Direct Line Insurance Group plc (DLG) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us at such short notice, especially at this time of year. We're delighted to have released the 2.7 Announcement this morning, formalizing our recommended offer for the acquisition of Direct Line Group, or DLG. And I'd like to thank the DLG Board for their engagement over the last few weeks. Today's presentation will include the key aspects of the announcement. I'll start with the highlights of the transaction. Jason and Owen will talk through the opportunity for U.K. Personal Lines, and Charlotte will then cover the details of our offer and financials, and there will be plenty of time for Q&A. Let me start with today's key messages. Over the last 4 years, we've transformed Aviva into a high-performing business with a consistent customer-centric strategy and real performance momentum. And we are excited about the opportunity that DLG presents to accelerate this momentum and deliver enhanced shareholder distributions. There's a compelling strategic case for this transaction as we create a leader in U.K. Personal Lines and accelerate our capital-light growth. And the financial case is just as strong, supported by GBP 125 million in cost synergies, which we anticipate will deliver 10% run rate EPS accretion and material capital benefits over time. Most importantly, we have confidence in our ability to execute and unlock the full potential of a combined Aviva and DLG. Aviva is a very different business today to the one I inherited. We've achieved a huge amount and established ourselves as the U.K.'s leading diversified insurer across Insurance, Wealth and Retirement. Our performance for customers and shareholders is testament to that. Quarter after quarter, we've proven that we can deliver. We have big ambitions for Aviva's future with no shortage of growth opportunities. And the acquisition of DLG further accelerates our trajectory. Now moving on to the transaction itself. Our offer values DLG at GBP 3.7 billion, and I'm pleased to say that this offer has been recommended by the DLG Board. For DLG shareholders, it represents a significant premium to the share price. With a balanced mix of financing, it will deliver meaningful cash consideration upfront. It will also allow them to participate in upside through Aviva shares. The benefits are just as attractive for Aviva shareholders, creating value from the start and enabling greater capacity for distributions. And this value creation is underpinned by a strong rationale. We are creating a leader in U.K. Personal Lines, powering our capital-light growth and expanding both our customer base and what we can do for them in line with Aviva's strategy. Together, we can accelerate DLG's plans, delivering GBP 125 million in cost synergies. That is over and above DLG's existing commitment for GBP 100 million in cost savings. We will also unlock material capital benefits over time. The transaction is consistent with our capital management framework and disciplined M&A criteria and ensures that we maintain financial strength. I am really excited about what DLG will bring to Aviva and what we can achieve together. This is truly a win-win for both Aviva and DLG customers and shareholders. So let me elaborate on these points, starting with the strategic rationale. As I've said, bringing together Aviva and DLG will establish a leader in U.K. Personal Lines with over 18 million policies in force. All customers will benefit from our increased scale and strength, be it competitive pricing, faster claims and stronger supply chains or more products and services. We will have an even more impressive portfolio of brands, including Direct Line and Churchill and attractive new products like Rescue and Pet. We will be able to engage with more customers directly through the retail distribution channels. And with greater operational scale, we will drive further efficiency gains for our customers. Beyond this, our priority will be to deliver the best of Aviva to all customers from our digital offering with the next-generation MyAviva app to a broader suite of products and services across Insurance, Wealth and Retirement. Moving now to the impact on our capital-light portfolio, which, as you know, is a core element of Aviva's strategy. This is important because it allows us to deliver more growth and higher returns for shareholders by investing to accelerate in these businesses. Our U.K. GI business had a Solvency II ROE of 22% at half year '24, and this transaction will drive further improvement here. We're already making great progress here organically. We are majority capital-light today, and we'll be approaching 70% in 2026 with our current plans. And with this transaction, we will be able to go much further in changing our earnings mix as we deliver synergies. Turning now to why we have confidence that we can successfully integrate these businesses. We have all the right ingredients. We built a track record on M&A, managing multiple disposals in quick succession and enhancing our capabilities and scale through a series of strategic bolt-ons. Our performance has been consistently strong. We've been beating our targets, including delivering over GBP 750 million cost reduction one year early. Our Personal Lines team, led by Owen, has proven that they can deliver impressive performance in challenging market conditions. Importantly, the integration will be contained within this business, supported by dedicated resources. And we've been improving customer experience with our transactional Net Promoter Score up 5 points this year alone. A large part of this is due to our fantastic and highly engaged colleagues and their relentless focus on customers. We know DLG's colleagues share this customer focus, and we're looking forward to welcoming them into the group. I am excited by this deal and committed to delivering great outcomes for customers and shareholders. To conclude, I'd like to further reinforce our commitment to deliver superior returns to shareholders. As you've seen, our track record here is rock solid. We've always had a very high bar for M&A, and we've been disciplined with this transaction to ensure it creates value for all shareholders and maintains Aviva's financial strength. On day 1, we'll operate at the upper end of our working range on cover ratio before any synergies, and we'll remain near our guidance on debt leverage. Over time, this transaction will allow us to enhance our dividend policy and unlock greater capacity for shareholder distributions. We expect to rebase the dividend per share upwards and resume capital distributions at higher levels. Charlotte will provide more detail on this later. I'll now hand over to Jason and Owen to talk more about the opportunity. Over to you, Jason.

Thanks, and good morning, everyone. As Amanda said, we have a fantastic opportunity here. I'm very excited about the capabilities that DLG brings from established brands to distribution strength in retail, complementary product offerings, customers and of course, the fantastic talent in DLG's colleagues. And I'm equally excited about the performance improvement potential that we can deliver together. We will accelerate DLG's strategic plans and go further to deliver greater efficiency gains from and upside from increased operational scale combined with our technical capabilities, pricing sophistication and underwriting discipline. With the balance sheet strength of Aviva, we'll be able to invest in the business to accelerate growth. And we're building on very solid foundations in our Personal Lines business. We have excellent technical bench strength and the numbers over the last 3 years highlight just how strong the team is. We're delivering significant growth in premiums, tracking at over 20% per annum, and that's largely been driven by the attractive retail segment, which has grown by 43% year-on-year, but this growth hasn't just been driven by inflation. We've added over 1 million customers in less than 2 years with double-digit growth in retail motor policies this year alone. Through all of this, we've been highly disciplined in underwriting, maintaining our combined ratio around the 96% mark throughout the market cycle and continuing to improve expense ratios. And this means that we've now met or exceeded all of the 2024 ambitions that we set for ourselves at the Personal Lines focus in January 2023. I am really proud of Owen and the team who have driven the impressive transformation of this business over the last 4 years. They've successfully navigated challenging market environments and delivered strong profitable growth right through COVID and periods of high inflation where others have struggled. We've transformed our customer claims journey and leveraged the benefits of auto repair capabilities in-house with Solus. And this has resulted in a material uplift to our Net Promoter Scores. They've integrated multiple acquisitions across high net worth and home and launched new partnerships with major banks. They've successfully put Aviva on price comparison websites, shifting our distribution to now majority retail. And they've built Aviva Zero, our fastest-growing PCW proposition from the ground up in just 6 months, and we've now sold over 1 million policies since launch. They've established leading data, AI and now Gen AI capabilities. And their list of achievements just goes on. So I know this is the right team to invest behind, and I'll now pass to Owen to share some details on the benefits of this deal.

Thanks, Jason, and good morning, everyone. The acquisition of DLG would expand our opportunity in what is an attractive market for Aviva, and I'd like to start there. The U.K. P&C market is one of the largest in Europe, and it's growing. That in itself already presents a clear organic growth opportunity for Aviva, and we've proven that with our underwriting discipline, pricing sophistication and claims capabilities, it is a profitable one. And with DLG, we'll be able to respond more effectively to the structural trends and challenges of this market, whether that's strong competition across a fragmented landscape, the scale of PCWs or the need to continue investing behind brand, technical capabilities and regulatory compliance. And importantly, we will be able to deliver better outcomes for our customers. As Jason said, the benefits of this transaction will come from the highly complementary nature of our businesses. Let me bring this to life for you with just a few examples. DLG's brands will extend our reach with customers. For example, the addition of Direct Line to Aviva's brands will boost our presence across retail channels, and Churchill will strengthen our position in lower-cost segments. As well as enhancing existing lines, DLG will bring new products and accelerate our progress in SME direct. We have already seen a material uplift in our Net Promoter Scores and optimizing our Solus auto repair capabilities with DLG Auto Services and Green Flag Roadside Assistance will further transform clients journeys. Our combined distribution mix will shift by nearly 20 percentage points towards retail across PCWs and direct. This is really important because it enables us to engage directly with customers. And as you can see, it is a more profitable and growing segment of the market. And finally, we'll have a much greater opportunity with our collective customer base. All customers will benefit from our increased scale and strength, be it competitive pricing, faster claims and stronger supply chains or more products and services. They will have access to fantastic Aviva customer capabilities like our next-generation MyAviva app, which Cheryl took you through at the recent Customer In Focus session and so much more that only Aviva can do. So hopefully, you share our excitement on what we can deliver for our customers and shareholders as a combined group. I'll now hand over to Charlotte.

Thanks, Owen, and good morning, everyone. I'm very pleased to discuss today's fantastic news. This is a great deal for Aviva and for Direct Line. We are really excited about the opportunities for the combined group to accelerate our growth momentum. The transaction represents an excellent strategic fit, as you've already heard, and it offers a really compelling financial rationale, about which I'm delighted to share more details. I'll start by covering the key terms of the recommended offer. The offer is for 270p per share with dividends payable to DLG shareholders of up to 5p. The transaction will deliver material capital synergies and GBP 125 million of incremental run rate cost savings, which will be embedded over 3 years from closing. We expect the transaction will be EPS accretive in the first full year post-completion, including the impact of restructuring costs and deliver around 10% EPS accretion on a run rate basis. This enables us to increase shareholder distributions through an upgraded dividend policy. We anticipate the transaction will close around the middle of next year, following the completion of required shareholder and regulatory approvals. I'll now unpack the financials a little further. The recommended offer price values the group at GBP 3.7 billion and means Direct Line shareholders will own about 12.5% of the enlarged group. We believe the transaction is highly attractive for DLG shareholders, offering a 73% premium to the undisturbed price, with consideration evenly split between cash and newly issued Aviva shares. The equity component enables DLG shareholders to participate in the future value upside from holding Aviva shares, not otherwise available on a stand-alone basis. The cash component of GBP 1.75 billion will be funded entirely through internally available resources. The transaction will also deliver material upside for Aviva's shareholders with significant cost synergies leading to around 10% run rate EPS accretion, substantial capital synergies and growing distributions. I'd now walk through -- sorry, I'd now like to talk about the synergies to be unlocked from this transaction. As I said already, we have identified GBP 125 million worth of cost synergies. These are represented in a quantitative financial benefit statement or QFBS. Under the takeover code, the plans that underpin the QFBS have been reviewed and corroborated by our reporting accountants. These synergies are incremental to the GBP 100 million of cost savings already identified by Direct Line, meaning total savings of at least GBP 225 million compared with their 2023 cost base. Broadly, the incremental synergies split into three categories. Firstly, head office and central functions. This is the biggest component of the synergies and includes removal of plc and shared services and de-duplication of management roles. Secondly, insurance operations, where we will see benefit from increased efficiency and scale of bringing the groups together. And thirdly, IT and systems, where we will consolidate certain IT platforms. We expect integration costs of around GBP 250 million to achieve these savings. These will be substantially incurred in the first 2 years. And we anticipate the savings to be fully embedded 3 years after closing and delivered broadly evenly in each of the 3 years. And it's not just significant cost synergies. The transaction is compelling from a capital perspective as well. We have a robust capital management framework with which this transaction is consistent, and it is a testament to the financial strength of the group that at completion, the pro forma cover ratio remains at the top end of our 160% to 180% working range after absorbing a transaction of this scale. And this impact at completion reflects the mechanical calculation of bringing two balance sheets together. That means it doesn't include the impact of any of the capital synergies, which will materialize over time. Let me explain what these are. Combining Direct Line's GBP 1.1 billion solvency capital requirement, or SCR, with Aviva's provides diversification benefit in two ways. Firstly, today, the diversification benefits from the mix of risks in our broad U.K. General Insurance business are substantial in the calculation of the U.K. GI SCR. Therefore, bringing Direct Line's largely Personal Lines business into our broader U.K. GI business will create a significant diversification benefit to the stand-alone capital requirement of Direct Line. This will appear at the U.K. GI level. Secondly, at the Aviva Group level, our complementary portfolio means there is substantial diversification benefit within the group SCR. You may recall in our disclosures at the half year, we reported GBP 2.3 billion of diversification to bring the capital requirement down to GBP 7.8 billion for the group. This arises because of the non-life risks and geographic mix diversifying well with the life risks. Therefore, the additional non-life risk coming from combining Direct Line will increase this group diversification benefit. It represents a further material capital benefit when compared with a stand-alone DLG capital requirement. So bringing these two together, the capital benefit from diversification that will emerge is significant. Next, let me turn to leverage and liquidity. We expect a limited impact to leverage from the transaction, principally because we are funding the cash component from internal resources. Our current leverage ratio is 29%. And whilst we anticipate a small uptick to around 31% to 32% upon completion, it will return back to below 30% over time. This is in line with our existing leverage guidance that we aim to be under 30%, but are happy to operate slightly above 30% for short periods. We also expect central liquidity to remain above GBP 1 billion post completion, in line with our capital management framework. Now I will cover what the transaction means for shareholder distributions. We have been growing ordinary dividends over the last few years with the cash cost of the dividend growing annually by around 5%. As well as the dividend cash cost growth, we have had a regular cadence of returns of capital to shareholders, having done GBP 300 million of share buybacks in each of the last 2 years. In combination, these have given DPS growth of around 7%. Now we remain committed to growing dividends and sustainable returns of capital. And I'm pleased to say that the strong financial benefits to be delivered from this transaction enabled us to take this one step further to raise dividends and increase buybacks. Let me explain. Now given the capital and cash generated from the acquisition, we expect to declare a mid-single-digit dividend per share uplift following completion. This will be applied to the higher share count. Our guidance of mid-single-digit growth in the cash cost of the dividend then continues, but from this uplifted level. As the cash component of the transaction will be funded from internal resources, we don't expect to announce another GBP 300 million buyback when we report our full year 2024 results at the end of February. This represents a pause in our regular buyback program, but we maintain the guidance for regular and sustainable returns of capital and anticipate these will resume alongside our full year '25 results in '26. And going forward, the level of buybacks will allow for the increased share count arising from the transaction to maintain the DPS growth. There's a slide in the appendix that helps to illustrate this. That covers all the financials. I will briefly cover the key points on time line before finishing. Now that the transaction has been announced, we will proceed with the publication of the Direct Line Scheme Document. This contains all the information DLG shareholders need in order to vote and will be available shortly after we publish our full year '24 results. Aviva and Direct Line will publish their full year '24 results in February and March, respectively, and we expect the Direct Line shareholders to vote on the transaction in March. There is no required vote from Aviva shareholders. Finally, we anticipate the transaction will close around the middle of 2025, following receipt of all the required regulatory approvals. And with that, I'll hand back to Amanda for closing remarks.

Thanks, Charlotte. So before moving on to Q&A, let me share some final reflections. Over the last 4 years, we've transformed the performance of Aviva and proven our ability to deliver quarter after quarter. Now is the right time to accelerate with M&A. And with DLG, we have a fantastic opportunity to do just that. As a result, Aviva's investment case will become even more attractive as we unlock the full potential of the combined group. We will improve our position as the U.K.'s leading diversified insurer with a steeper capital-light trajectory. We will bring the best of Aviva to even more customers. We will step change already strong organic growth, extending our track record of delivery. And by doing so, we will enhance our capacity to deliver shareholder distributions. So I'm sure that you can see why Charlotte, Jason, Owen and myself and the rest of the team are confident about this transaction and excited to welcome DLG customers and colleagues to Aviva. So we're going to move to Q&A now.

For those of you on the call, you will have been sent details on how the Q&A is going to work by the IR team earlier. So please raise your hand in the meeting or send an e-mail and we will get to you. [Operator Instructions] So the first question is from Andy Sinclair of Bank of America.

Well done, a lovely deal and well done, especially getting it done just before Christmas. Three for me, please. First was just on the cash. Nice to see lots of cash being upstreamed from the subsidiaries or part of the subsidiaries to fund this deal. Just to understand, after the deal, will there be a desire to rebuild that flexibility within the subsidiaries? Or is that really just kind of extra fat that was sitting in there that's not going to be needed so we can keep those subsidiaries at slightly thinner levels? That's question one. Question two was just on the reinsurance agreements within Direct Line, how that differs from Aviva. I realize no numbers on that today, but just qualitatively, how do you think about those opportunities going forward? And third was just about the enlarged group's bargaining power for acquisition costs, just how -- when you are engaging with PCWs with other distributors that you use, you have a pretty sizable market share. Anything allowed for in terms of negotiating power going forward or anything you consider that in the future?

Okay. Thank you. Charlotte, do you want to pick up the first two and maybe Jason and Owen, the second -- the third?

Yes. So thanks, Andy. I mean I think on the cash, the management of cash across the group is something that we spend a lot of time on and have some flexibility. So we will be upstreaming the cash into the center. And then the objective will be to maintain about GBP 1 billion of cash centrally, and that's all consistent with the capital management framework. If you remember at Q3, we said that we had about GBP 1.7 billion at the center at that time. And it's always a little bit dynamic, reflecting the timing of remittances from the business, the timing of external dividends and when we're paying debt. And that is the flexibility we have. So we will be pulling that up, and it will -- we've got a plan to do that. I think the important thing to remember is that this transaction itself is very cash and capital generative. So that in itself will do quite a lot of the rebuilding over time. On reinsurance, I'm not really going to talk specifically on that today. We would, of course, be running the two companies independently through this reinsurance renewal round in January. I think once we get through to completion, we will look at the two together. Obviously, through the due diligence process, we've had line of sight of the reinsurance, and we're comfortable with that. Jason?

Great. So I mean, just on bargaining power, I think what you're getting at is the broader scale synergies and data that we're going to have to be able to benefit from going forward. So I mean, a few obvious examples. I'll let Owen talk about PCWs, but the obvious space to talk about is claims between our Solus network and DLG's repair network, the additional scale and capability that's going to give us. I think we really look forward to that. Similarly, there's a lot of overlap between DLG's claims providers and our claims providers. And again, just expanding our relationship with those key claims providers and looking at what that means going forward, we think there's lots of upside. But Owen, just on PCWs or anything else?

Yes. Look, we have an excellent relationship with PCWs, and we work really well with them and have done for a good number of years. And we look forward to working with them in that in large context. And I think just expanding that point more generally, I think, look, this is great opportunity for us to be more efficient for customers. And I think that's what I'd come back to. I think this deal gives us a great opportunity to do that.

So the next question is from Dom from BNP.

Amanda. Congratulations from me also to you and all your colleagues. Three questions as well, if that's okay. Firstly, just on the baseline for the financials. You've given us this 10% EPS accretion figure, which is very helpful. I think on my sort of back of the envelope, this implies a baseline for the stand-alone Direct Line roughly in line with the 13% margin ambition and obviously, your incremental synergies on top of that. Is that a fair assessment of how you're projecting the financials forward? Second question is just coming back to the synergies. Clearly, at this stage, you're not yet quantified revenue or capital synergies. Charlotte, your explanation of the SCR synergy is super helpful. I wonder if you could qualitatively give a view of some of the things on both the operating revenue side and on the capital, perhaps the own funds things that you can do? And if I can just ask an adjacent question to that. It looks from your slide that you're expecting capital synergies to improve leverage. So does that imply that you've got own fund synergies in there? And then the third question, was really just on the reserving. My guess is that, that was one of the areas of focus for your due diligence. Given inflation impacts over the last year or so, reserve additions have been an important topic for the sector. Did you observe any areas of weakness? Conversely, put it completely the other way around, Aviva reserves, I think, at a relatively strict best estimate level. So is there any implicit prudence in the Direct Line balance sheet that can be released.

Okay. Thank you. Those feel like three questions for the CFO.

Excellent. Thanks, Dom. Look, I think in terms of the baselines for the -- around 10% EPS accretion, I mean, I think you won't expect me to give any new profit forecast on this call. But obviously, anything that's sort of factoring in direct lines projections is consistent with consensus because if it wasn't, then we would have to explain. So I think you can assume that that's the way we've constructed. And the EPS accretion of 10% is following the GBP 125 million of expenses being realized. So that's kind of over that 3 years. So it's sort of 2028 beyond when that 10% accretion comes through. But there would be accretion we see even in the first year following the transaction close. In terms of synergies, not yet quantified. As you say, I've tried to give as much guidance as I can on how we see the capital synergies coming through. The other areas would be in reinsurance. There would be some revenue areas and other things like that, that we can't factor in things to do with claims costs. All of those are not quantified, but they're certainly in mind. And they are the sort of things that as we step into the integration, we'll be able to talk more about. In terms of leverage, I think your question was around we move above the 30% in the first instance and then expect it to be able to come down. Because we are funding this entirely from internal resources, the step-up in leverage is really coming from the GBP 610 million of debt that DLG has that doesn't count for solvency, but of course, it does contribute to leverage. We will -- we have flexibility in our debt plans over the next few years. And of course, this transaction is capital and cash generative. So the combination of those 2 give us a clear line of sight to getting below 30%. And then on reserving was your last question. I mean, really, there's very little I can say. This was a deal done in the public markets under the regulations of the takeover code. Obviously, we operate in some of the same markets as DLG as a PLP. And so we have a good idea of how they operate outside-in. So we did a lot of outside-in analysis, and then we did a focused level of due diligence consistent with the takeover code requirements and into the areas that you would expect an insurance company due diligence process would do, and we were granted good access to management to supplement that analysis. But that's all I can really say. Clearly, the pricing and the deal structure today is very similar to what it was before we entered into that due diligence phase. So I think you can read that it was comfortable.

Thanks, Charlotte. Thanks, Dom. Rhea from Deutsche Bank.

Congratulations as well on this deal. So 3 questions for me as well. The first one, if you could just talk a bit about customers. I mean, your tNPS score has increased over the years. But what are you expecting, especially in the first year of integration for this to progress like? And do you have any expectations of attrition to your policies on both books again in the first year? The second question is around technology. So are you planning on putting the DLG brands onto the MyAviva app over time? And then third, around capital. When do you expect to complete the Part VII merger? Will it be in the first 12 months of -- after completion?

Okay. Thanks. So I'll pick up the first 2, Charlotte, you can pick up the second. And if I miss anything, Owen and Jason, let me know. So on customers, yes, we have seen our tNPS number increase significantly this year. And that has been the investment that we've made into the customer proposition. So putting more people on the phones, building more digital propositions, looking at the claims process to make sure that they are operating well for customers, utilizing the Solus repair network to make sure that we get the customers basically in an Aviva network so that they are actually getting the best possible experience. Obviously, they're also benefiting from the supply chain and the size and scale of Aviva. So -- and we're able to pass some of that on through pricing. And in the -- if you look at our efficiency ratio, we've managed to continue to improve the efficiency ratio. So we actually see that this is really, really good news for both sets of customers because we'll be able to continue to invest in the business and continue to deliver on all of those great claims process, great digital processes and people in contact centers. But we'll also, through scale, be able to pass on some of that benefit through -- whether it's through the pricing and through the indemnity spend. So we are really, really excited about that benefit to our customers. And that's before we even get into offering customers all the other opportunities that Aviva has, whether that's the wealth products, the travel products, home products, whatever it is. So we feel really good about that. On technology, integration into the MyAviva app, and it's good that we don't have the Chief Technology Officer in the room, is relatively straightforward because it's through an API integration. And obviously, the app has been rebuilt this year. And the app is performing incredibly well. If we look at our online experience scores in the app, they're significantly higher than they were in the old MyAviva app. And when we rebuilt the app into this new technology platform, it is much easier to integrate APIs from other areas. So that we believe that, that is a reasonably quick win opportunity for us to be able to do that. And of course, it also means that any investment that Direct Line might have had to build an app would not now need to be made because they can take advantage of the MyAviva app. On capital, Charlotte?

Yes. So on capital, as you -- as I've said and as you've repeated, we -- the capital synergies are not going to accrue on day 1 following completion. That is just the mechanical bringing together of the 2 balance sheets. And the time line from then is -- I can't be incredibly specific, but we have a successful track record of doing things like this. We need reg approvals on certain aspects. And as you say, there'll be a Part VII to do as well. So the mechanisms are a Part VII, as you rightly say, which is the legal transfer of policies. We would expect that to be 18 months or some sort of time frame around that, but it's, again, difficult to tell. Naturally, as the policies come up for renewal, they're likely to be renewed within Aviva rather than DLG. So you'll sort of start to see more of the policies coming on to our balance sheet. And then we can undertake reinsurance arrangements where DLG transfers some of the obligation risk from its policies to Aviva. But again, some regulatory hurdles to get through there. So it will be over time, but we have a decent line of sight. We know what the work package looks to do, and we're confident that it will deliver.

Andrew Crean from Autonomous. Andrew, are you there? Okay. We'll come back to Andrew. So you can tell that we're live, you see this is how it works. So William Hawkins from KBW.

Can you hear me?

Yes, we can.

An exciting transaction. Congratulations. On Slide 22, please, what are the addressable costs from which you're reducing the incremental GBP 125 million, please? And where might you go further? I mean it just seems to me that the GBP 40 million and the GBP 25 million in particular seem very small given that there's massive overlap. And I think it's implying that there's still GBP 400 million of costs from DLG that you won't be addressing. So I'm just trying to understand what's sticky in the cost base that leads to actually quite -- what seems to be limited synergies against the massive overlap you're talking about? And then the second question, again, this has already been touched on briefly, please. But is there any risk of revenue dis-synergies from this? Again, I'm really not sure in the Personal Lines market. I can imagine that each individual customer doesn't sort of focus on moving when 2 portfolios come together. On the other hand, presumably, this transaction could lead to an awful lot of market competition. And as you step up, you could suffer from that. So what thoughts have you given to revenue dis-synergies from the combination? I'm so sorry, I'm going to add a third. Are there any regulatory issues that we need to be aware of that are substantial in this transaction? Again, I haven't seen any reference, but I don't know any large portfolios you need to address or whatever to satisfy the interest of other stakeholders.

Okay. Thank you. It wouldn't be a question if there weren't 3 questions. So Charlotte, if you do one. Owen, do you mind doing 2, and I'll pick up 3?

Yes, that's fine. So look, I think what I was trying to say or was articulating when I sort of set out the GBP 125 million of cost synergies is that has been through the review and corroboration process by the reporting accountants that requires, therefore, evidence and track record. So read into that what you will, but that is the basis on which the number is compiled and relatively short period of time of due diligence that was able in order to support that. So I think that's the first thing to mention. I think in terms of the addressable cost base, at the Capital Markets Day in the summer, DLG disclosed an addressable cost base of around GBP 650 million. But there have been various moving parts since then, given the inflationary environment and their own cost program of GBP 100 million. But I think if you think of it, it's sort of in the 20% range. And then I think I would just say that there are other potential value levers within and beyond the cost base that we haven't quantified at the moment.

Yes. So in terms of dis-synergies, I tend to think about them actually as synergies. So if we think about trading each of the brands, which we certainly intend to trade very hard, Direct Line and [indiscernible] and Aviva and all of those, the brand suite, you think about that and then you think about, well, if we add in some of those extra capabilities around pricing and claims that we can get from the sort of shared data and shared capabilities. And then on top of that, think about the shared sort of 18 million to 20 million customers that we can then market more products to. I think actually, there's a real prospect of some improved synergies. But look, we need to work that through as we get into it. But yes, I'm more thinking synergies rather than dis-synergies if you think about it in that context.

Thanks, Owen. And on the regulatory side, so as you would expect, we've notified the relevant regulators, which includes the PRA, the FCA ahead of the approach, and we continue to have an open and constructive dialogue with them, and we'll keep you updated as we go along on that. We expect the Competition and Markets Authority will review the transaction. You would expect that from a deal of this size, but we remain confident that we can get this deal done. We're going to try Andrew CreanCrean again. Andrew? Can you hear me? No, no. I'm confident it's going to be third time lucky for Andrew. So in the absence of Andrew, we're going to go to Farooq.

Happy holidays and Merry Christmas to everybody. So as you'd expect, 3 questions, hopefully, not too long. One of the things that you said in your customer session, Amanda, was that it's easier to cross-sell to a non-life customer than to a life customer. Can you talk about your thoughts around the DLG customer base and what you can do to get the kind of average holdings up to the sort of level that you've seen for the rest of the platform and just kind of the time line around how you're going to do that? Second question is to go back to the GBP 2.3 billion of diversification benefit. Just to help us all out, what percentage is that of the -- sorry, undiversified group SCR roughly, so we can sort of have a go at maybe applying that? And then the third question is really around pricing. When you looked at your technical capabilities, and then you said you're aware of how DLG is approaching it in the market, is the implication here that basically everything is going to go on to your pricing platform as soon as possible? Or do you think there are kind of advantages that you can gain from DLG's technology and pricing that will sort of make 2 plus 2 equals 5 when you put them together?