Legal & General Group Plc (LGEN) Earnings Call Transcript & Summary

So good morning, and a warm welcome both to those of you in the room and to those joining online. I'm Michelle Moore, Group Strategy and Investor Relations Director. To start, a few housekeeping points. Firstly, to those in the room, please make sure you've turned your devices to silent. In the event the fire alarm sounds, colleagues will guide you to the nearest exit and the normal forward-looking statements apply. Our running order for today will be as follows: Antonio will open with a summary of our full year results and an update of the progress we're making in delivery against our strategy. Jeff will cover the financial results in more detail, and then Antonio will make closing statements before opening to Q&A, at which point he will be joined by Jeff and the CEOs of our 3 businesses to take your questions. Antonio, over to you.

Thank you. Thank you, Michelle, and good morning. It's great to see everyone. We've had a great year with strong financial performance and significant strategic progress. Our core operating profit is up 6% at GBP 1.6 billion, and our capital generation is GBP 1.8 billion, both demonstrating the positive fundamentals of our business. Our balance sheet continues to strengthen with a store of future profit of GBP 14.8 billion, which, as you know, will release into operating profit over time and our solvency ratio is 232%. This gives us substantial strategic flexibility. And as I promised, we are returning more capital to shareholders with a 5% increase in the dividend per share and a buyback of GBP 500 million. Our 2024 results reflect the progress we're making in executing the strategy that I shared last June to be a growing, simpler, better connected business, which becomes more capital-light over time. The business I took over last year had good fundamentals, but I knew that there were 3 areas for improvement. Firstly, we needed a sharper focus on our core activities. Secondly, we needed to push harder in delivering sustainable growth in the businesses where we have competitive advantage. And finally, we needed to be more disciplined and also more transparent in the way we allocated our capital to deliver better returns for shareholders. So 1 year on, I'm really pleased with the progress that we've made and the momentum that we have. We have disposed of noncore assets to sharpen our focus on our strategic businesses, and we've simplified the organizational structure from the 4 businesses that we used to have to 3 businesses with the creation of a single public and private markets asset manager. In terms of sustainable growth, each of our 3 businesses has good momentum. In Institutional Retirement, we have written good volumes above our target returns in a more capital-efficient way here in the U.K., and we continue to grow internationally. In Asset Management, fee-related revenues are up as we pivot to higher revenue margin products whilst investing to deliver future growth. In Retail, we have seen strong growth in Workplace DC assets and our annuities business delivered another record year. These commercial successes have resulted in enhanced returns for our shareholders. With the announcements that we've made, we now expect to return over GBP 5 billion over the next 3 years to shareholders through a combination of dividends and share buybacks. Let me now give you a bit more color on each one of these 3 areas, starting with sharper focus. So we've rebalanced our portfolio, reallocating capital from businesses that had limited strategic fit to areas of greater growth potential. In June, we created the Corporate Investments unit, which reports to Jeff. And in September, we announced the disposal of the largest asset within that portfolio, Cala for GBP 1.35 billion. Last month, we announced our largest ever transaction, the disposal of our U.S. protection business with proceeds of GBP 1.8 billion and the new strategic partnership with Meiji Yasuda that will drive growth in both our U.S. PRT and Asset Management businesses. The capital that we generate organically and the disposal proceeds of over GBP 3 billion are then taken to a disciplined capital allocation framework where they must achieve returns on cash or capital above our 14% hurdle. If they do not meet that hurdle, we will return the additional capital to shareholders as we've demonstrated in 2024 with the share buyback that we've announced this morning. It's worth spending a moment on our long-term partnership with Meiji Yasuda, which is transformative for L&G. Exiting our U.S. protection business at very attractive multiples sharpens our strategic focus and allows us to do 3 things with the proceeds of this sale. First, we will invest together with Meiji Yasuda to accelerate our growth trajectory in U.S. PRT. Second, we will reinvest a portion of the proceeds to grow our strategic businesses, notably Asset Management. And I'm particularly excited about the JPY 150 billion, that's around $1 billion of co-investment commitment from Meiji Yasuda in our growing Private Markets business. This $1 billion figure, which we are announcing this morning, together with our own balance sheet will be catalytic to attract third-party capital into our Asset Management business. And finally, we will return GBP 1 billion of the proceeds to shareholders on completion of this transaction. As you can see, we're very pleased with this partnership and the 5% shareholding from Meiji Yasuda. Now turning to sustainable growth and the commercial successes that we've had in 2024. Firstly, Institutional Retirement. We continue to be the global market leader and wrote GBP 8.4 billion of PRT business here in the U.K. As we told you in December during our Investor deep dive, we've been successful in adapting to new market conditions. And as a result, we have written profitable business in a highly capital-efficient manner with a new business strain of 1%. This is one of the reasons why we have increased the size of the buyback that we've announced today. The outlook in the U.K. remains very strong. We've already completed GBP 1.2 billion of transactions this year at similar strain levels, and we have a large deal pipeline for the rest of 2025, which you can see there on the slide. We have a great track record in writing PRT internationally and have had record PRT volumes in 2024 in both the U.S. and Canada. Our new partnership in the U.S. with Meiji Yasuda will allow growth not just to continue but to accelerate. The partnership will bring together our knowledge and expertise with our combined balance sheets. U.S. PRT is a highly attractive business for us, and we will continue to retain 80% of the economic interest in both the existing in-force business and the new business going forward. In Asset Management, we've made good progress against the commitments we've set out at the Capital Markets event last year. I've appointed our new CEO, Eric Adler, here in the room, and his leadership team is in place to take forward the combined global public and Private Markets Asset Manager. We have positive momentum in growing our revenues. In 2024, our average revenue margin increased from 7 to 8 basis points as we pivot to higher-margin products, and there is clearly room for further upside. Growth in our other businesses, so in Institutional, in Retail Annuities and in Workplace will further boost revenues and margins. And we have seen good growth in Private Markets. Now with GBP 57 billion of assets under management, this reflects the positive momentum from new strategies that we launched into 2024 that will deliver GBP 20 billion of assets by 2028 at a 50 to 90 basis points average revenue margin. This includes our newly launched Private Markets Access Fund, our affordable housing fund and the new build-to-rent partnership with Nest and PGGM. We've already have GBP 1.2 billion of new external commitments across these fund. We're also investing to add new capabilities, including our investment in Taurus, a U.S. real estate firm. So let's turn to our investment in Asset Management. We have been disciplined with our Asset Management cost base, driving efficiencies and streamlining the organization. And as you can see there, with underlying costs -- operating costs growing below inflation at 1%. At the same time, we have invested GBP 48 million for growth. This is at the bottom end of the guidance I gave at the Capital Markets event, investing between GBP 50 million and GBP 100 million per year. We are investing in our distribution and investment capabilities, expanding our footprint internationally with growth in Asia and Europe and improving our operational scalability. This has led to an increase in our cost-to-income from 71% to 74%. But subject to market movements, we expect this broadly to represent the high watermark in our cost to income as we now see the benefits of our investments coming through in revenues. We will do a full deep dive on Asset Management on the 17th of June, similar to what we did in Institutional Retirement last year. In Retail, our customer base continues to grow. We are a trusted brand, and we pride ourselves on the service that we offer to our 12.3 million customers here in the U.K. across Workplace savings, retirement and protection. Our U.K. Retail Net Promoter Score of 50 is a testament to that excellent service, and this underpins the commercial successes of our Retail franchises over the last 12 months. Our Workplace assets are up by 17% to GBP 94 billion with net flows of GBP 6 billion. And our Master Trust, which is the largest commercial master trust in the U.K., grew even faster, as you can see, at 22% and has now reached GBP 30 billion. We had another record year in Retail annuities, delivering high volumes at strong margins and increased our market share by 5 percentage points. And in U.K. protection, we have increased volumes whilst also improving margins. We're also planning an investor deep dive into our Retail business in the second half of the year. So all of this together has resulted in enhanced returns for our shareholders. I said at our Capital Markets event that we intended to return more to shareholders, and that is exactly what we are doing, distributing more than GBP 5 billion over the next 3 years. You can see that here on the slide, you can see the GBP 3.6 billion of dividends, and then you can see a series of buybacks. The GBP 500 million buyback that we've announced today is the sum of GBP 200 million from the ongoing buybacks, GBP 100 million from the disposal of Cala and GBP 200 million, as I mentioned earlier, from the lower capital deployed in writing PRT business. We then expect to return GBP 1 billion after the transaction with Meiji Yasuda completes. And additionally, you have the ongoing buybacks beyond 2025. So in total, this is more than GBP 5 billion over the next 3 years or to put that in context, 40% of our market cap. This is the result of our strong financial performance that I've described and also the significant strategic progress that we're making. So with that, I will now pass over to Jeff to run you through the financials. Jeff?

Thank you, Antonio, and good morning to anyone I haven't already met. The synergies between our businesses and our market-leading positions have continued to deliver growth. Core operating profit was up 6% to GBP 1.6 billion, driven by the predictable release of the contractual service margin and risk adjustment from our growing insurance books. And our record new business successes in 2024 will provide sustained performance over the coming years. Like others, investment variance mainly reflects the impact of higher interest rates on our portfolio and movements in inflation expectations. This is consistent with our published sensitivities. For corporate investments, the investment variance predominantly reflects already announced valuation write-downs and the accounting impact from the disposal of Cala. Around GBP 70 million of this will come back as profit over time as the discounting on the deferred consideration unwinds. Capital generation is stable against our prior year, and our solvency ratio of 232% is up 8 percentage points. So now moving on to the divisions. Institutional Retirement operating profit was up 7% to GBP 1.1 billion, driven by higher CSM and risk adjustment releases due to a growing and maturing annuity book as well as new business written in a higher rate environment. Expected investment margin is stable as we continue to see good performance on the annuity portfolio and optimize the back book. The annuity book continues to grow as do the consistent margins it produces. As Antonio has already mentioned, we adapted to the economic market conditions, allowing us to write U.K. PRT at a 1% strain. This means we have used around GBP 200 million less capital than in 2023 to write very similar levels of business net of funded Re. This capital efficiency helped support the share buyback announced today. The lower capital deployment means the business generates very attractive returns. Solvency II and IFRS value metrics are moderately lower, reflecting the slightly lower initial asset yield, but with scope for further upside through future back book optimization. In Asset Management, fee revenues were up 4% in the year despite the lower average AUM as our conscious shift to higher revenue margin business takes effect. This is evidenced by the positive flows we have seen in DC and our wider Private Markets offering. These were offset by low fee outflows from DB. Clients continue to adjust their portfolios in response to improved funding ratios and execute one-off rebalances. Excluding U.K. DB, annualized net new revenue was positive at GBP 17.4 million. As Antonio covered, overall expenses and our cost-income ratio have increased, reflecting our investments to grow in Asset Management, but we are showing good discipline with underlying operating expense growth of just 1%. And we will continue to be disciplined on costs in Asset Management and across the whole group. Total Asset Management operating profit also reflects GBP 145 million from our origination platforms and seed assets. This is down slightly following a more modest valuation uplift for Pemberton. Pemberton has again made significant progress in raising and deploying capital with total commitments increasing by EUR 6 billion. As an example, the first close of its new NAV strategic financing strategy secured commitments of over EUR 1 billion, including anchor investment from the Abu Dhabi Investment Authority. We expect future growth in valuations as a result of this momentum. International Assets now make up 44% of our total AUM, and we remain the market leader in U.K. DC with AUM up 12% to GBP 183 billion, reflecting the growth in our own Workplace DC business. In Retail, operating profit increased by 12% year-on-year to GBP 504 million, and we've seen good progress across all major business lines. This strong performance was again driven by predictable and ongoing profit releases from our growing CSM balance as we add profitable new business. There was also favorable experience variances in the U.K. and U.S. We have seen strong growth in both Solvency II and IFRS new business value with record sales of GBP 2.1 billion in Retail annuities at attractive margins and improved metrics in our U.K. protection business as we continue to operate with a focus on disciplined pricing. As Antonio outlined, the sale of our U.S. protection business and the creation of a strategic partnership with Meiji Yasuda increases our ability to deliver sustainable growth. The transaction will generate both immediate and future value for shareholders. We covered the key earnings and capital metrics at the time of the announcement with GBP 1 billion of IFRS profit and GBP 1.2 billion of capital generation. And cash accretion from the proceeds is around 18x the ongoing dividend that we were receiving from the entity. The future benefits of the partnership are clear. We are bringing together 2 strong balance sheets with a view to scaling our U.S. PRT business whilst leveraging our own expertise and track record. Our Asset Management business will continue to manage this growing book, and Meiji Yasuda have also committed JPY 150 billion of co-investment capital to our Global Private Markets business. The sale of our U.S. Protection business also unlocks value that we can redeploy at attractive returns into strategic growth areas. Our Solvency II coverage ratio has strengthened to 232%, reflecting the increase in interest rates over the year and the capital-efficient way we were able to write new business. We remain well positioned to capitalize on the opportunities in our growing strategic markets as we move into what we expect to be a busy 2025. Finally, I want to remind you of the group financial targets that we set out at the Capital Market event last June. We will now start to track against these. Our strong business performance in 2024 and our financial flexibility with strategic optionality in capital and liquidity set us up well to deliver. The continued momentum we have demonstrated in executing our strategy and the clear commercial benefits of our partnership with Meiji Yasuda gives us even more confidence in achieving these targets. I will now hand back to Antonio.

Thank you, Jeff. So in summary, 2024 has been a year of strong financial performance and great momentum executing our strategy. We have simplified the company and unlocked significant value from noncore asset disposals, which we are redeploying into strategic businesses. Our businesses each showed strong commercial momentum last year and into 2025. And we are delivering enhanced returns for shareholders with 6% growth in our core operating profit, as Jeff just mentioned, and the new GBP 500 million share buyback announced today and over GBP 5 billion to be returned over the next 3 years. As I said back in June at our Capital Markets event, our 189-year heritage and our purpose in society are at the core of our strategy. This is a huge motivator for our people. Two days ago, actually, the Financial Times published the results of their first best employer survey, and I'm proud to say that L&G is the second best employer in the U.K. out of 500 companies. So I'd like to thank my colleagues. Their hard work made all our successes possible this last year. The outlook for 2025 is positive. We have good commercial momentum in each of our 3 businesses. We have a busy PRT pipeline in Institutional Retirement and expect strong volumes this year with good profitability and low strain. Asset Management has had a positive start to the year. We continue to see inflows into our higher-margin products, and there is further upside to come, as I mentioned earlier, and we look forward to discussing this with you at our deep dive on the 17th of June. And in Retail, several of the Workplace schemes that we won in 2024 will now fund this year as we continue to strengthen our proposition in this growing and strategic business. We'll also give you more details during our Retail deep dive in the second half of the year. So overall, I'm excited about the future and our progress to become a growing, simpler, better connected LNG. Given that momentum, I'm even more confident today that we can meet and ideally exceed our 3-year targets that Jeff just showed. As I promised, we are investing and growing the business, whilst at the same time, also returning more to shareholders. Thank you. So with that, I would like now to invite the CEOs of our 3 businesses on to the stage to take your questions together with me and Jeff, Laura, Eric, Andrew, please join us.

So I was going right to left. I think, yes, Larissa, you're the furthest right.

Three quick questions from my side, please. The first one, the margins in the U.K. PRT business have been declining for the last few years. You did make a comment about the impact of the high-yielding gilt environment. But how should we think about that trajectory going forward and about the eventual unwind into earnings? That's the first question. The second one, still on the high-yielding gilts. Is L&G able to take advantage of the fact that gilts are currently yielding attractively, but expected to decline going into the year with bulk typically weighted towards the second half? And the last question, can you give us any insight into the impact of weight loss drugs on longevity reinsurance pricing, please?

Great. Thank you, Larissa. So I'll ask Andrew to comment on the margins on U.K. PRT and maybe on gilts, maybe, Jeff, you want to add on gilts as well. Interestingly, on weight loss, maybe, Jeff, you want to mention this. We had a session -- actually, one of my Board member is here, but a session with our Board last week just on this, actually, where we looked at all of our longevity assumptions, and we went into really a lot of detail. We invited a few scientists too that are part of our panel to really give us kind of view. So maybe you can add that. Just a first comment, and I'll hand over to Andrew. In terms of maybe the overall comment I made about the disciplined capital allocation framework, you're right, Larissa, that some of the metrics have changed. But the IRR, basically, the return on capital that we hold the business to is exactly the same one, 14%. So yes, some of the metrics have changed, but with much lower strain, we're consuming much less capital. And therefore, what you can be reassured overall, and this is true for U.K. PRT, U.S. PRT, Retail, Asset Management is every single pound that we spend in the company has that return on capital above -- return on capital or cash depending on the type of business, above 14%. So the -- if you think about it, the profitability of the business has not changed and that hurdle is the same. But do you want to comment on the actual metrics?

Yes. That's exactly what I was going to say, Larissa. But serious point, that 14% return on capital that Antonio referenced is really the sort of the binding constraint that we look when we allocate we allocate capital. You saw from the numbers that Jeff put up. We've seen that, as you rightly say, the margin come down on U.K. PRT. I mean the IFRS 17 first year margin, that was 9%. That's very high. That will be a high margin. I think this year, we reported 7%. We're pleased with that margin given the capital that we've allocated at a 1% strain. And again, as Antonio mentioned, the deals we won in '25, the deals that we're currently pricing in that pipeline using gilt-based strategy are again looking at about those levels. So we're consistently using low strain, a margin we are comfortable with, but that all-important return on capital is what we're looking to achieve as part of the strategy. Your question on gilts, as I just mentioned, the deals we are pricing right now, and we are planning to price through the remainder of the year are taking advantage of that dislocation we're seeing between credit spreads and gilt spreads and that strategy. We show we can pivot from one base to another. And if the market changes, and of course, the markets are very volatile right now, we'll make that pivot back. But the plan is that we are still pricing and expecting to price this year using a higher proportion than historically average around gilts. And we're using -- working with a number of sort of counterparties to look at sourcing those gilts, whether they be U.K., U.S. or more widely to sort of optimize the margin.

Yes. And that's an important point, just to double-click on that because -- and some of you were asking me when we were kind of in the session just before just coming in. Up to now, what we wrote of GBP 1.2 billion is exactly with the same strain. I made that point. And as Andrew says, what we're pricing right now is with the same gilt strategy. But the market is volatile, as Andrew said, and is changing. Jeff and I were discussing, we're starting to see a bit of corporate credit spreads potentially widening. We don't see that yet. But it could be that in the second half of the year, we are then using more of a traditional way of pricing PRT. So at the moment, what we are doing right now in the first half is exactly with the same market conditions. But as you know, if corporate spreads were to widen, that's actually good for us, and that would be good for the business. Do you want to maybe build on that and then talk about the longevity and loss of weight.

Yes. I mean, I guess Andrew's point I was going to make on the gilt source, and we are happy to sort of warehouse those, if you like, we're almost thinking about it in the same way as we do DI. Given the volume we expect to need, it won't go to waste. We can always apply it actually to some of the back book if we want to. And so we are working to ensure we're sourcing that, so making the best of the timing of when we're picking those up as well. And yes, I think you asked about profit emergence. Obviously, there's -- on top of the margin that you see there, there is the back book optimization opportunity in the future, and that comes through over time. That will come straight through in expected investment margin and operating profit as we execute on that, which will to do with the timing when we see the opportunity and when we think it's best to deploy that over time. So yes, that comes through there. And obviously, that's then not completely factored into the margins that we are quoting. Ozempic weight loss drug, yes, we had a session. It was actually really interesting. We have -- I mean, we work with academics across the whole of longevity. This is just one of the areas that we're looking at. We obviously look at cancer, et cetera, and allow for that. We -- it splits -- definitely split into 2 areas. So for -- I'm sorry to say, but for pensioners in payment, weight loss now doesn't have much impact. Our average age of our pensions and payment is about 70. So they've been obese for 15, 20 years, the damage is done sort of thing. So it doesn't have much impact. But it is important for the deferred annuitants, and we are looking at that. We're looking at that where we're retaining more of them. We've modeled a number of scenarios eradicating obesity, what we look at -- what we think is sensible. Certainly, where we would see a sensible outcome in that is within what we allow in our best estimates already for mortality improvements and the more extreme is well within what we hold under Solvency II. And so we're constantly monitoring these in both internal people and academics externally do a lot of work around this. And we did the session with the Board to show them, "Look, it's a comfortable position where we are today, makes sense for us to retain deferreds where we think that pricing is appropriate."

Yes. It's fascinating. Actuaries and academics in the room. Mandeep?

Mandeep Jagpal, RBC Capital Markets. Three questions from me, please. First one is on CSM growth, which is a follow-up to Larissa's question. You grew only 2% year-on-year, and you take out longevity essentially flat. So do you see underlying CSM growth as an important measure of growth for the business? And should we expect to see low growth in the current market environment where you write with more gilts? Second one is on BPA visibility. The press release states that you are actively pricing on GBP 17 billion and visibility on a further GBP 27 billion. So does that imply you are expecting kind of GBP 45 billion to GBP 50 billion worth of volumes this year? And if so, how do you see margins developing as aggregate demand is flat year-on-year, but there's now more players writing? And then the final one on regulation. The PRA will publish its life insurance stress test for each company in Q4 this year. Have you heard back from the PRA on the calibration parameters for the stress test? And if so, what kind of stress solvency ratio can we expect for LNG?

Great. Thank you. So on CSM, I think, Jeff, you should take that one. And Andrew, you should comment on the market and the size of the market. And then, Jeff, you should take the list exercise. By the way, on list, we -- this will be, as you know, published in the fourth quarter. And so we've had quite a lot of discussions, but also we start from 232%. So I mean, not to sound overly relaxed, but clearly, from the position we are right now, that is less of a concern. Andrew, can you talk about the market? When we were on stage exactly here sort of December, we talked about the golden year of PRT, GBP 500 billion over the next 10 years. How are you seeing the market right now?

Yes. So big picture, nothing has changed from what we said in December around the market. And yes, the numbers we quoted, we would expect as an estimate and so are other commentators, the U.K. market to settle at around GBP 40 billion to GBP 45 billion this year. But again, you have heard me say, this is a very lumpy market and the timing of particular very large deals before one side of the year-end or the other makes quite a material difference, but we're planning on that. I'd also add, and again, we said this in December, we are not chasing volumes. We give out guidance targets, but they're not hard targets to change. We price. So your question around margins, and there are more entrants in the market, going back to my previous answer, we have very clear and deliberate guidelines around where we price and the margins we expect to achieve. So I don't expect a change in margin from us. I think on the new entrants that you've seen the announcements just like I have, it doesn't really change the market picture in the short term. It's an attractive market, and therefore, capital is flowing into it, both on a direct and a reinsurance side. But again, we're very comfortable with our position, both direct and with the relationships with our reinsurers and therefore, are comfortable, but going back to margin is really important, and we don't chase volumes.

CSM?

Yes, CSM. Yes, I mean, obviously, a lot of that is a function of how much longevity release. It was very small this year, sort of just a normal BAU change compared to the previous year, but also the margin, in particular is driven by the PRT margin, which clearly, if some of that upside of value is to come through in back book optimization, that doesn't get captured in CSM, that comes straight out. You see it in the slight reduction in the IFRS margin as a result of that. So it's a combination of the 2 that achieves the profit growth. Obviously, then we're also using the capital that we're not using to do the buyback. So in terms of EPS growth, we're very comfortable that we're compensating for the pure pound notes as well that is there. But that is without allowing for that upside of the back book optimization that we haven't already done, which will come through over time and could or could not be significant. Let's see where credit spreads go versus gilts, et cetera.

Do you want to say something on the life insurance.

Well, yes. The big picture answer is, yes. I mean the calibration has been published. We know what's out there. You can look -- even if you look at our sensitivities and apply them crudely and knock it off at 230% or an LGAS, I believe, is around 220% when that will be published. Then we're clearly going to be well within our risk appetite after those stress tests. Once agreed with PRA, we won't talk about results in advance, won't publish that, et cetera. We're working with them around the best way to do it. But I think it's a case of anyone who's got large investment credit portfolios. We all move in the same way because it's aimed at credit and matching adjustments. So you'll see the same answer for everyone that has a book that looks like ours.

Thank you, Mandeep. Tom?

Thomas Bateman from Mediobanca. I'm getting a little bit excited thinking about back book optimization and upside from share buybacks. And I feel like I'm double counting a bit here. So could you talk me through the benefits from the back book optimization? And then if you've got a low strain this year, does that necessarily mitigate that a little bit? Second question, just on Asset Management. Nice to hear you think it's the high watermark in terms of the cost income. But could you just give us a little bit of color on what's changed, why you think that's happened and your confidence in the GBP 500 million to GBP 600 million operating profit target? And then finally, just on your comment on warehousing gilts to make sure I'm understanding this correctly. That feels to me as you're taking a bit of a bet on interest rates coming down. Is that the right way to think about that? Or is there something else we don't...

Thank you. Jeff, do you want to take the back book optimization and the warehousing of gilts, and then I'll come to you, Eric, for the overview of the management.

Sure. I'll start on the last if you like. No, I mean, it's more that some of this is not pure gilts, as we said. Some of this is working with banks, counterparties to put more complex gilt strategies in place. That takes time and you need to secure the capacity with the banks. We want to make sure we've got, I'd say, more than our fair share of that. And so we're looking to deploy that over time. I don't think we're expecting, famous last word was a massive dislocation in actual gilt spreads. And so we'll just do that prudently over time. It's exactly the same as we do on the direct investments. We basically say to the asset manager, we'll need X billion this year, just get them when you can at the right spreads and bring them into the book. So we're taking that sort of thought. It's much easier on corporate credit because you can just go to a new issuance in the market and pick up a name that you want as and when you need it. But even there, we do buy corporate credit in advance. In the old days, pre-gilt strategies, we would buy it in advance and warehouse that because we knew we had volumes coming. So I don't think we're taking any different risks or any different views on the markets. Yes, back book strain, I think I know where you'll come from. Obviously, there is a world where we choose to shift from pure gilt strategy, which is low capital to corporates, and that involves some strain. There is another world where the gilts and corporates have moved in such a way that actually we can get upside with no additional strain. And we will look at both of those, and we will think about them before we execute. If we have to deploy capital on that, it will very much look like a management action, and we will very much have to pass the 14% hurdle, and that is how we would think about that. If we're deploying strain on that, you will see it. It will come through. We'll be able to show that in our disclosures. And then the optimum solution is that you get more of the dislocation where you can actually deploy this with no additional strain. So we'll decide which -- what makes sense at the time and obviously communicate that if we're doing it at scale.

But you're not double counting.

No, you're not double counting on that.

Yes, there's better upside because we would still deliver the GBP 5.1 billion plus. Then we could do more additionally. Eric, the core of our growth strategy? Welcome, 3 months in.

Yes, absolutely. First of all, let me take this opportunity to tell you how pleased I am to be here for my first participation in L&G's annual results. And I think a lot of my observations in the first 100 days, just under 100 days, actually are the leading to a lot of the answer to your question. The potential here is tremendous. I think the range of activities we have from the barbell -- everyone talks about the barbell, the passive, more index replication, high liquidity strategies all the way to the private areas that obviously is an area of particular knowledge of mine and that we're very focused on. The collaborative nature of this business, I think more and more of the largest GPs in the world are looking to do more things with less investors. That's going to mean more solutions delivered more seamlessly. I think we're in a really good position to do that. And the mutually reinforcing business model that Antonio talks about, I've seen firsthand that that's already been working well. You're already seeing that come through in last year's results. And we're just going from strength to strength in some of the discussions we're having. So the cost-income ratio, obviously, the fact that we're investing for growth puts a little bit of early pressure on that. But I agree, I think we're at the high watermark because we're already starting to see some of the returns from the things that were done last year. When you think of some of the strategies that Antonio mentioned, we're seeing inflows today from those. Particularly the PMAF, we're seeing inflows every month. We're seeing over $1 billion of third-party money, higher-margin business coming through from that investment. The good news is we're not letting up. I'll talk more about it with Antonio in June on how we're going to harness some more of these capabilities for our strategy going forward. But I think that return on investment is going to keep coming through. So the revenue side of the equation, I feel pretty good about in the near term, but more importantly, the medium and long term. So the GBP 500 million doesn't feel like clearly anything but an [indiscernible] bar. And I do think it's only fair that as we keep that discipline on the operating costs, which we have, we were below -- if you think about it in real terms, it was quite a disciplined year when you see how high inflation was. I think we can maintain that. We can continue to put money selectively in other areas where we can grow. And I think the combination of those 2 things is going to bode well for, a, the cost-income ratio to come down over time to where we'd all like to see it. And that profitability number feels very attainable in the 4-year horizon that Antonio set out.

Yes. More to discuss clearly on the 17th of June, but Eric mentioned this point on the links to the other 2 businesses. If you think of Workplace, particularly and how he was mentioning PMAF, the Private Markets Access Fund, that's not yet in our numbers yet. So we have now started to allocate part of our DC default funds to Private Markets. That's not in the 2024 numbers. That's what I mentioned in terms of upside for 2025. And then in December, when we talked about Institutional Retirement, remember that we showed that statistic that when a client goes from Asset Management into Institutional Retirement, then, of course, that client also we invest that back in Asset Management, and it's 3x more profitable when -- for us as a firm. So the link between Institutional Retirement, Asset Management and Retail and Asset Management is critical. Thank you, Tom. Abid?

It's Abid Hussain from Panmure Liberum. I've got 3. Firstly, just coming back on to the bulk annuities market. Do you think the demand for the risk transfers there outstrips the supply of BPAs? Or is the increased level of competition that we saw in 2H spilling over into Q1 and actually having an impact on the volume? I know that you've written GBP 1.2 billion year-to-date, but are you finding it harder to secure the transactions? So any color on the tension that you're seeing in the market, please? The second question is on Workplace Savings. Can you give us a sense of what the all-in margin, so the admin plus the investment fees on the Workplace savings platforms might be or at least what you're targeting them to be as you hit scale? And then finally, on Private Markets, what's the gross investment return that you're generating on behalf of the clients in Private Markets versus the fee that you're charging the clients? And are you seeing any compression in either of those?

So I think that seems very logical sort of Andrew, Laura, Eric, actually in terms of the questions. so maybe just say one thing, actually, a couple of words. So on the supply-demand, and this is -- because this is my second full set of full year results. When I was standing here a year ago, we had written nothing actually, the GBP 1.2 billion that we've written this year compared to where we were a year ago. And it's true that last year, we were finding not so much the supply-demand, but how we were going to price with what then turned out to be heavy gilt strategy. We are much more positive right now in terms of the demand in the market. And as Andrew said, the -- of course, we respect all the new entrants in many ways. It's flattering that they want to come into this into this market, but that's not making a difference where we're competing with the same 4 or 5 players that we've always been competing, particularly for the large deals, which are the ones that are going to make a big difference. We are literally pricing them right now. And actually, it's competitive. But I would say that from a supply-demand perspective, if anything, for me, it feels less pressure now than we had exactly a year ago. Do you want to...

Yes, agree. Just to build on that, you heard us say in December, we're very fortunate over the last 40 years in this market and our relationship with Asset Management, where over 80% of our business is sourced from. We get to see the entirety of the market, large schemes through to small schemes. Different competitors compete in different segments of the market. We compete across the entirety of the market. So short answer, we're not seeing any restrictions on, if you like, demand being sort of supply constrained there. Just to anticipate your other question, we're also not seeing any letup in the pipeline as a result of government consultations around surpluses and where schemes might go. I can talk about that more if people are interested. But again, we're still seeing the gold standard being the buyout solution and trustees moving towards that as they look to fulfill their obligations. And therefore, it's still a very healthy pipeline. And certainly, at the top end of the market, the new entrants are really changing the dynamic.

Yes. We're more bullish now than when we last spoke to you. I said -- I know I said this to you outside. We're not going to give you the full dynamics of Workplace right now, but we are going to deep dive on it in June from an Asset Management perspective and then in the second half with Laura. But I think Laura, also 3 months in role. So it's also a good opportunity for you, particularly Workplace, which is the key strategic business within Retail. So...

Yes. No, I mean, I suppose a bit of context, really exciting about the opportunity we have there. Obviously, it's a growing market for everyone. I think we feel we're particularly well placed given the component parts we've talked about a little bit today. Probably Antonio talked earlier about we do have the biggest commercial Master Trust in the U.K. There are a lot of tailwinds, as I'm sure you're aware, sort of from [indiscernible] reviews, et cetera, looking at players with scale. We do have sort of a totally vertegrated business from that perspective. I think the only thing I would say to build on what Antonio said is I think overall, we're very pleased with the margins we're seeing now. We are investing to make the most of that -- of the growth we see. We set out that we think the market will be -- will have doubled by 2030 from where it is now. So I do think we're really well placed and already sort of the margins we're seeing end-to-end are good and will improve as we scale.

Thank you. Eric, do you want to talk about private markets?

Yes, I actually really appreciate that question because I think as private markets -- I've been in private markets my entire career, and I've worked across them, and I've seen the definition of what can be an investable private asset class continue to grow, things like agriculture. There's all kinds of types of strategies that we would have never thought about before, but that are now being classified as infrastructure. And frankly, you even have merging between infrastructure, real estate, even some kind of -- some venture capital between the difference in that and life science, bricks and mortar, it's all converging. And I mentioned that because what is important is to really understand that there's multiple risk returns within privates. There are multiple levels of active management versus passive. And so what it means is if you really think of the spread of yields, it goes anywhere from 25 basis points for some of the easier to access lower consistent returning strategies all the way up to over 200 basis points. And the investors, particularly the institutional investors have been very sophisticated about already squeezing on understanding what kind of work are you doing? How high are the barriers to entry in this specific strategy, i.e., what's special about you and how -- and why can't that be easily replicated. And therefore, the kind of scaling of the fees, there's a lot of work that's done. A second thing I've seen in over 20 years is you have cycles. So when privates, which are more liquid fall out of favor, the fees get compressed. The good news for us is we're growing is we've just been through one of those cycles. If you think about what's happened with interest rates shooting up, inflation in Europe and particularly, the war in Ukraine, it really shut down the private markets in all but the most -- I don't want to call them beta, but the most low-risk credit strategies where the fees have stayed the same. So we're working off the basis as we believe interest in these markets are going to come back. So the fee discussion is back a little bit in the favor of the GPs. So we do many strategies. So in there, we've got some of the lower -- and again, the strength we have is that it's coming from 7 or 8 basis points, this is all very accretive to us, the private market. I think that's why the team even before I got here, focused in on it so much. It's a huge opportunity for us. We do have players that are having to come down from 200 basis points. Everything we're doing is going up. And I think we're going to be in a very good position to bring out some more high value-added strategies. We're very good in the longer -- not surprisingly for our 188-year history, recurring fees, low volatility, perpetual life type vehicles, we're very strong there. A lot of the private equity players are trying to get into that space. And I think there's room for us to move up into the higher value-add space. So 50 to 90 basis points, I could see us over time edging into the higher range of that.

And Abid, that actually bridges your 2 questions because the Private Markets Access Fund that we've launched, we said that it will be GBP 12 billion by 2028, and we gave the 50 to 90 basis points. But actually, it's both of your questions, right? That's how we make money from a Workplace perspective because we make a bit of money on the Workplace admin side, but most of the money then gets made on the Asset Management side. When we come to do the deep dives, we'll give you the full P&L. I know you've asked -- other people in the room have asked, we'll give you the full P&L when we do the proper deep dive and really explain it how it's scaling. But that particular fund is also very aligned, as Laura said, to the government agenda of having more of the DC money and pension money in private markets. And a big part of that, particularly for us is in U.K. strategy. So it's aligned with what DC savers need, what we need from a shareholder perspective and what the government is pushing for. Thank you. William? And I'll come to the Andrews afterwards.

William Hawkins from KBW. The solvency surplus market movements is a negative GBP 200 million for the full year. Can you give us the split between the owned funds and the SCR in that or at least a directional comment, please? And then secondly, I know this is a very old issue, but I think it's pretty clear that a rising yield environment should be an economic positive for your business and your balance sheet, but we're still seeing these negative market movements. Maybe IFRS can be discounted as noise, but I'm still trying to get my head around why we're seeing this as a drag to your reported solvency? Lastly, yes, the expected investment return, should we take the 2 numbers for Institutional Retirement and Retail as kind of a normal base for the future? Or are there any kind of big things we need to be thinking about for the moving parts? Again, I know there's more in those numbers. So just trying to get the detail there.

Yes. Sure. Yes. Maybe to the last one first, just is reasonably straightforward. Yes, there's nothing -- there's no [indiscernible] in there, if you like. I mean it's made up of 3 items. It's the return on the credit spreads that come through to us as those unwind, and we don't have any defaults. So that's the sort of expected credit return that comes through. You've got the return on the shareholder assets back in the annuity business, if you like, that sits in that and is managed by Andrew's team for the whole annuity portfolio across the 2, as you say. And then the more variable ones because those will just grow with the portfolio, they just come over time. The more variable is the back book optimization, which flows through there. So as per our earlier conversations, that's the thing where there would be more variability. Clearly, there's a combination of us wanting to give a reasonably smooth trajectory whilst at the same time, making the best of the economic opportunity. And so it could be. But clearly, if we do something exceptional in the year because there's a big opportunity, we'll highlight that because we wouldn't want expectations to run away that was repeatable. But at the moment, it's a pretty level rate given the additional benefit of the gilt strategy and the capacity that, that gives us around the back book optimization. All things rates and market movements. So without a doubt, rising interest rates is good for solvency because your SCR just gets lower. And so that's all you're seeing. You see a smaller solvency requirement and so your ratio gets higher and higher with the rate increasing. And I would argue that it's not necessarily a sweet spot for us with rising interest rates. We would probably like in the yield curve to fall a little because you get the opposite impact that we're seeing on IFRS. And so we would then get -- we wouldn't expect to repeat. So as rates fall, we will get a positive investment variance on an IFRS basis. And as well, the Asset Management business does see a negative from rising interest rates because quite a lot of our assets are fixed income, long dated. And so a fall in that -- in the yield curve would also be a tailwind to the Asset Management business. So just purely rising interest rates is actually not hugely positive because also we still -- and that's some of the investment variance coming through, we saw the rates impact on property investments. It was less marked in 2024 because people had already factored it in, but we certainly saw I don't know, 55 to 75 basis points added to the discount rate that valuers were applying to property. Again, we would expect to see that to come back. We are reasonably positive for 2025. We keep asking them when is it coming back. Clearly, a lot of things could happen in the world that can impact that. But from a pure sort of yield basis, if you get any fall in that, that would come through again in positive revaluations in one of our very, very long-term assets. So that's really what's happening with us around rates, I would say.

The SCR and owned funds, do you want to say anything more on that?

No. I mean there's so many moving parts. I mean the spread widening is what's happened on both inflation and on rates. I mean the biggest picture is that overall, we've got the rate increase reduces the SCR. Obviously, the owned funds also reduces. And so you see that coming through. There isn't a lot else that happened. Actually, we had some benefit from -- in the SCR again from spread dispersion, one of our favorites, where the sub-investment grade spreads narrowed. And so that comes through as a positive for us in the SCR as well. But otherwise, there wasn't really a huge amount going on in there.

Thank you, William. Stephen -- sorry, Andrew Baker, and then I'll come to the 2 Andrews here, and then I'll go back.

Andrew Baker, Goldman Sachs. So first one, can you just help me understand, on Slide 15, the ongoing buybacks beyond '25. So I think you need about sort of GBP 300 million to GBP 350 million to get to your 40% market cap number. You've got the GBP 200 million recurring buyback, which I may or may not be double counting sort of going forward. You've got sort of Cala proceeds. I think you've still got sort of GBP 660 million of Cala proceeds coming through, I think, over the next 5 years. So again, some timing difference there. Noncore asset sales, which you flagged today are sort of in process where you have a plan. So it seems like you still got a lot of sort of surplus strain in terms of what you're writing so far today. And obviously, your solvency position is really strong. So why shouldn't I expect that number to be significantly above 40%, I guess, is the simple question. Then secondly, can you just help me pick apart the operating surplus generation in the second half? So owned funds generation was up 17% year-on-year. Are you able to give a sense of what that growth would have been if you exclude the U.S. protection business? So was that growth driven by U.S. protection or not? And then secondly, on the SCR component, it was again negative. I appreciate there's sort of some management actions going on there, higher rates also has an impact there. But how do we think about the sort of development of own funds generation and SCR going forward as it relates to the operating surplus generation?

Thank you, Andrew. Let me take the first one and you take the second 2. So in terms of how am I thinking about overall returns. So what we put on that slide is what we've announced to date, including the GBP 500 million today. As you saw, rightly so, there's that bar that says ongoing buybacks after 2025. But if you go back to what I said back in June, we have outlined a very clear strategy. It's a growth strategy. We're investing in the business. We're growing PRT. We're growing asset management. We're growing Retail. And at the point that we make the share buyback decision, we take those growth opportunities into consideration, plus particularly the level of strain that we have in PRT. And by the way, how much PRT we've written because, of course, it's -- you multiply one by the other, and you look at noncore disposals. Now in terms of noncore disposals, just to take that first, we've sold the biggest asset within the Corporate Investment unit. That's half basically of the Corporate Investment unit, and we are now selling the rest of the assets. There's good progress on that. You may want to comment on that also in a second. But we've been very explicit with Cala that GBP 100 million are the capital that we released from that. So there's nothing else from Cala to think about. What you need to think about going forward is exactly the amount of strain, how much business we write. And as we've demonstrated this morning, a year from now, when I'm announcing the next share buyback, we'll do the same equation, the same decision. I don't know standing here today, how much business we'll end up writing. I don't know in the second half of the year, what the market conditions will be. So if the strain is higher or lower. I'm giving you as much information as I have today. Everything I've written so far is on a 1% strain in the U.K. We've said that U.S. and Canada are on normal strain because it's the normal strategy. But what I hope you -- we've now demonstrated is that we will return additional capital to shareholders if that's what the math is telling us. And maybe a year ago, it was a promise because we had never done -- in almost living history, we had not done a share buyback. We did the first GBP 200 million, and we're doing the GBP 500 million today that demonstrates that. And we've been very clear on the GBP 1 billion from AGS and the transaction. That's it. The GBP 1 billion is the number that we're going to -- we intend to return with one of my Board members here. So we will approve that next year. So Jeff?

Sure. Yes. And just on the Corporate Investments, yes. I mean, we have a plan asset by asset. We've been through all of those. We're actually hoping to sign a few imminently, but there's a long tail now. You see it's GBP 800 million. There's pieces of land, et cetera. Some things are still a bit more substantial, but it's quite a long tail of assets, but there is activity on every single one of those. Some of them still need to be put into the right shape to get the best shareholder outcome of that. But we would expect to be making progress on a regular basis on those. On the OSG, yes, I mean, -- the owned funds is where you get most of the benefit coming through most of the time. Actually, what we expect is you don't see a huge reduction of SCR. Basically, all our capital is the back annuity business, mostly, very crudely. That does run off reasonably slowly. It's very long. It's a bit like the CSM. It takes a long time to come back. So that reduces. But all the balance sheet assets that we're holding are anticipated to grow. And that's what happened. You put an expected return in. As those grow, then you anticipate in your OSG actually putting more SCR up and that offsets. So you get a very small change as expected in your actual SCR for just the pure runoff of the business. The owned funds is where you see more of the benefit. And then if you look back, I'll come back to management actually. If you look back, historically, OSG sort of moves by broadly flat to max sort of 8%. And so if you're going to be in the range, it should be, over time, looking similar to your sort of profit profile, et cetera, things like Asset Management profits simply flow through to that. We obviously saw a reduction this year because Asset Management profits were down, interest rates not helping with some of that and some of the investment coming through. But -- so you would expect -- if you solve for that with a broadly flat SCR, it doesn't do a huge amount, then you get the balances in the owned funds. Now unfortunately, for everyone, management actions distort that because some management actions are very accretive to owned funds and other management actions reduce SCR. I can give you an example. So for example, we did some optimization of our U.S. annuity portfolio this year, quite a material amount moved to a Bermuda entity. That actually meant we put up more SCR. I can tell you it was about the order of GBP 50 million of extra SCR that we put up, but we released 3x that in own funds, just the difference between the way it was aggregated through a U.S. deduction aggregation and a Bermuda basis. And so you can see that, that made sense for us. It was very accretive overall, but we were putting up longevity capital in Bermuda for it. And so it distorts that through the management actions. Other management actions, the year before, we adjusted hedging strategy, which actually released quite a bit of SCR. And so without us doing a deep dive in all of those, it does get lost. So it's the sort of underlying, which I think we try and give you by the annuity cash flow. So we give the full annuity cash. That really drives the underlying. And everything else on top of that is looks quite a lot like IFRS and then you get some management actions on it.

Thank you. Thank you, Andrew Crean and then Andy Sinclair?

Andrew Crean for Autonomous. Can I ask 3 questions? Firstly, in numbers terms, can you give us the management actions within the net surplus generation in '24 and '23? Secondly, you said that you want to be more transparent about how you allocate capital. Could you actually give us the strain, not just normal strain, the actual numbers, the strain on the international PRT and the retail annuities? And then finally, on the gilt strategy, could you tell us what the split between gilts and direct investments was? And you appear to have this idea that there's a mechanical action between the gilt swap spread and the corporate bond spread. But there is a set of circumstances where the gilt swap spread could compress without corporate bonds rising. What would that do to your 90 to 110 basis point spread?

Yes, thank you. Jeff, do you want to take that?

Sure. So at the beginning, yes. Management actions. So I'd say in the last couple of years, they have been about GBP 100 million higher than our average. I mean, they vary. So the average is GBP 200 million. So they've been more in the ranges of GBP 300 million to GBP 400 million in the 2 years, I would say, yes. Strain, yes, happy to say -- I mean, there's been some commentary, net surplus generation. We wrote record volumes at very attractive margins in both international PRT and annuities. And the big thing to remember there is we don't reinsure any of those. And so naturally, they have higher strain? They have a risk margin associated with them. I just said even if we write stuff in Bermuda that has longevity capital and less so in the U.S. And so the strain is more aligned, probably even higher. It varies between 3% to 6% at any point in time. If you're using 4% to 5% for those types of businesses, then that's roughly right. It makes sense if you're not reinsuring anything. Of course, we have a lot of optionality on those in the future. We could put longevity swaps in at any point in time. We're optimizing the value metric because it isn't using a substantial amount of capital. Clearly, if we were writing GBP 10 billion in the same way as we are in the U.K., we'd be way more focused on actual quantum of strain and less on the other metrics. So what we do at the moment is we compile a portfolio over a year that completely makes sense across all of the metrics to both give us pounds to pay dividends, gives us quantums of operating profit and minimize the strain across the whole piece. And so that's how we think about it.

And still achieves our 14% hurdle.

Absolutely.

[indiscernible].

And actually -- and I think, Andrew, what's -- no, no, I got it. But what is different this year is that we wrote GBP 2.1 billion of individual annuities, which is the second record year and last year had been also a record year. And we had record years both in the U.S. and Canada. So yes, you're right. This year, the combination of it. So if you compare it with 2023 when we wrote more U.K. PRT and less of the other 3, the strain -- so I take the point of giving more data and more disclosure because it used to be a much smaller number than what it is right now with those numbers. And on gilts, actually.

Yes. I mean we -- some of this is a competitive advantage or not, it's how are we writing it. So we're not going to say how much was gilts and how much was DI. But it's a substantial proportion is in the gilts type strategies at any point in time. But equally, that is bringing us up to do a lot of direct investments either associated with the actual deal or because of the capacity it gives us in the back book that we're able to do at the same time. And so we think about that across the whole piece. But it's very little corporate bonds, big percentage of gilts. And obviously we have a maximum we can do about direct investments at any point in time, 40% to 50%. But that -- so we would solve around those dependent at any point in time what yields we're getting, which is a bit to your second point. Yes, there's a hypothetical, which actually would be very positive for us. If gilt swaps come in, that gives us huge opportunity on the back book optimization. What we would do on new business is slightly hypothetical at this point because we would solve again for those complete dynamics of all of the different asset strategies, what's happening on DI spreads at the time, what do we think is most advantageous. So I think it's difficult to say, but we would clearly continue to write business that hits the spreads that we need, it's the 14% and balance this strain versus returns at that point in time.

Yes. And if you look at it from a back book perspective, we are at 40% or so direct investments. But from a new business perspective, we are pricing just as deal by deal. We've been discussing last week and the week before with Andrew. It will depend on each one of particularly the large schemes. Also if we use or not funded Re, because last year, we pretty much didn't do any of it. But there are specific schemes, particularly depending on the type of the scheme and the duration of the scheme, where we will deploy a different strategy, and this is where Jeff says, it is competitive, right? So this is really where we win or lose the schemes. But then you take the management actions and with what we do in back book optimization, then we end up going back to that 40% direct investment. And over time, we should have more corporate debt, which we're not using at the moment. Andy?

Andy Sinclair from Bank of America. I'm a pretty simple guy, so I'm going to ask a couple on cash first, as usual, and then one on annuities. First, I appreciate that you have added some more cash disclosure today. And of the GBP 850 million cash generation from the Private Asset businesses, GBP 500 million from Cala. Just can you break down that remaining GBP 350 million for me? How much of that is recurring? Is any of that Cala presale? How should we just think of that as a recurring number going forward? That's question one. Second is on remittances. So GBP 1.7 billion of remittances, including nothing from America. What are you expecting for 2025 and going forward here? Like a lot of your peers are now putting out remittance targets. Some more color in terms of what you're expecting for remittances going forward would be super helpful. And the third was just on IFRS PRT margins. I know you said about 7% margin in the U.K. You've said GBP 583 million new business profit on IFRS, GBP 10.7 billion of volumes, that gets to about 5.8% margin overall. Just can you help square that 5.8% versus 7.1% and is anything of that to do with international margins lower?

Yes. Well, look, thank you for appreciating the cash. Just on the remittances for a second because we did discuss this, and we do take feedback from all of you and what we're trying to do is to make the disclosures more transparent. There's a limit to some extent, and there's a balance here. But on remittances, we did discuss this for June last year actually. And given the structure of LNG, which is very different from the structure of our competitors, we really have LGAS as the one legal entity, and then we have Asset Management. So having been in different companies where we did have remittances targets -- when we have lots of legal entities and are holding on top, remittances are very important as a target. For us, I think that would be less helpful for you to understand LNG. So we can give you a sense of where we are on the GBP 1.7 billion. But having an actual target for remittances, Andy, I think, is less useful for us. Do you want to talk about cash generation and...

Yes, I'll start with the remittances. I mean -- and I wouldn't be surprised. So normally, we absolutely make sure the remittances from the divisions -- from the entities. It's actually nothing to do with divisions. From the entities cover group costs, et cetera, dividends out. Don't be surprised if we close the Meiji transaction before the end of the year and I get GBP 1.8 billion, but I don't take quite as much remittances from the entities because there is no point if I don't need to. It will just sit at cash at treasury. We don't have any ways of investing in anything that isn't cash if it sits in treasury. So I mean, it just emphasizes your point a bit.

And just you should actually mention one thing that you mentioned on the slides, nobody has asked, but it's important. Jeff showed in the -- because it's the legal entities, as Jeff says, the remittances that we used to get from the U.S. is roughly the GBP 100 million that you have there. And I know there were lots of questions on the multiples of the transaction with Meiji. And actually, in a very simple way, I use the 30x earnings, which looks good. But actually, the logical is how much were we getting in a recurrent basis in terms of remittances. And Jeff showed the fact that we basically were paid 18x the remittances, but...

Yes. Exactly, yes. And then on the cash, yes, we gave the extra disclosure on the sort of private assets that we hold outside the annuity portfolio. If you like, those are sort of ex-LGC assets. Yes, nearly GBP 500 million of that was from Cala. There is quite a lot of recurrence so there's dividends of operating businesses, dividends from Pemberton or cash flow back from Pemberton investments that we've made, et cetera. But there is a proportion of this, which is why you recognize it goes up and down and where it's realization and moving of assets into funds in particular. So -- and that's perfectly valid because a lot of these investments were made to get a track record and to prove that they were -- should be going into funds. And quite frankly, [indiscernible] doesn't have a plan to put them into funds, they're going to be in corporate investments. I'm going to get rid of them because that's partly why they're there. We will optimize the shareholder value from them rather than sit on some of these for a very long time. So there is a number of those where we've launched new funds and we've moved assets across into those and therefore, realized it for the shareholder because they've been brought across, and we'll continue to do that as well as an ongoing remittance from others. But we'll monitor it. We do expect it to move around because of the nature of it. And it's only a GBP 3 billion portfolio these days.

I mean, should I think that as kind of the right order going forward?

Yes, it does move. I mean, clearly, you take most of the Cala and -- so yes. I mean without Cala, you get half of that. So it's a reasonable number.

IFRS margins?

Yes, IFRS margins, yes, I was going to say, new disclosure shocker, yes. So the whole business because -- mostly because that calculation is wrong. So the international PRT, IFRS new business margin is almost identical to the U.K. PRT margin. They're both 7.1% or 7.2%. The reason why you can't do it from that is because, in particular, the risk adjustment is distorted by the timing of reinsurance. So we adjust our metrics because the accounting means you can only take credit for reinsurance at the point you've actually done it, which makes some sense, but it doesn't necessarily allocate the reinsurance to the schemes that you wrote it. And so the biggest example for us was Boots, where we did a significant part of the GBP 5 billion that we wrote in December '23, a significant part of that reinsurance in the first part of '24. And so that automatically reduces the risk adjustment by quite a lot. And so that's what's distorting it. So yes, the equivalent number for the international is exactly the same. So it's a higher strain business, very good margin for us. It just looks different and especially where you have the deduction aggregation version for the business we hold in America, et cetera.

Thank you, Andy. I'm going to go to Reah and then go that side. But by the way, you've seen that Michelle is now our new Head of IR. Keep on feeding -- I can't promise we always do it, but keep on feeding comments on things that you would like to see as different disclosures. And Michel also is taking sort of a fresh pair of eyes kind of to what we do. So please feed those comments to us. Reah, and then I'll come to Dom and kind of that way.

Rhea Shah, Deutsche Bank. So 3 questions from me as well. The first, maybe a question for Laura on retail annuities, but also protection as well. So if you could just give some outlook for '25, but over the next few years. I mean, the market in retail annuities has been really strong, and you grew substantially in '24. Competitors actually complained about how much you took last year. So how do you expect that to look this year? The second one is around the GBP 70 million of investment variances, which is going to unwind back into profit. If you could just give some kind of timing on that and where we should see that within the profit number? And then finally, just back on to buybacks and linking that to EPS ambition. When you say ongoing buyback in that slide, is that -- how should we think about that versus the capital savings? And then linked to that, within the 6% to 9% EPS ambition, how much of that is profit and how much of that is kind of buyback capital management helping the number?

Great. Thank you, Rhea. I'll try to do it quickly because I'm conscious of getting to everybody. So Laura, on the retail annuities and protection, and then I was going to answer buyback. But why don't you answer that? We'll do -- you do the unwind and I'll do the buyback.

So starting with retail annuities. I mean I think there are a number of reasons why both the market and we grew so much. Obviously, rates were really good and people were for pricing and people were quite rightly making the most of that. I think also there is a sort of realization that actually some sort of annuity and fixed income through sort of retirement is a good thing. And I think there is a sort of a general realization of that now. In terms of why we won, I think there are a number of factors. We work very closely, and we sort of always have managed the sort of investment side of the retail annuities with our PRT business. So we have the whole depth of expertise of Eric's team in terms of pricing. So we're able to very quickly react to different pricing environments and therefore, really be sure that we can sort of get the best pricing and keep our margins, which we've talked about. We've also done quite a lot of investment into sort of digital systems that mean particularly for our direct customers. I can do a total digital journey now. So we really have invested in that business. But again, I do think, again, it sort of talks to what we can do across the business in terms of our pricing as well and be able to react very quickly there. And I think in terms of the outlook, rates have come off a little bit, but I do think that move to making sure that people -- and again, sort of moves from the government too in terms of realizing that people should have a combination of income and investment through their later lives is sort of really supporting the market outlook. So I think we're very -- obviously very pleased with what we achieved last year, but we'll continue to -- we'll continue to keep investing, but also linking in to Workplace as well in terms of later life opportunities there. And I think the only thing I'd say on protection as well. I mean, protection, we have about -- we can sort of from publicly quoted stats, we wrote about 20% of the retail protection market. Again, I have invested over the last few years in ensuring that digital interaction is really easy. Half of our claims last year were made through our digital journey. So again, making sure that we do just sort of maintain our proposition in both those markets.

And if you go back to just it's worth saying that we have 1/4 of all the DC market in the U.K. That's the market that's going to be GBP 1 trillion. So hopefully, we'll have that. Half of that is our own workplace, so the GBP 94 billion that we talked about. And as Laura was saying, at the moment, not a lot of that DC money is yet going into individual annuities, but that's the future, right? So if you happen to live to 110, you probably do want an annuity for this. So -- and I think we want to promote decumulation solutions together with individual annuities. We're the largest individual annuity player in the U.K. So that's a huge opportunity for us. At the moment, we're doing mostly that through third parties and not yet because we have a very young book on the DC side. We're not yet connecting the 2 things. There's a huge upside for that to come. Just on EPS, look, the ongoing bar, let's go back to -- it's a long time ago. But on the 12th of June, I said that we would return more to shareholders by growing our dividend at 2% plus the share buyback than what we would have otherwise if we had grown at 5%. So -- and then most of you did the math and you said, well, actually, for that, you need to at least do 3 sort of GBP 200 million buybacks. We didn't give you exactly how many years and when, but most of you then put something in your models, which was the ongoing EUR 200 million buyback. That bar there is what that means. And so that's -- I'm not going to give you exactly what we assume in our models, but we've assumed that ongoing buyback. That is then, to Andrew's question earlier, will change depending on strain and others. So the bar could be bigger. But we've assumed that to get to our 6% to 9%. So a part of that 6% to 9% is the benefit of that buyback. But we did that, if you remember, before the EUR 1 billion of Meiji Yasuda, et cetera. So we had an original plan that allows us to do that. What we'll do when I stand here a year from now is tell you what the share buyback is for next year, but you should assume something in that. Do you want to say something on that?

Yes, I don't think there's anything to add to that.

So the GBP 70 million of the...

Yes, the GBP 70 million, it's just discounted over the period of the deferred consideration for Cala that we disclosed. I think at least half of what's left is quite back-end loaded. So that will come at the end. It will unwind over that. It is just the discounting of that amount to reflect the risk we don't get it, I guess. And so I'd love to put it in operating profit, but I don't think I'd get away with that one. It's clearly just going to come back as a positive in investment variance because that's where we took it as a hit.

Yes. We just wanted to make -- like I asked exactly the same question when I saw the numbers, kind of that number in a way shouldn't be there because we have it at GBP 70 million negative and then it comes back, but it will come through the investment variance line. So thank you. Good question. Dom?

Dom O'Mahony, BNP Paribas Exane. Really looking forward to the deep dives, both asset management and retail and I'll try to give myself to just 2.5 questions. They're a bit numbersy, so apologies in advance. Just on the OSG outlook, I'm just thinking through the moving parts into 2025. The disclosure you gave on the surplus emergence from U.K. annuities shows GBP 0.8 billion of OSG in '24, GBP 0.7 billion expected in '25. I get why interest rates gilt heavy strategy, but I'm guessing that's sort of a small headwind. And then if you normalize the management actions, that's another GBP 100 million. You then get growth, hopefully, in the other businesses. But my sort of gut reaction is it sounds like OSG down in '25 and '24. Please tell me if I'm wrong. The second question is just on the disposal to Meiji Yasuda. Thank you for the point about the cash remittance. Could you just help us understand why the cash potential, and I emphasize potential for the point you mentioned, Antonio, which is you guys draw up what you need, not what you can. Why shouldn't the potential be the same as the OSG if you reach run rate? I appreciate that, that business has had massive growth, presumably SCR strain, presumably you need to keep that capital to maintain the ratio. So any reason I shouldn't expect the real potential cash to be closer to the GBP 200 million to GBP 225 million? And then the half question is, to the extent there is a constraint on the remittance side of U.S. protection, why isn't that also true of U.K. protection?

Let me just make one comment and Jeff, you should answer. Just on OSG overall, I said something right at the end, which is I'm more confident today than I was when I announced on the 12th of June that we can meet or ideally exceed our targets. So I measured those words very carefully because several of you pushed me on the 12th of June, are you being too conservative on the OSG target? And I said the GBP 5 billion to GBP 6 billion actually, our plans were -- I was not trying to underpromise to deliver. Actually that was -- those were our plans. Actually, now having delivered the Meiji Yasuda transaction, I'm more confident on that target. So I'm more positive about OSG, which accounts for what we're getting from Meiji Yasuda. So -- and we've both said this in different ways, which is by having brought forward that, we are now more comfortable about our 3-year targets, which are '25, '26 and '27. So the GBP 5 billion to GBP 6 billion.

Yes, I think that's right, and that's a very important point. I mean, in any 1 year, the OSG will move around. We saw things like Asset Management profitability feeding into that. We see increases coming off the, obviously, individual annuity portfolio. Whether we're -- it's a bit too early to completely predict that. Whether it's minus 5% plus, 5% is still to be completely landed on with the performance of some of the businesses. But we do see over the period that we're looking at the targets for that, that would increase over time, absolutely. So certainly, by the endpoint, we're seeing good compound growth across the OSG irrespective of where we go in '25 or not.

Which is an important point for what you then project after '27, right? Because we have '25, '26, '27. We'll get there when we get there, but it's -- we will need to announce the targets for the years afterwards. And we have modeled what the OSG is at that point, which depends a lot on the growth across the 3 businesses, particularly what we're doing in Asset Management. No pressure for the 12th of June.

Yes, yes, yes. So the other one is, yes, I mean, it's the difference in cash and capital because ultimately, the OSG. And as I said, when we announced the Meiji transaction, a lot of that -- if you think of what's happening with the protection business in the U.S. and what that number is representing as well as paying commission out of the door, which is real cash gone, it's actually the present value of all the future profits that we're putting on the balance sheet. So that is not cash, and that isn't what we're dividending out of the entity. And yet that isn't necessarily the capital that you've got in the U.S. stat entity. Because you don't again necessarily get the same benefit there. And so it's the difference between what is the statutory capital and what's being created, which is advantageous to the cash that the business is using up, and that's why the dividend. Now we had always equally set it. It had sort of grown from $100 million growing at 2% to 7% per annum anyway because that sort of made sense, and that was where we were at the number. But I don't think with the combination of financing strain, financing commission out the door, also financing the PRT business within the entity, even though we optimize that across the group, we would necessarily have been taking a lot more cash out of that entity. So this is absolutely an acceleration of what we would have expected to be getting from that entity as a whole in respect of that business.

Thank you. Farooq?

Farooq Hanif from JPMorgan. Two questions from me. So firstly, on back book optimization. If spreads are low at the moment, doesn't that mean your back book optimization is going to be difficult in the near term and this kind of back-end loaded? Or am I just reading that wrong -- or thinking about that wrongly? So I mean, is there kind of material run rate upside to the investment margin coming, but coming in a few years when things sort of normalize? And added to that, do you still think the picture is back book optimization being above what you -- potentially above what you've guided in the past? And the second question actually for Eric. So your private markets business in terms of external flows is still in outflow mode. I mean I think in the second half, it flattened. Just kind of wondering what's been driving that, but also to get to your ambitions, for example, the GBP 12 billion that you talked about earlier. I mean, presumably, you would be expecting that to turn very positive very quickly to try and get there. So if you could comment on kind of what's going on there, that would be very helpful?

The overall private market franchise increased to GBP 57 billion. But you're right, to get to the GBP 85 billion, that's why we have Eric. But I'll let him answer. Just on back book optimization, we did say, Jeff and I were careful last time to say with the gilt-heavy strategy, there's further upside, but we kept on talking about the GBP 200 million times 5, which was the GBP 1 billion we mentioned. But do you want to say something more on back book -- back-ended? Or is it more kind of...

I mean it's not quite as simple as that because obviously, some of this is also the DI spreads. We still see very good value in putting DI against the back book where we are holding. Even corporate credit, we can effectively rotate out of that, if you think corporate credit is very tight. Well, actually the benefit we're getting in moving into different duration direct investments is very positive. So we still have good capacity to deploy. There is still a debate as well about using some of the gilt strategy in the back book and doing that once and then doing it. If it works for new business, why doesn't it work for back book? And do you do that once and then rotate that again in the future. So there are a number -- without giving too much away, there are a number of opportunities around this. We certainly don't see headwinds to achieving what we would expect. And I think you're right that certainly in the medium term, we see the opportunity for potential upside depending on where markets go.

Thank you. Nasib? Sorry, Eric. I sort of -- I was looking at the clock and kind of thinking about all my -- Asset Management -- private market?

Yes, no worries. I think -- well, some of the grains of why we have some optimism on how this can continue to grow is what we saw last year, particularly in the residential strategies and the private market access fund that cuts across multiple strategies. But generally, if you think about the scale of our business today, we're largely in real estate and private credit right now. We have an infrastructure business. It's small for now, but it's growing. And there will be a lot of things to talk about probably by June in terms of areas we're incubating in areas in infrastructure, but also real estate. We obviously just bought Taurus in the U.S. We think over time, there's some real opportunity to grow that business as well. But when I get back to the private credit, that has been growing consistently. I feel that's something that we're very strong in. There's ebbs and flows in private credit. But the general credit space and the hybridization between public and private is going to keep playing to the strength of private. So I feel really good about a continued consistent growth on our core private credit business. Real estate, we're highly exposed to date, and this is a good thing for the future, but it's not -- it hasn't been -- it's been a really tough ride. I can't think of a developed market real estate market that's been hit harder than U.K., and that's where we're concentrated. I'm very optimistic about the turnaround. I think that's shared by a lot of the industry. There's a lot of focus right now on how to take advantage of the uptick in the U.K. So that's a second pretty bedrock capability we have, where I think we've weathered what has clearly been a storm in the U.K. better than most, and we're very well positioned to grow on that front. So already that -- those 2 consistent growth in our 2 core areas, I think, is going to be a lot of getting us to the GBP 85 billion. The merger with LGC, and I think, Jeff, you started alluding to it, but I'm very excited about different strategies that have been vertically integrated strategies that were in that business that we're now thinking about how to incubate for third parties. And that's what -- hopefully, I can give you the first seeds of that in June, but that's going to play out over, frankly, the next 18 months. Private strategies take a while to get off the ground. The fundraising period can be long. So you will see that rolling out over time. But if you add that to our bedrock strategies, I think the GBP 85 billion is clearly achievable.

And Eric, to your point, we've talked about this GBP 20 billion about those 3 things that I mentioned earlier. Most of that, Farooq, is not yet in our numbers. I talked about GBP 1.2 billion of the GBP 20 billion of external commitments. What we'll give you on the 17th of June is the detail on how is that progressing and how we get to GBP 85 billion plus. Thank you. Now, Nasib.

Nasib Ahmed from UBS. So I think 3 follow-ups here. Firstly, just following up on those comments around the private assets. So you've got GBP 800 million odd from Meiji Yasuda committed, and you had a net new asset target of GBP 100 million to GBP 150 million cumulative. Does that mean I add the GBP 800 million because you didn't know about that when you stood up at the...

So when you say GBP 800 million, you mean the private markets...

No, the USD 1 billion converting into GBP 800 million.

No. Yes, GBP 800 million, yes. I understood that.

So is there a lot more upside? Can you say a little bit more on that target? In addition to saying you're very, very confident in meeting that. Secondly, on OSG, following up on the GBP 5 billion to GBP 6 billion, are there any negatives versus when you stood up at the CMD and set out the target, for example, TMTP runoff being a little bit accelerated, rates being higher, is that impacting you? And then finally, on the corporate investments, what's the SCR of the GBP 0.8 billion?

I'll take the first and then, Jeff, you should take the other 2. So on the GBP 102 million to GBP 150 million, different from what I've just said on OSG, we were reasonably cautious on the GBP 100 million to GBP 150 million when we talked about that. The reason is I was still merging LGIM and LGC. Eric had not yet arrived. We needed to get the momentum. Without being overly optimistic, January and February have been good months for us from an ANNR perspective. But Eric is right. I mean these things take time. As you know, it's the nature of the business. What -- so the JPY 150 billion, which is the $1 billion and GBP 800 million, is great. A lot of this is how are we going to get to the target. Certainly, it's something we were not counting on a year ago. To be honest, the Meiji Yasuda transaction took longer than that to negotiate, but we were very clear and well, very pleased and very positive about that particular aspect of it because when we write more U.S. PRT, we then have an agreement with our own Asset Management business to continue to manage that, but it is on top of that. It is -- and I think what's particularly important about it is not so much that it's GBP 1 billion or the GBP 800 million, but it is what it would give us from a seed capital perspective. Because at the moment, we use our own balance sheet to seed strategies, but to have also such a large institutional investor coming with us, and Eric, you could add, but we should have several of those, right? We should have -- Meiji Yasuda is fantastic because they're also a 5% shareholder and we have this broader partnership. But we would want other institutional investors to come in at those types of levels as seed investors to new strategy. So we're very positive about it. I hope there's upside of around GBP 100 million to GBP 250 million. I think that's the 17th of June discussion rather than today, but we were reasonably conservative on that number because there's a lot of delivery to come. Do you want to say a word on that?

No, I think you -- I couldn't agree more. And Meiji Yasuda is just a brilliant example of the compatibility we have with those kinds of strategic partnerships coming. Again, I've been here just under 100 days. And I think our long-term focus, our client centricity and the client centricity for the long term plays very well to those kinds of strategic partnerships. And when you think about how to get particularly new funds off the ground -- again, we have some bread-and-butter strategies that we think the climate is very good for those to grow naturally. But we do expect to take things that we're incubating today and make them into full-blown strategies. The critical moment is that cornerstone investor. And it has nothing to do with in how -- we have a balance sheet, so we'll have the skin in the game that everyone wants. But people want to see world-class investors who are voting with their feet. And those cornerstone investors, they really move the needle with midsized investors. So something like Meiji Yasuda is extremely catalytic. And like Antonio says, we're compatible with a few -- we're big enough. We do enough things around the world. I think there's room for a few strategic partnerships.

Yes. There's a few more billions that come with that GBP 800 million, and that's what we need. But we now need to deliver on that. Jeff, OSG and corporate investments?

I've seen nothing particularly to call out in the OSG. The main headwind has been the reduced Asset Management profit, if you think through rates. There will be -- there's a tweak from gilt strategy, et cetera, but it's -- there's nothing that isn't within the swings and roundabouts of the calculation, I would say, since it was only last June. So nothing's really changed there. In terms of the SCR for Corporate Investments, it's not dramatically different from what we were holding for the whole of Cala. If you think it's GBP 800 million of balance sheet left, some of those are higher beta, so they will be slightly higher. So I think off the top of my head, it's somewhere between GBP 100 million and GBP 150 million because you're not going to be holding more than that against them. Some will be 20% capital requirement, but maybe a bit higher, 25%, but some of them will be really low [indiscernible]. A bit of agricultural land doesn't have a very high beta and just sits there. So it's that sort of range. It's not a huge amount of capital.

Thank you, Nasib. Anybody else? No. Are we good? Well, thank you. Thank you for coming this morning. It's great to have everybody here. As you can tell, we are very positive actually about what we delivered last year, both in terms of financial performance, but particularly about the strategic momentum that we have. I look forward to continuing to share with you the progress that we are making. As we said several times, the next opportunity to do that will be on the 17th of June with Eric, but a bit as I did with Andrew when we met in December, I'll do a bit of how is the group doing overall. And then we'll do a deep dive on Asset Management that we're all very excited about as a core engine for growth. So with that, thank you for coming.