatory balance sheet? When does that start to increase? And then just finally on excess cash generation and the uses there.

So beyond the debt retirement, which opportunities are you seeing for reinvesting for growth? And then in terms of M&A within that associated with that, is something like the Aegon U.K. book of interest to you, would you consider that? Or would you hold capital back for when spreads finally do widen and then redeploying that into annuities?

Sure. Yes. So I'll take 1 and 3 and let Nic take 2. So on your first question on the annuities, yes, so the over 20% lifetime IRR is -- it includes capital management policy. It includes the recurring management actions that we would expect to do as well on that book of business over time. And I think it is because most of our peers are monolines or effectively monolines that that's the main reason why that number is higher.

But also, we have built out a really strong capability in managing assets of annuity business in doing these recurring management actions, and that definitely helps that outcome. And I think the key point I'm sort of trying to land is we are able to generate very attractive returns in this space.

In terms of your third question, I mean, ultimately, the priority in the short term is using the excess cash. So as Nic said, we expect GBP 0.5 billion of excess cash this year on top of the north of GBP 550 million dividend.

The plan is we use that to delever and get to the 30% leverage ratio target. Then from the end of this year, we'll be able to use against whatever the highest return opportunity is, be that organic growth, be that considering M&A or be that additional shareholder returns. Specifically on M&A, you mentioned Aegon U.K. So I won't sort of comment on specifics.

But the way I think about this, what's kind of changed for Standard Life compared to Phoenix 5 or 6 years ago. And by the way, I'm so pleased so far. I've not said Phoenix in the wrong place. It's -- I got away with Bloomberg TV and radio, and I've got it right. So we've got a square box that it will be expensive if I do. But what's changed for us is that back then, we relied on M&A to grow at all.

We've now really built out a very strong franchise that's growing strongly organically. And therefore, firstly, we no longer need M&A. Secondly, there's a higher bar for considering M&A because we can deploy capital against organic growth options. Having said that, when any business is available in the market, we will always take a look.

And what we're basically looking at is 2 things. Firstly, strategic fit. So for example, does it bring capabilities that accelerate the strategic journey we're on. And then secondly, financial attractiveness. But it will be a high bar given the alternatives that we have available to us. Nic, do you want to -- I think own funds are already increasing before debt reductions.

On a recurring basis, after funding our recurring uses, own funds is accretive -- we're striving to make sure that the nonrecurring items are flat, whether it's on a surplus basis or on an own funds basis, and we're kind of almost there on that. And what's -- therefore, what is reducing own funds at the moment is the debt program. So once we get kind of past this year, ultimately depending on what use we put that excess, we're going to be own funds accretive. Unrestricted Tier 1 increased. So it just gives you a sense that the underlying performance of the business is coming through.

And on equities, yes, we -- I'll repeat what I've said earlier that excluding the economic effects, we should get to a place where we are increasing our shareholders' equity from 2027. But the market effects, we can't control.

I don't want to -- if markets go down this year, I don't want to claim early victory any more than if markets continue to ramp up in 2027, again, we can't control that. So the bits we control will -- which is everything before that on an IFRS basis, we will manage in 2027 to put it on a positive tack.

Michael?

Thanks very much. Three questions. So GLP-1, credit and Makastream. So GLP-1, does it change the world at all either on your mortality or longevity or how you look at developments there? I've asked the questions of some of your peers. The answer so far has been not really not yet or it's in our assumptions or whatever, but I'd be really interested.

The second on credit, you -- I think you said something on Bloomberg, Andy, about 20% Yes, if you repeat it, but also if you give us a little bit more color, that would be hugely helpful. It really is a topic where it seems that my salespeople are really worried and you're obviously not, so there's a gap here. And then the making us dream, so you gave us numbers, the current mix of what the money is doing.

So I took a figure of EUR 10 billion going into individual annuities, I have individual annuities rather than the rest and then EUR 40 billion maybe at some stage in the future. Can you say what that does to your own metrics? I'd be most interested, obviously, in the cash.

Okay. So I think I'll ask Nic to do the first. I'll repeat what I said to Bloomberg for those that weren't on Bloomberg, but then I'm sure Nic will add to that, and I'll take the last question as well.

I mean what I'd say, Michael, is that we're pretty agnostic. So if we want to basically help more and more people on their journey to and through retirement. If it's right for the customer to go into drawdown, then we'll take our circa 20 basis points margin on that. but it's capital light. And then whereas if customers prefer individual annuities, then we'll support them with that as well.

We can comfortably manage that within the -- because ultimately, we can then be more selective about how much PRT we do to stay within the overall amount of balance of business we want. So we're really keen to -- in the same way as we offer an excellent digital app, award-winning app. We offer telephony guidance. We'll add targeted support. We offer advice. So however customers want to engage with us, we want to be there. We very much see ourselves as customer orientated, having the right propositions to meet their needs. What I said on Bloomberg on the credit side, and say Nic will add to this is that -- so we've got GBP 317 billion of assets overall for our 12 million customers.

About GBP 40 billion of that is the shareholder assets backing the annuity business. GBP 3.7 billion of that is private corporate credit. Within that GBP 3.7 billion of private corporate credit, only about 20% is the U.S. and we've got no exposure to software, for example, within that. I even had a journalist earlier saying, you're underexposed, should do more of this.

So yes, so all of what we're doing is investment grade. We have a 500 strong team in -- on our asset management side that are doing really rigorous detailed work, exploring the credit risk of anything we're doing. We're very diversified in what we're doing.

In the private asset side, a large proportion is either government-backed and/or secured against physical assets. It's very diversified. Do you want to add anything to that, Nic? And then I'll let you do TLP1s.

Yes. On the overall $42 billion now sort of fixed income book that backs the annuities, no change in credit quality. It's 100% investment grade. only 17% is BBB. And when you get a chance to study the detailed disclosures, you'll see that the proportion of that 42 billion that's now invested in government bonds, gilts, other sovereign bonds, supranational has increased from EUR 6 billion to EUR 12 billion.

A lot of the money that we've taken this year, partly our pricing strategy was on new flows on annuities has been parked in gilts, even the component that relates to the liquid credit. Spreads are quite narrow. We're warehousing that temporary strain at the moment on our balance sheet, and we're waiting for spreads to normalize.

But in doing so, it's increasing, if you like, the government-backed component of our overall portfolio and is actually giving us more in the hopper, so to speak, at the point at which spreads normalize in terms of rotating out of gilts at that point.

We are GBP 4 billion to GBP 5 billion longer in U.K. gilts alone this year-end than we were at the previous year-end. And to the earlier question, that's another tailwind to own funds at the point at which spreads begin to normalize to historic norms, and we come out of gilts into that. In relation to the GBP 3.7 billion of corporate private credit, there's 62 securities names that back that.

We have -- we're highly selective in our approach on what we onboard in terms of private corporate credit. We want to make sure that it meets the matching adjustment requirements. It meets the duration requirements, that we're getting appropriately rewarded vis-a-vis equivalent credit risk on the liquid side and that we're getting appropriately rewarded if there's any complexities.

So we execute less than 3% of the ideas that come across our desk. That's how selective we are on that particular piece. On your question on longevity mortality, we undertake our own reviews each year. We consult medical experts.

We factored in societal trends, kind of the impact of potential impact of weight loss drugs, any movement in health treatments and project forward what might happen. We do that annually. We repeated it this year. And if anything, that study unlocked some additional longevity assumption benefits, which are part of the reason why the CSM increased in the course of this year.

The CSM has been driven by a combination of market movements, which I highlighted, expense savings and also sort of positive experience and some assumption changes, including longevity.

Andrew?

It's Andrew Crean,Bernstein Autonomous. Three questions, if I can. The first one is on your P&S margin, where you said you're higher than everyone else. How do you know that? You've got within there basically a legacy business, the individual pension business.

Can you tell us what the profits are on that? And then we can look at more sort of capitalized elements and make comparison there. Secondly, on the uses of excess cash from '27 onwards, -- the debt leverage on a shareholder basis is still well above 30% at that point. Is debt deleveraging off the table from '27? Or is that part of the choices of which you could do?

Those are the first 2 questions. And then the last question, I wonder whether you could talk a little bit more about third-party capital in BPAs relative to -- I mean you've lost quite a lot of your management team there in the last month or 2 as to whether that may affect partners coming in with you.

Okay. I'll take the first and third, and Nic, let you take the second. So look, let me just talk about what we do. So the reason all of our pensions and savings business is capital-light. So it's all unit-linked non-guaranteed capital-light business.

The reason we run it as a business as a whole is ultimately, we want to make sure we're engaging with all of our customers and helping them on the journey to and through retirement, given only 10% take advice, the other 90% need our help and support. And as people get into their 50s, very, very few, hardly any, have a strong existing advisory type relationship, so we want to be the place they turn to.

As I say, for each pound they have with us, they typically have GBP 3 elsewhere. and they have no particularly strong allegiance at that stage in any particular direction. So that's why we run the thing holistically as a whole. And I think that's the right way to run that business. And ultimately, we're then looking to meet the needs of those customers over time.

I mean the numbers we quote for others are just what they publish, yes. So I'm -- you're probably better placed than we are to comment on that.

What we're doing in our business is incorporating all the customers in capital-light retirement savings propositions and looking to meet their needs to and through retirement, and we make a 19 basis points margin on doing that.

Workplace margins, I think the best in the market around 11.5 basis points. Is that where you are?

Yes. So the way we run the business is we look at it holistically, and I talked earlier about the revenue margins, yes, and we manage those. But the reality is -- and one of the reasons why our margins are strong is because an awful lot of the costs of being in this business are fixed costs, and they then spread across the scale of business that you have.

So yes, we're running it looking at the revenue margins and the variable costs is how we run internally. On your third question, so the level of interest in terms of third-party capital and BPA is really high and very strong, and I haven't seen that dim at all.

Yes, Mike Eakins has got the group CEO role at PIC pleased for Mike. He's a great guy, and he's done a great job by us. He's got a group CEO role and good luck to him. One of the things that's the only sort of person we've lost there. The -- one of the reasons that Mike has been so successful in that business is the strength of talent and capability that he's built in the team.

And Nuwan is Nuwan Goonetilleke's the interim CEO of that business. Nuwan is the guy who runs what we call capital markets. It's basically all of the annuity investing, the private assets, private credit, shareholder assets, the recurring management actions. We've got strength in depth across that team. We're very confident we can continue to compete and win. And as -- yes, the external capital interest in this sector has not dimmed in the last 2 weeks in any shape or form. Do you want to take the second one, Nic?

On debt. When we get to 30%, Andrew, we'll be much more market approximate than we've been historically. As to what is an appropriate debt leverage for this business, throughout my entire career, I've come to that question in the various organizations that have worked by asking myself 3 questions. One is what is the weighted average cost of capital that makes sense for that entity in the context of its strategy and the returns that it wants to generate for its shareholders. That's question number one. The second one has been what is the company's ability through the free cash that it generates to cover the interest burden. And the third question is what rating is appropriate for that organization and what are the constraints imposed by that.

At 30%, I think that will be the appropriate level of leverage for Standard Life as we go forward and prosecute our strategy. So I will be comfortable to stop there. Maybe let as own funds grow, let the thing drift down organically or not as a case maybe depending on how I view the weighted average cost of capital and the opportunities that we have. So no, once we get there, then the other 3 aspects of our financial framework will loom larger in our option list.

So I'm conscious we kept people on the phone waiting. I'm going to go to online, if that's all right, Michael. Joe, do we have any questions online?

No questions online, Andy, no.

No questions online. So right. Final 2 questions then. One for Michael, and I can't see in the dark there, but there's a hand over there. From Kailesh, Sorry. yes.

Just one, the over 20% IRR, how much of that is management action? And how much is a day 1, if you like, margin? I'm probably expressing myself completely wrong here.

Yes. So in summary, day 1, we would talk about mid-teens and then recurring management actions being the balance, yes. Kailesh, sorry, I need my glasses and i'm 60 a week tomorrow, yes. So the glasses are needed more often now. So apologies.

Just a couple left. First one is on Slide 56. Could you just clarify, there's a line in there, trading profit. Is that -- that's basically asset optimization. So what's the bridge to the OCG world? Or are there other trading profits in other business lines? Second one is just on U.K. PRT. How are competitive conditions are evolving given the international players coming in? And obviously, one of your peers last week talking about with profits annuity with potentially lower hurdle rates.

Okay. So Slide 56 is definitely a mix.

Do you want me to start with that?

Go for it.

Yes, it is the yield optimization actions. I mean, clearly, when we undertake them on an OCG lens, some of the benefit may be in the form of reduced capital requirements, some of it will be in the form of own funds. So it's the own fund component that is driven here. So practically, the difference between the 2 lenses is the form that the optimization takes and then clearly, the IFRS component doesn't include the capital release. But more broadly, if you wanted to bridge the 219 basis points, roughly 220 basis points that you see on OCG to the 140 basis points that you see on -- this is at the overall profit level that you see on IFRS, 60 points of that is to do with the capital requirement and the other 20 points is just differences in the way you look at the sources of value.

For example, if we save costs, we're able to capitalize that effect in OCG, but it will go into the CSM and amortize more slowly. So there are valuation differences. But hopefully, that broad bridge gives you a sense.

Thanks, Nic. And then on your second question, yes, the U.K. PRT market is competitive. Obviously, last year, it was a bit smaller and there definitely was increased competition then from [indiscernible] who felt that they really needed to get certain levels of volume on board. It remains competitive coming into this year. But as I said earlier, we've already either written or secured exclusivity on GBP 1.6 billion. So we're comfortable we're confident we're in a good position. What I would say though is, say, throughout my nearly 40 years in the sector, annuity markets -- so I've seen, for example, companies offer with profit bonds 20-odd years ago with bonus rates that just weren't sustainable, and we all know where that ended up.

And I've definitely seen people go into capital-light markets offering low prices that just aren't economically rational -- but I guess it's sort of lower risk being capital-light. Annuities has always been economically rational always. So when rates move, when longevity moves, people reflect that and are economically rational. So I'm not at all concerned that new capital coming in will behave irrationally. I think people will be rational. And then ultimately, it's about the asset management capability and the yields you're able to get. It's about the strength of proposition and customer offering that you have. And obviously, from our perspective, it's the diversification that is a real advantage we have in that market.

So look, I think we're timed out there, but thank you very much indeed for coming along and listening to our first results as Standard Life plc. Management team will be around for a few minutes afterwards if you have any further questions you want to catch up on. But otherwise, thank you very much indeed. We look forward to seeing what you all write. Thank you.

Thank you, Claire, and good morning, everyone, and welcome to Phoenix's 2025 Half Year Results. Today, I'll start with a summary of the progress we've made. Nick will then take you through the first half financial performance, and I will close with an overview of some of the strategic developments we'll be delivering over the coming months before taking your questions.

Last March, I set out our vision to become the U.K.'s leading retirement savings and income business, helping more people on their journey to and through retirement. Today marks the halfway point of our 3-year strategy, and there are 3 key messages I'd like you to take away. The first is that we're making strong progress on executing against our strategic priorities. We're meeting more of our customers' needs and driving organic growth. Second, I'm particularly pleased that this set of results evidences that the balance sheet pivot is beginning to show. So we can confidently say we're on track to deliver all of our financial targets. And third, what I'm most excited about is that we're uniquely positioned to capture the momentum in our structurally growing markets.

Progress towards achieving our vision is delivered through our strategic priorities of grow, optimize and enhance. We've achieved a number of material strategic milestones already this year. To grow, we need the products which meet the needs of our customers and build out our ability to engage with them both directly and through advisers. From an engagement perspective, it's great that we've received approval from the FCA for our in-house advice proposition, which we'll launch later this year. And from a product perspective, we've launched the Standard Life Guaranteed Lifetime Income Fund, completing our full product suite. So we're now able to help customers at every stage of their retirement journey from when they first start saving right into later life. Within Optimize, we've taken a material step forward on the journey to in-housing the asset management of annuity backing assets that I spoke to you about back in March. And we're currently preparing to in-house a further GBP 20 billion, which I'll come on to later.

Lastly, enhance. Key here is completing the migration of customer administration to modern technology-enabled platforms. We migrated a further 0.8 million policies onto the TCS Bank's platform in the first half. We also entered into a new strategic partnership with Wipro to manage an additional 1.9 million policies. This delivers an acceleration in our cost savings run rate and increases execution certainty as we are no longer migrating these policies. Progress against our strategic priorities is translating directly into attractive financial outcomes. And hence, our first half performance has been strong across our financial framework of cash, capital and earnings. Operating momentum is excellent with 9% growth in operating cash generation and 25% growth in IFRS adjusted operating profit. And I'm particularly pleased with capital, where our solvency capital coverage ratio grew from 172% at the end of last year to 175% at the half year, even after retiring GBP 200 million of debt.

Our leverage ratio improved from 36% to 34%, taking us a step closer to our 30% target. And we are materially accelerating delivery of our cost savings target. So firmly on track across the board. The U.K. retirement savings and income market is already huge with over GBP 3.5 trillion of stock. It's also structurally growing, driven by a range of demographic and socioeconomic trends. Summarizing the gray boxes across the top, there are 2 themes I'll draw out. Firstly, the structural growth is driven by the aging population and the shift from defined benefit to defined contribution. Secondly, people simply are not on track to have saved enough for a decent standard of living in retirement. And most are doing this without any advice or guidance. We feel passionate about helping everyone achieve financial security in retirement, and it's a huge opportunity for us.

We will continue to advocate for the changes that will make the biggest difference to our customers. So I'm really encouraged by recent regulatory and political proposals that create additional tailwinds to our industry as outlined in the orange boxes on the slide. These will accelerate the existing structural growth drivers in the market. As a top 3 player in workplace, we're already well in excess of the GBP 25 billion minimum threshold requirement for default funds as set out in the government's pension scheme bill. So we are ready to take on business from corporates who need a secure provider. We think the pension adequacy review must raise savings levels through an increase in auto enrollment contribution rates to help close the pension savings gap. And the introduction of targeted support and pension dashboard has the potential to be a game changer for engaging customers and helping them make better financial decisions. We are well positioned to benefit from these structural market drivers.

Turning to Slide 8. The top of the slide shows how those market trends are driving substantial flows across the savings and retirement market. The bottom half of the slide sets out our ambition and strategy where our business mix is diversified and balanced across the key markets we operate in. We are the only at-scale U.K. player focused solely on the retirement savings and income market via workplace, retail and annuities. And we're already taking a good share of flows in each, but with plenty of upside potential. Specifically in Workplace, our ambition is to consolidate our top 3 position as that market grows strongly and consolidates down.

In retail, we're looking to move from a top 10 to a top 5 position, and we'll continue to focus on this. And in Retirement Solutions, we aim to maintain a top 5 position. These clear ambitions are underpinned by robust strategies supported by the strength of our franchise, brand, customer base and product set. Essential to a robust strategy is being crystal clear on how we are well positioned to win share in these growing markets. And this starts with the 3 competitive advantages of the group. Customer engagement is key and with 1 in 5 U.K. adults being customers of Phoenix, including a large existing workplace book, we have an exceptional level of customer access.

This gives us deep customer insights, which in turn supports how we develop and design propositions. We also benefit from capital efficiency from our diversified business model, comprising both capital-light fee-based and capital utilizing spread-based businesses. And we have cost advantages, underpinned by our scale with 12 million customers and which have been achieved by leveraging technology across our business. This will increase further through our cost savings program.

These 3 group advantages then directly translate to the specifics needed in our customer offerings in each market. Taking workplace as an example, on the bottom left of the slide, where we're one of the top 3 players in the market. I regularly meet our employee benefit consultant partners, and they consistently tell me that we win by having excellent customer engagement through offering leading employer propositions as we truly understand what customers, both employers and their employees want and need. Offering excellent service is also key to winning. When I was in Edinburgh at our workplace pitch last week, it was clear that providing their employees with exceptional service is critical. Our ability to succeed here is underpinned by our strong digital capabilities, which include our market-leading app rated 4.7 stars on the App Store. Alongside this, our capital and cost efficiency and inherent scale mean we can offer our products at competitive prices while delivering attractive margins.

Let me now touch on some of the activity the teams have been doing to enable us to keep winning in these markets from both an engagement and product perspective, starting with pensions and savings. Engagement is key here. And on this slide, I call out the imminent launch of our Retail advice proposition that I mentioned earlier. So as we start to roll out trusted in-house advice, we'll provide customers with a compelling reason to stay with Standard Life. To be clear, we'll start small here and scale over time. In partnership with digital engagement specialists Life Moments, we've launched Family Finance Hub. And Standard Life also completed its connection to the pension dashboard ecosystem, both being examples of ways we've looked to empower our customers and increase engagement with them. Testament to our commitment to excellent service, we are the first workplace provider to win the Master Trust Treble across the Pensions -- Corporate Adviser, Pensions Age and Professional Pensions Awards. I'm really proud of the team for this external recognition.

From a financial perspective, our pensions and savings business is simple. It's about growing assets, which we've done, and it's about expanding margins, which we've also done. Together, this delivered 20% growth in operating profit. We've also continued to develop winning products for customers in Retirement Solutions. We launched the Standard Life Guaranteed Lifetime Income plan for advisers on the Fidelity platform in March. Separately, we've enhanced our BPA offering. Many DB schemes have existing longevity reinsurance, and we've leveraged our extensive expertise to novate these into a BPA transaction. What does this mean? It means we're better placed to win by helping corporates with their broad range of requirements.

As proof, this, among other innovations, enabled us to complete our largest ever BPA deal in July worth GBP 1.9 billion. This particular transaction was the in-house scheme of a large employee benefit consultant, so a really positive testament to our proposition. The other item I'd call out on this slide is the launch of the U.K.'s first fully digital signature-free application for annuities. As you'll know from your own experiences, having a hassle-free digital experience is increasingly important. So we're always looking at ways to make our customer journeys easier. Looking at the financials, Nick will come on to the actual annuity volumes in the first half, which were relatively modest, but we've now secured over GBP 3 billion of BPAs with individual annuities performing strongly, too. Of course, our focus remains on value, not volume, and our execution here enabled 36% growth in profits.

To optimize customer outcomes and enhance returns, we've been evolving our approach to asset management. Historically, we've had an outsourced operating model for all assets. For our Pensions and Savings business, which represents the majority of our assets, this strategy is unchanged. Moving forward, we expect to consolidate the number of asset managers we partner with, and Aberdeen continues to be our key asset management strategic partner, potentially attracting a greater share of these assets. As signaled in March, our strategy for the management of the annuity backing assets is evolving to one which is predominantly in-house.

We will leverage the internal capabilities we have built to manage public credit and private assets alongside partnering to source differentiated and unique private assets. We are now managing GBP 5 billion of our GBP 39 billion portfolio in-house and are preparing to in-house a further GBP 20 billion. To be clear, this in-housing only covers our annuity backing assets. We have no intention of becoming a fully fledged asset manager nor are we looking to manage third-party assets. But we're excited about the benefits this brings by underpinning the delivery of management actions in annuity portfolio reoptimization and with greater cost efficiency.

Our strategic execution is creating financial flexibility for the future. This chart focuses on operating cash generation. This is the most important way to look at our financials because it's the sustainable surplus generation in our Life operating companies, that's also remitted as dividends up to the holdco. Hence, it's the primary driver of shareholder dividends. We reiterate our ongoing target of mid-single-digit percentage growth for the full year and going forward. This level of cash generation not only means that our dividend of circa GBP 550 million is well covered and secure, but also generates at least GBP 300 million of excess cash per annum after financing our recurring uses. We will deploy this excess in accordance with our capital allocation framework with our current focus continuing to be on deleveraging as we remain laser-focused on achieving our 30% target. As you would expect, the Board will look to allocate capital to the highest returning opportunity, and we are excited about the optionality our strategy is creating.

With that, I'll hand over to Nick, who will talk in detail about our financial performance. Nick?

Thank you, Andy. Good morning, everyone, and may I extend my own welcome to all of you joining us today. I am pleased to be reporting strong operational performance in the first half, evidenced by the profitable growth in both our pension and savings and our Retirement Solutions operations, by the execution of sizable recurring management actions and by the acceleration of our cost savings initiatives. This operational momentum is driving strong value creation with improvements across all 3 pillars of our financial framework with growth in operating cash generation of 9%, growth in net recurring capital generation of 4 percentage points and growth in IFRS operating profit of 25%. It is also supporting the emerging balance sheet pivot with both leverage and overall solvency capital levels improving. This means that we are firmly on track to achieve all of our 2026 targets.

Turning to the financial highlights. Operating cash generation grew to GBP 705 million, and we delivered total cash generation of GBP 784 million. The shareholder solvency coverage ratio increased to 175%, remaining in the top half of our operating range, and our Solvency II leverage ratio improved to 34%. IFRS operating profit increased to GBP 451 million. And whilst the IFRS loss after tax was GBP 156 million, the impact of this loss was cushioned by CSM growth of 10% with IFRS adjusted shareholders' equity closing at GBP 3.4 billion. In line with our policy, the Board declared a 2.6% increase in the interim dividend to 27.35p per share.

Let me now take you through these results in more detail. Operating cash generation, shown on the left, was up 9% to GBP 705 million, supported by growth in surplus emergence to GBP 411 million and an increase in recurring management actions to GBP 294 million. I am committed to providing you with the segmental OCG analysis by business, and we'll do so with the full year results. For now, I continue to share an indicative split. As you can see, the contribution from Retirement Solutions is greater given the capital-heavy nature of this business. The contribution from the capital-light pensions and savings business is lower, but is growing fast, benefiting from new business flows and cost savings.

On the right, you can see that operating cash generation more than covered our dividends and recurring uses, generating excess cash of GBP 246 million in the period. This result has been flattered by the relatively low level of annuity investment in the first half, reflecting timing of BPA deals. At the full year, we expect excess cash to be at least in line with the GBP 0.3 billion reported last year. Turning next to recurring management actions. These represent repeatable sources of value that we deliver year after year across our business. In any given period, these will vary in quantum between the 3 categories we first highlighted in March, which are repeated on this slide. On the left, the largest component relates to annuity portfolio yield reoptimization actions, which generated GBP 189 million of OCG in the first half. By way of reminder, we capture such opportunities by making frequent small-sized trades through market cycles, which optimize the risk-adjusted return of our portfolio without taking on more risk, whilst remaining duration and cash flow matched.

We delivered GBP 81 million of OCG through capital improvement actions, representing a long-standing Phoenix capability of extracting recurring value from model and data improvements, primarily from our capital-heavy business. On the right, you can see the GBP 24 million OCG contribution from ongoing fund simplification. In the first half, we closed 65 out of a total of around 5,000 funds, delivering further operational and service fee reductions. This component represents an enduring source of value as we continue to simplify our fund range with further fund closures expected in the second half.

Our half year performance puts us firmly on track to deliver recurring management actions in the order of GBP 500 million at the full year, in line with our guidance. Having delivered GBP 705 million of OCG in the first 6 months, going forward, we expect a more even half-on-half profile compared to 2024, which was second half weighted. And so we reiterate the mid-single-digit percentage annual OCG growth guidance. On the right, you can see that the total cash generation over the last 18 months of GBP 2.6 billion is also tracking towards our GBP 5.1 billion cumulative 3-year target.

Turning from cash to capital. I set out on this slide, the shareholder solvency walk, which I will step through in some detail. Looking at the 2 book ends of the chart, you can see that we increased both our solvency surplus to GBP 3.6 billion and our solvency coverage ratio to 175% after repaying GBP 200 million of debt in February. In between these bookends, we analyze the various recurring and nonrecurring components of the walk and show the corresponding own funds and SCR values in the table below. You will see that our recurring net capital generation represented by the items grouped in the top left box of the chart was positive GBP 0.2 billion, equivalent to 4 percentage points of solvency coverage ratio. The corresponding recurring own funds generation shown in the bottom left box, was also positive GBP 0.2 billion, supporting the favorable evolution of our leverage ratio. The items grouped in the top right box show a net positive generation from nonrecurring items of GBP 0.1 billion.

Stepping through each component in turn, other management actions were GBP 0.1 billion positive and include benefits arising from 2 sources. The first relates to the expense savings from in-housing annuity backing assets. And the second results from selling the shareholders' 10% share of future income in one of our 90/10 funds to the estate of this fund. We have initiated a program covering 12 with-profit funds, which over the next 2 years will release total surplus of around GBP 150 million. There is more detail in the appendix for those who are interested. Economics and temporary strain were neutral overall. Our hedging strategy delivered as expected, producing a GBP 0.1 billion negative, which was offset by the unwind of the annuity temporary strain that we carried over from full year '24. The investment spend and other component reflects continued spending on our investment program, offset by the beneficial impact of the Wipro strategic partnership, which has accelerated the start point from which the lower per policy administration charges apply on the GBP 1.9 billion impacted policies.

Before leaving the slide, I would note that the capital improvement in the period is flattered by the timing of BPA deals. By way of illustration, if we had written the same BPA volumes as in the first half of 2024, the coverage ratio would have been around 3 points lower, reflecting both the day 1 capital investment and the related temporary strain. Notwithstanding this, the underlying capital improvement in the first half remains strong.

Turning to leverage. We made a clear commitment to bring this ratio down to 30% by the end of 2026. Leverage improved to 34% in the period, supported by the GBP 200 million debt repayment and the growth of regulatory Own funds, reflecting the drivers that I covered in the previous slide. We remain firmly in control of our path to 30%, supported by the GBP 650 million of excess cash that we expect to generate over the next 18 months. As I said before, the path to 30% will not be linear and deleveraging will be managed within the upper half of our 140% to 180% operating range. Our IFRS adjusted operating profit increased by 25% with our 2 main business divisions growing at a strong double-digit rate. I will come back to their respective performances shortly. The overall increase to GBP 451 million is supported by business growth, which has driven our asset base higher and increased both investment contract revenues and insurance contract CSM releases. It is also supported by a high level of investment margins, reflecting the value added by Phoenix Asset Management and by cost savings, which I will cover on the next slide.

Our successful delivery of our grow, optimize and enhance strategic initiatives puts us well on track to achieve our GBP 1.1 billion operating profit target by full year '26. Consistent with the comment I made earlier on OCG in-year profile, IFRS operating profit will also be more even first half on second half going forward. In March, I shared my assessment that our cost savings target of GBP 250 million was credible and that I was looking for opportunities to accelerate its delivery. The actions we have taken in the period, namely the introduction of Wipro as a strategic partner for customer administration and other changes to our operating model have accelerated the delivery profile with GBP 160 million cumulative run rate savings now expected to be achieved by full year '25, some GBP 35 million higher than our previous guidance. At the end of the half, cumulative run rate savings reached GBP 100 million with actions taken in the period, adding GBP 37 million to the full year '24 total. Some GBP 40 million of this run rate total was earned in the period.

Our cost savings initiatives remain a key underpin to delivering the 2026 operating profit target and to supporting ongoing business margin improvements. Our Pensions and Savings business continues to grow in assets, profitability and margins. As Andy outlined earlier, we continue to win in workplace with a leading employer proposition, excellent customer service and competitive pricing. This translated into GBP 4.9 billion in workplace gross inflows, including GBP 0.7 billion in new scheme wins. You may recall that last year, we won a GBP 0.9 billion large scheme, which are relatively infrequent, boosting the prior year comparator. Excluding new scheme wins, we reported robust growth in gross inflows to GBP 4.2 billion, highlighting the workplace flywheel effect as the combination of strong new business flows in recent periods and low bulk losses expands our overall regular premium base.

Our workplace pipeline is at a very healthy level, reinforcing our optimism of sustained business growth. Workplace outflows were slightly up year-on-year, reflecting higher base AUA and the natural attrition from those taking their pensions or porting their workplace schemes to their new employer. Moving across the slide to retail business flows. It is pleasing to see an uptick in gross inflows with outflows stabilizing. Positive market effects have more than offset the overall net fund outflows with average AUA closing up year-on-year. Looking at the bottom half of the slide, IFRS operating profit increased 20% to GBP 179 million. The improved investment contract result is supported by higher fee revenues from the 5% growth in average AUA and continued cost discipline. Our scale and operating leverage supported an improved operating margin of 19 basis points.

Our Retirement Solutions business also delivered a strong operating performance in the first half. As a reminder, new volumes are not the primary driver of profits here. We run GBP 39 billion of annuity assets. So it is the management of this large book of business that drives most of our profitability. Stepping through the slide, starting in the top left, BPA volumes were GBP 0.3 billion in the first half, reflecting market factors and our selective participation. We have since completed a GBP 1.9 billion deal, and we are at an exclusive stage for deals totaling GBP 1 billion. So at GBP 3.2 billion year-to-date, our BPA volumes are robust. In individual annuities, new premiums grew by 20% to GBP 0.6 billion with our market share rising to 13%. In the bottom right, you can see that operating profit increased strongly in the period, up 36% to GBP 286 million. The improvement is supported by higher CSM releases, reflecting growing business scale, higher investment margins, reflecting the value add by Phoenix Asset Management and ongoing operational leverage.

We have maintained pricing discipline with business incepted at a similar level of strain to last year of around 3%, generating mid-teen IRRs. We remain committed to deploying up to GBP 200 million of capital this year, provided with secure sufficiently attractive returns. The 10% increase in our store of insurance contract value recorded in the CSM represents another key underpin to our future operating profitability. This increase reflects ongoing contributions from the usual sources as well as a sizable contribution in this period from strategic projects, namely the expense savings benefit from in-housing annuity backing assets and the impact of the Wipro strategic partnership on associated contracts. Completing the IFRS picture, this next slide shows the first half movement in IFRS adjusted shareholders' equity.

Our higher operating profitability means that we continue to close the gap between recurring sources and uses being negative GBP 36 million in the period compared to negative GBP 139 million period last year. Nonoperating expenses reduced to GBP 184 million, reflecting the tapering of our planned investment spend. We reported adverse economic variances of GBP 275 million, driven primarily by the negative marks on equity hedges following a 7% rise in markets. As I illustrated back in March, this is a known consequence of our hedging strategy, which protects cash and solvency capital that gives rise to an accounting mismatch under IFRS. The slide which accompanied the explanations provided in March is included in the appendix. Actions such as the with-profits initiative to sell GBP 0.7 billion of future shareholder transfers to the estate will reduce our overall equity risk exposure, allowing us to shrink the size of the equity hedging program by around 10%.

On the right of the chart, you will see that we closed the period with an adjusted shareholders' equity of GBP 3.4 billion. Before leaving this slide, I reiterate that our aim is for IFRS shareholders' equity ex economics to grow from 2027.

Moving next to dividend. Phoenix is a highly cash-generative business. We have a strong track record of consistent dividend growth and operate a sustainable and progressive dividend policy. I outlined in March the financial metrics that the Board considers when undertaking the annual dividend assessment. These are repeated on this slide being mainly OCG, the solvency coverage ratio and the parent company distributable reserves, all of which remain healthy. Consistent with previous guidance, the Board continues to consider that the group's consolidated IFRS shareholders' equity does not give rise to any practical limitations to dividend payments.

To conclude, we have made a -- we have made positive progress at the midpoint of our 3-year strategy, and we have increased execution certainty across all of our 2026 financial framework targets. We have positioned the business to generate mid-single-digit percentage annual OCG growth, producing a level of OCG, which more than covers our recurring uses and delivered excess cash of GBP 300 million or more per annum. We're on track to reduce our leverage ratio to 30% by 2026 with all the levers required to achieving this being firmly within our control. Finally, supported by the acceleration of our cost-saving plans, we are on track to deliver GBP 1.1 billion of IFRS operating profit in 2026, enabling us to cover our recurring uses on this reporting basis as well.

Thank you for your attention. I will now hand you back to Andy.

Thank you, Nick. Our vision is simple: to become the U.K.'s leading retirement savings and income business, serving customers of all stages of their life cycle from 18 to 80 plus, and we're making great progress. We have built leading propositions across our Pensions and Savings and Retirement Solutions businesses and enhanced our asset management capabilities. Our focus will now turn to further building out our customer engagement tools, which will be enhanced by our increasingly digitally enabled customer interface shown in the lighter purple. Our strategic priorities are clear, and we're excited about what comes next. Looking forward, we expect the second half of 2025 to be just as busy as the first as we continue to execute against our strategic priorities. For growth, while we'll continue to consolidate our excellent position in Workplace and Annuities, the focus of our investment is in retail as we build out our capabilities.

Priorities here are engaging our customers. So I'm particularly excited about the imminent launch of our Retail advice proposition also connecting our full range of products into key platforms. And so the launch of our Smooth Managed Fund on the Quilter platform, one of the largest in the market is a key step forward to reach more customers. For Optimize, we will progress our shift to in-housing annuity backing assets. And for Enhance, by the end of the year, 75% of policies will be on their end state platform. Today, we're announcing our intention to change our group name from Phoenix to Standard Life plc in March 2026. Our move to Standard Life brings our most trusted brand to the forefront and demonstrates our commitment to helping customers secure a better retirement. It's a brand known to all of you and the brand we are already using for new business in the pensions and savings and retirement solutions markets.

The move aligns our brand strategy with our group strategy, supporting our focus on organic growth. It unifies our colleagues and strengthens our employer brand. And it simplifies our business, reducing duplication and cost. In summary, we are executing -- successfully executing on our vision to be the U.K.'s leading retirement savings and income business. Let me recap the 3 key messages. I'm delighted with the progress we're making against our strategic priorities. I'm pleased that the balance sheet pivot is beginning to emerge, and I'm optimistic about the future. Delivering on our strategy is enabling us to meet more customer needs and in turn, deliver strong shareholder returns.

So with that, let us move to questions. So we'll start with questions from the audience in the room. If you can raise your hand if you have a question and we'll direct one of the roving microphones to you. Please you can start by introducing yourself and the institution you represent. For anyone watching on the webcast, please use the Q&A facility and we'll come to your questions after we've answered those in the room.

So we start with Abid. I hope it's 3 questions first.

So 3 questions. It's Abid Hussain from Panmure Liberum. The first one is on your own funds. You're making a number of investments across the business now and margins are moving in the right direction. So when do you expect the own funds to start increasing? That's the first question. And the second one is on your dynamic hedging. Can you give us an update on your plans to reduce the overhedged nature of the Solvency II balance sheet or as I see it, the overhedged nature of that Solvency II balance sheet. I think you previously said you were going to move to a more dynamic approach on that. So any update, please?

The third question is on margins across the pensions and savings business. Where do you think those margins might settle down to. It's good to see the operational leverage coming through, but I suspect there's an element of over earnings. So just sort of any guidance on that. And as a subpart to that, if I can, just very quickly. Can you give us any color on where the Workplace savings margins might be?

Sure. So I'll take the first and third of those, and Nick will take the second. So on Own Funds, so unrestricted Tier 1 Own Funds, the Own Funds, excluding the debt did grow from GBP 4.2 billion to GBP 4.4 billion. But obviously, what we're then doing is paying down debt to reduce the leverage ratio. So we had GBP 0.2 billion growth in the recurring Own funds. And then the nonrecurring, basically the one-off management actions covered the cost of the investment. So that was neutral on Own funds. And so very pleased with that progress. And that's a key focus for us. So I know there's a lot of focus on shareholder equity. But the point of the hedging is to protect that Own funds growth and the solvency surplus, which protects the dividend in due course. So we want to keep momentum in growing that Own funds going forward as we've shown in the first half.

In terms of pensions and savings and margins there, so you saw the margin increase from 17 basis points to 19 basis points. The revenue margin was broadly flat and the revenue was up by 5% because the average AUA was up by 5%, and that was coupled with reducing costs, which led to the growth in the margin. Probably the guidance I'd just reiterate is back in March, we talked about that over half of the growth from '24 to '26 in operating profit would come in pensions and savings. That basically implies pensions and savings will hit around GBP 450 million of operating profit next year.

If you work that through, that will be a margin getting into the sort of low 20 basis points. And I think what we'd expect to do over time is you would see a gradual slow decline in the revenue margin. But ultimately, we want to hold the costs broadly flat and absorb inflation and therefore, you continue to get the benefits of operating leverage. We don't disclose the margin split between the different areas in any detail. But broadly speaking, Workplace would be typically high 20s would be the sort of revenue margin there. And that's what's leading to the sort of slight decline, but only marginal decline in the overall revenue margin of 46 basis points in the first half.

Nick, do you want to take the hedging question?

Will do Andy. So we hedge around 80% of the equity risk. That's where we are. And the way we think about this is that, if you like, that relates to the equity exposure of the legacy book, which is in runoff. And we, therefore, don't hedge the new business that we write. That 80% will gradually taper over time as the legacy book runs off, clearly 6 months on from when I updated to you, there's been minimal movement in that. But the initiatives to effectively neutralize our shareholders' transfer will have an impact. As I said, that GBP 700 million of future shareholder transfers. There is substantial equity risk associated with that. And as we deliver that program, we will see a 10% reduction in the notional. The program is across 12 out of our 22 with profit funds. Those 12 funds are 9 to 10 funds with very strong estates.

The customers want to take more risk, but we don't want to do that, hence, the transactions that we're putting in place. Three of those with profit funds will be completed by the end of the year, another 7 next year and the final 2 in 2028. And the benefits, whether it's the GBP 150 million of extra surplus that, that will generate or whether it's the 10% reduction in the hedging will come through around 50% this year, 30% next year and 20% in 2027. So Gradual decline sort of to summarize gradual declines as the legacy book runs off, and then we'll take 10 points off that, 5 this year, 3 next year and 2 the year after.

So we go along to Andy.

It's Andy Sinclair from Bank of America, and great to see the Standard Life brands coming back to the fore. Three for me, please. First, just on the operating profit balance H1 versus H2. Just trying to get a little bit more color on that comment. I guess I thought pensions and savings stronger in H2 with higher AUM, retirement I have thought about flattish, and that's before the cost saves coming through. So should we still be expecting H-on-H growth H2 on H1? And just a little bit more color on that, please. Second was actually on IFRS nonoperating on the amortization of intangibles. I think the guide for that has typically been down about 8% a year, but it dropped, I think, 16% last year, and it's, I think, 11% year-on-year in H1.

Clearly helpful to have that nonoperating drag dropping away. Is there any reason why that's going faster? And how should we think about that? Should we still think about 8%? Or should we think about it going faster? And then just third, just on those with-profit transactions you're mentioning. As I understand it, for the equity hedging, one of the positives is when equity markets go up, yes, you lose on the short term from the hedging, but you gain that back with higher fees, et cetera, over time. How -- where are we seeing that IFRS kind of unwind from that hedging coming through at the moment? Is there anything that's coming through maybe in H2 as kind of a one-off coming through there? And does that change the sensitivities as well as sensitivities already updated?

I'm going to let Nick do all 3 of those. While he's just thinking of those, if you didn't know, Andy started his career at Standard Life in Edinburgh, hence, the reference to brand, he's feeling good about it. So Nick?

Well, I didn't mean to imply that H2 is going to be exactly the same as H1. Inevitably, there will be factors that shift that. I mean clearly, the higher CSM base should benefit the second half in the same way as it's done this year. We'll see what the AUA does on the investment contracts. Cost savings, yes, we'd expect more to emerge in the second half. But compared to what we saw last year, both in relation to OCG and IFRS, you should see a much more balance. It was 45-55. That's not the shape we're going to have going forward. Amortization of intangibles, there has been an acceleration. If you look in the recent past. That's merely a reflection of some of these books running off completely. So it's great to see that we are on a tapering path for that. And actually, that's also true in relation to interest costs. It's also true in relation to the, if you like, the nonoperating investment spend.

All of this very helpful as we seek to get to 2026 and cover all our recurring uses and 2027 to cover all uses, except the hedge-related volatility. I mean on equity, I think you answered the question that there is a mark-to-market. The benefit will come through higher charges going forward. There's been no discernible change in the equity strategy or approach. So I wouldn't expect to see anything different in the second half compared to what we've seen in the first, unless I misunderstood your question.

I was just asking for the with-profits transactions that you're doing, if I can understand it reduces the equity hedging going forward, but are you giving away some of that benefit of expecting in future to get those higher charges through? Just kind of interested to know a bit more in terms of the color of.

So the impact on IFRS of the with-profits program will be second order. I mean, before we used to get effectively 10% of the increase in asset share come through. That was hedged. So we didn't -- if you like, the risk-weighted contribution to the result was modest. As we go forward, that will be replaced effectively by an investment return on whatever it is that we're investing the proceeds in. So the impact will be second order.

Mandeep Jagpal, RBC Capital Markets. Three for me as well, please. First one on management actions. You plan on bringing a further GBP 20 billion of annuity assets in-house. Just to clarify, are the potential expense savings that you mentioned already included in your nonrecurring management action guidance? And then it also supports the delivery of recurring management actions. So is that already included in your GBP 500 million per annum guidance? Or could there be upside to both these targets quite soon? And then just on the -- follow-up question on the hedging. How should we think about the impact of the hedges to the with profits with respect to the SCR? So trying to understand if we should expect the increase in market exposure to increase the SCR potentially? And finally, you highlighted the pension adequacy review as a tailwind. What does Phoenix think the contribution rate should eventually get to make pension adequate? And how long do you think it would take to get there in the U.K.?

Thanks, Mandeep. So I'll take the first and third and ask Nick to take the second. So in terms of the GBP 20 billion of housing annuities, so the 2 benefits of that. One is more cost efficient, and that is one of the drivers of the nonoperating Own funds growth that we showed and I talked about to Abid a moment ago. So that's taken through there. It also -- by having the assets in-house ourselves with our own people, it is favorable in terms of the annuity reoptimization portfolio actions that we undertake. We're not increasing the guidance from the GBP 500 million per annum, but it's going to be easier to get there now effectively, yes.

So it puts us in a strong position. In terms of the contribution rate, so we have a think tank. It was called Phoenix Insights. It's rebranded to the Standardized Center for Future Retirement, a bit of a clue of the direction of travel for the group. We did that earlier this year. And we did a piece of independent research work there. And the proposal that came out of that was that we should look to increase the auto enrollment contribution rate from 8% to 12%.

So that was the kind of the independent research. Just giving you a kind of sense of this from a couple of perspectives. So although the minimum rate in the U.K. is 8%, the average savings rate is 10%. In Canada, the average saving rate is 20% to give you a sense of where U.K. consumers are heading compared to Canadian counterparts. Of that 8% in the U.K., the employer contribution is 3%. Australia is just increasing their employee contribution to 12%. So this is why we're calling this out quite very loudly. It's not going to be that visible because people retiring today still have significant defined benefit pensions. But in 10, 20 years' time, we are heading for real impoverished retirements. Now the bit that's interesting in all of this is actually our market is huge, GBP 3.5 trillion. It's already growing really strongly, as you can see from the fund flows I had on Slide 8. But if we address this under provision, it's going to grow even faster still, yes. And that's what we're advocating for and driving for.

Nick, do you want to take the second one.

Yes. With profit. So just to add some more numbers and some more detail, if I may. On the solvency -- so these funds there's about GBP 700 million of shareholders' interest in future transfers. And that GBP 700 million is on the solvency balance sheet. In addition to that, there's about GBP 200 million of shareholders' interest in the estate. The solvency rules don't allow us to take credit for that GBP 200 million. So in making this transaction, albeit it's a small discount to the values that I've just quoted, we get to recognize the GBP 200 million shareholders' interest in the estate, hence, why there is an impact on solvency. Now that GBP 700 million was subject to a whole host of risks. Yes, there was equity risk and interest rate risk, but that was hedged.

So very modest SCR in relation to that. But there's credit risk associated with the investments that are backing up. There is expense overrun risk, there's mass lapse risk. So there was an SCR associated with those. And clearly, as we complete those transactions, that SCR falls away. If it's replaced by cash, we won't hold any risk capital in relation to that. So the benefits come through recognizing the shareholders' interest in the estate and removing the SCR.

I think just a couple of quick comments on this. This is a sensible simplification. So in the shoes of a customer, historically in these funds, basically, there was this concept of you're sharing the profits 90/10 between the customer and the shareholder. It's not the easiest concept for your average consumer to get your head around. Where we're effectively going to by doing this is we're making the with-profit funds kind of mutual with-profit funds. So the customer gets the smoothing, but it's just the same as any other fund they can invest in. There will be an annual management charge and our revenue is charges less expensive than the same is on the unit-linked business. So it's a much simpler customer proposition. It also is beneficial financially. It reduces the equity hedging risk. It adds own funds. So it's beneficial. But I wouldn't overplay it. And all the things we're talking about today, this is quite a small part of the picture of the value creation of the group.

Dom O'Mahony, BNP Paribas Exane. I've got 3, if that's all right. The first is just on the in-housing of the assets. Great to see the benefit across all the financial metrics on that. Is there more you can do? Clearly, that's about -- it's now just over the majority of the annuity book, but there's anything to stop you doing the rest. And on the -- you're very clear in saying that you're not trying to become a third-party asset manager. But on the with-profits book in particular, I guess you have quite a lot of discretion about how you manage that. Is there anything you could do to in-house any of that?

Second question was just on the excess cash build, which is very pleasing, clearly. In terms of deployment, Page 13 runs through the way you're thinking and it's very helpful. Would you feel that you would have to get above the 180% solvency ratio before deploying that into, say, additional capital returns beyond your existing deleveraging program or indeed to shareholders? And more broadly, what would be your priorities for using excess cash beyond this -- beyond the deleveraging plan? And then third question, the bond yield curve has moved in an interesting way since the end of the half. It moves every day, of course, but I think there's been some steepening. My guess is that your fixed income duration is quite long. Should we be focusing more on the 30-year or the 10-year when we think about the various impacts on your balance sheet?

Thanks, Dom. So I'll take the first 2 and ask Nick to take the third. So in terms of the in-housing of assets, so we have GBP 39 billion of annuity backing assets. We have 5 already in-house. And today, we're announcing a plan to in-house a further GBP 20 billion. So there is a bit more that we could go after in due course. But I wouldn't envisage we end up with all of the assets in-house because we'll do public credit in-house, derivatives and so on. We'll do some private debt in-house, but we'll also continue to partner with third parties that can get us access to particular differentiated private credit that we couldn't get directly ourselves, yes. So it wouldn't be the whole GBP 39 billion in due course. In terms of with-profits, no plan to change our current approach there. So view that the same as the pensions and savings side where we are determining the right strategic asset allocation. We're partnering with external asset managers that have real expertise in different sectors that we will continue to partner and outsource those assets.

In terms of excess cash flow, so as we said, we're once again reiterating that we will have at least GBP 300 million per annum of excess cash. That's significant. We're paying a dividend of GBP 550 million. And then on top of that, after all recurring uses, we have GBP 300 million of excess cash. So it shows the strong solid cash generation. The great thing about Phoenix is because of the approach we take to hedging, you're going to get that money because the solvency balance sheet is protected, and that's why we hedge in the way we do so that, that money comes out. In terms of how we're using it, the priority at the moment is using it to delever. We believe that's the highest return on capital. And in many ways, you can kind of see that in terms of our share price performance, the market implied WACC has come down, and it's increased the intrinsic value by the most amount, if you like.

So that seems to us to be proving to be the right call. What we basically will then do once we get the leverage down to 30% is we will allocate the excess cash against the highest return opportunity using our capital allocation framework. So historically, we've illustrated that could be investment in organic growth. It could be considering M&A. It could be further deleveraging beyond the 30% level or it could be further capital return, share buybacks we'll make a call -- the Board will make a call at the time based on what would be the highest return on capital for shareholders of how we deploy that excess capital.

I wouldn't see that we would need to be north of 180% to do that. We have a target range of 140% to 180%. We would rather be in the top half of that target range so that in the event that we're extreme shocks, we're still above the bottom, although obviously, our balance sheet is much less sensitive to market movements than our peers for the reasons I've said. So it wouldn't need to be above 180% to deploy excess cash. As indeed, we're not above 180% at the moment, and we're deploying the excess cash against deleveraging.

We're deploying the excess cash to grow, optimize and enhance. So the deployment is happening. On your question on duration, I mean it's not -- it's less a question of choice. We have to hedge in line with the duration of our annuity liabilities. At the moment, we hedge the 1 in 200 cash flows, and that takes us somewhere in the 15- to 17-year point. So our hedging program kind of reflects the -- if you like, the length or the tenor of those liabilities on a 1 in 200. And yes, what the impact that we've seen on our solvency balance sheet of the rate movements since the half year, indeed equity markets and some of the other is de minimis, both at the own fund level and at the surplus level. So hedging is delivering exactly what it's designed to do, which is to provide stability to our balance sheet, to our solvency balance sheet and in doing so, underpin the progressive dividend policy.

Andrew? Then we'll come from Andrew.

Andrew Baker, Goldman Sachs. I'll go 3 as well, if that's okay. You just mentioned de minimis impact in the second half on solvency balance sheet. What would that be on the IFRS equity side, if that's okay? And then secondly, we've seen quite a bit of M&A recently in the U.K. bulk annuity space. Do you expect this to have any impact on your ability to deploy the GBP 200 million of capital that you have in your plans at attractive margins? And then finally, is there anything you're able to say on sort of the life insurance stress test later in the year and what we should be expecting there? That would be really helpful.

Okay. I'll let Nick do 1 and 3, and I'm happy to pick up the second one on the M&A in the BPA market. So I think there's 3 things I'd say. The first is it's actually quite good, isn't it, that all this capital wants to come into the U.K. savings and retirement market. It shows it's a really attractive market. The market is growing strongly. The margins are attractive. The profit pools are attractive and people are prepared to pay a lot of money to get them to be part of it. I'd say that's a real strong endorsement of the market. I mean in terms of ourselves, we feel in a good position competitively. We're far more diversified than many of our competitors. So we have a capital efficiency advantage because we've got a much more diversified overall business mix. So we find we can compete well in the market currently, and we're well placed to compete well. The Standard Life brand lands really positively in this market. But we also have a whole host of developments that we're undertaking to continue to evolve our competitive position.

So the in-housing of assets is really helpful that we're announcing today. We continue to look to partner with external asset managers that have unique differentiated private asset capabilities. That's a key focus for us. And I'm also really pleased with the build-out of individual annuities. So our individual annuities grew 20% first half on first half. That took our market share up from 11% to 13%. And obviously, a lot of this external capital coming in is going to focus on BPA rather than individual annuity. So all in all, are we confident that over time, we'll be able to deploy our GBP 200 million of capital? Yes, we are. But we will be disciplined, and we will not deploy the capital if we can't get attractive returns. We're focused on returns. The beauty for us of having a very diversified business mix is we can afford to then be disciplined and focused in what we're doing.

Nick, do you want to take the other 2?

Yes, happy to. Maybe just to add an addendum to your answer. the 3% strain data point that I gave earlier and the mid-teens IRR, those relate to effectively the year-to-date GBP 3.2 billion of BPAs that we've written and the GBP 600 million of the individual annuities at the first half. So if you like, it's an updated -- it's a current number. Let me take list because that would be quick. Yes, like everyone else, we submitted our stress test results in relation to Phoenix Life Limited. The PRA will publish information later this year, sometime in early Q4 on the industry impact and specific impact, nothing to say at this point, and we can have a conversation at the point that those are published.

On the impact of market movements, I'll answer the question on IFRS, but if you permit me, let me explain to you why I regard that as noise. okay? So as far as -- for as long as we continue to grow our OCG to cover our uses for as long as we have a very healthy solvency base and for as long as we're increasing our IFRS operating profits that we can sit here so that they can cover the recurring uses. As long as we're doing that appropriately, then I am unconcerned about the hedge-related volatility that comes to IFRS. And why is that? As we have explained before and as it's set out on Slide 44 in the appendix, the hedging is giving us the stability to the solvency balance sheet. You can see that this time around, you can see that going back. But the offset, the IFRS balance sheet doesn't cover all the components that we hedge. So it's a mismatch and it's noise.

What matters, as I said, when it comes to dividend is the distributable reserves that we have in plc. They were GBP 5.6 billion at the end of full year '24. At the half year point, they've increased to GBP 5.7 billion. What's feeding that are remittances from the Life subsidiaries. We've just filed accounts for the Life subsidiaries. They showed that in 2024, we made GBP 500 million of profit and the hedging resides within these Life companies, GBP 500 million of profit, their distributable reserves going up to GBP 1.8 billion.

In the first 6 months of this year, the U.K. Life subsidiaries made another GBP 400 million of U.K. GAAP profit after absorbing the -- again, the hedge-related impact. Why U.K. GAAP is the same economic basis of reporting as we see in Solvency II. And therefore, the numbers are exceedingly healthy. That's why we're confident that there are no practical implications to that hedge-related noise that is coming through the IFRS. Again, I'll repeat what I said a minute ago on the solvency balance sheet, de minimis impact, both on our own funds and in relation to the solvency, the accounting noise, if you like, since the half year is adverse GBP 150 million.

Nasib Ahmed from UBS. Three questions from me as well. Firstly, on the retail business. You say you're trying to get from top 10 to top 5. What does that mean in terms of flows? Do you reduce the GBP 7 billion of outflows? Or do you increase the GBP 2.5 billion of inflows in that business as well? If you can kind of give us some update on -- I think you have targets for the end of this year. It seems like they're not going to be met, but maybe next couple of years, where do you see the net inflow on the retail business going to?

Second question on M&A. It seems like -- I mean, you've been pretty clear it's not a focus or not as big a focus anymore. But there was a deal done by HSBC Life. What was the reason for not going for that one? Was it just the new business proposition was not aligned to where you guys are? And then on disposals as well, Europe and Sun Life over 50s, where is your thinking around disposals of those 2 businesses? And then finally, on leverage, Nick, you say it's not going to be linear, but it seems like if you retire the Tier 2 this year and the Tier 3 next year, you're kind of there. Why would you not do that? Why is it not linear?

Okay. So I'll take the first 3 and let Nick take the fourth. So on the retail side, so to answer your question, basically, top 10 to top 5 is roughly going from GBP 5 billion of inflows to GBP 10 billion of inflows to give you a kind of sense of it, yes. Key focus for us. We very consciously went about this strategic pivot to organic growth by looking at the 3 markets in a logical order. We started with BPA, then workplace. We're now turning our attention much more to retail. The reason we did the first 2 first is that in those, you've got a small number of expert buyers in the employee benefit consultants and corporates, you can get to them quite quickly, and we've successfully done that and that those businesses are performing very strongly indeed. Retail will take more time because we're trying to get to literally millions of customers and thousands of individual advisers.

So it's going to take more time, but we are confident we're on that journey. We're confident we've got structural advantages to get there. I think the other thing I would say as well, just that when you look at our overall business, roughly half of our outflows are actually customers taking their income in retirement. That's what we're here to do. That's our whole purpose in life. So that half goes with a big smile on our face and our hands clapping. We're delighted we're helping with a kind of GBP 14 billion payroll of U.K. retirees, yes. I mean that's what we're here to do. So we really focus on the other half that is transferring elsewhere. That's the particular focus on the outflow side.

So in terms of M&A, what I'd say is M&A remains something that we would absolutely consider. What's great for us now is that we're delivering strong organic growth. So we no longer have to do M&A. It becomes a choice. We are still the first port of call for anyone considering looking at M&A. We still see M&A as the opportunity to create value, build scale. But what we're doing is we're basically allocating our capital. We now have far more choices where we can allocate. We're allocating our capital where we can get the highest returns on that capital. So I'm not going to comment on any specific deal, obviously. But rest assured, any M&A going on, we would get the call, and we would look at it, and we would think about it compared to alternative returns on capital and other sources, and we will deploy against the highest value returns.

In terms of potential disposals, so on Sun Life, you may recall, we considered potentially selling that last year and then the FCA came up with their protection market review. Not an issue for us specifically, but when we were trying to sell the distribution arm and one of the key focuses was on commission rates between the manufacturing arm and distribution arm, we own both. So we're agnostic as to what that is internally. That basically became an issue. We've got a great team of people there in Sun Life. They're doing a great job. I'm going to let them get yes. I'm not going to disrupt them again, if you like.

In terms of Europe, you mentioned that as well. So what we said on Europe is that we have a number of things that we need to do to that business, which are the right things to do to it organically. We need to get it on to more modern technology. We need to get a partial internal model in place. Those initiatives are still in train and will run for another period of time, and they are the right things to do for that business organically for the future, but also would create greater optionality as well in a number of dimensions.

Nick, do you want to pick up on leverage?

Yes. On leverage, really to reiterate the comments that I made in my prepared remarks that we have all the levers to be able to get to 30%. What do I mean by that? Well, clearly, we have the recurring capital generation, sizable enough to more than cover the recurring uses. So we can finance it. And then, yes, we have the instruments that are coming up that fit within the kind of the timing -- the time frame that is covered by our target.

The bottom line there, is if we keep growing own funds, we won't need to take out all of the debt coming up over the next 12 months to get to the target. And so the point is we may choose to refinance some of that potentially and still get to the target if we keep growing own funds. That's the point if we want to refinance some. We may or may not. It's a decision we'll make at the time. Andrew, you've been pretty quiet so far.

Okay. I've got 10 questions if I may. I was just going to ask on the pensions and savings business and particularly the savings element of it. Could you split down the net flows in the retail bit between the old-fashioned individual unit linked and the new retail? And perhaps give some sense in pensions and savings as to the split of the profits between those 3 elements within that because you have one legacy business within there.

So that second bit again.

And then give us some sense of the legacy profits within the pensions and savings business. And then secondly, you're talking about Europe, need for more modern technology and a partial internal model. When will you have completed that and therefore, can look at your options?

Sure. So on pensions and savings, the -- if you look at the sort of annualized retail inflow of around GBP 5 billion that we have gross flows, roughly half of that is regular premiums on existing customers. So all the workplace levers, for example, end up in retail. And the other half is effectively transferred in, so lump sum. So if you want to sort of draw the distinction, roughly half is regulars, roughly half is transfers in. In terms of breaking down the profits between the different segments, it's not something we do, Andrew, and I do hear that people want more, and it's something we will give some thought to in time. But the point I'd draw is that an awful lot of the cost of being in this business are fixed. And therefore, the marginal revenue fund flow you generate, generates significant marginal value. And that's exactly what we're seeing.

So our margin at 19 basis points is materially higher than our other main listed peers, materially higher. And it's not actually that we're much better. It's that we just have more scale. And so if you try and do the cost allocation down, you've got a large fixed cost of being in this business, the systems and processes and so on involved that you'd be allocating around. So the point I'd really draw to is going forward from here, we would expect to be obviously, there will be a runoff of revenue. Think about the revenue line and the cost line separately. There will be a runoff of revenue over time as customers take their income in retirement. We'll have all the new flows coming in, and we kind of give a bit of a sense of the revenue margin. The average is 46. Workplace is down in the high 20s. So you can get a bit of a sense of that.

And then in terms of the cost base, the cost base is going to continue to come down in line with our GBP 250 million cost reduction. So in trying to model the picture going forward, I'd encourage you to split the revenue and the cost side out. There's a trajectory of cost that I think is sort of clearly defined by our cost reduction target, and then you can get a sense of the revenue picture. But I do hear you, and it's something we will give some thought to. Europe, I would say 18 to 24 months would be the order of magnitude frame. I'm looking at Jackie in the front row, you're going to be horrified at that 18 to 24 months, that's fine, yes. 18 to 24 months will be a sense of time frame.

Your question was on the partial internal model as well in relation to Europe. I mean I -- look, it's a good question. It's one example of many things that are available to us to kind of optimize the balance sheet. And let me just expand on that a little more, if I may. Clearly, business-led drivers such as the Wipro, such as in-housing of annuities, the cost savings programs is driving capital efficiency. Ultimately, it's helping our operating leverage as well. But there's many balance sheet type actions that we can do with profit simplification is one example. I mean the other few I would flag just by way of example, we -- unlike many of our peers, up until now, we've only done one major model change. That's when we put Phoenix and Standard Life together. Others have done 3 or 4. So our capital models or our approved model is a little behind the curve. We're in the process of making our second ever application as we look to increase the sophistication of the way we model credit risk.

At the moment, it's very simple. We're moving to a transition and default approach in stressing it. Others have done that since day 1. Whether it's Europe on a partial internal model or ReAssure on a standard formula, Sun Life on a standard formula, again, there will be other applications that will come over the next year or 2 as we move those to an internal model. And in doing so, we will benefit from the diversification benefits that come across when you integrate it. In Ireland, we're happy with the partial internal model, but there are further transactions such as a mass lapse reinsurance, for example, that will put that partial internal model to an outcome that is very similar to a full internal model. Lots and lots of activities and a big runway over the next few years to generate more value. And all these things are in our scope, and we will address those systematically and extract the benefits.

Any other questions in the room? Do we have any questions on the webcast?

Three questions from Farooq at JPMorgan. Firstly, on the asset management side, can you let us know how many external asset managers you think you'll end up working with? Secondly, can you talk about your use of a heavier gilt-based investment strategy compared to and any use of derivative strategies to capture a higher spread from gilts? And lastly, right now, how is further deleveraging versus other uses of excess cash looking on a return on capital basis?

Okay. So on the -- I'll take the first and -- you'll take the second. Do you want to do a third or should I do a third? What do you think? I have to think about it.

Write it down. So we're thinking about the second.

Okay. I will do the first and the third. So on the asset management side, how many partners will we work with? We don't have a sort of set specific number we're targeting. We just feel that with 5,000 funds and the broad range of partners we currently have, we can simplify that down. We can get a better outcome for our customers by having a smaller number of funds and a smaller number of partners. And we would expect Aberdeen as our key strategic asset management partner are likely to be a beneficiary of that exercise. In terms of the return on capital looking at different options, we're very clear. We have stated a target of a 30% leverage ratio on a Solvency II basis and we're aiming for that. And there's nothing we've seen that suggests that there will be a higher return on alternatives to doing that. So that is absolutely our focus. Expect us to use excess cash to delever until we get to that 30% target.

And then Nick, on the second?

On gilts, 2 or 3 things to say. Yes, we're long gilt at the moment. The opportunities to deploy some of the new premiums that we've collected over the last year or so into credit are not as valuable as we would like them. So yes, we're long gilt about GBP 1.5 billion. We -- but we don't do -- I think if your question was referring to sort of leverage gilt approaches to improve deal economics, we do very modest amounts of that.

I think the point I'd just quickly add there is we're quite happy with the strain around 3% because we're quite happy to deploy capital and then generate an attractive return on that capital and hence, make a decent amount of money. There is a little bit of a tendency in the market at the moment to focus on getting the strain as low as possible. So for example, doing these leverage gilt trades, it does bring the strain down, but you end up making an attractive return on very little capital, so don't actually make that much money. And if you do the leverage gilt trades, you then can't do the annuity portfolio optimization over time either. And so it kind of takes away another source of ongoing value. So we're -- we view the value creation is the primary thing we're trying to achieve here rather than get the strain as low as we possibly can. It's -- we've got plenty of capital. We're high surplus cash generation. So we're happy to deploy where we get attractive returns.

Any other web questions?

Okay. So that brings us to the close. I'm actually going to go off piece here and the team don't even know I'm going to do this. Claire looks very worried, Joe looks worried. But I was chatting to [ Barry Corns ] earlier today. And you tell me, Barry, that after over 1,200 analyst company meetings, today is your very last one and your last day. Is that correct? So I think that -- over 1,200. I think it deserves a round of applause to finish, hope you agree. I've always gone quite well with Barry. I think he's completely bought to ever speak to me again. But anyway, thanks, everyone, for coming along. We'll be around for a while if you have any further questions, but thanks so much for your time. Much appreciated.