Perfect. We're live and welcome to M&G's 2026 half-year results.

Welcome back after summer. It's a very good set of results.

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

Thank you. Good morning, and welcome to M&G's 2026 half-year results.

It is a pleasure to be here with you today. In the first six months of the year, we have made great progress on our strategy.

Despite a volatile macro environment, we delivered good net inflows from open business and strong profit growth. I am excited to see how, day by day, our vision for M&G is translating into operational and financial delivery.

Let me share with you the main highlights of the year so far. In 2023, we set three strategic priorities for M&G.

First, we focused on financial strength and simplification to set up M&G for long-term success. Now, we are delivering growth.

2025 was a good year for us, and this strong momentum continued into 2026. Operating profit of £435 million is our best half result since listing in 2019.

It is up 15% year-on-year, thanks to a 24% increase in asset management and double-digit growth in PruFund. Our strategic pivot is paying off, with high-quality, capital-light earnings now representing 80% of total earnings.

They will continue to grow, thanks to the success of our With-Profits offering. Our new With-Profits BPA, called BPA Plus, is a prime example of this.

Since its launch in February, we have completed £1.7 billion of sales, already improving on last year's total annuity volumes. Whilst driving innovation in Life, we continue to deliver strong asset management performance, with £2.2 billion net inflows in high-value solutions across public and private markets.

As we have grown the business, we have also improved our profitability. In the first six months of the year, our asset management cost-to-income ratio reduced by two percentage points to 73%.

We expect further improvements in operating leverage as we continue to transform M&G. We have delivered over £250 million in savings since 2023, and will go further.

We continue to simplify our business and free up capacity that we reinvest in products and services supporting long-term growth. Let's now review our financial targets.

Here, we continue to make steady progress as we reached the halfway point to our 2027 targets. Our commitments to shareholders is clear: to deliver strong capital generation, to improve the efficiency of our business, and to drive sustainable earnings growth.

We are delivering. Capital generation is on track to achieve the £2.7 billion cumulative target.

Our cost-to-income ratio improved to 73%. We achieved record operating profit of £435 million, up 15% year-on-year.

In March, I told you that 2025 was a year of foundation building for M&G, as we added distribution, products, and investment capabilities. Now, we're seeing the benefits come through.

We are on track to deliver low-double-digit profit growth this year as we continue to experience strong momentum with clients across the group. The reason that I'm confident we will continue to deliver is because we have a clear strategy and the right business model to win.

Our ambition is to be Europe's leading integrated asset manager. To achieve it, we will scale across both Asset Management and Life, with the growth of one segment reinforcing and compounding the growth of the other.

Life gives Asset Management the scale and long-term capital it needs to develop high-quality investment capabilities. In return, Life benefits from this expertise, with access to alternative assets that are essential to back its core propositions, including PruFund and bulk purchase annuities.

The balanced and synergistic nature of this model is reinforced by the With-Profits Fund, which attracts insurance assets in a capital-light way with limited shareholder balance sheet exposure. A real competitive advantage.

Another important differentiator for M&G is our strategic partnership with Dai-ichi Life, one that builds on and leverages our business model. Like us, Dai-ichi also believes in the powerful combination of asset management and life.

Fully understanding the value of M&G, Dai-ichi decided to invest in our group. Over the past year, they have become our largest shareholder, with a 15.7% position.

I'm delighted by the strength of our partnership, and to announce that senior Dai-ichi executive, Hitoshi Yamaguchi, has joined our Board of Directors, effective today. He brings more than three decades of leadership experience, spanning international insurance and finance.

By becoming Dai-ichi's preferred asset manager for Europe, we have gained access to a second large balance sheet, which has already allocated over £1 billion to our investment solutions. At the same time, we're actively exploring a number of joint business opportunities across Asset Management and Life, including product co-development and distribution.

Having covered the group highlights, I will now move on to our segments, starting with Asset Management. I am very proud of the progress we have made in our asset management business.

Over the last three years, assets under management have grown steadily, increasing by 17% to £356 billion. We have improved our diversification, becoming less reliant on our internal client and on the UK market.

Over the same period, external assets have increased by 29% to £189 billion, with our international business increasing even faster by more than 40% and now accounting for nearly 60% of total external assets. We also remain disciplined on costs, translating higher volumes into better operating leverage.

The cost-to-income ratio reduced to 73%, and fee-related earnings increased by 45%. The outlook is bright.

New business momentum remains strong, with net inflows of £1 billion in July alone. With good client demand, a £7.8 billion capital queue in private markets, and new business from Dai-ichi, we are confident that we will continue to drive profitable growth in Asset Management.

Another reason that supports my confidence is the quality of our flows. Net inflows of £2.2 billion in H1 correspond to £13 million in annualized net new revenues.

This proves that our focus on high-margin and high-value solutions is delivering. Both our private and public markets teams achieved good results.

Within private markets, client appetites for structured credit remained very strong, and we saw renewed interest in real estate. Infrastructure is another priority area for our clients, where we have strengthened our leadership team.

Within public markets, equities continued to outperform thanks to great investment performance and a compelling offering across global, European, and Asian strategies. When looking at flows from a client perspective, you see a similarly positive picture.

Firstly, we delivered £1.1 billion of net inflows in high-margin wholesale solutions. Secondly, we achieved net inflows in the UK institutional market for the second consecutive period, an important milestone as we turn around this segment.

While the UK remains a mature market, we continue to innovate. Later this month, we will launch our new CDI Plus proposition, an innovative insurance-backed solution designed to optimize the investment and hedging strategy of DB pension schemes in run-on.

Finally, we achieved net inflows with international institutional clients for a fourth year in a row. Europe has historically been the primary driver of our expansion, but now we have added new engines for growth, establishing strategic partnerships with high-caliber institutions across Asia and North America, as you can see on this page.

As mentioned earlier, I am very pleased with the quality of the performance of our asset management business, which gives me real confidence in its future. Let's now move to our Life segment.

Here, I want to start by reiterating why Life is now a core driver of M&G's capital-light growth. From this year, nearly all our new business in Life is being written by the With-Profits Fund.

This means that we are gathering assets in a way that is capital-light for shareholders and that carries limited risk and balance sheet exposure. We expect to attract at least £50 billion to the group by 2030 through these With-Profits solutions.

The chart in the middle of this slide gives you a rough indication of the breakdown, with PruFund and the recently launched BPA Plus driving the bulk of the volumes. These assets will generate at least £100 million of annual operating profit by 2030, emerging across Life and Asset Management.

While offering great shareholder outcomes, the With-Profits Fund also delivers superior client outcomes. Our new BPA Plus has been a great success since its launch six months ago, and with good reason.

Entering into a BPA transaction is the most important decision that pension trustees can make. It influences the lives of thousands of people for decades to come.

When dealing with the With-Profits Fund, trustees know that their members are protected by one of the best capitalized insurance companies in Europe, a mutual that has put client interests at the heart of everything it does for over 175 years. They are getting a great deal, too.

The low cost of capital of the With-Profits Fund makes its pricing attractive. If the fund achieves good investment returns, it shares them with customers, declaring a bonus on top of their guaranteed income.

You can see why our BPA Plus has a real edge in the UK BPA market. We expect to scale our sales at least by 50% this year, remaining disciplined on pricing and to achieve our target volumes of £3 billion to £4 billion in 2027.

As we scale, we support our growth in Asset Management, in particular, thanks to the significant allocation of BPAs to private markets. Within Life, we are also making good progress on our retail strategy.

Here, we have two core objectives to drive sales: first, to improve the distribution of PruFund, and secondly, to broaden our proposition with other investments solutions. From a distribution perspective, we are pleased to have launched PruFund on Scottish Widows' platform.

We will add a second FNZ platform later this year. From a product perspective, last summer, we launched our retail fixed-term annuity, which has generated over £100 million of net inflows in the first 12 months.

A good start. In February, we declared our first bonus for this product, giving customers an uplift of an extra 45 basis points to their investments on top of their guaranteed returns.

Again, clear evidence of the value delivered by our With-Profits solutions. Our sales in the first half reflect this positive momentum.

When combining PruFund and fixed-term annuities, our retail net flows improved by over £500 million year-on-year. Looking ahead, we expect PruFund to deliver improved inflows in the second half, and are encouraged by the positive market reaction to our launch on the Scottish Widows platform.

Before handing over to Kathryn, I will briefly cover our group transformation. In March, we completed the first phase of our transformation program, achieving £250 million of savings.

There continue to be exciting opportunities ahead as we explore ways to make our business simpler and more scalable to deliver improved customer outcomes and long-term growth. AI plays a key role on this journey, improving personal productivity and transforming end-to-end processes.

It changes how we serve our clients, how we operate, and how we grow. On this slide, you can see some of the initiatives we are working on.

Our advisers are now spending less time on admin and more time with the customers. We are faster and more accurate when pricing BPA new business, answering RFPs from institutional clients, or addressing customer needs.

Our research and asset sourcing teams have reduced their cycle times without compromising on quality. The core objective is always the same: to deliver a better customer experience, improve process efficiency, and free up resources which are redeployed on high-value activities that drive growth.

To sum up: We have had a good first half, with record operating profits, strong flows in Asset Management, and new product launches in Life. As we grow, we are making M&G more diversified, resilient, and capital-light.

Through cost discipline and business transformation, we are also freeing up resources to support our long-term ambition. We are delivering on our targets and are confident we will sustain this positive momentum in the second half.

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

Thanks Andrea, and good morning, everyone. I'll now take you through the details of our H1 results, which show steady momentum across the group and good progress against our targets.

Covering first the key highlights. We delivered £2.4 billion of net flows from open business, an increase of £300 million year-on-year.

In Asset Management, we continued to grow across both our wholesale and institutional channels, despite the volatile macro environment. In Life, flows improved meaningfully on the back of higher annuities and PruFund sales.

Group adjusted operating profit increased by 15% year-on-year to £435 million, our best first-half results since listing. Within it, Asset Management earnings increased by 24%, thanks to higher recurring revenues and improved operating leverage.

In Life, a higher contribution from the capital-light With-Profits business led to a 9% increase in profits. At £372 million, operating capital generation was £36 million lower, largely due to movements in our capital requirements in Asset Management and the Corporate Centre.

New business strain of £20 million was £15 million better year-on-year, despite us delivering twice the volume of BPAs, reflecting the capital-light nature of our new With-Profits BPA Plus. Thanks to this good result, we remain on track to achieve our £2.7 billion capital generation cumulative target.

Finally, supported by our strong operating performance, the Solvency II ratio reached 247%. Let's now turn to our flows.

Closing AUMA stood at £387 billion, supported by £2.4 billion of net inflows from open business and £13 billion of positive market movements. With £2.2 billion, Asset Management accounted for the majority of net flows, equally split across our wholesale and institutional channels.

This equates to 2.4% of opening AUMA from external clients on an annualized basis. As you've heard from Andrea, we delivered another £1 billion of net inflows in July, with good momentum across a range of public and private strategies.

While we continue to grow internationally, supported by our strategic partnership with Dai-ichi Life, we're very pleased with the continued turnaround of our UK institutional segment, where we delivered net inflows of £800 million. Thanks to our business model, we're very well placed to support UK pension schemes along their entire derisking journey, leveraging the capabilities of both Asset Management and Life.

Our new CDI Plus solution, which Andrea just mentioned, is an example of our product innovation for these clients. In Wholesale, our strong investment performance, particularly in public equities, remained a key attraction for clients.

Life net flows from open business of £200 million was a £700 million improvement year-on-year. This reflects £500 million increase in PruFund year-on-year, and continued growth in the BPA market, where we recorded £600 million in sales in the first half.

Activity has picked up over the summer as we completed a further £1.1 billion in BPA transactions across July and August. We're very pleased with our continued positive growth in net flows across M&G, despite a volatile external environment, as we deliver the products and solutions our clients want.

Moving on now to profit. At £435 million, our operating profit in the first six months was up 15%, with the key features being: firstly, 24% higher earnings and improving operating leverage in Asset Management, supporting a steady reduction in our cost-to-income ratio; secondly, a 9% increase in Life profits to £375 million, with double-digit growth in both PruFund and traditional With-Profits more than offsetting an £8 million reduction in annuities, due to lower returns on excess assets, which we flagged in March; and finally, the Corporate Centre outcome was adverse by £5 million, impacted by lower investment income and slightly higher head office expenses.

Our operating profit is not just growing, it's also improving in quality as we increase the diversification of our business and pivot it to capital-light sources. Today, 80% of our operating profit comes from Asset Management and With-Profits capital-light business.

This proportion is up meaningfully from 73% last year, and we expect it to rise further over time as we now write the vast majority of our annuity business through the With-Profits Fund. Let us now look at each of our businesses in turn, and starting with Asset Management.

Our asset management business delivered a strong result, with adjusted operating profit up 24% to £159 million. This was driven by a higher asset base and resilient margins, generating much-improved recurring revenues.

At £356 billion, assets under management were up by £32 billion compared to last year, supported by sustained net inflows and favorable markets. Our average fee margin remained resilient at 32 basis points, as we continue to expand our business with external clients, focusing on high-value solutions, particularly in private markets.

We're very pleased with the quality of our flows, which generated £13 million of annualized net new revenues. Together with a growing asset base, this contributed to revenue growth in the first six months of 10%.

Costs of £470 million increased by 7% year-on-year, but remained flat compared to the second half of last year. This cost base reflects our investments to support long-term growth in Asset Management as we added distribution and investment capabilities, including our acquisition of P Capital Partners and Baumont, and scaled our distribution platform to support our international expansion.

These initiatives drove a 7% increase in costs in the second half of last year. Since then, costs have stabilized, remaining flat over the last six months.

Looking to the remainder of H2, we expect asset management costs to stay in line with the first six months of the year, while Corporate Centre costs will be roughly £10 million higher due to the seasonality of our head office expenses. Our approach to cost management remains the same: we will continue to create capacity by streamlining our operating model, reengineering our processes, optimizing third-party spend, and better leveraging technology such as AI, as you heard earlier from Andrea.

These savings will offset inflationary pressures and free up resources to be reinvested into growth. By investing for long-term growth and remaining disciplined on costs, we will further improve our operating leverage and achieve our target cost-to-income ratio by the end of next year.

With that, I'll hand back to Andrea.

Thank you, Kathryn. Before concluding, I want to summarize the key elements of M&G's investment case.

Our message is simple: we are becoming Europe's leading integrated asset manager. Our synergistic business model underpins our growth.

We operate in attractive markets with clear competitive strength, including our unique With-Profits Fund. By delivering a balanced combination of yield, growth, and quality, we offer consistently strong outcomes to our shareholders.

Life underpins our attractive dividend yield. Asset Management and With-Profits drive the group's growth.

As they do that, the quality of our profits improve. 2026 has been a strong year so far, with record profits and real business momentum.

That reflects the hard work of colleagues across M&G, and I want to thank everyone for their contribution to these half-year results. We will build on this track record, maintain our momentum, and continue delivering for our clients and shareholder.

I am proud of what we have achieved, and I'm energized by the opportunity ahead as we enter this new phase of growth. Thank you.

Now we're going to do Q&A.

Thank you very much, Andrea and Kathryn. We can move to the Q&A.

As usual, for those that are following us online, when you ask a question, please pull out the microphone from the seats, push down and hold down the button, state your name, the firm you are working for, and then go with your three questions, or more nested into one. We'll later take questions online.

A couple of analysts couldn't make it in the room, but they've already submitted questions, but we'll keep them for last. Dawid, Andrew, Farooq, and Tom, in that order.

Hi, thank you for taking my question. Dawid Pych, RBC Capital Markets.

I will kick off with only two questions, actually, just for a good start. The first one on dividend and excess capital: I suppose with the shareholder Solvency II ratio of 247%, it sits materially above the top end of your stated operating range.

Just wondering, how do you think about shareholder returns going forward, especially in light of the strong capital position? Is there maybe a specific point at which you would consider a more meaningful step-up in those returns?

Then second question on Asset Management: the private markets AUM continues to grow, which is very good to see. However, the blended margin stays flat, and also the private markets margin actually decreased one basis point year-over-year.

Just if you could share more color on what drove the contraction there, and how do you think about the trajectory going forward? Thank you.

Perfect. If you want, you've got a bonus question later, if you want to come back to it.

In terms of the first question, I guess there were two questions in one: one was around dividend and one is around maybe more capital return, maybe we'll split them a little bit. I don't know, Andrea, if you want to...

This time I didn't show our clear capital management framework, which every time we show. I hope you remember what the four different things.

As we have a clear capital management framework in place, and we've been on a journey in the last three, four years. If you remember, in the beginning we were focusing on financial strength, and we have been strengthening the balance sheet, we have been improving our leverage, improving liquidity.

Then it was about making sure when business was doing better to actually pay out attractive dividends, and we came out with a growing dividend policy 18 months ago. Let's not forget that our investors, and I meet many of them, they're very pleased with what we're doing.

We have been returning back to our investors over £4.4 billion since we listed in 2019, and also a double-digit annual total shareholder return. Our investors are very, very pleased with what we're doing in terms of capital returns.

Now it's time for growth, huh? We are focusing on growth.

That's our focus. Those results that you see there is thanks to a relentless focus on growth and investing for growth.

That's our focus. We will do so by making sure we realize double-digit IRRs above our cost of capital.

That's our focus. I don't know, Kathryn, if you want to add on something.

I guess only that we also think that at 247%, today is quite an uncertain, volatile time, and it is a competitive advantage to have a very strong balance sheet. One of the points I made also was we've got a great asset with the PVST at £4.8 billion.

We've got quite a unique own funds because of the strength of PruFund. This really does underpin today's results.

It will flow through into earnings, cash, and capital generation over time. We've got strong financial flexibility to do the growth investments that you heard Andrea talk about.

No, very comfortable where we are, and we're already delivering good returns back to our shareholders.

Andrea, maybe do you want to tackle separately the dividend question, in terms of the dividend trajectory?

Yes. On the dividend question, and as you all know, dividend is a matter for the board, but if you look at our results today, obviously we're very, very pleased with the AOP growth.

You should not see a one-to-one relationship in the short term between AOP and DPS. There are other elements you should take into account.

There is capital generation, there are the state of the business. All these things means more you should look it from a more longer-term perspective.

Obviously, we're very, very pleased that we have a growing dividend policy, as I said before, and it's a matter for the board. It will be discussed in February next year.

I feel comfortable with the market expectations in terms of DPS growth. I'm sure you know what the market expectations are, and obviously it's a discussion for the board in February next year.

Perfect. Moving on to the asset management point, it was around private markets and the impact on margins.

Yeah. I'd like to say one thing here.

I'm sure if you look at some of our peers, they must be very jealous about our trajectory, because we have resilience on average bps. Yes, some peers might move up, but they move up from such a low bps, it doesn't really matter.

Look at our average bps at 32. That's a good average bps.

Of course, that is driven by strong flows in our wholesale solution at an average of 55 bps. Private markets is important for us.

It went down by one bps, I think 37, 38, but that's a mix of whatever private assets we have. If you look at our private assets, the quality and our performance is very, very positive.

We had £1.3 billion of net inflows in the first six months. Of that, we had £1.2 billion in private credit and structured credit, and we see good momentum here.

Let's not forget, when we talk about private and structured credit, this is nearly 100% Europe. I know that there are issues with private credit mainly in the US.

We have no exposure to the US, no real exposure to tech and software either. We're very, very pleased with what we're doing there.

The interesting thing here as well is that we have a capital queue of £7.8 billion for our private assets franchise. You should see resilience in that I would say for private markets.

Of course, I took the institutional one. It's also fixed income in institutions, not only private assets.

We have fixed income mandates, buy-and-maintain mandates, we have equity mandates. It's a mixture, but you should see resilience in our average margin in terms of bps, which I think is a great result.

Thank you very much, Andrea. Andrew Baker from Goldman Sachs, I've done the introduction for you.

Great. Thanks, Luca.

Appreciate the intro. Three questions, please.

First one, I guess if I look at slide 11, you're guiding, or at least soft-guiding to £3 billion

to

£4 billion of BPA flows of '27 to '30. Given, I guess, the advantages that you've outlined versus peers, post-2027, when you hit your £3 billion to £4 billion target, why shouldn't we expect a material increase in flows after that?

Is there any constraint to volume growth that's maybe not obvious that's stopping being a bit more aggressive there? Then secondly, just on the Asset Management underlying capital generation: can you just give a bit more detail on the SCR increase, and if there's anything we need to be thinking about going forward there?

Then thirdly, hopefully a quick one, on the leverage change in methodology: is there any change to the 30% target at all? Thank you.

Probably I'd say the first one, Andrea, if you want to take it, while the other two for Kathryn.

Yes. I think we have to remember where we come from.

Four years ago, we were not growing in our Life business in the BPA market. We reentered it, and when you look at our track record, we've been consistently growing by 50% on average every year.

Of course, the £1.7 billion that we have done the first eight months this year, for me is very, very strong performance. We have a unique feature, it's true.

I said it today about the BPA Plus. I think the With-Profits Fund gives us a competitive advantage.

I'm not going to repeat them again, the key features here. It gives me that confidence that we can continue to grow.

We will grow, as I said, this year at least 50% year-on-year, and we will continue to grow next year. If you look at the market, it's roughly £40 billion to £50 billion.

That means that we have in three years, three or four years, moved from 0 to 6% to 8% market share, which I think is a very relevant performance. Now, beyond that, we will see what we can do, and we will see whether that can continue.

Of course, we have, in my view, strong competitive advantage with the BPA Plus, but it's not only about BPA Plus. It's also about other innovation that we have brought to this market.

You saw last year when we presented results, our BPA ValueShare, where we shared the economics with the scheme sponsors. Now, of course, we also launched the CDI Plus for run-on.

We have what it takes in order to provide a solution across whatever requirements that pension schemes are looking for. Last but not least, and I think this is a critical element because we see a lot of partnerships out there: we have the unique combination of having a very strong asset manager supporting our Life balance sheet.

We're very, very strong in private assets, in private credit, and as there is a significant allocation into private credit, and of course also public fixed income. We have all the elements to grow, and that's why we're growing.

Let us get to 2027, £3 billion to £4 billion, and then we will talk about the future growth.

Maybe, Kathryn, on the BPA, do you want to add anything on kind of pricing discipline and capital constraints, or lack of, in the With-Profits Fund?

Obviously one of the real advantages is the lower cost of capital of the With-Profits Fund, and we're very much focused on obviously delivering these schemes and their members superior outcomes, with the possibility of this bonus and the very strong backing capital ratio behind it. We're delivering double-digit IRRs.

That's what we remain very focused on. The earnings profitability will improve over time.

We're still in sort of scale-up mode. We'll get more operating leverage as we go into 2027, and the second half should also improve versus the first half.

We're very disciplined, and that's why also, to Andrea's point, we're really comfortable with the guidance of £3 billion to £4 billion, given what that means where we'll be in the market. Obviously, importantly, it delivers the AUM and fees for our asset management business.

We expected this, it does look quite unusual. Asset management profits are up 24%, and yet you've got a reduction in underlying cap gen.

Own funds is up, obviously, there's nothing there. We had a difficult comparator, we had quite an unusually low impact last year.

Seeding numbers were pretty low compared to normal. There was an FX element as well.

That is more normalized. It just happened to be unusually low last year, which meant we had a bigger swing in capital requirements year-on-year.

Again, another FX element this year, but nothing in particular I would call out, just a notable year-on-year delta in the capital requirements of the business. I think on leverage, yeah, we've been wanting to do this for some time.

We have now completely aligned the numerator and denominator, and so we've seen a movement obviously reflecting the Solvency II value of debt, and that's meant we're now at 29%. We do still have a guidance range, or not a target, guidance of around 30%.

We're obviously at 29%, really comfortable where we are.

Farooq from JPMorgan, while you pull out the microphone.

Thank you for the introduction. Two/three questions: so firstly, on the BPA, the £3 billion to £4 billion that you're writing, can you tell us a little bit about what size of scheme you're targeting and what size of scheme you're allowed to target by distribution?

Is it more possible to go for middle-size or small-size? Just some detail around that.

Then secondly, on the CDI Plus, can you just explain a little bit what you see as the opportunity there, the margin, how that's going to work? Is it going to be a big market, run-on, or do you think it's just a supplement?

My very last question is on operating leverage: so is 70% the right number for you? I know you can't give us guidance on where you're going to be in '28, '29, '30, but it feels like you're saying AI is generating efficiency, which you then reinvest in the business and remain efficient, rather than AI is a overall cost reduction, operating leverage measure.

Just want to understand, qualitatively at least, what you meant by that. Thank you.

Okay.

Why don't I do the cost-to-income ratio, and then you can do the BPA? Is 70% the right number?

It's a target we have for the end of next year. When you look at our track record, remember we were at 79% three years ago, and now we are at 73%.

We have gotten there by also investing in the business. We've been investing in distribution, we've been investing in product capabilities, we've been doing some bolt-ons.

All that are what I call the good cost. We also have been very disciplined on cost, because when you go and look at the last H2 of last year with H1 of this year in Asset Management, costs have been flat.

Of course, then there is the top line. There is market effect, but it's the quality of the flows which I think is critical.

There's a number you should remember of today is the £13 million of annualized net new revenues. This is a key KPI, because making flows with negative net new revenue, it's not that great.

What you want is you want positive. That shows that we have flows in the right, higher-margin investment solution: private assets, public equities, etc., and also of course see strong momentum on wholesale.

When I am looking for end of the year and 2027, we have the operating jaws in order to deliver that 70%, which is without performance fees. Remember, we do not put performance fees because of the, I would say, the volatility or lumpiness of the performance fees.

Let us get to the 70% end of next year. I think that is a target I'm confident we will deliver, given the strength of our investment capabilities, the strength of the investment performance, capital queue of £7.8 billion in private assets, and also Dai-ichi obviously putting in more money as well.

Let us get there, and then we will see after 2027 what targets we will put. At the moment, I think 70% is a good target.

As you can see from the track record, we have been consistently improving this cost-to-income ratio by two percentage points per year.

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

AI, yeah. AI is an interesting one.

For those who know me a little bit, I did Six Sigma in end of the '90s. I wish we had AI then.

It would have made my life much easier, because we were transforming processes in order to improve customer outcomes. It took us four or five months to get to improve from 3 sigma to 3.5.

With AI, all this can be done, I'm not saying instantly, but it can help you substantially to improve your processes and improve, I would say, client outcomes and quality that you deliver to your clients. It's something that we are implementing in a very smart way.

We're very careful how we implement it, because as Kathryn says, we do it only if it covers our cost of capital. It needs to deliver double-digit IRR.

We've been doing it, I would say, in several processes in our business. We've been doing it, and you can show the slide if you don't mind, in order to grow our business.

For example, when we do now our BPA pricing, we utilize AI, and that has significantly improved the speed of pricing. When we do RFPs for institutional clients, the same thing, it's taking it down by substantial number.

It's also about how we service our clients. Very, very important.

For example, I was up in Scotland. We have a big customer service center there.

The way now we resolve issues or even how we do policy management has significantly reduced the time, and our operators can now work on more value-add activities. The good news in all this is, yes, it takes down costs, or it creates efficiency and productivity.

If you're growing your business, this means that I can support my growth. Yes, there should be an improvement in the, I would say, numbers moving forward.

It's a bit too early to start talking about what the returns are, but surely this will support your growth. There's no doubt about it, and it will support your growth at lower unit costs.

We're a growing business, as you can see, this is supporting our growth, profitable growth, I would say.

Going to the other questions around the BPA volumes that we're seeing. You've obviously seen a number of other market players give their results already, and I'm really pleased that we have been obviously delivering the £1.7 billion, above the one and a half for the whole of last year.

We're comfortable with our guidance of 50% up this year and next year. Over the I guess eight months of the year, we've seen both a small and slightly larger scheme, we've been really pleased to be able to participate at the smaller end, but also larger schemes as well.

That's important for us as we clearly are a new player. We've got great credibility with the team.

Kerrigan, who leads the business, is here in the room today. Given our size ambitions, we're not going to be at the large end of the market that some of the bigger players who are in the market participating.

Just going back to discipline on pricing and double-digit IRRs. On CDI Plus, this is a product we will be launching.

We haven't launched it yet. It's designed, and this is one of the benefits of our business model, because we call this an insurance-enabled product, because we benefit from all the asset management capabilities, fixed income, credit, cash flow matching, as well as the insurance balance sheet that gives the schemes who want to run on and they're not yet ready to do buying or buyout, the ability to manage their cash flows, they've got liquidity that's available for payouts whenever they might need it, and also the advantage of a strong balance sheet with strong collateral flexibility, which is a real plus for some of these schemes.

Slightly better economics for them also, more flexibility, and again, it's the combination of an insurance business and an asset management capability, which is really, really strong in the key areas of cash flow matching. We'll share a little bit more on the economics.

It will be fee-based when we launch the product.

I think there was first Tom Bateman from BNP Exane, then let's go to Andrew and Abid.

Thanks, Luca. Morning, all.

Could I just ask on the profitability of PACL? I think we had the numbers over the past few months, and I guess the profitability under UK GAAP is quite different to what you report at a group level, it looks like the equity position's still falling.

Can you just help me understand that, if that's a concern at all? The second question is just on the tax outlook, another positive one-off on capital generation.

What's the outlook for full year? Then finally, I just want to understand the economics from writing all of the Life business on the With-Profits balance sheet.

You're gaining £100 million of operating profit there, but presumably you're giving something up. Could you just help me kind of put those pieces of the puzzle together?

Thank you.

I think the first question was on Prudential these subsidiary profits, is that right? I think you'll probably have seen that the full-year 2025 numbers, we've got the CFO in the room.

They had profits, UK GAAP basis, £971 million. You might have seen we did a capital reserve release from Scottish Amicable reserve into retained earnings, so that's looking really, really strong in terms of PAC.

Like you see in our IFRS numbers, you'll have seen some moves in terms of interest rate rises impacting statutory numbers, which affect many of our peers that you cover. That will have impacted their statutory numbers.

Obviously in the first half, also will have had a ground rents impact. They'd be sitting at around just under £1 billion in terms of balance sheet equity, which is a really strong position.

Also obviously PAC made more profits than it also dividends up, as you can see from their numbers. Again what we look at in terms of obviously the strong capital, strong liquidity position of the group, we've got £2.7 billion of equity at the holding company, £2.2 billion of retained earnings, and we obviously dividend up to the holdco of £700 million to keep that stable.

It was a bit lower this year, we had a slightly higher employee share scheme payment at the holding company.

Does that help?

I think we might be talking about slightly different numbers,

but

I can pick it up again offline.

Okay. I

think the key point is, think about retained equity impact was £1 billion last year, we've done half a billion of reserves shift, it went up to £1.5 billion. Clearly, in H1 you've got the impact of ground rents, but we're still sitting at around £1 billion.

On a normalized basis, PAC generates more earnings than what it upstreams to the parent company, so that balance should grow naturally over time. Then obviously, over the last couple of years you've had interest rates rising, which does impact as a market movements.

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

We can go through those numbers.

Then

the other one was the tax outlook for the full year.

I think it's more again, another one that perhaps we can pick up offline. You've seen historically we had obviously the benefits in the last two full-year results into the tax numbers.

We still have some impact coming from the loss absorbency, which impacted capital actually more than the tax numbers. I don't think there's anything unusual in today's numbers.

The statutory losses obviously have a tax impact that you see, but apart from that, there's just no major impact on the numbers, and nothing that we guide to at this stage either for full year, because obviously the dynamics that impact that depend on clearly the IFRS results, the capital numbers that you see, and the loss absorbency that we might need or have under stress when we do all our modeling. No, nothing unusual to call out here, or nothing yet either for full year.

The economics. I think the final question was on the economics.

I guess this is something that we've shown before in terms of the profitability of the products, because we are clearly writing quite a different profit signature from the products that we put on the With-Profits balance sheet. What we've said is that we'll have 10 to 15 basis points of profit on AUM that we put on the books.

When we think about where that will come from, you've got £3 billion to £4 billion of BPAs that we've guided to. Typically, PruFund is about £6 billion.

We did £3.3 billion gross in the first half, which is good, and we're obviously writing new business from some of the other smaller individual products. That's the sort of numbers where you get to the 50-odd billion that you can see over the next five years.

Of course, we also have the asset management revenues also, which will be a similar margin that you're currently seeing in the financials on the internal AUM that we manage, which is about 20 basis points of revenue margin. This comes through over the years to 2030, and the important point to make also is that clearly we become more profitable, we get greater operating leverage, we're really comfortable with our guidance, and this is very high-quality earnings, very transparent, alongside also this switch that we've talked about from 90/10 to 100/0 for the PruFund products, which only started on the 1st of April, they'll feature more next year and the years after.

In terms of what are we giving up, in many ways, look, we were not in BPAs, and there's a question of whether would we be big and growing as much in BPAs if we wouldn't have the With-Profits Fund. I wouldn't see that portion as we're giving up something.

It's generally a new stream of business from a new product that is growing very nicely. On the PruFund side, you're right that we have always been writing PruFund, and we're not guiding to dramatically different products volumes.

We're just simply suggesting that the profit signature will change slightly from a value perspective on that portion of the book. It is meant to be a zero-sum game, because we don't want to take advantage of the With-Profits Fund, and the With-Profits Fund doesn't want to take advantage of the shareholder.

It's just coming through in a more predictable, transparent, fee-based nature, which we think is helpful from a public market perspective. We had Andrew Crean and then, if I remember correctly, there was Abid.

It's Andrew Crean at Autonomous. Can we stay on that slide?

I think what Tom's trying to get to is the counterfactual. You set a target of annuities of £3 billion to £4 billion.

That was before this. Clearly, that £3 billion to £4 billion is going to be written largely out of the With-Profits Fund, 20% still on the shareholder.

That means that the shareholder annuity profits are going to be less than they were. When we look at that £100 million, you're going to get the asset management profits anyway, that's not an additional.

Then you've got the 10 to 15 basis points on the new With-Profits Fund, which is £50 to £75 million by 2030. What we're after is the counterfactual of what you lose in the annuity profits there.

I think expanding the question from there, you've got a very strong solvency ratio. You say you've got to invest in the business, but you're increasingly investing in the business through the With-Profits Fund as opposed to the shareholder.

It does come back to this question, it's difficult to understand why there's a slightly curmudgeonly approach on dividends and buybacks. You say you're on a journey.

At what point do you think you can come back to us with a different strategy? Then finally, the last question is, you've given us very helpfully BPA sales in July and August.

You only gave the net flows into the asset management business in July. How has August gone?

Maybe on the last one, it's simply because BPA sales are big, chunky, you see them right away. It's hard to get them wrong.

In Asset Management, it takes a few days after the period close to actually get the data. It's purely due to the lumpiness of BPAs that allows them to identify them very easily in M&I, while typically we get asset management flows, 5, 10 days after a period end, we don't have them yet and would be inappropriate to guide on August asset management flows at this point in time.

Kathryn, on the bigger and longer question.

No, on the counterfactual, on the profitability of the in-force book versus the new book: I think in terms of clearly what we're trying to do for our shareholders, and not just the shareholder balance sheet of PAC, but is to really improve the quality of the earnings, and it is doing capital-light business, because we obviously focus on the 20% that we have in the shareholder balance sheet, which aligns interest with the With-Profits Fund and the shareholder. Over time, and it is an over time to 2030, we will deliver those profit numbers and with those volume growth for our shareholders.

The quality is clearly coming through because it's nice and visible. It will expand in quality.

We're disciplined on the capital hurdle rates that we've talked about. The key thing is, we're going to grow profits, and we've got very clear guidance out for profit growth over the next few years.

You will see, given also the scale of CSM and the profits that we already have sort of locked in that flow into profits, they are very, very meaningful. At £7 billion, it's not that common to see CSM up 6%, we're very pleased, and it's £4.2 billion across the With-Profits Fund.

That will underpin really strong profits every year, depending on where CSM clearly finishes, some of the drivers of that, and the amortization rate. That really will underpin a core part of our annual profits.

Then on top of that, we've got the new flows that's coming in that's got the guidance we've given that will deliver this additional £100 million in 2030. Obviously with the benefit also from asset management revenues with the 20 bps margin on that.

Again, just to repeat on the counterfactual, when we first presented the £3 billion to £4 billion target in terms of annuity sales, the very first time that we presented it, we also clearly stated that we were confident in getting there because we would have also launched the With-Profits Fund, which has been in the making for the last 18 years 18 months before launch, right? We would have not put out that target without the confidence of the With-Profits Fund.

On that I totally get the counterfactual that you're asking on the PruFund side, but on the BPA volume, we would not be where we are and we wouldn't have this ambition and this target if we wouldn't have this very distinctive and competitive proposition, which does allow us to have confidence in reaching those volumes.

Was this second question was around the capital ratio and distributions? Do you want to kick that off, and I can...

Do it.

Yes, we're operating above our range at 247%. When Andrea talks about the capital framework, the four quadrants that we've used consistently over the last three and a half years, and given our focus is very much around investing in the business, because we want to continue the growth that we're seeing, we want to continue delivering the momentum in flows, and obviously hit our profit and our capital generation target.

We have got a strong balance sheet at the moment in terms of the stock of CSM, £7 billion, I talked about underpins earnings, the PVST of £4.8 billion underpins earnings, capital, and cash generation over the next few years. We've got real financial flexibility, which is very good for us because it allows us to continue to invest in the business.

What we've said is, we've done the £4.4 billion of returns we've given back to shareholders. We only moved to a progressive dividend 18 months ago.

We kept it at 2% last year despite flat earnings. Profits are up strongly this year, we've guided double-digit for full year.

One of the elements around what might trigger an increase in shareholder distributions would be sustainable earnings growth. We're only 18 months into progressive dividend.

It's a really incredibly different strategy that we're now pursuing, with great success in today's numbers. We do value absolutely delivering good returns to shareholders.

For this year, we're comfortable with expectations, as Andrea said, and it's very much a decision for the board. We've also said we would expect to be at this sort of solvency range for the medium term.

Shareholder returns are important to us.

Good. Over to Abid from Panmure.

Thank you. It's Abid Hussain from Panmure Liberum.

I've got three questions. The first one is on fees on the new mandates.

Just wondering what the fee rate is on the Dai-ichi mandates that are coming in, and on the £7.8 billion private markets capital queue. Then the second one is on the equity release disposal.

I'm not sure if I've read that right in the release, but it looks like there is a disposal there. Just wondering what was the driver behind that, and what are you going to do with any capital released?

Then the final one is on capital itself. I'm still trying to understand, just following on from Andrew's question, how do you assess the excess capital position?

Is it on the regulatory balance sheet or the shareholder view of that? I think at the moment on the regulatory basis, you're running at sort of 180, 181%.

Where do you want to operate on that basis? Just trying to triangulate where do you actually want to operate at?

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

No, I'm afraid it's on fees. On fees you have to talk, but Dai-ichi, obviously we're very pleased with the partnership, and when I look at what we have been delivering since we signed the partnership in May, £1.1 billion of inflows, and it's been 50/50 between public and private.

I don't think we're giving out on fee what we do. We're obviously treating them as a large institutional client, and therefore, obviously higher fees in private assets, lower fees in fixed income.

It's a partnership which for us is important not only because access to the balance sheet. You should not forget Dai-ichi co-owns Asset Management One in Japan with Mizuho, big distribution in Japan, and we're looking to do things with them.

They also are significant in Asia, with a large footprint, and we're looking to see opportunities for working with them as well in Asia. It goes beyond just access to the balance sheet.

When you think about our model, the Life balance sheet, Asset Management, and in particular private assets, we now have access to a significant second balance sheet, which by the way today also did an acquisition in New Zealand, their balance sheet is increasing even further. Very, very important partnership for us.

The commitment they had of doing $6 billion over five years, we're at £1.1 billion sterling after a little more than one years. I'm confident that that will grow significantly in the coming months and years.

Very, very pleased with the relationship, and having on board Yamaguchi-san will also help to engage further and create an even stronger relationship. More to come with Dai-ichi.

Obviously we've got the £7.8 billion of private markets capital queue that we've talked about. We answered the question on what happened in the first half, which is a bit of a mix effect in terms of the private markets margin.

Given the strength that we talk about in structured credit, some good demand in real estate, but overall feeling really confident about the private markets interest that we've got with that size capital queue. Obviously the success of our public equities market in the wholesale channels supports the 55 basis points that you see in wholesale, and actually I would say record revenues in wholesale in the first half as well.

Obviously that's in other markets as well. On the equity release mortgage transaction, which was a post-balance sheet event, you will see some notes in the financial statements about that transaction, which was actually, you might have seen one of our peers did something similar, but it was just to make a more optimal balance sheet structure in our matching adjustment, delivering a superior outcome across the key financial metrics that we look at.

I think we gave some disclosures around the size of the book, and there might be a little bit more at full year. It was just basically optimizing the position.

There's nothing meaningful that I would call out in terms of capital or any other benefits that we get. I guess, back to the Solvency ratio, what we've said is that we have got quite a unique balance sheet because we have such a successful With-Profits Fund, and the PruFund has grown to £73 billion, and the PVST asset has also grown to £4.8 billion.

That's driven a lot of the growth also in the ratio to 247%. We're saying that we expect to operate at about this level, or above the top of our target range for some time, because of the success of PruFund.

Obviously we've said that this strong financial position is giving us flexibility to continue to invest in the business, to drive growth, which is coming through in today's numbers, and yeah, continuing also to deliver good outcomes for our shareholders. It is a higher ratio reflecting the shape of our balance sheet.

Very importantly, this asset, this PVST asset underpins today's numbers that you're seeing, the great results, the answer to the earlier question around the size of earnings from our With-Profits business. It also underpins the future earnings, the future capital and cash generation.

It's a great position to be in, and we're very pleased with this asset, and it just means that our solvency ratio will be a little bit higher for the medium term.

Kathryn, there are a couple of questions online.

We

will come back. We'll make sure that we ask all the questions.

Alejandra Chavez Valencia from Citi asked regarding to the ground rent or the Leasehold Reform Bill, whether you can remind us of, is all the impact taken? I guess there's an element of one-off impact upon announcement, and then back in February, you might recall, we did talk about an ongoing impact on AOP and capital generation.

We quoted a number of £50 million, she just wanted to understand what has taken place, what will take place, and are the numbers broadly in line?

Yep. The impact in our balance sheet and our financials from ground rents that you see today are identical to what we put out in March.

It reflects the government announcement around a 40-year transition in the £250 cap. There's nothing new in today's numbers.

We obviously will look at the October 28 budget, where clearly engaging, as you'd expect, with the government. We're not expecting any changes really to this position.

We were prudent anyway leading up to it. We took a very conservative position on the balance sheet.

I think we did guide to a modest £10 million AOP impact at the end of 2028 as a result of this. That's just the key guidance, which again today we're not changing it.

It's completely consistent with what we've given to the market before.

Just for clarity, that is an impact across AOP and capital generation roughly similar, from the end of 2028 only onwards. Another question online from Nazib at UBS.

He is asking whether can you do more 100/0 products? Basically, can't you just write everything on a 100/0 basis on the With-Profits Fund?

Because we referenced that two of our PruFund flavors are on 100/0, I guess that's also what prompted the question.

We will be moving the other final large product or sleeve of PruFund onto a 100/0 charges-less-expenses approach, which is really transparent, it accelerates profit recognition, you'll see it earlier in the CSM, slightly earlier recognition also in terms of underlying cap gen. We're very comfortable that that is the right thing to do for PruFund.

No changes to other products. It was really important for us also with the BPA Plus to have the 20% reinsurance with the shareholder, so that they are completely aligned in terms of the economics and motivations and financial metrics for BPA Plus.

It will just be on PruFund, but all PruFund.

Perfect. Those were the questions online.

We can come back to Farooq, JPMorgan.

Hi, Farooq from JPMorgan. I want to explore that counterfactual-type question again.

When you first talked about capital-light or With-Profits BPAs, the implication was that you would be able to accept a slightly lower hurdle rate than your peers. Given that you're aligned, you have this 20% share, are you actually just writing the same kind of IRRs that you would have?

Associated with that, is this 20% reinsurance an annual kind of arrangement? For example, are you able to say, "Okay, right, we can adjust that reinsurance rate if we feel like we want to invest capital in this because either shareholders like it again, or we feel like we're getting good margins, or there's a big opportunity coming"?

I was just kind of wandering around the counterfactual to the counterfactual. Thank you.

I can take that, perhaps. It's a really good question, because we have got this new, exciting product, which is definitely capital-light for the shareholder.

If you look at the numbers, and you'll spend some time, I'm sure, after today's call to look at some of the detail in our disclosures, and what we've said is we had £20 million strain, down from £35 million last year. That's across the whole of the business.

It does reflect a threefold increase in BPA volumes. Obviously we have strain across the whole £600 million of premiums.

Also you can look at the shareholder component, and just as a reminder, we do not reinsure longevity at point of pricing for these transactions. It remains a management tool that we can use at some point.

We have a lot of flexibility given the strength of the balance sheet and our appetite for longevity risk as well. That's an element that will impact strain.

What we've talked about is obviously just making sure that we get the shareholder double-digit IRRs. That's absolutely key for us.

Essentially, the key benefit for trustees and clients is that we can deliver superior pricing. We can have the ability to deliver better economics.

They have this bonus, you've already seen a 45 basis point bonus on fixed-term annuities. It's obviously a different product, but it has got a lower cost of capital in the With-Profits Fund.

I think in a previous call, we talked about the regulations and the With-Profits Committee and how they think about profitability, and what we need to do in terms of their hurdle rates for this business that Luca actually also covered earlier on the call. Happy to pick it up later.

That means that we can speak to these trustees and the consultants, and Andrea talked about having this essentially mutual on the balance sheet, we have got the ability to be really competitive, and also with the attractive prospect of a potential bonus at some point. Those are essentially how we think about the hurdle rates.

On the 20%, we're guiding to 20%. I think we said approximately 20%.

Technically, we could, of course, change and put something on the shareholder balance sheet with a greater number, but we're really comfortable at that level, and I think we're encouraging people to assume that it will stay close to 20%. Again, we can be quite flexible around how and when we do that, but that's a sort of annual number.

Farooq, what might help on the hurdle rates is that you have to think about the transaction as a transaction between the DB pension scheme and the With-Profits Fund. The With-Profits Fund will price to achieve its IRR, and that's the transaction, right?

Then after that, there's a reinsurance between the With-Profits Fund and M&G plc, and M&G plc will achieve its target IRRs, right? It's very transparent, but it's almost you see the outcome as a one transaction, but it's really a two-step.

That's why different parties can achieve the thresholds that they're targeting. Cool.

I don't see any raised hands, I think this brings the results to an end. Thank you very much for being here with us today.

Thank you.

Thanks,

everyone.

Thank you. Thank you.