Standard Life (LSE:SDLF) — HY26 Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the STANDARD LIFE PLC investor presentation. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish your responses where it's appropriate to do so on the Investor Meet company platform.

0:26 Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. We will now begin the presentation and move to live q and a at the end. Thank you. Good morning, everyone, and welcome to STANDARD LIFE's twenty twenty six half year results. Today, I'll begin with an update on how our delivery is building momentum across our strategic priorities. Nick 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 three year strategy, and I'm delighted with the progress we've made since 2024. First, The UK 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.

1:26 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 twenty twenty six targets with 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 £2,000,000,000 Aegon UK acquisition and the recently announced £2,000,000,000 UK 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 UK's leading retirement savings and income business, a retirement champion, helping customers achieve better outcomes and greater financial security.

2:17 And 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 £1,100,000,000 operating profit target in 2026, having delivered another period of strong operational performance.

3:09 And we continue to grow our dividend, bringing total dividend payments to 1,400,000,000 across this phase of our strategy. In 2024, we set a highly ambitious three year strategy underpinned by three 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 UK acquisition and our UK 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 DC default solution designed to improve customer outcomes by opening up access to high quality private assets.

4:02 And we're increasing the allocation of the 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 £12,000,000,000

4:30 Under Enhance, we delivered £210,000,000 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 UK market has never been this exciting. And better still, in this rapidly growing market, we're the only scale UK player solely focused on the full savings and retirement life cycle, with strong existing market positions in workplace, retail and annuities.

5:22 This slide will be familiar as we've used it before, but we've now added our pro form a market positions to reflect Aegon UK and our new PRT partnership, both of which significantly strengthen those market positions. Specifically in workplace and retail, we moved to having number two positions in both markets. And annuities, we moved to a top three 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.

6:13 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 three, as demonstrated across a collection of key customer metrics. We've seen our Net Promoter Score increase four points this year to 64. We've maintained an exceptionally high level of client retention at 99.8%, which demonstrates how happy our customers are with us. We secured GBP 6,200,000,000 of new scheme wins in the first half, including the largest ever for Standard Life, which will support our flow trajectory into 2027.

7:06 Scheme wins are lumpy, but the £6,200,000,000 compares very favorably to the £1,500,000,000 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 into 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.

8:01 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 six 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.

8:50 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 three 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 in 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 7,000,000,000 And with huge client interest in our new partnership, it means that we expect an even stronger pipeline once it launches.

9:43 And with that, I'll hand you over to Nick, who will cover the financials in more detail. Nick?

9:55 Thank you, Andy, and good morning, everyone. I am pleased to be presenting today another strong set of results at the half year 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.

10:18 Starting my presentation with the usual financial headlines. Operating cash generation of €745,000,000 in the first half was in line with our mid single digit growth guidance, while total cash generation stood at €900,000,000 We have achieved the leverage ratio target at June 30, while ensuring that our solvency cover remained in the upper half of our operating range at 169%. IFRS operating profit was 25% higher at CHF $563,000,000, supported by asset growth and cost savings, which reached €210,000,000 on a cumulative run rate basis. Adjusted IFRS shareholders' equity was €2,700,000,000 benefiting from strong growth in operating profit that now covers recurring uses, offset by the negative hedge related market impacts.

11:17 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 two 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.

12:07 Backed by our leading propositions and brand, our pensions and savings business continues to grow assets, margin and profitability. Workplace saw gross inflows of €4,900,000,000 in the first half of twenty twenty six, including €800,000,000 from new schemes. A total of €6,200,000,000 of new scheme wins have, in fact, been secured this year, most of which are expected to incept in early twenty twenty seven, and we continue to see a healthy pipeline of new opportunities. Including excluding rather the contribution from new schemes, regular gross inflows were EUR 4,100,000,000 in the first half, highlighting once again the strong flywheel effect of this business.

12:59 Outflows reflect the higher asset base and the natural attrition from members taking their pensions. Turning to retail. Gross inflows are up 9% year on year at €3,600,000,000 benefiting from continued momentum in international bonds and the early fruits of our retention efforts. Gross outflows remained sizable at €7,300,000,000 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 €226,000,000,000 up 7% year to date.

13:49 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 EUR $217,000,000,000, which combined with an improved operating margin of 22 basis points, drove operating profit 36% higher to EUR $244,000,000, 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.

14:37 As I have previously stated, new volumes are not the primary driver of profits here. We run over €40,000,000,000 of annuity assets, and it is the management of this large book that drives our profitability. We have two 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 EUR 600,000,000, supported by a 14% growth in premium secured in the open market.

15:14 PRT premiums in the first half totaled EUR 1,600,000,000, with a further EUR 400,000,000 completed or at an exclusive stage since the end of June. Our stated aim is to deploy up to 200,000,000 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 UK PRT partnership with prominent global financial institutions.

16:05 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 in force book, combined with our scale, efficiency and expertise in delivering asset portfolio optimization actions, enabled us to sustain the annual spread based margin at two twenty two basis points, which apply to our growing average AUA of EUR 42,000,000,000, produced OCG of EUR $466,000,000, up 5% year on year.

16:50 I will now move to the group metrics, starting with operating cash generation. In line with our guidance, OCG increased 6% to EUR $745,000,000, reflecting both growth in the surplus emergence and higher recurring management actions, which contributed EUR $318,000,000 in the first half.

17:14 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 €500,000,000 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 and S grew by 23% to $2.00 €3,000,000 supported by underlying business growth. As covered earlier, the OCG from Retirement Solutions grew by 5% to €466,000,000 while that from with profits, Europe and other taken together produced €76,000,000

18:02 Turning next to the group solvency walk for the first half. After covering recurring uses, we generated €200,000,000 of net recurring capital, mostly in the form of own funds, which added five percentage points of solvency cover. Nonrecurring items netted to a small negative amount and included EUR 100,000,000 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 €500,000,000 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.

18:56 Turning next to leverage. Our ratio improved to 29%, reflecting the €500,000,000 debt redemption outlined in the previous slide. We have achieved our 30% target in the first half of twenty twenty six, while remaining in the upper half of our solvency operating range. Since the end of June, we have issued a EUR $350,000,000 RT1 debt instrument to fund a portion of the cash consideration for the Aegon UK acquisition and a further €300,000,000 debt raise will be undertaken ahead of completion.

19:32 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.

19:51 Turning next to cost savings, where we remain on track to achieve our €250,000,000 target net of inflation by the end of this year. On a run rate basis, we have achieved €210,000,000 of savings up to the end of June twenty twenty six. Savings on an earned basis in the first half of twenty twenty six were CHF 95,000,000, which was some CHF 55,000,000 higher year on year, with broadly two thirds of this uplift reported through earnings and the remaining one third accounted through the CSM. The chart on the left depicts the delivery timing of the EUR $250,000,000 cost savings, with the final EUR 40,000,000 component expected in the second half of twenty twenty six.

20:41 On the right, the pie chart shows where the cost savings have come from, highlighting how we have structurally reduced the ongoing 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 EUR $563,000,000. Profits from pensions and savings grew by 36% to EUR $244,000,000, while those from retirement solutions increased by 13% to EUR €324,000,000 With the pensions and savings earnings growth outpacing that from Retirement Solutions, we continued to improve the capital light mix of our profits.

21:40 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 EUR 1,100,000,000 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 users, in line with what we said would happen in 2026. Non operating items include the planned investment spend to deliver our strategic priorities and €25,000,000 of expenditure relating to the strategic transactions announced in the first half.

22:30 Adverse economic variances of €473,000,000 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.

23:17 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 two key stores of future value. These are the insurance contract CSM and the investment contracts value in force, which grew by EUR 100,000,000 and EUR 600,000,000, respectively, year to date before tax, with EUR 500,000,000 of the combined increase coming from market effects.

23:46 These future stores of value are now over €10,000,000,000 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 €229,000,000 and we expect this to be 500,000,000 at the full year, the level required to cover the 2026 debt redemptions from in year capital flow.

24:41 Also in 2026, we have announced two strategic transactions, namely the acquisition of Aegon UK, which is expected to enhance recurring excess cash from year one and the new UK 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, Nick.

25:27 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 UK'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.

26:15 Through both our £2,000,000,000 acquisition of Aegon UK and the up to £2,000,000,000 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 UK 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.

27:03 First, it gives us increased scale. Standard Life will become the largest retirement savings and income business in The UK. 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 800,000,000 of net synergies and increase our excess cash by £400,000,000 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.

27:49 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 UK 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 UK 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's strengths lie more with corporate advisers focused on small to midsized workplace clients.

28:44 In retail, Aegon'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, strengthen 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 £2,000,000,000 partnership. This is, first and foremost, about helping more customers achieve greater financial security in retirement.

29:34 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 £2,000,000,000 Schemes at this upper end of the market represent over half of the £1,100,000,000,000 of UK scheme assets, the majority of which are expected to be derisked over the next decade. And customers here are currently only served by three 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. Largest 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.

30:31 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 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 that 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.

31:16 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 outlined 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 £32,000,000,000 worth of transactions.

32:08 We allocate around £200,000,000 per annum of capital to this business, which generates around £6,000,000,000 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 and AD.

32:56 This investment reflects their confidence in both The UK PRT market and the strength of the proposition being created through this partnership. The potential is for 5,000,000,000 to $7,000,000,000 per annum of incremental business from the partnership. And of the £2,000,000,000 total over five years, Standard Life expects to fund its 500,000,000 capital contribution from yearly excess cash generation. So two 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.

33:50 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. And the additional annuities capacity from our PRT partnership on top of STANDARD LIFE's existing business moves us to being a top three 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 one third of 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.

34:38 Overall, we'll be The UK's largest retirement savings and income player with £05,000,000,000,000 of assets. To give a sense of scale, the number two player is around £300,000,000,000 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.

35:27 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 UK and our UK PRT partnership. Post-twenty twenty six, 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.

36:19 In summary, I'm really confident and excited for what is to come from Standard Life. So with that, let's move to questions. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand of your screen. But just while the company take a few moments to review those questions that have been submitted already, just like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can all be accessed via your investor dashboard. Rosie, at this stage, if I may hand over to you to chair the q and a with the team. And if I pick up from you at the end, that'd be great. Thank you. Thank you very much, Jake. So first question, what is the impact of rising interest rates and GILTI yields? Is this a positive or negative for the company?

37:05 Say that, mate. 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 to pay dividends is immunized. From a consumer perspective, the higher interest rates are good for annuities. For those that want to take... Opt for a... Annuitizing their retirement pots, it's it's good news for consumers. You've demonstrated strong progress in workplace and annuities, but are still seeing strong outflows in retail.

37:56 What's your strategy to address these outflows? So so, obviously, if you go back when I when I started in 2020, so nearly seven years ago, we were much more of a closed book consolidation at that point in time. And and we've taken... There there are three big market opportunities in The UK. They're growing strongly. Workplace pensions, which is generally younger age customers saving up towards retirement. What we call retail, which is 50 to 70 year olds wanting help to together different pension pots and develop a plan to roll over to retirement income. And then annuities is more focused on the 70 year olds, and that's dominated by pension risk transfer business. So our our approach was to focus first on pension risk transfer business and then on workplace just because those are basically corporate transactions.

38:48 So we only had to get to a small number of professional buyers in order to persuade them. And and and both those businesses have turned around very strongly and are growing growing very strongly. It's only really now we're turning our attention fully to the retail side. But what... What's interesting in The UK 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, one in four adults in The UK are customers of that enlarged standard life group. And it really is all about building out the ability to proactively engage with customers and and and support them on that journey to into retirement, and and we're we're now focused on on the investment to do that.

39:42 One for Nick here. Pension and savings operating profit margin increased from 18 basis points to 20 basis points. How much further can margins realistically improve? And what's the sustainable long term level? Thank you for that question. 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 $250,000,000 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.

40:29 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 the margin will be... The overall profit margin will be... Will will move effectively with with business mix. Some segments within our business have lower revenue fee margins than others. And as as the various segments grow faster than others, then there'll 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 Avon UK.

41:23 That's a that has different profit characteristics at this stage. The average margin is 11 basis points. We're targeting a 110,000,000 savings, which should push that margin up to 18 basis points, so very attractive, being a little lower than than that for standard life, standard load, it is 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 LNG or Aviva that operate around the seven, eight basis points mark. So more headroom as as as savings... As cost savings, be it the completion of a program or the 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 and policies?

42:12 What percentage is done, and where do you expect to be at year end? So it's a great great question. Thank you. So we're basically working through through that on an ongoing basis, and and this is, you know, 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 the 75% level. Since our our results back in March, we we haven't had a a further migration going. The next one is actually in the fourth quarter this year, so in November. And then the the next one after that is in May of next year. And at that point, we we would be up into the 90% done at at at that stage.

43:05 IFRS shareholders' equity was negative in the first half. You've said you can you declared a dividend. How is that possible? And how are your discussions with the regulator around this negative IFRS shareholder equity? So the... Being overall negative, it was was something that that wasn't a surprise for us given the market movements in the in the in the first half of the year on top of market movements in in previous years. It's the outworking of our hedging strategy, which is designed to 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.

43:59 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 recurring uses, which on a cash basis, we're very comfortably covered, producing an excess of 500,000,000 a year, either to use to reduce leverage. And on IFRS earnings as committed, we've now put the business on basis where the operating profit covers our recurring uses, which is what we said would happen in 2026. And finally, it's determined by the legal entity distributable reserves, you know, in other words, the underlying statutory accounts of Standard Life PLC at the the top co, indeed, the statutory accounts of our U. GAAP basis and continue to show very healthy level of profits and distributable reserves.

45:05 So as we've said previously, the group IFRS shareholders' equity doesn't does not... Whether it's marginally positive, non negative, has no bearing on the way we think strategically about the business and and has no bearing on our ability to to pay a dividend, which is why we've declared a dividend notwithstanding. And just the point about the the regulator. So so the regulator's focus is is very much on the solvency balance sheet because that's the economic balance sheet that that, you know, determines the economic health and well-being of the business. So so the the the regulators don't tend to focus on the IFRS balance sheet. It's interesting. And I read earlier today, this is sort of the press that the government is cons... Is consulting on whether they they they should determine dividend payouts only by reference to solvency balance sheets from from here on.

46:04 The Aegon UK acquisition is very exciting and takes the company into new segments. What do you see as the major challenges and risks with this transaction? So I I would completely agree. It... It's very exciting. And it... What... What's, you know, attractive, it gives us real scale as as I've said in the pre prepared presentation that that that you saw earlier. It takes us to 500,000,000,000 of assets, the number two players around 300,000,000,000. So it gives us real real scale advantage. But but in particular, it's very complementary in terms of the capabilities. So the areas where standard life strong, the area where you got a strong, a very complementary and and and fit well together. I mean, I I would say that the the the... I mean, the the single biggest risk here is is that we have so many different opportunities ahead of us as an organization. It's a very, very fortunate position to be in.

46:56 With the excess cash we're generating, we can inform inform to invest invest into the business as well. And it's been really quite disciplined about choosing the most important priorities, sequencing the order we do things in, making sure we we have great people and talent, but making sure we retain that talent and continue to build and grow the talent and capability in in in in the organization going going forward. And because we are in a very fortunate position with lots of opportunities. So so I would say that that's the element that I'm I'm most most most focused on, you know, really ruthless prioritization and sequencing and getting the very best talent. You talked to the pension risk transfer market having competitive pricing, but at the same time have launched a new PRT partnership.

47:45 Is this sensible given the current market backdrop? Yeah. Very much so in our view. So so maybe, first of all, let me touch on the the market backdrop. So last year, the government was consulting on whether corporates with a defined benefit scheme could get a return of the surplus in that scheme from an ongoing scheme that's that's carrying on running. And that led to a number of corporates putting a foot on the ball and stopping and seeing how's that all gonna play out. Our our observation of how it's playing through is, firstly, if you are the trustees of that defined benefit scheme, the gold standard remains to a... Doing a buy in or buy out with an insurer. That's the way you get the the best possible security of of of the benefits that that you're responsible for for your for your members. Equally, if you're the corporate, what we're seeing emerge is corporates, including that the best way for them to get a return of surplus is is by doing a buy in or buy out and extinguishing their liability because then what is left it it... That they're they're able to to get access to. So we're seeing the pipelines in the market increase, and our view is as as the inquiries in the market increase, that then that competitor...

49:02 That that sort of the real competitiveness we've seen will will will ease back to a more more normalized level. And the the the reason why the the partnership is really attractive is is that we're very keen at STANDARD LIFE to keep up our overall diversified balance sheet. We want to keep a balance of workplace retail and and annuities as our sort of three three main lines of business. And so the way we've done that is we've just focused on PRT transactions up to about 2,000,000,000 in size, and over half the market is PRT transactions above 2,000,000,000 in size. So STANDARD LIFE PLC solutions is very much focused on that larger end of the market. We only contribute 25% of the capital. The capital partners contribute the other 75%.

49:48 We will get a a fee based revenue stream for running it because it'll be standard life as a as a business in the market that will be presented to customers, and we will run that on behalf of of of the partners. And and and then the other key benefit is that that the three of the capital partners all all have really excellent private credit origination capabilities, and that's one of the most important competitive factors in in a competitive market situation is is what yield can you get on the on the private credit. Now we will still make all of those private credit decisions. It will all be investment grade. We'll be very judicious and thoughtful and careful as to what we're doing, but We'll have access to a much broader range of of private credit across the whole of our annuity business as a result.

50:35 And just sticking sticking with the partnership, perhaps one one for Nick here. How much incremental profit or cash will Standard Life get from each one pound of its own capital committed to the PRT partnership? Yeah. We... Great questions. We we haven't disclosed that. Clearly, we have a an objective to continue to grow our operating cash generation by mid single digit over the long term. So we we see this together with a a host of other initiatives as underpinning our confidence and our ability to execute to that. Of course, it's not a a spot amount. It's a it's guidance. It's a range. And and if you like, because it is a long term objective that we have or a long term target, this is us, if you like, laying laying the the tracks or our ability to to deliver to that commitment for a long time to come.

51:39 Could you share with us an outline of your AI strategy, including, in particular, the deployment of agentic AI customer facing packages? Do you have a time frame for rollout? And are you confident of always maintaining human insight at all critical decision taking? So so, again, very very good question. So so the first thing I'd say is I think it's really important when you come to think about any technology, including AI, which is a a very powerful new technology, obviously, to be really clear on your business strategy first and foremost, and then to think about how the technology and AI can help you execute on that on that business strategy. So we the... Our approach here is is is basically threefold.

52:25 The the first is is is getting the right AI tools, capabilities, upscaling the the workforce, getting lots of use cases up and running and and going across the organization. We rolled out m three six five Copilot this year. The the consultancy that helped supported us doing that said that that it was the fastest and sort of highest take up rates, if you like, rollout they'd seen anywhere. So we're we're really pleased with the the progress we've we've we've we've we've made there. And on the back of that, we've always got lots of local use cases. We're we're now starting to think against that sort of strategic backdrop of where we're trying to go. What what... You know, how how can we really leverage AI as part of it? So I'll I'll give you an example of this. So we're we're putting AWS Connect, a new customer contact system in in in place as we speak at the moment.

53:23 And we're basically using AI in in three different ways as we do that. The first is we're looking through our customer database, customer three sixty, and identifying those customers at at most risk from a retention perspective going back to the retail flow question we had earlier. And so we're we're... Which customers we we particularly wanna target in terms of engaging them from a retention perspective. And second example of AI in this is when a call handler is on the on the phone with a a customer. Well, you know, the the, you know, call handlers are very capable and do a great job, and and they will think through what is the next best action that they could recommend to that customer.

54:09 They're kind of doing it just real real time. So AI is now prompting those call handlers. We suggest... In this case, you suggest this, this, or this, or you explore that, that, and that. And and and, obviously, that's happening in a much more systemic way through through the technology than call handlers just making that decision themselves. I mean, I I personally spend quite a bit of time customer call listing. It's a great way to keep in touch with what customers are are saying to us, what experience they're getting. And and when I call this in with with the call handlers, at the end of a call, they'll typically spend ten to twenty minutes doing a wrap up of the call, follow-up actions, capturing on the CRM, the customer... The the customer relationship management database.

54:54 And AI is basically doing all of that or preparing it all, and then the call handle just look over it and and and check check that all all all makes sense. And then to the the the the part of your question about whether there'll always be a a human involvement. So so as you can see in that ex ex... Those examples, in all of those, there's still a human involvement. So I... Yeah. I I I think we're a way off, you know, letting AI just get on with customer engagement. And in fairness, I don't think customers would like that either. They're happy for AI to be involved in the engagement, but when it comes to make a decision on their retirement, they they want to talk to someone. And then the final area we're focused on is just really building the capability and building the the the skills. And so in bringing Angela Burn on board as CEO of our pensions and savings business at the start of this year, she's got an excellent track record of of of deploying AI and technology for customers very successfully.

55:56 And then we've actually created a a new role, chief digital technology officer, and hired someone called Wendy Redshaw. Again, a very experienced AI native CIO, digital data character who who will join us later this year. So so building the capability as well. What would you like the government to be focused on, and what's your expectations for the upcoming budget? So there are three things we think are really important from governments to support our customers getting a better income in retirement, which is the whole purpose of our our business. The first is pension adequacy. So at the moment in The UK, only one in seven people are saving enough for a decent retirement because the auto enrollment contribution rates at 8% aren't sufficient for a decent retirement.

56:46 And so the first point is a review of that, and that's in trade. The government sets up an independent pension commission. It didn't need to report in the summer, which said, you know, people just aren't saving anything like enough, and and it will come up with its recommendations in in in January. The the the second is only 10% of the population get advice as they journey to and through retirement as I referred to earlier. And therefore, the introduction of a a new regime called targeted support, which is is basically a a soft recommendation. People like you tend to do this. We think it's a great opportunity to get more and more people more help as they journey to and through retirement. So we'll be launching our first target support proposition in the in the... Towards the end of this year.

57:31 And then the third is is that we think there's an opportunity for customers to get better returns if they had a higher allocation to private assets. And, again, there's a whole number of areas of government policy focused on on on that, including legislation that if you're... As a provider of workplace pensions, if if your your your, you know, assets as a provider aren't above 25,000,000,000 by 2030, you can no longer trade. Driving a concentration down to a smaller number of bigger players, which then means you have the expertise, but also the the the breadth of assets to get a very good diversified range of private assets as as part of customers' overall overall portfolios.

58:19 So those are the things we're we're we're lobbying for. In terms of the budget, what we basically want is is, you know, consistent direction of travel on those three areas and and nothing else. What worries us most is is the idea of tinkering around or the speculation about changes in pensions every year. We we think that's quite detrimental for consumers because, ultimately, aren't saving enough, and then my concern would be they won't save if they think the goalposts are gonna move between the point of saving and the point they then come to to take that income. So we we think pensions sort of strategy should be set on a long term basis, not be the subject of speculation in each annual budget cycle. You talked to generating £500,000,000 of excess cash per annum.

59:06 How will you look to utilize that going forward now you have reached your 30% leverage target? Could you increase your dividend growth? Or will capital be needed to fund the growth you are trying to achieve? Right. So we we what we won't be doing is using using using it to reduce debt further. We're comfortable with the 30% leverage ratio that we have achieved. I think it's the appropriate level for an... For our organization in the way we think about the the capital... Cost of the capital that we're deploying, the returns we're securing on it, producing plenty of cash to cover the interest. And it supports the the rating that we we want to secure from from Fitch, our rating agency, the rating agency that we use.

59:59 Look, from here on, it's... And we will provide further guidance of... On our thinking around that at a capital markets event that is scheduled for the November 30. We will be extremely value centric in our approach of how we deploy that. We will seek to deploy it in opportunities that increase the intrinsic value of our business. And, yeah, at 500 or so million, you know, there's headroom to to do several things, but more more about that later this year. And just lastly, on that capital markets update aside from the uses of excess cash, what can we expect to hear about at that event? So the the... We're we're obviously on a three year strategy with with targets associated for '24 or three to twenty twenty six. And so that comes to the end of the end of this year.

1:00:55 And therefore, we felt it was appropriate to update the market. I mean, the the timing isn't necessarily imperfect because, obviously, we won't have completed the Avon transaction until the turn of the year. And so, you know, in reality, we'll be able to give you more color around that aspect of things post completion. We're pretty confident in in, you know, from the due diligence we've done, but all my experience in doing m and a is you do learn a bit more when you actually have the keys than than than than you knew prior to getting the keys. So so in the context of that, the overall vision and strategic direction for the business won't be changing. It's it's the right strategic direction. Expect we will evolve our strategic priorities a bit. So for example, we had a a priority called Optimize before, which included getting the leverage down to 30%. But now we've done that. We could... Can evolve on from from that one as an example.

1:01:46 We'll be looking to give financial guidance going forward, having got to the end of the the... This three year set of targets. But but don't necessarily expect to be another set of three year targets. We're still thinking through what what our financial guidance might look like. And then as Nick was just covering, we... We'll also touch on the... How we expect to use the excess cash in in 2027. Great. That's the end of our q and a session. Can I hand back to you, Andy, just for some closing remarks, please? Thanks very much, Rosie. Well, look, thank you all very much indeed for taking the time to to join us today. Thank you for for those of you, imagine most of you are are shareholders in Standard Life. So thank you very much indeed for for your your support. I I hope you are pleased with the consistent, reliable dividends that that that we pay and a decent bit of capital appreciation over the last eighteen months as well.

1:02:37 But but rest assured that as a management team, we we feel we've only just been beginning on the the exciting journey ahead. Our market is is huge. It's growing strongly. You know, we are uniquely well placed as as the number one player to to help more and more customers on that journey to and through retirement and and, hence, continue continue generating attractive returns for shareholders as we do that. So thanks so much indeed for your time, and we'll catch up again soon. Thank you. Perfect, guys. That's great. If I may just jump back in there. And, Andy, Nick, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback? On behalf of the management team of Standard Life PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.