Earnings Transcript for PHNX.L - Q2 Fiscal Year 2023

Operator: Good morning and welcome to Phoenix Group Half Year Results 2023. Please welcome Andy Briggs. Andy, over to you.

Andy Briggs: Good morning, everybody, and welcome to Phoenix Group’s 2023 half year results presentation. Now, as you know, we have always run our business focused on cash and capital, as that is what underpins our sustainable, and growing dividend. But we recognize the industry has transitioned, to IFRS 17. So the plan today is that Rakesh and I will walk you through our excellent half year results, as usual, including a summary of the key IFRS 17 transition impacts. We'll go straight into a Q&A on the main results. We'll then take a short break, and follow-up with a further education session for the analysts, on the technical accounting transition to IFRS 17. As you are probably aware, our half year IFRS 17 results will not be published until Thursday, the 28th September. I understand this maybe frustrating for some of you, for which we apologize. It reflects a short delay in our process, in part due to the complexity of the project. But let me reassure you, there are no concerns with the numbers themselves. So starting with our first half performance. At Phoenix, we have a clear and focused strategy, and I am delighted with how well our team are executing, on that strategy. Delivering strong growth, and resilient cash generation. We have more than doubled new business long-term cash, year-on-year, to £885 million. Thanks to a strong performance in the first half, in both Workplace and BPA. And this means that we have already more than offset the run-off of our in-force business of £800 million per annum, in just the first half. Our new business net fund flows increased 72% year-on-year to £3.1 billion. This is particularly pleasing, given that across the wider market, net fund flows are down. As ever, we have delivered strong cash generation, with around £900 million remitted. We are therefore on track, to deliver at the top-end of our target range, of £1.3 billion to £1.4 billion for the year. Our balance sheet remains resilient, with a shareholder capital coverage ratio of 180%, at the top-end of our target range, supporting our investment into growth. Phoenix has a single strategic focus, which is helping customers journey to and through retirement. This is important, because we are seeking to meet a huge societal need. With only around 10% of people currently getting advice on their journey, and only one in seven defined contribution savers on track for a decent retirement income, that maintains their current standard of living. So there is a clear need for more propositions and support, which we at Phoenix are well placed to provide, which is why we are building a business that can support customers, across every point of their savings lifecycle. Through offering them the long-term savings and retirement propositions, and the education and advice, that they need. As they accumulate wealth through the savings phase, then transition, through to securing income in retirement. And yet in spite of these unmet needs, the market is already huge today, with an estimated £3 trillion of stock. And is growing strongly, with around £150 billion to £200 billion of annual flows, that we can access. So a significant organic growth opportunity. Now, many are saying that the UK economic environment is challenging, and it is for most industries. But for us, the structural growth opportunities in the market are only being accelerated, by the current economic environment. So we are seeing strong growth in Workplace, fuelled by the high levels of salary inflation, and full employment in the UK economy. The Retail market has slowed down in this economic environment, with less switching of flows between providers. But for Phoenix this is helpful, given our scale in-force book, as it helps us to improve our customer retention. And the BPA market is seeing record levels of demand, due to higher interest rates, making buy-ins and buy-outs more affordable. Finally, we believe there will be more M&A opportunities coming to market over time, as high inflation means it’s harder to deliver the necessary cost reductions, every year in unhedged closed books. So their cash generation will reduce. It’s counterintuitive, I know, but the challenging UK economic environment is positive for our sector. Now, a bit more color on where we play in the market. Phoenix is the UK’s largest long-term savings and retirement business. We have a diversified and balanced business mix, across the savings life cycle. And two-thirds of our business is capital-light, fee-based products. Our strategy is designed to maintain a balanced mix, as we leverage our existing scale, in capital-light fee-based products to grow our Pensions and Savings business. And we are disciplined in our annuity growth, as we keep this to a small proportion of our business mix, and hence limit the credit risk we retain on our balance sheet. Our strategy is already delivering strong new business net fund flows, which are exceeding our expectations. This excellent execution of our strategy, together with the positive tailwinds of the UK economic environment, is why we are now confident of delivering positive group net fund flows from 2024. Which means that our new business inflows will more than offset our legacy run-off outflows. This is a pivotal moment for Phoenix, which Rakesh will cover in more detail later. Having trusted brands is critical to engaging customers, and having the credibility to support them, with some of the most important financial decisions they make. We are therefore very proud to have a family of brands to successfully engage and support customers through their savings lifecycle. And therefore, support our growth, both organically and through M&A. I want to highlight Standard Life, our primary organic growth brand. It is a brand that people trust, with a deep history and heritage, going back nearly 200 years. And it is therefore well known to both advisers and customers. But all of our brands have a role to play. In total, our brands service 12 million customers. And they come together in our passion to deliver Phoenix Group’s purpose of Helping People Secure a Life of Possibilities. We deliver that purpose and our strategy by focusing on our three strategic priorities; growing organically and through M&A; optimizing our in-force business and enhancing our operating model and culture. All of which are informed by, and in support of, our key ESG themes across both planet and people. Executing on these strategic priorities will strengthen our competitive advantages of capital efficiency, customer access and cost efficiency. Phoenix is well known for leveraging these competitive advantages to deliver strong financial outcomes on our in-force business. And we have a long track record of successfully leveraging them on M&A, and creating shareholder value. Now, we are also growing organically, by leveraging those same competitive advantages. All of which supports us in delivering increased cash, better returns and a dividend that grows over time. So looking at our first half performance, against each strategic priority in turn. Starting first with our organic growth. I am delighted with the further progress we have made this year on our capital-light fee-based business, with new business long-term cash up almost 50%, year-on-year. This growth has been driven by our Workplace business, and reflects our success in leveraging our key competitive advantages in this market of customer access and cost efficiency. Workplace is different to most other markets, in that the majority of growth comes from your existing customers with regular new joiners to existing schemes and increased member contributions through higher salary inflation. So it is critical to retain your existing customers, which is what we are now doing very successfully. And that is why 95% of our new business cash in the first half has come from our existing clients. Given there is virtually no acquisition cost on these incremental flows, and our customer administration platform is already highly cost efficient, this embedded growth generates highly profitable long-term cash. In addition, by winning new schemes in the market, we can turbo charge our future growth too. It is therefore great to see that our new scheme wins continue to accelerate. And we are now winning the big schemes too, which has enabled us to attract around £3 billion of new scheme asset wins over the past 12 months. We expect these assets to transfer across to us in 2024 and 2025. And so will drive future net fund flows, and new business cash. We are also currently quoting on a significant pipeline of new Workplace schemes, and are confident of winning further new schemes over time. Finally, we are now turning our attention to the retail opportunity. Here we have a huge in-built growth opportunity to better support the one-in-five UK adults, who are already customers of Phoenix Group. With the development of our advice proposition a key enabler. I am hugely excited by the opportunities we have available to us in both the Workplace and Retail markets. And I am confident in our ability to achieve the ambitious targets we have set for our business. We also continue to deliver sustainable growth in our Retirement Solutions business, where we are winning in a competitive BPA market with our strong proposition and the Standard Life brand. This market is large and growing, ever more strongly, due to higher interest rates. Our participation is consciously disciplined to limit our exposure to credit risk and maintain our balanced business mix. We therefore continue to take a selective approach to deals focused on value over volume with £3.2 billion of premiums written in the first half, driving strong year-on-year growth in new business cash. However, given the size and attractiveness of the BPA market, we are exploring innovative ways of leveraging our expertise to participate in a capital efficient way, through our recently established Bermudan entity, Phoenix Re. Our initial focus is on improving our capital efficiency through internal reinsurance. Future plans could see us leverage third party capital, in time. Finally, we continue to see increased demand from customers for annuities, and this month, launched our first open market individual annuity product. This product is available to both new and existing customers under the Standard Life brand. And is another example of us filling in the remaining gaps to complete our full-service customer proposition. Turning now to M&A. We have a long and successful track record of delivering strong returns from M&A. By buying at an attractive price and delivering significant cost and capital synergies, we deliver cash generation over the life of the business, which far exceeds the purchase price. But what is particularly pleasing is the speed of that cash emergence. For example, we bought ReAssure for £3.2 billion, and have already remitted £3.7 billion in cash generation to achieve a three-year payback with a further £3.3 billion of cash generation still to emerge over time. While on Sun Life of Canada UK, we completed the acquisition in April, and have already received nearly 20% of the purchase price back within three months. Looking forward, we are optimistic on the outlook for further M&A over time with an estimated £435 billion of Heritage UK assets potentially available. Now, I can’t predict exactly which books of business will come to the market or when. But as you know, I have regular conversations with my peers across the industry. And these suggest that the challenging economic environment makes M&A both large and small more likely. As ever, we stand ready to do our next deal through our ability to integrate efficiently and swiftly and to manage multiple migrations concurrently. We also have the financial capacity to fund deals with our surplus cash and capital ready to deploy. And we have debt funding capacity too, if required, with a Fitch leverage ratio that was 25% at the end of 2022. Our second and third strategic priorities are optimizing our in-force business and enhancing our operating model and culture. These are the core capabilities that drive management actions with £412 million of benefit delivered in the first half. And these are the same capabilities, that also help us to generate better returns from both organic growth and M&A. The slide covers the specifics of what we have delivered in the first half against the key actions I outlined at the full-year results, back in March. Our first half performance extends our recent track record of delivering high levels of management actions, and reflects the fact that we continue to optimize and enhance our business. However, we do not expect our pipeline of management actions to ever dry up. Instead, we are confident that the capabilities we have now built, in-house, across asset management, and capital optimization will enable us to leverage evolving market dynamics on an ongoing basis. And hence deliver a repeatable pipeline of management actions over the very long-term. So in summary, we are executing on our strategy to deliver a dividend that is sustainable, and grows over time. Our organic growth is compelling. We've more than doubled our new business long-term cash, in the first half. We are comfortably on track to deliver our target, of £1.5 billion per annum, by 2025. And now expect to deliver positive Group net funds flows, from 2024. We are also growing through M&A, delivering strong returns, with an accelerated payback. We are optimistic of further acquisition opportunities emerging over time, and are confident in our ability to both fund and execute transactions successfully. Finally, we continue to optimize and enhance our business, which has supported the delivery of a further £412 million of management actions in the period. And we believe that our enhanced in-house capabilities will enable us to deliver a sustainable level of repeatable management actions, over the very long-term. So a strong first half, and an exciting future ahead. And with that, I will now hand you over to Rakesh, who will cover our first half financials in more detail. Rakesh?

Rakesh Thakrar: Thank you Andy and good morning everybody. Phoenix has a clear financial framework, which is designed to support growth and deliver enhanced shareholder returns over time. We are investing in our growth, which is accelerating, as we maintain our balanced business mix. And our high levels of predictable cash generation provide the financial flexibility to invest into the significant growth opportunities available to us. All of which is underpinned by our resilient balance sheet, which we will not compromise. Phoenix has delivered a strong financial performance in the first six months of the year. Our dependable cash generation continues to emerge as expected, and we have more than doubled incremental new business long-term cash generation, while our long-term free cash has also increased. And our balance sheet remains as resilient as ever. As a result, the Board has declared a 26 pence per share Interim dividend, in line with our final 2022 dividend, which is a 5% year-on-year increase. So turning to the detail. Starting with cash. We have delivered £898 million of cash generation in the first half. And now expect to deliver at the top end of our target range of £1.3 billion to £1.4 billion for the full-year, with a long track record of meeting or exceeding our targets. Our Group Holding Company cash balance is around £700 million and means we have surplus cash available. This is because I would generally look to hold a minimum buffer of around £300 million to £400 million. This is sufficient to cover six months of costs and dividends. And it is appropriate given the cash remittances from our life companies are typically paid up twice a year. In addition, the free surplus in our life companies is significant at £1.7 billion, and provides further financial flexibility should we need it. Group in-force long-term free cash is a measure of the cash that will be available to our shareholders over time, from our existing business. It is calculated net of the cash needed to service and redeem all outstanding debt, and after deducting committed integration costs. During the first half, it increased by around £400 million, primarily driven by a net £700 million increase through organic growth and £200 million through M&A growth. This equates to long-term free cash growth of 7% in just six months, which more than offset our uses of cash in the period. At £12.5 billion, we have a huge amount of in-force cash to emerge over time, and this means that we can sustainably fund our dividend over the very long-term. And as it continues to grow, it will support us in delivering on our policy of paying a dividend that is sustainable and grows over time. Turning next to resilience. Our resilient Solvency II capital position is enabling us to invest surplus capital into growth opportunities with our shareholder capital coverage ratio of 180%, remaining at the very top-end of our target range even after this investment. Our surplus, prior to investment was broadly flat with the high levels of predictable surplus and management actions, funding our ongoing uses. Our closing surplus of £3.9 billion therefore reflects our active decision to invest around £400 million of surplus capital into growth, which has increased our Group in-force long-term free cash, and will drive future cash and capital generation. And as ever, our reported surplus also reflects the accrual of our Interim dividend. Looking forward, I expect our end of year surplus to be slightly lower, as we continue to invest into growth. Our ability to deliver management actions is a key differentiator for Phoenix, and we continue to demonstrate our capability here, with £412 million of management actions delivered in the first half. This significant ongoing level of management actions reflects our focus on optimizing and enhancing our business. During the first half, the majority of these were from business as usual actions. They included £151 million of asset management actions primarily driven by the dynamic optimization of our liquid credit portfolio, and £157 million of ongoing cost and capital actions. It is also pleasing to see that we continue to deliver integration synergies from our previous acquisitions, such as ReAssure, with £104 million realized in the period. We have invested into enhancing our in-house asset management capability. We have built an expert team of investment professionals, who set the strategic asset allocation, and oversee the performance of our assets. This capability enables us to operate our differentiated strategic partnership model, and partner with the best asset managers in each asset class and geography. abrdn, who manage around half of our customer assets, continue to be a key strategic asset management partner, and playing a significant role in supporting the asset deployment from our new business growth. We are also complementing our partnership approach, by developing our own in-house capabilities. And we remain very focused on integrating ESG into our wider investment decision making, with our recent addition as a signatory to the UK Stewardship Code, a clear statement of intent. As you can see on the right hand side of the slide, we are seeing the benefits of our investment. We are confident that our capabilities will enable us to leverage evolving market dynamics on an ongoing basis. And deliver a repeatable pipeline of management actions, over the very long-term. Looking next in detail at our credit portfolio. As Andy outlined earlier, our strategy is designed to maintain a balanced business mix, with credit risk making up a small proportion of our balance sheet. We therefore maintain a prudent and diversified £34 billion shareholder credit portfolio, which is currently around 13% of our total £269 billion of assets. We are conservative in our sector positioning, with only 2% of our credit portfolio exposed to cyclical sectors, and our portfolio is 99% investment grade. During the first half of the year we have seen more credit rating upgrades than downgrades, and have suffered no defaults, testament to the pro active approach taken by our in-house asset management team. Looking forward, we will continue to manage our portfolio to optimize our risk adjusted returns. Moving now to Growth, Phoenix is now delivering sustainable organic growth, year-in, year-out. The growth in our new business net fund flows is accelerating, through our success in Workplace and BPA. And we now expect Group net fund flows to be positive in 2024 for the first time in Phoenix’s history. As new business inflows offset the legacy outflows, due to our improved proposition and higher customer retention. Our progress is also delivering increased incremental new business long-term cash generation and we are very much on track to deliver our target of £1.5 billion per annum by 2025. I am delighted therefore that we have more than doubled incremental new business long-term cash generation to £885 million in the first half. The contribution from our fee based businesses increased nearly 50% year-on-year to £220 million, primarily due to a strong performance in Workplace. Retirement Solutions remains the largest contributor at £665 million, with an impressive first half in BPA. And whilst I do expect 2023 to be another record year for new business, you shouldn’t expect this first half performance to simply be annualized when looking at the full-year. A lower second half contribution is expected from BPA, reflecting our disciplined approach to capital allocation, in line with our annual investment of around £300 million. Building on the momentum we saw in 2022, our Workplace business has continued to grow strongly in the first half through the Standard Life Brand. This is due to the investment we have made into our enhanced Workplace proposition, which is helping us to both retain our existing schemes, and win new schemes in the market. Our strong retention is enabling us to reduce our outflows and stabilize the inflows from our existing business. We will continue to benefit from the Workplace compounding “flywheel” effect, with new business growth coming from new joiners to our existing schemes, and increased member contributions including salary inflation. On top of that, we are winning new schemes in the market, which will both increase the stock of existing assets and accelerate new inflows. That is why I am delighted with the success we are having in attracting new clients of all sizes. Last year our largest scheme win covered £2 billion of assets, and is expected to transfer in 2024 with a further £1 billion scheme won this year that is expected to transfer in 2025. And neither of these schemes are in our numbers today, so they will benefit future net fund flows and cash generation. We are also quoting on a strong pipeline of opportunities, totaling £3.5 billion of assets, and are confident of winning further new schemes over time. The strength of the Standard Life brand is also helping us to win new business in a competitive BPA market. With £3.2 billion of premiums written in the first half, driving £665 million of new business long-term cash generation, with an improved cash multiple of 3.4x achieved. Our capital strain in the first half was 6% on a post-CMP basis, with our target of 5% remaining very much on track. And this target equates to 3% on a pre-CMP basis and positions us well in a competitive market. Looking forward, we are quoting on a significant pipeline of opportunities and expect a total market of in excess of £40 billion this year. Turning next to IFRS 17. IFRS 17 is a new accounting standard that became effective on 1st January 2023. However, I want to emphasize that this accounting change does not alter the underlying economics of our business. It therefore has no impact on our strategy or dividend, and we will continue to remain focused on delivering cash and capital. I do though want to provide a short update on the impact of IFRS 17 transition for Phoenix. And I will also host an IFRS 17 transition education session for the analysts, following the main presentation, to answer any of the more technical questions. It is important to note that the impact of IFRS 17 is different for Phoenix, due to our history of M&A. As a result of the value accretive transactions we have completed, around 95% of our business has been recognized using the fair value approach. And this results in a lower CSM at transition and increased volatility in our shareholders’ equity. So looking first at our adjusted shareholders’ equity. This was £5.2 billion at the end of 2022, which is 24% higher than under IFRS 4. This is inclusive of a £2 billion CSM, net of tax, which is a significant store of future profits. And importantly, on a gross of tax basis, this grew year-on-year by 7% in 2022. Unadjusted shareholders’ equity is lower under IFRS 17, primarily due to the transfer of items to the CSM, and increased accounting volatility related to our hedging approach and the loss of some prudence that existed under IFRS 4. IFRS 17 re-baselines the level of operating profit we will report. In 2022, our adjusted operating profit has reduced to around £600 million. This is principally due to the well understood transfers of annuity new business profits, assumption changes and management actions to the CSM. There is also a small reduction from items not recognized in operating profit under IFRS 17. Looking to full-year of 2023, I would expect a broadly similar level of annual operating profit. So turning now to our leverage position. Our restated Fitch leverage ratio at the end of 2022 was 25%. This includes the impact of the transition to IFRS 17, which had only a small adverse impact on the ratio. There is a material reduction in the ratio due to the consistent application of the Fitch ratio calculation with others in the industry. This update to our calculation was made in agreement with Fitch and follows our most recent annual review with them. As you can see on the slide, we now include the policyholder’s share of the With-Profits estate, due to its loss absorbency in a stress. Any burn-through risk is covered by that estate first before it impacts shareholders. This is the same approach used by our peers, and so updating it alongside the other IFRS 17 methodology changes, now brings us on a market consistent basis. At the end of 2022, we were at the bottom of our target ratio range of 25-30%, which is a key factor for maintaining our investment grade credit rating. We have also been proactively de-levering our balance sheet over the past few years, with £772 million of debt repaid since the end of 2020. And importantly we have increased our Group in-force long-term free cash to £12.5 billion, which is after the redemption of all of our outstanding debt and the servicing of interest to maturity. We do not see leverage as a constraint to future M&A. To put it in context, £200 million of additional debt is around a one percentage point increase in the Fitch leverage ratio, as at the end of 2022. I remain comfortable with our leverage position and the wider financial flexibility we have available to support our strategy. So to conclude, we are executing on our strategy and delivering on our financial framework, of cash, resilience and growth. We have delivered a strong first half financial performance across our core reporting metrics. And we have clear targets for this year and beyond. All of which support us in delivering on our dividend policy, which is to “pay a dividend that is sustainable and grows over time”. With that, I will now hand you back to Andy for the summary.

Andy Briggs: Thanks, Rakesh. So in summary, Phoenix is successfully executing on its single, strategic focus – helping customers journey to, and through retirement. We do this by leveraging our position as the UK’s largest long-term savings and retirement business, offering a full range of products and services, to support customers through all stages of their savings lifecycle. This market is our sole focus. It’s huge. It’s structurally growing. And this growth is being accelerated by the current economic environment. This is enabling us to deliver strong organic growth, as we leverage our three competitive advantages, of capital efficiency, customer access, and cost efficiency. And we are also confident of executing further, value-accretive, M&A over time with the financial capacity to fund transactions, as and when they emerge. Delivering on our strategy drives our dividend. We offer an extremely attractive yield today, which is sustainably funded, by the resilient cash from our current in-force business, over the very long-term. And will grow over time, both organically, and through M&A. And with that, we will move to questions.

A - Andy Briggs: As a reminder, I've got a little bit of script first just to tell people online. They're keen, they're enthusiastic here. The purpose of this Q&A session is to cover our strategy and the results that we have just presented. We will be hosting an IFRS 17 transition session for the analysts following this, so please save any detailed technical accounting questions for that. Given our agenda today, we’ve also got a stricter time for the Q&A, so around 40 minutes remaining. So I'm – this is going to hurt. I know, but I'm going to have to limit you to two questions each, at least in the first time round. But if we have time, we'll get round for a second round. For those watching on the webinar, please use the Q&A facility there, and we will come to your questions, after we’ve answered those in the room. So you can go now. If you're ready, raise your hand and please just state the institution you are representing as well. Why don't we start here and move across, yes.

Andrew Baker: Great. Thanks so much. Andrew Baker, Citi. So two questions then, both are on leverage actually. So first, are you able to give an update of the first half 2023 Fitch ratio? And I guess within this, on the Fitch ratio, you noted that you've taken a haircut to the policyholder estate; you were able to say how much that – how much that haircut was? And then secondly, your peers, I guess, you've heard several peers that once they get to sort of 30%, 35% Solvency II leverage ratio, they've undertaken debt reduction programs. Just interested I think you're at 37% of the half year, why you guys are different on the Solvency II lens and why you don't see any, I guess, need to take action there and why the Fitch is your primary metric? Thank you.

Andy Briggs: Sure. Okay, so I'll take the second question then get Rakesh to answer the first. So in terms of the second, we use the Fitch methodology as an input. I think what's different with us is firstly, we have a big stock of in-force business with high levels of cash, so £12.5 billion of cash due to come from our in-force business over time. Secondly, we hedge out the major financial risks so that cash is very, very predictable over time. So what I'd say, Andrew is that, we had £4.9 billion of leverage a couple of years ago and 11 point something billion of cash in the business, and we were fine with that level of leverage at that point in time. We've now got £800 million less leverage than that today, but we've got £12.5 billion cash in the in-force business. So Fitch is one input to our considerations, but we do feel comfortable with our current level of leverage. We were comfortable with the level we had before and we don't see that as a constraint. I think the other point I'd draw out is that when we do M&A, it pays back really quickly. So we paid £3.2 billion to buy ReAssure three years ago. We've had £3.7 billion of cash back already. So a less than three-year payback period, £3.3 billion more still to come going forward. So that's also a consideration when we consider leverage from an M&A perspective. I think in terms of the first half, we can't say much. Can we? But I'll let you say, we can't say much.

Rakesh Thakrar: So yes, as you'd expect, we can't say much on the first half. What we have given you is the sensitivity of it and the calculation itself. So we'd expect to be comfortably within the range. So I mean, that's all I can say. So nothing more because it's based on half year. And in terms of the prudency, the haircut that we've taken – we've taken about half of that policyholder estate for prudency?

Andy Briggs: So we'll keep going across this way.

Mandeep Jagpal: Good morning, everyone. Mandeep Jagpal, RBC Capital Markets. Thank you for the presentation and taking my two questions. First one is on the new business cash generation, which was strong over the period. Could you provide any details on your current thinking on how a year-on-year increase in this metric at the full-year will affect dividend growth? And then second question kind of a big picture question. Andy mentioned at the start there, only one in seven DC savers is on track for savings that maintain the current standard of living. What are your current thoughts on how the government could enact policy changes to address this and how could that impact Phoenix in the long run?

Andy Briggs: Sure. Okay. So on the first one, really delighted with the organic growth we delivered in the first half and the fact that we've got new business, long-term cash at £885 million for half a year when what we need to offset the runoff of – of the in-force is £800 million for a whole year was very pleasing. I was also – I was even more delighted to be honest with the net fund flow position and the 72% growth. I struggled to find a peer that was up when I kind of interrogated their results, so delighted with that. Our dividend policy as we pay a dividend that's sustainable and grows over time, that delivery of growth in new business long-term cash and indeed benefits of M&A are key inputs, but the Board makes a dividend decision in March of each year, and it will make that decision based on range of judgments when we get to March and not now, I'm afraid. So on the second question, I mean, ultimately auto-enrolment has been a huge success. If I go back 10 years ago in the UK, we had 10 million people saving for their retirement through workplace pensions. Today, it's 20 million, been a huge success. The challenge is that it's only an 8% contribution, and that isn't going to give you a decent standard of living in retirement. So we think that definitely needs to change. We've actually – one of the things we've done at Phoenix as part of being a purpose-led organization, we created our own think tank called Phoenix Insights, trying to do research into this area. And we're currently doing a piece of work through Phoenix Insights, which will publish shortly, which basically recognizes the current cost of living crisis recognizes that right now it'll be challenging to start increasing those contributions with the cost of living crisis. But what would be the economic conditions in the UK that would need to prevail for it to be a good time to start to do that? Because we do think it's something that needs to happen in time. The other thing that needs to happen is more than 10% need to get advice and support on the journey to and through retirement. And that's the – if you sort of think about the organic growth for Phoenix, we kind of built the BPA business first. We've been number two the last two years. Workplace is going fantastically well, really delighted 64% growth in new business cash there. We're now turning our attention to that retail opportunity, helping those customers consolidate their multiple pension pots, develop a plan through retirement income. But we think that's a great market opportunity generally, and with one in five UK savers being customers of Phoenix Group, particularly attractive for us. Farooq?

Farooq Hanif: Hi there. Farooq Hanif from JPMorgan. Thanks very much. Going back to capacity to do M&A, I mean, you've given some numbers on the percentage points, it sounds like £1.1 billion on leverage. And then you've got surplus, and then it also depends on what you buy as well, I guess it creates some headroom. But what are your thoughts given how profitable you are saying this business is and the cash generation on M&A, what are your thoughts on raising equity again, if you see something that's profitable enough, are you sort of happy to do that given the economics? And then question two is, I know you don't care about IFRS, but IFRS volatility is something that investors will look at, are you able to within your hedging framework, reduce that volatility and also maintain your hedging philosophy? Or is that something that's just going to stay with us. Thanks.

Andy Briggs: Great. So I'll let Rakesh take the second of those. In terms of the first, so we have three core criteria, as I've said before, very consistently for M&A. That the first is that it's value accretive. And so we're looking very hard at the financials, the cash flows and it's value accretive. Secondly that it supports cash generation and our dividend. And thirdly, we want to maintain our investment grade credit ratings. Those are the three criteria. So in the context of that, we would consider raising equity, but obviously with equity prices being lower, effectively the returns on a deal would need to be sufficiently attractive to justify it. So we wouldn't rule it out. And it would be a very tough objective assessment of what are the cash flows in the business we're buying, what can we get them to as we drive out cost and capital synergies, what are we raising? What's the cost of what we're raising in terms of funding to do the deal? What's the economics of that and the return on that capital? So it'll be a very tough objective assessment depending on the nature of a deal and the pricing of a deal, it's definitely possible that we could use equity as part of it. Do you want to pick up on the second one?

Rakesh Thakrar: Yes. So on the IFRS volatility, so I mean, first thing I would say, our focus has always been to manage cash and capital that ultimately protects the dividend, the short-term and also our hedging strategies ensures it protects the long-term free cash in the long-term as well. And that means the dividend is safe. Now in relation to the IFRS volatility, we always saw this under IFRS 4 and what's happening under IFRS 17 is probably just increased slightly because essentially the CSM is insensitive to interest rates and therefore you're getting that little bit of additional volatility coming through that. Now our focus will continue to be on cash and capital, but I will continue to do, review my hedging and to make sure it's optimal for the business as a whole. So that will continue, but the focus continues to be on cash and capital.

Andy Briggs: Andy?

Andrew Sinclair: Thanks. It's Andy Sinclair from Bank of America. First one, just digging further, I guess, on leverage. Just want to check how you think about Solvency II tiering capacity constraints, and if that influences your thought on debt issuance. I suppose if you went to the top-end of your debt leverage range, you'd have some non-qualifying debts under Solvency II, do you care about that and does that influence thoughts of senior versus subordinated debt issuance? And then second question was just on consumer duty. Just wonder if you can give us a little bit of color. What does that mean for Phoenix for your heritage book when it comes in? And do you see any changes on charges on cash or anything really? Thanks.

Andy Briggs: Great. Okay. So I'll take the second and get Rakesh to take the first. So on the second, I mean, we are supportive of consumer duty in the direction of travel. Because the essence of it is basically we're focusing in on getting the right outcome for the customer as a purpose-led organization as a company that as a single strategic focus helping customers journey to and through retirement, we want to focus on those outcomes. So like others in the market, what we've done is we've enacted consumer duty around our open product lines, and we're now working on enacting consumer duty and implementing consumer duty on our closed product lines with a deadline of July of next year. We've had an ongoing on focus on this in Phoenix over many years. So as we transform businesses, we buy and close products and migrate them to more modern technology, give those customers better experience and outcomes, drive the cost and capital synergies. We have shared a fair bit of that benefit with customers over time. So we kept charges in different areas, would be one good example of that. So we're not expecting the impact on our book to be material in terms of the scheme of the financials of Phoenix Group overall, but we're still working through – working through that project over the next 10 months. Rakesh, do you want to pick up on the tiering question?

Rakesh Thakrar: Yes. Sure, Andy. So we would always look at all the possible options and tiering is one area we continue to look at in the context of M&A, which is why I've always said, every time you've asked me this question, it always depends on the company that you are buying because that capital structure will determine on how you best finance that deal. So in the context of M&A, if you are acquiring a company that's got no debt, you effectively got more capacity to do it. So even if you do, effectively utilize the headroom that we have currently, which is still quite big, you still have the ability if you're buying company that's got no debt at all to utilize that headroom and to make it the most efficient capital structure, which is something I've always been saying. And if it meant that, in that context, if the cache is really quick like we've seen in ReAssure where you get it back in three years as we've just shown and demonstrated with that, then why wouldn't you also have – having senior as an option as part of that.

Andrew Sinclair: Thank you very much.

Andy Briggs: Steven?

Steven Haywood: Good morning, Steven Hay from HSBC. Two questions. Following on from the consumer duty one, related to your surprise announcement to go positive net fund flows in 2024. Do you see yourself retaining more customers going forwards? And is this related to the Consumer Duty Act or is it just how well you're doing on the open business side of things? Secondly, you mentioned on the BPA that you are looking at more efficient capital ways to enhance this business, I guess. Could you give a bit more detail in terms of what you could possibly do, and are you thinking about literally doubling the amount of BPA business you can do by adding on another £300 million of third-party capital to your already £300 million of own capital going forward? Thank you.

Andy Briggs: So I'll let Rakesh take the second of those. In terms of the first, I mean, yes, I do think getting Phoenix Group, what people would've historically seen as a closed book consolidator to be net fund flow positive next year is a huge step for us. And I'm excited by it and I'm – really am genuinely delighted with how our organic growth is coming along, that's not driven by consumer duty. Our strategy helping customers journey to and through retirement is the right strategy for our business. It's also entirely consistent with consumer duty. But we were going in that direction anyway. And again just the risk of repeating that there's basically that £150 billion to £200 billion of net flow – sorry, of gross inflows across the market each year that the growth in the market, £40 billion to £50 billion of that is Workplace, and obviously that's going exceptionally well for us. £30 billion to £60 billion of it is BPA, and again, very happy with our performance there. £80 billion to £100 billion is in what we call the retail space. So that's helping these customers who move jobs and therefore have multiple workplace pension pots to think about consolidating those together and journeying through into retirement income. So at the moment, our business is roughly circa £20 billion of inflows and £20 billion of outflows a year, give or take a bit. £7 billion to £9 billion of that £20 odd billion of outflows is transfers to other pension providers. So effectively we're a net kind of loser there at the moment because we haven't had an offer for our customers there, we haven't focused on that. So that market opportunity when one in five of those customers is customers of Phoenix Group, when only 10% are getting advice on the journey to and through retirement, we think that's a substantial opportunity to be the one they turn to and engage with to think about bringing those pension pots together. And that's what we're now starting to turn our attention to. Don't expect that to have an impact on the numbers this year. We're still building the capabilities we need to go after that. Things like the new Standard Life individual annuity is a good example of building those capabilities. But as we get into 2024, I'd expect to start to see some benefit from that. Rakesh, do you want to…

Rakesh Thakrar: Yes. Sure. So on the BPA more efficient capital ways. So this is reflecting what we are doing by setting up this Bermudan reinsurer. We just started on this, so we just – this is very, very early days. But the intention here is potentially to look at generating more value internally from the annuities that we have within the group, currently that are not necessarily getting the best return. And this is outside of the UK currently. And then we would look to access, if we can, the third-party capitals. What this will enable us to do is essentially bring that capital to the UK via and really access the fact that we, in line with our purpose of helping people secure a life of possibilities, get those customers who are looking, the corporates who are looking to do a BPA transaction and help them do that over time. What it will mean is that, we'll be able to do more deals, but what it won't mean that we'll be spending more of our own money. We're still disciplined in our own £300 million, but essentially we're facilitating additional deals by the use of getting more capital in and we'll be able to also be earning fees from that in a capital-light way, which is essentially what we're trying – which will help us in our strategy.

Steven Haywood: Thank you.

Andy Briggs: Keep going on.

Abid Hussain: Good morning. Abid Hussain from Panmure Gordon. Two follow-up questions, if I can. One on M&A capacity, just wondering how much firepower you have for M&A as opposed to organic growth without raising equity capital. And the second question is also follow-up on the BPA strain. I'm just wondering if it's possible to get down to the 5% new business strain before 2025 or is it largely dependent on when the Bermudan reinsurer comes online? Thank you.

Andy Briggs: Probably both for you Rakesh.

Rakesh Thakrar: So on the first question, I mean, it's similar, is going to be on the capital structure of the – whatever we're acquiring to and understand how much you need before going to equity. You need to understand the size of the deal that you're doing and the capital structure before we can actually determine whether it is you need equity to do that deal. But in any deal that we do that the returns have got to be attractive, right? That's the first and foremost. And you've seen ReAssure, a lot of it was through equity and you can see the attractiveness of that deal, but a lot depends on the size and the capital structure to determine, so it's a difficult to give us precise number on that. But certainly a small deal bit like the one we did at the Sun Life of Canada, the UK business, you wouldn't need any equity for that as a guide. So it depends on – the bigger you go, it's going to depend on the capital structure. And then on the strain and can we get down to 5%? So we're currently at 6% on a post-CMP basis, and then the market is pretty competitive, but we are on track to get down to 5% and there's still – lots we got to do on the reinsurance side and also on our credit modeling as well that would improve that. And what the opportunity, what Bermuda gives us is some additional fees. Most of it will be actually from the work that we're doing on the reinsurance side and on the credit modeling side.

Andy Briggs: It's pretty worth just adding. We did less quota share reinsurance in the first half than we did through last year. We had the Mitchells & Butlers and the Chubb schemes both landed, so they were both over a billion. They both landed in June. That gives you less time to work through some of those elements here.

Andreas van Embden: Andreas van Embden from Peel Hunt. Just a quick question about owned funds. If I look at the unrestricted Tier 1 equity, it's come down to around £4.5 billion this half year. It's been coming down for some time. I just wonder what are the drivers of that decline and are you comfortable with the level? Thank you.

Rakesh Thakrar: Yes. So the Tier 1 has been coming down, but ultimately, as we've said, our focus has always been on managing the cash and capital position. So what we do in that context is manage the surplus above the SCR. So we ensure we're always protecting that. What that does? It protects the cash and also protects the dividend. That's ultimately what that means. Therefore, the impact of that is that, as SCR moves your Tier 1 funds, owned funds will also move, but we accept that trade off because what it's doing is protecting our cash today and it also protects the cash over the very long-term.

Andreas van Embden: Yes. What's the key driver of the decline is? Are those the hedging losses, less the dividend or what's driving that? It's the organic capital generation is quite solid, including the management action. So it should offset each other?

Rakesh Thakrar: Yes. So most of it is due to the hedging on the interest rates.

Andrew Crean: Good morning. It's Andrew Crean from Autonomous. A couple of questions. Firstly, you gather confidence on your dividend from your long-term cash generation, your new business cash generation, but you have to pay the dividend now and these cash generation figures that go long into the future. And indeed, I don't think your IFRS operating profits will cover your dividend this year. Could you therefore give us the present value of the long-term cash generation and the new business profit cash generation so that we can pair apples-with-apples rather than with pears? And then secondly, and along the same theme, value – the net flows figure is all very well, but you've got some very high margin flows coming off and some capital light low margins coming on. Could you give us a view as to what the – whether your value net flows, what they are, and whether they will be positive on your target range?

Andy Briggs: Sure. So I'll take both of those, Andrew. Thank you. So we run the business on cash and capital because that is what pays the dividend. So we have two key focuses there. One is growing the stock of long-term cash, where we've grown, as Rakesh said, basically that the impact of new business in M&A was a 7% increase in six months on that stock from the first half of the year, we're now up at £12.5 billion. But then, as you rightly say, we also need to have the cash today to pay the dividend as well. And that's why we focus on the Solvency II surplus and our target range of 140% to 180%, and we're at 180%. So that's our focus. We don't run the business by IFRS because it isn't cash and capital and we are focused on being able to pay the dividend in the short-term and the longer-term. Having said that, I do hear you and we are going to give some thought to our financial framework and disclosures for March. We decided not to do it now because we've got IFRS 17 coming in. We thought we'd kind of deal with that and present IFRS 17. But I do hear you that effectively presenting a stock of undiscounted cash is a financial framework you'd associate with a closed book player. For an open book player, investors want to see particularly the progression of ongoing flow measures over time. So I hear you. It's something we'll leave some thought over the next six months. And your point is understood and well-made. On the high and low flows. So let me try and explain this. So basically, we have circa £20 billion of inflows and just over £20 billion of outflows each year. The outflows basically are taking about £800 million of cash out of the business each year. The inflows last year added £1.2 billion. So what's happening is the new business is actually more profitable than the outflow. And there's two reasons for that. One is that the BPA business is particularly profitable, comes at very high levels of cash. And the second is that our Workplace business is very profitable because we're leveraging the infrastructure. So our philosophy of enhance our operating model, that I talked about, our strategic priority, that's about us moving to a single best way of doing things, leveraging modern technology. For example, on the customer operations side, we partner with TCS on the BaNCS platform. So as a result of that, we have an absolutely fantastic rate card with them for Workplace business. So Workplace is generally thinner margin, but because we're so much lower cost, our Workplace business comes at attractive margins, hence the 64%. So if you see there, our flows were up 18%, the new business element of flows were up 18% in Workplace. That's the new stuff rather than the inflows or the outflows, [indiscernible] slides, but the new business long-term cash was up 64%. Now that's basically leveraging those flows against that low, relatively fixed cost base, yes. And that's why we are growing in cash terms, but we want to get to be growing in net fund flow terms, but the new stuff coming on is coming on a higher margin.

Andrew Crean: Can I just press you on that? You said £800 million is coming off and £1.2 billion is going on in value. Is the £1.2 billion – what's the present value of that? Because the £800 million is today coming off.

Andy Briggs: Yes. So the – but they're all kind of undiscounted cash numbers. Yes, so the stock of cash is increasing by that difference, but again, we hear you and recognize that we need to give some thought to what is the right financial framework to best. And I get this from buy side investors, that they like the sound of what we're doing strategically. But they're not – they find it harder to compare us with others to see how that's going. So we hear that challenge and we are going to reflect hard on that over the months ahead, yes.

Larissa van Deventer: Hi. Larissa van Deventer from Barclays. Just to get back to the M&A capacity without raising equity at a simplistic level. Can we simply take shareholder cash and add the 5% leverage headroom that you have? In which case the question becomes, can you give us some clarity on what shareholder cash would be, of course, then minus Rakesh’s buffer? And the second question is at what point would you consider buybacks?

Andy Briggs: Okay. So I will take the second question and get Rakesh to take the first. So the way to think about this is, is that we have a rigorous capital allocation framework at Phoenix where we treat every pound of shareholder capital very, very seriously. We're focused on long-term value, and we're exploring, where we can deploy that every pound of capital to get the best return for shareholders over the long-term. And so the share buyback would be part of our toolkit, and we would consider that in a situation where we were above our target solvency range. So we were above 180%, and where we felt that we didn't have higher value opportunities to spend that money in terms of driving higher levels of returns for shareholders compared to share buyback. So at the moment, we're at the top of the range, but we're not above the top of the range, and we do feel pretty bullish about the opportunities to deploy capital at very attractive returns. And that's what we're doing. That's why our results are so strong today, but it's absolutely part of the toolkit, and those will be the circumstances in which we would consider deploying it in that way. Rakesh, do you want to pick up the first?

Rakesh Thakrar: Yes. So let me start with our own cash flow. So we've got about £700 million of group holding company cash. I said I want hold somewhere in the region of £300 million to £400 million. So give or take, that's at least £300 million available to invest in growth opportunities. Looking at the potential of current to leverage ratio on a – just take the Fitch, Fitch basis, we're currently at 25%, and we've given the sensitivities there on how much each one – each 1 percentage point is worth in terms of additional debt. So 1% is roughly around £200 million. Then it comes the risk of repeating myself, again, I do apologize, but it all comes back to the company that – the target structure that we are acquiring. And that's where we've already spoken about potentially in consideration of whether it's senior, whether it's capital debt as well and how quickly the cash flows come out. So if it's something like ReAssure, you'll have a different capital structure than something that's over a very long time. So it's a combination of all those factors. I can't give you an exact figure, but using those data points, I think you can work out the potential that we can. So again, similar to a deal that we've just completed, the Sun Life of Canada easily, that it can be done on our own resources as they get bigger, larger, if they're getting towards the £2 billion mark, clearly that's going to have a different capital structure.

Larissa van Deventer: Just to clarify, it's a full-year, correct me if I'm wrong, but I think you see capacity for 1.6. It sounds that currently it's about 1.4, is that correct – or 1.3?

Rakesh Thakrar: Larissa, if you do the same calculation, that's what you would get to, yes.

Larissa van Deventer: Thank you.

Ashik Musaddi: Yes. Thank you. Good morning, Andy. Good morning, Rakesh. This is Ashik Musaddi from Morgan Stanley. Just a couple of questions. So I'm sorry, going back to leverage. Do you think that you need a plan B on leverage because your dependence on Fitch is increased materially now? Because I mean, on IFRS basis, on Solvency II basis, your leverage ratio has diverged quite a lot versus your peers, and those look pretty high, 44% IFRS, 37% Solvency II. Yes, Fitch is giving you the benefit for a state and for RT1, but probably estate only take the burn through off with profit not for annuity. So do you see that you need a plan B for leverage just in case Fitch says the other way at some point? Maybe not now, one-year, two-year, five-year down the line. So that would be my first one. And secondly, there was a chart that shows that ReAssure you have released £3.7 billion cash over three years. So that's £1.2 billion a year. And going forward, you'll be releasing £3.3 billion. So that's over say 15 years. So that's £200 million a year. So does that mean that cash will fall off by about 1 billion at some point, or am I missing anything in those numbers? Because if the cash falls off versus your £1.4 billion guidance at the moment, then it's a big number. So how do we think about that? Thank you.

Andy Briggs: So I'll take the first and let Rakesh take the second. So we don't think we need a plan B on leverage. We had £4.9 billion a couple of years ago with 11 point something billion of cash in the business, and we were not uncomfortable at that level. We've reduced it by £800 million over the last couple of years. And yet the cash in the in-force business is now £12.5 billion. So we're not uncomfortable with the level of leverage we have. The Fitch ratio is one input to it. And I just reiterate that our business has substantial amounts of in-force cash. So that £12.5 billion is after paying off debt, and it's after the interest on that debt until maturity, there's still £12.5 billion left. Our annual cost of shareholder dividend is £520 million. So that's the volume we have. And then we do hedge out the major financial risks. And therefore, that cash generation is very predictable. So I do recognize it's different to others. I think our business model is different to others, and it justifies it, and we're comfortable with it. I think in particular, the reality is, and it sort of comes to part of your second question that when we do M&A, because it pays back that quickly, then you have the position where you can and you look at the profile of debt maturities over time, you can get back quickly when you do M&A because of how highly cash generative it is. Do you want to pick up the second question, Rakesh?

Rakesh Thakrar: Yes. Thank you, Andy. So looking at that ReAssure transaction, we said when we did the transaction, we'll deliver £7 billion of cash over the lifetime of it. We've delivered £3.7 billion, a lot of that is through the integration synergies that we've delivered. Again in the first half, we did another over 100 million on integration synergies, primarily on ReAssure, which helps us with that cash. So yes, there's £3.3 billion left to go, but I wouldn't be expecting that to be over 15 years. It'll be a lot shorter than that because it is actually closed to new business. So it's not that long in terms of duration. I mean, in terms of the bigger picture, what I would say is that, we deliver as you actually know, we've already talked about £800 million of cash every year. Yes. And then on top of that, we now have a pipeline of management actions that we can deliver over the very, very long-term. And we can already see the BAU management actions, we've delivered this year is quite substantial. And I've already spoken about that in my presentation. So when you add that on, so you've got the capability to do, and you've got £800 million, which is growing because we are writing new business. We've got the capability to drive management actions each year, and we've got £1.7 billion of free surplus currently sitting in the life companies. And we've got the potential of more in terms of the management actions we can do. I'm not concerned.

Andy Briggs: There's certainly no billion pound drop off. Please don't worry. I mean, we're also – ultimately we're a holding company with a number of life companies underneath, and we're kind of in many ways indifferent as to which one we get the cash generation out. We're putting the new BPA business into one legal entity, so we're indifferent across. And of course, what we're also planning in the fourth quarter of this year is we're going to bring four of those life companies together through what will be the largest ever part seven in the market. So 7 million customers coming together and a LifeCo level that will also be positive in terms of the financial flexibility and diversification at our LifeCo level. We've got that benefit at group level already, but LifeCo level, that will also be helpful.

Ashik Musaddi: Thank you.

Andy Briggs: Dom?

Dominic O'Mahony: Cheers. Dominic O'Mahony, BNP Paribas Exane. Two questions. Can I just start on the new fee business, fabulous growth, 49% growth in the long-term cash generation from that. Could you give us a sense of the breakdown of the drivers? So I'm thinking volumes of new business versus revenue margin versus cost margin versus investment performance. And I'm just – I'm curious as to whether your projections are actually sensitive to interest rates, whether a higher interest rate environment increases expected investment return or whether actually the way that you project it is indifferent to that. Another slightly detailed complicated question. So I'm looking at Page 41 on the appendix. The group cash flow much stronger than I was expecting. There's £266 million of collateral cash and hedge closeouts. Could you just explain what's going on here and how you run the hedges? I wasn't expecting the hedges would run from the center. I thought that might be run from the entities paying the cash flows. And it's quite a big swing. I mean, it's almost as big as the buffer. So is this very, very much a one-off? Or actually, is it something where actually we could see swings in the future? Thank you.

Andy Briggs: I think they're both for you, particularly when we get to Page 41 in the appendix, that's definitely for you.

Rakesh Thakrar: So let me do that second one first. So in the group cash flow, you have seen the benefit. If you recall, last year we saw an outflow on the collateral side. But what this is actually doing is effectively hedging the debt, the foreign denominated debt that we have at the group level. So you're absolutely right, all the hedging – interest rate hedging, equity hedging, other than in the context of a target M&A, all that hedging is done in the underlying companies. What's being done here is the currency hedging on the debt where we are not – we are just hedging both the principle and also the future interest payments to protect ourselves. I would hope going forward it's stable on a – going forward. In terms of your first question. And your concern is around interest rates, as you know, we hedge a lot of the interest rate exposure, which also would be in relation to this business as well. So anything that impacts the shareholder or the owned funds, we would be protecting ourselves on that interest rates element of it. I mean, in terms of different margins, clearly, we don't quote on those margins. But as the asset values move around, the margins will also change. And Andy has already spoken about the benefit of the cost we get with our TCS deal in terms of our Workplace schemes. You can see that that cost is pretty much fixed and it's protected from a number of external headwinds. So overall, we're pretty happy with the business that we're writing.

Dominic O'Mahony: That's very helpful. Thank you. Could I just clarify the point – my point on rates, so I wasn't clear, what I meant was whether the projected investment return for the customers over time, whether that's sensitive to the economic environment, I know some other – certainly insolvency, when rates go up, you expect higher investment returns. I'm wondering if that's the way that you project your cash flows, or whether actually you should just start off with a – I don’t know an assumption about how their equity performance will be, which is consistent, whatever the interest rate environment.

Rakesh Thakrar: Okay. So I understand your question, yes. So what we assume is based on the – when the business is written, we effectively then assume what we think the long-term returns are on that underlying business. And we take a long-term view and estimate it on that basis. Clearly things will change by the point of time it's written, we estimate, okay, this is – this business written here, we think the longer term outlook is X and that's how it's projected.

Andy Briggs: So in sort of simple summary, strong growth in the – I mean, it's a simple business. You need to grow your funds. So we've had strong growth in funds benefiting from not having the outflows, we're retaining existing schemes, holding the revenue margin and then keeping costs broadly flat is what's gearing up the profits, basically, yes. And that's the kind of headline of what's going on. So look, I'm conscious we're almost out of time, but I do want to give Riya and Asim a chance for, and I think we'll just have to be quicker in our answers, yes.

Riya Shah: Thanks. Riya Shah, Deutsche Bank. Firstly on the cash generation, how should we be thinking about management actions going forwards? Or put another way, if there was no M&A, how should we think about management actions at BAU levels around £300 million out of £900 million, say a simplified way of thinking about it? And then secondly, around the incremental cash generation from new business, the £220 million, which came from everything apart from the BPA. Is it okay if we annualize that for the full-year, or is there anything that would drive that up or down in the second half?

Andy Briggs: Yes. Okay. So I'll take both of those. So on the first one, obviously as we're still integrating businesses, but also still optimizing what we have, we have this high level of management actions for a decent period of time. And as we do further M&A, it just adds more into that. But what we've been looking to do is build out Phoenix asset management, our in-house asset management capability, as Rakesh said. And that in particular means that we will continue because markets are dynamic, will continue to have opportunities. So this year for example, we moved on the first half, we moved just over 1 billion of assets from the UK to the U.S. and after the cross currency swap for the same credit rating of assets, we had a material yield uplift because the market dynamics were such. Another period of time, it might be the way around and we can get that yield uplift and ultimately because we're then to hold to maturity, you get the benefit of that. So any way to think about it is to say that we pointed out all the management actions about £150 million in the first half was down to asset management. And that might not be a bad way to think about what the long-term would be. I mean, there'll be other factors at play and so on and so forth. And that's something where, I think most people think the management actions dry up at some point, we are really confident that with the capabilities we now build, they will carry on into the very long-term. In terms of your second question and the £220 million. So there is a factor in the first half, which is the Workplace salary increases. Generally most companies do salary increases in the first half of the year. So that's a driver that means Workplace net fund flows and new business cash tends to be more half year orientated. And so I would say, bear that in mind when you're thinking about predicting to the full-year. And finally, Nasib?

Nasib Ahmed: Nasib Ahmed from UBS. So firstly on the retail advice proposition, what are you thinking exactly there? Are you trying to recruit more advisors and how is that different to the business that you sold to abrdn? Secondly on the LifeCo surplus, that reduced by about £600 million, there's a £300 million other in that. The drivers of that £300 million similar to what you've presented on Slide 41. And then what uplift do you expect from the part sevens on the LifeCo surplus in Q4? Thanks.

Andy Briggs: Okay. So I'll take the first and Rakesh will take the second. On the first on the retail advice, what we're basically doing is, is two things. We already have a telephony guidance team of about 80 people, and we're building that, and it tends to be reactive at the moment. We want to make it more proactive. And then we are building an in-house salary-based, no bonus-based, salary-based advisory Salesforce capability for those of our customers that need advice. What we sold to abrdn was basically the insurance links, so thinking sort of SIP and type insurance type links that backed things that were already on their platform. So it was kind of virtually zero margin for us, and it was an exceptionally complicated operating model between ourselves and abrdn. So abrdn have a strong platform that they promote in the market, advisor platform and their team of advisors, we were providing the insurance wrapper in support of that on a pretty much sort of zero margin basis. That was all about simplifying the operating model between us and just taking out complexity rather than anything else, and it just makes it easier for abrdn and for ourselves.

Rakesh Thakrar: Yes. So on the LifeCo free surplus, the other £300 million. I think they're broadly the same items as what you can see in the main [indiscernible], as I described earlier. So they will include the fact that we created a Irish entity for Brexit, again, for our policyholders that primarily reside in Phoenix Life and ReAssure, so that had a – the other strain of £0.1 billion also got the investment in growth, which is coming through from there as well of 0.1. And then there's other regulatory projects to make up the balance. So it's broadly the same as the walk you get in the [indiscernible].

Andy Briggs: Fantastic. Well, look – sorry that was a little bit more rush, and I really do thank you for not asking detailed technical accounting IFRS 17 questions. That was brilliant. Much appreciated. So what we're going to do is, we're going to take a – that sort of the end of the event for the webcam side of things and we’re going to take a 10-minute coffee break now, refreshment break and then we’ll come and Rakesh will lead you through a few slides with a bit more detail around the IFRS 17 transition together with a detailed Q&A on that topic. So we will come back in for the half past, yes. Thanks very much.