Standard Life plc (PHNX.L) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Standard Life plc Investor Presentation. [Operator Instructions] Before we begin, we would like to submit the following poll. If you could give that your kind attention, I'm sure the company would be most grateful. And we will now begin the presentation and move to live Q&A at the end. Thank you.

Good morning everyone and welcome to Standard Life's 2026 half year results. Today I'll begin with an update on how our delivery is building momentum across our strategic priorities. Nic will take you through the detail of our financial performance which supports achieving our 2026 targets. I'll then return to update on our next phase of growth before taking your questions. We're now in the final stages of our 3-year strategy and I'm delighted with the progress we've made since 2024. First, the U.K. market is one of the most attractive globally for retirement savings and income and we're uniquely positioned in that market because of the capabilities and platforms we've built, our leading brand and our commitment to putting our customers at the core of everything we do. Second, we're building momentum through execution of our strategic priorities, which is driving growth across our key financial metrics. It means we've already achieved some of our end 2026 targets with in our strong half-year results, and we're on track for the remainder. Third, we're poised for further growth and an acceleration of our strategy through both the GBP 2 billion Aegon U.K. acquisition and the recently announced GBP 2 billion U.K. PRT partnership. Together, these are a step change in strengthening our capabilities and customer offering and provide access to a broader customer base. All of which means we are accelerating our vision to be the U.K.'s leading retirement savings and income business, a retirement champion, helping customers achieve better outcomes and greater financial security. It also means we have even greater financial flexibility to further invest in growth and deliver strong shareholder returns. As I mentioned, the execution of our strategy continues to translate into strong performance across cash, capital and earnings, as demonstrated here. Once again, we have good growth in operating cash generation, and we remain confident in mid-single digit percentage growth into the long term. Our growing business is generating surplus capital, which we've used to improve the quality of our capital by paying down debt, while remaining in the upper half of our solvency range. Finally, on earnings, we remain on track to achieve our GBP 1.1 billion operating profit target in 2026, having delivered another period of strong operational performance. And we continue to grow our dividend, bringing total dividend payments to GBP 1.4 billion across this phase of our strategy. In 2024, we set a highly ambitious 3-year strategy underpinned by 3 strategic priorities ; grow, optimize, and enhance. We've made excellent progress against all of these in the first half, which has contributed to the strong financial performance that I just covered. Under grow, we announced the Aegon U.K. acquisition and our U.K. PRT partnership. I'll come back to these later. Alongside these transformational developments, we're also continuing to innovate, launching future opportunities, a new alternative default solution designed to improve customer outcomes by opening up access to high-quality private assets. And we're increasing the allocation to private assets in our main default fund. The overall investment in our new business capability is driving strong outcomes. I'm particularly proud of the workplace wins in the first half, which I'll touch on later. Under optimize, we achieved our deleveraging target ahead of plan and increased the amount of annuity backing assets managed in-house to GBP 12 billion. Under enhance, we delivered GBP 210 million of cumulative run-rate cost savings using technology, including AI, to reshape our organization, enhance our colleague experience, and create a more efficient and scalable business. The message is simple. We're executing with discipline, delivering against our strategy, and building strong momentum for the second half and longer term. Let's look at the market we operate in. I continue to believe that the U.K. market has never been this exciting. And better still, in this rapidly growing market, we're the only scale U.K. player solely focused on the full savings and retirement life cycle, with strong existing market positions in workplace, retail and annuities. This slide will be familiar as we've used it before, but we've now added our pro forma market positions to reflect Aegon U.K. and our new PRT partnership, both of which significantly strengthen those market positions. Specifically in workplace and retail, we moved to having #2 positions in both markets. And in annuities, we moved to a top 3 position. Let's now talk to the progress we've delivered in the first half in our key markets. The themes on the left-hand side of the slide are the key reasons we're winning in our chosen markets, consistent with what we set out in March. Each of these are underpinned by a broad range of capabilities which we continue to enhance to meet the evolving needs of our customers and which are further supported by the trusted Standard Life brand. I'm delighted that our relentless focus on delivering better customer outcomes is, in turn, translating into strong operational performance. Starting with workplace at the top of the slide, where winning requires three things: a leading employer proposition, excellent customer service and cost-efficient administration. We're strong in all 3 as demonstrated across a collection of key customer metrics. We've seen our net promoter score increase 4 points this year to 64. And we have maintained an exceptionally high level of client retention at 99.8%, which demonstrates how happy our customers are with us. We secured GBP 6.2 billion of new scheme wins in the first half, including the largest ever for Standard Life, which will support our flow trajectory into 2027. Scheme wins are lumpy, but the GBP 6.2 billion compares very favorably to the GBP 1.5 billion of wins across the whole of last year. So more great progress and hugely exciting that this market will be further supercharged by market consolidation as minimum fund size is enforced and expected contribution increases. Moving to retail, this is an area that we've more recently focused on. We're investing to ensure effective customer engagement, and that we offer the right products and solutions at the right time. For example, to help our customers navigate some of the recent budget changes, we've reentered the onshore investment bond market, which you can see in the flow uplift on the right of the slide. We're also preparing to expand our advice proposition to include inheritance tax planning and aim to launch our first targeted support proposition around the end of the year. I've called out in the dotted box that we still have a significant opportunity to leverage our digital infrastructure, and there's more to do here. This is an area Angela Byrne has been focusing much of her energy on since joining earlier this year, and will be further bolstered by the arrival of Wendy Redshaw, who will join us in our newly created role of Chief Digital and Technology Officer in the coming months. The outcome of our existing efforts in retail are already encouraging, visible on the right of the page. Similar to workplace, our retail customer satisfaction scores are improving with our net promoter score of 61, a 6-point improvement in the first half. I'm particularly pleased that our advice proposition is resonating so well with customers, with 95% of them rating it as good or excellent value. Lastly, the annuities business in yellow, which includes both individual annuities and PRT. Winning here is all about having a leading employer proposition, excellent member experience and competitive pricing. Our strength in all 3 is why we're winning in both these markets. Growth in our new individual annuity products continues, up 14% year on year. Our disciplined approach to annuities is evidenced by the attractive returns generated, with lifetime IRRs on our Annuity business maintained at more than 20% in the first half. From a PRT perspective, our existing business is delivering strongly, actively quoting on a pipeline of about GBP 7 billion. And with huge client interest in our new partnership, it means that we expect an even stronger pipeline once it launches. With that, I'll hand you over to Nic, who will cover the financials in more detail. Nic.

Thank you, Andy, and good morning, everyone. I am pleased to be presenting today another strong set of results at the half-way point of this year, as we navigate towards the delivery of all of our 2026 financial targets and prepare Standard Life for the next stage of its journey. Starting my presentation with the usual financial headlines. Operating cash generation of GBP 745 million in the first half was in line with our mid-single digit growth guidance, while total cash generation stood at GBP 900 million. We have achieved the leverage ratio target at 30 June while ensuring that our solvency cover remained in the upper half of our operating range at 169%. IFRS operating profit was 25% higher at GBP 563 million, supported by asset growth and cost savings which reached GBP 210 million on a cumulative run rate basis. Adjusted IFRS shareholders' equity was GBP 2.7 billion, benefiting from strong growth in operating profit that now covers recurring uses, offset by the negative hedge-related market impacts. In line with our previous practice, we have declared an interim dividend of 28.05p per share, up 2.6% year on year. Overall we remain on track to deliver all the targets at the end of this year. I'm very pleased with the step-up achieved in our operating cash and earnings performance over the last 2 years. In line with what I indicated back in March 2025, this has provided us the headroom to reduce leverage, improving the quality of our capital, and has lifted IFRS operating earnings to more than cover our recurring uses. I will now take you through the financial results in more detail, starting with the performance of our main businesses. Backed by our leading propositions and brand, our pensions and savings business continues to grow assets, margin and profitability. Workplace saw gross inflows of GBP 4.9 billion in the first half of 2026, including GBP 0.8 billion from new schemes. A total of GBP 6.2 billion of new scheme wins have in fact been secured this year, most of which are expected to incept in early 2027, and we continue to see a healthy pipeline of new opportunities. Including -- excluding, rather, the contribution from new schemes, regular gross inflows were GBP 4.1 billion in the first half, highlighting once again the strong flywheel effect of this business. Outflows reflect the higher asset base and the natural attrition from members taking the pensions. Turning to retail, gross inflows are up 9% year-on-year at GBP 3.6 billion, benefiting from continued momentum in international bonds and the early fruits of our retention efforts. Gross outflows remain sizable at GBP 7.3 billion, but we expect these to continue to improve as a percentage of AUA as our retention focus gains further traction. In the top right, you can see how these flows have combined with positive market effects to lift the overall AUA base to a combined GBP 226 billion, up 7% year to date. In the bottom half of the slide, I summarize the drivers of the financial performance for pensions and savings. Given the capital-light, fee-based nature of this business, we consider IFRS operating profit to be the most suitable performance measure. Average AUA grew 10% year on year to GBP 217 billion, which, combined with an improved operating margin of 22 basis points, drove operating profit 36% higher to GBP 244 million, highlighting once again the power of our scale advantage and operating leverage. Our retirement solutions business also delivered a strong operating performance in the first half. As I have previously stated, new volumes are not the primary driver of profits here. We run over 40 billion of annuity assets, and it is the management of this large book that drives our profitability. We have 2 main product lines in this business, namely individual annuities and PRTs. For individual annuities, product innovation and rising consumer demand saw new premiums grow by 8% year on year to GBP 0.6 billion, supported by a 14% growth in premiums secured in the open market. PRT premiums in the first half totaled GBP 1.6 billion, with a further GBP 0.4 billion completed or at an exclusive stage since the end of June. Our stated aim is to deploy up to GBP 200 million of capital to annuities this year, provided we secure sufficiently attractive returns. As Andy mentioned, new business returns were broadly similar to those achieved in 2025, but given ongoing low credit spreads and competitive pricing, we expect these to be lower in the second half. We remain disciplined and confident in our ability to win in this market, and our competitive position will be further supported by our new U.K. PRT partnership with prominent global financial institutions. The drivers of performance for Retirement Solutions are covered in the bottom half of the slide. Given the capital utilizing spread-based nature of this business, we consider OCG to be the most appropriate performance measure. Our effective management of the enforced book combined with our scale, efficiency and expertise in delivering asset portfolio optimization actions enabled us to sustain the annual spread-based margin at 222 basis points, which applied to our growing average AUA of GBP 42 billion, produced OCG of GBP 466 million, up 5% year on year. I will now move to the group metrics, starting with operating cash generation. In line with our guidance, OCG increased 6% to GBP 745 million, reflecting both growth in the surplus emergence and higher recurring management actions, which contributed GBP 318 million in the first half. The composition of these management actions is broadly similar year-on-year, with further detail provided in the appendix. We're confident in achieving our guidance of GBP 500 million recurring management actions each year as the capabilities and dynamics that underpin this performance are both differentiated and enduring. On the right, you can see the business segment analysis of OCG. P&S grew by 23% to GBP 203 million, supported by underlying business growth. As covered earlier, the OCG from Retirement Solutions grew by 5% to GBP 466 million, while that from with-profits, Europe and other taken together produced GBP 76 million. Turning next to the group's solvency walk for the first half. After covering recurring uses, we generated GBP 0.2 billion of net recurring capital, mostly in the form of own funds, which added 5 percentage points of solvency cover. Non-recurring items netted to a small negative amount and included GBP 0.1 billion negative contribution from economics, net of hedging. The operating capital generation in the period, combined with support from the opening surplus position, enabled us to retire GBP 0.5 billion of debt in June. The resulting shareholder coverage ratio declined to 169%. But with the debt reduction program now behind us, we expect this ratio to rebound in the second half. Turning next to leverage, our ratio improved to 29%, reflecting the GBP 0.5 billion debt redemption outlined in the previous slide. We have achieved our 30% target in the first half of 2026 while remaining in the upper half of our solvency operating range. Since the end of June, we have issued a GBP 350 million RT1 debt instrument to fund a portion of the cash consideration for the Aegon U.K. acquisition, and a further GBP 300 million debt raise will be undertaken ahead of completion. I would remind you that the mixture of debt and equity funding of the transaction has been structured to produce a leverage ratio on completion that is in line with our 30% target, a level which I consider appropriate for our business going forward. Turning next to cost savings, where we remain on track to achieve our GBP 250 million target net of inflation by the end of this year. On a run rate basis, we have achieved GBP 210 million of savings up to the end of June 2026. Savings on an earned basis in the first half of 2026 were GBP 95 million, which was some GBP 55 million higher year-on-year, with broadly 2/3 of this uplift reported through earnings and the remaining 1/3 accounted through the CSM. The chart on the left depicts the delivery timing of the GBP 250 million cost savings, with the final GBP 40 million component expected in the second half of 2026. On the right, the pie chart shows where the cost savings have come from, highlighting how we have structurally reduced our ongoing cost base through a combination of migrations to end-state platforms and business simplification. These actions will both underpin and sustain the improvement in our operating margins as we grow the business from here. Moving to the IFRS results, our adjusted operating profit increased by 25% to GBP 563 million. Profits from Pensions & Savings grew by 36% to GBP 244 million, while those from Retirement Solutions increased by 13% to GBP 324 million. With the Pensions & Savings earnings growth outpacing that from Retirement Solutions, we have continued to improve the capital-light mix of our profits. These performance improvements were driven by business expansion, cost savings, and higher investment margins, reflecting the successful delivery of our grow, optimize, and enhance strategic priorities. We are on track to achieve our GBP 1.1 billion operating profit target at the end of this year. This next slide completes the IFRS basis picture. As you can see in the dotted box, the improved operating profit performance is now covering our recurring uses, in line with what we said would happen in 2026. Non-operating items include the planned investment spent to deliver our strategic priorities, and GBP 25 million of expenditure relating to the strategic transactions announced in the first half. Adverse economic variances of GBP 473 million were almost entirely driven by negative marks on equity hedges following an 11% blended rise in markets. As previously explained, this is a known consequence of our hedging strategy, which protects cash and solvency capital, but gives rise to an accounting mismatch volatility under IFRS. The resulting IFRS shareholders' equity level continues to pose no practical restrictions to our strategic and capital flexibility, nor to our ability to pay a dividend. As I have previously indicated, this adverse variance is offset elsewhere in our financials, which I will come to next. I have updated the slide that I first shared in March, which shows where these offsets come through in our financials, namely in the increases in our 2 key stores of future value. These are the insurance contract CSM and the investment contracts value in-force, which grew by GBP 0.1 billion and GBP 0.6 billion respectively year-to-date before tax, with GBP 0.5 billion of the combined increase coming from market effects. These future stores of value are now over GBP 10 billion on a pretax discounted basis and will emerge through IFRS earnings in future years, providing a strong underpin to our performance trajectory for many years to come. In my final slide, I would like to take stock of the notable transformation in our ability to generate positive excess cash since 2023. By growing OCG and moderating our recurring uses, we have significantly improved our ability to both cover our growing dividend and generate a rising level of excess cash. In the first half, this excess was GBP 229 million, and we expect this to be GBP 0.5 billion at the full year, the level required to cover the 2026 debt redemptions from in-year capital flow. Also in 2026, we have announced 2 strategic transactions, namely the acquisition of Aegon U.K., which is expected to enhance recurring excess cash from year one, and the new U.K. PRT partnership. Both will allow us to accelerate the growth of our main businesses and will provide further support to our mid -single digit OCG growth guidance. With these transactions in place and the leverage ratio target achieved, our capital allocation focus from 2027 will be directed to growth and shareholder returns. I will now hand you back to Andy.

Thank you, Nic. We continue to be focused on delivering our promises for 2026, and we are really excited about what comes next as we progress to our next phase of growth. So let me cover some of that now. When we started the strategic plan, we set out a clear vision to be the U.K.'s leading retirement savings and income business. We began building out the capabilities shown here in blue to achieve this vision, and the evidence of this comes through in our strong first half results. The light-blue box at the top, a digitally-enabled and personalized customer interface, focused on data, guidance and advice, is the last bit of the picture. Building this out is now very much our focus and expect to hear more on this in 2027. Through both our GBP 2 billion acquisition of Aegon U.K. and the up to GBP 2 billion PRT partnership, we can scale and accelerate that same strategy. And in doing so, help more customers achieve better outcomes and greater financial security in later life. It's not just me who's excited about what is to come from Standard Life. It's fantastic to see the collective energy from our colleagues throughout the organization. With the Aegon U.K. transaction, we're bringing together two businesses with shared goals, ambitions and social purpose to create a new leader in pensions and savings. This transaction is both strategically and financially compelling. Let me remind you of the logic behind this , as set out on the slide. First, it gives us increased scale. Standard Life will become the largest retirement savings and income business in the U.K. Second, it's really complementary in terms of capabilities, which I'll come on to. Third, it accelerates making us a more capital -light business. Fourth, the financial metrics for the deal are attractive. We expect to unlock GBP 0.8 billion of net synergies and increase our excess cash by GBP 0.4 billion over the next five years. That will give us even greater flexibility to invest in growth and return capital in the future. Finally, the funding structure is efficient, and it enhances our capital strength. We continue to make good progress towards completion, which is expected around the end of the year subject to regulatory approvals. And I look forward to welcoming Aegon U.K. colleagues into the Standard Life family at that point and working together to capture the huge potential in front of us all. As well as giving us increased scale, this acquisition strengthens our capabilities and what we can offer our customers. Many of you will be very familiar with Standard Life's existing products and solutions, which are set out along the top of the slide in the dark blue box. Aegon U.K. adds a number of areas where our Standard Life business has less of a presence today, and we regard as being very important to our offer going forwards . In Workplace, Standard Life tends to be stronger with EBCs, while Aegon U.K.'s strengths lie more with corporate advisers focused on small to mid-size d Workplace clients. In Retail, Aegon U.K.'s adviser platform will extend our adviser reach and relevance, while the financial advice proposition will add significantly as well. And the additional products, including ISAs and general investment accounts, that will broaden our range. Aegon's expertise in these and other areas will help to significantly accelerate our growth ambitions and better meet our customer needs. The enlarged group will have broader waterfront capabilities, strengthened distribution with an enhanced digital and technology offer. Another important milestone this year is the announcement that we're expanding our PRT business through a GBP 2 billion partnership. This is first and foremost about helping more customers achieve greater financial security in retirement. As more defined benefit pension schemes look to secure member benefits over the coming decade, we see a significant opportunity to expand the strength of Standard Life's PRT business to schemes above GBP 2 billion. Schemes at this upper end of the market represent over half of the GBP 1.1 trillion of U.K. scheme assets, the majority of which are expected to be derisked over the next decade. And customers here are currently only served by 3 providers. Second, we thought carefully about the best way to serve this part of the market and concluded that this structure creates a differentiated and unique proposition for trustees of the U.K.'s largest 8 DB schemes, as the partnership combines Standard Life's trusted PRT expertise, customer service and operational capabilities with substantial long-term capital and specialist investment expertise from our partners. Here, our brand, a household name, will be a key differentiator. Trustees have specifically told us they want Standard Life to participate in the larger end of the market. We've selected partners who have similarly strong brands and reputations. The partnership will bring access to diversified private market origination through multiple leading global institutions. This consortium approach gives us access to a broader range of asset classes, sectors and geographies than will be available through any single provider, which means more competitive pricing and structuring flexibility. And this is available to the whole of Standard Life. Let me now touch on the attractive financials of the partnership. In addition to the attractive returns the partnership expects to generate, Standard Life will receive fee -based payments for its oversight of operational services and origination of PRT transactions, creating a new capital-light earnings stream for us. Together, these underline our confidence in delivering mid-single-digit growth in operating cash generation and also growth in operating profit over time. The partnership is expected to launch in the first half of next year, subject to regulatory approvals, and will build volume over time. On this slide, we outline the structures of our PRT businesses in a bit more detail. On the left-hand side, you can see our existing business as it stands today, a leading player in the PRT market that has completed over GBP 32 billion worth of transactions. We allocate around GBP 200 million per annum of capital to this business, which generates around GBP 6 billion per annum in total annuity volumes. This business remains unchanged but will have the additional benefit of private market origination provided by the specialist capabilities of our partners. There is clearly a lot of private capital interest coming into this market which shows the opportunity. What makes our offering unique is the nature of the partnership. We've deliberately brought together multiple global institutions with very strong and complementary private credit origination capabilities, including CVC, Prudential Financial and Goldman Sachs. I'm also delighted to further deepen our long-standing strategic partnership with MS&AD. This investment reflects their confidence in both the U.K. PRT market and the strength of the proposition being created through this partnership. The potential is for GBP 5 to GBP 7 billion per annum of incremental business from the partnership. And of the GBP 2 billion total over 5 years, Standard Life expects to fund its GBP 500 million capital contribution from yearly excess cash generation. So 2 different ownership structures, but trustees and sponsors will continue to engage with Standard Life directly and receive the same high standards of service, governance and member experience that have underpinned our success in the PRT market to date. Putting all this together, within the pensions and savings market, we'll be the largest player underpinned by a number two position in both Workplace and Retail, as I outlined earlier. What is unique to us is that we're big in both of these markets, which brings real synergistic benefits, whereas the other players are only big in one or the other. The additional annuities capacity from our PRT partnership, on top of Standard Life's existing business, moves us to being a top 3 player in the annuities market as well. But we will remain disciplined in our approach with a laser focus on value over volume. Put another way, these transformational developments extend our participation. We're now able to play in the 1/3of the retail profit pool, which we weren't before, with the added products of ISAs and general investment accounts. And we're opening up the other half of the profit pool in PRT. Overall, we'll be the UK's largest retirement savings and income player with half a trillion pounds of assets. To give a sense of scale, the #2 player is around 300 billion of assets. This scale supports greater commercial advantage and further operating leverage given a high proportion of costs in our sector are fixed. We'll use our expanded scale and expanded capabilities to be better for customers advocating for better retirements and helping our customers achieve lasting financial security, as we champion in the belief that everyone's journey to and through retirement can be better. So to summarize, we operate in one of the most attractive retirement savings and income markets in the world and we are uniquely positioned to benefit. Our strong execution is delivering better customer outcomes. We're building momentum through executing on our strategic priorities, which means we're on track to achieve our 2026 targets. And we're poised for further growth with Aegon U.K. and our U.K. PRT partnership. Post 2026, the broad strategic direction for Standard Life will be in line with our current vision. In November, we'll share a high-level view on our future strategic priorities as well as new financial guidance. We'll also outline uses of excess cash for 2027. Executing on our vision gives us greater financial flexibility and the luxury of generating excess cash and capital. And we'll look to strike the right balance between investing in growth opportunities and shareholder returns. In summary, I'm really confident and excited for what is to come from Standard Life. So with that, let's move to questions.

[Operator Instructions] I'd just like to remind that a recording of this presentation along with the copy of the slides and the published Q&A can all be accessed via your Investor Dashboard. Rosie, at this stage, if I may hand over to you to chair the Q&A with the team, and if I pick up from you at the end of the, that would be great.

So first question, what is the impact of rising interest rates on yields? Is it a positive or negative for the company?

So from a company perspective, our economic balance sheet, which is our solvency balance sheet, is hedged against the major financial risks. So whether interest rates rise, whether they fall, whether equity markets rise or fall, currency, inflation, our economic balance sheet, solvency balance sheet, which determines our ability to fund our strategy, our ability to pay dividends, is immunized. From a consumer perspective, the higher interest rates are good for annuities, for those that want to take [indiscernible] for annuitizing their retirement [ bucks ], it's good news for consumers.

You've demonstrated strong progress in workplace and annuities, but still seeing strong outflows in retail. What is your strategy to address these outflows?

So obviously, if you go back when I started in 2020, 7 years ago, we were much more of a closed book consolidator at that point in time. And we've taken that there are 3 big market opportunities in the U.K. that are growing strongly. Workplace pensions, which is generally younger age customers trading up towards retirement, what we call retail, which is 50 to 70-year olds want to help to bring together different pensions and develop a plan to roll over to retirement income. And then annuities is more focused on the 70-plus year old, and that's dominated by pension risk transfer business. So our approach was to focus first on pension risk transfer business, and then on workplace, just because those are basically corporate transactions, so we only had to get to a small number of professional buyers in order to persuade them. And both those businesses have turned around very strongly and are growing very strongly. So it's only really now we're turning our attention fully to the retail side. But what's interesting in the U.K. market is that only 10% of the population will get -- will pay the fees to independent financial advisers as they journey to and through retirement. 90% of them won't do that and they'll end up turning to one of their existing providers. And as we combine together with Aegon, 1 in 4 adults in the U.K. are customers of that enlarged Standard Life group. And it really is all about building out the ability to proactively engage with customers and support them on that journey to and through retirement, and we're now focused on the investment to do that.

One for Nic here. Pension & Savings operating profit margin increased from 18 basis points to 20 basis points. How much further can margins realistically improve and what is a sustainable long-term level?

The underlying driver, the major driver for the improvement in the margin has been our efforts to reduce the operating cost base of our business. We have a GBP 250 million cost savings program. We are more than 80% through that program at this stage and the components that now are earning through our results are material, and that accounts for the majority of the increase that you see to 22 basis points. As I said, there is still further runway for the margin to improve as we complete the remaining component of our savings program and as that fully earns through. And then from that point on, the margin will be -- the overall profit margin will be -- will move effectively with business mix. Some segments within our business have lower revenue fee margins than others. And as the various segments grow faster than others, then there will be a mix effect that comes through. That mix effect has been net-net negative over the last few years as some high-margin business is slowly running off. Of course, from 2027, we will also onboard the pensions and savings business from Aegon U.K. That has different profit characteristics at this stage. The average margin is 11 basis points. We're targeting GBP 110 million savings, which should push that margin up to 18 basis points, so very attractive. Albeit a little lower than that for Standard Life stand-alone, it is very attractive given the mix of business that it has. And indeed, very attractive when we benchmark that with other competitors, companies such as L&G or Aviva that operate around the 7, 8 basis points mark. So more headroom as savings -- as cost savings, be it the completion of our program or the Aegon cost savings, and then from that point on, it's just a mix effect.

What is the progress with the journey to end-state technology policies? What percentage is done? And where do you expect to be at year-end?

So great question. So we're basically working through that on an ongoing basis. And this is a reasonably time-consuming work because you obviously want to make sure you maintain very high standards of service and have complete accuracy as you migrate across the more modern technology. So at this stage, we're about 75% level. Since our results back in March, we haven't had a further migration go in. The next one is actually in the fourth quarter this year, so in November. And then the next one after that is in May of next year. And at that point, we would be up into the 90% done at that stage.

IFRS shareholders' equity was negative in the first half. You said you [ couldn't declare a ] dividend. How is that possible? And how are your discussions with the regulator around this negative share?

So being overall negative was something that wasn't a surprise for us given the market movements in the first half of the year on top of market movements in previous years, it's the working of our hedging strategy, which is designed to hedge out, as I said at the beginning, the big financial risks and protect our economic balance sheet, which is the solvency balance sheet. But because the IFRS balance sheet doesn't have all of the components, then you see that timing mismatch effect, which is a timing effect. What determines our ability to distribute dividends is not the overall group reported IFRS shareholders' equity. It's the overall solvency level of the group, which remains very healthy at the upper half of our operating target range. Our ability to operationally deliver cash and earnings that cover our recurring uses, which, on a cash basis, we're very comfortably covered, producing in excess of GBP 0.5 billion a year either to use to reduce leverage. And on IFRS earnings, as committed, we've now put the business on a basis where the operating profit covers our recurring uses, which is what we said will happen in 2026. And finally, it's determined by the legal entity distributable reserves. In other words, the underlying statutory accounts of Standard Life plc and the [indiscernible] indeed the statutory accounts of our subsidiaries, which are prepared on a U.K. GAAP basis and continue to show very healthy level of profit and distributable reserves. So as we've said previously, the group IFRS shareholders' equity does not, whether it's marginally positive, now negative, has no bearing on the way we think strategically about the business and has no bearing on our ability to pay a dividend, which is why we've declared the dividend notwithstanding.

And just a point about the regulator. So the regulator's focus is very much on the solvency balance sheet because that's the economic balance sheet that determines the economic health and well-being of the business. So the regulators tend to focus on the IFRS balance sheet.

Interesting I read earlier today, this is sort of the press that the government is consulting on whether they should determine dividend payouts only by reference to solvency balance sheets from here on.