M&G plc (MNG) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the M&G plc Half Year 2023 Results Presentation. We will now go live to Luca Gagliardi, Director of Investor Relations. Luca, please go ahead.

Good morning, everyone, and welcome to M&G's 2023 Half Year Results. It's a pleasure to have you all here today. As usual, we'll have a short presentation from Andrea and Kathryn that will take you through that, and then we'll have more than enough time for questions for those in the room and also online. So without further ado, I leave it to Andrea. Thank you.

Good morning. And welcome to M&G's 2023 half year results. It's a pleasure be here with you today, to give you an update on our performance and our progress towards delivering our three strategic priorities. In March, we spoke about what kind of company we want to be: one that uses its differentiated, balanced and integrated business model to deliver better client outcomes. Today, we confirm that ambition and how we are achieving it. I was confident about M&G's future when I joined nearly 1 year ago, and I'm even more confident now. At the time of macroeconomic volatility, we have delivered strong operational and financial results. In the first part of this presentation, I will focus on our financial highlights and business achievements. Kathryn will then expand on the financial results, our first under the new IFRS 17 accounting standards. I'm proud to say that our half-year results evidence a strong performance with meaningful year-on-year growth in both adjusted operating profit and operating capital generation. In a short period of time, we have progressed significantly on our three priorities: financial strength, simplification and growth. In these six months, we have seen how M&G differentiated business model really delivers value to clients and shareholders. So let me take you through the key highlights. It all starts with financial strength, proving we are good stewards of our shareholders' capital. We remain on track to achieve our 3-year target of GBP 2.5 billion operating capital generation by 2024, having delivered 53% of it in the first 18 months. Given the progress against this target and the continued strength of our financial position, I'm pleased to declare today that 2023 interim dividend of 6.5p, up 5% on last years. Let's look now at our second priority, simplification. Having launched a transformation program just six months ago, we are making real progress to become a more efficient organization that can better serve its clients. We have already begun rolling out a new target operating model. We reshaped our leadership team, we are rationalizing our location footprint, and we have accepted over 200 applications for voluntary redundancy. We're just at the beginning of a 3-year journey, but we are confident we are on the right track, and we expect to achieve GBP 50 million in run rate savings by year-end. Finally, let's look -- talk about growth. In half 1, we delivered positive external net flows and reentered the U.K. DB derisking market. This is a key step forward as we aim to maximize the unique combination of the three business units within M&G. Despite facing expected outflows from U.K. institutional clients, we have successfully expanded internationally and seen traction in high-value segments of the market that offer compelling margins. PruFund, private assets, wholesale asset management, all these franchises attracted positive net flows. Let's dive deeper now into each one of our priorities. When looking at financial strength, we have good reasons to feel confident. After a meaningful improvement in 2022, operating capital generation continued to grow by 17% year-on-year. The strength of these results underpin the quality of our dividend with the interim DPS growing by 5%. Our balance sheet remains strong and of high quality, with a Solvency II ratio above the top end of our target range. And finally, with good levels of liquidity, both in the holdco and subsidiaries, we had the resources to focus on leverage as we remain committed to achieve a ratio of below 30% by 2025. Moving on to simplification. In March, we launched a transformation program with three stated objectives: streamlining the operating model, achieve GBP 200 million cost savings and reduce the asset manager cost-to-income ratio to less than 70%. Our work on our transformation program has already started. We are laser focused on improving our ability to serve clients, reduce costs and unlock growth. This year, we achieved a major milestone as we successfully migrated 2 million policies to a modern and stable admin system. This allows us to decommission legacy IT systems to lower costs and to deliver a better client experience. We are also improving digital journeys for our clients, with MyPru registration up 14% year-on-year. By the end of 2025, we will have streamlined and automated more internal processes and reduce costs through rationalizing activities. As we strengthen internal change capabilities, we expect to substantially reduce contractor and consulting spend. We are also addressing our office footprint, expanding our presence in lower-cost locations while reducing it in London. As we complete the program, we expect to reduce office spend by over 20%. We have an ambitious plan, which the entire Executive Committee is fully focused on. We have already made a good start, and we are confident in our ability to execute. But as I've said before, the transformation program is not just about costs. It is about becoming a leaner organization, which better focuses and delivers on client outcomes. With this goal in mind, we have strengthened our Executive team with dedicated leadership for each one of our 3 business areas. I'm delighted that Clive Bolton and Caroline Connellan joined us this month to lead the Life and Wealth business, respectively. They bring to M&G deep expertise in their fields, together with the drive and commitment needed to fulfill our ambitions. As I said in March, the three components of our business model are balanced and complementary. We lead with the Asset Manager, the core of our business. It both serves and is supported by Heritage and Wealth. Working together, all thrive. Let me be clear. While we now have new leadership in each of our 3 businesses, Caroline, Joseph and Clive will work together to deliver the best-possible outcomes for clients and shareholders. Having covered financial strength and simplification, I will now turn to growth. And here, I'll start with the Asset Manager. We have offset headwinds from U.K. institutional clients by growing internationally and winning high-margin businesses in Wholesale Asset Management and Private Markets. M&G has building its international presence since the [ demerger ] from Prudential, and the collaboration between the three business units plays a crucial role in this growth. In just over three years, we have added investment capabilities in Asia and the U.S. This allowed us to repatriate over GBP 27 billion of our internal client assets, including a GBP 5.5 billion Asian fixed income mandate earlier this year. Adding capabilities to serve the internal clients has also improved our proposition to external clients. This, coupled with focused deployment of distribution stuff in Continental Europe and Asia, has translated into continued external net inflows from international clients, and we are not done yet. We continue to invest in distribution capabilities in the most promising developed markets across Europe and Asia. Another area where we continue to grow is Wholesale Asset Management. As you can see, in 2020, only 20% of our mutual funds performed above median, and we suffered net outflows of almost GBP 12 billion. We believe that this franchise could return to profitable growth. So we brought in fresh talent, tackled performance and reviewed our proposition and pricing structure. As of the end of June, over 70% of our mutual funds performed above median, and we achieved positive net flows of GBP 1.3 billion. In doing so, we did not rely on a single blockbuster fund. Instead, we leveraged a high-quality offering, diversified across equities and fixed income, developed and emerging markets, as you can see on the slide. Despite our positive experience in half 1, we are not complacent. We remain focused on delivering strong client outcomes to sustain our performance over time. So the next area I want to touch on is Private Markets. With GBP 74 billion of assets under management, we are one of Europe's largest investors in this space, offering high-value solutions that deliver attractive margins. While accounting for under 1/4 of the Asset Manager AUM, our Private Market operations generate over 40% of the revenues at a strong average fee of 55 bps. Here, Joseph Pinto, our Asset Manager CEO, has simplified the business structure to focus on 6 centers of excellence, where we are recognized for our market-leading expertise. We have seen positive momentum across all of them in half 1, with meaningful wins in real estate, [ Infracapital ] and responsAbility, our Swiss-based team specialized in emerging markets impact investing. In Private Credit, a key area of focus for us where we see increased client demand, we launched our first CLO fund, raising GBP 400 million and adding a new element to our offering. Looking forward, I'm also excited about the prospects for our [ Impact ] team. So far, it has been serving only the internal clients, who has committed a meaningful amount of seed capital to develop these capabilities. Now, thanks to an excellent track record and a good level of interest from clients, we are getting ready to open their funds to external assets. One more reason for optimism is our capital queue, roughly GBP 5 billion of commitments across both our internal and external clients. So these are mandates we have already won and which will generate fees once deployed into assets. So let's turn now to our Wealth business. Here as well, we have seen operational improvements and growth. With sales of GBP 3.3 billion, PruFund has delivered the best result in over 3 years. This is a meaningful increase on 2022 levels, which had already recovered sharply on previous periods. The quality of this proposition and the outcomes it delivers to clients continue to be strong. And at these volumes, it is one of the best-selling investment solutions in the U.K. Where we need to do better is in the other elements of our Wealth proposition, in particular, our digital platform and advice business. We need to take action to improve profitability. This will require time and effort, but we are already making progress. In May, we launched all PruFund solutions on the M&G Wealth platform to support sales, while improving and digitizing adviser journeys. Finally, this year, we have grown our control adviser network to over 500 people through organic recruitment, in-house training and the completion of the acquisition of Continuum. We have all the elements we need to make the Wealth story a success: a scaled advice business, a digital platform, a differentiated investment solutions. Our objective is to combine these capabilities into an integrated proposition, improve efficiency and drive profitable growth. Last but not least, the Life Insurance business. This morning, we announced the closing of 2 BPA transactions for a combined total of over GBP 600 million. These are the first deals we have completed since we closed the annuity book to new business back in 2016. Reentering the DB de-risking market is a key component of the strategy we presented in March, expanding our capital generation capacity while driving flows into the Asset Manager. And meeting this milestone in just over six months shows our execution capability in action. We have done this from a position of strength, experiencing good levels of client demand and with a solid and resilient balance sheet. While we have capital to invest, we will be extremely disciplined in doing so, ensuring that new business meets or exceeds stringent financial hurdles and credit risk is actively managed. In the process of completing these deals, we have screened more than GBP 20 billion worth of flows. We pursued only those opportunities which best match our capabilities, where we could achieve attractive returns and add most value to our clients. Under Clive's leadership, we expect the Life Insurance business to become a third contributor to M&G's growth, next to the Asset Manager and Wealth. Our aim is clear: generate good returns on capital, drive flows into the Asset Manager and better leverage With-Profits Funds. So in summary, I'm very proud of the progress we delivered in the first half of the year. At a challenging time for the Asset Managers, we delivered positive external net flows. This is the third year in a row we achieved this. In doing so, we have expanded our international presence, once again partnering with the internal clients that awarded us a GBP 5.5 billion Asian mandate. As we improve the diversification of our footprint and client base, we continue to build a more resilient business. We have also matched U.K. institutional outflows with high-value inflows in Wholesale Asset Management, Private Assets and PruFund, high-margin solutions that improve our product mix. And we reentered the DB de-risking space, leveraging our business model to open the third avenue of profitable growth alongside Asset Management and Wealth. Our growth efforts go hand-in-hand with our simplification agenda. We have already made significant progress on our transformation program with a clear ambition to improve client outcomes and reduce costs. No doubt, there is still more work to do, but today's results underscore the financial strength of M&G. Adjusted operating profits, operating capital generation and dividend per share are all up year-on-year. With that, I will now hand over to Kathryn to take you through our financial results in more detail.

Thanks, Andrea. Good morning, everyone, and thank you all for joining us today. I'm pleased to present what is a good set of numbers, particularly in light of the ongoing external macroeconomic uncertainties and inflationary pressures. Despite these challenges, our external net flows were positive for the third year in a row with strong inflows in Wholesale and PruFund. Both our operating profitability and capital generation improved materially, and we are well on track to achieve a GBP 2.5 billion capital generation target. We've also made a good start on the transformation program, and expect to deliver GBP 50 million in run rate savings by year-end. And finally, our Solvency II ratio remains strong and above the top end of our target range. I'll now turn to the details behind these highlights. External net flows were positive at GBP 700 million. And within Asset Management, you heard Andrea talk about how we offset U.K. institutional outflows with international growth and also about the strong performance in our Wholesale business. But the real highlight for these six months is PruFund, which delivered its best flows since 2019. Its smoothing mechanism and diversified asset allocation are very attractive for clients, particularly in light of the ongoing market volatility we are seeing. Operating profit of GBP 390 million is up 31% year-on-year, reflecting the strength of our diversified business model. Here, we saw an improved contribution from Heritage and the Corporate Center and resilient performance from both Asset Management and Wealth. Operating capital generation of GBP 505 million is also up by 17% on an already-strong 2022. We had good support from both the underlying result, which was only modestly down on last year at GBP 352 million; and management actions, which were up in the period. We finished June with a Solvency II ratio of 199%, a strong position, considering the current economic cycle. And it's important to note that year-to-date, we've not experienced any credit defaults and only very low level of downgrades. Let me now deep dive into assets under management and flows. Adverse market movements of GBP 7 billion and outflows in our Heritage books were the main driver behind closing AUMA of GBP 333 billion. Our open business was in net inflows for the third consecutive year, despite a tough external environment and headwinds in our institutional franchise, where we saw GBP 3.8 billion of net outflows here in the U.K. These outflows were matched by strong growth with international institutional clients as we gathered GBP 2.4 billion of net inflows and as you heard from Andrea, in Wholesale, with GBP 1.3 billion of inflows, meaningfully up on 2022. Looking forward, the U.K. institutional market does remain challenged. But at the same time, we have already absorbed the majority of the exceptional redemptions we flagged in March, and we remain confident in the quality of our proposition. We're also encouraged by the strong pipeline in our international institutional business across both Europe and Asia. And as we discussed at full year, we see renewed interest from clients in our fixed income capabilities, which we expect to support flows in the second half. We're, of course, mindful of the challenges faced by all asset managers and continue to focus on investment performance, product innovation and distribution to build on the improvements we have delivered so far. Wealth net flows improved by GBP 700 million year-on-year, thanks to the PruFund sales of GBP 3.3 billion. We are very pleased with this achievement and believe it can be maintained over the second half of the year. Having covered flows, I'll move now to operating profit, which we report today for the first time on an IFRS 17 basis, which you can see on Slide 18. At GBP 390 million, group operating profits were up by 31% year-on-year. The key features of this AOP results are, firstly, that the Asset Management business showed great resilience as it delivered a stable year-on-year result, despite adverse market and a tough trading environment. We took action on costs to offset inflationary pressures and win new business and high-margin areas supporting our revenue line. Secondly, Wealth continued to provide a meaningful contribution to earnings with an improved PruFund performance offsetting losses in the advice and platform businesses. Thirdly, Heritage was up almost 40% on the prior year, providing a solid underpin to the broader business with a strong result from both annuities and traditional With-Profits. And finally, our Corporate Center was GBP 18 million better year-on-year due to higher treasury income, driven by the external interest rate environment. Let's now look at the Asset Management result in a bit more detail. As we've highlighted today, we're encouraged by the resilience shown in our external flows and in our Asset Management profitability. The financial result included the consolidation of responsAbility, which added GBP 20 million to the top line and GBP 19 million to costs versus the first half of last year. So on a like-for-like basis, revenues declined by 3%, impacted by the 5% drop in average AUM, but benefiting from improved margins due to a higher-quality product mix. Our overall margin is up to 33 basis points, thanks to our continued efforts to expand the Private Markets business. And you heard Andrea talk about our focus in this area, where we are excited about the opportunities we are seeing in private credit and infrastructure in particular. Looking at expenses now. Once we strip out the impact of responsAbility, costs were up by only 2%, demonstrating our continued focus on cost discipline and well-below current inflation rates. The resulting cost-to-income ratio is 79%, which includes performance fees, and is primarily driven by these adverse market moves. Given our progress on the group-wide simplification agenda and the plans Joseph is well underway in executing, we remain fully committed to our cost-to-income ratio target of below 70% by 2025. We are determined to control absolute costs and deliver positive operating jaws over time in our Asset Management business to drive higher profitability. Moving on now to Wealth and our PruFund AOP results. We've already touched upon the strong growth in PruFund sales, which you can see on the bottom right of this slide. These are up over 30% on H1 last year. And while we don't expect this level of growth to continue, we do believe these current volumes are sustainable. PruFund earnings increased by 16% to GBP 119 million, despite the nonrecurrence of a provision release relating to new business expenditures that we benefited from in 2022. The main driver of the year-on-year improvement in AOP was a CSM release of GBP 101 million, which was up almost 30%, thanks to a higher opening CSM, which benefited from positive market experience last year. I will cover the main drivers of CSM moves in a minute. On this page, it's worth noting the PruFund CSM runoff rate. At 12%, it's higher than the 10% we've previously assumed and that we communicated at the IFRS 17 event in July. Return on surplus assets more than doubled to GBP 21 million, thanks to higher interest rates. So thanks to these strong current sales volumes, the PruFund CSM continues to grow. And we, therefore, expect the current level of earnings to be sustainable. Turning now to Heritage. And here, AOP for the first six months was up by almost 40% on H1 2022, underscoring the importance of our insurance operations and the benefits we get from our diversified business model. The same drivers lifting the PruFund result also benefit the traditional With-Profits book, where earnings have grown by 30% to GBP 129 million. And again, a higher starting CSM and rates underpinned the improvement in profitability. At 14%, the traditional With-Profits CSM runoff rate reflects the greater level of maturity of this book. In annuities, nearly GBP 50 million improvement in AOP year-on-year to GBP 150 million is due to the higher returns on surplus assets of GBP 110 million, driven by the significant increases in interest rates over the last year. The two BPA deals, we're delighted to announce this morning are, of course, not included in this result. And under IFRS 17, they won't immediately impact annuity profits, as you would have seen under the previous accounting standard. What you should expect is an increase in the annuity CSM from new business coming on to the balance sheet. I'd like to now cover the CSM movements in the first half of the year, which we include in our results for the first time. So on Slide 22, we show how we think about the CSM, its key drivers and how these differ across annuities, PruFund and traditional With-Profits. At the end of June, the total CSM stood at almost GBP 5.8 billion, showing a sizable discounted future value from M&G's insurance operations, split across With-Profits Funds and annuities. Over the first six months of the year, the total CSM improved by GBP 185 million before market impacts, with interest accretion and expected returns more than offsetting the CSM release to earnings. Looking more closely at each product line, you can see the different numbers across the key drivers on the right-hand side of the page. The annuity CSM remained flat, primarily because we've not yet reopened a book to new business. And of course, market assumptions are locked in, leading to no impacts from market variances. On the other hand, within the With-Profits Fund, you can see a GBP 50 million from PruFund new business. And you can also see an impact from markets, which, mirroring the approach for capital generation, is split into an expected return, which is added to the CSM interest accretion and experience variances, which are included in market impacts. Turning now to underlying capital generation, where we saw another strong result of GBP 352 million. Retail & Savings once again drove this outcome. We're very pleased by the resiliency of the underlying result of GBP 352 million as it underpins our confidence in the dividend and of course, in achieving our operating capital target of GBP 2.5 billion by the end of next year. So the main differences compared to last year are the lower Asset Management contribution due to negative impact from market movements, the nonrecurrence of a GBP 16 million provision release in Wealth that we benefited from in 2022 and higher treasury income in our Corporate Center. When we think about the remainder of 2023, we expect a similarly strong underlying result. The resilience and predictability of the capital generation from our insurance operations provide strong foundations, upon which we can grow our businesses and achieve still greater diversification. I'll now move from underlying to operating capital generation, which you can see on Slide 24. Here, management actions led to a 17% increase in the operating result to GBP 505 million. These management actions of about GBP 150 million were almost entirely driven by what's labeled its asset trading, predominantly in the With-Profits Fund and to a lesser extent, in the annuities book. This positive contribution generated by the With-Profits Fund is due to changes in the strategic asset allocation that powers PruFund. In light of the current market environment, our [ Investment Office ] decided to reduce the allocation to equities and increased the allocation to fixed income, which led to a fall in our solvency capital requirements. Within other management actions, in 2023, we had a small favorable impact from mortality experience, while in 2022, we had minor headwinds from persistency and credit experience. And of course, as usual, longevity assumptions will be reviewed in the second part of the year. Overall, we are very pleased with our strong operating capital generation, in particular, as it further improved on a strong result in 2022. And we are well on track to our GBP 2.5 billion 2024 target. Having covered the operating result, I'll now walk through the other movements in Solvency II surplus on the coverage ratio, which ended the year at 199%, but flat to the end of 2022. The GBP 505 million operating result more than offset the final dividend to 2022 of GBP 310 million and adverse market movements of GBP 141 million. These market movements were mostly driven by the actual returns generated by the With-Profits Fund being lower than the expected rate. In the period, we also experienced a GBP 280 million capital restriction, corresponding to a reduction in the solvency ratio of just over 6 percentage points. Our capacity for Tier 2 and Tier 3 capital is set by our regulatory SCR, which reduced in the period due to the runoff of the Heritage business and higher rates. And you can find more details on this in the appendix. Turning now to our leverage ratio, which remained broadly stable over the first half, finishing at 36% due to higher rates reducing our own funds. There was no change to the quantum of debt or servicing costs. We are committed to a target leverage ratio of below 30% by 2025, and we will take action to achieve it. As you know, we've a call date in 10 months with an amount that roughly matches the capital restriction. So if we were to call and not refinance the debt, assuming the current position, we would positively impact the leverage ratio without seeing a material impact on the solvency ratio. With the implementation of IFRS 17, we've also shown on this page the IFRS 17 leverage ratio, which stands at 29%, although Solvency II leverage remains our main metric. So to summarize, in the first six months of the year, we yet again delivered positive external net flows in a very challenging market. We have made a strong start on our simplification agenda and our GBP 200 million savings target. We achieved an increase of 31% in AOP, demonstrating the strength of our diversified business model. Operating capital generation improved by 17% on a strong 2022 result, and we ended the period with a stable Solvency II ratio, offsetting capital restrictions and dividends. And with that, I'll hand back to Andrea to wrap up.

Thank you, Kathryn. So to conclude, in March, we shared with you our vision for M&G. We are at the start of our journey, but I'm very pleased with the progress achieved in a short period of time. Today's results are good results with higher earnings, operating capital and dividends year-on-year. They demonstrate the strength of our differentiated, balanced and integrated business model. They also demonstrate progress on our three core priorities: first, financial strength with a strong operating capital generation and resilient balance sheet; second, simplification as we transform M&G to deliver better client outcomes and more focused organization; and finally, growth with positive net inflows for the third year in a row and having successfully reentered the DB derisking space. And of course, these achievements would not have been possible without the dedication and expertise of all our colleagues across M&G. I would like to thank them for their hard work and their continued commitment to the growth and success of this business. The external environment might still be [ uncertain ], but we are confident in our capabilities and in the strength of M&G. With three balanced and complementary parts, our business model gives us a diversification and resilience we need to succeed. We have the right operating model and the right team in place. We will maintain our financial strength, we will simplify, and we will continue to grow this business. Thank you.

Go ahead. So we already have a couple of questions online, but I would start with those in the room. So Ashik was the [ fastest ] one. Let's go left to right. [ Full year], we went right to left, but now, it's left to right. I see all the analysts that are now [ set ] on this side, so let's swap it around.

There's a couple of questions I have is [indiscernible].

Thanks, Ashik. And I'll repeat the question just because I forgot to mention when you ask the question, please pull out the microphone and press the button. So of course, for those on the line who didn't hear it, I'll just repeat it for the benefit of the people that are following us virtually. The questions were fundamental two. One is about the sustainability of the underlying capital generation results, and the second question is around leverage and our plans to bring it to below 30% by end of 2025.

I think these are good questions. Obviously, the CFO -- it's more CFO material. What I can say maybe just on the leverage side is we have a clear capital management framework in place. And by priority, the first one is on financial strength, Solvency II ratio, leverage ratio, holdco liquidity. And as you saw in the presentation, we're committed to our target of 30% leverage ratio by 2025. That's a real priority in capital when we go thorough how we're going to get there. The second one is obviously continue to pay attractive dividends to our shareholders. Today, we showed you that the DPS per share is going up. We want to invest -- and the third one, we want to invest in the business in order to support the growth. You saw the business growing today. I'm glad to say also we are -- we see growth also in the insurance business with the 2 BPA deals. But obviously, to transform the business and to grow the business, we have to selectively invest. And then if there is anything left, you will see other venues to return capital. But our priority's, of course, in terms of priority, the first one, and clearly, leverage ratio is something we're very strongly committed to. But I'll hand over to Kathryn because they're very CFO-related questions.

Thanks, Andrea. And you may remember back in March, we said that we were pretty encouraged by the underlying capital generation we saw in our Retail & Savings businesses continuing in 2022 because exactly as you said, of the expected returns that we would get, and these have indeed flowed through. So while the [ GBP 352 million ] is modestly down on last year, as you know, that did benefit from a provision release last year, we had the Asset Management result that was slightly down year-on-year. So you really did see a very, very strong contribution from PruFund, traditional With-Profits and also the annuities business. So when you think about the drivers of that underlying capital generation, you would expect that the expected return, obviously, is sustainable throughout the year. And clearly, it's the PBST or underlying capital that improved as we guided to in March, over the course of 2022. Now there are slightly different sensitivities in the PBST between traditional With-Profits, which is less sensitive, and PruFund. But overall, we are encouraged by what we're seeing, and we've given guidance around the second half being broadly the same as the first half. And obviously, annuities is a meaningful contribution to that number two, and that's clearly benefited from meaningfully higher increase in expected returns. On surplus assets, that are modestly down, but the expected return definitely more than offset the small reduction in surplus assets. And clearly, now we are also reentering in a very selective way, the BPA market. So I think when we look at the underlying result, it is so important for us to really continue to drive that higher. And when we look at the second half of the year, we think the same numbers we saw in the first half to broadly continue into the second half. And of course, we added to that strong management actions in the first half. And then clearly, that delivered the GBP 505 million total operating capital generation. So just following up on leverage, and I think Andrea really did make the point that when we stood up in March, we really emphasized that in our capital allocation framework, we were very confident around capital, we were very confident around liquidity, and we really wanted to prioritize leverage. So we've said that leverage is our priority. We now have, obviously, a leverage ratio that's only modestly up on last year. We've got very strong capital generation, very strong cash generation. We have a call date of GBP 300 million in just 10 months. And I think very importantly, we've got own funds that we certainly intend to continue to grow. So we will absolutely get to the 30% leverage ratio target. We do constantly monitor the market. I think a year ago, I talked about our understanding of all the options we have available to us. But we've got time, and we know how we can get to the 30%, but we continue to monitor all the developments. And I think you also mentioned how we think about the impacts of own funds, which obviously have been impacted industry-wide by market movements, and we spend a lot of time also looking at own fund sensitivity. And clearly, with our strong capital generation, with our strong growth and profitability ambitions we have, we're confident also in the own funds trajectory. Thanks.

So it seems that your international business, the net flows have really bailed you out of a tricky situation in the U.K., but you're still growing. So I'm just wondering kind of where you see those net flows grow -- going short term, longer term, I mean it seems to me that if you are building new businesses and attracting assets that, that number could grow. So if you could give a sense of that and the long-term vision for international assets as a percentage of the group, maybe in 10 years' time maybe. That's question one. Question two, I think you had some sort of gain in your Asset Management, [ but you see ] capital. If you give us a number, that would be useful. And then question three was, clearly, your interest rate's sensitive in your earnings because of the volatility of CSM and return on surplus assets. Do you have, somewhere in your pack, sensitivity analysis that we could use? Or could you give us a guide to, let's say, if you were 50 bps down in yields, what that might do to earnings or just a rough direction of travel?

So maybe, shall I take the last one first? So do we have earnings sensitivities to rate somewhere in the pack? The short answer is no. And I think it would be inappropriate for us to try to kind of answer it on the spot, but we can get back to you on that one offline. And then, I guess, to the question of Asset Management...

Yes. I'll take that. So we are very pleased, of course, when we look at the first half, how we have delivered on the Asset Management flows. We showed it we had some headwinds in the U.K. We already flagged that in the full-year results due to the mini budget. But on the other hand, we saw significant inflows on the institutional side across Europe and selectively also in Asia. And I would say, it's a combination of -- that -- those flows are a combination of, a, of having the right investment capabilities that are of interest for clients. So clearly, we've seen some more interest into credit, in general, both on private credit and public credits where the rates are. And we've seen some institutions reviewing their asset allocation, moving away, in some cases, from equities to fixed income. I think also, that's what we have been doing also ourselves to a certain extent. But also, selective interest in private assets, in particular on the impact side. So overall, I think it's a question of really having the right investment capabilities where there is demand. We have also, I would say, invested in making sure we have more resources on the ground to support that. So we have increased our distribution efforts in institutional. We have added resources, one in the Middle East, in Germany and also in Asia, where we have appointed a new Country Head with institutional background in Japan; and also Korea, which are big institutional markets. And as you know, also there, because of the Solvency II implementation for insurers, we are well placed in order to support that. So very pleased with the diversification there, and it's something that we want to continue to see. I mean, I would like to also talk about the Wholesale Asset Management because I think that's an important one because as you saw, we had GBP 1.3 billion of net flows, those flows were in a market where generally today, retail investors are putting most of the money in money market and cash due to the high rates, in particular in Continental Europe. And I'm very pleased with what we've done here in the U.K., where we've seen significant inflows. We actually have gained market share. And that's all due to the quality and the investment performance we had on the Asset Management side. You saw the numbers that they're behind me. I thought they were going to be here. The screen is not working, okay. But the numbers are rather unique. And once again, it's also very important to see that it's not just one unique blockbuster fund, [ it's ] very diversified. So looking forward, how do we see the next -- or this -- the next half? I mean, I would be cautiously optimistic on where we can go. But if you think about the macroeconomic environment and the demands that we see with clients, clearly, there is interest in credit, and we're a strong credit house. So we see there a significant, I would say, movement in interest from institutional clients. We have a capital queue, which is a strong one at GBP 5 billion. And of course, we also have some unfunded wins. So I would say, we see a diversified momentum, going forward. On the Asset Management -- on the Wholesale Asset Management side, strong still in the U.K. A little bit more difficult in Europe. European retail investors are more risk adverse. And I would say, the European governments are doing everything they can to have them to invest in their government debt. Italy is a good example. They just came out with [ BTP Valore ]. So then it's a question of whether you want to invest in that, but that's a different question. But there also, I think we will see, potentially probably more towards next year, some movement again. But I think overall, when you look at the different investment capabilities we have, the diversity of where we are in different countries, the Middle East is another one, we should not forget that. We see a lot of interest into the U.K., into private assets, into credit in the Middle East, from Japanese, from Korean investors. So yes, I think we are pretty well placed in order to get momentum there. The second question was...

The final question, I guess, Kathryn, we have it in the appendix, but maybe you can give a couple of words on...

You spotted that we -- I guess, overall, as Andrea said, we thought the profitability performance of Asset Management was really resilient, given the revenues were much less impacted [ by ] market movements, and costs stayed well under control. So there was an increase of GBP 11 million in investment income to [ GBP 13 million ] in the first six months of the year, [ you said ], on the seed capital, essentially reflecting the market environment. So yes, that was an improvement year-on-year, given the external market developments we saw in the first half.

Andrew Crean from Autonomous. So I've done the intro for you. You can go straight to the questions.

Andrew Crean, Autonomous. I just wanted to talk firstly about the liquidity. I think [ GBP 0.8 billion ] buffer's where you want it to be, and that's where you are. The [ GBP 0.8 billion ] buffer is where you want to be and where you are. Could you talk a bit about what the restructuring costs are going to be and also the commitment to the DB market because if you've also got to pay down [ GBP 300 million ] of debt, is that buffer under threat? And then secondly, could you talk a little bit about your DB ambitions? What is the redemption at your [indiscernible]? So how much you need to write in order for annuities to be balanced? And what is the strain of writing here?

Okay. So I'll take the last one.

Yes, do you want to start with the last one and I'll go back to talk?

Yes. So I always said we reentered the DB derisking space because we saw an opportunity to be -- the market obviously widened, and we wanted to [ reenter ] in a very selective way. And we always said that we wanted to utilize this opportunity to top up the sort of natural runoff we had, which is between GBP 1 billion and GBP 1.5 billion, to respond to your question. Once again, when I say selective, we want to reenter this utilizing, particularly the investment capabilities on private assets and credit we have. So our ambition here is not beyond that. We're not going to compete on the big deals you see out there. It's going to be very selective. And it's really not to go beyond the sort of natural runoff that we have. Now in terms of economics or strain here, obviously, we cannot give you any information because we only have done two deals, commercially sensitive. But what I can tell you is we follow a rather stringent framework, and those two deals have delivered double-digit IRRs. So I mean, we're very careful in how we write these businesses.

So I go back to your question on liquidity and I guess, also around restructuring costs and how we feel about leverage, too. We've talked before about how we have a very strict capital allocation and internal capital management framework. So Andrea's talked about our priorities of financial strength, how we think about liquidity, solvency and capital and also, of course, leverage. So the [ GBP 835 million ] of [ holdco ] liquidity is absolutely something that we look at. And we want to maintain always good levels of holdco liquidity. What's quite important, which I'm sure you know, is that when we think about the cash remittances we get from the subsidiaries, which came in at the first half at GBP 333 million, we choose to keep capital in our subsidiaries if it makes better economic sense. We are very strict in terms of ensuring we've got the right capital metrics across the group, but we will only upstream that as and when it's needed. So we monitor the holdco liquidity. We've got plentiful levels of capital play that you've seen in liquidity in our subsidiaries, and we clearly have plans to reduce our leverage, as we talked about, by 2025, but have also got this bond that's callable in just 10 months' time. So obviously, planning for a potential call of that, we need to go through the regulator. It's obviously something with our forward planning that we want to make sure we've got the ability to do. So the capital positions, and you can see the positions of -- with profit certainly in the presentation, are very strong and similar the liquidity positions. So when we think about the savings we're generating, the GBP 200 million, and obviously, we've got a GBP 50 million impact in terms of the run rate reduction already for the end of the year; we guided at full year to about [ 1, 2.5 ] of cost to achieve. Now [ 1, 2.5 ], so that will be mostly front-end loaded. So you can see in our results announcement, some restructuring costs that are slightly up on last year. But clearly, when we think about the CTA needed to deliver these savings, we, of course, factor all of this into our overall capital position, our liquidity position and are very confident that we've got already good progress across these savings. You'll start seeing it flow through the numbers in the end of this year and into 2024, but very, very good start. And obviously, this will clearly also deliver greater financial profitability, which also supports and strengthens our overall capital and liquidity metrics. So I think you asked apart from what the runoff was of the book and how our volume intentions might play out on BPAs, it is interesting on BPAs because if anything, I think you might see a modest increase in capital requirement, which will come through this [ strain ] in the second half of the year. We will obviously create a little bit more capacity for our offsite capital. So obviously, the SCR reduced a little bit more on the Heritage book than outside in the first half of the year. So actually a modest increase in capital requirements is something we've been planning for with the selective deals that we're doing, and it will create a little bit more capacity also for capital. But as we said, if we were to call the bond next year, it will have very little impact on our solvency, which remain very, very strong. And obviously, it will help us get much closer to the 30% leverage ratio.

Andrew Baker from Citi.

Andrew Baker, Citi. So sorry, one more on leverage. Just curious, you based your leverage ratio on [ shareholder-owned ] funds, whereas your peers base it on [ regulatory owned ] funds. So what's the decision behind that? Because obviously, you would look a lot more favorably if you use the [ regulatory owned ] funds? And then secondly, are you able to say anything on consumer duty, how you've sort of thought about that? Any impacts there from the business that's already under consumer duty? And how you're thinking about that, going forward, for the business that's not?

Why don't I take the consumer duty one? So on consumer duty, I mean, we don't foresee any impact. We have been, since many years, doing value of assessment. And we -- I think it was 2 years ago, 3 years ago we repriced some of...

[indiscernible].

I was not here 2, 3 years ago. So we don't see any real impact on us. Obviously, we're monitoring it. But once again, you're going to look at how we perform in terms of investment performance that puts me in a pretty relatively safe place. I mean when you have that sort of investment performance with 44 of our funds in the upper quartile, I'm not saying you should charge more, but I mean, I think we are -- when we check versus others, we are where we are. So I don't foresee any issues from consumer duty on the business.

And on the leverage ratio, clearly, there are multiple different ways of looking at leverage. And you look at them various rating agency approaches. Obviously, one of our peers is following one of the rating agency approaches, and we've given the IFRS 17 29% leverage ratio. We feel the right ratio for us is on Solvency II, and it's how we look at the business. When we think about all of the capital metrics and the capital allocation framework across the group, we do feel that Solvency II leverage is the right one for us. You probably saw in the slide, clearly, holdco debt is completely unchanged. We are very comfortable with that, comfortable with the servicing cost, got plenty of capital generation, you can see coming through. And we've also reflected, I guess, or clarified that it's unrestricted own funds. So we haven't got that GBP 300 million coming through in own funds. But we do have nominal value of debt [ to get, and others ] take market value of debt. We've got nominal value. So we have spent quite a bit of time thinking about leverage. It is a core strategic priority for us. We've got the call date in just 10 months' time. We know all the other options that are available to us at any time. As we said, we've got -- we constantly monitor the market, but I'd highlight the call date and the fact that we're in a very strong position. So yes, I think perhaps over time, others thinking may evolve on leverage, but we're comfortable with the metric that we are choosing to manage the business.

Let's go with Dom O'Mahony from BNP Paribas Exane.

One of the two, yes. Dom O'Mahony, BNP Paribas Exane. So I just got two questions, if that's right. So I may have just missed it, in which case, sincere apologies. Have you published a PBST number, the contribution to capital? And then just on the defined benefit ambition, just to sort of provide some challenges, I suppose. You've been very clear, you have -- you want to be selective on this. I'm just wondering, why? And why not be more ambitious? You have a scale book. I'm wondering whether this is -- I'm trying to understand whether this is driven by your view on your operational capabilities that there are competitors who have been doing this for longer, they have the asset sourcing and the deal teams in size or whether this is more -- a more a view on strategy, capital allocation, shape of the business, what shareholders want from your business model?

Okay. And again, I might take the first one on PBST, is not included in the slides, but we can share it. There's no particular difference.

Let me take the one on the ambition. First of all, I explained why we reentered, and we reentered because the market became larger. We have always said that we are committed to see our capital-light business grow more. We had a target of 50% capital-light versus capital-heavy. The reason why we saw this as an opportunity [ to ] explain and want to be selective is because we want to utilize the capabilities we have, the investment capabilities we have. Clearly, since we have not been writing any business since 2016, we had to invest a little bit in order to get -- so we get pricing team. We've got some origination team. I don't think we should go and be much more ambitious and go and compete on pricing versus some of the larger players. They have the setup since a long time. My focus, I always said, is I want profitable growth. Ideally, I want capital-light growth. Asset Management is at the center, Wealth Management also. And indeed, with the integrated business model, I think by utilizing the strength of Asset Manager do raise a space for us to play within the DB derisking space, and we want to utilize our capital in a smart way. So I don't foresee that we want to go -- it will be contrary to what we just said, go heavy on capital-heavy business and increase that even further. Having said that, there could be opportunities for us to write this business also in a capital-light way, but those two first years [ we were ] playing [indiscernible] business. So think it's linked more to focus where we want to really grow and putting those efforts into those businesses. And as I said, Asset Management [ is a big one]. We really believe we have the right to win there, and we can grow profitably in the coming years. And Wealth Management is another one beyond PruFund. PruFund, obviously, is an amazing solution but beyond PruFund, okay?

Nasib, Rhea and then Larissa.

Nasib Ahmed from UBS. So first question on the last target on the last slide that you presented. [indiscernible] still on IFRS 4, the greater than 50% earnings. What would the equivalent be on IFRS 17, if you have that number in mind? And also, if it's still on IFRS 4, you're growing your insurance business. So that's front-end loaded on IFRS 4. It means you have to grow Asset Management even more to get to the 50%. So are you comfortable with that? Second question on the internal pension scheme. How much more can you do? What's the funding level? And then finally, if I can slip a third one in, your management actions guidance was GBP 200 million. You've done GBP 150 million already. So it seems like this year, the [ longevity releases ] you're going to exceed that. Is that kind of that correct thinking?

Good. It sounds like very CFO questions.

I'll just take again the first one on the 50%. Clearly, there's a business planning process that M&G goes through and is in the second half of the year. And obviously, we have just implemented IFRS 17, so we need to translate the business plan into IFRS 17 language. So I guess what we're trying to say is we kept it here for now because we are still committed to that type of effort. At full year, when there's going to be a revised business plan, will translate that into a new IFRS 17 percentage.

So I'll take the question on the internal BPA transaction that we announced this morning and also the guidance around management actions. So you can see in our results pack, not in the slides, obviously, the details of the various schemes we have [ it'd ] not appropriate to comment on anything else that we might choose to do. So you can see which scheme in the announcement this morning that we did this buying with [ in the pack ], but it's pretty not appropriate to talk more about other internal opportunities. As Andrea said, we have got a huge amount of interest externally in this, as you know, given the amount of activity in the market, and we're just being very selective choosing those deals that really suit our private asset capability and lead to the strong impacts on our Asset Management business. And so in terms of management actions, yes, the first half did come in at a very good level. I would say that the asset allocation, SAA decision at the beginning of the year to gather on equities and into fixed income did drive a pretty meaningful amount of the management actions. We did see some favorable mortality experience come through in the first half as well, I think, seen by one of the peers, which was good. We had some adverse expense experience, and we had some improvements year-on-year versus last year. So you're absolutely right. We did guide to GBP 100 million to GBP 200 million of management actions. I'd certainly expect us to be at the top end or more than that in the second half. Obviously, we do review longevity in the second half. But you'll remember, last year, we did do a really meaningful release because we did a huge amount of work with an external expert panel around all of the trends on longevity, [ proved ] impacts and all those sort of industry-wide data. So -- but yes, we do have line of sight to a good second half of the year also in management actions.

Rhea Shah, Deutsche Bank. Two questions. So the first one around Wealth. Andrea, you mentioned that you want to make this more profitable over time and work on it. Could you just give some color on this, on timeline of profitability? And also, how much more -- or what growth do you want from the advisers? So there are [ 510 ] at the moment. Where do you want to get to and over what period? And then secondly around the cost savings. So what should we think about the phasing of the remainder of the cost savings across 2024 and '25? And then equivalently, what does that mean for restructuring costs as well?

Yes. I want -- you're right. I mean when you look at the numbers on Wealth, you saw that indeed PruFund [ grades ], but there were some strain in -- particularly from the advice and particularly on the platform, which have taken down the profitability, I think, by 29 -- the numbers -- GBP 29 million. And clearly, we want the business to be profitable. We should not forget we acquired different components in the years and we're still working on integrating some of them, in particular, making sure that we are utilizing technology in order to give hybrid advice to clients, but also improve the way the advisers can work from an administrative perspective. So clearly, Caroline, who's just joined, one of her key task is going to be to accelerate the integration, but also to review how we can drive further efficiency there. Very pleased, of course, of having 500 advisers. But I think once again, we have the Wealth business not only to sell PruFund, but also to provide solutions to our retail customers, which are coming from M&G, which are good, of course, which are either -- whether it is our amazing mutual funds or other things. And of course, we will look also how we can do that through the model portfolio [ NPS ]. So ideally, we want to drive more flows. We want to drive efficiency. But I think with Caroline now coming on board, we will update fully probably when we -- full-year results in March with more guidance. I think it's great to have a Caroline. We will be there to help her to drive profitable business in -- for Wealth, going forward. And as you know, I'm very much committed to the 2 capital-light businesses, which I want to see growing. So more to come.

And just -- I'm sure you spotted, just one final comment on Wealth, there was a small one-off in the numbers, we had a GBP 7 million. So that partly explain the year-on-year movement in profitability. So addressing your question on cost savings and the likely sequencing and when you'd start to see them coming through the numbers and also the restructuring costs to deliver those savings, So clearly, we've made a very good start. We've identified the GBP 200 million across the group. We've highlighted that we've got GBP 500 million in run rate savings coming through at the end of the year. Now these -- sorry, GBP 50 million, sorry, getting excited.

It's not going to go -- model...

And that's -- we've got the [ VR ] tailwinds coming through that we did early this year. We've got some property exits that we talk about this coming through and some technology savings. So those are where the early savings are coming from. Now, there's also savings coming through in Asset Management, as we talked about. Joseph has taken very early action in Asset Management. He has restructured private assets, which is an area that we're also looking to grow. So I think it's -- looking at the Asset Management trajectory, clearly, we've had the main impact in the first half being from the 5% down in market. We were very disciplined on costs. So the savings in Asset Management will also start flowing through in 2024. And then obviously, we want to really mitigate the revenue headwinds, which is why our margins being up to 33 basis points is so important for us and continuing to grow in our private assets business. So that -- when I'm answering the question on Asset Management [ plus ] the income, which is clearly also one of our main targets, so those benefits will start flowing through next year. I would say that the results of the overall savings program group-wide, will start coming through next year but probably in the second half of next year. The spend is definitely concentrated in 2023 and 2024. And clearly, what we want to get is a position across the group where at the end of '24, we're really looking very good as we come into 2025 to deliver GBP 200 million. I think it's really important to say that this simplification program is not just about savings. We really are about simplifying the company, streamlining it, really strengthening it, getting it close to clients across the business both Asset Management and Wealth. And we do want to -- obviously, it's a [ gross ] savings target, we want to create as much capacity with these savings to allow the investment in the core businesses where we do want to grow. But I think you'll start seeing the savings come through at the end of 2024 and into 2025, and the cost will be more front-loaded. And we'll obviously update on that at the full year.

And let me add to that. As you said, the simplification and transformation program, it's not about cost savings. Yes, that's a byproduct. It's really about improving the way we're organized in order to serve our clients better, get a better client outcome. And I'm glad to say although we've done this transformation, which we are doing, our Net Promoter Score has gone up, you saw investment performance has been resilient and actually improved. And of course, we had positive momentum in terms of flows. So I really think you should see this from two angles, if you see are we improving client outcome, are we also then delivering on savings, but please focus on both not only the cost savings, but we will deliver on the cost savings.

Larissa Van Deventer from Barclays. Three quick questions, please. The first one, on the run rate on the CSM going down from 12% to 10%, that suggests that the duration has gone from 10 to 8.3 years.

Can you speak a little louder?

Sorry. So first question. On the run rate of the CSM, you mentioned that it's now 12% versus 10%. That suggested the duration has gone down from 10 years to about 8.3. Can you help us understand why that is? The second question you mentioned, double-digit IRRs on the bulk annuity transactions. Can you give us an indication of the margin and the runoff period, so we know [ where ] to point to the CSM? And then on leverage, just from the comments previously, should we understand that with the GBP 300 million that's coming up for redemption of a call next year, that the combination of that plus an increase in owned funds will get you to the leverage ratio? Or would you need a bigger redemption?

On the first one, on the CSM runoff rate, it's not that the runoff rate increases that when we did our result -- the result in the presentation in July, our best guess at that point in time was we were going through the economics, so to speak, is that the runoff of the CSM for the With-Profits Fund was about 10% as we as we improved and refined the working as we got closer and closer to publishing number. We realized that the runoff rate is 12%, and so we also restated the 2022 results. So it's not that it went up from '22 to 2023, but we simply -- you'll have to forgive us, it's the first time that we are doing it, and we realized that, that was a more accurate number to put through. And I guess it's comforting to see that despite having a higher runoff rate, the overall system still increased since the beginning of the year because of good new business on PruFund and a good interest accretion dynamics. Then there were two questions, one on the bulk IRR...

You saw, obviously, we've had -- when we put the CSM drivers out, I think that we're encouraged with the annuities result. But obviously, there's no new business element there yet, which will come through in the second half. So I think, again, it's a little bit too early to guide. But at GBP 1.2 billion, that's a good amount of CSM, and we do monitor and like to see that CSM growing. So as we give a little bit more color at full year around the profile of the BPA deals, we can't really give anything else at the moment in terms of the financial metrics apart from just reinforcing what we said, which is we've got a very disciplined approach around the hurdle rates that these deals need to have. We've highlighted the double-digit IRR, and we just continue to want to play quite selectively but with these very strict financial metrics. So -- and again, we've got meaningful capital, clearly, at the moment as well. As Andrea said, there are also other capital-light options that we can look at. So we'll update on that at the full year. And we hope you found the CSM drivers guidance across the whole book, both With-Profits and annuities, helpful. And back to leverage. As you said, we do have a bond, Tier 2 sub debt, that's callable in just 10 months of GBP 300 million. That does remain obviously subject [ to approval ]. But clearly, that would reduce our leverage ratio halfway towards the 30%. We can all figure out the [ math ] in terms of what our own funds would need to do for us to get naturally to the 30% target by 2025. We're very confident in our ability to grow own funds, given the numbers you've seen today, which, again, [ underpin ] strong underlying capital generation, real confidence in the momentum we've got in Asset Management. So we are confident in our own funds position. And as I said, we've also done quite a bit of work looking at own fund sensitivities. However, if own funds does not move, we would need to do more than the GBP 300 million to hit the target. We've got plentiful liquidity we've talked about at the holdco, GBP 835 million. We've got plentiful liquidity in subsidiaries. We're very capital and cash generative. We are very aware, we monitor the markets. We know what's achievable. We've been doing that for many -- well, I remember being asked about it a year ago, but we're not in a rush, and we're very confident around our ability to hit that target. But yes, [ were our owned plans ] not to move, we'd have to do more than the GBP 300 million.

And maybe just one point to add on the double-digit IRR. That's kind of the Life Insurance business per se, so it doesn't account in a way that business needs to be sustainable and attractive on its own right. And then obviously, what happened is that, that also drives flows into the Asset Manager, where obviously you'd make and capture additional margins, right? So the double-digit IRR is purely on a Life Insurance perspective.

Mandeep?

Mandeep Jagpal, RBC Capital Markets. Just one last question for me, please. On Asset Management flows, what's the outlook for U.K. institutional, going forward?

Okay. Well, I think if you compare to the first half where you had significant outflows from the pension funds, we will still see some pressure in the second half. If you look at institutional, however, overall, we see interest from insurance companies and the local authorities. So I would say, if you look at those three different institutions, [ we see on ] the latter ones, we see interest both on credit, both public and private, and selectively on private assets, of course, not private equity, but infrastructure. And mainly, real estate is a bit probably under pressure. So I would say, if you took the numbers, we had minus GBP 3.8 billion first half of the year on the institutional in the U.K. Second half, we will not see as much outflows from the pension funds. So it's sort of easing a little bit, but still under pressure.

So I think we have -- we are through the questions in the room, unless there is anyone else. There are a couple of questions online that were submitted at the beginning of the [ session ]. So I'll read them out just because [ Fahad ] from [ Mediobanca ] and Steven Haywood from HSBC could not be here today. So to be fair to them, I'll read them out, but I think most of the ground has been covered already. So [ Fahad ] from [ Mediobanca ] asks around color on retail investment appetite in Wholesale, given the interest rate environment. So that's probably more for you, Andrea.

Yes, we responded to that.

And then question on new business stream for BPA, which I think we covered, so probably the one we don't need to answer. And finally, why -- he is asking a little bit similar to [ Andrew ] but not exactly identical, why on the definition of the leverage ratio, we are focusing in the numerator on nominal value of the debt and not market value of the debt, which obviously would be favorable by about 10% at this point in time, given where bonds are trading? So do you want to say two words on kind of [ sentiment ]?

With the sentiment, I mean, I think we responded. But clearly, when we look at Wholesale Asset Management, with the high rates in Continental Europe, it is -- we see [indiscernible] retail investors going into cash and going into money markets. As I said before, there are some governments which are pushing as much as they can to get their citizens to invest in the government. However, when I look, for example, at the U.K. and when you look at our number, we had significant inflows here in the U.K., and I think that's due to really the great investment performance. So I would -- and I always look at a retail investor. U.K. are less risk adverse than the Continental European ones, so I would expect us to continue the momentum that we have had in the first half. Although obviously, I cannot predict the market uncertainties, but -- and I say that because of the great investment performance that we have on different strategies, and that makes a difference. And once again, we have gained market share in the U.K. market. I mean most other players have suffered, and we have positive net inflows of GBP 1.5 billion in the U.K., slight outflow in Continental Europe. Looking forward, hopefully, 2024, Continental Europe is going to come back, I hope, but that all depends on where rates are going. I cannot predict that.

And Kathryn, on the nominal versus...

Yes. I guess as I answered before, there are multiple measures of leverage that are used in the market by all the rating agencies and a number of different approaches by our peers. And some, I think, do use market value, not nominal value. Look, I think this is what we feel is the appropriate measure for us, is a little bit more conservative because we know where our bonds are trading, but we're comfortable that it's nominal value of debt and the unrestricted owned funds. And as I said, look, this is a priority for us for 2025. We've got a call date in 10 months. And you can look at and do your own different leverage measures, but we are very comfortable on the basis of prep that we're using.

Perfect.

So I guess, no more questions online, no more questions in the room. So with that, I'll just thank you all for joining us today, and see you in six months.

Thank you.

Thank you. Thank you very much.

See you soon.