Aviva plc ($AV)

I would now like to hand the conference over to Aviva's Group CEO, Amanda Blanc.

Thank you very much. Good morning, everyone, and welcome to Aviva's first quarter update. As usual, I do have a short overview and then hand over to Charlotte to give you the details before we move to questions. Aviva has delivered another quarter of strong trading and profitable growth across the group, once again demonstrating the benefits of our diversified capital-light model against the backdrop of global market volatility. Let me just share a few highlights. In General Insurance, premiums are up 19%, with an improved combined operating ratio. This shows our ability to effectively manage through the cycle and get ahead of emerging inflationary impact. In U.K. General Insurance, strong premium growth has been driven by the addition of Direct Line and underlying performance in U.K. personal lines. In Canada, our new management team is building momentum with growth across personal lines and commercial lines. And in wealth, where we are the #1 player, we secured GBP 3.3 billion of net flows, up 49% year-on-year, and flows have continued to be strong since the end of Q1. On strategic delivery, we are making excellent progress on the direct line integration and remain firmly on track to meet our synergy targets and the improvements we are making to underwriting and pricing are paying off with better profitability and direct line branded PCW policies nearly doubling since the full year. Looking ahead, our continued strong trading momentum, real progress on the direct line integration and market-leading businesses give us confidence in our 2026 outlook, including the guidance that we've given around combined operating ratio. And we are equally confident in delivering our medium-term group targets and continuing to deliver value for our customers and our shareholders. I'll now hand over to Charlotte to take you through the financials.

Thanks, Amanda, and good morning, everyone. I'll first cover the business highlights, starting with General Insurance. We achieved strong growth with GBP 3.4 billion of premiums across the U.K., Ireland and Canada. I'm pleased with the core development across all markets. a result of our discipline in pricing, strong rate adequacy and cost focus. Weather was more consistent with first quarter long-term averages compared with the prior year, which had been adverse. Overall, this led to an undiscounted core of 94.1% which was 2.5 points better than Q1 '25. In U.K. General Insurance premiums grew 28% to GBP 2.4 billion. We have remained disciplined in pricing across the portfolio and rate adequacy remains strong. Personal Lines premiums were up 62% to GBP 1.5 billion. This was naturally higher with the addition of Direct Line alongside growth across the rest of the portfolio, including intermediated business and our new home partnership with Nationwide. We added 2.5 points of rate across the motor portfolio in March to help manage inflationary impact. Commercial lines premiums of GBP 834 million reflects strong retention and our continued focus on deliberate underwriting discipline to manage profitability through the cycle amid softer market conditions. So to unpack this a little bit more for you, mid-market, which makes up about 60% of the SME channel was up 1%, benefiting from high retentions of close to 90%. This offset lower top line in digital and intentional profitability actions taken in scale. Probitas was up a little, driven by the addition of new lines of business. And although GCS volumes were lower, primarily where U.K. market conditions have softened the most and competition is the highest. This is because we have chosen price adequacy over volume. Across all segments, quote flow and broker engagement is strong. We continue to grow selectively protecting earnings quality. This is more important to us than defending short-term volume in parts of the portfolio where prices would not clear our return thresholds. Finally, April renewals have gone well, and we expect the top line trends seen in Q1 to moderate over the rest of the year. The U.K. undiscounted core was 94.8%, a 0.5 point improvement on Q1 '25, and we expect further improvement in the core throughout the year. particularly as the pricing actions we have taken on the Direct Line book and through. In Ireland, premiums of GBP 157 million, up 8% in constant currency, with personal lines up strongly. Ireland saw its core improved by 18.5 points, reflecting more normal weather compared to 2025, which have been significantly affected by storm Éowyn. So looking at the U.K. and Ireland together, the Q1 core of 95.1% is 1.8 points better than last year. And as you'll remember, Q1 core is typically higher than other quarters due to a higher weather loading. And the weather experience was in line with this loading and therefore, is consistent with the expectations we had when we set the served 94% guidance for the full year. And to confirm, we remain firmly on track to meet it. In Canada, premiums of GBP 907 million grew 3% at constant currency. Personal Lines premiums grew 4%, supported by continued rate actions across both auto and personal property. In Commercial Lines, premium grew 1% as lower average premiums in SME property were offset by some large wins in GCS. Canada's undiscounted core was 91.8%. An improvement of 4.4 points. The strong performance reflects the actions we have been taking to improve profitability across all lines and more favorable cat experience than last year. This is a great start to the year in Canada, and we remain on track to meet our guidance to achieve a core approaching 94% for the full year. Remembering that Q3 is a peak quarter for cat activity in Canada. Moving to IWR. Wealth flows were up 49% to GBP 3.3 billion representing 6% of opening AUM, another excellent performance. Workplace flows of GBP 2 billion, up 71% and benefiting from strong retention and new business wins in 2026 compared with the loss of a large workplace scheme in Q1 last year. Platform continues to perform really well, up 24% to GBP 1.6 billion. Tax year-end was another success with strong inflows in both adviser platform and direct wealth. Our wealth business continues to demonstrate its resilience as it has done through a number of periods of volatility over recent years. And we are confident in our ambition to deliver GBP 280 million of operating profit by 2027 and in the continued growth trajectory beyond that. In the insurance business, protection sales were broadly consistent year-on-year as growth in group protection was offset by a lower result in individual protection. You may recall that Q1 2025 benefited from strong sales in advanced stamp-duty changes last April. For health, in-force premiums increased by 9%. And supported by large corporate, which more than offset some reduced demand across SME and consumer channels. We remain focused on achieving our ambition of GBP 100 million of operating profit for health this year. Moving to retirement. Sales were GBP 1.1 billion in the quarter. Within this, individual annuities increased by 10% and equity release sales up 8%. In BPA, we wrote volumes of GBP 619 million across 20 schemes within the quarter. As of today, this has extended to GBP 1.1 billion. We have maintained our discipline in a highly competitive market and continue to exceed our hurdles and achieve at least low teens IRR. Finally, in Aviva Investors, AUM was stable as we saw improved flows across both external and internal channels, supported by wealth and the additional transfer of direct line assets. I'll now move on to the balance sheet metric. Solvency was 171% at the end of Q1, in line with our expectations. This was after using 13 points of capital for the final 2025 dividend of GBP 800 million and the share buyback of GBP 350 million. Cash generation in the quarter added 6 points. This included around 2.5 points from beneficial market movements, mainly from higher interest rates in the U.K. and Canada was partially offset by the expected 2-point reduction following the end of Solvency II grandfathering rules for GBP 200 million of Tier 2 debt. Our previously published Solvency II sensitivities demonstrate we have relatively low exposure to market volatility. Therefore, recent market turbulence hasn't had a material impact on our solvency position. We remain absolutely on track to deliver at least GBP 350 million of further capital synergies from the Direct Line transaction by the end of this year. And as you'll recall, this is equivalent to 7 points of solvency and is in addition to the 3 points we delivered at the end of 2025. As always, we maintain a high-quality asset portfolio, our credit portfolio continued to perform well in Q1 and to date. We experienced no downgrades below investment grade. Almost all the assets outside of public debt on our balance sheet are sourced in-house by Aviva investors using a robust risk management framework. They are predominantly real estate and high-quality U.K. productive assets, including infrastructure. And we have no exposure to the types of investments you have seen in the headlines. And we've provided more color on our portfolio in this month announcement. The assets are high quality, almost all investment grade and provide predictable matching adjustment-eligible cash flows under the Solvency II framework. To summarize, we've had another good quarter. Aviva continues to have a firm grip on performance management, and we are on track to deliver our ambitious plans. The Direct Line integration is making excellent progress with improving profitability and strong PCW volume momentum. We are absolutely on track to meet all our integration milestones and to deliver the expense and capital synergies previously announced. We are well positioned for the period ahead. And despite the ongoing geopolitical uncertainty, we have observed limited changes in customer behavior. The insurance sector generally and Aviva more specifically, have consistently proven to be resilient, and we have successfully navigated periods of uncertainty in the past. While we are not complacent, we remain confident in the outlook for our group. With that, I'll hand over to the operator so we can start question and answers.

[Operator Instructions]. Our first caller is Farooq Hanif from JPMorgan. Please go ahead.

Hi, everybody. Could you possibly give us your traditional summary of pricing in U.K. portfolio and commercial and also between Home and Motor. Just for clarity, and can you also confirm that what you're saying is that your ex direct line, there was underlying growth in personal lines? Second question is -- can you talk a little bit more about your long-term ambitions in the commercial lines market? Obviously, Probitas is growing a bit. I believe you've entered or thinking about entering the U.S. market in a very small way. what are the attractive pockets for you? And where do you think pricing is still attractive where there are opportunities for you? And then final question very quickly is, you talk about growth in the wealth profit beyond the GBP 280 million, is that a stable margin? Or do you think operating leverage is going to play a very important part in the profit expansion there?

Okay. Thanks for those questions, Farooq. Okay. It's good to know that it's a usual summary of pricing. If we become that boring, that we always do the same thing. But yes -- so shall we start with Motor and Home. I think that's probably the best place to start. So I would say that in motor, we would say that market is hardening. And and what we have done in the first quarter is that in -- across the motor and the Aviva and Direct Line, we have put in 3 points of rate in Q1 versus the [ Pearson HAM ] data, which is showing motor at 1. So I think that all that shows the discipline once again that we are displaying there. In Home, the Pearson HAM data, I think, is showing rates as minus 1 for Aviva, our rates are at 2. So in Commercial Lines, so I think the -- I think you asked a number of questions about ambition. So I'll come to that in a second. So maybe to just give you an idea of rating strength in commercial lines rate adequately. It might be the sort of easiest way for us to play it. So on what we call our SME business, which is the sort of digital scheme and mid-market, rate adequacy is well over 100% and it's more than that in our Global Corporate specialty business. And what you obviously are seeing is that -- and by the way, there's strong retention in both those areas. But what we are doing is when we are looking at our rating adequacy for a new piece of business, we are being incredibly disciplined about that rate adequacy for new business. And where we have quoted on one new business, the rate adequacy is about 10 points higher than if we had -- than business that we lost to the market. So I think that gives you an explanation of the difference between our approach to pricing and what we are seeing in the market. So you'll have seen the March data about I mean, that is sort of what we are observing. And the more difficult lines of business of financial lines, commercial property in that global corporate space. So look, I've been perhaps around too long, 35 years in this industry and starting as an underwriter. My guidance to the team rightly or wrongly is you not grow into a soft market aggressively. And so we have been have, we have and we will be disciplined about our approach to that, albeit, I think that in that first quarter, we had a few sort of big laxes where we just weren't prepared to match the market. And we believe that we will moderate on commercial lines in terms of that premium towards -- in the 3 quarters. The 2 big quarters for commercial lines of Q2 and Q4. Now if we think about what -- what are the pockets in commercial lines. So first of all, let's be very clear. Aviva is an incredibly strong player in the commercial lines, SME digital mid-market in the U.K. We would be #1 with the vast majority of brokers here. And we've got very strong proposition, so our fast trade proposition wins all the awards in the best proposition, a very strong comments in mid-market. As Charlotte articulated there, 1% with a strong close to 90% retention rate. And we've got very strong propositions, whether that's in terms of our broker Academy, the deal proposition, our partnerships proposition. So I think our schemes proposition. But what we will not do, however, on the relationship with the brokers, is if they're a profitable segment of business. And we've seen that in this quarter, we had some schemes that were underperforming. We will obviously not keep hold of those schemes. So I would say in Canada and in U.K. and Ireland, very, very strong propositions in our SME, mid-market, digital proposition. And we -- that learning is being shared between the Canadian, Irish and U.K. businesses. Ireland have launched new fast trade positions in the last number of years, very, very successfully and launched lots of new product lines. Now GCS is much more, there's less loyalty in the GCS space. I always look at Charlotte and say is people like you making the decision business. It's not relationship trade. It's sort of hard note traded. And so it's much more driven by price. And if you think about commercial motor, which is where our retention has been lower in GCS this quarter, property. Those are areas where they are marketed almost every year. And so you'll have the opportunity to write that business at more profitable rates. We will not write that business unprofitably. In terms of that GCS market, we will maintain discipline through this market. And we do consider that the sort of -- that market will be soft for the balance this year. but there are opportunities for us to grow in other segments. So you touched on U.S. GCS. So obviously, this is not a new market for Aviva. We've already got a profitable book of U.S. business is underwritten from London. And what our planned onshore business builds on this and enables us to get closer to the customers there and significantly expanding our addressable market, whilst leveraging our distinct capability. The important point here is around the broker relationship because if we think about the brokers now, in U.K. and U.S., our accounts with those brokers will be huge in the U.K. So if you think about the likes of Gallagher, Aon, Marsh, Willis, Holden, they've all got big U.K. relationships. And so we're harnessing the opportunity for -- from the U.K. relationships, and we've put a small team in the U.S. Our initial focus will be on property casualty particularly specialty lines business. And that we will start, and we'll start small, and we'll be very careful clearly about how we do that. But we're looking at this -- at that investment over the long run. We see an exciting opportunity, and we'll do it in a measured and sensible way. Hopefully, that's answered all of those questions. Charlotte, did you want to pick up the wealth margin?

Yes. Would you -- I mean, I suppose the point around unstoppable momentum in our wealth business coming from workplace combined with all the investments we've been doing in the direct proposition, guided to what coming along, there's a lot of tailwinds. I think we said all the way back to the in-focus session on wealth that we continue to expect revenue margin -- and that we talked about at the year-end, and we expect that to continue in line with those expectations. So it does make it really important that we use our scale and efficiency within the cost base to deliver improving operating margin all time. And I think we talked at the year-end that despite the headwinds on revenue margin, we were just over a point improved on operating margin. And we will continue the initiatives to keep driving that forward.

And just one on the Mercer scheme, which obviously we talked about at the full year, so that is not in the Q1 because the first those tranches of the scenes have started to transfer in April. And the majority of those flows and the larger schemes will be back-ended over the next -- so as well as this is GBP 1 billion of regular contributions, 112 new schemes that we've won. We've also got this Mercer business, which will be flowing in. So very, very excited about the opportunity for us.

Our next caller is Andrew Baker from Goldman Sachs. Please go ahead.

I guess both BPA side, if that's okay. Firstly, how should we think about the VNB margin development for the rest of the year? And do you expect the PAs funded reproposed changes to have any material impact on pricing. And then secondly, I can see you're still doing low teen IRRs. But I guess if competition increases here further, will you simply just pull back on volumes? Or could you explore other options like sidecar structures or anything like that?

Yes. So look, I think on the VNB margin, I mean, it is important to remember a couple of things. The scale of the BPA market, the transactions that came in Q2 is sort of more in the $4 billion space, whereas back in -- from a market perspective, whereas in Q4 '25 it was sort of more in the GBP 12 million to GBP 14 million. So it was a very different size and scale of market, combined with increased numbers of players looking to compete. So you got those -- 2 of those dynamics -- if we look at the trades that we did, actually, what we saw towards the end of the back end of Q4 was there were smaller schemes and through the clarity and they thought they gave us a slightly higher margin. We see this time is a couple of bigger ones and some smaller ones, so it's been a bit more of a mixture. So you are seeing that competitive driver. And as we said, for us, it's less about the margin. It's more about the capital strain and therefore, the value creation over a period of touch is why we focus the IRR. And with a WACC of sort of 9% or 10%, 9-ish percent, having low teens IRR is a good margin over that. So that's a focus. I think as we outlook this year, already having now got to by now with a pipeline that is reasonable, not this year, but over the course of next year, we would expect some of the remaining internal schemes to come market as well. So there is a decent pipeline. We will always be disciplined we compete hard, and there are some transactions that we don't win because we're not willing to go to the prices that they transact that. And that is the discipline that you know and should expect from us. With funded, we don't use it very much. We use it sparingly and where we use it because it makes sense to do so, not to take advantage of perhaps historic differences in the capital framework it's not altering our plans. Again, we will continue to use it where it makes sense to do so, but it's pretty sparing. So it has very little impact on our strategy or execution, which is probably different from some of the others in the market. And then I suppose, if we can't hit our hurdles just to repeat, the discipline will mean that we've got other options. That's the beauty of the diversified model, and we will look to deploy it in other areas. But I think we have a great team and we are continuing to compete and where we're losing out here and there is because people are doing so at prices that we don't see are economical.

Our next call is Thomas Bateman from Mediobanca. Please go ahead.

I just want to come back to the BPA margins. It's a little surprise, you've written business at these margins at all because I would have thought that the strict -- so strategic asset allocation was quite similar to last year. Is the market really that competitive? Or is it just -- is there -- I know you alluded to the mix shift here? Is that playing an even bigger effect than I might think. Second question is just on your comments around health and slightly slower demand. Could you just bridge us to how we get to the GBP 100 million 2026 target? I say this because you seem very completely in the target, but there's still a big gap, I guess, there. And the final question is just on the integration with Direct Line. Could you let us know how you're going on in terms of cost cutting and the benefit from expense synergies that are likely to impact the GI combined ratio the here. I say this considering that -- I assume there's relatively little impact in the combined ratio so far.

So I do want to do one, I'll do 2 and a bit of 3, and we share 3. Look, I mean, I don't know there's a huge amount more to say on the BPA margin. We are disciplined. We're writing BPA business. It's relatively low, low strain from a capital perspective, and therefore, it's driving those IRRs, the total sense. The IRRs themselves are a long-term metric as posed sale metrics. So they kind of drive the value and kind of like include sensible assumptions on Solvency II and capture more of lifetime value. And that's our focus. And as I say, we are able to transact at levels that meet those hurdles. It's a small component, obviously, but it has been a smaller market, too. So mean in danger of just repeating what I said to Andrew, but that is the -- and on -- so on health, so what we're seeing in-house is these dynamics going on depending on what part of the business you're talking about. So we're seeing good demand -- and from the large corporates. And you've seen our -- decrease by 9%, and that is primarily driven by those large corporates, where we're seeing less demand is in that SME space, where there's a real affordability point following the national insurance contribution changes and SMEs have got choices to make. And I guess it's pretty important that the National Insurance contribution. And on consumer demand, we're seeing less written about waits, et cetera. But I think the way that we look at this and why we feel very confident about it is that what we're seeing much more is that the corporate customers are looking at health and protection together and looking at how can you get people back to work more quickly. And therefore, that is there some real good demand dry there. And we launched in a couple of weeks actually, our new well- proposition of protection well-being proposition which brings together protection and health proposition. So it's much easier for our customers to be able to navigate their way around that and utilize both products in line because, obviously, quite often, we have corporates that have got their health and their protection product with us. We have been very disciplined on how -- we use the word disciplined a lot this morning. And I'm not going to apologize for that we're an insurance company. That's what we should be doing. The health combined operating ratio remains strong in the low 90s. It has been consistently like that as we've navigated through various periods over the last number of years. and that's in line with how we manage the business. So when we set the GBP 100 million target operating ambition, obviously, that was an ambitious target, and we were operating in a different market. And there's no lower demand. But the way that we look at these things is we've worked hard to meet the ambitions that we've set. And so we believe that we are on track to that GBP 100 million operating profit in-house this year. In terms of the Direct Line, so maybe I can talk a little bit about the progress on the integration, Charlotte can come back on your point the expense synergies. So I think, obviously, the inflation is going really well. And we've taken a swift amount of action right across the business. So whether that is getting the pricing models in place, getting the Ford models in place, putting Direct Line on all the 4 major price Carson website. And by bringing together, by doing that and bringing together all of the data set, we've been able to enhance the pricing across the book. We've also been able to broaden underwriting footprint. And that change of marketing from less direct marketing to more PCW. We'll see that changes. It does change the expense as well as anything else. Also, we've harmonized the supply chain. So 60% of the supply chain spend already shared. So we focused on harmonizing the rates that we pay. And we've also streamlined the non the non-claims suppliers. So -- and 70 of those already and more under review. We've made really good progress on the what we call the Ping, the movement of colleagues from one entity to another. That will complete later this year. And we've also made good progress on the new lines of business, a micro SME, the PET and the rescue where we see that there's loads of more potential. So I think all of that combined I mean I was speaking to the team last week. And what's really interesting is that, yes, we bought all of the benefit from these models. And that is phenomenal, but you also have the added benefit of scale. And by having these 2 books of business that come together we can not only apply obviously the models across the way, but we're just able to make better pricing decisions because we've got more data. And that is the bit that we are really seeing starting to benefit the under performance, which we'll obviously come through over time. Charlotte, did you just want to talk about...

Yes, just on the actual synergies themselves. So if you remember back in November, we said we set the synergy target of GBP 225 million to be delivered by the end of '28. And then we said that at the end of '25, we had achieved EUR 50 million of those run cost savings, of which GBP 10 million were recognized in year in '25 and for '26 GBP 50 million kind of starting at the beginning of the year running through. Obviously, we're continuing to work away. And so some of the cost savings that linked to the initiatives that Amanda mentioned will be realized here. Some will kind of come towards the end of this year. The capital synergies are linked to -- 2 things, the major model change and the Part VII obviously, at the point that we achieved the Part VII, which is end of this year, then quite a lot of the legal entity structures at the sort of pluses and you get an additional moment when there's quite lots of cost savings to come through. So I think originally, we guided to the sort of the GBP 225 million being relatively spread and was fully run rated through by '29. We'll give you more updates at the half year, but we remain completely on track.

Our next caller is Nasib Ahmed from UBS. Please go ahead.

Just 3 for me. Firstly, on Canada combined ratio, around 92%. I know 2Q and 3Q is high on weather. But is there anything else in the 92% like DYD that makes you comfortable about approaching the 94% because the run rate is actually better at the moment? Second, on the health business, you've got BP 30 million of earnings to come in '26 growth in earnings to reach the GBP 100 million. I think you were at GBP 72 million last year. but your top line is reduced. So how do you -- like what are the moving parts to get there to the GBP 100 million target for this year? Then finally, on the solvency bridge, I think you get to around GBP 180 million already if you had direct line. So on [ 1 plus 7 ] points. Can you kind of pre the moving parts? What is the OCG contribution -- net of the dividend. And I think the buyback is already excluded?

Yes. So shall I'll start with Canada combined. So look, I think it's, as I said in my opening remarks, the Canadian combined ratio is a function of the profitability actions that we've been taking. And it was a more benign weather quarter relative to last year, but it was consistent with the weather loadings that we have for Canada in Q1 -- but they're not the heaviest weather quarter. We'll unpack all of the components of core at the half year. At this stage, I'll just give you a bit of that color. So it is the improved profitability actions that we took is modest amount of PYD kind of across the group this time. But as I say, I'll give you more detail on that at the half year. But assuming that the loadings for weather operate as we would expect, which she have in Q1, we would expect a heavier on then we absolutely see the pathway to approaching 94% for Canada. I'm not sure I've got a lot more to add on Health. I mean, there's not that many moving parts in a combined operating ratio is that you've got your premiums and you've got rate flowing through and there's been good rate going through the portfolio. Medical inflation is high, and we are carrying that rate. And then you've got your expenses. And as I said, it's the combination of us looking at all gives us the confidence of getting to the GBP 100 million. I don't think there's much like I can actually add on the solvency bridge change -- the solvency bridge. So yes, so I mean it's obviously early in the year kind of bridge to the full year. But I think, as you say, there's a 7 points that we go to come in from direct line. there's probably, if you think about the sort of regular capital build each quarter, then that's 3 quarter plus a little bit for management actions. Then I would say that's a 12-point build for the remainder of the year. So that's 12 up, 7 up, there's probably about 5 to pay for the interim dividend. Those -- that would take you to mid-180s. That sort of excluding market impact, either positive or negative, which I think makes sense because, as you can see from activities, we're relatively insensitive to movements. And even if I look at what's happened since Q1 with swap spreads being around 20 points up, the sensitivity means that kind of that's relatively small. So those are the main obvious blocks and then there's the kind of market moves..

Our next caller is Andrew Crean from Autonomous. Please go ahead.

Sorry, I'm going to come back to the BPA thing, low teens IRRs, given how little capital is being used now in sort of build heavy strategies -- doesn't argue for a substantial decrease in the profitability. Could you just talk a little bit about when you say low teens, are you loading is solvency or a higher rate of sort of 175%? Secondly, I wonder whether you could give us the new business profits for the Wealth division, which you used to give -- and then thirdly, could you talk about the growth in your direct wealth business? And how big in assets is your direct wealth business now?

Andrew. Charlotte, do you want to pick up the first one pick up the...

Yes. So look, on the IRR, we do allow for a Solvency buffer in that. So it's kind of more like the 145, 150-ish kind of that sort of level. So it's not just a pure 100. So I think we are factoring in fully what the capital strain that's on there in a real way and achieving more than the weighted average cost of capital. On the -- so look, on the metrics that we've given for a while, we've -- we think that the business is best model using flows, revenues and expenses. And kind of at the back, we've given you the gross flows on Page 6, which we historically have only given at the full year in the half. In our view, that is the most relevant way to the business and kind of rather you focused on it like that. I know that in the past, people have liked to add up the components for an IWR, but then it's been dominated by the wealth piece, which -- for which this metric is the least relevant. So we are moving away from that metric going forward.

And on direct wealth. So we've made really good progress in direct wealth. Customer numbers are 30% and they've now passed the 100,000 mark, and the net fund flows are 56% as we continue to see strong demand, particularly in the weeks prior to the tax year-end. So we expect that to continue to grow, obviously, using brand, enhancing the proposition and the way that we optimize our marketing. I think the other area Obviously, our focus here is the introduction of the targeted support rules. So I think they've definitely got the potential to transform how we support our consumers with their pensions and their investments. And we're developing that targeted support service, and we're now in the process of seeking the formal regulatory approval and we're aiming to launch that in the summer. So we -- our first 2 use cases are going to be in the pension space, which is slightly more complex, but that's where we believe the bigger opportunity and obviously, that plays into stimulating U.K. growth by enhancing customer the financial products. It's innovative and we're reducing the -- there's some reduction in regulatory barriers. So we honestly believe there's a really huge opportunity for us here, given the size of our customer base across that sort of wealth and the heritage book and possibly utilizing artificial intelligence with our position in Workplace. So that sort of a together in terms of supporting that continued growth in direct wealth, Andrew. So we're quite keen on that, obviously.

So what were the assets in Direct -- well -- and...

What was that at, we got that for you. it's about GBP 4 billion, I think.

Our next caller is Larissa Van Deventer from Barclays. Please go ahead.

On my side, focus on 2, please. The first one on commercial pricing. You mentioned the soft pricing environment. Could you give us a sense of your outlook for when it may harden and to what extent along with your expectations for retention if you do Amy keep your pricing elevated. The other one is on workplace. Very strong flows now up 71% should we take this as the new normal or the one-offs that we should take into account when we consider how this may grow going forward?

Okay. So Larissa, I obviously spoke quite a lot about commercial lines earlier on. So maybe I'll just focus more on your the outlook point because I think we've told you where we sort of are where we are today. So look, I think the outlook suggests that pressure will on rates will remain with elevated competition throughout the year. But just to be clear, I'm going to use the same word, underwriting discipline is firm. I've talked to you about our rate adequacy the rate dynamics do vary by line. Some lines are still positive. Others are not. I won't go through the whole [ 20 ] but I think if you looked at the Marsh index, we wouldn't be dissimilar, we would be seeing the same sort of things that they they're seeing. In terms of opportunities, though they do still exist. We've talked about the dual stand platform, the new -- the 7 new products we've been able to launch through Probitas, at the specialty lines, and we will continue to prioritize margin over volume. I don't have an indication of when the market will harden. I just -- I can't tell you that. I think for the -- we would say that certainly, for the course of this year, we would see it being similar to what it is today. Clearly, tactics and everything else will change by different insurers according and responding to that. But I think that with an insurance business, and like I say, done it, been in this for such a long time, -- the absolute key thing is to keep your discipline in a soft market to keep your relationship with your brokers strong to look after your customers, to beef there when they need them, so that when the market hardens, you've got all of those relationships and you've got everything that you can really work on. And that's the way that we will be playing it. We're not in this market out of -- we are long-term players as we always have been, and that's the way that we'll be continuing to focus on it, whether that's in the U.K., in Ireland or in Canada. In terms of workplace, remember, Charlotte actually said we lost a large scheme in the first quarter of last year. So there is an element of that in the first quarter of this -- so I think that's how you should think about it. But also, I would say the momentum is incredibly strong. You're looking at this GBP 1 billion of regular contribution monthly coming from the existing schemes, a high retention rate, a high win rate, 112 new schemes in the first quarter. And the Mercer scheme still to flow through over the next 12 to 15 months. That isn't in these numbers yet at all. We started that in April, and that builds over the period. So I think there's more to capture. So all I would say is don't build your model on 71% -- each time. But the GBP 2 billion of workflows, plus kind of like thinking all of those factors, that is off the course.

Our next call is Fahad Changazi from Kepler Chevreux. Please go ahead.

Could I just ask a bit more about the U.K. commercial. You mentioned 60% was mid-market, presumably that's Q1. Could you just tell us so how much is GCS for the whole year? And could I just confirm you said Q3 and Q4 -- Q2 and Q3 were -- quarters GCS could you just confirm that? And the other thing I just wanted to ask about was on Canada. You were rolling out your replicate our Gerlach network, I believe, where you can with within in the U.K. I was wondering how that was progressing?

So on -- the way to think about commercial lines, and I think Charlotte said, looking at the whole portfolio, of the what we call SME, which I admit is very confusing is what we call internal U.K. commercial, mid-market is around 60% of that with the balance being digital and schemes business. And then obviously, we've got the GCS business and the Probitas business that sits on top of that. In terms of the way that in the GCS business, the sort of larger business, the way that it works, is that -- and these are not exact numbers. Q1 is about 20%. Q2 is about 30%. Q3 is about -- 20% in Q4 was about 30%. It's about [ 2030 ], I think that add up to 100, I think. So I think that does pretty much how to think about it. And April has got off to a good start on that. As far as the garage network in Canada. So yes, we continue to invest in that garage network. The ambition is to in-source the claims value chain because obviously, we see the real benefit of that in the U.K., where we've got an average cost per claim saving of around GBP 500. I think we talked about that at the full year. So as we sit here today, the Aviva AutoCare centers in Canada accounts for around 10% of claims. We'd like to bring that over 30% over time and coupled with the deeper relationships with our dedicated that will improve the overall indemnity spend, we believe considerably. So in Canada, the severity savings from what we call our captive shops are currently averaging around $518 per claim with about -- with year-to-date savings relatively modest people when you just started it. So we continue to strengthen the network and -- and I guess we'll have more to say on that. And the brilliant thing here is solvency in the U.K. have been spending time over in Canada. They've helped the team set up the garages. So we feel very, very positive about that.

Our next caller is William Hawkins from KBW. Please go ahead.

I would like to come back to expenses, please? I'm picking up what you said to Thomas. On the non-life side of the business, I've been doing a lot of work, and it still stands out that Aviva's expense ratios in non-life are a lot higher than the other big 5 composites. There may be big problems of definition in this, which I accept -- but I guess I'm just kind of wondering, when you're doing your own assessment about where you've got best practice and where you can improve, what are you looking beyond Direct Line? Is it just all about the Direct Line synergies? Or is there a lot more stuff that you can do? I'm not suggesting cost cutting is the only thing in life, but the difference in the ratio is quite an outlier? And then secondly, please, also just back to how you're thinking about how the synergies play through. So if we take non-life expenses relative to 2026. Are they going to be lower because of the synergies? Or ultimately, could they still be flat or higher because you've got all the other drivers like business growth and passive inflation. And obviously, you're still going to be investing in the business.

Okay. Thanks for the questions, William. So obviously, I don't know the data that you're looking at. But if I think about the nonlife expense ratios, for Aviva. This is -- you have to here look at the -- what the business mix actually is. It's purely a symptom of business mix. But with Aviva, we have got, yes, a big direct business, where we've also got a very big intermediated business, and we've also got a very successful partnerships business. Now in that partnerships business, obviously, we are taking the expense but -- and we're managing those very profitably within a range of combined operating ratio, where we're protected on the downside. And in the intermediated business, you've got the commission which is payable. So you've got to look at all of those things together. So I think honestly, having tried to do this for many years, it's almost impossible to put every business side by side, unless you know exactly what the business is. The other point is some of the bigger insurers we'll write a lot of business net and not with full commission, whereas a lot of our business is SME mid-market, and therefore, we will write that with commission. So difficult to see through. The other thing, I think, which always adds a little bit of a specialty in the mix here is the way that you look at in-sourcing and outsourcing and things like adjusted costs on claims, people deal with those differently. And so your point around definition is very well made. There will be major definitional points depending on the way that you're looking at it. So I mean, look, happy to sort of take it away. And we will have, obviously, at the full year and half year, we always have more exposures. But what we see our expense ratio is improving and continuing to improve over time. But you're never going to be able to remove that element of commission of the intermediated costs. when you've got such a big intermediated book of business. I don't know, Charlotte you've got any more to add on that.

Not really other than to give you the assurance that we're very focused on cost -- and internally, we're always doing what benchmarking we can do and focusing on what good costs are. So if there's volume-driven cost and supporting top line and customer growth, then obviously, that's really important cost, whether that's marketing or making sure that we've got the personnel to be able to deal with it. always looking at how we supplement people costs with automated abilities to make them more efficient. There's ongoing inflationary pressure that we have to look at for our workforce. We have good contracts with outsources to kind of manage and keep on top of that. But is constantly the battle against inflationary pressure. And then we're always looking at how do we drive productivity and savings, how do we kind of do things best both for the customer and from an efficiency perspective. And all of that kind of continues. So I think as we continue with the efficiencies out of Direct Line. That will drive -- and that's kind of 2 points of the EPS development. We've got 2 points of business improvement coming across the piece, which -- some of which will come from efficiency savings -- sorry, 7%. And kind of like it's all together, but you can be rest assured that we are very, very focused on it.

Sorry to be -- but can I come back -- does that can...

Yes, go ahead, William.

Very sorry. Just to push you, I'm still just trying to get clear. Does that mean that 2028 expenses are highly likely to be lower than 2026 expenses? Or because of all the other moving parts, is that just too simplistic a way of looking at it?

I think that's too simplistic. We haven't made all the decisions that will drive us to '28 yet anyway. Opportunities come, like if partnerships come and we have to add cost in order to do that. I mean, there's so many different -- and then there's the inflationary drivers, it's too simplistic. But we'll be very focused on the ratios and keeping it as efficient as possible. And look, we sit here today, think about artificial intelligence and what benefit that can provide to the business. I mean we're just at the sort of beginning of that. So I think it would just be impossible for us to say. But to just reinforce what Charlotte said, our focus is always on delivering the lowest cost because if we're inefficient, we pass that on to our customers, and then they can make choices about where they want to place their business. We need -- it's a competitive market. We need to be able to price well. And if we're pricing well, we have to have an efficient back end in order to be able to do that. And at about the efficient back end share -- that's what I'm saying. Next question. I think this is our last question.

Our last call today is Abid Hussain from Panmure Liberum. Please go ahead.

I've got a couple of questions. The first one I'm sorry to say, is coming back on the BPAs. I'm just trying to understand what are your minimum IRR hurdles? It looks like you're margins that are compressing and you're sort of at the low teens. But that sort of low teens number is difficult for me to reconcile with those quoting a greater than 20% lifetime IRR. I'm just wondering if you can help us reconcile the 2? Is it something on the asset side, the capital side. So just wondering what's your equivalent lifetime IRR if possible? And just an aside on that, would you ever consider switching to a capital-light fee-based model on BPAs? So that's the first question, slightly long, sorry. And then -- the second one is on Motor. What's the claims inflation outlook that you're pricing for across the rest of the year? And then do you think that, that is broadly being priced in -- fully being priced in now across the market?

Okay. Charlotte, do you want to do the first one?

I think on IRR, we've had I think let's provide a little bit more detail when we do so at the half year, although I don't see that there's a huge amount of good disclosure on the methods that peers are providing either. Ours is bear in mind the WAC, which is and 9 or so percent. It's definitely applying the solvency kind of -- if that's the right word. So kind of it's not just a required levels with the expected return or the return that we need on it. and low teens is there for the hurdle and is a good use of capital and drives a good return on that use of capital. I think probably that's as far as I'll go today, but we take I think on board the feedback of people wanting to understand this a bit more, we'll do it at the half year.

And then on the final point, so inflation -- motor inflation is around mid-single digits. And I would just say from our perspective, therefore, obviously, we're pricing for that. We are adequate in the Motor portfolio. And you have to layer on top of that, the benefit I talked earlier about the supply chain models and the scale of the portfolio, which will allow us to drive I would say, better prices out of our supply chain and perhaps others can, which sort of mitigate some of that inflationary impact. So we feel very confident about that. So I think that might be the end of the questions. I mean, that's been a whole hour for a trading update, which is fabulous. And thank you all I'm sure there will be questions you want to follow up with the team, please do. We take both the feedback about the IRRs, and we will have a look at that. But it is our new trading statement as we always say, it's been very good to answer your question to get a feeling of what you're thinking about. So thank you very much indeed, and we look forward to seeing you soon. Thank you.