Legal & General Stock

Good morning, and a warm welcome both to those of you in the room and to those joining online. Thank you for your interest in Legal & General. I'm Andy Sinclair, L&G's Chief Strategy and Investor Relations Officer. So our running order for today will be as follows: Antonio will open with an update on progress we've made delivering our strategy, along with the highlights from H1. Andrew will cover the results in more detail, and then Antonio will be back with some more comments on our outlook before opening to Q&A. At which point, Antonio will be joined by Andrew and the CEOs of our 3 businesses to take your questions. For Q&A, again, we'll be taking it to 2 questions each. Thank you for your cooperation last time around. With that, over to you, Antonio.

Thank you, Andy, and good morning, everyone. It's great to see you here. So I'm pleased with what we have delivered so far in 2026. We are delivering on our promises, and this starts with our [ 30 ] million customers. We want to be the best company for them to invest and retire with, and we're doing that at scale. First, as the U.K.'s leading annuity player, we provide income every month to 1 million retirees. Actually, you can see it on the slide, those payments were over GBP 3.7 billion in the first half of 2026. As the U.K.'s largest asset manager, we're trusted to invest on behalf of both institutional clients and individuals, including more than 5.2 million workplace customers. And finally, on the right-hand side, since we were founded in 1836, we've always provided protection insurance. In the first half of this year, we have paid almost GBP 700 million to support customers and their families. And we are delivering for shareholders.

As you can see on the slide, we have generated year-on-year predictable growth in our headline earnings. These are clean numbers. If you remember, we talked about this at the full year now that we've drawn a line under legacy issues. Core operating EPS is up 11%. That's above the top end of our guidance of 6% to 9%. OSG per share is up 7% year-on-year. And our solvency coverage ratio was 201% at the end of June. This is a strong capital position, well above our 160% to 190% target range, allowing us to continue to deploy capital for growth. We are committed to increasing shareholder returns with an interim dividend per share up 2% to 6.24p, and we have now completed around GBP 450 million of our GBP 1.2 billion share buyback program that's as of a couple of days ago. L&G is now a growing, simpler, better connected business, and we're firmly on track to meet our financial targets. And we have scope to deliver more as we will discuss later.

So we have strong growth momentum in each one of our 3 market-leading businesses. We have written or are exclusive on GBP 6.9 billion. You can see it there on the slide of annuity -- overall annuity volumes that includes GBP 5.7 billion of PRT and GBP 1.2 billion of individual annuities. Our asset manager delivered GBP 23 million of annualized net new revenue, ANNR, in the first half, which is the highest we've ever reported. In Workplace Pensions, we attracted GBP 6.2 billion of net inflows, benefiting from the onboarding of new schemes that we won last year. We now have almost GBP 1 billion per month from recurring flows. So let me now go into each one of the businesses. As I mentioned, in Institutional Retirement, we have written or are exclusive on GBP 5.7 billion of PRT year-to-date. This compares to GBP 5.2 billion at the same stage last year. We have remained disciplined in what is a competitive market, for the -- and this is important, for the GBP 2.1 billion of business that we have written, so as you can see, we have written GBP 2.1 billion, and we are exclusive of since written the GBP 3.6 billion.

So just on the GBP 2.1 billion that we have written in the first half, our new business margin declined to 4.2% and the strain rose to 3.4%. We are still beating our 14% IRR, the internal rate of return, and we're still above that hurdle while at the same time, locking in optionality for the future. In fact, this is what you can see in our numbers. In the first half, we have generated GBP 288 million of asset optimization. This is across Institutional Retirement and retail, and that number compares to GBP 212 million in the first half of last year. And you remember this from when we were sitting here back in March, we've talked about we guided to more than GBP 300 million of asset optimization per year. And what I'm now saying is that we can deliver more than GBP 400 million this year and going forward even in benign markets. Credit spreads widening, because I'm sure you're going to ask me this question, would provide further upside potential on top of that number. We are on track to hit our target of 5% to 7% compound annual growth rate in operating profit.

Turning to Asset Management. Asset Management is the standout performance in the first half of the year, with fee-related earnings up 37% year-on-year. We have delivered, as I mentioned before, an impressive GBP 23 million in annualized net new revenues during the period, but this ANNR will support earnings growth further into the second half and into 2027. We have increased revenue margins over the last 3 years. You probably remember first time I talked about this. Back in 2023, the average revenue margin was 7 basis points. That number is now 9.6 basis points, and we are ahead of plan for a revenue margin over 10 basis points. We continue to grow our private markets franchise with AUM rising by GBP 4 billion in the first half to GBP 79 billion. And again, here, we are on track to exceed our GBP 85 billion AUM private markets target. Our cost-to-income ratio, it's worth spending a moment on this, reduced from 75% to 71%. This is the first time this ratio has reduced in a decade, and it will continue to reduce further to hit our below the 70% target. So we've made great progress in asset management, and there is more to come.

We're on track to meet our GBP 500 million to GBP 600 million target operating profit in 2028 with more than 80% coming from fee-related earnings. This is really important. The quality of that number is more than 80% coming from fee-related earnings. So finally, retail. In retail, we serve over 12 million customers across 3 structurally growing markets. First, workplace savings; second, individual annuities; and finally, protection. Let me go through the 3 of them. They've all performed really well. Workplace net flows are up 35% year-on-year. And if you remember, we talked about this before, our end-to-end workplace profits, and that includes both the admin and the asset management part of those profits. I was talking to some of you outside about this, more than doubled to GBP 48 million. Andrew will talk about this a bit later. We continue to be the #1 player in the open market in individual annuities, and you can see the number there. Premiums rose by 36% year-on-year. And finally, our protection business saw both an increase in margins and a 22% step-up in sales. And we also have new distribution agreements with 2 large banks that you'll see that in our future numbers.

Again, we are on track to hit our 4% to 6% operating profit growth target. So I'll talk about the 3 businesses. The 3 businesses show good momentum, as we've just discussed. And importantly, they support each other with clear synergies. Typically, you can see that 80% of PRT transactions come from asset management relationships. Eric and Gareth are sitting next to each other there. Actually, the number in the first half of this year was 98%. So virtually every single PRT deal that we did this year came from a long-standing asset management relationship. And then -- and this is what you have here, 90% of the annuity assets are then managed by our own asset manager. A good example of that in the first half is the GBP 1.6 billion of investment-grade private credit sourced by asset management for our annuity book. On the right-hand side, as I mentioned, we have very exciting growth in workplace pensions, but this is particularly important to us because -- and this is very specific to L&G, 95% of those flows are managed by our asset manager.

A great example here is the private markets access fund that we have, which is now over GBP 3 billion. So effectively, our institutional retirement and retail businesses represent controlled distribution for our asset manager. And in the first half of this year, that accounted for more than half of the ANNR. Talking about the bottom of the page, for most of our 190-year history, we have used scale as a competitive advantage. We increasingly share operations and teams across our business units and our large customer base and proprietary data are a source of competitive advantage in an AI world. Two examples. We have launched an AI-driven agent desktop, which Laura talked about in the Capital Markets event that we did in the retail business, which is now driving efficiency improvements. And second, we were the first large U.K. provider to get approval for targeted support, the new FCA regime that is now also launched with AI-driven nudges supporting customer decisions, and we have seen good early engagement. We can talk about that with Laura in the Q&A. There is more to come. Work is underway to make L&G a more efficient and a more competitive business. So we understand the importance of a sustainable growing dividend.

And in the first half, the performance that we have supported another 2% dividend increase, as I said, to 6.24p per share. But our earnings are growing faster than our dividend with EPS up 11% year-on-year and OSG per share up 7%. We expect, and this is what you can see on the chart, our dividend to be covered by core operating EPS this year and that cover will further improve in 2027. As I mentioned at the full year results back in March, also our NSG will cover our dividend by 2027. So on that note, let me hand you over to our CFO. Andrew, over to you.

Thank you, Antonio, and good morning, everybody. I'm delighted to be here presenting a strong set of results. Importantly, these IFRS results are clean and predictable after we draw a line under legacy complexities at our full year results in March. We've delivered 7% growth in core operating profit, supported by 5% growth in Institutional Retirement, 10% growth in Asset Management and 5% growth in retail, all while holding central expenses and debt costs flat year-on-year. Our core operating EPS was up 11%, and we now expect to be above the top end of our 6% to 9% target range for the full year. Our profit before tax benefits from the sale of our U.S. protection business, as we previously guided, and we have a significantly smaller impact from the investment variances, which I'll cover in more detail later. On this slide, you can see a summary of the solid trading metrics across the group in the first half of the year, with each business delivering good growth and on track to meet our 2028 targets. So let's discuss these results in more detail.

Starting with Institutional Retirement, our largest business. We delivered GBP 646 million core operating profit in H1 with asset optimization increasing 38% to GBP 227 million as we took advantage of market opportunities. This is ahead of our guided run rate. And as Antonio mentioned, we're now on track to deliver greater than GBP 400 million per annum of asset optimization across Institutional Retirement and retail annuities, even in benign markets. That's up from our prior guidance of GBP 300 million as we've industrialized our processes. The flat CSM is a function of the sovereign-based investment strategies we're using in a tight credit spread environment. In this environment, asset optimization is a greater driver of our profit growth, and we'll discuss more of that in a moment. Further spread tightening through 2026, alongside the competitive pressure has increased the upfront new business strain we're reporting, even though our investment approach and capital requirements have broadly been consistent. But despite markets and competition, we continue to deliver strong returns on our capital. We remain highly selective and disciplined in the transactions that we go after.

On this slide, you can see our long-term track record of success in Institutional Retirement. We've written around GBP 95 billion of PRT over the past decade, typically averaging 20% to 25% market share. This has supported growth in our PRT asset every year, excluding market impacts. The slide also shows the impact of the move to IFRS 17 accounting. This changed the timing of profit recognition, but it has led to a more steadily growing predictable stream of profits from the Institutional Retirement business. And we continue to rigorously apply our minimum 14% IRR threshold to all capital allocation decisions. New business margins have reduced though, so let's dig into that further. In a competitive market with tighter credit spreads, we've used sovereign-based investment strategies to back our new business. And this has led to lower day 1 new business margins. But the optionality for the future is created through asset optimization profits. Sovereigns, as you can see, are now 29% of our asset portfolio, up from just 10% in 2022. And asset optimization generated GBP 288 million across our total annuity portfolio in the half year and writing new business on sovereign-based investment strategies feeds this optionality and growth. Asset optimization doesn't require large market volatility.

We have the optionality to rotate across ratings, currencies and sectors in credit and in sovereigns. We increased our sovereign exposure, reduced derivative-related exposure and remained cash flow matched in H1 and in so doing delivered earnings and capital with no increase in our capital requirement. We're confident in delivering asset optimization of more than GBP 400 million per year across our greater than GBP 90 billion annuity portfolio. We believe we have the option across the various components to deliver this, and we see further upside as and when spreads widen. So moving to Asset Management, which Antonio has mentioned, is really the highlight of today's update. Fee-based earnings grew 37% year-on-year as revenue grew and costs were controlled. Balance sheet earnings of GBP 53 million are consistent with our guidance of GBP 80 million to GBP 100 million for the full year, and we have substantially lower investment variances than we've seen in prior periods. Annualized net new revenues, ANNR, were GBP 23 million in H1, which is more than we generated cumulatively over the period 2020 to 2024. We are positioned well as the U.K.'s largest asset manager with GBP 1.2 trillion of AUM and an improving business mix, as I'll cover on the next slide. Our cost-income ratio reduced year-on-year for the first time in a decade from 75% in 2025 to 71%, with operating profit returning to growth, up 10% compared to half year 2025.

We are building momentum, but there's definitely more to come. Our ANNR growth and cost discipline will drive further operating profit growth in coming periods and support the delivery of our GBP 500 million to GBP 600 million operating profit target for 2028. In both public and private markets in H1, we've seen ANNR growth even with net outflows in public markets, as you can see on the slide. Our revenue margins have increased annually from 7 bps in 2023 to 9.6 bps in H1 2026. This contrasts with the industry trend of declining margins. We are consistently improving our revenue margins by attracting net inflows in higher-margin mandates, which more than offset the net outflows from the lower-margin mandates. We said that 2025 would be the pivot point for Asset Management, and we're delivering on that. The cost/income ratio improved by 4 percentage points to 71%, driven by strong revenue growth and disciplined cost management. Revenue grew 13% year-on-year with around half of this increase driven by net new revenues generated over the last 18 months. Cost growth of 5% reflects increased variable compensation linked to those higher revenues in the first half and our continued investment in the business. Underlying costs are flat on a nominal basis, i.e., down in real terms, reflecting the cost action we've taken in the business. So this is an important milestone, but not the destination.

We remain on track, as Antonio said, to reduce the cost/income ratio below 70%. Retail saw similar trends to Institutional Retirement with a small increase in the CSM release and a step-up in asset optimization. As a reminder, our annuity portfolio is managed as one across PRT and individual annuities. Workplace admin profitability is improving as underlying profitability growth continues to fund investment in our proposition. In H1, we invested GBP 25 million in our admin proposition, so admin was profitable on an underlying basis in the half year. As we've outlined previously, we manage workplace profitability across both Asset Management and retail, and I'll touch on this a bit more later. Our new business margins also improved for both retail annuities and protection. We have impressive growth trajectories across our retail franchises. Workplace pensions assets under administration grew nearly 20% compound over the past decade, and our recent win rate suggest this momentum continues. We're not the largest, but we are growing fast. Individual annuity sales have increased in recent years, and we see structural growth, which will further support us as the market leader. And in protection, this is a steady growth business with gross written premiums growing by more than 1/3 over the past decade.

As you can see here, our workplace pensions business is starting to open its profitability jaws. Our end-to-end profitability for the first half more than doubled year-on-year to GBP 48 million. A simple doubling of this suggests a significant step-up in 2025's profits for the full year. We have a strong proposition in which we continue to invest. Our app, for example, is the top rated in the market, and we already have 2 default funds above the government's GBP 25 billion minimum threshold. We're on track to deliver our commitment for a tripling of end-to-end workplace profits to GBP 180 million by 2028. Workplace Pensions is our hidden gem, a business which has grown significantly and is beginning to benefit from the scale that it has. It might still be small in the group profit context, but we see a really attractive trajectory. Turning to investment variances. I've maintained the same format as presented in March, separating out insurance and shareholder asset impacts. Importantly, the legacy items that previously drove larger adverse variances in the blue boxes on the slide are behind us, and I'm pleased with the immaterial experience recorded in the first half.

The investment variance in the insurance business, the green boxes was primarily driven by day-to-day market movements in the annuity portfolio, particularly from changes in inflation, interest rates and property, where accounting for asset and liability movements doesn't perfectly offset. The largest impact there came from higher short-term inflation expectations and no corresponding increase of longer tenors, which increased our liabilities more than our assets. But importantly, we hold these assets for their cash flows, not their short-term price. The risk we care most about with our annuity assets is defaults, and this investment variance doesn't reflect any deterioration in the underlying credit quality. These rates and inflation impacts reflect exposures that we intentionally retain as part of our strategy to manage the size and volatility of our Solvency II capital requirements. Consequently, we accept a degree of market volatility in IFRS, which remains consistent with our risk appetite. Last year, for example, movements in rates inflation delivered positive investment variance. Our store of future profit, including the CSM and risk adjustment, was down slightly in H1.

The underlying fall was around 1% before the impacts from experience and modeling refinements. This is largely due to the sovereign-based strategies we're using to back the annuity business, which contribute less CSM than historic business, but as I've said previously, increase our asset optimization opportunities. We would like to get back to a world with wider credit spreads, which would support a return to more significant CSM growth, but we will not chase yield when credit spreads are tight. And as I've discussed earlier, we have a significant asset optimization opportunity to drive our profit growth. Our solvency ratio is 201%, which is robust and remains well above our 100% to 90% -- 160% to 190% target operating range. We reiterate our intention to organically move down this operating range over the coming years as we invest in growth opportunities. Over the first half, our solvency position benefited from the sale of our U.S. protection business to Meiji Yasuda, net of the cost of our share buyback announcement. We also adjust for the final dividend for 2025, which is seasonally larger than our interim dividend payment in the second half. Operating variances reduced the ratio by 5 points, reflecting changes to ALM management, improvements to cash flow modeling and capital model strengthening.

This was partially offset by market movements, including a positive impact from higher interest rates over the period, which reduces our SCR net of adverse inflation impacts. As you can see, our recent debt refinancing took advantage of attractive RT1 pricing and leads to a step-up in the pro forma solvency ratio to 209%. Whilst we don't formally report our debt leverage at the half year, we've seen a modest uptick in the ratio due to seasonal factors like dividend payments. But to reiterate what I said at the full year, we're committed to reducing this ratio in the medium term. This slide is a reminder of our asset portfolio. More than 99% of our bond portfolio is investment grade, so less than 1% sub-investment grade. The portfolio is well diversified by sector and internationally with our public credit more U.S. focused, but our private credit more U.K. biased. Further details on this are contained in the appendix to the pack. At the full year results, we committed -- I committed to greater transparency in our discussions with investors.

And I heard some of you talk about the importance of cash disclosure. So we're moving there to today, we're disclosing our stock of cash at holding company for the first time, and you see it's GBP 1.4 billion at 31 December 2025. Our holdco cash is around 1x our holdco outgoings for a full year and is likely to stay at that level for a foreseeable future. We think this is an appropriate level for our business. We have further liquidity held in our business units, which is material and available to invest in growth. So we're well positioned to meet our continued growth objectives and support the attractive dividend. And on that point, I shall hand back to Antonio.

Thank you, Andrew. So I'm pleased with the growing momentum of our key metrics, which you can see here on the slide in the first half of this year. But there is more to come from L&G. We have strong positions in structurally growing markets. First, we see a golden era of PRT with over GBP 1 trillion of global flows over the next 10 years, including GBP 500 billion here in the U.K., where, as you know, we are the market leader with 20% to 25% market share. This is a competitive market, as both Andrew and I have just said, particularly with tight credit spreads, but we are still beating our IRR hurdles while locking in optionality for the future. We also continue to win in international markets, including the U.S., where we are now quoting on jumbo deals. Basically, jumbo deals are the ones above $1 billion, thanks to our partnership with Meiji Yasuda. Second, DC pensions are set to double to GBP 1.5 trillion by 2034. We are the fastest-growing player in the workplace pensions market and the only one with a global asset manager, which manages 95% of flows. We are future-proofing L&G with DC providing an additional growth engine beyond DB. Third, the same growth that we're seeing in DC is a structural tailwind for individual annuities where we are the market leader. We see, as you can see there on the slide, annuity market flows more than doubling from GBP 8 billion in 2025 to GBP 20 billion by 2034.

Bigger pension saving pots will lead to larger annuity purchases and better retirement incomes for our customers as they reach retirement age. And for reference, this is important, the average age of our workplace pension customers today is only 44 years old. Also, our protection business will also deliver steady growth with an opportunity to grow particularly whole life insurance following the inheritance tax changes in the U.K. So our synergistic business model, which is the flywheel you can see here on the left, puts us at a competitive advantage to benefit from the structural trends I've talked about and better serve our customers. We have scope to do this more efficiently. Work is underway to drive efficiency improvements across L&G. And we naturally see lots of opportunities from technology, particularly AI, but we also see opportunities from a simpler operating model and a leaner business.

As I say here on the slide, we will reinvest some of these savings in growth initiatives and further efficiency improvements, but only where the payback periods are short. You can see the initial results of this effort in Asset Management, and Eric can talk about this more later, where the cost actions that we've taken helped drive our cost to income down from 75% to 71%. There's more to go, and we will give operational efficiency a bigger focus in our future updates. So Andrew said this, but just to reinforce, we expect EPS at full year to be above our 6% to 9% EPS target. And as you can see on the slide, we are on track to meet or exceed the rest of our targets. But I believe we can go further. And why do I say that? We have 3 arguments, market-leading businesses with 20-plus percent market shares in structurally growing markets. Second, our synergistic business model is unlike any of our peers and puts us at a competitive advantage.

And as I've just said, we see opportunities to use our scale to drive further efficiencies. And finally, this supports attractive, sustainable and growing capital returns to shareholders. So we flagged today that we may have not seen this, that we will introduce quarterly trading updates. The first one will be our third quarter update on Monday, the 16th of November. So with that, Andrew, Laura, Gareth and Eric will join me on stage to take your questions, which Andy will be facilitating.

[Operator Instructions] Let's start a [indiscernible].

So first question on asset optimization and second on dividend cover. So with asset optimization, can you -- there are lots of questions on this, obviously, as you can understand. So can you give us an example maybe of something that you did in 1H, kind of roughly what basis point increase it gave and how that capitalizes just so we can get comfort that this is a business as usual type of harvesting that you're generating. And I'm guessing that this harvesting will grow with the size of the annuity portfolio when you talk about the greater than 400. That's question one.

Question two, on dividend cover, I think there's obviously a question of your dividend cover from Solvency II percentage points rather than just earnings or net surplus generation. Can you give us some comfort around that? So you've given a 160 to 190 target range. Is there kind of a level at which solvency will ultimately fall to and stabilize at? And I saw the slide on stock and flow as well that you gave. So what conditions would make that come sooner, that stabilization?

Thank you, Farooq. So Gareth, you should give a specific example on asset optimization, and then we'll come back to Andrew and [indiscernible] the word on that as well. But why don't you go first, Gareth?

Sure. So thanks for the question. A few examples, U.K. to U.S. sovereigns. So we see both the U.K. and the U.S. as being default risk-free. And so therefore, we will look for opportunities where we can optimize from one to the other. We also saw opportunities this year in selling out of BBB credit and into single A credit. There's a range of others as well, but we're looking for opportunities where we are taking little or no additional risk where we think that we can get an uplift. The uplift might be 10 basis points or more. It needs to be big enough to make it worthwhile, but -- and because of our scale, we're able to trade and generate large numbers. So one of the reasons that the number will grow over time is because as our book grows, the size of the trades we can do are relatively larger.

Yes. It's important, actually, Andrew mentioned this that in this GBP 400 million we're talking about, we're not consuming additional capital. We have talked about, I forgot if you ask Farooq. If we rotate the additional credit spread widening with the rotation, that could consume capital, but it would still meet the same 14% IRR. But we feel good about the GBP 400 million plus even in benign markets.

Andrew...

Very high-quality earnings. So I think absolutely. Farooq, on your dividend, I mean, maybe just repeat some comments we said at the full year when we talked about the range. So solvency ratio we reported today, 201%, 209% on a pro forma basis. I think if we looked at it today, it's even higher given the rates environment. So we're very comfortable where the ratio is right now. But we've also guided that as we price business in the 160 to 90 range and we write more business, we would expect and plan to come down to that range over time. It's a range because it's dynamic, and you talked about the stock and flow and the examples we've given in the appendix, I hope are helpful to give you an illustration how that moves. But we would be expecting over the next few years, that ratio to trend down to the 160 to 190. And I think repeating something we also said at the year-end, we're still very comfortable supporting the dividend at 160 and writing business. Below that, we take actions to bring it back. We've got actions we could do to do that. But it's -- we gave the range for a reason, we're comfortable operating at that level.

Yes. And we're still saying what I said at the full year, what we said at full year, NSG will cover the dividend by 2027. That's obviously in pound terms, the ratio itself, we expect to come down.

Andrew Baker...

Andrew Baker, Goldman Sachs. First one, just on -- obviously, we saw the asset optimization upgrade on the IFRS side. No change to the OSG growth. Can you just talk through the sort of dynamics of what's happening on the OSG side that we're not sort of seeing an upgrade there? And then I guess just more generally on that sort of comment around dividend covered by NSG 2027. You're very clear it's under normal new business strain scenarios. There's a lot going on, on the strain side with Funded Re, obviously gilt heavy versus traditional. Are you able just to give us a sense of what is a normal new business strain scenario? And then secondly, I guess, just on the volume side. So you've got your GBP 50 billion to GBP 65 billion '24 to 2028 target for U.K. PRT. Again, just related to the Funded Re potential changes. Is there a chance that the gross target is my understanding. Is there a chance we should look more at the net volumes that you've done in the last few years, and therefore, there may be some downward pressure there? Any comments around that would be really helpful.

I think actually, Gareth, we should start with you on volumes. And if you can say something about Funded Re there. And then we'll come to Andrew for the OSG generation and the asset optimization.

Sure. So volumes, I mean, the first thing to say, Antonio talked about the Golden decade, the $1 trillion opportunity. I mean we see this as a really attractive market. Pipeline is bigger than we've ever seen as we sit here right now. And so in terms of the opportunity ahead of us, then we think it's really large. We find ourselves particularly well placed at the larger end as well. And so as those larger schemes look to buy out, then we find ourselves in a really good position. So I think that's the first thing to say. On Funded Re, so consultation just closed. We have been presenting some what we think are robust arguments back to the regulator. We continue to see Funded Re as an attractive opportunity. In the current market, the modeling suggests that we will expect to still see that in the future, and we will continue to use Funded Re where we see it as being economically attractive.

And just one point to add on that. On -- I guess all of those targets. But if you remember, because you were sitting here in Andrew, in June 2024, I said all of the other numbers were targets, but that the GBP 50 billion to GBP 65 billion was guidance. The reason why I'm just stressing that is we will not chase volume. And we'll see this in the second half of this year in terms of disciplined pricing. We're printing today probably something that surprised most of you positively in terms of the GBP 5.7 billion. But in the second half, if the conditions are not there, we'll write less PRT. So there is -- and this is -- comes from the Board to me and for me to Gareth and the team, our objective -- even the 20% to 25% market share is not a target. It's -- the target is the pricing discipline and creating value. And then we gave guidance at that time that we thought that will be GBP 50 billion to GBP 65 billion %. We still think that. We still think the potential is there. But it's important that the other ones are actual targets. I would be comfortable if we didn't meet it for the right reasons, which is we're creating value for shareholders.

Yes, on the OSG point, we haven't formally updated the guidance for the asset optimization under OSG, a couple of points though. Directionally, you should expect it to flow. We're doing more from IFRS side. It will flow through to OSG in a natural way. But there are some structural differences. The really obvious one and very mechanical one is tax is a post-tax basis, we can adjust for that. But when we optimize assets in a Solvency II world, we may have to deploy additional capital to achieve the optimization. Now that's something Gareth and the team take into account. And we'd only do it on a post-strain basis if it works.

But giving quantitative guidance when you have that strain dynamic is just a bit more complicated. So we'll reflect on your question, but absolutely aware you should expect that to flow directionally. And on the strain, I think you'll see the strain is up on the deals that we've written in the half. I think the deals coming after that this year are obviously on the exclusive piece are sort of lower. But we've said before, we -- the IRR and hitting our capital target is the most important thing. And therefore, we reminded when we look at transactions, of course, we would consider the strain carefully. But actually, if we can deploy capital for the right return for us, that's a good trade.

So we -- the normal level will depend on conditions, but it's the return that's more important than the strength, mindful of the fact the conversation we've had about capital deployment, NSG dividend cover. So we have to take all that into the round.

Yes. But everything else being equal, the 3.4% globally, it's 3.1% in the U.K. We expect the U.K. number to come down. So the strain in the U.K. that is abnormally high for the GBP 2.1 billion, but we expect that number to come down in the second half.

I'm going to keep moving along the row.

It's Fahad Changazi from Kepler Cheuvreux. Could I just touch upon the asset optimization strategy in terms of what sort of infrastructure you have in place for talent and teams? And how dynamic will you be versus what you were doing previously with daily trading, for example. And then another point, I appreciate what's happening with new business on IFRS CSM. But the CSM release ratio ticks up. Is it expected to continue to tick up a little bit given the new cohorts of business from post Solvency II coming through?

Thank you. I think on CSM, you should comment, Andrew. I think you should talk Gareth, about the new hires we have in terms of new CIO, but maybe there's an opportunity for Eric to add because this is done obviously jointly between asset management and Institutional Retirement. But maybe, Gareth, do you want to start and then can say a couple of words, Eric?

Sure. So I started as CIO 18 months ago. And at that time, working closely with Eric, we started looking at what infrastructure we needed to be able to build. And so last year, we talked about having done a relatively smaller number of larger transactions from back book optimization. We've increased the number of transactions. We're not doing daily trading. We're looking at relative value opportunities. But we have created a team across asset management and institutional retirement that works on this, looks at relative value opportunities together, enhanced our system so that we're looking at the same data together and looking at working together as a team. And that's one of the reasons that's driven some of the increase in activity over the first half of the year.

Yes, not a lot to add to that. Actually, we're really excited about this prospect of a more dynamic approach to our asset optimization. As I think you know we're well known for our solutions business and a lot of what our most important client in Gareth's team needs is a more active approach to both public and private markets. Derivative overlays is something we understand really well. So this is actually quite a motivating factor for our teams that are delivering similar solutions for a lot of third-party clients.

And as we get into -- if you think about things like our cost-income ratio, I think Andrew mentioned, on a like-for-like basis, we really have a lot of control over our cost. But because we have the revenue to do it, we are very focused on variable compensation right now to make sure that we can continue to pay our talent to do what they've been doing so well this first half in a competitive market. So again, we're really set up to be able to drive this kind of dynamism in partnership with institutional retirement.

Along to Derald and then Will.

On the CSM release, CSM release, I mean broadly flat proportionately in institutional, actually slightly up in retail. I wouldn't guide to expecting significant changes in that.

It's Derald Goh from Jefferies. Two questions, please. So the first one, could you help me understand the movement in the PRT new business margin and strain because margins have gone down and strain has gone up, whereas I would have thought they would have moved in tandem.

And then secondly, the 5 percentage point hit to your solvency from those hedging, it looks like it was a bigger number if you exclude the benefit from interest rates. Maybe you could go into a bit more detail as to what is the impact there? And could you clarify if that has anything to do with the high levels of asset optimization you've taken?

I think we've covered some of that, but why don't you cover solvency first? And then Gareth, can you come back on the strain on new business margin? Maybe double-click on what I said earlier about the 3.1% coming down and -- but yes. Thank you, Derald.

Yes. On the solvency, rates was a component, a larger component was inflation. So -- and then we have some model refinements that are the balance. So I think in terms of the 5%, we made some changes to our sort of hedging strategy in sort of foreign exchange and inflation that added to our SCR, which therefore deteriorated the ratio, but the bigger component was inflation, not interest rates.

If you look at the market sensitivities, really the only one that's slightly different to the market sensitivity would be inflation, which is to do with the shape of the curve. It was the other things that led to that, as Andrew mentioned.

So on the new business margin, so the market is competitive. It was competitive last year. The thing that's really changed from last year to this year is that credit spreads are tighter. And so we have preferred to retain optionality instead of me incentivizing my team to lock into long-dated spreads that we don't think are attractive. We preferred to print an underwritten new business margin at 4.2%.

We give ourselves the optionality to trade up on that over time, which we've demonstrated we've been able to do. So we're fine with that in the current market. The strain, as Antonio said, we're expecting to come down. We will see opportunities at times to, for example, optimize when we use reinsurance. And so this is a little bit higher because we've seen an opportunity to not reinsure some of the business that we might ordinarily do to -- because we saw a good return on capital on not doing that in isolation.

Mr. Hawkins.

William Hawkins from KBW. I wanted ask another one on PRT, but I think we've probably had a lot.

I think Eric and Laura to add something, yes.

Maybe could you just flesh out a little bit more, Antonio, about what you're thinking about in terms of scope for operating efficiency as you look to the future? And also how we're going to see that in your numbers? Because my view is you joined a business that was already quite cost focused. So where you see further to go is interesting. And also the risk of being nerd, a lot of your profits kind of come from the CSM and how it unwinds.

And so it's not just a simple thing saying right, we'll cut costs and they'll drop to profits. So if you could talk a little bit about how you're thinking about operational efficiency, please? And then secondly, and again, sorry if I'm just navigating the slide slowly, but the workplace profits of GBP 48 million, can you just remind me where we see that in the P&L? Because the P&L has got a minus GBP 14 million for admin expenses somewhere. But I'm still not quite sure where I kind of see that number and therefore, get visibility about how it's taking off in the future.

So why don't I give that to Laura because it gives you also an opportunity to talk a bit more about that business. But let me comment on your cost point. So actually, we haven't talked a lot about costs externally. So the fact that we're talking about it today tells you that it's an important thing for me internally.

And -- and yes, you're right that the way -- particularly in our insurance businesses, so -- and I'm including in that PRT and individual annuities, a lot of mechanically how anything, but particularly costs go through it to grow to the CSM and then it would be released, so it would make our profitability better. So that's the simple answer to that question. But the bigger point here, and you can see it in our asset management numbers by keeping our nominal costs flat, which means that our real costs were down, we've been able to reinvest some of that into growth areas, and that's what we want to see across all of our businesses. I'm the largest annuity player in the country. I'm the largest asset manager.

We have 20% plus market shares in many of our businesses. You would expect us to be looking for efficiencies. Also, we're at the moment where technology, particularly AI gives us an opportunity to do things in a much more efficient way to be a leaner organization with more efficient. So we can expect as I present results, trading update and results to hear more about the results of what we're doing. I was going to go to Laura, but maybe do you want to say a word, Eric, on what we've done in asset management in terms of cost efficiencies and...

Yes. We really didn't think about it in terms of pure cost. We thought about what does it take to be one of the leaders in the asset management world while it's consolidating and while you're seeing more and more being asked of us from the largest clients around the world, they're looking for much more partnership-led type solutions. And what that means is you need to be incredibly efficient. You need to be seamless and very transversely connected. You need to be less manual than I think we and others have been in the past to be able to deliver a wide range of solutions in a way that's not clunky.

So when you think about that, what you're really thinking about is maximum efficiency and maximum ability to deploy resources where you think you need them quickly and ability to pull a lot of different resources together to win these new mandates. When you think through that, what you end up with is quite a bit more discipline and control over your business as usual costs because you need to know where to direct them. You need to also be able to react to a very volatile economic world.

So what you've seen, I'd say that some of our cost efforts are just as apparent in the 13% increase in revenues as they are in the cost number because we are now winning more sophisticated mandates at a speed with which I think we would have been more challenged to do that. So in many ways, if you think about rewiring the organization for efficiency and connectivity, the costs are kind of a result of that versus the actual aim. That's how we've looked at asset management.

Laura?

So on your workplace numbers question, so the number -- the GBP 48 million number is the end-to-end workplace profit. So comparing the number we gave to you in the Capital Markets event last October, with effectively 140% increase in the sort of end-to-end, so asset management and retail profits. That doesn't actually include the new business that we've won but not yet funded. So the GBP 9 billion of business that we will sort of onboard over the next 6 to 12 months.

And then your question on the minus GBP 14 million, which is on Andrew's retail slide, that's effectively the retail profits taking into account the investment spend as well. So the GBP 48 million doesn't actually include the sort of non-BAU investment spend. So the investment spend we're making on things like efficiencies, customer agent desktop and the app, et cetera.

And actually, if you have a follow-up, we can -- with Andy and the team, we can reconcile all the numbers.

Over to Nasib.

Nasib Ahmed from UBS. Antonio, when you set the targets on kind of IFRS, you had the asset optimization of GBP 200 million. Now it's gone to GBP 400 million. And that's significant in terms of the uplift that you could get in our projections, right? So what's -- why haven't you upgraded target is kind of the short question. What's the delta? Have you seen any negatives that's offsetting the GBP 200 million that you're getting from asset optimization? Second question, technical one maybe for Andrew. In the shareholders' equity, there's GBP 1 billion that's moving from reserves into P&L. Why have you done that? I know a lot of other companies are doing it. Is it because you want more distributable capital where you're running out of road?

So Nasib, thank you. So on the targets, look, I set out the target in June 2024, and our role here across this table is to deliver those targets and ideally exceed them. So what I haven't done is upgrade targets because my job here is to put something out there and deliver. And so that's the simple answer.

The reason why we've gone from GBP 200 million to GBP 300 million to GBP 400 million is the change that Gareth was describing, which is we're getting less of that profit upfront from a CSM day 1 margin, but we're getting it more from an asset optimization perspective. So as you go back and update your models, I'm sure Andy and the IR team can help you after this. You need to kind of balance the two, but I didn't want you to leave today without knowing that this is what we're doing. We're delivering more than GBP 400 million in asset optimization. So it's important for you to know that number. At some point next year, I'll need to give you the next targets in the next three years, but that's not the purpose of today.

And to your question, we undertook a capital reduction exercise at the Holdco, which is a number of other companies have done post IFRS 17. So we caught approval to move share premium reserves and capital redemption reserves into distributable, which basically don't have a flexibility just gives us more flexibility having distributable rather than non-distributable reserves.

David Beck, RBC Capital Markets. Actually, most of them on asset optimization have been answered. But then on the asset management side and I guess, cost-income ratio trajectory, you're already at 71% against the target of below 70% by full year '28. So I guess given the progress on the revenue mix and the cost discipline that you delivered this half, I guess if that momentum continues, where do you think realistically you could land in terms of the cost income ratio?

And then I guess, on margin, strong progress there as well. So the path to double digit seems very likely. Again, what's the ceiling there? You've got positive underlying dynamic of the outflows are coming out being lower margin than inflows being higher margin. So I just wondered if you could share more color on where do you see it going forward?

Thank you. I think they both squarely with Eric, you're doing my half year review with him yesterday, which is, of course, we want to move faster. But again, to the previous question, we're not changing the targets because we certainly want to beat them. But with that, do you want to talk about both the cost-to-income dynamic and the margin dynamic?

Yes, I couldn't be more pleased with the trend and the underlying substance behind them. So we alluded to it in the answer to the last question. But I think we're now at a point where we've got a very good handle on where we want to spend to grow. Revenues have a lot of intrinsic factors to go along with tailwinds we've had in the market today. We can go over. There's more intrinsic factors that give us a lot of confidence that we can continue to drive that cost-income ratio down. I don't think we want to be setting new targets now, but I'm really pleased with the fact that so far ahead of 2028, we're close to it.

So -- and I do think the trend will continue to be positive. And frankly, it's a similar story on the revenue margins. We -- I described a very dynamic situation. We can do a lot of different things for clients, and they're asking for new types of partnership-like mandates versus the pure product mandates before. So I really want to make sure the team has maximum flexibility to move across asset classes and across types of mandates. So without getting into where costing -- the revenue margin could get, again, very positive trend. We are moving towards more and more sophisticated strategies, more in the private markets. We think that trend will continue, and that's naturally going to have a positive effect on these numbers.

Michael?

Two. One is I asked Laura before, but I wanted some numbers, the default accumulation. How much more do we get? I know it's 2028 or '29. And then similarly, Eric, you've spoken a lot. I think you've danced around the plot really, GBP 500 million to GBP 600 million. Can you give us a feel -- I know you don't want to raise guidance. I don't know how to phrase the question, but it looks like you'll achieve this like 1 to 1.5 years early. Is that the best way of asking the question? Maybe you can kind of help a bit on this.

And Michael, on the first question, which is default accumulation in the default DC fund.

Correct. So you've spoken a lot about workplace, but the extra bit of workplace is this thing. Yes.

Laura first and then come to Eric.

So default decumulation, which is part of the pensions review and the Pensions Act that is now in force. So by 2029, all workplace DC sort of master trust providers will have to have what's been called a default decumulation. So effectively, sort of default option for their members to go into. So members who don't actively sort of choose to go into an annuity or something else will be sort of put into a default accumulation, which we are designing and alongside many of our competitors.

So that will look like a sort of combination of, if you like, of sort of annuity and drawdown. So in the numbers that we showed, I think on Antonio is probably one of your last slides where it showed sort of just the annuity market going from GBP 8 billion to GBP 20 billion over the next decade, which is really a sort of ratio in how much do we think -- how many people -- the AUM, if you like, that is going into retirement. That number actually only projects what we think is sort of happening today. It's just a sort of simple ratio. So the default accumulation bit, we think will actually be sort of additional to that. It's hard to sort of give you an exact number on that, but you can sort of think of that 20 million is almost -- there'll be extra annuities sort of on top of that, all else being equal.

Yes. And that's why I've said that today, the standout performance today on the results is asset management, but the most exciting long-term point is what's happening in DC. And I know several of you have asked me this before in terms of does it really generate money. It generates money, as we say, on the 180 million, but as Laura is saying, on everything else we can do on those customers, individual annuities, hybrid solutions in terms of accumulation and annuities. Eric?

Yes. Look, I think I couldn't be happier with where we're at in terms of the objectives we've set for ourselves in 2028. And it's true, it's relatively early in that phase, right? But I think if I were to point to what I'm most pleased about, and Antonio mentioned it earlier, it's the trend in terms of the quality of those earnings. The fact that we're now targeting something near 80% of that being fee-related earnings. I think that is what's really important qualitatively. And secondly, we know the other piece of it, there's fee-related earnings, there's balance sheet investments. I'm really pleased by, and Andrew alluded to it, the profit before tax number, right? Because what really is important is we also have a very good handle on the bottom line of our balance sheet investments.

We are targeting towards $80 million to $100 million of that in terms of operating profit. But the fact that we've really got a handle, and as you said, sort of the proverbial drawing of a line under the real understanding of that portfolio, I think we've got a lot of control over it. So those two aspects together for me are really pleasing. And clearly, we are fairly early in the game for the 2028 results, and we're on a positive trend, no question.

And my standard answer next year, we'll upgrade guidance, meaning we'll update rather New guidance, Freudian slip there. We'll update the new targets.

Andrew Crean at the front.

It's Andrew Crean from Autonomous. A couple of questions. Firstly, on the dividend cover, which is just breaching 100% on both IFRS earnings and on net surplus generation. What level of cover do you need to get to grow the dividend in line with the earnings and the operating surplus generation? And secondly, on the BPAs, I understand you're operating in leverage gilt strategy. So you're backing them with more gilts. Can you tell me about the leverage, how much the leverage is? And when the leverage unwinds, what is the new business profit underlying and what is the IRR underlying?

Thank you, Andrew. We can start there with Gareth. It's a structured sovereigns and actually, we should call it that rather than leverage. But you could explain that, but it's a really good question for everybody actually. And then I'll come back on your coverage point.

So bearing in mind that some people will be less familiar with this than you, Andrew. So we trade really three types of structured sovereigns. So we trade sovereigns on asset swap. So where we use a swap with a bank and a government bond. We trade cash flow swapped gilts and treasuries. And we also use forward starting. So where we like the future cash flows and we purchase those. And the amount of embedded leverage, as you described, differs. In some cases, there's no leverage and in other cases, there is some leverage.

I think I said previously that with all of those, the way that we look at the transaction is that they've all got to be liquidity self-sufficient, i.e., that in very, very severe scenarios, even beyond Solvency II scenarios, we would be able to post the collateral of the underlying to cover that movement. So if interest rates went up or down, then we could post the underlying government bond into the collateral form.

So that's really important. That is the way that we make sure that we don't take on more leverage than we would feel comfortable with. The point on the unwind. So the first thing that we say to all of our banks is that we can and will, if need to be, hold these assets to maturity. So we buy these assets with a view that we don't have to do anything with them. However, we have seen lots of opportunities in the last 18 months to restructure the transaction.

There's been a contribution to our back book optimization profit, and we expect that to be the case in the future as well. So we never need to unwind them, and we will only unwind them if we see a positive benefit effectively an increase in our IRR. And that is -- we've already seen that over the last 18 months and we would expect to continue to see that.

And that over GBP 400 million that we're guiding for is clearly after those costs of unwinding or changing anything that's what we're guiding for.

Well, that's like saying what's the IRR if you chose to invest in different assets. So we choose to invest in structured sovereigns because we think they're really good assets to back our liabilities alongside corporate public credit and private credit. And at some point in the future, we might choose to trade out of them and into something else. But at the moment, we want to invest in structured sovereigns because we think that they give really good match to our cash flows, and we like the economics of the transaction.

And the answer, Andrew, has to be, it will be above 14. Otherwise, we wouldn't write it. But it's true that we probably wouldn't write some of that business if we were not using structured sovereigns because simply the assets and liabilities. So the answer is it's always above 14%, and we have rejected and actually you should make the point, Gareth, many transactions where we decided not -- simply not to quote because we didn't think they were appropriate.

Can I come back to your coverage point? It's an important point. We -- my #1 priority is dividend sustainability. I've been doing that for the last 2.5 years. And I know you know this, but it's worth for everybody in the room and dialing in. The GBP 1.9 billion that I will have done of share buybacks of the GBP 1.2 billion, the GBP 500 million and GBP 200 million have reduced the cost of the dividend by GBP 300 million plus, reducing the 5% to 2%.

So that was very clear when I met many of you and the buy side as well for the first time that dividend sustainability is my priority. What we're signaling today is two things that core EPS now is expected to cover this year the dividend. And so that is important in that Page 11, I think it is, where we show that by next year that dividend coverage will continue to improve on an IFRS basis. But also, we need to look at the dividend cover from a Solvency II perspective, and I'm saying that NSG minus dividend will be covered by 2027. To answer your question directly, this is what I need to do next year. I need to say, now my new capital distribution policy for the next three years is going to be x, and here's what the dividend payout ratio is. I have a number in mind. It's not something we have yet agreed internally or disclosed to the market, but that's what the next phase is.

Having made it sustainable, then there will be what is the right dividend payout ratio. I know you'll have a view -- we have a view on that. But now I feel much more comfortable that the dividend today is much more sustainable, to be honest, than it was the day that I took over.

Abid Hussain from Panmure. I've got a few questions, but I'm going to stick to two. And the first one, I'm afraid, going back to the PRT margin. So the move to the sovereign-based strategy clearly defers the value into asset optimization, as you said. But can you just help us understand the underlying economics a little bit more, to put a bit more color on it. So for example, what was the cash IRR in the first half this year versus last year? And then could you perhaps give us an estimate of the lifetime IRR? I suspect that's probably closer to 20%. So that's the first question. And the second one is on the asset management. The margin mix effect is clearly helping lift the revenues. Do you think that mix effect can still drive the numbers forward over the next few years even if the public AUM remains in outflow?

Look, I want to answer, but I don't want to get too dragged into details. But I think from an IRR perspective, the simple answer, Gareth, you may add is the day 1 IRR is above 14%. But yes, if I include the lifetime value, so I'm not accounting for the additional rotation and asset optimization later in my 14%. So if, let's say, a deal is 15%, let's say, clearly, the lifetime value will be closer to, to your point, I'm going to make it up, just to use another 20%. So that's true deal by deal. Anything else you want to say on just brevity would be good.

I mean maybe just a reminder of how many deals we've declined and the fact that although we're really happy with the volumes that we've written, we have lost more deals than we quoted on, and we have declined to quote on 96 deals so far this year. And so we're looking for the areas of the market where we think that we've got a competitive advantage. And we will only be able to get something through our group investment committee if we can hit our minimum 14% IRR hurdle.

Historically, we've cleared that comfortably. And obviously, if that's a minimum, then we expect to clear that comfortably this year. And the final thing is just we can't calculate a lifetime IRR yet because we don't know what the future opportunity is. But as Antonio says, that sets a floor, but we can -- the best way to answer your question is probably looking at some sensitivities of what you imagine that GBP 400 million does over the lifetime and what that adds to your IRR.

Can I just -- so that business that you declined, is it because of the shape of that business, tighter spreads? Or is it just competition?

So lots of the smaller deals, we think we've got a structural advantage where our asset manager has an existing relationship. And so that's why the number is so high at 98%. Particularly in the current market, we're seeing that, that is important. With some of the smaller deals we work on a sole insurer basis as well. And if the client is not prepared to work on a sole insurer basis, we might decline those.

And in other areas, we're just seeing the spots in the market where we don't think that we will be able to generate as much value for our investors as others, and those are obviously good areas of the market to decline. I mean that's obviously what Laura does in her business as well. We're looking for the best parts of the market where we think we can add the best value. We've got the best proposition for our clients.

Just that point is important, right? We play in small deals, medium-sized deals, large deals and in individual annuities. And you saw that in this first half, the individual annuity margin went up by 0.8%, so 80 basis points. So we also choose where we want to play across all of that being the largest annuity. And you'd expect us to do that to generate more value.

Further upside on the margins on the mix?

Yes. So the short answer is yes. I think we can sustain this in public markets as well. We're obviously very pleased with what's happening in the private markets. AUM has gone up nearly 40% in 18 months on the private side. So there's clear momentum there. But ANNR is positive on the public side as well, including in this first half, and it's quite broad-based, and it belies some real areas of strength in the public markets. And that's both in certain asset classes, but also distribution channels that we're really growing into.

And some highlights are private wealth in Asia through some of our global unconstrained bond strategies is seeing a lot of positive growth. We're putting a lot of effort into widening our ETF strategies, and that's getting a lot of very near-term traction already. And I think that will continue in Europe, Continental Europe, both in the institutional side, but also in the wholesale side. So that mix that we have, and all of that is in keeping with this moving towards higher revenue margin businesses. So I feel it's very sustainable.

Question from Tom.

Thomas Bateman from BNP Paribas. Just touched on it, Eric, maybe coming from a slightly different angle in terms of the pickup in ANNR. How much of your DC funds are in private market funds now. What's the allocation? I just want to get a sense of how much is transferred so far and what's kind of the target level there?

Yes. So I actually don't have the weighted average number because we have different preferred strategies, different default strategies. And what we see in the DC space and what's working for us, Laura and I have -- we're really completely in lockstep on that business from end to end. You have solutions that still don't have a lot of private markets exposure, and we are winning some mandates where at least at an initial phase, there's not a lot of private markets exposure.

Where we are seeing more private markets positive, if you will, strategies, the overall mix is about 15%. We think over a cycle, the right mix for DC, if you're looking for material private markets exposure is 15% privates, 85% publics. So between the two strategies where we're getting a lot of momentum, we've got some weighted average between probably mid-single digits to a max of 15%.

Yes. And also, Tom, it's important that this is the flows, right? I was just -- I do the media calls just before, so I get asked a lot about Mansion House commitments. So our private markets access fund is about $3 billion, which means for some of those default funds, we're already above the Mansion House commitment, which is at 10%, which Laura, you signed for me and you were there. And then the part of it, which is the U.K., we typically allocate 1/3 to the U.K., which means that we're meeting the 5%.

So just picking up on what Andrew said, we have two default schemes that have private markets allocation that get to the sort of average that Eric talked about. So one, our lifetime advance fund, which has 15% and another one, our target default fund, which has 10%. So those are the sort of flows that we're seeing most of our sort of new schemes coming into, if you like. So -- and as Antonio said, it's very aligned with the Mansion House compact.

But it's a decision by the employer. If the employer doesn't want to do that, we would do what the employer wants.

Kailesh, from the back.

Kailesh Mistry, Bank of America. Two questions. The first one is just on the holding company cash, you talked about GBP 1.5 billion at the holding company, and there's some excess in the operating companies. If you were to bring those up, roughly what does that look like? Second question is just on the new cabinet, new government, however you want to call it. Can you talk a little bit about your expectations around policy and how that could impact your business? -- where you see the most potential change, if you like?

I'll try to say something from a shareholder perspective. But do you want to talk about the GBP 1.4 billion, actually. Do you want to say that first and then I'll come back?

As at December 31, because that's dynamic. We give a disclosure in the pack in the RNS, which talks about total cash at a group level of being GBP 3.6 billion across the group. That's not saying that, that cash can move up from subsidiaries. It's just to give you a cash figure. I mean the actual amount in each subsidiary and when it could move is clearly dependent on a number of factors, but just gives you a sense in the pack and the detail of total level of cash.

So without making too much of a political statement from an actual results perspective, there's two areas where we can see -- we don't know what's going to happen on the 28th of October, particularly with the budget. But if you think about what we do as LNG, we do a lot of investments that are place-based investments. So think about affordable housing, think a lot of what we are known for and we do well. We've done that across the country.

Actually, we do that with the Greater Manchester Pension Fund as it happens. And so we can see more of that. I think that direction is good for us as a business. And second, something that I've said publicly, particularly from your business, Laura, DC, I've advocated for an increase of an 8% auto enrollment contributions going to 12% over time, recognizing that we have cost of living crisis and employers themselves are under pressure, but a gradual increase.

So the numbers we showed today are assuming the current auto enrollment rates. But as you probably know, there's a pension commission right now. If the proposals that we've put forward to increase that to 12%, of course, that's an upside from a workplace perspective. So I think those things are good for the country, but they're certainly good for LNG.

Before we go to any follow-ups in the room, I've got some questions coming through online. So first of those is looking at PRT market volumes, some suggestion that maybe it could be a bit lower than previously expected this year with some large transactions moving into 2027. A question on why those transactions are moving into 2027, expectations for 2026. And as an extension to that, expectations for global or U.S. PRT.

I think, Gareth, you should address that. I think I sort of answered the first question in terms of the longer term, but you should talk about '26 versus '27 volumes, Gareth.

Some deals are large and lumpy. And some of them will fall one side of the year-end and some of them will fall on the other side of the year-end. So we don't know as we sit here today what -- where some of those really large deals will land. But we -- what we do see is the pipeline over the next 5 years being incredibly healthy. And so it is possible that some will kick into 2027, but it's also possible that some larger deals will transact towards the back end of this year. And it's much easier to predict longer-term pipeline than really super short pipeline.

Global market volumes, I mean, U.S. in particular, we see the U.S. as being roughly similar to the size of the U.K., but in dollar terms. So it's a GBP 50 billion U.K. market, $50 billion in the U.S. I mean that market is a very large market as well and so could clearly grow too. We're active in Canada. That's a big market. And we're also seeing whether there are other markets that could open up as well.

So Antonio, your number on the GBP 1 trillion golden decade over the next 10 years. I mean there could clearly be upside to that as well. But that probably takes into account the current mature markets of the U.K. and U.S. and Canada.

Maybe just one point on the U.S., which is typically our market share in the U.S. tends to be around 5%. So I'd say, so $50 -- $40 billion more. We tend to do $2 billion or so in the U.S. I think the big difference is what I said earlier when I was talking about the future. What we're now doing with Meiji Yasuda is quoting on jumbo deals. So if you think about it, we had 5% market share, but we were playing only in half the market.

So we had 10% market share of the lower bottom -- what we can do with Meiji Yasuda is effectively do double the volume because we're now quoting for jumbo deals, which is the market above GBP 1 billion. So I think that's -- everything else being equal, we could double the volumes of which we keep 80% and Meiji Yasuda keeps 20%.

Andrew, for a follow-up.

Yes. A quick follow-up. You've given us the asset optimization on the operational surplus generation. What was the asset optimization on the strain both in first half '26 and first half '25?

Asset optimization, I think it's actually in the pack. Institutional retirement was about GBP 10 million on the strain. I forget the retail. We'll give you that to Andrew.

It's in the appendix slides, Andrew, on Slide 43, the details broken down. It's relatively small. So...

The biggest strategic point we made, which is the asset optimization we're doing right now involves very little strain. With credit spreads widening, it would include a bit more, but it would always meet our capital allocation framework of more than 14% IRR.

And we'd be happy to deploy capital. We're well above our target range. Part of the reason why we're above our target range is because we're in a tight credit spread environment. If we get the opportunity of wider spreads, we'd really like to deploy capital and make a really attractive return on that. So if those opportunities come along, we're happy to take advantage of.

Michael, for follow-up.

You said you talked about defaults. You said they were low, but I'd like -- do you have any numbers? And then the other question is on debt leverage. Maybe talk a little bit more about what the trajectory could look like?

So I think both for you. Last time we had a default was 2008.

Yes. So this is credit defaults. Antonio has answered the question, it was GBP 25 million in 2008 and 0. So on the leverage, again, we don't formally report here, but it's in the RNS. So that's sort of 33.9% as at the half year. As I communicated, the plan is to move that down. So over the medium term, we'll sort of manage that down to levels that are obviously lower than that.

Let's end with Farooq.

Last but not least, thank you. On the balance sheet investments in asset management, you've given obviously guidance of GBP 80 million to GBP 100 million this year. Is the idea to wind that down as a percentage of the total profit? Or would you say the assets invested there are kind of sustainable and will grow because you like them? I just want to understand that part of the future.

Eric?

Yes, I'm happy to handle it. What we really -- the real switch is that we use our balance sheet ideally to really incubate third-party assets. And that's really a lot of what's been driving our FRE -- so I think for this year, the $80 million to $100 million, we feel really good about it. We feel good about the quality of the assets we have. We have real estate. We know real estate is still in the downside of the market.

We know interest rates are volatile. And that's why we feel good about how we're managing those assets. But in many ways, we want to use our balance sheet to maximize that FRE. And so you will continue to see balance sheet investment operating profit, but that's why really the focus on that quality towards FRE is where we're guiding increasingly towards going forward.

Yes. And if you do it mathematically, right, so it's 80 million to 100 million, so let's assume it continues the same until 2028, it's maximum 20% of the overall 500 million to 600 million. So really, you're thinking more like 85% or so of the fee -- of the operating profit is fee-related earnings. So the quality fee-related earnings keep on growing, and you have the balance sheet investments really stable now in a sustainable way, right now. So that is the shape of that 2028 number.

I think that brings us to the end of our Q&A. So I'll hand back to Antonio.

Well, thank you, everybody, for the questions. That was -- we've covered a lot. As you have seen and as you -- we've also just discussed through Q&A, we have a combination of, on one hand, momentum in the businesses, but also scope to accelerate that further, although I'm not giving further guidance, but we are -- you can see the potential that we have in the business.

Our next update will be on the 16th of November. As Andrew said, we committed to be more transparent and update you more frequently. So we will have the third quarter update on the 16th of November. But in the meantime, Andy and the Investor Relations team are always available. We hope to meet many of you over the next weeks and months. I hope you have a good summer break. Thank you.

Good morning, everyone, and welcome both to those of you in the room and those joining online. I'm Andy Sinclair, L&G's Chief Strategy and Investor Relations Officer. After many years of following L&G from the outside and sitting in this audience asking questions, I'm delighted to now be part of the team.

We've got great businesses, great people, and we understand the need to increase investor engagement. Our running order for today will be as follows: Antonio will open with an update on progress we've made delivering our strategy, along with a summary of our full year results.

Andrew will then cover off the financial results in more detail, and then Antonio will be back up to make closing statements before opening to Q&A, at which point, Antonio will be joined by Andrew and the CEOs of our 3 businesses to take your questions. For Q&A, we will be keeping it to 2 questions each. And yes, I totally appreciate the irony that I am limiting you to 2 questions.

With that, over to you, Antonio.

Thank you, Andy, and welcome to the team. So good morning, everyone. We've had a strong 2025 with continued year-on-year growth in our headline numbers, which you can see on the page. Excellent earnings growth with core operating EPS up 9%. If you remember, that's at the top end of our guided range of 6% to 9%.

Our OSG is up 5% to GBP 1.5 billion. That's an increase in OSG per share of 8%. Our coverage ratio is 210% after the completion of the Meiji Yasuda transaction. And this is a strong capital position that allows us to continue to deploy capital for growth. We are delivering increased shareholder returns with a dividend per share up 2% to 21.79p, and we are starting a GBP 1.2 billion share buyback. This is the largest in our history, following the GBP 500 million share buyback that we did last year and the GBP 200 million that we did back in 2024.

We are firmly on track to achieve our financial targets, and we are reshaping L&G into a growing, simpler, better connected business. Put simply, we are doing what I said we would do back in 2024.

First, our 3 core businesses are growing. We have delivered another year of impressive new business volumes in Institutional Retirement and in retail. And I'm particularly pleased with the inflection point in the annualized net new revenue in Asset Management, which will translate into positive financial performance in 2026.

Second, I promised a sharper strategic focus. Last month, we completed the sale of our U.S. protection business for $2.3 billion to Meiji Yasuda. We are growing the strategic partnership with them, Meiji Yasuda, and they are building a 5% shareholding in L&G. On top of that, since creating the corporate investments unit back in the second half of 2024, we have now completed GBP 1.5 billion of asset disposals.

And finally, back in 2024, I introduced a new capital allocation framework and promised stronger returns to shareholders. That's exactly what we are doing through a combination of dividends and share buybacks. I'm particularly pleased with the commercial momentum in our 3 core businesses. In Institutional Retirement, we have written almost GBP 12 billion of PRT volumes globally at a capital strain of 1.6%. We secured large transactions last year with Ford, BP and NatWest. And several of our 2025 wins will have potential for additional PRT follow-on transactions. We've also, as you can see, more than doubled the profit from asset optimization to GBP 331 million. In Asset Management, as I said, we turned the corner from a revenue perspective with GBP 34 million of annualized net new revenue.

Private Markets AUM continued to expand now at GBP 75 billion, supported by strong fundraising momentum and strategic partnerships we can -- you can see there on the page as well. This growth has contributed to an increase in our average fee margin to 9.1 basis points. In retail, our workplace DC assets grew by 21% to GBP 114 billion. We had strong net flows and excellent new scheme wins with GBP 3.7 billion to be onboarded to be onboarded over the next 12 months. In retail annuities, we had another strong year at GBP 1.8 billion of new business with an acceleration in the second half of the year.

So we are in a stronger position, delivering on our strategy and with good growth momentum. But today, as you've seen, we want to provide you with greater clarity, both on the results themselves and also on our future trajectory. And why now? This is the culmination of the process that I set in train when I became CEO back in 2024 of clarifying our strategy, disposing of noncore assets, establishing rigorous capital discipline and putting in place a refreshed leadership team. So with the heavy lifting now done and as a refreshed team, we have taken important steps to enter 2026 with stronger foundations, ensuring legacy issues are fully behind us.

Today's presentation, I said to a few of you outside, will be slightly longer than usual, as Andrew will talk you through the detail of the 3 blocks shown on this slide. First, further transparency on the drivers of our performance, particularly on investment variance and what sits behind it. Second, we are giving you guidance on a 160% to 190% target operating range for our coverage ratio. This is something that many of you have asked for. And finally, we are addressing the resilience of our business model, particularly of our dividend.

But before I hand over to Andrew, I will go through a few slides reiterating how positive I am about L&G's future. Our investment case is clear and compelling. First, as you've seen from last year's performance, we have strong market-leading businesses, many of them with more than 20% market share in growing markets that are benefiting from structural tailwinds. Second, we have a synergistic business model that our peers cannot replicate, linking our 3 businesses. And finally, that means that the whole is worth more than the sum of our parts and that we can deliver attractive and sustainable capital returns.

So let me go through the 3 key reasons to invest, starting with our market-leading businesses. We have circa 20% or above, as I said, market shares in the 3 markets you can see on this slide, pension risk transfer, retail annuities and DC. Importantly and unusually, each of these markets have strong structural tailwinds and are expected to more than double over the next decade. In PRT, we are the market leader with a position that is difficult to replicate.

First, we've been doing this for nearly 40 years and have a track record of smooth execution. Second, we benefit from long-standing relationships with DB clients and their trustees in our asset management business. And finally, we have exceptional asset origination capabilities internally, which are complemented by partnerships like the one we have done with Blackstone.

In retail annuities, we see this market more than doubling in terms of flows as more people want to secure income for their retirement. We have circa 20% of this market. And in 2025, we continue to be the #1 provider. Importantly, the number of our own workplace members taking out an L&G annuity grew by over 15% year-on-year, and we expect this trend to continue for years to come.

And finally, on the right-hand side, we manage 25% of the defined contribution assets in the market between our asset management and our retail businesses. The market is growing strongly, as you know, and is expected to double by 2034 to GBP 1.5 trillion. As we mentioned at our retail deep dive with Laura back in October. Was it tober?

Yes, there is a significant operational leverage in our business as we continue to grow and scale. So we have great positions in growing markets, but what does that mean for us financially? I think of the financials of L&G in 2 ways really, in terms of spread and fee-related earnings. Let me start with the spread earnings. We are the U.K.'s largest annuity provider with a portfolio of GBP 93 billion, which grew 11% in 2025 as we wrote GBP 13.6 billion of annuities between PRT and retail. That book, as you can see, will continue to grow at more than 6% per year.

We invest in safe and diversified investment-grade assets and operate with a track record of close to 0 defaults. Given the current geopolitical and macro uncertainty, we want to reassure you about the quality of our book, and Andrew will cover this later. We will also describe the sustainable profits we make from asset optimization and the significant upside that we see as credit spreads widen. We are growing our fee-related earnings from Asset Management and Workplace even faster.

Over the next 3 years, we expect them to grow at more than 20% per annum. We have delivered a record ANNR of GBP 34 million in 2025. As I mentioned earlier, the full year revenue impact of that growth will now be seen in our 2026 numbers. We have increased our average revenue margin to 9.1 basis points.

As you recall, we went from 7 to 8 and then now from 8 to 9 basis points with a target to be in the double digits by 2028. We are one of the few global asset managers, maybe the only one, increasing average fee margin, and this is because we are shifting our asset mix towards higher-margin products. We are growing strongly in private markets with GBP 75 billion of AUM and on track to beat our GBP 85 billion target by 2028. So we're already at GBP 75 billion.

Fees from our workplace business will continue to grow both in retail and asset management as we then continue to grow our assets under administration. So we have leading businesses in growing markets. But as you can see here, these businesses have clear synergies between them. It's the second argument of our investment case. We use scale as a competitive advantage.

As the largest asset manager in the U.K., 80% of our U.K. PRT deals are with existing asset management clients. But when we transfer these clients to PRT, as you know, the investment shift -- the investor mix shifts to more direct investments, and therefore, we increased the fees in asset management by 3x.

On the right-hand side, you can see that our asset management business manages over 90% of our annuity assets and over 95% of our workplace DC assets. This is pretty unique. This is a strong underpin to our ANNR ambitions. And then beyond the commercial synergies, we also have significant operational synergies across our businesses. You can see there at the bottom, our PRT and retail annuities businesses share investment and customer services teams, creating scale advantages.

And also, we make broader investments in technology and AI across all of L&G. And then this is the final argument. This synergistic market-leading businesses will continue to deliver attractive capital returns for shareholders. Back in June of 2024, I promised we would return more to shareholders, and that is exactly what we are doing.

At the time, I announced a new dividend and capital return framework for the subsequent 3 years, '25, '26 and '27. We introduced share buybacks, and I committed to return more capital to shareholders over that period that we would have done by maintaining the 5% annual dividend per share growth. You can see that on the right-hand side of the page. So even excluding the GBP 1 billion share buyback that's related to the Meiji Yasuda transaction with our guided dividend growth, we have delivered on that promise.

Looking forward, we are investing to meet our growth ambitions and my priority is our growing and sustainable dividend. Beyond that, future capital allocation decisions, including share buybacks, will be assessed at the time and subject to market environment, our views on solvency and opportunities to invest in the business.

Overall, you can see on the slide that we are on track to return more than GBP 5 billion of capital to shareholders over the period of '25, '26 and '27, and we will be returning GBP 2.4 billion of that over the next 12 months between dividends and share buybacks. So we have a compelling investment case, and I'm excited about the growth ahead of us with stronger foundations and a new team to execute on that vision. You can see on the slide the appointments I have made with a combination of both internal promotions and external hires.

So on that note, let me welcome on stage Andrew Kail for his first set of results as CFO. Andrew, over to you.

Thanks, Antonio, and good morning, everybody. I'm delighted to be here presenting a strong set of results for the first time as the group CFO. As Antonio highlighted, today, we're committed to providing greater clarity on the drivers of our performance and the future trajectory.

Over the past few months, I've been in listening mode. I've been engaging with investors, analysts and my own team. And it's clear we have an opportunity to provide more clarity on our performance and to reinforce the strength of our investment case. So today, I'll start with our results, and then I'll turn to the foundations that position us for sustained growth.

So let me begin with what we delivered in 2025. Our group financial headlines are strong. Core operating profit grew solidly, reflecting the resilience of our earnings base. Core operating EPS grew at the top end of our 6% to 9% target range, demonstrating our commitment to delivering sustainable compounding returns. Solvency II operational surplus generation, OSG, is up 5% year-on-year.

And our OSG per share metric is growing at 8%, creating increasing headroom over the 2% dividend per share growth. We're now presenting OSG excluding the amortization of transitional measures on technical provisions. This is to better reflect underlying capital generation. 2024 OSG has been restated. And going forward, we will continue to separately disclose the TMTP amortization. Our pro forma Solvency II coverage ratio remained strong at 210%. That's after the Meiji Yasuda transaction and its related buyback.

Now let me take you through our IFRS performance, beginning with each of our businesses. Institutional Retirement delivered a strong result with operating profit up 6% year-on-year, driven by higher releases from our store of future profit and a substantial uplift in asset optimization. Asset Management remained broadly stable at GBP 402 million. But importantly, we now believe we've reached an inflection point in the financial performance of this business.

Retail operating profit increased 4% to GBP 447 million, driven by predictable earnings from our insurance entities and similar to Institutional Retirement also benefiting from higher asset optimization. Across the group, expenses and debt costs were flat year-on-year, highlighting continued cost discipline to offset inflationary pressures and ongoing investment in the business.

And so as a result, core operating profit is up 6% to GBP 1.6 billion, demonstrating the reliability of earnings from our insurance businesses and the turning point in the performance of our Asset Management business. Investment variances, while improved compared to recent years, continue to be material in 2025 at GBP 771 million. So moving to our business P&Ls. Institutional Retirement delivered another year of predictable high-quality growth.

Operating profit increased 6% to GBP 1.2 billion, driven by high release from CSM and the continued strength in the expected investment margin. Asset optimization contributed GBP 258 million, more than double last year and what we believe a sustainable level going forward. Investment variance largely reflects our modeling changes in the year. Across our insurance businesses, this added GBP 290 million to our store of future profits, but generates a day 1 adverse investment variance as we've seen in the past, and this effect will unwind into profit over time.

The Institutional Retirement annuity portfolio grew to GBP 75 billion, up 12%, driven by the strong PRT flows. The risk profile remains well matched and new business strain continued at around 1% in the U.K. and 1.6% across all of PRT. This business continues to deliver recurring and capital-efficient growth fully aligned to our strategy. As you can see, PRT continues to grow strongly as we wrote close to GBP 12 billion in 2025. In the U.K., we wrote over GBP 10 billion. That's about 25% market share, and this was written at attractive margins under the capital-light investment strategy.

Our overall IFRS new business margin of 6.5% reflects a continued tighter credit spread environment and doesn't capture the increased opportunities this generates for asset optimization, which I'll cover later. Our international PRT business is down on the prior year given an overall slower market in the U.S. But looking forward, I am extremely optimistic about the prospects for our PRT business. Client demand remains high with a GBP 17 billion active pipeline here in the U.K., and we have line of sight of over 10 schemes in excess of GBP 1 billion, and we expect the market overall this year to be circa GBP 50 billion.

Asset Management delivered a stable operating profit in 2025 despite the market volatility in the first half of the year. Markets were positive in the second half of the year, setting us up well for what's been a strong start so far in 2026. Revenues grew 4% to over GBP 1 billion, supported by favorable market conditions and continued progress in pivoting the business toward higher-margin strategies.

The rebalancing of our product mix continues to take effect with overall fee margin increasing to 9.1 basis points, up from 8.8 basis points last year. However, expenses also increased by 5% as we continue to invest in growth initiatives, digital capabilities and enhancements to our operating platform. And therefore, as a result, the cost/income ratio was 75%. Operating profit from balance sheet investments was GBP 144 million, broadly unchanged from the prior year. Performance included strong contributions from Pemberton and good performance of assets within our digital infrastructure portfolio. The investment variance was more adverse in 2025, driven by in-year performance relative to expected longer-term performance and from revaluations across several assets, of which I'll cover later.

As I said, we're at an inflection point in Asset Management's financial performance. U.K. DB, our largest channel, is naturally shrinking. And whilst it continues to support growth in PRT, we've not seen in recent years, we've not been replacing lost revenues quickly enough. We are now seeing higher-margin new channel growth beginning to accelerate. We've generated GBP 34 million of ANNR in 2025, which provides a tailwind to our 2026 revenues.

Our targeted cost actions taken in 2025 are also beginning to come through into our numbers, maintaining lower cost growth. Therefore, our current run rate for 2026 shows revenue growth significantly outpacing cost growth, increasing fee-related earnings and reducing the cost/income ratio. Retail delivered another year of positive high-quality growth.

Operating profit rose 4% to GBP 447 million, driven by higher release from CSM and risk adjustment and the continued strength in the investment -- in the expected investment margin. Asset optimization added GBP 73 million, more than double last year, similar to Institutional Retirement. Our workplace DC assets grew 21%, supported by strong win rates and our member-focused proposition. And as we outlined at the Retail deep dive, we look at workplace profitability across both asset management and retail combined with an all-in revenue margin for this business around 30 basis points.

In retail, Workplace is broadly breakeven before investment spend. And for the first time, we've shown our Workplace Administration profit split on the slide. We expect to invest around GBP 30 million per year on average up to 2028, higher in some years, such as '25 as we focus on member engagement and technology-driven efficiencies. So Workplace is core to our growth story in retail and the wider group.

This chart shows the trajectory of the combined profit in Retail and Asset Management that Workplace is expected to contribute over the next decade. This is driven by the scale of our GBP 114 billion assets on which we administrate pensions in Workplace, benefiting from the compounding economics of growing monthly contributions and our high client retention rates. Over the next decade, we will deliver significant operating leverage from tech and operational efficiencies, and we expect the cost/income ratio from these combined to fall to below 50% from its 75% today.

The result is a greater than 15% CAGR over the longer term and higher in the short term as we expect to triple our workplace earnings by 2028. And our balance sheet position is strong with a 2025 pro forma Solvency II ratio of 210%. On this slide, I've provided a detailed Solvency II walk for the first time, including both movements in own funds and SCR. OSG from our in-force book added 26 percentage points to the ratio before we paid our dividend and invested in new business.

Other variances include the impact from market movements, which is similar to the impact we see under IFRS. Our acquisition of a 75% stake in Proprium had a further 3 percentage points impact on the solvency after allowing for the option to acquire the remaining stake. And our pro forma closing position of 200% post the Meiji Yasuda transaction and is net of the -- the related GBP 1 billion share buyback. This includes a temporary eligibility restriction on Tier 2 owned funds. This is available to us under stress and is expected to unwind over the next 5 years as we continue to deploy capital to meet our growth ambitions.

Our results this year reflect both strong operational delivery and continued strategic transition. We've maintained solid momentum across each of our core businesses while simplifying our portfolio and reinforcing capital discipline. Our progress against targets is encouraging. We're on track or ahead on every measure. And I want to take a longer-term view on what I see as the significant opportunities for our business, building on some of the points that Antonio made earlier today.

We have great businesses, well positioned in growing markets, which will be enhanced by our synergistic model. This combination will drive compelling returns, and I'm really excited about the prospects for the group. But as Antonio mentioned, we've taken important steps to address some legacy issues, and these are now behind us. We enter 2026 with a stronger, more resilient foundation. And as I mentioned earlier, I've been in listening mode.

After many, many conversations with several of you here in the room, it's clear there are aspects of our disclosure that are opaque. Today, I'm taking steps to address this and provide you with greater clarity on our results. In addition, I'll more clearly explain how we think about the longer-term trajectory of capital generation and how we're going to deploy that capital. So let me take you through each of these in turn, including some new disclosures.

Over the past 3 years, one recurring feature in our results has been negative investment variances. It's important to unpack to see what's really driving these movements. Not all adverse variances erode long-term value. Some result from positive impacts on future profit. So let me talk you through what's going on here, both in our annuities portfolio and in our shareholder funds.

Firstly, modeling and assumption changes in our annuities portfolio. This reflects the mismatch that arises between the impact of reserving changes on today's liabilities compared with calculating these changes using the locked-in discount rates at the time we wrote the business. This mismatch appears as an adverse investment variance, but actually represents a positive contribution to our CSM, increasing the profit that will emerge in future periods.

Secondly, market impacts on our annuity portfolio where movements in asset values aren't fully matched to the movements in our liabilities. As interest rates rose in '23 and '24, we saw roughly GBP 700 million of negative variances arise as the fall in asset values was greater than the fall in the liabilities. We hold these assets for their cash flows, not their short-term price.

And in 2025, we've seen this start to reverse with over GBP 100 million of net positive movements. The risk we care most about with annuity assets is defaults. And with 99% of the portfolio investment grade, we've seen no defaults since 2008 and even then extremely small at GBP 25 million. Thirdly, the variance that arrives in our shareholder funds from the actual in-year returns versus the long-term expected return that we assume in our operating profit.

Over the last 3 years, we've seen around GBP 600 million of cumulative negative variances as the higher interest rate backdrop has caused many asset classes to underperform their long-term averages. Each year, we reassess our return assumptions. And today, our average blended long-term expectation is around 6%, including our cash assets, which we view as appropriately conservative. And finally, revaluation of our balance sheet assets.

Specific sectors such as commercial real estate and venture capital have seen more pronounced challenges since 2022. This is reflected through reductions in asset values in line with market movements and views on future performance. And then in addition to the investment variances shown on this slide, we incurred close to GBP 200 million of M&A, restructuring and transformation costs, which we report outside of operating profit.

Beyond M&A-related expenses, these costs reflect organizational restructuring and our multiyear transformation programs as we strengthen our operating platform to capture the significant growth opportunities ahead. I expect these costs to remain at around GBP 100 million to GBP 200 million per year over the next 2 years.

Following Eric and his team's detailed review of balance sheet investments and asset management alongside my broader assessment of the overall shareholder portfolio, I'm confident that current valuations of shareholder funds are appropriate and materially derisk the balance sheet and earnings from future downward revisions. The dynamics are different across each of the 3 pools of shareholder funds we invest. In corporate investments, we expect our assets to be materially sold down by the end of 2027 at current valuations, further simplifying the balance sheet and reducing exposure to sectors experiencing structural repricing.

In Asset Management, we've completed a rigorous review, challenging ourselves on the strategic relevance of our future balance sheet investments. We transferred close to GBP 200 million of assets that no longer meet our strategic or funding criteria into the Corporate Investments unit. The remaining portfolio is well positioned and will drive long-term future value for the group.

We remain confident in delivering our asset management profit target of between GBP 500 million and GBP 600 million by 2028. This is now more heavily weighted to high-quality fee earnings as balance sheet investments are expected to generate around GBP 80 million to GBP 100 million of profit, approximately GBP 50 million lower than previously guided.

And finally, the balance sheet investments in our insurance entities, where we have delivered strong traded profits and where the fall in assets largely reflects routine disposals for liquidity management. We expect returns to remain stable at around 5% with opening balances broadly unchanged. So that was transparency on where we are today. I'll now add some clearer guidance on the sources of annuity lifetime value and the trajectories of our Solvency II coverage ratio and debt leverage.

First, lifetime value from our insurance businesses, a subject definitely close to my heart as the previous CEO of Institutional Retirement. Under IFRS 17, our earnings have become increasingly predictable and reliable with nearly 2/3 coming from the release of our store of future profit. We added GBP 1.2 billion to our CSM in the year through new business and locked in interest. This represents 2% growth on what is already a very large CSM base. However, as we've adapted our investment strategy for writing annuities under a tighter credit spread environment, the sources of value have also shifted with the store of future profit now only telling part of the story.

So we are now seeing a growing contribution to our earnings from recurring asset optimization. Writing new business on gilts-based investment strategies over the past 2 years feeds this optionality. While day 1 IFRS profitability metrics are moderately lower due to the lower initial yield, the ability to rotate our investments to capture higher risk-adjusted spreads is scope to deliver increased lifetime value. Asset optimization doesn't require large market volatility. We have the optionality to rotate across ratings, currencies and sectors in credit and in sovereign.

A recent example is how we've monetized elevated relative positions in cross-jurisdiction rotations between U.K. and U.S. sovereign bonds. We increased our sovereign exposure, reduced derivative-related exposure and remained cash flow matched and in doing so, delivered tens of millions of earnings and capital with no increase in the capital requirement. In fact, the opposite. We are confident in delivering asset optimization of more than GBP 300 million per year.

We believe we have enough optionality across the various components of our greater than GBP 90 billion portfolio to deliver this, and we see opportunity to deliver further upside as and when spreads widen. Turning to Solvency II outlook, where we are well capitalized to invest in future growth. Today, we are sharing with you our medium-term Solvency II coverage target operating range of 160% to 190%. We will continue to deploy capital to meet our growth ambitions and expect to take us into this range compared to where we sit today. How we think about our ratio changes under different market environments.

The actions we might take to manage solvency depend on why the ratio is at that level and how we expect risks to evolve from that point. Interest rate hedging is a good example of where we might take action to change our approach as our solvency changes. We're comfortable that we can withstand a variety of market stresses from any point in this range. Below this range, we would seek to respond to be within the range quickly. But this is not an automatic trigger for capital measures. Our dividend is still sustainable at a lower ratio.

Our Solvency II balance sheet on debt leverage has increased in the short term to 33%. And that's on a pro forma basis following the sale of U.S. Protection and the related buyback. This sits well within our comfort levels. The ratio is likely to remain around this level for a few years before it declines as the growth in own funds accelerates. All 3 major rating agencies currently have us on strong ratings and stable outlook, reflecting their confidence in our balance sheet position. We have a strong balance sheet, but we are also a highly resilient business in terms of our flows.

Our businesses continue to deliver strong, sustainable and increasingly diversified capital generation. On this slide, we outline OSG by business and its trajectory. And in the appendix, we've provided you with more breakdown of this by own funds and SCR. Through our share buyback program, we have returned GBP 700 million since its launch in 2024, and we will return a further GBP 200 million in 2026. As a result of this, OSG per share grew by 8% in 2025, which is ahead of total OSG growth of 5%.

We expect growth in OSG per share to continue outpacing OSG through to 2027 post the GBP 1.2 billion buyback. The returns previously generated in our insurance businesses from this excess surplus are being replaced by growth across the group. As this transition completes, OSG will grow below 5% in 2026, returning to greater than 5% by 2028, supported with strong momentum in fee-based earnings. OSG starts from a robust base, adding more than 25 percentage points to our Solvency II coverage ratio each year, reinforcing our balance sheet, supporting shareholder returns and the continued investment in our growth.

Overall, we have high-quality, resilient releases from our large existing book and clear visibility on compounding OSG growth through 2028. This clear trajectory underpins our confidence in the sustainability of the dividend. OSG comfortably covers the dividend on a per share basis and grows more rapidly than our guided 2% annual increase in the dividend per share. Our dividend coverage on a net surplus generation basis is sensitive to our in-year new business strain.

Given the size of the annuity opportunity in front of us and the long-term potential for OSG growth in later years, we view the investment in new business at the expense of the payout ratio to be a good trade-off in the near term. By 2027, we expect Solvency II net surplus generation to cover our dividend under a range of new business strain scenarios. I want to close by returning to what I said earlier. I am really excited about the prospects for our group.

Over the long term, we see a huge opportunity for growth in our core markets, and we're investing today to meet that opportunity. The investment requires some trade-offs in the short term, like on the dividend payout ratio, but these are trade-offs we are happy to make with the long-term sustainable growth of our business in mind.

Let me now hand back to Antonio for his closing statements.

Thank you, Andrew. So to close, I'm pleased with our 2025 performance. As you've just heard from Andrew, it was important for us to provide you with greater clarity on the drivers of our financial performance, particularly on the adverse investment variance that you've just addressed and also provide clearer guidance on our future trajectory. I hope you got that from Andrew's presentation.

I'm confident that we now have strong foundations with legacy issues fully behind us. So we have positive business momentum. So I've talked about the positive business momentum of 2025. We've carried that into this year into 2026. And this year, we expect to deliver another year of core operating EPS growth at the top end of our 6% to 9% target range. In Institutional Retirement, our PRT pipeline is as strong as we've ever seen it, and we are expecting a bigger U.K. market this year of GBP 50 billion, as Andrew also mentioned. So last year, GBP 40 billion, this year, closer to GBP 50 billion.

In Asset Management, we have reached an inflection point with a GBP 34 million of annualized net new revenue last year that will translate into positive financial performance in 2026. This year, we have had good client wins so far with strong revenue momentum. And in retail, our annuities business is continuing the strong performance seen in the second half of last year.

Our monthly workplace inflows are compounding steadily. This is a really great business from that perspective. And we still have that GBP 3.7 billion of schemes won last year due to onboard this year. This momentum is a testament to the compelling investment case there that I outlined earlier.

First, we have scaled businesses in growing markets and asset management financial performance is turning a corner now in 2026. Second, we have a synergistic model between our 3 core businesses and are adding to that through the partnerships that we've established. We use scale as a competitive advantage, driving efficiencies across the business.

And finally, we are delivering sustainable long-term value for shareholders and are firmly on track to deliver our 3-year targets. So with that, Laura, Gareth, Eric will join me on stage to take your questions, which Andy will help facilitate.

Thank you. And remember, it's going to be 2 questions each this time, try to hold yourself back. And if we have time at the end, we'll be able to circle back for a second choice. Remember to say your name and the financial institution you represent, and please wait for a microphone to come around. Farooq, we'll start with you.

Farooq Hanif from JPMorgan. So I will stick to 2 questions. Firstly, can we just think about the sustainability of the buyback? So if you go to the chart on the Solvency II percentage point movement, it's 6 points negative after strain and dividends. It feels like you will have a negative even in 2027.

So in that context, if we start approaching the GBP 160 million to GBP 190 million, how do we think about the buyback? I mean what -- you've talked a lot about the sustainability of the dividend, but just kind of how you're thinking about the buyback and what should -- how should we think about it? Second question, thanks for the detailed description of the investment variances. I think that will help a lot.

So if we just go to the CIU charges and restructuring, am I right in thinking that you're saying, look, the negatives from that are going to die down in 2026? I mean you've talked about the ongoing project restructuring costs and the markets. But just on that alone, that would be helpful.

Great. So let me start with the sustainability of the -- well, the capital distribution, and then you can add to that, Andrew, and maybe make a point on CIU, which, by the way, the answer is yes, we don't expect more. But so but the new duo here.

So look, my priority is a sustainable growing dividend and the sustainability of that dividend. And I was very clear, and that's why I sort of talked slower than usual in that chart where I said, if you go back to 2024 in that chart that I showed you at that time with the numbers that we were doing at that time, I said that in '25, '26 and '27, we would distribute GBP 4.2 billion in between dividends and we would have if we had grown the dividend at 5%.

And now with the share buybacks that we've done and the growth of the dividend at 2% we have delivered on that. So I was clear on that. Future decisions, Farooq, to your point, are exactly what I've been saying all along. So that hasn't changed, which is we will look, to your point, at the coverage ratio. And now we actually have a range that we are disclosing to you. We'll look importantly at the market conditions and what are the business opportunities ahead of us.

So if we see a fantastic year, I think this year will be a fantastic year for PRT. The strain continues to be low. But if next year, we see that spreads have widened and we've gone back to the old way of writing PRT with a higher strain and still with GBP 50-plus billion in the market, at that time, I will make a judgment on capital distribution, particularly share buybacks. So priority on the dividend, we've said -- we delivered what we said we would do, and we will do the assessment of future -- any future distributions, including share buybacks at the time, which be a year from now.

Anything else on that? And then on CIU or IV?

I mean just to reinforce the solvency guidance we've given you the range now, we don't see the bottom of that as a trigger. So that's very much we see our capital policy being achievable within that range, reinforcing Antonio's point about PRT, in particular, where we see attractive markets, deploying capital even at higher levels than we've deployed in the last couple of years, where the margin return is worth it, we see that trade-off as a sensible one. So just reaffirming that.

And then reaffirming the corporate investments unit question for, fantastic progress in the last couple of years on the Corporate Investments unit. We mentioned we'd transferred another couple of assets in there, but we're drawing a line today on that. So I just expect that to be 0 going forward.

Quick clarification. Buybacks are possible depending on all of the above between GBP 160 million and GBP 190 million.

Yes, they are possible. Yes, they are possible. So the point I made was we will look at the time where we are on our coverage ratio and what are the growth opportunities at that point and what's the market environment. By the way, on the rest of investment variance, so this is the first line.

But also I made the point and you made the point, Andrew, as well, which is this is the combination of 2 years of -- when I first arrived, I looked at everything that's strategic and not strategic. That part is done. That led to the disposal of Cala and other assets. Then Eric arrived and did a forensic review of everything in asset management. So those strategic type of decisions we've taken, those are done. We're also drawing a line under those. What you can expect is now what Andrew described as the more normal IV.

I think on -- I'm sure other look at, we've got 2 pieces on IV. The discount mismatch and the market movements, we'll still expect those to flow through. As I made in the comments earlier, adverse movements there aren't necessarily adverse to profit. They're just -- it's accounting. And then the final piece of investment variance is the M&A and transformational work, and I guided you to expect between GBP 100 million to GBP 200 million in that line for the next couple of years. So that's not 0 guidance. The other asset movements should be.

Next is Mandeep.

Mandeep Jagpal, RBC Capital Markets. Two questions for me as well, please. First one on Asset Management. Good result on the ANNR of GBP 34 million. It seems like a lot of it was from your internal sources. So how much of that is from third parties? And as we head into 2026, where do you see the highest growth potential for external third-party flows and ANNR?

And then secondly, on your Blackstone partnership to originate North American private credit, you have the option to invest 10% of annuity premiums. And with all the recent negative headlines in the space, how attractive are you viewing the market at the moment in terms of new deployment and the private credit on your balance sheet at the moment?

Thank you. Thank you, Mandeep. I think, Eric, you should definitely take the first one. And Gareth, can I ask you on the second one. But just one point, and I'm sure Eric will make this point. But when we say internal sources, a big internal source for us is DC money. That's external money. So of course, one is really internal, our annuity book. But the other really powerful side of our synergy, and I think this is an important detail.

Yes, we've said that those things are the underpin of our ANNR, but DC money is one of the most attractive channels which we, as L&G have as a captive channel because more than 95% of our DC money comes into -- so that is third-party money, right? So just to be clear on that. Eric and then Gareth.

Yes. Thanks, Antonio. I think that's a good point. And I will answer specifically the question you asked, but I think it's important to put it in the context. And the context is the trend from 2024. So we were at negative 5%. We're up to 34%. Importantly, the synergistic business model, we clearly have gone a step further in '25.

So we're really pleased with how much more we can generate, but it existed before. So when you look at the previous minus 5, there was a lot of internal money, whether that's true annuity PRT outcome from that and the third-party money that we generate together with Laura's business to the Workplace Solutions. So I think we need -- I want to put everything in the context because that means by its very nature, the third-party ANNR was frankly above my expectations in terms of how quickly we've turned into a positive number.

So to answer your question specifically, roughly half of the GBP 34 million is coming from that IR PRT money, which you could call internal, right? Another 1/3 is coming from the business we do together with Laura. And I just want to underline what Antonio said, this is an area that all of our competitors are desperate to get in. We have the leading market share. So although it is internally generated, it's part of our value-added synergistic business model. This is a true third-party channel that I think we just have an edge on everyone else.

So that leaves about 1/3, so call it GBP 10-ish million that is the net result from true arm's length third party. And of course, within that, you're contending with an ongoing negative ANNR in our LDI business because of the natural shift from LDI to PRT. So we're -- in some ways, as that continues to happen, you'll continue to get negative flows out of our LDI business.

And to be clear, we're a leader in that space. We will remain a leader. We actually won quite a few new mandates because it's going down, but there's a lot of movement within that. But as we shift to the 3x revenue PRT business, in many ways, that's an affirmation of our model. But when you just look at DB, it is going to naturally shift towards more in-house money. That's a very healthy development.

So we've got GBP 10 million or GBP 11 million of really completely arm's length, not linked to the synergistic business model, positive ANNR, taking into account -- I mean, I can give the number. It's roughly GBP 10 million of negative ANNR, which is to be expected from LDI. So in many ways, there's the absolute number, but the change from '24, frankly, happened quicker than I thought it would when I -- when we were talking about this about a year ago.

Exactly. And so look, Eric has been in role for a year. Let's go back to the targets for a second. We said GBP 100 million to GBP 150 million ANNR cumulative, '25, '26, '27 and '28, 4 years. Eric won't like me saying this, but if you just multiply the 34 and you do the 34 every year, just 34 and our plans are more ambitious than that, you'd be at 136 -- so we're well within towards the top end of our range. So at the moment, I'm very, very pleased with the turnaround of the commercial performance that Eric has led. Blackstone and what we're doing, Gareth, and maybe Andrew may want to add to that as well.

Sure. So I'm sure there'll be other questions this morning about the competitiveness of the PRT market. And so right now, I think it's really important to have diversified sourcing channels and Blackstone offers us diversified sourcing channels. And where we see attractive opportunities, then we will add that to what we already are able to generate. So we have made our first investment through the Blackstone partnership, lending money on a triple net lease to a credit that we really like called a hold. We like the credit in the public market, but the private asset offered a significant premium to the public issuance. That's exactly the sort of investment that we want to be making in the current market.

And actually, as you know, this is also Gareth's first time as the CEO here. He was the CIO of the business and of course, succeeded Andrew. So the right guy to be talking about this. He led a lot of the negotiation with the partnership with Blackstone.

Can we go to Dom and then on to Larissa.

Dominic O'Mahony, BNP Paribas. So sticking to the 2, I'll start with just a technical one, which is, if I understand it correctly, the operating profit assumption is driven off a short-term yield, I think a 1-year yield. That's come down quite a lot over the last 12 months. Is that going to be a headwind to earnings into 2026? Hopefully that question made sense. broader strategic question about the corporate investments. It sounds like you're making good progress there.

And thanks for the transparency on the way that you're accounting for those and the investment returns on the broader balance sheet. Could you just spell out for us how the proceeds from those disposals are fueling your business? If we go back to the Cala disposal, there wasn't much solvency uplift. But of course, there's plenty of cash coming out of that. And I think cash still coming and presumably further liquidity also from the other disposals. How does that play into the rest of your business and support your ambitions?

Thank you, Dom. You should take both, Andrew. But just to reinforce, I said that in my script, and you may have heard it. So the core EPS growth for 2026, we're again guiding to be at the top end of our 6% to 9% range. So we should talk about the yield. But the overall number, we're guiding towards the top end of the range. Andrew?

Yes. Thanks, Dom. On first question on the yield, no, it's not a headwind for 2026. I mean that's something we -- again, I talked earlier, we've looked at those yields. We look at them regularly, and we're comfortable with those now. So don't view those as a headwind for '26.

On the second point on disposals, yes, a number of disposals you mentioned them. I mean those in a sense, you've seen the level of buybacks that we've done. So those have been recycled through, but we've also invested in the business in M&A that we've done. and investing in the PRT business. So we take that into the round as we're thinking through, as Antonio said, what's the investment in the business, what's the dividend ability and how we use that capital. So it's a -- it forms part of the evaluation as to what we do.

As we get further proceeds through from CIE, we'll do exactly the same. But for Antonio made the point so that there are -- each of our businesses has investment opportunities behind it because of the future growth that we see. So we're balancing that. We recognize the importance of the dividend and the sustainability of that. And hopefully, the guidance we've given you today is that it's really important we keep growing the business.

And therefore, the needs that Gareth, Eric and Laura have to do that, those proceeds are being recycled back where we see the return on our capital being appropriate, and that's not something we made in the presentation, but each decision we take has that IRR calculation at the center of it and saying, is it going to generate the return we need. Otherwise, we think about distribution of that to shareholders.

Yes. This is an important point to stress. We have the capital discipline that I talked about. It's a return on cash and return on capital, and we look at the sources and uses of that cash and liquidity as well as the returns on the business. And that's something we put in place kind of 2 years ago. It's in a really rigorous way. And so all of that goes into that. Thank you, Dom.

Larissa? And then we'll just keep passing along to Andrew.

Larissa Van Deventer from Barclays. On the divisional side, the underlying OSG was flat year-on-year. However, if you look -- you give guidance as to where that may grow to in 2028, which is roughly 7% compound annual growth rate. How do you get confidence in reaching that? What are the key drivers that need to be in place to get there? And then you've mentioned the current gilt environment quite a few times.

New business strain was low with spreads narrow and gilts being attractive. How do you see that evolving if gilts continue to come down and spreads widen or do not widen over the next few years? And does that still meet the IRR that you just mentioned?

Get it. Why -- Andrew, don't -- you should take the underlying OSG, but maybe Gareth can also talk a bit about gilts and how that reflects -- impacts all of our businesses, particularly PRT. So Gareth, should take that.

So I thought it was really important we gave you this information. I said I've been listening, I heard this ask a number of times to see that OSG by business. So I'm really pleased we've done that. But as we've done that, as you say it tells the story where the year-on-year growth in those -- in the underlying business ones is actually down in most cases.

So why am I confident it grows up? The reason it's down year-on-year is we took surplus assets out of the business in 2024 through dividend remittances, and that's why we use it to fund buybacks and dividends. That's why you see the OSG per share growth growing faster than OSG because effectively, it's those surplus assets have reduced the share count. That's why the year-on-year movement is down slightly.

The reason we're confident about the underlying growth in OSG is the growth prospects we've talked about for the business. So in each of those markets, we're expecting to see growth in PRT, as we've talked about, Worplace, asset management Eric talked about. So the underlying OSG growth going forward, the CAGR that you see is driven by the business plans we have in place for the business.

Gareth, gilts.

So over the last year, our investment strategy has been similar to historic in terms of traded assets and private assets, but the traded assets, we've seen a lot more value in structured sovereigns that we have in credit. The spreads have been higher. The capital usage has been lower. So as we look into 2026, as you say, the spread between gilts and swaps has come in.

We still think that they are attractive. There comes a point at which they become so tight that then there's an opportunity for us to optimize on the back book and reinvest into credit. So I guess there's a point both for new business, which is we look at the best asset allocation on a go-forward basis between traded credit and structured sovereigns to pair with our private credit. And then there's also the back book, which is that there becomes an opportunity where we can generate more profit in optimizing some of the back book structured sovereigns into credit.

Do you believe that you can make your hurdle rate either way, though?

Yes. So we've done it in the past. If you go back to pre the end of 2024, we did that in the past through investing in credit. And at the moment, we do that through consuming less capital, but continuing to make our returns using more of a structured sovereigns-based strategy.

And I think I may have said this at the half year when we were discussing this that in many ways, we would rather the IRRs were lower, but with slightly higher capital strain so that we generate more pounds, so the trade-off. But we -- everything we do meets that 14% hurdle for every transaction, and particularly for the very large ones that you should expect because we price this one by one, including all the way to our Board.

One thing to say that -- to stress is the GBP 300 million in that chart on the back book optimization, the asset optimization, we're assuming -- and we've told you the guidance before of more than GBP 300 million, but assuming that there's no more volatility. So because sometimes I get the question on are you assuming that is the sustainable level. That's why both Andrew and I said with credit spreads widening, we would see more upside in the back book for us to optimize.

And so that's -- we're making all of that, and this is -- Gareth is leading this. We're making the back book optimization much more systematic and the GBP 300-plus million is sustainable in any market environment. And if we see credit spreads widening, it has the impact on new business that Gareth mentioned. But on the back book, we would see further upside.

Andrew?

Andrew Baker, Goldman Sachs. So that leads right into my first question, actually. So you mentioned the asset optimization upside from corporate credit spreads widening if that happens. Are you able to give us a sense of sort of what that could look like? So if we see 50 bps, 100 basis point widening, what that upside could look like for asset optimization, both in IFRS and OSG lens?

And then also any considerations on the SCR that we should be thinking about there? And then secondly, just on the U.K. strain. So it was 1% at the half year, 1% for the full year. You did a lot more funded Re in the second half. I guess, why shouldn't I expect to see that strain lower given the proportion of funded Re was so much higher in the second half versus the first?

Maybe, Andrew, we'll ask Gareth to talk a bit more about what we're doing from an asset optimization perspective and the upside and maybe you want to add in terms of numbers. Do you want to start, Gareth?

Yes, sure. So it's very difficult to give numbers without knowing what future scenarios will look like. But I think Antonio has already anchored us at the GBP 300 million level with minimal levels of volatility. We would expect to be able to materially exceed that in moments of significant spread widening.

So I mean, it's probably easier just to do some modeling on different scenarios, and then we could look at the capital consumption and also the spreads. But broadly speaking, with spreads wider, then going back to Antonio's point, we generate more profit. We're happy to consume some more capital, and we'll continue to generate a return of more than 14% on that capital.

Yes. And it's fair to say both Andrew and I also said we don't want to give specific guidance on what that -- because Gareth is right. It will really depend on what the scenario is. And so -- but we can have a discussion on the sensitivities on that. Do you want to talk about strain as well? So why is the strain 1% and kind of...

Yes. So I mean, I can't do the math in my head, I'm afraid. But the investment mix was not materially different in the second half of the year versus the first half of the year. So I mean, go back to my answer to Larissa's question, our investment strategy over the course of the whole of 2025 was continuing to invest in structured sovereigns on the traded side and private credit on the private side. That continued throughout 2025. And yes, we did increase funded reinsurance, but all of that came out with a 1% strain. I can't do the math in my head I'm afraid.

I agree, Gareth. I'd just say it's -- the asset mix was the same, but the profile of some of the transactions are quite different. So when you have the type of book we have and you have a forward deal landing, those individual transactions influence half year results very significantly and therefore, thinking that through will be.

I was going to say that. So if you look at Ford, EP and NatWest, the 3 that are public and they were on the slide, they have completely different profile. So when we talk about an average 1%, some had actually higher strain with better metrics and some had lower strain but with worse metrics. And so we fundamentally didn't change anything in the strategy. It just happens those are quite lumpy deals and Ford was one in the second half, skewed probably the metrics that way versus the first half.

Yes. And then just to add, Andrew, on the SCR, just to say what -- when we look at asset optimization opportunities, we are very much factoring in the impact on the SCR. Some rotations are worth doing because they're effectively capital free. Other ones, there's a strain that we have to take into account. And therefore, again, come back to the 14% IRR, we're always looking to say, is the rotation capital accretive? And if it is, then we're likely to proceed. And therefore, SCR is very central to that deliberation.

Kailesh?

Kailesh Mistry, Deutsche Bank. A couple of questions. First one is -- sorry, on the solvency ratio. At the bottom end of the target, the 160%, what happens at that point? Does the dividend come under stress? Does it affect your ability to write new business? And secondly, just going back to Slide 30, on the first 2 lines of that slide, is it possible to provide any sensitivities around that to help with the modeling interest rates, credit spreads, et cetera?

Yes. Andrew both but reassuring that the dividend is not at risk in that situation.

So yes, just reiterating the comments I made just a few minutes ago. As we get towards the 160, clearly, we're marching. I think it's really important to remember, we have to look why we're there and the market environment that we find ourselves in around that position because that will likely determine some of the management actions we would take.

But as I said before, this is not a trigger point at 160, the dividend is sustainable, and we are comfortable operating at that level. We're just making a point. It's our target operating range. And where the business to fall below that, we would look at actions to get us back into that range. But it's not triggering of the dividend.

And historically, we've been close to those levels where the market was -- we continue to be above most of competitors in the market. So it will depend, as Andrew says, on how we get there. Did we answer your second question because you were both related.

Disclosure...

It would depend where we're in. One management action available to us to manage our solvency ratio is to change the level of new business we write depending on the strain environment. So in theory, the answer is yes. But again, given we're comfortable at that level, and as Antonio says, we operated at that level before, depending on why we found ourselves at that level, we'd still be expecting to write new business.

And I think a key difference of what we're seeing today versus the last 6 times I stood in front of you in different scenarios was we are giving the 160 to 190 million. So we are saying deliberately that we want to be within 160 to 190, which implies that we're writing business and we are growing PRT, and that's why the solvency -- one of the reasons why the solvency comes down.

So Kailesh, sorry, you had the second question about sensitivities as well. I think the answer to that is we'll have a look, and we haven't disclosed anything today. We won't be disclosing anything in the presentation, but absolutely, we'll take that into account.

Michael?

Do you have a number for the stressed solvency? So [indiscernible] gives a figure, 197, they say that's actually the number you should manage your -- they manage themselves on. And then the second question is, I was curious, I spoke to -- excellent IR this morning, and they highlighted the very strong new business in the second half, a strong run rate in individual annuities. I just wondered if you can talk a little bit about more the growth and also the IRR. I'm always curious because I'll be buying one of these.

We have some people outside. And so we can just -- we can take care of that, and Laura will be very happy. Definitely, retail annuities, Laura, you should address that in the run rate of the second half. First question, do you want to take that? Yes. Actually also I didn't quite catch the question. Yes. So can you repeat the first part?

The stress solvency. So if you were in the GFC, answer would be today and they say that's the number they manage themselves. They don't use stress number. I just wondered what is your best number today.

We don't look at the business that way. So it's not -- I can't give you, Alex, the 197 ours is something else. It's the range that we think about. And as I said before, why we find ourselves in that range depending on the market conditions. So there's no singular 197 figure that I would...

But what we do, so we do also ourselves with the Board and then with the regulators, we do also, which is basically the stress -- so to reassure you, when we look at our 5-year plan, we look at all the different scenarios and what could happen. And we are still comfortable that everything that we're talking about, including the GBP 1.2 billion buyback is in the back of stressing our numbers to different scenarios. So -- but we can maybe pick that up afterwards.

I think what we would say is we are happy through that 160 to 190. We're happy to operate in the 160s. We're happy to operate in the 180 even with -- even in the 160s, we're happy to grow our dividend. We're happy to invest in growing new business. So we're happy with throughout that range, bearing in mind that there could be stresses after that.

And as Andrew said, like the reasons why we're at a certain ratio will depend, -- have we had a big credit cycle, have we had government bond yields down 200 basis points or up 100 basis points. It will depend why we're there, how we act.

And Laura, individual annuities.

Individual annuity. So yes, so we predict that decumulation flows will sort of double over the next decade. And I think just looking back at the last 2 years, where on average, we've seen individual annuities grow on average 20% each year. As Antonio said, we had a really strong second half of last year.

So a run rate of about GBP 1 billion, having had, I suppose, a slightly slower run rate in the first half of about GBP 0.8 billion, but actually a really strong start this year. So our run rate is pretty much where it was at the second half of last year and certainly where it was in 2024. So in terms of your question on IRR, we do have an internal target of 14%. So everything needs to meet that hurdle rate.

And then we then manage the individual annuities with the bulk annuities in one big annuity business. And so they have to all meet the target hurdles. There was one statistic that I mentioned that also reinforces. So the majority of what we do is still with clients that are not necessarily L&G clients. But I mentioned that we had a 15% year-on-year increase of workplace customers taking an individual annuity. And if you fast forward, the average age of our book is 42 years old on the workplace.

About 42.

Yes, exactly. It's 1 year later, but still 42. I guess we're getting a few younger people. And -- but as they get closer to retirement, there's more and more people that want to take an individual annuity to your point earlier about it's actually a really good thing to do.

And there is an important potential for us that we haven't yet seen. It's still a very small percentage of our own customers that are getting to the age where they take individual annuities. But as we continue to grow workplace, that's a massive upside. And so it's a 15% year-on-year increase on a small number, we see that trend continuing for a real long term.

I'm just going to say one extra point, Michael, on the solvency. The sensitivities aren't exactly the same. If you're at 165 versus if you're at 210, the sensitivities change as well. So it's not exactly the case if we apply the exact same sensitivity to that point.

Andrew, the front.

It's Andrew Crean for Autonomous. Could I ask a couple of questions? Firstly, your comment that by 2027, the net surplus generation will cover the dividend. At what point of cover would you be prepared to start growing the dividend in line with the growth in net surplus generation, bearing in mind that the operating variances have been consistently a dumping ground of negative hits below the net operating or net surplus generation. That was one question.

The second question was on Workplace. Profits went down from GBP 60 million to GBP 55 million, I think, all total, including asset management. What was going on there? And why do you see them trebling to GBP 180 million by 2028 on that basis?

So Andrew, thank you. So on your first question, there's 2 sides to that. One, what we're trying to do today is draw a line on some of those hits, to your point that we've had. In terms of the dividend itself, I will need to be standing here in front of you next year, telling you how the dividend is going to grow in '28, '29, '30, right?

So we've given you the '25, '26, '27, the 2% growth with the share buybacks. You're right, the underlying business is growing faster than how I'm growing the dividend at the moment, but I'm not yet at the stage to actually tell you what the next 3-year plan is, but it is it is very much in my mind and something we need to discuss as a team and with our Board, how are we going to -- what's going to be the capital distribution policy going forward for '28, '29 and '30.

So I think you said you -- this year, you're drawing a line under the investment variance. What I was talking about is the negative operational variances, which sit below -- I don't think you've talked about that.

No, you're right. But from a dividend perspective, your first comment, we're going to, in the second half of next year, outline what the next 3-year plan is going to look like. And I appreciate not giving you more guidance on what that is. But we've said that the OSG per share grew at 8% last year and it's growing at more than 5% going forward. So it gives you a sense of where the underlying business is growing.

And Andrew, just if I could maybe add on the operating variance, we gave some disclosure of that on the solvency walk earlier in the slide pack. large components of that map directly to the IFRS investment variance I was talking about earlier. So drawing a line under those variances for IFRS is drawing a line under those for Solvency II. And the other major components of those other variances that you referred to, outside of the GBP 100 million to GBP 200 million I guided around the transformational projects, then those won't recur either. So we are -- when we're drawing a line, we're making a very significant statement around those variances under Solvency II as well as IFRS.

Yes. Workplace responded to the second question. So workplace profits, and we are comfortable that it will triple in the 3 years. 2/3 of that is in asset management, 1/3 is in workplace. But Laura, do you want to address that?

Yes. No. I mean, I think the -- obviously, the profits will come through scaling efficiently. We are doing a lot -- making a huge amounts of investment actually at the moment through our digital channels and into our proposition, which will sort of tail off and allow us to run the business more efficiently. We talked a little bit at the Capital Markets event about our customer agent desktop, which is effectively embedding Magentic AI into operations. So that will be a big source of that sort of efficiency, if you like. So I think we're sort of well on track to improve those profitability and the efficiency of the business.

[indiscernible].

They are. Yes. And that's the number that triples. So if you remember that you have it there in front of you, Slide 24. So it doesn't help that it doesn't have the actual numbers in it. But you see that I was using the 2024 numbers when Laura stood up. Those are -- that's still our guidance. So from '24 to sort of '28, so for '25 to '28, it triples before investment, but we also gave guidance that it will be a bit lumpy. It was high the investment last year, but that investment is now reducing because a lot of the heavy lifting we've done, including in technology is now done.

Tom?

Thomas Bateman from Mediobanca. One of the slides, I think changed was on asset management and just on the investment cost there. I think one of the things that probably missed today was the overrun on investment costs. I'm not quite sure what the guidance is, whether it's incremental or what the total is. Can you just clarify what you think the investment is into the asset management business at the moment? And then the second question is, my understanding is that you weigh the capital strain about 100% rather than the solvency ratio target. If you were to weigh it the new solvency ratio target, when would the dividend cover be covered under NSG?

And I ask because the eligibility of the leverage of the debt doesn't seem to be temporary to me as long as NSG is not covering the dividend. And similarly, I don't really see how you can continue to do buybacks after 2027. because of that reason. So yes, when does it cover the dividend under the full capital strain?

Andrew, you should take that. On the asset management question, Tom, can you clarify, maybe you got it, but you were saying it's -- was it the investment variance that you're talking about in Asset Management?

I think you gave guidance before of GBP 50 million to GBP 100 million. And I think people take that as...

Yes. The returns on the balance sheet investment.

GBP 50 million to GBP 100 million investment.

The cost investments, sorry.

My understanding is that it's incremental actually, not a kind of annual spend, it's GBP 50 million potentially on top every year, and that's...

Yes, absolutely right. Sorry, sorry, on that. So we should start it there. So I was more -- so when we talked about the costs in Asset Management, we said we were investing in the business at GBP 50 million to GBP 100 million. That's the number I gave before Eric's arrival. When Eric then did this Capital Markets event, he was saying actually, we're spending less than that at the moment. But you're right, we didn't include it on the slides.

So do you want to talk about how are we investing? And also there's this slide that Andrew showed on the revenues that was said indicative. The revenue is growing more in 2026 than the costs. And so both of those.

Yes. No, it's a great -- and it's true, we skipped the slide. I think we are par for the course for last year. I feel like the answer I had last year would be the same this year. The GBP 50 million to GBP 100 million, we are in a growth strategy. So I really appreciate the potential flexibility if we saw a real investment opportunity. But in our build, buy and partner strategy, the GBP 50 million to GBP 100 million really is around the build, which is organic.

And when I look at what we already have in place, we will continue to make incremental investments. I feel extremely comfortable with never having to get out of the GBP 50 million to GBP 100 million range. And as of now, again, my prediction for '26 is we won't hit the bottom end of the range, just like last year. That's the sense. We don't have any particularly material spend in an area that would make me feel we have to be well into that range. It's a lot of little things we're doing to continue to grow the top line, and it seems to be adding up to well below that range.

Yes. And originally, they were incremental. Remember, Tom, we were saying it was every year, we're going to do another 50 million to 100 million was, let's say, 75, 75, 75. We are spending less than that incrementally. So we've been much more cost conscious since Eric's arrival in Asset Management because to be honest, we need to -- those jaws need to go the other way. Eric has closed them in the first year. So the revenues and costs are growing roughly at the same level. We -- they now need to cross. We need in 2026 for the revenues to grow more than costs.

Yes, it's worth. And maybe why that slide is not up. The way we look at...

'24 actually...

Yes, it's really holistically. In other words, we need to keep our overall growth in costs within a range that we're happy with. That has to include this number as well, but we look at it in the round. And the important thing, I think Antonio underlined it is we need to see the revenues growing faster than the cost from here on in. And the only reason why you'd see us up the investment spend specifically is because we can see a direct line to higher revenues. That's how we think about it.

Andrew?

So Tom, thanks for the question. I might want to pick up with the team on the detail, but just a couple of observations. On the eligibility restriction, I mean, that exists because our Tier 2 owned funds are capped at 50% of the SCR. So as we grow OSG that grows own funds, that effectively starts to reduce.

And therefore, it's temporary because we grow our way out of it. And then I think as we have guided, we will -- ASG will cover dividend by 2027 and then grow significantly after that. So in terms of working you through your question, we'll pick up with the team afterwards. But it is temporary and NSG is covering dividend by '27 and beyond.

Yes. We're actually an interesting obsession where the more capital-intensive the business we write, the faster we start qualifying again because the SCR rises faster. So own funds generation is actually covering the dividend today, but then we choose to invest a lot of that in growing our SCR and growing our business. And as we grow the SCR, the restriction is 50% of the SCR. So the more we grow the SCR, the faster that comes back comes back over time, but we'll catch up in the detail.

And actually -- and today, I appreciate we're giving you much more information than usual, so we can also, at the end, kind of with Andy and the team kind of follow up on any more specific questions. Thank you, Tom.

Will?

William Hawkins from KBW. I'm sure there's a lot of work that's gone in behind the scenes. Back to Workplace, please. getting the commentary so far, but I'm still a bit uncertain about the flows that we're seeing in Workplace because you did GBP 6 billion in the full year, which implies about GBP 2 billion in the second half of the year, quite a step down from GBP 4 billion in the first half. So I'm not sure in retrospect, if I'm sort of missing some big issue of seasonality or if there's some other kind of driver around that.

So understanding a bit more about workplace flows would be helpful, please. And then secondly, sorry, because there's so much helpful stuff that you've said. The core guidance for this year of core EPS rising 6% to 9%, I mean my back of envelope is you're going to get most of that from the buyback. So the implication is either that your guidance is hugely conservative or that the absolute earnings figure isn't growing very much. And if that's the case, I can't figure out myself what the headwinds or one-offs have just been.

Yes. So Andrew, you should address the EPS, but the underlying core earnings are growing, first point. And yes, we have -- bear in mind that we start the largest buyback in our history, which was starting this week, the first tranche of it.

And so you have a 12-year -- 12-month -- you have quite a long period where -- so not -- the EPS itself is not -- is going to be impacted more in 2027 than in 2026. So when we actually look at the math that you were doing in your mind, there isn't a massive -- there's half of it, but there isn't a massive EPS upside from the GBP 1.2 billion because a lot of this is going to be done throughout 2026. So we can actually give you the exact numbers because, of course, we have that behind it. But do you want to add on that and then we should come to the workplace.

Just going to reiterate the point you just made. I think if you look at our operating profit growth by business, as I said before, we're on track or ahead on all targets. So those are growing positively. And the point you just made, Antonio, is that the buyback really has a bigger impact in '27 and '26 just because of the timing of it. And therefore, I suspect that's flowing through your numbers.

Yes. We're giving additional disclosure because the buyback is quite big. So on every week, we'll have it on the investor.

We'll have a tracker.

We'll have a tracker on the website. I'm not sure if we said that already. So -- which will track exactly what -- where we are on the GBP 1.2 billion, and it will give you a sense of how it's impacting the EPS. On the GBP 6 billion, there is a lot that we've done last year, as I said, that is coming into 2026.

Yes. No, I mean there's no sort of seasonality at all impacts in the business. I suppose the 2 main sort of inflows, if you like, are the regular contributions, which are very sort of regular and predictable. The scheme wins can be a bit lumpy like PRT. So in the GBP 3.7 billion that we talked about that we actually won last year, but will not fund until this year. There was sort of, for example, there was a GBP 2 billion scheme in there.

So it does tend to be a little bit lumpy in terms of the sort of new business wins, if you like. And sort of very -- for us, we have a 99% client retention rate. So sort of no big outflows, if you like. So it really was just the sort of timing of when we won those sort of some of those bigger deals.

Yes, which goes back to 2024. So in 2024, we won some of the schemes that funded in the first half of 2025. There were more of those funding in the first half of 2025 than in the second half of 2025. But this -- we have it in the slide, the GBP 1 billion monthly contributions, as Laura says, there's no seasonality. The -- well, they just keep on increasing actually because the book is bigger.

I'd kind of go for Abid and then Asad.

It's Abid Hussain from Panmure Liberum. I'll limit it to 2 questions. The first one is on bulk annuities. Could you just talk to what the competitive landscape is now in the U.K. versus the last couple of years given the increased capital and capacity being deployed across the industry? And then is that then driving the margins down? Or are the margins coming down because of the tighter credit spreads and the business mix that you're writing? That's the first one. And then the second one, can I just come back to the net surplus generation?

Just trying to understand and work our way through this in terms of which numbers we should be focusing on? Is it excluding or including TMTP? Should we be thinking about 100% Solvency II cover or 160% Solvency II cover on new business strain? And then ultimately, where do you want that net dividend cover to get to in the medium to long term?

Andrew, you should take that. But Gareth, you start -- can you start with the competitiveness of -- by the way, I feel super proud that we are at 25% of the market in 2025. And so we somehow just skipped through that and the GBP 10.4 billion. I think great Andrew and Gareth as well and the team before. But can you talk about it going forward? And we get a lot of these questions given the new entrants.

Sure. I'm impressed that it's 1104, and that's the first time we've had the competitive landscape question. So the market is competitive. The market has been competitive for a long time. And if you think about what's been happening over the last couple of years, then one of the changed competitors, if you like, has been one of our most formidable competitors for a long time as well.

So we expect the market to continue to be competitive, but not materially different to what we've seen in 2025 in particular. So then on to new business margin. The first thing just to say is to reiterate that we are making our return on capital. All of our deals have got to make our 14% hurdle. And so we are continuing to write in a price disciplined way. But you're right, and you alluded to this in your question that the reason that the margins are a bit lower is because we're using less capital-intensive investment strategies and buying optionality for the future.

And so the way that you would expect that to change would be if you -- if we continue to write low capital strain, relatively lower spread investments to back our business, then you'd expect the numbers to start out low and then give more optimization opportunity in the future. And if credit spreads start to widen, then you'd expect that new business margin to grow again and to perhaps have less future opportunity because we'll crystallize more upfront.

I would say one thing about the new entrants. They are certainly very rational and sophisticated. And so the sophisticated part could worry you, but the rational part actually is reassuring. I mean they have the same return hurdles we have or higher actually, if you think about their own shareholder structures.

So we expect -- you were mentioning PIC as one of our competitors. PIC is already one of our biggest competitors. So we expect -- it's a market maybe different from some of the parts of retail and others where sometimes you have competitors coming to the market in a slightly more rational way. We are a big player in the U.S. as well, as you know, where we compete against those same competitors. And everybody tends to behave in a very -- it's a very professional market and mostly a very rational market. So we feel reassured by that as well. NSG covering dividend by 2027.

Just let me talk about the TMTP and why we've done that. The reason we made that adjustment this year and to be really transparent is we're trying to -- because we've guided for the first time on the OSG by business, that TMTP adjustment will run out over time. It can be sort of volatile in places. And therefore, we wanted to give you a cleaner underlying view of what each business was generating and where the run rate would go. The reason we've then transparently disclosed that is you can just add it back if you need to, you can see where it goes.

So that drive, therefore, to give that transparency was the important one. And using that basis, that was -- and we talked here about OSG rather than NSG because that's by business, that growth in per share OSG in particular, is what gives us the confidence on the dividend coverage, which is 2%.

And then, of course, NSG depends on the strain environment that we're finding ourselves in, which obviously impacts Gareth and Laura's business. To the point of dividend coverage, I think I made some comments earlier about the -- in terms of things like payout ratio, it's a decision we are currently comfortable with the payout ratio. It will trend down over time. But currently, we are comfortable with the payout ratio that we have, recognizing the short-term trade-offs on the amount of strain we're going to deploy against new business. So that's where we're co. And back to NSG, yes, it covers the dividend by 2027 onwards.

Nasib?

Nasib Ahmed from UBS. PRTs in new business. there's different ways to cut it. You've got IRR, you've got IFRS new business, you've got lifetime value. What is the kind of the bottom on the IFRS new business value where you say, okay, I'm going to walk away. I'm not making enough pounds, as Antonio you said, on the IRR. I'm still meeting 14%. You could do more structured sovereigns, still meet the 14%. But is 6.5% the bottom where you say, okay, if I go lower than this on IFRS margin, I'm going to walk away. Question number one. So question number two, on Slide 38. You give the 2028 OSG underlying of GBP 1.4 billion. And then you've got to add management actions on top. Am I adding GBP 300 million? Or you did GBP 238 million last year? And then you had GBP 172 million of balance sheet optimization. Is that GBP 410 million equivalent to the GBP 300 million? Or is it GBP 238 million going to GBP 300 million?

I'll give that to you, Andrew, in a second. But on the first one, look, there are many constraints. And not only that, when we look at -- the beauty of this business is that we price in a very specific way deal by deal. And so every deal has a different make in terms of how many deferred kind of duration, et cetera. But the binding constraint is the IRR of 14%. So what the deal can't -- whatever way we structure it, if it has more funded R less, we have the pound of capital that we're deploying needs to be above 14%.

But when we approve it, and you may want to add to this, Gareth, there's lots of -- there's many more than those metrics. But from my simplistic view as the group CEO is, is this capital -- this pound of capital better deployed here versus in those 2 other businesses, we need to look at the return on capital and the return on cash. So from a PRT perspective, it needs to meet that.

And so there is yes, there are many, many deals last year where we didn't bid or where we bid and we didn't win because if we were -- and we are the largest player in the market. So I'm very conscious that we need to have that pricing discipline. Actually, the #1 objective I have from the Board is pricing discipline, not market share of volumes because we want -- we want to maintain the health of the market from a profitability perspective. Do you want to say something on that, and I'll come back.

Maybe one more thing just to kind of bring to life. So if you imagine we're bringing one of our bigger deals to discuss with Antonio and Andrew and then on to the Board, then we've got our base metrics that we're underwriting on, but we then also look at what might happen over the lifetime of the business.

And so one of the things we did over the course of last year was we slightly reduced the duration of some of the credit that we're investing in, which gives us a little bit more optionality later on. And in some of the scenarios, let's say that we were pricing scenario which hit the 14% IRR, but had a relatively lower IFRS new business margin. One of the things that Antonio and Andrew would definitely ask is what are the numbers that can drive those up over time.

And so if we see that there is more optionality that we're able to access in that particular deal, then that might make us feel more comfortable underwriting at a lower headline IFRS new business margin, but with the opportunity to be able to go and redeploy in the future. And that was definitely the case for some of the deals that we looked at over the course of last year.

Slide 38.

Yes. I mean just -- this is definitely one for the team to work through. So think about the GBP 331 million number that we disclosed in the GBP 300 million, that's an IFRS number, and that's for asset optimization. When we disclose asset optimization on a Solvency II basis, one important adjustment is that gets disclosed net of tax. So you have to sort of translate the numbers through a different basis.

What we've done on this slide is embed the asset optimization OSGs within the underlying business. So you see that coming through and then other management actions sit on top of that. So the equivalent of the GBP 331 million on a sort of pretax basis is -- sorry, on a post-tax basis is sitting in the charts and other actions will sit around that.

And if that's not clear, we can talk to you -- we spent a lot of time on this chart, meaning we didn't just put this together yesterday. So there is sort of -- there's a lot of thinking on -- but I appreciate that there's a lot of new numbers. So we can take you through that, Andy.

The last couple of minutes left. We've got some questions online. I think Fahad's questions have already been answered there. So I'm just going to take 2 follow-ups in the room. So Andrew and then Andrew.

We only have...

It's not just Andrew thing.

Exactly, yes, exactly. There's a bias there towards the Andrew.

Okay. One question. Sorry, thank you for giving me the extra shot. Listen, you've just done 9% EPS growth for '25. You're doing 9% again, you say for '26. You say that share buybacks will be more impactful for '27. So why not raise the 6% to 9% guidance?

We'll think about it. So look, I think we are -- we gave a 6 -- so the serious answer is in June of 2024, I gave guidance for 3 years, '25, '26 and '27. And our #1 focus is to deliver on those numbers. I've said here on stage, I'd love to beat the targets that we've announced. But as we continue to deliver, we're not changing the guidance, but I want to beat our targets. Thank you. Andrew?

Just a quick question. So the modeling and assumption changes, so the negative variance that you mentioned, was that longevity? And I guess if it is longevity or I guess if it's not as well, how are you thinking about longevity going forward given where, I guess, mortality trends are going in the U.K. Is that -- how should we think about the risk of at some point having to strengthen longevity reserves, not the next couple of years, but down the road?

So yes, this is the first line of Page 30, which are the ones that we said we focus a lot on the other 3 lines, which are the ones that are more that we require more explanation. But on the modeling changes.

Broadly, no, it's not longevity, those changes. It's more around we did some cash flow, some change to our cash flow modeling, the principal change around persistency. On longevity, yes, I think we've disclosed we use a CMI '23 table, but we have taken in '25 was a light year for death. So taking -- that's -- our experience has been overlaid on to '23, and we'll continue that process going forward. But short answer to your question is no, it's not really driven by longevity changes this year.

Well done to everyone in the room for keeping 2 questions. Just one final question has actually just come through online. It's from Markus Rivaldi from Jefferies, which is just given the level of Tier 2 debt restriction, is there an appetite to consider liability management to rightsize Tier 2 and accelerate debt deleveraging? Andrew?

So been working closely with the treasury team. There are no shortage of help us, including from many organizations in the room to help us suggest how we might manage some of our sort of treasury and capital requirements. So the answer to that question is we are looking at the mix of Tier 2 and Tier 1 and financing structures that optimize the balance sheet.

A great point to end on. But look, thank you for all of your questions. I know we've covered a lot today, actually even more than usual. I'm very happy with the progress that we're making and the strong foundations that we've been stressing that we have to build on for 2026 and beyond. We'll see you back here on the 5th of August for our half year results.

Andy was saying this, our Investor Relations team is available. If you have any follow-up questions, I appreciate some of the questions today and the numbers as you digest them. Thank you for coming today, and see you.

Good morning and a warm welcome both to those of you in the room and to those joining online. My name is Michelle Moore, and I'm Group Strategy and Investor Relations Director.

Just a few housekeeping points before I hand over to Antonio. Firstly, to those of you in the room, please make sure you've turned your devices to silent. In the event that the fire alarm sounds, colleagues will guide you to the nearest exits and the normal forward-looking statements apply.

Our agenda for today is summarized here. Antonio will kick off, setting the scene of the importance of retail for the group before handing to Laura, who will outline why we win in each of these businesses and set out her vision for the future. Jeff will then cover the financials before we open to Q&A. Over to Antonio.

Thank you, Michelle, and welcome, everyone. Thank you for being here this morning. So as you know, this is the third of the deep dives that we're doing on our businesses. Last December, Andrew Kail explained why we are the global leader in PRT and how we make money in that business. As you will have seen, [ Gareth Me ], who's sitting just there next to Andrew will take over as the CEO of Institutional Retirement in December when Andrew succeeds Jeff as our CFO. This is Jeff's last market presentation, so please be nice to him.

In June this year, then Eric Adler, you heard from him on his vision for our asset management business, how we're going to grow the business, which is the largest in the U.K. And then today, Laura Mason is outlining the vision for our retail business as the U.K.'s leading DC and retirement platform. So these 3 core businesses, each market leaders in their own rights are the building blocks for our strategy, our strategy to be growing simpler, better connected L&G that becomes more capital light over time.

So since I last spoke to you in August at our half year results, we have continued to make really good progress executing on our strategy. First, in terms of sharper focus, we have disposed of 15 assets in our Corporate Investments units, going from close to GBP 2 billion to GBP 500 million in assets currently. The sale of our U.S. Protection business to Meiji Yasuda is progressing well. We are going through regulatory approvals and expect to complete either side of the year-end. We're also driving operational improvements across the group, creating capacity to invest for growth.

On our second priority, sustainable growth, we are making really good progress in each of our businesses. And in a moment, I will give you a trading update over the next slides. And then finally, the third priority, I said we would return more to shareholders, and that is exactly what we are doing. We are on track to deliver our 3-year group targets and return more than GBP 5 billion to shareholders through a combination of dividends and share buybacks.

We've also announced this month that Scott Wheway will take over from Sir John Kingman at our next AGM, as you probably know, John comes to the end of his 9-year tenure. So let me now take you through the progress that we are making this year so far in each of our 3 businesses. In Institutional Retirement, we have delivered strong volumes, higher than last year already at good margins. We have written over GBP 10 billion in the U.K. this year, including 2 large schemes in the second half of the year, a GBP 1.6 billion transaction with BP and a transaction with another client of over GBP 4 billion, that's the largest deal in the market in 2025.

We expect the market this year to be just over GBP 40 billion, so our market share should be around 25% of the whole market. Next year, given the pipeline that we already see currently, we expect the total market to be closer to GBP 50 billion. I'm excited to work with Gareth and the team to continue to lead the PRT market.

So turning to Asset Management. In Asset Management, we have increased the pace of delivery against the strategy that Eric outlined back in June. Client wins and internal flows have contributed to strong annualized net new revenue of, and this is a really important number, GBP 29 million in the first 9 months of the year. I'm really proud of that number. Private market assets under management are now GBP 71 billion, and we are particularly proud of the recent first close of our digital infrastructure funds and the continued flows into our Private Markets Access Fund, which now has more than 2 billion assets under management.

Our average revenue margin continues to increase, now at 9 basis points as we shift to higher-margin products. So as you can see, we are firmly on track to turn around the financial performance of our Asset Management business. Now turning to retail, the focus of today. We start from a position of strength with over $300 billion of assets under management in U.K. retail wealth market, which I think is something that many people don't really appreciate, we are the largest U.K. DC manager with over GBP 200 billion that's roughly 1/4 of the market with over GBP 100 billion of that in our own workplace DC market, and we also have the largest commercial master trust in the U.K.

Beyond DC, and you can see it on the right-hand side of the slide, we have GBP 100 billion of assets across wholesale, retail annuities and lifetime mortgages. So that's where we are. So looking forward now, there are major structural tailwinds in the retail market. You can see the 4 of them there on the left. And we expect U.K. retirement assets to grow from GBP 3.5 trillion to GBP 5.5 trillion over the next decade. So the question is how are we capturing this growth opportunity.

We are the U.K.'s leading DC and retirement platform, serving nearly 13 million customers across retail and institutional retirement. We have 12.4 million customers, which Laura will talk about in retail, and the rest are in our institutional retirement business. We have 20% plus market shares in the key markets where we choose to play in across accumulation and decumulation, and we are crystal clear on what we don't do. We won't go beyond our core strengths and our core customer base, and we want to make expensive acquisitions. Why? Because we can make the most of this opportunity with our existing capabilities.

The first question, which I get from many of you, including just now, as we started is how do we make money in retail? Well, we make money in 3 ways. First, we have reliable, predictable earnings, primarily from our Annuities and Protection business, number one. Second, on top of that, we generate fees in asset management. This is a really important statistic. More than 40% of our ANNR target in asset management comes from retail, particularly workplace. That was true also in the first 9 months of this year. And then third, we are sowing the seeds for the long-term growth of LNG through our growth in DC and as retail annuities replace PRT volumes.

So let me take you through this growth opportunities, starting with DC first. So DC, we expect the market to grow to GBP 1.5 trillion by 2034. Keeping our current market share, which I mentioned is roughly 1/4 of the market, that implies doubling our AUM to GBP 400 billion. And we expect a growing proportion of that GBP 400 billion to be in our own workplace business, which is significant because over 95% of our workplace assets are managed internally, increasing our profitability. And that is why I'm really pleased with the progress that we are making in workplace.

We have had GBP 5 billion of net flows year-to-date, and we are on track to finish the year higher than 2024. We have, you can see it here, 99% scheme retention, and we've won 35 schemes so far this year. These schemes will be onboarded over the next 18 months adding GBP 3 billion of new assets to our flows. And then you can see on the bottom, we have another GBP 3 billion of potential opportunities in the pipeline. So that was DC.

Now turning to annuities. We are the U.K.'s largest provider across PRT and retail annuities with a market share that's typically between 20% and 25% of the overall market. You can see on the slide that a decade from now, the annual annuity market will grow to GBP 60 billion. You can see that as the gradual decline in PRT is more than compensated by the growth in retail annuities to GBP 20 billion. You can see that retail annuities go from GBP 8 billion last year to GBP 20 billion by 2034. Therefore, retail annuities will be the long-term successor to PRT, and we are ideally positioned to capture that opportunity.

So in summary, I'm really ambitious for our retail business. First, we will grow operating profit by 4% to 6% per annum to 2028 with the reliable release of earnings from annuities and protection. Second, we will grow fee-based earnings, both in retail and asset management. Workplace will be the major driver of that growth with GBP 40 billion to GBP 50 billion of cumulative net flows. And as we scale that business, our operating leverage will improve and the combined workplace profits will triple by 2028. I know many of you have asked us for the profits of workplace. Jeff will spend quite a lot of time on this later on.

And then third, beyond 2028, DC will continue to grow and retail annuities -- as retail annuities will replace PRT volumes. So I would like now to invite Laura on to the stage to set up the vision behind these numbers and how we are -- and to explain how we are already executing at pace and with conviction. Laura, over to you.

Thank you, Antonio, and good morning, everyone. It's great to be here to talk about the retail business since taking over the CEO at the end of last year. I know L&G LNG Well, having been CEO of Institutional Retirement and also led private markets. And it's great to have the opportunity to now lead the retail business.

We provide lifetime financial products to over 12 million customers. And I've really enjoyed getting to know the teams in Cardiff and Hove, who run operations across all of our retail businesses. I'll be focusing on 3 key themes today. First, I'll speak to the strength and positioning of our businesses. Secondly, our clear direction in DC and retirement. And finally, on how we are executing with advanced technology at the heart of it.

So I'll start by telling you about our businesses, their scale, strength and why we win. We are in the parts of the retail market that really play to our strengths as a group. First, we deliver outstanding customer service. Second, we excel in distribution; and thirdly, we leverage our group synergies, particularly with our asset manager, which is the largest in the U.K. And finally, scale. We have top 3 market positions in each of our businesses.

Now let me go into these 4 strengths in a bit more detail. We have a deep understanding of our 12.4 million customers, and we have a long history of innovating to meet their changing needs. This customer-centricity is core to the strength and longevity of our brand. Our service is excellent. Our average NPS score is currently 54 and we're consistently top of insurance wide customer indices. We get repeat business from our partners because of this. We have broad distribution coverage. That means we're present where our customers are across channels, partners and platforms.

We have strong relationships with the most influential U.K. financial institutions. We sell both retail annuities and protection through the top 5 wealth intermediaries as well as asset management, providing fund solutions to them. Our workplace and corporate channel is a highly efficient customer acquisition engine for us. Once these customers are with us, we are able to engage with them directly and retain them over the long term.

Our synergies with the rest of the group offers a significant advantage. We leverage shared capabilities across retail, PRT and asset management. We are able to optimize capital, unlock efficiencies and shape opportunities across sectors. As an example, Eric and I appointed Paula Llewellyn as CEO of DC & Workplace earlier this year to coordinate our asset management and retail teams to better address the entire workplace and DC opportunity that we have across the group. So now on to our businesses.

We have 4 core businesses in retail, each in large scaled markets, each with significant top 3 market shares. We have scaled our businesses organically driven by a focus on what our customers need and by investing in technology to drive our proposition and customer service. Let me tell you about each of them in turn and their long-term growth potential.

Starting with Workplace in D.C. Across Retail and Asset Management, we have 1/4 of the growing DC market. Our Workplace business has over GBP 100 billion and is the core customer acquisition engine for our lifetime retail strategy. We win customers in workplace with over GBP 40 billion of net flows since 2020 and retain them over their lifetimes.

As Antonio mentioned, we have a 99% scheme retention rate, and our pipeline of new scheme wins for next year is the healthiest it has been for a number of years. We also have the U.K.'s largest commercial master trust at GBP 39 billion. And we generate strong asset flows for asset management with 95% of our workplace assets managed in-house.

We have a young customer book today, which offers us long-term growth potential. We will double our assets over the next decade. Retail annuities is our largest contributor to profit today, and we have a long track record of leading pricing and underwriting capabilities backed by longevity science. We are the #1 in open market annuities, testament to the strength of our proposition and the investments we have made in digital innovation to improve speed and customer experience.

We have an efficient operation model combined with institutional retirement that drives scale benefits and the same access to asset sourcing for competitive pricing. We expect significant growth in the market over the next decade as the first wave of DC only customers start to retire.

Next, lifetime mortgages. We have been in the market since 2015 and managed the third largest portfolio in the U.K. funded by PRT and retail annuities. We have a good track record of tech innovation, offering the first digital application journey in 2017 and bespoke pricing in 2024.

Housing equity is an increasingly important contributor to customers' retirement planning, and we expect more people to unlock the GBP 3.7 trillion held in housing equity over the coming decades. And last but not least, protection, which is where L&G started 189 years ago. It is a core business for us with reliable profits and valuable diversification benefits, with retail protection, delivering day 1 capital creation.

Our market share has been over 20% on average in retail protection over the last decade. In Group Protection, we are growing fast particularly in the SME space using our new technology platform. We are a scale player with deep and wide distribution network and sophisticated underwriting and pricing expertise powered by machine learning. Protection is a stable market in the U.K., but we will pursue emerging growth opportunities, such as the recent demand for whole of life policies and inheritance tax planning.

So we have a very strong position today. Now let's turn to our strategic direction and how we will continue to lead in the DC and retirement markets. The U.K. pensions landscape is undergoing a fundamental shift. DC assets are expected to nearly double to GBP 1.5 trillion by 2034 and decumulation flows will grow to GBP 100 billion per annum. This shift has already begun. This is a once in a generation opportunity. The changing regulatory landscape provides tailwinds that play to our strengths.

Pension reforms are driving consolidation among schemes with default funds under GBP 25 billion. Our leading master trust will be a major beneficiary. There is a significant advice gap for our mass market workplace customers today. The combination of the new FCA-targeted support regime and advances in tech will allow us to deliver personalized, data-driven guidance at scale. And finally, with growing interest in productive finance for DC, we offer our private markets access fund, which now stands at over GBP 2 billion.

Our strategy to meet these major flows is simple: to own the customer journey, from accumulation right through decumulation. And Workplace is our core customer acquisition engine. We support customers throughout their lifetime. We will combine digital guidance and targeted support with affordable human advice. This will meet our mass market customers' needs at scale in a part of the market, the traditional advice doesn't serve. In decumulation, we offer a full suite of products from annuities, drawdown blended income and lifetime mortgages.

We already have a scaled base of 5.2 million customers in workplace. This is set to grow by 50% in the next decade as we win new schemes. We have a young mass retail book today with our customers at an average age of 42. Over the next decade, we expect around 1.7 million customers to reach retirement age, with their pot sizes more than doubling. As the data on this slide shows today, at retirement, 60% of the market goes into drawdown and only 13% into annuities.

Over the next decade, as pot sizes grow and more people have DC only retirement parts, we expect people's choices to change. We expect an increase in the proportion of people looking for guaranteed income through annuities. Blended solutions that combine drawdown and annuities will also play an increasingly important role in customer retirement actions. We are well positioned to capture this shift and have already seen an increase in our workplace retention into drawdown and annuities since 2020.

Let me talk you through 2 examples to demonstrate the value of lifetime retention. First Ruth, who works at a bank and joins us at 45 when she takes a job with an L&G workplace DC pension. Through our digital in-app consolidation tool, we encourage her to consolidate her pots from previous employees. And then as she approaches retirement at 65, we support her as she moves to a drawdown strategy.

Second, the example of Frank working in the hospitality sector and who has been paying into the same LNG workplace pension since he was 20. As he approaches his retirement, he uses our retirement guidance planning service and decides to take out an annuity with us, which he then supplements in later life with a lifetime mortgage. In both cases, retaining Ruth and Frank into their retirement considerably increases lifetime value for both retail and asset management.

We see huge potential for the growth of our retail business over the long term as the DC market matures. Up to 2028, we expect retail operating profit to grow at 4% to 6% per annum, with over half of this profit coming from the predictable, steady release of our GBP 4 billion store of future profit built up from insurance business already written.

Retail workplace profits will grow at a faster rate as we invest for scale and deliver operating leverage. Asset management fees from our retail business will grow at more than 15% in the same period as our asset flows at scale. The full extent of this DC and annuities opportunity will emerge through profit over the longer term and as our workplace and annuity assets grow, a greater proportion of our profit will come from fee-based earnings.

So we have strong foundations, clear direction, and we're executing with pace to deliver on our targets. The major strategic building blocks are already in place, and we are closing the remaining gaps. We have engaged early with the FCA on target support, and we have a blended annuity drawdown product that we will launch next year to meet growing demand for more innovative default retirement solutions.

Our greatest focus continues to be on technology as it is critical to our success as we scale. Technology is a key part of our retail strategy and has been over the past decade, whether this is building in-house or through partnering. Let me take you through some of the newer technologies we are using to remain ahead in this changing landscape. We are using best-in-class marketing technology together with AI and behavioral science to create a personalized experience for our customers in real time.

Each time a customer logs in we are able to tailor their service and communications instantaneously. Our engagement engine is active across all our channels, and we are seeing increasing flows through our #1 rated pensions app. We regularly roll out new features and now have integrated open banking and [indiscernible] journeys and can do pot consolidation and one-off contributions through the app.

Through our tailored approach, we have seen digital consolidation increased by 60%, and proactive nudges have led to a 30% increase in customers taking further action in our guidance journeys. Our hybrid engagement model sets us up well to meet the at retirement needs while many mass market and mass affluent customers.

A significant proportion of these customers fall into the advice gap, and we are building an integrated model that combines free digital guidance and target support with low-cost human advice. We have rolled out retirements guiding planning through our app already, and we'll be supplementing the at-retirement journey with targeted support to help customers make better retirement decisions. We already offer in-house solutions for customers seeking traditional advice and continue to explore how best to support those with more complex needs.

We are innovating in deaccumulation too. Our new blended income solution, L&G Guided Income, adapts to our members' needs throughout their retirement. It draws on our expertise in annuities longevity and investment management. and is a great example of why we've combined our DC retail and asset management teams under one leadership. And finally, technology is also a driver of efficiencies. Since 2020, we've delivered over GBP 85 million in cost savings by unlocking operational efficiencies through digital self-service, robotics and generative AI.

Last week, we announced our new collaboration with Microsoft. We will use the power of agenetic AI to analyze the next best actions for customers, improve real-time interaction and carry out back-office processes. This will improve customer experience and also ensure we scale efficiently. This is one of several initiatives expected to deliver an additional GBP 130 million in operational benefits over the next 5 years.

So to summarize, we start from a position of strength. We are well positioned for the huge growth in DC and Retirement. We have a clear strategic direction. We have the building blocks we need and structural tailwinds in our favor. And finally, on technology, we will ensure we can scale efficiently to meet the future market opportunity. I'll now hand over to Jeff to talk in more detail about the sustainable, predictable returns that this delivers.

Thank you, Laura, and good morning, everyone. Retail is a financially attractive business for us. Firstly, our mature annuities and protection businesses generate high-quality earnings, capital and cash that are predictable and diversified. Second, we foresee long-term growth as we scale in workplace and deliver retail-wide operating leverage.

And finally, retail unlocks further value for the group, most clearly through the reliable and growing inflows for Asset Management from both workplace and annuities. Let me take you through each of these in turn. Retail is a strong contributor to the group's overall performance, delivering operating profit of GBP 430 million and operational surplus generation of GBP 315 million in 2024.

The Retail operating profit today is driven largely by our more mature annuity and protection businesses. Accounting profits are spread out, leading to steady releases over decades from our GBP 4 billion store of future profit. As a result, 60% to 70% of our 2028 earnings are already written and underpin our earnings growth target. For both retail and asset management, workplace profits will add significant growth in the medium term as assets scale.

Today, we have announced our new retail profit target out to 2028, resetting our position following the sale of our U.S. protection business. This target will be delivered by continued growth from our mature businesses, where profits are deferred and by scaling workplace and optimizing returns from our growing annuity asset portfolio. Growth continues and will accelerate beyond 2028 as the market opportunity scales and as we retain more customers from workplace into annuities.

As we have said, a major contributor to operating profit growth is workplace, and we set that out on this slide. We take a combined view of profitability across asset management and retail. Our average revenue margin today is close to 30 basis points. This converts to a 7 basis points operating margin or GBP 60 million of total workplace DC profits generated in 2024 across the whole group.

We expect this profit to triple by 2028. And around half of these incremental future profits to come through in retail, you see why I'm talking slowly. Earnings growth will come principally from net new flows, with the majority from contributions as well as new scheme wins. Scale benefits will emerge through operating leverage and we expect our total cost-to-income ratio to fall from around 75% to below 50% over the next decade.

This means our operating margin is set to double over the same period. As we have said before, we broadly break even on this business in retail before investment spend. We will continue to invest for growth, and we anticipate spending around GBP 30 million per annum on average as we focus on engaging and retaining our members to capture lifetime value and delivering increased efficiencies through new technologies. Let's turn to the future growth in annuities now. New business successes contribute to our store of future profit, which will release steadily into earnings over time.

As our annuity asset portfolio grows, we will see additional in-year profits emerge, benefiting from the greater capacity for back book optimization in the same way as PRT. Additionally, as the annuity portfolio grows, it will contribute to new revenues in Asset Management. We have already outlined our strong position in the open market for annuities and over time, as more workplace members reach retirement, we will also sell increasing volumes to our existing customers.

Indicatively, if we write GBP 2 billion of annuities per annum, we'll be adding 10% on average per year. Net of payments out, we expect an average portfolio growth of around 6% per annum delivering the benefits outlined above. Looking longer term, we expect our total U.K. annuity portfolio to grow at 5% to 6% per annum out to 2044. Retail annuity assets will make up a greater share of the total in later years as PRT assets stabilize, and the retail annuity market grows from GBP 8 billion of annual flows to GBP 20 billion by 2034.

At a 20% market share, this would imply around GBP 4 billion in new annuity business, and we would expect this to increase further out to 2044. We have set out the dynamics of the products and the growth potential, but they are also resilient due to the diversification offered at higher interest rates, annuities become more attractive. And if rates were to fall, we would see a pickup in our lifetime mortgage business and more significantly value uplift in our asset management fixed income assets.

We also expect annuity volumes to decouple from interest rates over the medium term as demand for guaranteed income in retirement increases. We have a natural longevity and mortality hedge between our Annuities business and our protection business. And for capital, our day 1 capital generative businesses like Workplace and Retail Protection, offset upfront capital strain in Annuities and Group Protection. This offset is expected to increase significantly as our workplace business scales. Like other parts of our model, there are significant synergies between retail and asset management.

Retail is already a key contributor to asset management earnings with around 15% of revenues in 2024 coming from retail assets. As Workplace and Annuity flows increase, we expect retail to contribute over 40% towards Asset Management's cumulative ANNR target. And then if we look further out, given the growth and the relative contribution to earnings, by 2034, we could see the combined profit mix from retail business hit close to 40% fee-based earnings, a significant shift from below 15% in 2024. This complementary growth in asset management will support our strategic ambition to shift to more fee-based earnings over time.

I will now pass back to Antonio for closing remarks.

Thank you, Jeff. So you've now heard our retail is central to our ambition to be a growing, simpler, better connected L&G. And actually, as Jeff just said, particularly to become more capital light over time. We have market-leading businesses across workplace, annuities, protection and lifetime mortgages, as you heard from Laura and we have all the building blocks in place to capitalize on the retail asset flows that we expect over the next decade and beyond.

We will continue to acquire customers in an efficient way through workplace and then serve them through their lifetimes, you saw the Ruth example earlier, through accumulation and decumulation solutions. And as we do that, we will deliver strong returns in the process. Retail operating profit will grow at 4% to 6% per annum to 2028. We will then generate additional profits in Asset Management with retail accounting for more than 40% of our ANNR asset management target. We will grow in workplace with GBP 40 billion to GBP 50 billion of net flows by 2028, and we will triple our combined workplace profits by 2028. And then beyond 2028, DC and Retail Annuities will continue to grow, and our profit growth will accelerate with greater operating leverage.

So I'd like now to invite Laura back on to the stage to take your questions with me and Jeff. As always, please state your name and company. And if you can, please limit yourself to 3 questions.

I normally start over there on the right. So [indiscernible] maybe yes. And I'll come to Larisa after she raised her hand first, but just being structured here.

It's Abid Hussain from Panmure Liberum. I think I've got 2 or 3 questions. So thank you for the presentation. The first one is on the the tech stack. So I think you now have a single view of your customer base. But just wondering, does the customer have a single view of all the products that they have with you? And then if so, is there an opportunity to then upsell or cross-sell? And are you doing -- are you tracking that? And just any color on how that might be progressing?

And then just secondly on margin, I just wanted to check my math, if I've understood everything correctly. So on workplace savings, I think you're saying you're generating 7 bps of margin at the moment. And then are you suggesting that goes to something like 10 bps by 2028 and then doubles to 14 bps by 2034 in 10 years. And then I just want to understand if you've benchmarked any of those numbers with your peers or with other sort of noninsurance competitors? And how does that sort of stack up with others? And then I guess similarly, your cost to serve is coming down substantially from 75% cost-to-income ratio to around 50%. Just -- is that just through the use of AI. So what's driving that? Any more color on that, please?

Great. Thank you, Abid. So Laura, you should take the tech stack question and actually also how the AI more generally is generating scale. Maybe just before we go there on margin, Jeff, you can add. But -- well, that's -- the 7 and 14 basis points is exactly what we said. We said 7 basis points today that's Chart 48 that Jeff spoke really slowly around, so you could give you all that. So -- and we wanted to give you full transparency, right? So we're saying on the GBP 60 million that we make today, all of that money is made in Asset Management, the current GBP 60 million. So when you think of the circa 30 basis points of average revenue margin, you apply a 75% cost-to-income. 1/4 of that is the 7 basis points. So that's the current position.

And the number that we gave you is 10 years down the road, that should be 14 basis that's correct, the 7 to 14. And then we have given you the 2028 view because that's -- those are our profit targets out to 2028, where we triple our profits from GBP 60 million to GBP 180 million. And then Jeff said specifically, if you hear that of the increase, half of that is in retail. So we have given you all the numbers. So of the GBP 180 million, we're saying that that GBP 60 million will come in retail and GBP 120 million in asset management. So I think, literally, we've given you all the numbers, we couldn't have been more explicit. We've spent a lot of time on on that? But anything else on that?

Spot on, you are listening.

There you go. Last time we do this together. No, but actually, and I think it's a serious point actually. Jeff and I spent a lot of time thinking how can you model this in a way that shows the excitement that we have for this business. And it's true that today, we break even before investment costs in retail. But you can see the upside in both businesses, including in Retail. Laura, tech stack and then linking to the cost-to-income income. Just maybe 1 thing to say on cost to income, the cost to income today is 75%. That is also our cost to income in asset management. right? So as you know, we're also trying to decrease the cost to income in Asset Management below 70%. So when you look at the big numbers, the 75% also makes sense because it's what we have overall.

Laura?

Yes. No. So you're totally right. We do have a single customer view internally. One of the things we announced last week through our Microsoft collaboration was ensuring our customer service agents are able to access that data seamlessly, which they're not actually at the moment, but they will be able to very soon. And on your second point of that question, no, people can't, from the outside, see all of their product L&G products in one place at the moment. In the short term, we are really focused on our sort of lifetime strategy. So our focus is on embedding the app, embedding digital guidance, which is already there with targeted support and then making it seamless journey through accumulation and decumulation.

On the road map, we do also have combining protection into that as well, but that's almost the second priority in terms of really embedding our lifetime strategy that we've talked about today in the app. And then on your second question, I mean, there are 2 parts to it really. First, obviously, scale, which we've talked about today, the market is scaling. We're really well positioned to benefit from that scale.

And the second point is efficiencies. And we -- really, we've got a very clear plan based on what we've already done. So we talked about the GBP 85 billion that we achieved. And that is a combination of a number of things that you would expect. So continuing to ensure all of our customer journeys are digitized where it's appropriate and sort of where they want it, ensuring that our teams in Cardiff and Hove are only doing the jobs that really they should be doing. And as you sort of alluded to, AI, we've done a lot actually already in some of the simpler AIs. One of the things we announced last week, again, was sort of being able to embed agentic AI.

And Antonio told me, I should tell you all this, but I do actually have a PhD in the early days of artificial intelligence. We did call it machine learning in those days because it was quite a long time ago. But I think the thing that we are really excited about is the fact that these types of technologies and techniques are now sort of available off the shelf in a way that we can embed with our current systems, but I think, importantly, at a price point that actually makes it worthwhile to do. So it is those combination of things.

Great. And you did ask 1 thing which we didn't answer, which is yes, the 30 basis points is comparable to competitors in terms of the average revenue margin. And yes, we have looked at the operating leverage that we get going forward. and I've talked about GBP 400 billion of DC money, if we double it over the -- so we should have more scale and we should have more operational leverage than other competitors.

Great. William, I'm not sure if you wanted a question or if I got to -- yes. Great.

I'm William Hawkins from KBW. The 12 million customers, where do you see the most attractive segments in terms of customer lifetime value? And where do you think you may have to do the most work to get the optimization of lifetime value over time. So yes, I'm just getting a feel for where you maybe see that the most intrinsically attractive pot size and that kind of thing and where you can do work to make money regardless.

And then secondly, sorry, because you've been really helpful on the numbers, but the baseline 2024 operating profits, the GBP 430 million and GBP 315 million in [ CapGen ]. Can you tell us the split between the 4 segments we've been talking about, please?

Yes. So on the first, Laura, should answer. But clearly, you see the split of pages on this presentation. We spend a lot of time on workplace because we see the lifetime value of workplace customers being a big part of how we -- that's why we spend so much time on Workplace, right? So disproportionately, our profits are more in Retail Annuities, Protection and then Workplace. But going forward, we've spent a lot of our strategic vision on Workplace because that's where we see a lot of the value. Do you want to elaborate on that? And then I'm not sure, Jeff, if we have more split on the actual numbers.

We do and we don't. As in, there's only really 3 things in there, and we've told you the Workplace doesn't make any money in retail. And so -- and in fact, it's a negative when you put the investment. And to be clear, that GBP 30 million is in operating profit. We're not hiding things below the line on that. And we've said that most of it's in annuities. There are other disclosures that the team can take you through to build out now why you get the GBP 300 million, how it compares to the GBP 430 million, but [indiscernible] make much more sense for them to do that and point you towards how it goes in the models.

And we said that annuity is bigger than protection. So we've given you almost all the -- we said Annuity is the biggest contributor then Protection and then Workplace. Laura, do you want to talk a bit about the lifetime...

Yes. No. And in terms of the most attractive customers, really, we are looking -- our customer book is very representative of the U.K. population. We see a massive opportunity to serve the parts of the market that are today sort of in the advice gap. We see huge tailwinds in terms of pension reform, which is now starting to allow us to interact directly with those customers through target to support and really provide something that isn't there today.

So we're really focused on that sort of middle band of customers. And hence, our focus really in the short term of being building out the digital capability that allows us to interact with those customers. And we've seen some really, I mean, significant statistics in terms of those that are going through that digital journey already. And actually, we've seen that those that do are 4x more likely to take an annuity with us. So that really is our sort of key focus in the shorter term.

And I kept on referring back to, I think, Ruth and Frank. But they are actually -- the reason why -- so if you look at some of the logos I put on my slide upfront, we have Tesco, the largest DC client in the U.K. We have EY. We have Accenture. It's those types of clients. That's why we did the Ruth and Frank examples, which we cover the entire spectrum of U.K. society. But we see over -- either a customer joins us at 20, as we just said with Frank or with Ruth at 45 because she consolidates and changes jobs into a bank that happens to be our client in Workplace. We see a lot of opportunity across all of that. And at this point, that 90 plus percent of all of those customers we can serve today with all -- we won't serve all of them, but we can serve the vast majority of them because they're the mass-mass affluent representation of the U.K. Thank you, William. Larissa.

Larissa Van Deventer from Barclays. Three questions, I'll stick to. The first one, you mentioned GBP 130 million in operational efficiencies over the next 5 years. Is that a net number? And does that include the Microsoft platform, if I can add a sub point, which I know is half cheating. If it does include the Microsoft platform, could you give us a sense of the cost investment versus the benefit and how that's derived please? .

Second question, very straightforward. You mentioned that retail annuities sell better when rates are high and that you expect that to be replaced by lifetime mortgages as rates come down. Could you give us a sense of the margin difference between those 2 product lines? Or are they roughly interchangeable? And then the last one, you mentioned that you expect Workplace, DC assets to double and then Annual Retail -- Annuity volumes to triple over the next decade. And then you mentioned that you expect your DC operating margins to double. All of these are double digits, why is your target only 4 to 6? Or how should we think about the potential upside?

Yes. Jeff, you should definitely take that. Maybe I'll say a couple of words, and Laura should add on the first point on costs. First all of that -- and actually, it relates to your first and third question. All of these numbers are within -- for the 2028, all the retail numbers are in the 4% to 6%. So Jeff mentioned this just now that we don't have. So the cost of Microsoft and everything we're doing, what we're investing in Workplace and then the cost, all of that is in the 4% to 6%. So we don't have sort of the below the line point. So that's important to make that point.

And just on the slide that Jeff talked about interest rates, the point wasn't so much that there is a replacement within those 2 products. The point was we as a company, when interest rates are high as we've seen last year. Last year, we wrote an abnormal high number of retail annuities because one, our market share was high, but the market was very high because interest rates were high. As interest rates come down, that's negative for retail annuities, but a positive for lifetime mortgages.

We weren't implying then 1 product replaces the other. But Jeff also mentioned that there's a structural trend that for us is much more profitable, which is this going from GBP 8 billion of retail annuities last year in the market to GBP 20 billion by 2034. That's almost regardless of interest rates because we just see many more of those DC customers coming into retirement, and we now see that people want that blended solution or indeed just an annuity. And so almost regardless of the interest rate environment, we see this structural tailwind of retail annuities is increasing. Jeff, do you want to mention anything on that profitability or then the final numbers on squaring...

Profitability -- I mean some of that is because -- some of that double-digit triple -- some of it that's a decade as opposed to 2028. We have said of that GBP 400 million-plus base of operating profit, we're adding, let's call it, GBP 60 million to Workplace. So that is significant growth. But of course, the majority still by the time you get to the end is the mature businesses, the protection and the annuities, which is going to be lower growth plus the back book optimization driving some of that. So it's really after that, which is why we had lots of graphs of big arrows and things going quickly after 2028 is where the operational leverage coming into that scale happening around Workplace. .

And the way a store of future value, the CSM, kind of unwinds a lot of that, particularly in retail annuities, doesn't emerge as a massive growth within the first 3 years.

You wanted to add on that?

Yes. I was just going to say on your GBP 130 million question, yes, the Microsoft is in there. And in terms of the spend, again, all of it is in the numbers. But in terms of, your slightly cheeky question, I mean, I think I can tell you that the spend -- the initial phase of the Microsoft is in sort of single digits, and we expect a 2-year payback period actually because of what it can do.

Yes. Good. Thank you, Tom.

Thomas Bateman from Mediobanca. I must say I was on the same kind of lines as Larissa on the last question in terms of why is the guidance not higher? If anything, you've taken the guidance down from 6% to 8% to 4% to 6%. And I was a little bit surprised by that, given the U.S. protection isn't that big a contributor. So -- and maybe just an extra point on that. For example, the Workplace AUM just more than doubling in 10 years. I'd hope my own pension doubles in 10 years, but you've got these structural tailwinds. So I feel like there's conservatism in those numbers. Why is it not higher?

Second question is on drawdown. I guess we don't hear too much about your drawdown offering. Could you tell us kind of what sort of sales you're seeing there or if any kind of product innovation is needed? And then the final one, I think on your example with Frank, you talked about your retirement guidance planning services. Could you just walk us through what that means, what you can offer and how that changes with targeted support, please?

Yes. Great. I think that's squarely for you, Laura. In terms of the numbers, maybe Jeff, you can talk about again, about the 4% to 6%. And again, there is a time frame logic. We're talking about up to 2028. And then Tom, a lot of the other numbers, we're looking at are the sort of 10-year -- the 10-year projections. So we want to start there and then we'll come to Laura.

Yes. So there is that key point. As I said, I mean, a lot of the doubling, et cetera, is there. And don't forget that 100% of the profits at the moment are coming from annuities and protection, and those are today relatively mature. It takes a long time for that. It's further out that you'll see the protection -- sorry, the Annuity growth in the portfolio coming through as the volumes increase as more and more people come to retirement. Our book is still only average age of 42 for Workplace.

And so -- but obviously, we have a visibility that beyond 28, you'll have a huge amount of people starting to come to retirement. And that's when you see the real acceleration. In the short term, the annuities and the protection is acting more like a mature market and then it accelerates. We get the upside from back book optimization. We get some growth in our sort of continued success and underlying growth in that and then the increase from Workplace that's coming through. So that's the target.

Why it compares to what we had is and the U.S. Protection made very little in '23. Hence, if you go back and revert to a normal result for them, they were still having COVID impacts, et cetera. through, they were already on a much higher growth trajectory. And we said that was actually a high-growth business that was doing well that we got paid very well for us. So that was an element of the base for the U.S. in 2023 was a very low number. I think they made GBP 23 million or something. So whereas in the past, they've made GBP 100 million.

And so that's quite a difference as well on the percentage-wise.

Yes. There was a lot of growth in that business, and that's what we took out of that. Just 1 thing on the numbers because you said, why isn't -- why are they not more ambitious. First thing, every single number that you've seen from a market perspective is an industry source number. So we're not here making up numbers and things are going to be big. So we haven't been a bit like what I've done with asset management. I'm trying to be realistic and hopefully, over time, we beat your expectations rather than just put big numbers on the slide. So what we are -- we're looking when I talk about GBP 400 billion is literally just keeping our market share of what the DC market is going to be. So we go from GBP 200 million to GBP 400 million. Of course, there's upside if we do better.

But I've been, I think, real -- well, not conservative, realistic on what -- and as we continue to deliver, yes, we'll -- you see those arrows on those slides, which are beyond 2025. I'll be in front of you in 2 years' time kind of updating my targets for the next 3 years. Laura, do you want to talk about drawdown as one. And second Frank, thank you for name checking Frank, Tom, and then the sort of retirement guidance and how...

So drawdown. At the moment, our drawdown product is very focused on our current Workplace customers. Hence, to your point, sort of not sort of being out there in the market. And to your point, yes, we are doing quite a lot of innovation, which is very easy for us to do because it is done all seamlessly with our retail and investment management business. So the 2 things we're looking at the moment, which you would probably expect is, how do we sort of until we have a product that's sort of you draw down in stages rather than just at once. And the second is the underlying investments in that product.

So innovating as part of our overall default accumulation solutions, which we'll be putting together as part of target support. And then in terms of, Frank, just at the moment, what we're offering is our retirement guideline solution, which is in our app. And as we said, has had very successful take-up with people taking action after it. Probably the nuance between what we've got now and when Target support comes in is at the moment through our guidance, which we are very happy to give you a demonstration of you can give very factual information to people about what certain products mean.

When under targeted support, we'll be able to make sort of suggestions to people. As we said, we've had very early engagement with the FCA on that, and we're quite well set up, not only just because of what we've done already in the sort of guidance, but also in terms of our customer segmentation, we've done quite a lot of work in making sure that the suggestions we make will be appropriate for the people we make them to.

And then the final -- the final point of your question about what else we have. We do actually have human advice, which we -- all of those customers can access following going through any guidance that offers retirement advice, protection advice, and we're shortly going to be offering investment advice too.

Great. Thank you going -- coming this way to Andy. Yes.

It's Andy Sinclair from Bank of America. First, I suppose just building on what you're talking about there about workplace pensions. If the targets are in line with market growth, it sounds like this is a consolidating market with some of the legislation that's coming through. What is the opportunity to really benefit from that consolidation? Do you think you'll be one of the winners, how do you stack up versus other Workplace providers essentially?

Second was on protection. I know you reinsure a lot of mortality risk on the protection book today. As the annuity side of the business grows, what's your thoughts on retaining some of that mortality risk as a diversifier, or is the reinsurance pricing just so good that's not worth it? And third was just to understand a little bit more about the app. You mentioned pot consolidation. How much consolidation do you actually get on the app today? And what's the scope to increase that level of consolidation of pensions onto the app.

Great. Thank you, Andy. So on -- maybe, Jeff, you can take the protection, mortality point. And then on Workplace and the app, maybe Laura, you can address that. So do you want to start with Jeff...

Yes. No, I mean, the way you summarize this, right. I mean we retain most of the mortality from sort of catastrophe concentration risk on the group protection, of course, which is very helpful for diversification. And of course, we don't reinsure almost any of the individual annuities today. All of this will be under review as the scale of the different things matter more in the balance sheet.

But to your point on protection reinsurance itself, we do see the -- market sees very attractive reinsurance terms still. But we have been challenging ourselves and actually doing more and more work on understanding the mortality and what you need to believe what we should be believing for those age groups because we're obviously very good at retirement age and 50 plus, let's say, for deferreds.

But the people you're selling protection to what does that look like. And each time we go through a reinsurance tender, we challenge ourselves, should we start retaining 10%, 20% of this because there are big capital benefits versus the reinsurance. So we will continue to keep that. And as you say, the bigger the retained longevity is getting and the more that we're writing individual annuities more of an offset, the more that will come into our thinking. But yes, it's -- it is definitely work in progress.

And just so Laura should answer on app and workplace. But just on workplace for a second. We are assuming, just to correct something I said earlier, we are looking at the market, right, in terms of having GBP 400 billion. But I did say right at the upfront that we expect a bigger proportion of that GBP 400 billion to be in our own Workplace business. So at the moment, we have GBP 200 billion of assets in D.C., of which GBP 100 billion roughly, just over GBP 100 million, within our one own Workplace. I said that we want a bigger proportion of the overall, let's call it, GBP 400 billion, Andy, in 10 years' time to be within our workplace, which means that we're winning more in workplace. And if you look at 35 deals that we've won this year, so the 35 schemes. Laura, it's fair to say that our percentage of -- so our win rate has been much higher than our natural market share. So I can see my team nodding. So it's true. So we have won a lot of big and small schemes this year ahead -- substantially ahead of our own market share. So don't take my conservatism earlier to say that we don't want to win market share and absolutely we -- and our numbers the GBP 40 billion to GBP 50 billion net flows imply that we're winning market share. So.

I mean a couple of points to add to that. I mean I'm sure you're aware of some of the pensions reforms pushed to scale. So providers have to have a default fund of GBP 25 billion. Our master trust is already up GBP 39 billion and is the largest commercial master trust in the U.K. I think there are a couple of other things as well. The pension reform are good for scale players like this, but for smaller players, there will be increased governance, et cetera, which we're already set up to do.

And then the other thing for us is our brilliant access to sort of clients through DB who also have DC schemes, some of which we manage the investment side of their DC books now, but we do expect to sort of consolidate into our Workplace business. So I think there's quite a few factors on why we're so well set up to scale. And then consolidation, yes, that's a really good one. We have set up digital consolidation. One of the things I touched upon briefly earlier is now we've set up a system that uses some of the marketing technology that we had on the slide that allows us that when customers log in to instantaneously work out whether we are able -- whether they are able to consolidate and actually flash up the right messages digitally to sort of give them the link to where to go to consolidate. And this number isn't verified.

But I think over the last 2 or 3 months, we've seen a 25% increase in that consolidation using this technology. But I think, again, we're quite excited by it because we have only really just started doing this at scale. So definitely more to -- for us to do that.

And there's a customer behavior as well. More and more people are consolidating their pots, which wasn't happening 3, 4 years ago. So that is -- that's a tailwind for us as well. p

So the 2 Andrews but the Andrew here in the front. And then we'll come to you, Andrew, yes.

Andrew Crean, Autonomous. Could you talk about the split of the revenue margin in Workplace 30 basis points? And where you see that revenue margin going over time? Could you split the GBP 4 billion of in-force profits between Protection and Annuities? And you haven't talked at all really about what you expect Protection profits to do over the next few years, flat line or grow? And then just to nail this thing, right at the beginning, Antonio, you talked about not doing M&A to build out retail. Does that basically mean you're not in the market to buy retail platform?

So I'll start there, Andrew. So I did -- to be specific, I said, we're not doing expensive M&A beyond our core strengths. So I think.

Big M&A, then...

We're not doing big, expensive M&A. And look at everything I've said over the last 2 years to all of you guys, I believe in an organic strategy to grow the business. We have all the right capabilities but you've seen it in the case of Asset Management, where logical we're doing small bolt-ons. I think we'll be, as Laura said, a natural consolidator, but we wouldn't discard buying something that sort of adds to scale. I was just pointing out to -- I'm not going to go out of our core strengths, and that's not something that I'm planning that -- I just wanted to make that clear.

And therefore, we don't have plans to buy a retail platform to answer your question directly.

On the other 2, Jeff, I appreciate that we've given a lot of detail on Slide 48, [indiscernible] slide. But are we -- because you asked for that several times.

Well, interestingly, I read Andrew's note this morning. And he broadly knows the answer to the first one. He was right because we've told you before the asset management split fee rates for -- and you took an average. So you're broadly right on that in terms of the split. It obviously varies by schemes. There's bespoke arrangements that people have. The big driver, of course, for our average revenue. And to your second part of the question is the increase of the [indiscernible] driving is increase in the revenue rate as a total for us. .

And so -- and I know Laura would love to say as would the team, we're also winning some where we're not the cheapest. So that goes against a lot of fee margin pressure. So we've put sensible assumptions in there, but with offset both the operational leverage, but also the private markets fund growing to offset some of that.

And just on that. So if you look at -- each time I open my mouth to talk to the market, the private market excess fund has grown, it's only GBP 2 billion yet. So if you think of the -- this mix effect of having the private markets excess fund, which has better returns for customers and better profitability for us. That's only GBP 2 billion of the GBP 100 billion that we have in Workplace at the moment. And a lot of those -- because the way this works is the employers themselves, they have to make those decisions, some of these decisions are in 3-year cycles. So think about the upside of that coming through. And yes, the market is very competitive.

There's margin pressure as well. But what we would hope is that one compensates for the other, i.e., we become a profitable as margin pressure continues to exist. So we've given you the current assumption, which is circa 30 basis points. And we hope to keep as close or increases where we can. And there is a spread, as Jeff said, there is -- there are many clients we don't want to from a competitive perspective, don't want to give too much away, there's a spread of clients that are below and above that. So there's also an element of sensitivity around that.

And I think store future profits type split, I think that's what you were saying...

Yes...

Between protection and with profits. So we did that yesterday. The Protection and Annuities Are split in the IFRS 17 disclosures. And then obviously, you need to take out the U.S. So easier for us to show you what's there in terms of what's disclosed, but I will say, and this is not because Andrew is a more generous man than me. But at the year-end, you will definitely have all protection and all annuities and you'll be able to take out the protection piece from that because the U.S. won't be in there anymore. So all the pieces will be there by then.

But we can talk you through what's available now.

I

Can point to the current disclosure, but the logic is as when we come to March, we'll have a split between what's Protection and Annuities.

Yes. And it's not disproportional obviously to the total annuities and the PLT, et cetera. You talked about the protection and where we expect the margins to go. Yes, it's a market that grows with mortgages, with cost of living and everything else. And actually, that combined with the fact that it wasn't making very much Three years ago, we were all very open about that, including our competitors. And the margins are improving on that business means you do get the small contribution to earnings, but it's big mature books. So it's definitely on the lower end of the 4% to 6% than the higher end of it and not something that we see the huge acceleration that we do around Annuities and Workplace.

Thank you. Thank you, Andrew. I'll come to Andrew Baker. And then I have a question online, but then I will come to the rest of the people in the room. Andrew?

Andrew Baker, Goldman Sachs. So I guess I'm just trying to think through some of the longer-term risks, whether there's upside or downside to the workplace AUM projections at the market level. I guess the first one just taxes. Just curious, I guess, very near term, any risks into November. And I guess, longer term, do you see potential tax changes as a headwind, tailwind? Any thoughts there would be helpful.

And secondly, on the same sort of topic. If I look at the U.S. market, the 401(k) market over there, it feels like over the last decade or so, you've seen quite a few recordkeeping providers, so workplace providers get in trouble of having too many of their own funds in the lineup. Clearly, that's not an issue in the U.K. at the moment. Again, do you think longer term, is that on your radar as a risk at all?

And then, I guess, thirdly, you've given us the asset management DC margins, so the 13 to 23 bps you just talked about. What would those -- would those margins be different for DC only. And then we don't have a flow -- I know this is more of an asset management question, but we don't have a flow target DC only. It feels like it's going to be lower than the 40 to 50.

But are we talking sort of the -- certainly, GBP 40 billion to GBP 50 billion Workplace flows target that we have, but we don't have a DC...

I know what you mean for the other bits that's only asset management...

It feels like it's below, but are you able to give us a sense of sort of the flows you're expecting there?

Great. Thank you, Andrew. It's quite a lot there. So I think in terms of tax changes, Laura, can you address that? And maybe you can address any other thoughts in terms of, I guess, regulation or changes. I think you're thinking particularly the 26th of November budget, but more generally kind of any headwinds there or tailwinds? And then I think, Laura, can you also address the sort of us having the largest asset manager and therefore, having a lot of the funds there. And then the margin point. Yes, I can address maybe the margin and Jeff, you can mention this as well. We don't disclose that. So we don't disclose the -- but -- it really depends on the question we were answering earlier. So if you have a scheme, so if we think about the big numbers, we have GBP 200 billion of DC money, GBP 100 billion is our own Workplace. Clearly, our retail business pays our asset management business that fee. You could argue that it's similar on the other side when we are working with another workplace provider where we are the asset manager, but it really depends on what assets are within those schemes.

So again, if you have, as we want to have more of a private market access fund logic, the profitability of that will be higher. But by and large, you can assume it's similar. But we don't disclose that. Also there, we start to get into sort of not so much a competitive issue, but we have lots of clients in spread of different fees. And so we wouldn't want to be too precise. But yes, if you want to model it that way, it's kind of roughly similar.

In terms of the flows, we don't have flows, Jeff, but what we did do is the ANNR, right? So in many ways, the ANNR for me is -- so the annualized net new revenue of those flows for me is more important than necessarily the actual flows themselves, and that would contribute to the, let's call it, truly third-party money that's coming into asset management, right? Because we've said this morning that over 40% of the ANNR comes from the retail business, primarily Workplace, but also retail annuities. That is not within that number, right?

So if those are DC customers that come directly into our asset management business that would just be the normal external flows. There's no reason to think that they would be lower. I did say that I want to have more of the flows coming to our workplace business, so that implies a bit of that. But the market is very healthy. We are one of the biggest players in DC as an asset manager, and we want to continue to strengthen that as well.

But it can be quite ironic in the rare occasions, we lose a Workplace scheme. Quite often, we get the money back in our asset manager. And so there is a net-net in some of this as well. .

Good [indiscernible] I have to say this every time I get up here normally is for PRT, so Laura, do you want to talk about tax changes and then 401(k) logic?

I mean, tax is an interesting one for us. I think in the short term, we expect to see very little direct impact given we have a younger book. What we have seen interestingly, which has been a bit of an interesting tailwind for us in terms of inheritance tax, which I know isn't quite what you're asking, but we have seen an uptick in both people taking up whole of life policies in protection and also annuities given the changes there. So that has been a small tailwind for us, actually. And then on the 1060, that's, again, a very relevant one. So some of the things that are coming through in pensions reform is ensuring that funds are able to show value for money, so it will be very sort of transparent. So that will be sort of regardless whether they are in-house funds or external.

And of course, I think the other thing is the governance around the master trust that -- actually the master trustees have to show that actually the end customers and members are getting the best value. So I think there's almost sort of regulatory governance in place to avoid what's happened in the U.S.

Before I go to either, I guess, Emily or Darryl or anybody there, just online, there's a question that you can't see, so I'll read it. Leading retail investment platforms like HL or Hargreaves or -- and AJ Bell would love to offer deferred annuities, which are commonplace in the U.S. to allow the clients to manage their life expectancy tail risk. Do you see an opportunity here? And if not, why not? Absolutely, definitely, actually, you, Laura, should answer because you mentioned these are a lot of our own clients, and we distribute a lot through them as well.

Yes. No. And we are interesting that you asked this because we are actually exploring what we could do in this space, given our institutional retirement business and the retail annuity and how we can combine that and actually, there's some work going on with our teams and one of the retail investment platforms at the moment.

Yes. And we'll tell you more once -- like this is a huge opportunity in the market because as we said we see this for our own workplace customers, we certainly would want to offer that more generally and only 7% of our own annuities at the moment. Is that correct? Yes, in the slide, to our own workplace clients. So the vast majority of what we do in annuities is in the open market. We are the #1 in terms of the open market, retail annuities market, which means that we are incredibly competitive. Obviously, we will distribute it through any platform that would want to do it.

Yes. And sorry, the point here is we are -- obviously are already doing immediate annuities. This is asking about the deferred, which we are. It is becoming a question that people are asking.

Yes. Sorry, to be clear, the 7% is low because we simply don't have many people retiring from our workplace because we are not selling...

The average age 42, and actually, you saw that in the slide that Laura showed that we expect in the market that 13% number that we're talking about to increase and more people, particularly in our book actually, if you think of that our book is more mass and mass affluent, we expect more of those customers to actually choose annuities. And so that will naturally increase, absolutely, Jeff. Other questions here in the middle. No. Here on the left, yes, we're going to get a -- there's 1 more online, but I'll come to Andrew and Tom, you get a second round of 3 questions. Andrew?

Just a point of clarification. The higher end of the 6% to 9% EPS growth, which you've targeted, is that against 19.2p, which is the EPS in '24 ex U.S. Protection of the 20p that you actually said? And then secondly, you were talking about GBP 30 million per annum of spend on Workplace out to 2028 per annum. Is that something which is a declining balance? Or should we -- is it basically a standard GBP 30 million a year of investment over the next decade?.

No, good questions. We have said, but it's definitely worth clarifying. So for the '25 target, the 1 we talk about it in our press release is based off 2024 base less the U.S. so the 19.2 because we haven't yet done the -- we haven't even closed the deal. And so -- but we're excluding the earnings. The cumulative target of 6% to 9% will include the U.S. business because we will have the benefit in the EPS of doing the buyback and we'll have closed the deal, so we can't take the best of both.

So we'll start that one from the high end number..

From 20p.

Yes, exactly. Yes.

That's right. But the 2025 number -- well, you saw the half year number that we were. And we think we'll be at the high end of 6% to 9%.

Yes, the GBP 30 million, it's broadly flat. I wanted to get down at the end, obviously, but it is broadly an average that's there or thereabouts. I mean it's -- we'll go through rigor on justifying it towards the end and what we're getting in terms of payback. I think one thing to say on it is we do allocate it to Workplace. I mean, it broadly appears in another line in operating profit. But if we're developing the app, it benefits -- it benefit in asset management's, benefit in the annuity business, but it is allocated to Workplace because predominantly, that's where the development is done even in time, it will help Protection.

And there's a lot of other customer-related benefits, which, again, are really for everyone. But the Workplace is the big customer acquisition engine and the big driver of growth. And so we're putting that investment spend there.

I'll come to Tom, but there's another question online first from Mandeep who couldn't be here physically. So could you tell us how much funded Re was used in writing at GBP 10.2 billion of PRT in the U.K. Jeff and I [indiscernible]

Yes. So we won't tell you the full answer because, especially on some of the bigger ones on the slides, we're still negotiating. And so we were either [indiscernible] negotiating position or we haven't decided how good the rates are and how attractive it is. So when we land on the number. But what I can say is it definitely won't be outside the type of guidance we've given. So we haven't suddenly jumped to doing 50% funded. I think it will be around that guidance of the sort of 20%, 25% as a maximum, if you like, as I say, we're still negotiating. It could be less, but we certainly won't go outside that and haven't -- so there's a big retention there, which means it's contributing nicely to store of future profits, et cetera.

Yes. And we still are on the 23rd of October. So we will give you the full numbers for that at the full year results in March. It's actually worth saying, if you pick this up from my comments that I said that we've done GBP 10.2 billion. So a lot of the deals that we're now working on our pipeline for 2026. So I said I expect the market to be just over GBP 40 billion for this year and for us to have a 20% -- 25% market share. So I'm actually saying the GBP 10.2 billion is roughly what we will do for the year because a lot of what we're doing right now is into 2026. So just in case you didn't pick up that. And what I said is like we're expecting a 25% market share on GBP 40 billion market, which will be very positive for us. We feel very good about 2025. Tom?

Just a couple of quick ones. Are retail Annuities higher margin than institutional annuities. And second question, given you're talking -- you talked so much about the lifetime value of workplace. Have you considered -- there are obviously specialists that consolidate pots really well. And I get the impression of hearing about your consolidation efforts in your app is kind of -- this is probably a really elementary whereas some of the peers.

I wouldn't describe it like that on a capital markets event.

But I feel like there are specialists that do a bit. Are those type of businesses attractive to you?

Yes. This is the Ruth question. You've used both of our examples. So Ruth came at 45 and consolidated. Actually, I think our capability is very good. Actually, what I said earlier, we're not yet seeing as much consolidation as we believe will come into the market. But that's not a capability issue. I wouldn't rule that out, but it's not a capability that we're actively looking to acquire because we believe we can build it. Laura, do you want to address that?

No, I think the only thing I would add as well is Yes. I mean some of those are charging quite a lot of money for the privilege. So I think we're going to -- we will continue to do it organically as we have and give customers a fair deal.

Yes. And retail annuities margins?

Yes. I mean the answer is they're very different dynamics. And so that's partly why we don't reinsure what we mentioned. So we deploy relatively more capital. The strain we've said is more like the sort of 4%, 5% on there, which is good because we're deploying capital, making pounds. So some metrics will be better, some metric will be worse. They do need to meet our IRR hurdles. But currently, that's probably lower relative on an individual annuity for IRR because you deploy more capital, but it's still meeting our hurdle. We're deploying very, very little capital on the PRT business is making higher IRR and making a lot more pounds on the individual annuities. But we still have the same optionality. We're actually putting some of the gilts, but not quite as much into the individual annuities. It's different duration, et cetera. So it all goes through the same filter, but we then look at as a portfolio, we're optimizing operating profit, IRR, et cetera, but make sure that it covers a hurdle across it. But we do publish it in the same way, the IFRS margins, et cetera.

Yes. I have 3 questions online from Dom. I've missed the detail of Dom's question. So here we are. One, you indicate 5% to 6% growth in annuity assets. Does the pivot towards retail imply higher growth in new business CSM and b, higher growth in strain, given you typically retain more longevity risk on retail. I'll give that one to you, Jeff. Second, do you make more economic profit per GBP 1 of assets in drawdown versus use versus used to buy an annuity versus an annuity, taking into account the cost of capital. And three, what percentage of workplace flows and ANNR into private assets are being captured in your own asset management division versus being directed to external asset managers. Maybe I'll take that one, and then Jeff, can you answer the other 2. So on that, on the third one. So we have said -- and actually, this links a bit to the question earlier. Was it Andy or I forget now who asked the question. The U.S. -- maybe the U.S. point of how much of our own flows are coming into our own asset manager. As we said in June, when we did a deep dive in asset management, we have all the capabilities that we want to have within Asset Management. And that's why we're such a big DC asset management providers for DC because we can give good value for money in terms of index and tracking solutions.

And then we can add areas like the private market access fund. Within the private market access fund, so the GBP 2 billion, some of the assets we are focusing on ourselves, clearly real estate, areas of private credit, areas of infrastructure. We've just launched our digital infrastructure fund. So you'd expect our own private markets access fund to be investing in those opportunities, the affordable housing that I've talked a lot about, including this Monday stuff we're doing across the U.K. But in the big part, more than 50% of that that part of the AUM is then in asset classes where we don't have necessarily a competitive advantage.

I said that we don't want to expand into private equity that want to -- so when the private market access fund does look at external fund managers, we still get the fees on the private markets access fund itself, but some of those assets are basically the best managers in the world in terms of, I don't know, U.S. private credit, clearly, we're not doing it ourselves. So we use an external manager as an example. Jeff, the other 2?

Yes, there's quite a lot. I could go on for hours, I think. But the -- so I think on strain and growth there, it's still a long way out that you're talking about any sort of material number. I mean, if we're writing GBP 4 billion annuities at 5% strain, it's still only GBP 200 million, and that's quite a long way out. And whereas if we're writing GBP 1 billion at 1% strain -- GBP 10 billion, I mean, a 1% strain, that's still already GBP 100 million. So it's -- you're not talking big differences here and quite a way out. We will obviously, over time, look at what's the options around reinsurance, what's the trade-off of capital deployment versus not as that scales and reinsurers will get more attracted to it as the market grows.

CSM is an interesting point. Short term, you've seen it in our numbers. It grows at a slower pace. But clearly, as that annuity volumes grow, you will definitely see a big CSM growth. The other bit to reiterate, which we've talked about on PLT is with the asset growth, you get the more -- the sort of the profit growth follows there for the investment margin piece because it's not just the back book optimization, but the expected investment margin element grows because you've just got the margins flowing out of the assets back in annuity. So those grow -- that grows at least in line with the asset portfolio, even if the CSM was flat, you would get the growth coming through there. And so it's not all about CSM because investment margin grows anyway. On the last one, it's the difference in asset management and insurance. So you can take that...

Drawdown versus an annuity.

Absolutely, we make our cost of capital on the annuity business. It's the same conversation about deploying capital to make pounds. You need a lot more scale in asset management to make the same amount of pounds, but it's very attractive business because it's very capital light. So it's the balance of the 2. It's the same question, I would say. And we're very happy to have both and especially as the drawdown of the mixed products will feed into more lifetime annuities over time, more guaranteed income. So it naturally makes sense.

And to some extent, it's not our choice, right? We showed that chart that says 60% of people are choosing drawdown, 30% of people are choosing annuities. We will serve them in either capacity or in the blended solutions. So it's not -- I mean, it's somewhat an academic question. Whatever the customers want to do, we will serve them in the best possible way. And it's actually good to have the mix of both insurance and asset management profits. Any other questions online, looking at the team here or any other questions in? Yes. Yes. Sorry, keep on saying that I should point to people.

I'll probably speak loudly without the mic, but sorry, it's Abid again from Panmure Librium. Just a follow-up. I'm just trying to understand the dynamics of the competitive landscape in workplace. So I suspect when you turn up the pitches, you have the traditional insurers like Aviva, Standard Life, et cetera, all turn up to those. But who's turning up from the platform providers or the nontraditional providers? Do you see Hargreaves, AJ Bell turning up to these pitches? I'm just wondering. For the workplace. For workplace specifically, just because -- given the opportunity, the growth opportunity there, are they becoming more keener to participate in that? And then how does that dynamic work if you have a relationship with, I think I saw Hargreaves elsewhere across the business?

Yes. Great. Thank you. Laura, on the 35 deals that we won this year, kind of where have we come across and...

Yes. You can check with Paula, who's sitting behind you, but I think afterwards. But I do think the names that we are seeing at those pitches are mostly traditional insurers and the players that you allude to are playing at sort of smaller scale and sort of more specialists.

Yes. And that may well change, but the market is very competitive. But actually, I think 2 things that reassure me, our win rate this year and opportunity to congratulate Paula and the team on has been a great performance in 2025, actually reassures me that we are really top of the game in terms of winning the schemes. And second, the -- as Laura said, the GBP 3 billion of pipeline that we're seeing is the strongest that we've seen in years. So it's a healthy market right now. I have one more online. Could you share a little more on the sources of growth in the workplace DC forecasts? How much from scheme wins versus, say, the government pension reforms on mega funds consolidation debt you mentioned? Apologies if it's in the presentation, and I missed in case -- in each case, ignored. -- no, I've already read it now. So Clive, thank you. So Laura, I should have read it before.

So I mean -- so I mean it is a combination. We expect to continue winning new schemes as we have. I think the bit that's probably worth pulling out on the reforms is really on the consolidation point and the move of having to have scale, which many current providers and own schemes don't as well as the uptick in governance that will be expected from everyone that we already have in place. So I think it will be a combination of both of those. And I think the biggest thing to say is that still the biggest driver is contributions in the market.

We have GBP 800 million of contributions every month. I think maybe that's a good point to leave you on if there's no more questions because there is a massive tailwind in this business. It's very competitive, as we've just said, in terms of winning schemes. The 99% retention rate don't take that for granted, meaning we -- there's a lot of work that goes into retaining 99% of our schemes. But then there is the ongoing contributions that at the moment are GBP 800 million per month, and that goes to GBP 1 billion. So do the math kind of that comes to GBP 12 billion per year.

So thank you very much for coming today, and thank you for your questions. I think it's important that this completes the sort of third of our deep dives into each one of our businesses. You have now heard from Andrew. You've heard from Eric and from Laura about the growth potential that we see across the group and how we are well placed and how are we delivering this growing -- the growing part, the simpler and the better connected L&G that becomes more capital light over time, particularly in retail, we probably got the sense from the 3 of us. We have an exciting vision for the future of our retail business.

I believe we have all the building blocks to capitalize on it. We talked a bit about acquisitions. I believe that organically, we can make the most of the major flows that we expect over the next decade, and we have the business model, as you've also heard from Jeff to deliver the long-term profits for LNG. But on that note, before I let you all go, I'd like to thank Jeff for his 9 years with L&G. I was counting this morning with him. It's probably close to 30 results and market presentations, including a riveting IFRS 17 titin a couple of years ago. So I just want to thank Jeff and I didn't show them on the script earlier. So I look forward to seeing you again at our full year results, if not sooner. Thank you.