Aviva (LSE:AV.) Q1 2026 Earnings Call

0:00 I would now like to hand the conference over to Aviva's Group CEO, Amanda Blanc. Thank you very much. Good morning, everyone, and welcome to Aviva's first quarter update. Usual, I'll give a short overview and then hand over to Charlotte to give you the details before we move questions. Aviva has delivered another quarter of strong trading and profitable growth across the group, once again demonstrating the benefits of our diversified capital light model against the backdrop of global market volatility.

0:30 Let me just share a few highlights. In General Insurance, premiums are up 19% with an improved combined operating ratio. This shows our ability to effectively manage through the cycle and get ahead of emerging inflationary impact. In UK General Insurance, strong premium growth has been driven by the addition of Direct Line and underlying performance in UK Personal Lines. In Canada, our new management team is building momentum with growth across Personal Lines and Commercial Lines. And in Wealth, where we are the number one player, we secured £3,300,000,000 of net flows, up 49% year on year, and flows have continued to be strong since the end of Q1.

1:19 On strategic delivery, we are making excellent progress on the Direct Line integration and remain firmly on track to meet our synergy targets. And the improvements we are making to underwriting and pricing are paying off, with better profitability and Direct Line branded PCW policies nearly doubling since the full year. Looking ahead, our continued strong trading momentum, real progress on the Direct Line integration and market leading businesses give us confidence in our 2026 outlook, including the guidance that we've given around combined operating ratio. And we are equally confident in delivering on our medium term group targets and continuing to deliver value for our customers and our shareholders.

2:08 I'll now hand over to Charlotte to take you through the numbers. Thanks, Amanda, and good morning, everyone. I'll first cover the business highlights, starting with general insurance. We achieved strong growth with £3,400,000,000 of premiums across The UK, Ireland and Canada. I'm pleased with the core development across all markets, a result of our discipline in pricing, strong rate adequacy and cost focus. Weather was more consistent with first quarter long term averages compared with the prior year, which had been adverse. Overall, this led to an undiscounted core of 94.1%, which was a 2.5 points better than Q1 'twenty five. In UK general insurance, premiums grew 28% to £2,400,000,000 We have remained disciplined in pricing across the portfolio, and rate adequacy remained strong.

3:03 Personal Lines premiums were up 62% to £1,500,000,000 This was naturally higher with the addition of Direct Line, alongside growth across the rest of the portfolio, including intermediated business and our new home partnership with Nationwide. We added 2.5 points of rate across the Motor portfolio in March to help manage inflationary impact. Commercial lines premiums of £834,000,000 reflect strong retention and our continued focus on deliberate underwriting discipline to manage profitability through the cycle amid softer market conditions. So to unpack this a little bit more for you, mid market, which makes up about 60% of the SME channel, was up 1%, benefiting from high retentions of close to 90%.

3:57 This offset lower top line in digital and intentional profitability actions taken in scheme. Probitas was up a little, driven by the addition of new lines of business. And although GCS volumes were lower, primarily where UK market conditions have softened the most and competition is the highest. This is because we have chosen price adequacy over volume. Across all segments, flow and broker engagement is strong. We continue to grow selectively, protecting earnings quality. This is more important to us than defending short term volume in parts of the portfolio where prices would not clear our return thresholds. Finally, April renewals have gone well, and we expect the top line trend seen in q one to moderate over the rest of the year.

4:49 The UK undiscounted core was 94.8%, a zero five point improvement on Q1 twenty twenty five. And we expect further improvement in the core throughout the year, particularly as the pricing actions we have taken on the direct line book earn through. In Ireland, premiums of a £157,000,000 were up 8% in constant currency, with personal lines up strongly. Ireland saw its core improve by 18 and a half points, reflecting more normal weather compared to 2025, which had been significantly affected by storm Owen. So looking at The UK and Ireland together, the q one core of 95.1% is 1.8 points better than last year.

5:37 And as you'll remember, q one core is typically higher than other quarters due to a higher weather loading. And the weather experience was in line with this loading and therefore is consistent with the expectations we had when we set the sub 94% guidance for the full year. And to confirm, we remain firmly on track to meet the In Canada, premiums of $9.00 £7,000,000 grew three percent at constant currency. Personal lines premiums grew 4%, supported by continued rate actions across both auto and personal property. In Commercial Lines, premium grew 1% as lower average premiums in SME property were offset by some large wins in GCS.

6:25 Canada's undiscounted core was 91.8, an improvement of 4.4 points. This strong performance reflects the actions we have been taking to improve profitability across all lines and more favorable cat experience than last year. This is a great start to the year in Canada, and we remain on track to meet our guidance to achieve a core approaching 94% for the full year, remembering that Q3 is the peak quarter for cat activity in Canada. Moving to IWR. Wealth flows were up 49% to £3,300,000,000 representing 6% of opening AUM, another excellent performance. Workplace flows of £2,000,000,000 were up 71%, benefiting from strong retention and new business wins in 2026 compared with the loss of a large workplace scheme in q one last year.

7:24 Platform continues to perform really well, up 24% to 1,600,000,000. Tax year end was another success with strong inflows in both adviser platform and direct wealth. Our wealth business continues to demonstrate its resilience as it has done through a number of periods of volatility over recent years. And we are confident in our ambition to deliver £280,000,000 operating profit by 2027 and in the continued growth trajectory beyond that. In the insurance business, protection sales were broadly consistent year on year as growth in group protection was offset by a lower result in individual protection. You may recall that q one twenty twenty five benefited from strong sales in advance of stamp duty changes last April.

8:17 For health, in force premiums increased by 9%, supported by large corporate, which more than offset some reduced demand across SME and consumer channels. We remain focused on achieving our ambition of 100,000,000 of operating profit for Health this year. Moving to retirement. Sales were £1,100,000,000 in the quarter. Within this, individual annuities increased by 10% and equity release sales up 8%. In BPA, we wrote volumes of £619,000,000 across 20 schemes within the quarter. As of today, this has extended to £1,100,000,000 We have maintained our discipline in a highly competitive market and continue to exceed our hurdles and achieve at least low teens IRR.

9:11 Finally, in Aviva Investors, AUM was stable as we saw improved flows across both external and internal channels, supported by wealth and the additional transfer of direct line assets. We'll now move on to the balance sheet metric. Solvency was 171% at the end of Q1, in line with our expectations. This was after using 13 points of capital for the final 2025 dividend of £800,000,000 and the share buyback of £350,000,000 Cash generation in the quarter added six points. This included around two and a half points from beneficial market movements, mainly from higher interest rates in The UK and Canada.

9:57 It was partially offset by the expected two point reduction following the end of Solvency II grandfathering rules for £200,000,000 of Tier two debt. Our previously published Solvency II sensitivities demonstrate we have relatively low exposure to market volatility. Therefore, recent market turbulence hasn't had a material impact on our solvency position. We remain absolutely on track to deliver at least £350,000,000 of further capital synergies from the Direct Line transaction by the end of this year. And as you'll recall, this is equivalent to seven points of solvency and is in addition to the three points we delivered at the end of twenty twenty five.

10:42 As always, we maintain a high quality asset portfolio. Our credit portfolio continued to perform well in q one and to date. We experienced no downgrades below investment grade. Almost all the assets outside of public debt on our balance sheet are sourced in house by Aviva investors using a robust risk management framework. They are predominantly real estate and high quality UK productive assets, including infrastructure. And we have no exposure to the types of investments you have seen in the headlines. And we've provided more color on our portfolio in this morning's announcement. The assets are high quality, almost all investment grade, and provide predictable matching adjustment eligible cash flows under the Solvency II framework.

11:34 So to summarize, we've had another good quarter. Aviva continues to have a firm grip on performance management, and we are on track to deliver our ambitious plans. The Direct Line integration is making excellent progress with improving profitability and strong PCW volume momentum. We are absolutely on track to meet all our integration milestones and to deliver the expense and capital synergies previously announced. We are well positioned for the period ahead. And despite the ongoing geopolitical uncertainty, we have observed limited changes in customer behave. The insurance sector generally, and Aviva more specifically, have consistently proven to be resilient, and we have successfully navigated periods of uncertainty in the past.

12:25 While we are not complacent, we remain confident in the outlook for our group. And with that, I'll hand over to the operator so we can start question and answers. Thank Our first caller is Farooq Khanif from JPMorgan. Your line is now unmuted. Please go ahead. Could you possibly give us your traditional summary of pricing in UK personal and commercial and also between home and motor, just for clarity?

13:20 And can you also confirm that what you're saying is that at your ex direct line, there was underlying growth in Personal Lines? Second question is, can you talk a little bit more about your long term ambitions in the Commercial Lines market? Obviously, Previtas is growing a bit. I believe you've entered or thinking about entering The U. S. Market in a very small way. What are the attractive pockets for you? And where do you think pricing is still attractive or there are opportunities for you? And then final question very quickly is, you talk about growth in the wealth profit beyond the $2.80. Is that a stable margin? Or do you think operating leverage is going to play a very important part in the profit expansion there?

14:12 Thank you. Okay. Thanks for those questions, Farooq. Okay. It's good to know that it's a u our usual summary of pricing. It would become that boring that that that we always do the same thing. But yeah. I'll get so shall we start with motor and home? I think that's probably the best place to start. So so so I would say that in motor, we would say that the that that market is hardening. And what and what we have done in the first quarter

14:42 is that in across the motor and the Aviva and Direct line, we have put in three points of rate in q one versus the Pearson HAM data, which is showing motor up one. So I think that all of that shows the discipline once again that we are displaying there. In home, the Pearson Hamm data, I think, is showing rates as minus one. For Aviva, our rates are up two. So in in commercial lines so so I think there I I think you asked a number of questions about ambition, so I'll come to that in a second. So maybe I could just give you an idea of rating strength in commercial lines, rate adequacy. It might be the the sort of easiest way for us to play it. So on on on what we call our SME

15:32 business, which is the sort of digital scheme and mid market, rate rate adequacy is is, you know, well over a 100%, and it's more than that in our global corporate specialty business. Now what you obviously are seeing is that and and by the way, there's strong retention in both of those areas. But what we are doing is when we are looking at our rating adequacy for a new piece of business, we are being incredibly disciplined about that rate adequacy for new business. And where we have quoted in one new business, the rate adequacy is about 10 points higher than if we had than where business that we lost to the market. So, you know, I think that gives you an explanation of the difference between our approach to pricing and what we what we are seeing in the market. So you'll have seen the Marsh data about rates down. I mean, that is sort of what we are observing.

16:30 And, you know, the the the more difficult lines of business, you know, financial lines, commercial property in that global corporate space. So, you know, look, I've been perhaps around too long. Thirty five years in this industry and starting as an underwriter. You know, my my my guidance to the team, rightly or wrongly, is you do not grow into a soft market aggressively. And so we have been we have and we will be disciplined about our approach to that. Albeit, I think, that in that first quarter, we had a few sort of, you know, one or two big lapses where we just weren't prepared to match the market, and we believe that we will moderate on commercial lines in terms of that that premium towards in the the three quarters.

17:17 The two big quarters for commercial lines are q two and q four. Now if we think about what what so what are what are the pockets in commercial lines? So first of all, you know, let's be very clear. Aviva is an incredibly strong player in the commercial lines. SME digital mid market in The UK. We would be number one with the vast majority of

17:38 brokers here, and, you know, and we've got very strong propositions. So our fast rate proposition wins all the awards for being the the best proposition. We've got a very strong performance in mid market, as Charlotte articulated there, at 1% with a strong, you know, close to 90% retention rate. And we've got very strong propositions, whether that's in terms of, you know, our broker academy, the the the the the the deal proposition, our partnerships proposition, so I think and our schemes proposition. But what we will not do, you know, however strong the relationship with the broker is, is if there are profitable segments of business, and we've seen that in this quarter. We had some schemes that were underperforming when we will we will obviously not keep hold of those schemes. So I would say in Canada and in UK and in Ireland, very, very strong propositions in that SME mid market digital proposition, and we're that learning is being shared between the Canadian Irish and UK businesses. You know, Ireland have launched new fast trade propositions in the last number of years very, very successfully and launched lots of new product lines.

18:44 Now GCS is much more there's less loyalty in the GCS space. You know, I always look at Charlotte and say, it's people like you making the decision on GCS business. It's not relationship traded. It's it's sort of hard nose traded. And so it's much more driven by price. And if you think about commercial motor, which is where our retention has been lower in GCS this quarter, and property, those are areas where, you know, they are marketed almost every year. And so you'll have the opportunity to write that business at more at at more profitable rates. You you know, I will we will not write that business unprofitably. So in terms of that GCS market, we will maintain discipline through this market, and we do consider that the the sort of that market will be soft for the for the balance of this year. But there are opportunities for us to grow grow in other segments. So you touched on U C US GCS.

19:40 So the obviously, this is not a new market for Aviva. We've already got a profitable book of US business, which is underwritten from London. And what our planned onshore business builds on this and enables us to get closer to to the customers there and significantly expanding our addressable market whilst leveraging our existing capability. The important point here is around the broker relationships. Because if we think about the the brokers now that are in UK and US, our our accounts with those brokers will be huge in The UK. So if you think about the likes of Gallagher, Aon, Marsh, Willis, Howden, they've all got big UK relationships. And so we're harnessing the opportunity from those U U from those UK relationships, and we've put a small team in The US. Our initial focus will be on property casualty and particularly specialty lines business.

20:32 And and and and that's where we'll start. And we'll start small, and we'll be very careful clearly about how we do that. But we're looking this at that investment over the

20:40 long run. We think it's an exciting opportunity. We'll do it in a measured and sensible way. Hopefully, that's answered all of those questions. Charlotte, did you wanna pick up the wealth margin? Yeah. Would you I mean, I suppose that the point around the unstoppable momentum in our wealth business coming from workplace, combined with all the investment we've been doing in the direct proposition, guided support coming along. There's a lot of tailwinds. I think we said all the way back to the in focus session on wealth that we, you know, we continue it to expect revenue margin And that, we talked about at the year end, and we expect that to continue in line with those expectations. So it does make it really important that we use our scale and efficiency within the cost base to deliver the improving operating margin all the time. And I think we talked at the year end, despite the headwinds on revenue margin, we were just over point improved on operating margin. We will continue the initiatives to to keep driving that forward. And just one point on the the Mercer scheme, which obviously we talked about at the the full year.

21:51 So that is not in the q one because the the the first of those tranches of the schemes have started to transfer in April. And, you know, and the majority of those flows and the larger schemes will will be back ended over the next fifteen months. So as well as this, you know, this billion pound of regular contributions, the 112 new schemes that we've won, we've also got this this Mercer business, which will be flowing in. So, you know, you know, very, very excited about the opportunities as well.

22:22 Thank you very much. Thank you. Our next caller is Andrew Baker from Goldman Sachs. Your line is now unmuted. Please go ahead. Hi, thank you for taking my questions. I guess both from BPA side, if that's okay. Firstly, how should we think about the VNB margin development for the rest of the year? And do you expect the PRA's funded re proposed changes to have any material impact on pricing? And then secondly, I can see you're still delivering low teen IRRs. But I guess if competition increases here further, will you simply just pull back on volumes? Or could you explore other options like sidecar structures or anything like that? You.

23:07 Do Okay. Want to take this one? Yes. So look, I think on the VMB margin, I mean, it is important to remember a couple of things. The scale of the BPA market that transactions that came in know, it's it's sort of more in the 4,000,000,000 space, whereas back in, you know, from market perspective. Whereas in in q four twenty five, it was sort of more in the twelve to fourteen. But it's so it was a very different size and scale of of market

23:37 combined with, you know, increased numbers of of of players looking to to compete. So you got those two of those dynamics. If we look at the at at the trades that we did, actually, what we saw towards the end of the back end of q four was they were smaller schemes and and and, you know, through the clarity and and and they they they gave us a slightly higher margin. What we see this time is a couple of bigger ones and some smaller ones, so it's been a bit more of a mixture. So you are seeing that competitive driver. And and as we said, you know, for us, it's less about the margin. It's more about the capital strain and therefore, you know, the the value creation over a period of time, which is why we focus on the IRR. And with, you know, a whack of sort of nine or 10%, nine ish percent, you know, having low teens IRR is is a good a good margin over that. So so that's that's our focus.

24:35 And, you know, I think as we outlook this year, you know, already having now got to to 1.1 by now with a pipeline that that is reasonable, you know, not this year, but over the course of next year, we would expect some of the remaining internal schemes to market as well. So that that, you know, there is there is a decent pipeline. We will always be disciplined. You know, we compete hard, and there are some transactions that we don't win because we're not willing to go to the prices that they transact at. And that is the discipline that you know and should expect from us. With funded re, we don't use it very much. We use it sparingly, and where we use it is because it it makes sense to do so, to take advantage of of perhaps historic differences in in the capital framework.

25:24 So it's not gonna it's not altering our plans. You know, again, we will continue to use it where it makes sense to do so, but it's pretty sparing. So it has very little impact on our strategy or execution, which is probably different from from some of the others in the market.

25:41 And then I suppose, you know, if we can't hit our hurdles, just to repeat, the the the discipline, will mean that we we've got other options. That's the beauty of the diversified model, and we will look to deploy in other areas. But, you know, I think we have a great team, and we are continuing to compete. And where we're losing out here and there is because, you know, people are are are doing so at, you know, prices that we don't see are economical. Great. Thank you. You. Our next caller is Thomas Bateman from Mediobanca. Your line is now unmuted. Please go ahead. Hi, good morning. Thanks for taking my questions. I just want to come back to the BPA margins.

26:29 It's my I'm a little surprised you've written business at these margins at all because I would have thought that the strategic asset allocation was quite similar to last year. Is the market really that competitive? Or is it just is there a I know you alluded to the mix shift here. Is that playing an even bigger effect than I might think?

26:52 A second question is just on your comments around health and the slightly slower demand. Could you just bridge us to how we get to the $100,000,000.20 26 target? I say this because you're you seem very confident in the target, but there's still a big gap, I guess, there. And the final question is just on the integration with Direct Line. Could you let us know how you're going on in terms of cost cutting and the benefit from expense synergies that are likely to impact the GI combined ratio this year? I say this considering I assume there's relatively little impact in the combined ratio so far. Thank you. Okay. Charlotte, do want to do one, I'll do two and a bit of three, and we share three? Share three.

27:41 Look. I I mean, I I don't know there's a huge amount more to say on on the BPA margin. We are disciplined. We're writing BPA business. It's relatively low low strain from a capital perspective, and therefore it's driving those IRRs that totally makes sense. The IRRs themselves are a long term metric as opposed to sale metrics. So they kind of drive the the value and and kind of, like, include, you know, sensible assumptions on on Solvency II and and and capture more of of of lifetime value.

28:19 And and that's that's our focus. And as I say, we we are able to transact at levels that meet those hurdles. It's a small component, obviously, but it is has been a smaller market too. So, yeah. I mean, I'm I'm in danger of just repeating what I said to Andrew, but, yeah, that that is that is the that's it. And on so on health? So so what we're seeing in health is there's different dynamics going on depending on what part of what part of the business you're talking about. So we're seeing good demand from the large corporates. And you've seen our in force premiums increased by 9%, that is primarily driven by those large corporate.

29:05 Where we're seeing, you know, less demand is in that SME space where that there's a real affordability point following the national insurance contribution changes. And, you know, SMEs have got choices to make, and I guess it's pretty important that they pay the national insurance contribution. And on consumer demand, you know, you're seeing less in in written about waiting lists, etcetera. But I think the way that we look at this and why we feel very confident about it is that what we're seeing much more is that the the corporate customers are looking at health and protection together and looking at how can you get people back to work more quickly. And therefore, that that that is there's some real good demand drive there. And we'll launch in in a couple of weeks, actually, our new well-being proposition, our our protection well-being proposition, which brings together the protection and health proposition. So it's much easier for our customers to be able to navigate their way around that and utilize both products in line. Because obviously, quite often, we have corporates that have got their health and their protection product with us. You know, we have been very disciplined on how we used the word disciplined a lot this morning. And I'm not gonna apologize for that. We're an insurance company. That's what we should be doing.

30:18 The health combined operating ratio remains strong in the low nineties. You know, it has been consistently like that as we've navigated through various periods over the last number of years, and that's in line with how we manage the the business. So when we set the the 100,000,000 target operating ambition, obviously, you know, that that there was that was a that was an ambitious target, and we were operating in a different market. There's now lower demand. But, you know, the way that we look at these things is we push hard to meet the ambitions that we've set. And so, you know, we we believe that we are on track for that 100,000,000 operating profit in health this year. In terms of the direct line, so I'll maybe I can talk a little bit about the progress on the integration, Charlotte can come back on your points around the expense synergies.

31:04 So I think, obviously, the integration is going going really well. And, you know, we've taken a swift amount of action right right across the business. So whether that is, you know, getting the pricing models in place, getting the fraud models in place, putting Direct Line on all the four major price comparison websites. And by bringing together by doing that and bringing together all of the dataset, we've been able to enhance the pricing across the book. We've also been able to broaden the underwriting footprint. And that that that change of marketing from, you know, less direct marketing to more PCW, obviously, that changes that does change the expense as well as well as anything else. Also, we've harmonized the supply chain. So 60% of the supply chain spend is already shared. So we focused on harmonizing the rates that we pay. And we've also streamlined the non the the non claims suppliers.

32:02 So, you know and it's 70 of those already and more under review. We've made really good progress on the the the the what we call the the the movement of of colleagues from one entity to another. That will be that will complete later this year. And we've also made good progress on the new lines of business, the micro SME, the PET, and the rescue, where we see that there's loads of loads more potential. So I think all of that combined I mean, I was speaking to the team last week, and what's really interesting is that, yes, we've got all of the benefit from these models, and that is phenomenal. But you also have the added benefit of scale. And by by having these two books of business that come together, we can not only apply, obviously, the models across a wider book, but we're just able to make better pricing decisions because we've got more data.

32:53 And, you know, that is the bit that we are really seeing starting to benefit the underlying performance, which will obviously come through over time. Charlotte, did you just wanna talk about the Yeah. So just on the on the actual synergies themselves. So if you remember back in November, we said we we set the the synergy target of 225,000,000 to be delivered by the end of twenty eight. And then we said that at the end of twenty five, we had achieved 50,000,000 of those run rate cost savings, of which 10,000,000 were recognized in year in '25. And for '26, 50,000,000 kind of is starting at the beginning of the year and running through. Obviously, we're continuing to work away. And so some of the cost savings that that linked to the initiatives that Amanda mentioned will be realized in years. Some will kind of, you know, come towards the the end of this year.

33:45 The the the capital synergies are linked to two things, the major model change and the part seven. Obviously, at the point that we achieve the part seven, which is the end of this year, then quite a lot of the legal entity structures sort of collapses and you get an additional moment when there's quite a lot of cost savings to come through. So I think originally we guided to the sort of the 02/25 being relatively spread with fully run rated through by '29. We'll give you more updates at the half year, but we remain completely on track. Thank you. Thank you. Our next caller is Nasiv Ahmed from UBS.

34:33 Your line is now unmuted. Please go ahead. Hi, good morning. Thanks for taking my questions. Just three for me. Firstly, on Canada combined ratio, it's around 92%. I know 2Q and 3Q is high on weather, but is there anything else in the 92% like PYD that makes you comfortable about approaching the 94% because the run rate is actually better at the moment? Secondly, on the Health business, you've got $30,000,000 of earnings to come in 26% growth in earnings to reach the $100,000,000 I think you were at $72,000,000 last year, but your top line's reduced. So how do you like, what are the moving parts to get there to the $100,000,000 target for this year? Then finally, the solvency bridge, I think you get to around 180 already if you add direct line, so 171 plus seven points.

35:24 Can you kind of bridge the moving parts? What is the OCG contribution net of the dividend? And I think the buyback is already excluded. Yeah. So I'll start with Canada combined? So so, like, I think it's it's as I said in my opening remarks, you know, the the Canadian combined ratio is a function of the the profitability actions that we've been taking, and it was a more benign weather quarter relative to last year, but it was consistent with the weather loadings that we have for Canada in q one. But they're not the heaviest weather quarter. We'll unpack all of the components of core at the half year. At this at this stage, I'll just give you a bit of that color.

36:10 So, you know, it it is the improved profitability actions that we took. There was a a modest amount of of PYD kind of across the group this time. But as I say, I'll give you more detail on that at the half year. But, you know, assuming that the loadings for weather operate as we would expect, which they have in q one, we would expect a heavier one in q three, then, you know, we we absolutely see the pathway to approaching 94 for Canada. I'm not sure I've got a lot more to add on health rate. I mean, there's not that many moving parts in a combined operating ratio, is it? You know, you've got your you've got your premiums, and you've got rate flowing through, and there's been good rate going through the portfolio. Medical inflation is is high, and we're carrying that rate.

36:56 You and then you've got your expenses. And, you know, as I say, it's the combination of us looking at all of that, which gives us the confidence of getting to to the 100,000,000. I I don't think there's much more I can actually add. No. On the solvency bridge chart? The solvency bridge. So yeah. So if I it's always obviously early in the year to kind of bridge to to the full year. But I think, as you say, there's the seven points that we've guided to coming from from Direct Line. There's probably if you think about those sort of regular capital build each quarter, then, you know, if that's three three a quarter plus a little bit for management actions, then I would say that's a 12 build for the remainder of the year. So that's 12 up, seven up, and then there's probably about five to pay for the interim dividend.

37:46 You know, those that would take you to mid mid one eighties. That's sort of excluding market impacts either positive or negative, which I think makes sense because as you can see from activities, you know, we're relatively insensitive to to movements. And even if I look what's happened since q one with, you know, swap spreads being around 20 points up, you know, the the the sensitivity means that kind of, you know, that that's that's relatively small. So those are the main obvious blocks, and then there's this kind of market moves. Thank you. Okay. Thank you. You. Our next caller is Andrew Crane from Autonomous.

38:33 Your line is now unmuted. Please go ahead. Thank you. Good morning. Sorry, I'm going to come back to the BPA thing. Low teens IRRs, given how little capital is being used now in sort of guilt heavy strategies, doesn't argue for a substantial decrease in the profitability. Could you just talk a little bit about when you say low teens, are you loading it as 100% solvency or a higher rate of sort of 175%? Secondly, I wonder whether you could give us the new business profits for the wealth division, which you used to give.

39:19 And then thirdly, could you talk about the growth in your direct wealth business? And how big in assets is your direct wealth business now? Thanks, Andrew. Charlotte, do want to pick up the first one? I'll pick up the third one. Yes. So look, on the IRR, we do allow for solvency buffer in that. So it's kind of more like the 145,150 ish kind of that sort of level. So it's not just a pure a pure 100. So so I think we are factoring in fully, you know, what what the the capital strain that's on there in a real way and and and and achieving more than the the weighted average cost of capital.

40:07 On the So look, on on the the the metrics that we've given for Well, look, we've we've we we we think that the business is best model using flows, revenues, and expenses. And kind of at the back, we've given you the gross flows, so page six, which we historically have only given at the full year and the half year. You know, in our view, you know, that that that that is the most relevant way to to business and and kind of rather you you focused on it like that. I know that, you know, in the past, people have liked to add up the components for an IWR, but then it's been dominated by the the the the wealth piece, which, you know, for which this metric is the least relevant.

40:54 So we are moving away from from that metric going forward. And on the direct wealth. So I you know, we've made really good progress in direct wealth. Customer numbers are up 30%, and they've now passed the 100,000 mark. And the net fund flows are up 56% as we continue to see strong demand, particularly in the weeks prior to the tax year end. So we expect that to continue to grow, obviously, brand, enhancing the proposition, and the way that we optimize our marketing. I think the other area, obviously, of focus here is the introduction of the targeted support rules. So I I think they've definitely got the potential to transform how we support our consumers with their pensions and their investments.

41:40 And we're developing that targeted support service, and we're now in the process of seeking the form of regulatory approval, and we're aiming to launch that in the summer. So we our first two use cases are gonna be in the pensions space, which is slightly more complex, but that's where we believe the bigger opportunity and obviously that plays into stimulating UK growth by enhancing customers' access to the financial products. It's innovative, and we're reducing the you know, there's some reduction in regulatory barriers. So we we honestly believe there's a really huge opportunity for us here given the size of our customer base across that sort of wealth and the heritage book, and possibly, you know, utilizing artificial intelligence with the with our position in workplace. So that that sort of all flows together in terms of supporting that continued growth in indirect wealth, Andrew. So we're we're we're quite we're quite keen on that, obviously.

42:36 So what were the assets in direct wealth? AUM? What was that, guys? We got that here. I don't that in front of me. It's about 4,000,000,000, I think. I'm k. Thank you. Thank you. Our next caller is Larissa Van Deventer from Barclays. Your line is now unmuted. Please go ahead. Thank you very much and good morning. On my side, focus on two, please. The first one, on commercial pricing, you mentioned a soft pricing environment. Could you give us a sense of your outlook for when it may harden and to what extent along with your expectations for retention if you do if you keep your pricing elevated?

43:29 The other one is on workplace, very strong flows now up 71%. Should we take this as the new normal or the ones that we should take into account when we consider how this may grow going forward? Thank you. Okay. Thanks. So so, Lewis, I I obviously spoke quite a lot about commercial lines earlier on. So maybe I'll just focus more on your the the outlook point because I think we've told you where we sort of are Yeah. Where we are today. So, look, I think the the outlook suggests that pressure will on rates will remain with elevated competition throughout the year. But, you know, just to be clear, I'm gonna use the same word. Underwriting discipline is firm. I've talked to you about our rates adequacy, And, you know, the rate dynamics do vary line by line. Some some lines are still positive, others are not. You know, I won't go through the whole 20, but I think, you know, if you if you looked at the March index, it we wouldn't be dissimilar.

44:25 We we would be seeing the same sort of things that they're they're they're seeing. In terms of opportunities, though, they do still exist. You know, we've talked about the dual stamp platform, the the news the seven new products we've been able to launch through Probitas, the specialty lines, and we will continue to prioritize margin over volume. I I don't have, you know, an indication of when the market will harden. I I I just I can't tell you that. I think for the for you know, we would we would say that certainly for the course of this year, we would say we would see it being similar to what it is today. Clearly, you know, tactics and everything else will change by by different insurers according to and responding to that. But, you know, I think that with an insurance business, and, you know, like I say, done it been in this for such a long time, the absolute key thing is to keep your discipline in a soft market, to keep your relationship with your brokers strong, to look after your customers, to be there when they need them so that when the market hardens, you've got all of those relationships and you've got everything that that you can really work work on.

45:33 And that's the way that we will be playing it. We're not in this market out of this market. We are long term players as we always have been, and that's the way that we'll be continuing to focus on it, whether that's in The UK, in Ireland, or in Canada. In terms of workplace, remember Charlotte actually said in the note, we lost a large scheme in the first quarter of last year. So there is an element of of that in the first quarter of this so I think that's how you should think about it. But also, I would say the momentum is incredibly strong. You know, you're looking at this billion pound of regular contribution monthly coming from the existing schemes, a high retention rate, a high win rate, a 112 new schemes in the first quarter, and the Mercer scheme still to still to flow through over the next twelve to fifteen months. That that isn't in these numbers yet at all. We start that we started that in April, and that builds over the period. So, you know, I I think, you know, there's more to capture.

46:31 So all I would say is don't build your model on 71% your fee fee each time. But, you know, the 2,000,000,000 of workflows plus kind of, like, thinking all of those factors, you know, that that is that is half the course. You very Thank you. Our next caller is Fahad Changazi from Kepler Cheuvreux. Your line is now muted. Please go ahead. Thank you for taking my question. Could I just ask a bit more about The UK commercial? You mentioned 60% was mid market. Presumably, that's Q1. Could you just tell us sort of how much is DCS for the whole year? And could I just confirm, you said Q3 and Q4 as Q2 and Q3 were important quarters for DCS. Could you just confirm that?

47:22 And the other thing I just wanted to ask about was on Canada. You were rolling out your little replicate your garage network, I believe, or in Canada, which you doing in UK. Was wondering how that was progressing. Okay. So on the way to think about Commercial Lines, and I think Charlotte said so looking at the whole portfolio of of the what we call SME, which I admit is very confusing, is what we call internal UK commercial. Mid market is around 60% of that with the balance being digital and schemes business. And then, obviously, we've got the GCS business and the Probatas business that sits on top of that. In terms of the way that in the GCS business, the the the sort of larger business, the way that it works is that q and I'm and these are not exact numbers.

48:17 Q one is about 20%. Q two is about 30%. Q three is about 30%, and q besides, two 20% and q four is about 30%. It's about it's about twenty twenty, thirty, thirty, I think. That does add up to a 100, I think. So I think that that's that's pretty much how to think about it. April has got off to to a good start on on that. As far as the the garage garage network in Canada, so, yeah, we continue to invest in that garage network. The ambition is to insource the claims value chain because, obviously, we see the real benefit of that in The UK where we've got an average cost per claim saving of around around £500. I think we talked about that at the full year. So as we sit here today, the Aviva auto care centers in Canada accounts for around 10% of claims.

49:05 We'd like to bring that over 30% over time. And coupled with the deeper relationships with our dedicated suppliers, that will improve the overall indemnity spend, you know, we we believe considerably. So in in Canada, the severity savings from the from what we call our captive shops are currently averaging around $518 per claim with about with year to date savings, you know, relatively modest if when you just started it. So we continue to strengthen the network, and we'll and I guess we'll have more to say on that. And the brilliant thing here is that the Solis team in The UK have been spending time over in Canada. They've helped the team set up set up the garages. So, you know, we we feel very, very positive about that. Great. Thank you very much for that. Thank you.

49:54 Our next caller is William Hawkins from KBW. Your line is now unmuted. Please go ahead. Hello, Amanda and Charlotte. Thank you. I would like to come back to expenses, please. I'm picking up what you said to Thomas. On the non life side of the business, I've been doing a lot of work and it still stands out that Aviva's expense ratios in non life are a lot higher than the other big five composites. There may be big problems of definition in this, which I accept. But I guess I'm just kind of wondering, when you're doing your own assessment about where you've got best practice and where you can improve, what are you looking beyond direct line? Is it just all about the direct line synergies? Or is there a lot more stuff that you can do? I'm not suggesting cost cutting is the only thing in life, but the difference in the ratios is quite an outlier.

50:43 And then secondly, please, also just back to how you're thinking about how the synergies play through. So if we take 2028 non life expenses relative to 2026, are they going to be lower because of the synergies? Or ultimately, could they still be flat or higher because you've got all the other drivers like business growth and passive inflation? And obviously, you're still going to be investing in the business? Thank you. Okay. Thanks for the questions, William. So obviously, I I don't know the data that you're looking at. But if I if I think about the non life expense ratios for Aviva, You know, this is you have to here look at the what the business mix actually is. It's a it's a it's purely a symptom of business mix. But with Aviva, we have got, yes, a big direct business, but we've also got a very big intermediated business, and we've also got a very successful partnerships business.

51:37 Now we we in that in that partnerships business, obviously, you know, we are we are taking the expense and the but we're and we're and we're managing those very profitably within a range of combined operating ratio ratio where we're protected on on on the downside. And in the intermediated business, you've got the the commission which is payable. So you've got to look at all of those things together. So I think, honestly, having tried to do this for many years, it's almost impossible to put every business side by side unless you know exactly what the business is. The other point is some in some of the bigger insurers will write a lot of business net and and not with full commission, whereas a lot of our business is SME mid market, and therefore, we will write that with commission. So difficult to see through. The other thing I think which all always adds a little bit of a make a specialty in the mix here is the way that you look at insourcing and outsourcing and things like adjust the costs on claims. People deal with those differently, and so your point around definition is very well made. There will be major definitional points depending on the way that you're looking at it. So, you know, I mean, look, you know, very happy to to us to to to sort of take it to take it away. And we will have, obviously, at the full year and half year, we always have more exposures. But what we see is our expense ratios improving and and continuing to improve over time. But we're we're you're never gonna be able to remove that element of commission of the of the intermediated cost when you've got such a big intermediated book of business. I don't know, Charlotte, where you've got any more to add

53:07 on that. Not really other than to to get give to you the assurance that that we, you know, we we're very focused on costs. And, you know, internally, we're always doing what benchmarking we can do and and focusing on on on what good costs are. So if there's volume driven cost and it's supporting top line and, you know, customer growth, then then obviously that's really important cost, whether that's marketing or making sure that we've got the the the personnel to be able to deal with it. Always looking at how we supplement people costs with, you know, automated abilities to to to to to to make them more more efficient. There's there's there's ongoing inflationary pressure, you know, that that we have to look at for our workforce.

53:55 You know, we have good contracts with outsourcers, you know, to kinda manage and keep on top of that, but, you know, there is constantly, you know, the battle against inflationary pressure. And then, you know, we're always looking at how do we drive productivity and savings. How do we kind of do things best both for the customer and from an efficiency perspective? And all of that kind of, you know, continues. So I think as we continue with the efficiencies out of Direct Line, that will drive, you know, and that's kind of two points of the EPS development. We've got, you know, two points of business improvement coming across the piece, which some of which will come from efficiency savings. Sorry. Seven. And and and kind of like, it's it's all together, but you can be rest assured that we are very, very focused on it.

54:51 Okay? Sorry, Bikini, but can I come back? Does that can Go ahead. Yeah. Go ahead, William. That's fine. Can you come I'm sorry to be very sorry. Just to push it, I'm still just trying to get clear. Does that mean that 2028 expenses are highly likely to be lower than 2026 expenses? Or because of all the other moving parts, is that just too simplistic a way of looking at it? I think that's too simplistic. You know, we haven't made all the decisions that will drive us to '28 yet anyway. Opportunities come, like, if partnerships come and we have to, you know, add cost in order to do that. I mean, there's there's so many different you know, and then there's the inflationary drivers. It's it's too simplistic.

55:37 But, you know, we'll be very focused on on on the ratios and keeping it as efficient as possible. And look, you know, we sit here today and think about artificial intelligence and what what benefit that that can provide to the business. I mean, we're we're just at the at the sort of beginning of that. So I think it's it would just be impossible for us to say. But, you know, to just reinforce what Charlotte said, our focus is always on delivering the lowest cost because, you know, if we're inefficient, we pass that on to our our customers. And then they can make choices about where they wanna place their business. And, you know, we need to have it's competitive market. We need to be able to price well. And if we're pricing well, we have to have an efficient back end in order to to be able to do that and It's all about the efficient back end, Charlotte.

56:23 That's what I say. Right. Next question. I think this is our last question. Thank you. You. Thank you. Our last caller today is Abid Hussein from Panmure Liberium. Your line is now muted. Please go ahead. Hello, good morning all. Thank you for squeezing me in. I've got a couple of questions. The first one, I'm sorry to say, is coming back on the BPAs. I'm just trying to understand what are your minimum IRR hurdles? It looks like your margins are now compressing and you're sort of at the low teens. But that sort of low teens number is difficult for me to reconcile with those quoting a greater than 20% lifetime IRR.

57:09 Just So wondering if you can help us reconcile the two. Is it something on the asset side, the capital side? So just wondering what's your equivalent lifetime IRR, if possible? And just an aside on that, would you ever consider switching to a capital light fee based model on BPAs? So that's the first question, slightly long, sorry. And then the second one is on motor. What's the claims inflation outlook that you're pricing for across the rest of the year? And then do you think that, that is broadly being priced in fully being priced in now across the market? Thank you. Charles, do you want do the first one? Look, I think on IRR, we thought of I think let's provide a little bit more detail when we do so at the half year.

58:00 Although I don't see that there's a huge amount of good disclosure on the methods that peers are providing either. And, you know, ours is ours is you'd bear in mind the WACC, which is, you know, nine or so percent. It's definitely applying the solvency kind of buffer, if that's the right word. So kind of it's not just a required a level. It's with with with the expected return and all the return that we need on it. And, you know, low teens is is therefore the hurdle and and is a good use of capital and drives a good return on that use of capital. I I think probably, you know, that's as far as I'll go today. But, you know, we take, I think, onboard the feedback of of people wanting to understand this a bit more, we'll do it at the half year.

58:51 Thank you. And then on on the on the final point, so inflation most inflation is around mid single digits. And I would just say, you know, from from our perspective, therefore, you know, obviously, we are pricing for that. We we we are price adequate in in in the the motor portfolio. And you you have you have to layer on top of that the benefit I talked earlier about the supply chain, the models, the and the the, you the scale of the portfolio, which will allow us to drive, I would say, better prices out of our supply chain than perhaps others can, which will which sort of mitigate some of that inflationary impact. So we feel very confident about that. So I think that might be the end of the questions. I mean, that has been a whole hour for a trading update, which is fabulous.

59:40 Thank you all so much. You know, I'm sure there'll be questions you wanna follow-up with the team. Please do. We take onboard the feedback about the IRRs, and we'll we'll we'll we'll have a look at that. But, you know, it is only a trading statement, as we always say. But it's been it's been very good to to answer your questions to get a feeling of what, you know, what you're, you know, what you're thinking about. So thank you very much indeed, and we look forward to seeing you soon. Thank you.