Assicurazioni Generali S.p.A. (G) Earnings Call Transcript & Summary

Good afternoon. This is the chorus call conference operator. Welcome, and thank you for joining the Generali Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agency Relations. Please go ahead, sir.

Hello, everyone, and thanks for dialing in into our call. Today with us, we have our group CEO, Philippe Donnet and the CEO of Generali Investments Holding Woody Bradford, who will present the agreement we have announced this morning. After the presentation, Philippe and Woody, together with our Group CFO, Cristiano Borean, will take your questions during the Q&A session. Philippe, over to you.

Thank you, Fabio. Good afternoon, everyone, and thank you for joining us today. We are very excited to be with you for this major announcement. We are delighted to announce that Generali and BPCE have signed a memorandum of understanding to create a 50-50 joint venture between our respective asset management operations, Generali Investments Holding for us and Natixis Investment Managers for them. By combining our powers with EUR 1.9 trillion of combined assets under management, we would be the leader in asset management in Europe by revenues and a top 10 global player. Bringing together our asset management operations present a unique opportunity to build out on our strong roots to serve the constantly evolving needs of our customers. We have a short presentation on the proposed transaction and the opportunities it would bring. Woody Bradford, who is our CEO of Generali Investments Holding and also the CEO of Conning and who would become the CEO of the new entity, will take you through it. We will also have some time to take your questions at the end of the presentation. Before leaving the floor to Woody, I would like to briefly talk about Generali's asset management journey. Asset management is and has been a key priority for Generali since 2016. From the beginning, the objective has been to create an effective platform with broad reach and capabilities to best serve our clients. We launched our first asset management strategy in 2017 before outlining our plans to develop a global platform as part of our Generali 2021 strategy, which we presented in 2018. We built our strong European base, expanded our affiliate strategy and invested in distribution. In the following plan, Lifetime Partner 24: Driving Growth, we focused on driving further diversification and integration, expanding our private asset capabilities and our distribution to build, scale and generate additional third-party revenues. Thanks to the group's strong capital position with an explored external growth initiative that would boost our product and distribution capabilities and accelerate third-party growth. We establish Generali Investments Holding to better focus on delivering world-class performance and service to existing clients while continuing to grow the business with global third-party clients. In July 2023, we announced the acquisition of Conning and its affiliates and the creation of a long-term partnership with Cathay Life. This deal further enhanced our asset management capabilities, strengthened our footprint in the key U.S. and Asian markets and created a platform to deliver on our broader asset management strategic ambitions. Last week, we acquired a majority stake in MGG, the U.S. private direct lending investment firm, to even better meet the evolving needs of our clients, including, of course, our own insurance companies. In conclusion, we moved from not having an asset management strategy in 2016 to building something that today allows us to co-create Europe's largest asset management business. I'm proud of our achievement, and I would like to thank all our people for their dedication and commitment. This proposed partnership between Generali Investments Holding and Natixis Investment Managers would take us to the next level, creating a truly global asset management platform. A platform with leading positions and critical sale -- scale in both Europe and North America. A platform that is ideally placed to further scale the third-party business in Europe, North America and regions with attractive growth potential in Asia. A platform that builds on a global distribution network with a strong centralized platform complemented by local presence and multichannel partnerships. That's all from me at this stage. I'm now handing over to Woody to take you through this exciting transaction and its opportunities in more detail. Thank you.

Thank you, Philippe. Appreciate that, and good day to everybody on the call today. Thank you for taking the time this afternoon to be with us and for your interest in our news and our development today. I'll start with some basic facts on the transaction that are listed on Page 2. Most of this, I'm sure you've read and studied well at this point. But the combination of our 2 businesses will create a EUR 1.9 trillion asset manager, which as Philippe noted, will be 1 of the top 10 players in the asset management global marketplace today and the largest asset manager by revenues in Europe. And in fact, it's a somewhat transformational landmark opportunity to redefine asset management in the European landscape in a way that others have not been able to do successfully to date. This partnership would be created in a way that would have 2 long-term shareholders with a shared vision of the asset management industry that we are facing together and how to approach it. We have a common view of industry trends, both headwinds and tailwinds that support the business. We have a common view of client needs and changing client needs and client appetites. We understand the importance -- the critical importance of investment talent to take good care of clients' money. And we agree on a common business model to deploy that talent to help clients achieve their financial objectives and to attract and retain talent to do that successfully over time and to grow the business. The partnership is one that represents equal ownership, equal governance and equal Board representation, and I'll spend a moment on governance before leaving this page, but the team is supported by a highly experienced and talented set of investment professionals across the complex and a management team with substantial experience in the business, and I'll come back to it. I've spent quite a lot of time with Philippe Setbon over the last number of months. And interestingly, at one point in his career, he was a Generali employee. And for the effect of the shared DNA and common understanding of each other's businesses, it's helped us quite a lot. With respect to governance before I leave this page, this is a co-controlled partnership. The Board would be an equal mix of representatives appointed by Generali and by our partner with 3 independent directors and the named Chief Executive being the additional director who would be recused for certain matters where he would represent a conflict of interest. We've spent a lot of time with our partners defining decision processes to make sure that there's an appropriate delegation of powers to the management to run and operate a co-controlled business. So we wouldn't find ourselves stuck on day-to-day or month-to-month or quarter decisions, but really leading strategic decisions to the shareholders to make the leading operating decisions to the management. Additionally, we agree very strongly on the critical importance of a powerful centralized risk and compliance oversight system. It's critically important in a multi-affiliate model to have such a system and to have it be very effective across the entire complex, and it's one of the points we absolutely agree on. Next page, please. Page 3. We've got a highly supportive set of shareholders for this business. You almost couldn't pick a better set of shareholders to have behind an asset management company. Many of you -- I think, probably all of you know about how many asset management companies and insurance companies are trying to tie up to create synergies and help one another. And fortunately, our business going forward is backed by 2 powerful and well-respected European bank and insurance company enterprises and a strong, well-capitalized Asian partner as a client and as a distribution agent for us in the Asia Pacific market. We have together agreed on a long-term partnership in asset management that will last at least 15 years and hopefully, much, much longer than that. We've, through that arrangement created a powerful alignment of interests to distribute each other's products across our networks in a preferred partnership framework, unit-linked bank networks, other types of products across our networks. Generali also, as you, I'm sure, read has committed to provide at least EUR 15 billion of seed capital for deployment over the next 5 years. And I'm sure you're all familiar with the concept of seed capital, which has become very common across the asset management industry. There are many examples just in the last 2 years of insurance companies and asset managers partnering up to provide seed capital to accelerate private markets businesses. This EUR 15 billion scale is a substantial size increase compared to what's been seen in the marketplace, only possible because of the tremendous scale of Generali's insurance balance sheet business. This seed and acceleration capital is a critical driver for our business going forward. Of course, any seed and acceleration capital that we deploy will be completely consistent with the insurance company's strategic asset allocation decisions, which are liability-driven. It will fit in the investment guidelines of the insurance companies, and it will fit the risk tolerance of the insurance companies. But the good news is institutions around the world are looking for the same types of exposures that the insurance general account is. So there's some real synergy providing attractive private asset product to our owners and to our clients on a go-forward basis. Page 4 talks about some of the highlights of the transaction. We do think there's a compelling industrial logic to the combination. We'll have strong positions in Europe and in North America. And I think a real growth imperative and growth opportunity in many of the Asia Pacific markets as we go forward. We will have more scale, will be a more diversified business as we go forward. But importantly, we'll have the unique combination for a multi-affiliate business to have a powerful centralized distribution network and very sizable seed capital commitments, which we think will create tremendous opportunities for our businesses, for our teams and align our interests with our clients. Page 5 highlights some of the statistics. I won't spend much time on this other than to say we'll be big and we'll be amongst the leaders once we conclude this, of course, through great performance and generating positive third-party net flows. That's how we'll stay there. But this will be the starting point for the business that we create going forward. On Page 6, we outlined some of the elements that we think are critical to us being positioned for success going forward. And I think where I'll start and end on this page, just to mention the critical importance of creating value for clients. On this chart, it's actually shown a little bit off to the lower right, but it should actually be at the center. It's the thing that matters most. And if people have asked me in the last 16 hours, what are my most important priorities now and after we close? Numbers 1, 2 and 3 are delivering differentiated and superior investment results for our clients and then supporting that with great service and doing that for a good value. And if we can do that, we'll have a very successful franchise. But in the industry today, you have to do a lot more than that. With the combined business, we have proven investment capabilities across insurance and pension with high conviction active strategies and a number of private market strategies today that we expect we'll be able to grow successfully together over time. We have been able to consistently meet or exceed our clients' investment needs and expectations across the combined complex historically, but our scale allows us to compete with the leaders with investments in data and technology in a way that smaller firms are not able to do. I've mentioned the EUR 15 billion of seed and acceleration capital in the first 5 years. Of course, that's a minimum, but that's the level that we will start with going forward and has been very consistent with the amount of money that we've deployed as seed capital over time. And if you look back through the other announcements that firms have made and what competitive announcements have been about seed capital, I just want to reiterate the critical importance of the size of the EUR 15 billion of seed capital and what that allows us to do as a management team with our affiliates and for our clients on a go-forward basis. In addition, the new platform benefits from a very strong distribution network around the world and I want to just mention that we've got 23 offices operating outside the United States with this combined entity. Depending on how you count 8 to 10 offices in the Asia Pacific region, clients in the region are real presence on which to build sales activities and service activities for clients around the world. When you put all of those pieces together, I think it's a very attractive value proposition as a partner to sophisticated asset owners who are now being much more discriminating in their choices about who they pick to do business with. They want more capabilities. They want better service, they want to be data enabled, and they want all that for a fair price. This collection of activities allows us to compete on that basis going forward. Page 7 provides a map of our investment capabilities together across a range of asset classes. And as you all know, the range of asset classes that sophisticated asset owners are choosing from today is much more granular than the simplified chart that's shown on this page. But it gives you a sense of where we are as a firm and how we're positioned on a go-forward basis. We have been thinking about the business in 3 different categories of offerings. In the middle left, we talked about the large global insurance asset management set of capabilities. This is our biggest set of businesses. As has been mentioned and was noted in the materials, we will be the largest -- one of the largest -- the largest insurance asset manager in the world on a pro forma basis when these activities are combined. We think our ability to provide sophisticated solutions to insurance companies and pension plans on a global basis will be best-in-class with others who compete in this space. We have a number of strong performing. And I mean strong performing for their clients and commercially conviction, liquid businesses, traditional liquid asset classes, which you might think compete with passive strategies. Today to compete in that space, you must have a differentiated offering and a specialized offering. And we're very focused on our platforms in that area that do have those capabilities. And lastly, real and private assets, which has been a tremendous area of interest and focus by asset owners. It's been a tremendous area of growth for many alternative asset managers. It's been one of the principal objectives for many alternative asset managers and partnering up with life insurance companies to build these businesses that can create tremendous value for clients and if operated correctly, can create tremendous value for owners. Building these businesses does take a little more time building private asset offerings, raising the private assets vehicles, managing them, deploying the capital back to investors is slower than raising a liquid mutual fund. But as I think you all know, the potential economics for being successful in that business are quite material. And our ability to do that with the support of the seed capital is a tremendous source of competitive advantage. I would mention here that we haven't been waiting for today to do this. You may have noticed last week that we also announced the acquisition of a firm called MGG, which is a specialized private credit manager in the United States that we acquired -- are acquiring 77% of that we expect to close this year. That is a differentiated business. It's non-sponsored lending in the United States. And that's a space in particular that has not become commoditized like other forms of private debt have over the course of recent years. And also, our infrastructure debt business, Infranity, which has been very successful in Europe, over EUR 10 billion of assets from a standing start a few years ago, recently announced the opening of our U.S. office and plans to expand in the United States that happened in November, December time frame. So we haven't been waiting. And I think that's good evidence of our ability to focus on building private asset businesses and deploy existing seed capital to build those private asset businesses. Page 8 gives you a snapshot of the mix by asset class, by client type and by geography of the business on a pro forma basis, you will see that we will still remain on the left side of this chart, principally a fixed income business. Certainly, on a combined basis, we will have a larger exposure to equities than we did before the transaction. But still on a pro forma basis, that number is still south of 25%. The mix by client types. We've mentioned a couple of times on this call and we've said it in writing, the importance of the insurance and pension assets and business that matches very well with the fixed income exposure. If you look at the balance sheets of insurance companies, the vast majority of that is fixed income. So that fits and that makes sense. But importantly for us, in this middle pie chart, retail and wholesale, our partner in the joint venture going forward has a very substantial presence in the U.S. retail marketplace. Their distribution network is highly respected, highly effective, staffed by extremely experienced individuals who've delivered tremendous value for their clients. This is nearly 400 professionals in the U.S. distribution network, covering banks, broker-dealers, financial planners, retirement plans. It's an extraordinary distribution network and one that has really successfully supported the growth and the buildup of some iconic brands in their system, Loomis Sayles, Harris Associates, AEW. These are tremendous assets in the U.S. asset management marketplace and ones that we're going to be proud to have in our family of companies on a go-forward basis. I talked a little bit about distribution, but I want to spend a little bit more talking about the entire network, not just the U.S. network. Page 9 provides some facts on that distribution network. You can see that we're covering more than 25 countries with our operations, and we'll have sales coverage and offices that exceed 60 on a go-forward basis. We've talked quite a bit in some of the written materials about how the principal operational centers of this enterprise will be in Italy and in France and in the United States. But I think it's critical to acknowledge that we will have very substantial investment sales and service centers in many, many geographies around the world. In fact, in the Asia Pacific region, we have 8 functioning offices -- 9 functioning offices on a go-forward basis. And I think, tremendous opportunities in Japan, Australia, Korea, Singapore and Taiwan, some directly with our new partners, some through our existing capabilities and some with the support of Cathay Life Insurance Company in Taiwan as well. I also think that we will have a tremendous opportunity to leverage the retail and high net worth networks of Generali and BPCE going forward. I think that the 2 distribution systems that we bring are actually quite synergistic, and they complement each other. Generali Investments has a wonderful network across Southern Europe with embedded centralized distribution. That's not as strong in their network. They cover Northern Europe extremely well. I've mentioned Natixis' U.S. distribution capabilities, which are extraordinary, which our affiliates in that marketplace are quite excited to work through and get to know extremely well. And in Asia, we've got a nice presence there, but to some degree, given the growth in that marketplace, it's a bit of a whiteboard for us going forward. Our distribution network is a true global operation. We have 400 sales and marketing employees outside the United States working from over 60 offices in 25 countries. That's a hard thing to replicate and something that would have been extremely difficult for us to contemplate building on our own in our standalone business plan. We think that the potential financially is very attractive in this transaction. Page 10 outlines some numbers, these are 2023 figures and there in euros. What's been widely publicized is the asset figures. The last number we checked, we're contributing around EUR 630 billion. Of course, these numbers move around from time to time. And the Natixis' last numbers that we looked at were closer to EUR 1.3 trillion, then EUR 1.2 trillion. And that leads you to the EUR 1.9 trillion figure that you've seen in the press releases and the comments earlier. You can see the revenue lines where the fee margins are not that much different in the 2 businesses for most of the asset classes. They do have more specialty asset classes, which leads them to a higher fee margin. But generally, in the core offerings, the fee margins are very much the same. You see the bottom line, the adjusted net income figures. Again, these are 2023 estimates or actuals for the 2 businesses. And when you see those 2 figures combined, you end up with a 50-50 joint venture, but only because of the value of the seed capital that we're contributing. That's the substantial item that closes the gap between our earnings profile and their earnings profile. It's not uncommon in the business today to see seed capital be valued by asset management partners in the marketplace. It's underpinned many of the opportunities that life insurance companies and alternative managers have capitalized on together. And I think it's a critical element of why we've been able to achieve the partnership in a structure that we have today. The combined platform even after that transaction does have synergies. We've tried to be extremely prudent and thoughtful and realistic about what we could achieve in the multi-affiliate model with our synergies. The numbers here are EUR 140 million of cost synergies and EUR 40 million of revenue synergies. The EUR 170 million of cost is based off of an addressable cost base that we've estimated about a 10% cost, and that is in line, we believe, with other transactions that have had centralized asset management firms. So we've actually tried to be extremely realistic and cautious about what the cost synergies would be with different affiliates rather than pulling a number out of the year and trying to tell everybody how great it is, we've really built this bottom up on an addressable basis to get to a number we felt very confident that we could achieve. Of course, we have scenarios around this that could be potentially more, but this is our base case today. And we've estimated revenue synergies and these revenue synergies are also net of potential negative revenue synergies, for example, we've made some estimates about the slowing of client pipeline commitments during the period between now and closing that we think is a realistic set of assumptions. So we've not been overaggressive at all about our sales synergies and we have left out the benefit of the seed capital. And lots of people could make lots of assumptions about what the value is with revenue synergies from EUR 15 billion of seed capital. We would argue that it's very material and it is not included in this number that we've presented today. Some of the synergies also come with our ability to avoid making expenditures that we would otherwise had to make on our own plan in building up our own distribution. We've thought hard about the execution risk of managing this as well in a multi-affiliate model and with lots of help from some outside advisers and lots of time working together closely with the management team of our counterpart, mapped out a fairly detailed 3-year integration plan, identifying costs to achieving the synergies, where we would have to make investments in technology and in data to deliver the value and deliver the benefits that would be necessary, how long it takes to renegotiate purchase contracts with outside data vendors and others. So we've tried to be very realistic about generating a plan going forward that we feel is minimally achievable. We've also spent quite a bit of time, and I think partly because of the benefit of clarity about leadership roles between the Chief Executive and the Deputy Chief Executive, articulating for each other a target operating model for the combined business, which we have a high degree of clarity about today. That work all has to be validated after the consultation period that we are entering now and between signing and closing. But I can tell you, I feel very confident and I know that my counterpart, Natixis, feels very confident in these numbers that we've presented. Page 12 outlines benefits to stakeholders in this transaction. And I mentioned the critical importance of clients before, and that's where I start on all of these conversations because if we do well for clients, we have a good chance of making everything else work. And so for clients, making sure that we don't make changes to successful investment processes to make sure we don't disrupt strong performing, profitable growing affiliates. But rather, we support them with more distribution and with seed capital. But we have a broadened set of investment capabilities, a broadened range that we can help clients solve their investment objectives with after this transaction. And we're at a scale that we can make investments in technology to improve the client experience at a level of the best in the business. For our affiliates, we offer them, as I said, seed capital and distribution support. We will require, obviously, important risk controls and compliance controls, but that's the standard today at Natixis and at Generali. So that shouldn't be a big change. For our employees, the opportunity to grow in a larger platform and to be proud of being a part of a large successful growing platform, we believe is an attractive value proposition for our people and our teams. And then for our investors, a diversified platform of industry-leading brands and managers with best-in-class performance and service for insurance companies and pension plans and a plan to deliver value creation for our clients and for our teams and for our shareholders over time is obviously a very high priority for us. Let me wrap on Page 13 by just reiterating some of the points that we started with. We're creating a global asset management leader here. It's a European champion, but a global leader. This is a landmark transaction to change how asset management in Europe operates and can compete on a global stage. We'll have a leading insurance and pension asset manager around the world. We have very sizable seed capital commitments to accelerate and support the growth of our private asset businesses. We'll have global and broad distribution capabilities, especially in the important U.S. market, and we will implement a robust governance framework with an experienced leadership team that has great clarity about what the shareholders want us to accomplish. Let me conclude my remarks and turn it over to you, Philippe.

Thank you, Woody. Before we take your questions, a few closing remarks from me. This proposed transaction reinforces our strategic commitment to building a global asset management platform. And the opportunity is much bigger, when you consider it within Generali's wider group vision as a Lifetime Partner. We are a market-leading insurance business, a well-capitalized, technically excellent life and P&C insurance underwriter. We are protecting our customers while addressing evolving and increasingly complex needs. We are also generating a large pool of long-dated, high-quality liabilities providing steady inflows and investment firepower to our asset management business. By creating a truly global asset management platform, we can offer diversified investment solutions in private and public markets, delivering differentiated risk-adjusted returns. This also allows us to increasingly attract third-party net flows. By bringing together the best of insurance and the best of asset management we will deliver excellence to our customers through integrated offerings and value-adding services whilst leveraging on our unique agent and adviser distribution network. For all these reasons and many more, we are fully convinced of the strong value creation potential for all stakeholders from this proposed partnership. I'm immensely proud of our employees and affiliates hard work since the launch of Generali's asset management business 7 years ago. This proposed partnership will take us to the next level. Together with our management team, I look forward to presenting the new strategic plan for our global and diversified group at our Investor Day in Venice next week, exactly next Thursday. Thank you. We are now ready for Q&A.

[Operator Instructions] The first question is from Andrew Baker of Goldman Sachs.

The first one is just on the EUR 15 billion committed seed capital. Can you just help put this in perspective in terms of how much of your investment portfolio you're reinvesting each year? How much you've been allocating to affiliates in recent years? And then maybe if you're able to give us a sense of the potential upside that you highlight in the revenue synergies that aren't included in the target, that would be very helpful. And then the second one is on the cost synergies. So I can see on Slide 10, the EUR 170 million and a 10% addressable cost base. If I look at Slide 9, though, you've got 74% cost/income ratio on a pro forma basis on the EUR 4.1 billion of revenue looks a lot higher in terms of a total cost base. So just curious if you can help me bridge between the addressable cost base and the total cost base.

Thank you very much, Andrew. The first question is for Cristiano. And of course, Woody, feel to complement while the second question on the synergies is for Woody.

Andrew. So speaking about the seed capital commitment, this is something for us being normal since the inception of this strategy 7 years ago. Just to give you, let's say, range of yearly reinvestment amount that Generali Group put into work between the general account number, both of life, non-life and the shareholder money, we are talking about EUR 25 billion to EUR 30 billion on yearly basis to be reinvested. So the amount here, which could be average out of EUR 3 billion per year is exactly consistent with which was, if not even less than what has been deployed in the last years. And by the way, I recall you that in the last year, we also experienced here with negative outflows where we were, in any case, deploying more than this on a run rate basis. This is, I think, the right palette. I hand over to Woody to complete on the revenue synergy upside.

So on the revenue synergy upside, if you look at private markets assets and typical fee ranges for private markets assets, it's not unusual to see private credit funds and strategies that are priced anywhere between 75 basis points and 150 basis points, and they often have a carried interest element. Of course, carried interest elements don't play out for some period of time. Infrastructure products, debt, in particular, tend to be lower. They tend to be in the less than 100 basis points on average fee range. Private equity typically is in the 1% to 2% with a 20% carried interest, although there's been some pressure in those industries with co-investment, I think, over time. And real estate runs the gamut depending on whether it's debt or equity and whether it's value-added or traditional. So there's a whole range of possible outcomes when it comes to the revenues that you might associate with private asset allocations going forward. We do assume that the marginal margins on some of those are fairly attractive as well consistent with how alternative investment firms have been set up. So that's -- it really depends to some degree on where we see demand in the marketplace and where our asset allocation goes, how we weight real estate debt, infrastructure debt versus private credit versus private equity as we go forward. The second part of the question, I think, had to do with the addressable cost base, Andrew. And the overall cost base is around EUR 3.2 billion. We have estimated that around 53% of that is addressable. And because -- the reason we did that is we wanted to carve out the affiliates that were strong, growing and highly -- high profitable affiliates. We didn't think it was realistic to apply a number across everything. So we were looking a lot more in areas that were overhead control functions, centralized capital expenditures like technology data. And we both have 2 very large LDI and insurance businesses, where I think there'll be opportunities over time for cost deference and cost avoidance as well. So hence, applying it just on that 53% and not on the entire cost base. I hope that answers your question.

The next question is from William Hawkins of KBW.

I guess, maybe with reference to Slide 7, where more specifically do you feel excited about revenue inflows sort of taking off across all these different asset strategies. I mean you talked very clearly about private markets, so I get that. But are there other areas that you'd want to be highlighting as particular opportunities for growth? And then secondly, can you help me sort of think about what you will gauge as a successful level of net flows for this combined entity? I'm not quite sure what the history has been and how you're thinking about net flows over time. And I guess within that, clearly, you've got these new strategies that are great, but maybe the insurance businesses and the LDI stuff you talked about that could be more structurally in outflow mode. So I'm just trying to get a feel for what you think should be the gauge of flow for this business. And then lastly, you've already kind of touched on this, but I'm just thinking about the outlook for the fee margins and cost income ratios on Slide 10. Again, given what you said about private market business, should we be comfortable that fee margins are rising over time? Or will competitive pressures be offsetting that? And the synergies you talked about that would only be knocking, I think about 4 points of that 74% cost/income ratio, which will still be a lot higher than where Generali has been historically. So should -- as you kind of alluded to in the discussion, should we be assuming the you can get that you can get that 70% down a lot further? Or is it going to be a sticky number?

Thank you very much. William, both questions are for Woody.

So thanks, William. I appreciate the questions. So I'll try to take them in the order. There's a lot there. So let me try to see if I can get it all Page 7, where do I see the growth? Actually, both businesses had a very strong second half of last year with net flows positive across the businesses, which was great. So I think we entered 2025 with positive flows and the momentum behind us. I think that there's great opportunities for us in the pension and insurance business, in particular. Those tend to be larger blocks of business that are much lower fee. So having a very efficient platform to go compete for those large, low-fee businesses is critically important. I can see asset growth there being very substantial and our ability to actually make it -- generate profits is incumbent on us having an extremely efficient operation. The private markets businesses, I think, are tremendous growth levers for us, where there's demand in the marketplace, every survey that I see -- vast majority of surveys that I see of client interest and client appetite, real estate has not been in high demand lately because of the crisis we've been through in the last 2 or 3 years. But there was a tremendous rotation to private credit and private credit has exploded away from typical broadly syndicated private credit loans to a number of other specialty asset classes, nonsponsored business will be in with MGG, asset-backed private credit that we're entering through our Aperture business and others. So I see the private credit opportunities as a tremendous growth area and infrastructure, in particular, is the last one because many clients that I talk to are very interested in shifting their private debt allocations over to infrastructure in particular. That was the first question. The second question is that you asked about was a successful net flow target. It's obviously not something that we have a target for at all. We expect it to be positive for sure. That's the first measure of a healthy asset management business as a positive third-party net flow business, and that's the expectation. My teams know and our business know that our expectation is to deliver profitable growth in our businesses. Now of course, there are times when asset classes are not in favor, but a healthy business will generate positive net flows as a percent of assets that can vary widely based on market conditions. I don't think we have a target that we've disclosed for net flows. Fee margins and fee pressure. It's no secret that in traditional asset classes, there is fee pressure in traditional asset classes. Passive has put pressure on a lot of traditional offerings in particular. Most of that's happened in equity businesses, not in fixed income businesses, managing passive strategies in the fixed income markets, as I'm sure you know, William, is very different than in the equity markets. But private markets is a place where we're seeing growth. And I think that has the ability to at least offset, if not enhance our overall fee margin as we go forward with the collection of the business. And the last point you raised was about -- question was about the cost/income ratio. And over time, we're expecting to get to a cost/income ratio that's for the combined business into the 60s and trending toward a 60% objective over time.

The next question is from Michael Huttner of Berenberg.

I have 3 questions. One is China. I mean you mentioned Cathay, but I think the China -- Generali's China assets are not here. So I just wondered if you can talk a little bit about that. The second is, you mentioned many times the value of seed capital and how unique it is, et cetera. And you've addressed some of it, but I just wonder if you can give us a flavor of what peers do in terms of seed capital and how you evaluate, I don't know, it's just of interest. And then the last question is a really simple one. How much dividend will NewCo pay? And when will it start?

Thank you very much. Michael, the first and third question are for Cristiano, while the second one on the seed capital is for Woody?