Good morning. Thank you for joining us for this results briefing. As you will have seen, the Board has announced today our intention to demerge M&G Prudential, our UK and European business, from the Group. We’ve been clear for some time about the importance of creating optionality within our corporate structure. After a rigorous review, we’ve now decided to exercise one of those options in the interest of both businesses and of all our stakeholders. As a standalone business, M&G Prudential has strong capabilities in the growing savings and wealth management marketplace. It will be focused on outperforming its UK and European competitors and will no longer compete internally with our businesses in Asia and the U.S. Following the demerger, Prudential plc will focus on the opportunities we have in the two largest insurance markets in the world, meeting the needs of the fast-growing middleclass Asian community and Americans approaching retirement. We’re also enthusiastic about the progress we’re making in Africa. The two independent groups will be headquartered in London, which we regard as the preeminent city from which to operate global financial service businesses. We would expect both to be members of the FTSE 100. The Board believes this demerger is in the best long-term interest of all our stakeholders. Customers will receive greater focus, employees will be more closely aligned with our businesses, and we are confident that this demerger will create market value. Today, strong full-year results demonstrate the positive momentum across all our businesses. With that, I’ll hand over to Mike, who will talk you through our results and provide some insight into the proposed demerger. Thank you.

Thank you, Chairman. Well, good morning, everybody. You had a slightly quieter morning than I’ve had. It’s been an interesting set o results to try and prepare a summary for you today. I think, one of the comments that a number of you’ve said early is there’s an awful lot in this pack. And there is couple of take ways. We’re going to do our best to get through that. As always will stay and answer any questions you have on the variety of topics and metrics and things that reported in this. I want to start, if I may, at the top. If you look at the scale of what was done last year, so, another incredibly strong record year of earnings. The combination of M&G improved successfully. Some of the businesses, we’ve increased stakes and decreased stakes hold in, all of the various dynamics. I said to a number of you when I first took this role that one of the things people under estimate about this Group is its bandwidth, its capability. And I hope one of the things you will take away from the just sheer amount of materials that’s in here and completed projects and work streams in here is the folks in these front couple of rose, even back at third row is are capable of producing a tremendous amount for you as shareholders, and I certainly owe them my thanks. So, another strong set of broad good financials. Let’s start on, if we could. Actually I will take this, all the key metrics, so, new business profits, cash, embedded value, earnings, dividend, capital. Embedded in that is a focus on quality of earnings, health and protection focus, Asia. You have IFRS up 15 in Asia; health and protection up 26; the U.S. increased…

Thank you, Mike, and good afternoon to you all. It is understandable of course that our strategic announcement today has drawn most of the interest but hopefully not to the complete exclusion of our financial performance in 2017. This set of results adds another period in the long-established trend of growth in scale and in quality. This really underlines that we begin the M&G Prudential demerger process from a position of strength, right across all our businesses. With this in mind, I will cover three main areas: First, an overview of the key financial highlights; second, a more detailed look at each of our major metrics and the drivers of the performance in the year; and third, I’ll provide some financial commentary on our plans to demerge M&G Prudential. So, starting with the overview of the Group’s financial performance for 2017. We have delivered good financial progress with increases across our main profit metrics alongside higher levels of cash remittances and 8% growth in the ordinary dividend. Our performance has been led by continued positive momentum in Asia, although all of our businesses have made healthy contributions with asset management in particular having a standout year. Turning to our key operating metrics. IFRS operating profit increased by 6% to £4.699 billion, new business profit was 12% higher at £3.616 billion, and free surplus generation at £3.64 billion on a headline basis and was up by 9% on a underlying basis before variances. Throughout the year, we have continued to enhance the mix of our businesses by growing fastest in the products, geographies and channels that offer attractive and sustainable returns through efficient allocation of capital. This continues and established progression that speaks to the absolute and the relative strength of our products and distribution platforms in our chosen market segments…

Thank you, Mark. So, in summary, again, strong growth in Asia, the balance of the business, the U.S. continues to deliver and probably the UK, strong performance underlying the rationale for creating a simpler, more-focused strategy there, and again, adapting the structure to maximize the opportunities for all of our businesses. So, what I’d like to do, if we could, is invite my colleagues up to join me for the Q&A. And then, we will address any individual concerns you have, questions you have in just a moment.

This is Jon Hocking, Morgan Stanley. Thank you. I’ve got three questions, please. Firstly, thinking about the go forward pre-plc business, so U.S., Africa and Asia. How should we think about binding constraints on capital for that business? I assume, you’re going to be trying to get out of the Solvency II framework, but I guess the advantage of Solvency II did have the Asian business, which you can get diversification benefit, you could zip up some of the best [ph] in the health and protection business. So, I guess, I am asking how do you harvest the diversification benefits across the go forward growth business is the first question. The second question, just looking at Jackson’s capital. There was a lot of moving parts I guess in that business and that market at the moment. The sort of 400% or so number you’ve got on the headline basis, you got a few things that come through, you mentioned C1 changes. I guess, we still haven’t seen the impact of the new VA framework. So, can you give some color please in terms of where you think the RBC ratio will settle down from the market? And then, what impact there is on the ability of Jackson to remit capital back up the group going forward? And then, the final question just on China, interesting to see your views on what’s happening in China. There’s obviously a lot of moving parts at the moment with the merger or the regulators et cetera. The regulatory environment seems to be quite fluid. Can you talk a little bit about how you see your business evolving and how well-positioned you are?

I think, we’ll divide these up. So, binding constraint and capital, Mark, why don’t I start and you finish. We’ve always said that in the -- outside of the UK, the binding constraint is the local capital regimes. It’s not a -- if you think of dividend, fundability of capital, that’s the driver. And where the other jurisdictions recognize Solvency II, their primacy is they are on regulatory regime and how we treat it. The other thing that should be -- I want to remind is, we don’t run any of the businesses to regulatory minimal capital. There isn’t a jurisdiction we do business in that they don’t look to us to maintain what is almost the AA level, if you were going to a put a rating agency mark on it. But, if you want to have long term relationships in these markets with the regulators, they’re much more holistic, much less resolution recovery focused than you see in western markets, particularly -- obviously in Asia. So, they want to see reinvestment in community, they want to see how we treat clients, they want to see our charitable activities, and they want to see a well-capitalized foreign entity again competing with domestics in every market. So, we probably could bring some of them down closer to regulatory. But, if you want a long term -- if you want a 90-year position in the market, they have to see you as committed and not as a foreign player that comes in and strips as much as they can at every year. So, there is a lot of reasons to maintain well capitalized firms on the local basis. And then, those roll up to Solvency II. We never set, as we’ve discussed and debated early on, our dividend policy of Solvency…

The obvious point is that we’re going to continue to be subject to Solvency II until the point of demerger. So, we will continue to run the business and be very focused on that. And then, over the course of that period, as we discuss with regulators in terms of what new capital position the capital model will be, we’ll then be in a position to communicate that for you.

Barry, on Jackson’s capital?

Yes. You’re right, Jon. There are a lot of moving parts. I mean, the principal impact that we had this past year was tax reform. So, that and I think you called that out Mark in your comments, so that’s over $600 million impact on free surplus generation. That’s a onetime hit. So, I would say to you broadly as the risk of being too forward-looking, I would say, you probably should be optimistic about Jackson’s ability to continue to generate cash.

Chad, did you want to comment on future direction of NAIC and some of their work?

I would say, there is a couple of things we know that are coming down the road. We don’t know yet as to timing or the magnitudes, we do have the NAIC. They will presumably react with respect to the denominator portion of RBC. We don’t know yet what the magnitude of that will be or the timing. They have not actually formed the group yet to do anything about that. They already have an ongoing process with respect to the C1 factors that’s expected to come in, in 2019, our hope would be, and we will have this conversation with them and when they have the appropriate folks in place. We think those two are best to put together because there are interactions between their view on long-term default rates and taxation and recoveries to come through there. So, hopefully that would be come together; if it does, that would be better, that would be in 2019 as it came together, you have the potential for 2018 denominator 2019 C1 factor and we think 2020 Oliver Wyman. So, there is things -- or NAIC Oliver Wyman project. So, there are things coming down the pipe that will presumably -- we don’t know the numbers but will presumably put downward pressure on the RBC ratio. That said, I think everything we’ve seen suggests that we’re generating capital, we don’t have anything at this point that would imply that we don’t -- can continue to support dividends the way -- at the level we’ve been remitting. I hope that answers the question.

And Nic, on China?

Okay. So, on regulatory development, yes, we’ve seen the creation of a new regulatory body to regulate, both insurance and banking. I mean, look, we see this as outworking of the decree, if you like, at the October Party Congress, which set that activity objective for the industry to return to its core. In other words, go back to its derisking purpose, play a role in the financial development of the economy, a source of financial stability and in time, improve the provision of health services and also care for the elderly. So, I think it’s step one. I think, the other reason why this was come together is to ultimately implement the liberalization of the sector as well, in order the regulators need to build up their regulatory capacity in order to regulate the sector that potentially more than 49% can be owned by foreign companies. So, this is pretty much in line with the direction that was set back in October. We don’t think it will impact our business in the short or medium-term. If anything, kind of stronger regulation is good for businesses such as our own. Now, should I give a business update on China more broadly and the opportunity? So, again, with the benefit, I guess of spending more time there since I addressed you at the investor conference, I’m kind of even more excited about the prospects in that market, both on the life and asset management side, and our ability actually to harvest those prospects. So, now, you’ve heard me talk about the opportunity, I can put some more numbers on that now. China is now the third, officially the third largest market in insurance in terms of premium income, it’s got to be kind of US$500 billion levels. If you look at…

We’re ordering Chinese food for lunch here in a minute.

35% of all financial services customers will use digital means to transact. And the payments that are made using digital platforms in China, 50 times the level that you see in the U.S. So, unless you are kind of highly automated and digitized in this market. And this business is pretty much leading the way within our portfolio, very excited about our prospects. Thank you for your question.

Okay. What other number you did leave out? [Indiscernible] actually rated the business number, which is no small feat.

It’s Blair Stewart from BAML. I’ve got three questions on China. Only joking. I do have three questions, though. The number, is the demerger contingent on completion of future UK annuity deals. You’ve still got two-thirds of the book. And have you got the bandwidth to deal with multiple processes? And secondly, if those annuity -- future annuity transactions do take place, anything like the one you’ve just announced, would that imply the excess capital would build up in the UK business? And if so, what would be the plan? Maybe too early to talk about that. B but the main point is, would there be excess capital emerging in the UK but just if those annuity books were to go as well? And thirdly, just a quick one on the U.S. RBC. Chad? can you remind us of the organic rate of build and RBC points, given that you’ve just seen a significant drop? What’s the organic rate of build, let’s say before paying any dividends to the Group?

So, on the demerger, no, it is not contingent on any future management actions. It is to Mark’s point though, we need the cooperative debt markets as probably -- if he said what’s the variable and we need a court system to approve a Part VII. Those two are outside of our control. But, we’re confident on the debt side and we are we were reassured I would say on the Part VII, I don’t think there is any obvious barriers given the process and the regulatory support. Jon, do you want excess capital?

So, well, on the question of will we do more, we’ll keep that option alive but we have nothing on the table right now. It is a big deal and we only closed at 2’O clock in the morning. And that’s why David’s snoring away at the back there. But, it’s the biggest -- it’s been done, and I’m very proud of the team for doing it. In terms of capital, well, we have to remit our capital to Group. So, they’ll tell us what to do with it. But, we take the annuity book like the rest of our business. We will evaluate it, what’s best for shareholders, what’s best for our business in the longer-term and for the moment, there is no plans.

And Blair on bandwidth, I think, if there is one thing we demonstrated this year, it’s bandwidth. I think we tell the teams endlessly, it’s business as usual first, and all these projects are sort of nights and weekends. And I think we can -- if we chose to another tranche, we could. But it is a -- it would be more about optimizing the capital for the new entity. And then, if it’s excess, it’s excess. And we’d look at distributing as we always would. Chad, on RBC capital generation?

So, the underlying tends to be around on that basis, around a $1 billion is let’s say the underlying capital formulation that we typically would see. That said, we are in a position right now where stat reserves are floored out. So, we get a little bit of an asymmetric dynamic going right now in terms of no real offset for -- no economic offset going on in the stat reserves for the hedges that are coming through which has tended to drag, call it £300 million right now, run rate. So, the underlying run rate is closer to £1 billion, £1.1 billion, but there is a drag right now, because where the markets are. It’s actually a good problem to have but doesn’t look as good on the numbers.

[Question Inaudible]

So, $1 billion would be equivalent to about 100 in RBC points.

[Question Inaudible]

Yes, I’d say, it’s an equivalent number.

Oliver Steel, Deutsche Bank. I’m going to try again on the UK. Is the $1.1 billion release, or improvement in surplus an approximate figure that we can take for future tranches of $12 billion, if that happens? Secondly, within the Solvency ratio, the UK insurance business, how much debt is effectively injected down as presumably Tier 1 capital from the center? And then, the third question is on M&G’s capital position. What is M&G’s current capital requirement and how much capital has M&G got within the business?

Yes. So, no, Oliver, you wouldn’t be able to extrapolate capital release from book across the whole book, because what we would I think have loved to have done would have been to slice the book vertically and sew components of it. You can’t do that. We’ve broken the book into various cohorts, if you like. And they have been sold all to one counterparty, but they could have been sold in different blocks to different people and they will attract different prices. The thing is that it depends on the market as well at the time. So, if you look at where we’ve done this trade, it’s a different price to where other trades have been done. So, there are that combination of factors. So, I don’t think there is any ability to read across directly.

UK debt, Mark, do you want to take that?

So, in terms of the UK debt though, at this stage what we’re going to look to ensure is that each of the businesses are well-capitalized and well set up for success in the future. We will be able to share with you in the future and due course, more information about what that capital structure would look like. But at this stage, it’s too early to say.

[Question inaudible]

At the moment, no.

[Question inaudible]

Yes.

And then M&G capital, Anne, do you want to do that or Mark?

The number, I’m just not sure what we’ve actually said publically on the number before.

I don’t think -- it’s not a particularly material number at all, actually.

Not in the grand scheme of things.

So, that’s a no.

Good morning, everyone. Greig Paterson, KBW. Three questions. One is, if you look back over time, as I was discussing earlier on, the Asian bancassurance deals have been financed by the [indiscernible] group, top of the head, it’s £3 billion over the last five years, going forward, just through new deals, possible new deals. So, in terms of -- I was just thinking about free capital generation in Asia, including that item, what sort of number do you think we should be budgeting annually for that number? I have something like £300 million, £400 million per annum. I might be wrong. Intertwined with that question, are there any currently any contingent liabilities between Asia and any other parts of the Group because they used to be? Second question -- that was a two-part one. The second question is like Old Mutual heavily incentivized their management to do separation. I think cumulatively, this year got £9 million, something like that…

Can you show me that later?

Are you going to modify your ultimate schemes in any way before the separation?

Okay. So, let me go to a couple.

Last question.

That was three.

It was a two-part. Contingent financing in the U.S., I was just wondering what the -- contingent reserve funding, what capacity is there to do, how much extra capital can be released into the RBC ratio through further tranches of that?

Right. Let me do the first couple. So, we’ve never disclosed -- I think, the most of bank transactions have confi agreement around them. So, we’ve not gone through the specific numbers and we don’t give forward-looking capital creation statements. Although you can see from the metrics on here, our expectations on the back book and the percentage of recurring earnings, which I think gets you a lot a way to your question from the materials we have distributed. There is no management incentives tied to the structural changes in the Group. We will have to adjust LTIPs. We’ve extended out, say, in the duration that we go -- obviously, as awards go past the separation date, we’ll have to work with our Board and our M code to have those delivered those, arguably, probably the dual shares. But, there is no financial incentive for anybody sitting up here to do this outside of their normal responsibilities as stewards of the business. And then, you asked inter company, which I don’t think we’ve done yet. I think, that’s probably best way to come back with it, with all this at once for you. Anne too will look in the pro forma. So, I think that’s probably a fair look at it, but it’s not material.

[Inaudible]

Not much. [Inaudible] So, there is nothing else there in contingent financing.

Thanks. Arjan Van Veen, UBS. If I could ask two question, please. One, on the timing of the transaction and what some of the key hurdles you need to overcome to make it happen? And as cited before, with some of the key things, I suspect the main one is the Hong Kong transfer of ownership. And I think in your release I saw data around which is ending 2019. Actually, the Part VII transfer is within the UK. So, I wouldn’t necessarily think that is a showstopper, unless you want to move capital out of the UK. So, just maybe bit more color around where you really need the approval to make for instance some sense of timing? The second one was the just on the Hong Kong RBC quantitative impact study that came out recently. My understanding is, your portfolio would be quite benefited by the proposed changes, so if you can maybe talk a bit about that and how material it could be for you?

So, you are correct, the long work stream in the project is -- the transfer Hong Kong is actually -- we’ve discussed that with all our key stakeholders, and we don’t anticipate -- we’ve got a work through all of our granular details but we don’t anticipate any barriers. It’s a lot of work to get the regulatory models and all of the various stakeholders sign off on it. But, everyone’s aware of the transaction. We’re not surprising anyone with this. We’re not -- we’ve effectively pre-cleared the activity with all the key regulators. So, again, we are quite responsible for following your processes, but we think that’s a work stream, not approval issue. The Part VII is a UK issue. It is dependent on PRA bandwidth and court bandwidth. So, we don’t want to try and anticipate in front of you that we can manage. The PRA, we have a good relationship with; we know how that would go and they’ve been briefed all the way through this process and supportive. The court side, we know what’s best practice. We know what outside firms can -- it’s very hard, our General Counsel is here, at the right way to do that. But, we are getting into a different space. And I think we have to be conservative on our estimates there. But those are the two long ones. And then, again, on the regulatory front, we’ve got to get all the regulators on site briefed ready to go in their normal course of meetings. So, you probably have couple of meetings each. So, that’s got a good nine-month plus window to it too. So, that gets you to the timing. And then, on the financials, as I mentioned earlier, we anticipate we would go off of half year, or full year results. So, we have audited financials to base the materials off of. So, we are not incurring any unit cost to do that. We are trying to keep the frictional cost of this to a minimum. So, it’s a -- that would define timing as well when the next window would be. But, we will keep you briefed on those as they occur. We will keep the releases -- we will be very public on the work streams. But, it’s work dependent, not an ambition calendar wise. The other question…

The quiz in Hong Kong.

The quiz in Hong Kong. Thank you.

Well, it’s too early to draw any definitive conclusions. The quiz that was undertaken kind of was only partial. Not all the parameters were tested. For example, they didn’t test allowance for diversification; they didn’t include any risk margin. So, that is all to come in subsequent quizzes. And of course, their level of a liquidity premium that they included in the quiz may well -- or matching adjustment for one to another expression may well change. So, there will be another quiz in the course of 2018 and probably another one after that. We are looking at implementation in 2022, some time away to align with the potential introduction of IFRS 17. So, we got those two changes to look forward to. But, as to your point, whenever we move to a more risk-based regime in any parts of Asia, given the nature of what we do which is a regular premium with a very heavy health and protection content, then we see that providing tailwinds. We saw that in China as we moved to CRS [ph] with our Solvency level increasing from kind of 150, 160, 170, to the high 200s, to 90% at the end of 2017. So, too early to say, but directionally should be positive.

Hi. Andy Hughes, Macquarie. Three questions per company. So, first one is just to understand the debt structure because that seems to get more complex bit about what’s going on. So, if you issue placement securities in the UK, would you still get the grandfathering or would you just -- are you saying that any new debt raised in the UK would have to be Solvency II qualifying, and you’d lose the grandfathering to the switch? Second question on the holding company for the remaining business, particularly all the debt stays in the remaining plc business, which is no longer on the Solvency II. So, presumably any future debt you raise post the demerger will be senior debt. So, does that kind of mean as there is incentive for the sub debt holders to kind of switch and that’s one way in which you can get people to move from the plc into the UK business? And then, third question is on Malaysia. Obviously, there’s a need for planning by the end of June to sell down 30% of the Malaysian business, which I guess could be a £1 billion. And so, how much do you think it might be, and are the tax implications from that, just comment on the usage of that. And while we are on potential disposals, are you still fully committed to the two Indian businesses getting the valuation there? And the last question I had on the U.S.

Well, it’s six. Let’s call it six, okay?

Yes I just wondered if Jackson had to diversify its product mix through M&A as a result of the demerger process. So, whether you’re going to keep that as it is?

So, Mark, do you want to start with debt?

So, in terms of the first two debt questions, Andy, I’m not really in a position to say much more than what’s said in our release in terms of the debt, because we want to be able to have a conversation with everybody, we want to be able to have conversation with the market in terms of what we do, and how it is that we’re going to do. We haven’t had any conversation yet in terms of the regulators, in terms of what we might do around grandfathering, Solvency II components. So, I think we would look to have those conversations and be able to give you an update in due course around that. And therefore, and that would also be the answer to the question in terms of the future debt and the senior debt. I think, we’ll be able to give you a level of color about that in due course but at this stage just wanted to give you a sense of the fact that the underlying position is one of ensuring that both entities are going to be well-capitalized, strong, set up for success.

Nic, do you want to discuss the conversations with Bank Negara and Malaysia?

Okay. So, as you know, Prudential today enjoys kind of a 100% of the economics of our conventional business, even though kind of the law suggests that foreign ownership -- foreign entity ownership is limited to 70%. That’s not unusual. We’re not unique in doing that. So, our ability or otherwise to continue to operate on this basis is under discussion with the authorities. We don’t have an update for you at this point, but we hope to be able to update you shortly. I mean, I’ll go back to what Mike said. One of the things that is great about this Group is our ability to adapt to new situations. And whatever happens in relation to the level of ownership that we would have, we will remain very-focused on driving value for you, our shareholders.

Do you want to discus India as well?

India, I mean, we like India. I gave you lots of stats earlier for China. I could do the same, and I will. For India, you have sizeable population, 2.8% penetration. On the insurance side, it is predicted to increase to 3.9% by 2025. Protection gap of $8.5 trillion, 60% of healthcare costs paid out of pocket, and you have 1 billion out of the kind of 1.4 billion Indian not being covered from a health perspective, on the asset management side, retail fronts, I mean that’s even more nascent. It’s $350 billion. About 12 million kind of people in India owned retail asset management funds is 12% of GDP. This is both sides are likely to grow. And we have a good presence. In the life company, we have a player which has around 13% market share; it’s growing its sales; it grew its sales last year by 26%; it’s growing its market share; it’s well balanced by reference to both product sets and distribution; growing it’s distribution for us and doing more through the 4,000 or so ICICI branches. And on the asset management side, we have number one player there, again 13% market share, today managing of the order of I want to say around 17 billion sterling on an AUM on a 100% basis. So, very strong distribution platform. And there are many very highly performing funds. And the good thing about the asset management side is we can own 50% which is a great place to be. So, we like the country and the opportunities to do more are obvious.

And what I would add to that -- we’ve down there together earlier this year, 20-year anniversary for us there. When we talk about being active managers of the business, it’s not trying to time the share price on the public piece of the life; it’s the decision is more is that a market we want a an earnings and capability positioning over long haul. And if we do what structure can we own that in and then how good we are at managing that structure, and that’s more of the lens. So, last time I was there, I heard some of the multiples that people were doing around and asset managers, what it tells you is everyone is trying to get what we have, as someone is going to pay these quite impressive -- they are paying a fortune at this point in time for an entry point because they believe in the future. Now, do we believe it, do we have a same view? We actually have a -- we think as a Group, we think as a Board that India is a part of our future. So, the question is from an earnings point of view, from a capability point of view, for products distribution how do we want to do that, not do we think this is a best share price for the LifeCo or -- and again, there is restrictions in what we can and can’t to do there. It’s a -- the market favors a bit the domestics. So, it’s a balance. But, we like India. And I’d say if you are looking at it, we’re long.

It’s Andrew Crean speaking. I just got one question. You were talking about concluding or the Board concluding that the UK’s plc was not the logical owner of the UK business or wouldn’t be fairly soon. Can you go through the parts of that decision, and why the thinking would not apply also to the United States?

Yes. I think, again, it’s multidimensional. It’s not a single -- that was not the reason that we’re -- sole reason we’re divesting. If you look at it and say, go back to the other comment I made about what is the business unit getting from the Group, is there fair lens, what is the shape of our earnings going forward, what’s the for capital allocation to earning. I mean, all these lenses are applied. And the things we thought that had the most leverage, management focus, the alignment of the capital as you see moving Hong Kong and getting the quality capital, the quality up, the quantum down, therefore the return on capital metrics better and how does that look in the overall group, and how does it look in its relative market? It looks fantastic in its relative market. It still has to compete heavily with the other business units in return and it’s just a function where it is. It’s a more cash centric earnings, which is a good thing, given it’s the UK and the dividend demands of a listed entity here, and the market is more mature. So, the earnings characteristics of stability, currency, things, they have a different appeal. So, one of our views is as investors you may want to choose those characteristics, not just the absolute return on the earnings. That may be part of your decision. You want pound denominated, you want less impact from a political statement in Asia, whatever, or you are an emerging market portfolio manager and you want more emerging market earnings and the characteristics to come with that and the waiting in the UK diminishes that. So, all these things were part of the decision. The best part of the decision was there was nothing to…

Ravi Tanna from Goldman Sachs. And I have three questions, please. And the first one is on the Asian business and strategy there. I think, you alluded to some of it just now. But, I guess, there is a lot of competitors that you just referenced, both in the U.S., in Europe and also very large place in Asia who are looking to expand their scale in the Asian market. I’m looking for good quality franchises. So, can you talk to us a little bit about the thought processes around were one of those companies to approach how you would think about that as an eventual outcome, given the demerger that’s currently going on, please? And the second one is on the Pru, M&G Pru go forward strategy. I suppose one of the areas that the business is perhaps arguably subscale is on the distribution side and you don’t have retail investment platform where many of your wealth peers do. I was just wondering if you could comment about whether there is any ambitions to expand product or distribution capabilities, please? And the third one was just, not put the – belabor the debt questions, but maybe what would be quite hopeful I suppose as to understand the leverage capacity and so not context. I know you talked about 500 million write down to equity following the annuity sale, but could you just please remind us what the IFRS for this equity for the UK entity is, please?

So, the housekeeper sort of question. Again, without putting a number, we think the two businesses are worth -- we think in our markets, they are pretty large. And so, is there any greater risk of Pru plc being acquired with or without M&G Pru, a couple of firms that might be capable of doing it. I don’t think the additional value of M&G Pru in a model would have made that big a difference in their question. And the ones -- I think [indiscernible] known for doing hostiles. It is always incumbent on us as a management team to demonstrate we’re the best stewards of the business and that’s where we get up every day having to recognize. So, can we run it better than them? That is first cut. Are we getting returns that are competitive with anybody globally? Are we growing in a way produces quality results that are sustainable? All those things are the things that make you attractive, also would be the defense. At the end of the day, it would be the Board’s decision if someone came with an obscene amount of money for the business, then that’s something that the Board obviously has to consider. But, it is by no means -- you could back into the likelihood of it. I think we can -- I think these businesses are competitive and I think we hold our own with anybody globally. And when they have plenty of scale, so we don’t need to do any sort of other M&A with someone to get attributes that we don’t have now. One of the -- it was on one of the slides and I probably went by too fast, but just given the amount of information today, there is no -- the resources we need…

So, the go forward strategy, Ravi, thanks for the question, I feel a Nic type answer coming on because I think it’s a -- we’ve really got a big opportunity here. I mean, Mark, put up the slide earlier on about how we see the opportunity. The issue I think we have right now is twofold. First of all, we are spending a lot of money to build the right platform for our business. And that’s happening as we speak. And we are very confident about the outcomes there. The other thing I would point to you is that we have signed, recently signed this administration partnership with TCS that puts us in a fantastic position to do far more with a partner who is already digitally-enabled, easier to do than say. And the last thing is that we -- look at what’s happening. We’ve got 36% increase in Pru fund; we’ve got 17.3 billion of inflows into M&G. I mean, one of the issues we have is deployment of capital. Anne will give you an idea of what that looks like at the moment.

If you look at the level of capital that we have, I won’t give you precise number, but the assets that have been awarded and not yet funded or awarded or not yet invested, we’ve really got the largest capital Q that we’ve ever had. And if you just roll back a little bit to last 18 months or so, we’ve launched more than 20 different investment strategies and capabilities and funds of different -- all of which have net inflows, if you like. So, the range of capabilities and the distribution of those capabilities that we’ve already achieved and the flows that we’ve got there, it’s pretty comprehensive. So, I think there is a lot that we can do on the digital channel, as John has mentioned. But actually, first and foremost, have you got the capabilities in the marketplace that the market actually wants to buy. And that’s the marketplace across all of the channels, institutional wholesale across the Europe as we’ve seen as well is in the UK. And the evidence suggests that we probably do, if you look at infrastructure where we’ve been doing stuff, alternative credit, private assets as well as the go-anywhere bond funds and asset funds. I mean the range of what we have that the market is interested in is quite compelling. So, I there is a lot more that we can do and I think bringing the two businesses closer together will help accelerate that, but we’re doing it from a position of strength.

And then, the debt question, is there anything more to add?

We’ll have more to say in Singapore on that as well. I think, we really want to showcase what aspects and where we think we’re doing when we get to Singapore.

And Ravi, in terms of the IFRS, equity position, I think you should work on about £6 billion is what’s in the account for the UK annuities piece. So, that should give you sense then against that 500.

It’s Abid Hussain from Credit Suisse. Just two questions if I can. Firstly, on the UK, I was wondering what sort of Solvency II ratio do you think is ideal for Pru M&G going forward? Is 150% too low or is that the sort of write about level? Secondly, on Asia, Asian distribution, can you just share your thoughts around the long term viability of the agency turnout in Asia? Do you think there is a threat there from the rise of online distribution platforms, particularly in China? How do you see this base evolving?

So, on Solvency II, no, I think, it depends on -- I’ll let Mark comment on this as well. It depends on what the nature of the liabilities are and what the nature of the capital is? So, one of the challenges with Solvency II is not all 150s are like, and across jurisdictions and they’re even less so. But, I think, given the mix of liabilities that’s there -- and then the other piece with M&G Pru is you have the backstop of the earnings from the asset manager as well. So, it’s got a new source of liquid earnings, liquid capital generation. So, we haven’t said what the ultimate number would be. But, if you said to me, is that strong number for that firm, given the liabilities that has -- what its capital structure looks like and what its earnings prospects look like to generate capital, I think it’s a healthy number. Do you want to disagree with me now, publicly?

I’d never do that. And remember that I suppose 30% of the credit risk has gone. And when you move Hong Kong, an element of interest rate risk goes with that as well. So, the risk profile of the business is significantly reduced, significantly less volatile. And therefore you need to look in that lens what is the appropriate cover ratio?

Yes. When you’re in the -- if you’re in the UK, the PAC Board meeting, the first lens is really Solvency II, second lens is own risk appetite. And if you think of that, that’s everything from our sensitivity interest in equity movements. And it’s all of the things that you say. Do we believe this is something we should be doing relative to everything else we’re doing? It’s much more personalized by company than it is sort of the more standard metrics. So, both by -- both are important and both are certainly important in the governance model. But, I think it’s fair to say the first lens is how does this fit with the risk appetite. So, if you do reduce the risk, the amount of capital you’re holding theoretically should come down, again, subject to market norms and all of the regulatory and everything else. The more risk you’re taking, obviously the higher it should be. But, it will be well capitalized and everyone would -- we’ll have the agreement we need on that from key stakeholders before we let it go. Asian distribution?

Clearly, we are alive for the trends. Where we have seen digital distribution gain traction is predominantly in the P&C space and kind of very simple low case size kind of in the health space. Whenever it’s come to high case sizes or something more complicated. And when you’re in Hong Kong, you’re talking about critical illness products that cover about 113 or so different conditions. Whenever you’ve seen it, increasing complexity, then they don’t get a lot of traction. In fact, we do, we have our own sort of digital distribution. We have 1.6 million customers in Ghana alone just doing very, very low case size protection and health business on the phone, literally a couple of dollars a year. So, our view is that digital channels will complement kind of rather than replace what we currently do, what’s distribution. I think the winning strategies ultimately will be ones that combine both online and offline. Online typically is to do research and then offline when you have to deal with queries, be it on the telephone or face-to-face. And we are developing the tools today. And there are many examples I can give you pretty much across all our businesses to equip our agents, to equip the people that sell our products in the branches in a way that enables them to do it as digitally as possible and then fulfill ultimately what the customer wants.

And parts of that, I think at the consumer level are they expect the paper work, the forms, the processes to be more digital. So, if you’re in our Singapore -- if you’re in Singapore, you take your ID card and our app scans it and pre-populates all the fields. I think the consumers expect that. I mean, it’s -- it may be leading edge for insurance where they are elsewhere, other people could do it. So, part of our comparative set is the other experience that consumer has, not necessarily what our insurance competitor does. And a lot of it is easy to use, not necessarily purchasing. In China, they’re doing photos as well as -- not only is at all digitals on the app and issued almost immediately, but facial recognition. They are taking a photograph because that is a more common way to access security. And so, there are different dynamics to -- we have to follow whatever -- we have to make sure we meet the clients’ expectations wherever they are. And those certainly are more digital, the further east you get.

Nick Holmes, SocGen. I will this very, very quick. Just a couple of questions on the U.S. First, are you thinking of moving away from variable annuity equity guarantees? I mean, we may be at the top of the market, who knows. Are you concerned that you’ll maybe putting on too much equity risk and you want to do more with products like Elite Access et cetera? And then, the second question is, could you tell us the size of the net amount of risk? And Mike, I was very intrigued by your comment that policyholders are making very good investment returns from their variable annuity assets, which I’m sure is true. But, the net amount of risk is fairly large, I believe. And so there is an underperformance versus the guarantees. And I just wondered what your thinking was on why that is happening. I’m not -- let me make this clear, I’m not suggesting that the net amount of risk is an amount what can be exercised immediately at all. But as an indication of the performance of those assets, it does suggest that not all policyholders through their own selection of funds are actually achieving such great returns.

So, I can do as much on net amount of risk as Nic can do on China, if you want to do this. It is one of my least favorite metrics and that may sound convenient. If the clients have return, you see the appreciation on one of the slides we showed earlier and you know the guarantees are sub 5? The withdrawal of guarantee after their money is depleted. So, if you just think of the simple economics, if they’re earning in the 7s net and the guarantee is sub-5, right, it’s very difficult for the net amount risk. If it produces a number that’s negative to be indicative of them underperforming the guarantee. So it’s -- and captures a variety of other metrics. The less you sale, the better it looks, because it just -- a whole bunch along with it as a -- in the money nests we’ve used before, and I’ll ask Chad here in a second to comment on it. But, Nic on the guarantee, on the are -- we exceeding the business because we are timing the top of the market, no. I think, you said before we reset the guarantee level annually. They effectively go up on the contract anniversary of the client as does the fee for the guarantee. So, if you and I created a variable annuity company today to enter the market and we sold a contract today at this S&P level, assuming they only buy the index fund, they can buy an index fund, we have the same -- we would be the same pricing point as Jackson will be with the client renewing today on the guarantee fee. So, the fees of the guarantee stay with the underlying exposure we have with the equity market. And as we said, we are not trying to make money on the guarantee fees, but it’s plenty to hedge the equity exposure. So, no, there’s no intention. The client behavior has not changed. We’ve seen a percent or two increase in their equity exposure, it’s still nowhere near our pricing assumptions. You wish for the consumers for the retirement accounts; they’re slightly less procyclical on their movements. But, it’s the nature of U.S. consumers; they’re fairly cautious with retirement money. So, we have not seen any material shift in consumer behavior. But Chad, do you want to fill in some color around that?

Yes. I’d say -- I’d second what Mike said. I mean, the net amount of risk is probably the least favorite and we don’t use it for anything for managing the book. It’s something that others have discloses. So, we made disclosures in the past. It’s the best example I can give you just in terms of the flaws of net amount of risk would be if you had somebody who is -- who had $100,000 policy, has bought a policy with $100,000 that had a benefit of $100,000 left, there is $50,000 of account value. So that would be measured $50,000 net amount of risk. If they were 95 years old and they will take out $5,000 a year out of their account, that’s going to show up as a negative indicator in terms of net amount of risk. The chance of them being able to actually access that for us to go on risk is roughly zero. So, that’s why we don’t like the measure. If you look at the overall moneyness, I mean, our average policy is basically at the money. And as Mike said, they step up annually with the market and with guarantee, so we’re in a position now. I mean, it’s actually the book is in the best position it’s ever been. And even if you look at the net amount of risk, which is a flawed number, you will see it’s as good as it’s been over the years as well.

We’re going to keep writing, Nic.

Just one thing I’d just add on that. In terms of -- the markets may look frothy from the equity side, interest rates backing up were actually quite helpful, in terms of overall value of the guarantees. So, that’s a good indicator.

We’ve got three more, if you want to call it that. And we’ll go right for dinner. Is that fair?

Marcus Barnard from Numis. Just a quick question. I’m just interested in why you’re going to headquarter the international businesses in London when they haven’t got any operations in London? I mean, I would have thought Singapore or America would be a much better location. Is that something you’ll review over time? I mean, is that next year’s announcement or are you committed to London?

No, we’re committed to London. I think, you’ve still got Africa. We don’t have -- I think M&G and Pru would tell you that however motivating visits are from JHO to their business units, they’re not critical in the day-to-day operations to the current structure. So, I think, where the Group is centered is not an operational issue. It’s the sovereign functions of the business. So, it’s everything from the rating agencies, the listing requirements, the interfacing with you folks, capital allocation and preparation of financials, risk management, compliance, those functions, and those are staffed and work well here. I think, another argument I’d make on a practical front is with everything -- if you -- so we’re talking to the management what we are saying as it’s business as usual and this stuff is done just proportionally by Group and on the nights of weekends as I said earlier. The exercise to do a redomicile would be massive. You’d have heavy turnover, you would be replacing people that you know are already good. And you may or may not get cost savings or some new -- I’ve heard the theory, are we going to get new investors -- we find Asian investors have no problem buying shares on the FTSE. And they tend to gravitate towards our most liquid. We are on Hong Kong, we are on Singapore, we have an ADR in the U.S. and we are here. The large investors tend to gravitate to the most liquid market, which is here. So, we don’t see any distinct advantages, we like rule of law, we like the talent, we like living here. There is a lot that says London.

Alan Devlin, Barclays. Just one question, You said Pru plc is not necessarily best owner of M&G Prudential over the long-term; if someone else thought they were a better owner, would you consider a sale of the business or is this demerger the single...

It’d Board responsibility to look at anything that came out as. But I think, again, given the current success of the business, is it -- there are other businesses about the same size in the UK, if someone was a buyer, they have different characteristics each. I recognize this is the best one. And it’s a -- but there is a question we can manage -- if that process occur, we can manage it. But I think, our preference and our intended model would be a standalone entity. When you are in the marketplace, you are subject to market activity. I mean, I wouldn’t diminish that can happen. But we don’t anticipate that being the outcome.

Back to the 6 billion IFRS net assets on the annuity, is that for the entire UK annuity book or just the slice that you sold? And what are the equivalent numbers in the EVV terms? Then as follow-on to that, should I allocate the 300 million EVV loss as a -- on the annuity disposal, the frictional cost of the demerger, or should I be worried about your EEV assumptions?

So, the 6 billion is the overall, so, the whole piece. And in terms of the -- would you mind repeating the second question,

It’s 300 million EVV loss, a frictional cost of the demerger.

That 300 million is effectively a loss as a result of the loss of future -- future fees from the annuity piece. So, I wouldn’t see it as a frictional cost of the demerger. It’s a result of the sale of the annuity book, which is something that we closed today and is effectively a core part of the derisking of the UK businesses.