Prudential plc (PUK) Q2 2018 Earnings Report, Transcript and Summary

So, I want to walk you through what we think are a strong set of numbers, update you on the demerger, a variety of other topics. And I’d say we won’t talk about Tesla. How’s that? Is that the only guarantee today? The headline numbers, let’s go through them. So in context, what we’ve been trying to do, as we’ve talked in the last few years, is the definition of quality earning being earnings that are recurring, client relationships that carry over year-after-year, that, the development of our existing consumer relationships that give us a resilience across the cycle. And I think the single, obviously, the single best measurement for that is new business profit. That doesn’t mean we’re not interested in growing every other metric. We are. It doesn’t mean we’re not interested in market share. We are. It doesn’t mean we’re not highly competitive as a management team. But I want to go through some of the metrics and just give you a little bit of context about it. Then again, as I mentioned, I’ll walk you through some progress towards the demerger. And Mark will give you a very granular look at the financials. So new business profit, up 13%; Asia, up 11%; health and protection in Asia, up 19%, it’s a great performance by the team; group IFRS, again, on a local basis, 2 point, up 9%; Asia life earnings, 14%; U.S. fee income, 13%; M&G operating profits, M&G Prudential, up 4%, but again adjusting for Rothesay and the earnings coming off, part of the period for the GBP12 billion in transfer; asset management business in the U.K., up 10%; operating earnings per share, up 17%; free surplus at just shy of GBP2 billion. So again, in some ways I think that was fairly consistent with a lot of your models, but given, look back a little bit on the last 6 months in the markets we’re in, there’s been a lot going on. And I think it’s, the resilience of the business is one of the pieces I’m most pleased with, and then just the level of execution on the objectives that we’ve given the teams, I’m going to give you a little more color on those today, has been outstanding. So the other thing we’ve talked about in this room for a few years is we’re active managers of the business. And that has a lens of we’re active managers of where your capital is deployed, we’re active managers of the types of risks we want and the combination of those risks, the markets we want to be in, the products we want to sell, all of those various dynamics. So part of that means, can we demonstrate things we’re willing to walk away from? And are we doing things we told you we would accelerate, increase our exposure to or build capability in? So that’s the other sort of, I think we have a really good 6 months on progress on that. So again in August, we announced demerger and transformation of M&G Prudential. That was not just about getting GBP165 million in cost savings. It was also about increasing their digital capability, aligning distribution, management, product set, getting to market faster, upgrading the back office of the asset manager with an Aladdin platform, the TCS partnership. All those things are rather done or moving very, very nicely and starting to get that, which you should see the benefits at scale of a firm with their capabilities. So that’s progressing very well. We also, again, announced the GBP12 billion transfer to Rothesay, that’s progressing. The Part VII, as we said, is scheduled, but we still think that’s likely to wrap up middle to end of next year. That is one we can’t control, as I think you all know, that’s a court-based decision process and the way that process works is very difficult to actually impact the timing of it. But we’re ready, Rothesay’s ready and the regulatory agencies have been very supportive with us on doing the pieces that they need to do. So we continue to progress on that. You’ve seen the transfer to Hong Kong progressing well. You’ve seen new bank relationships across Asia. So SCB expanded that relationship. We added Ghana in Africa. An announcement came out last week about the Babylon Health partnership, and that gives us some unique capabilities. Again, I’ll come back to this in a little more detail in a second. That is ex China. Tencent has a partnership, a JV with them in China, just to be clear. So I think we’re in good company there. And then you saw the Thai Military Bank both acquisition of a fund management capability in Siam Thailand as well as the distribution relationship there, again, further expanding our distribution and our manufacturing capability in Thailand. And we’ve also had a lot of success with our Siam Commercial Bank relationship, which is a unique one in structure for us, but is working quite well. On the separation process itself, how do you look at that? How do you look at the progress? The key steps are, as we outlined before, the debt process. So restructuring the corporate debt in a reasonable, balanced way to make two well capitalized firms that have proper debt ratings and proper access to capital markets. That’s continuing at pace. The operational models, as I’ve mentioned, we still need to finalize the establishment of a UK Holdco for the new entity. We’re in the final stages of selection and appointment of a chairperson for that entity. They all create an independent board. That continues at pace, we’re a bit ahead there. The unwinding of the group linkage. A group our age, as you can imagine, we find relationships that are 170 plus years old we didn’t know we had. And again, we’re managing those as they come up and there’s nothing that’s material in that, I’m being a little facetious. There’s a lot to do, but all of it within the scope and capabilities that the teams are working on, and there’s been nothing that’s taken us off our calendars or cost targets or any other elements of the business. But there’s been a lot of work to do and they’re doing a great job on it. The Part VII transfer, I mentioned at the shareholder regulatory approval, you saw that last week that the regulatory college voted. So the way the regulatory model will work is the entire group will be regulated by the Bank of England through the PRA until the demerger. And then post demerger, that regulator will regulate the M&G Prudential company as well the FCA and, obviously, any local jurisdictions they do business in. Prudential plc, the international business, the regulators meet in what’s considered a regulatory college, including with the PRA’s support and involvement; they actually cohost it currently, and they’ve selected Hong Kong as the new group-wide supervisor. So at the time of the split, Hong Kong will assume that role. On a day-to-day basis, all of the individual jurisdictions we do business in have a material say in how we operate in those entities, and they are all providing input to Hong Kong on how they want to see a group supervisory role structured. They all get along pretty well, and it’s been a very cooperative process. And again, I think it’s fair to say that we’re ahead of schedule on that and we’ll hopefully give you more detail on what that looks like in November. But the early conversations have been they’re fine with a transitional relationship that looks a lot like what we have now. And again, I would suggest you to look at the local statutory models, have always been, including under Solvency II, the binding constraint for any capital fungibility, dividend, investment, it’s a portfolio of businesses and they’re governed by a portfolio of regulators. So this is the entity where they cooperate. And again, both these companies will be based in the UK. Both -- premium listings on the FTSE, and we think both are technically -- should be technically qualified for FTSE 100 inclusion, if that’s meaningful to your portfolio or position. So what are we doing with the new company in the UK? I’ve been asked this a couple of times in the last few weeks. I just want to make sure it’s absolutely clear. As people have thrown out in one-on-one meetings some of the, is it like XYZ firm? Is it like this model? I actually think it’s a very, very clear argument that it’s not like any existing competitor in the UK market, it’s highly differentiated. It’s, as you see from the net flows, a very strong asset management franchise with M&G; that has funds in the category that consumers and institutional investors want and are disproportionately in the lower risk, higher value or total dividend -- or total return or asset allocator spaces where you have a little less impact from passives when passives affect the industry, but you see funds that are difficult to index is the spaces where M&G; has done well, so the research and fund selection. And then moving up towards the with-profit fund allocation capability has produced the returns you see that make these products competitive. The with-profits funds in itself is unique, still has £9.6 billion of capital in it. It provides smoothing, it’s provided excellent returns for the consumer. We have highly competitive platforms on the administrative side on life and annuity. So all those things give it a unique footprint. It also has scale at 7 million plus clients, again, the financial firepower to do a variety of different things in the market. It’ll have the ratings it needs. So we think it’s got multiple earnings engines. It’s got multiple ways it can generate cash, capital, unique product. And it’s very well situated for the consumer demand and the opportunity sets that we see in the markets where it’s currently succeeding and clearly has the ability to extend in those markets and go to other markets as well. As far as the ambition transformation, I mentioned a couple of these in the beginning. Transformation is going very well. This is an upgrade as well as an efficiency exercise. A lot of work here. So the partnership with TCS is the integration I mentioned. You’re seeing the scalability of common platforms. 95% of the advisers now submit business online on some of the new technology. There’s other technology coming. It’s -- there’s a lot of work going on that improves the competitiveness and the consumer and adviser interaction with the firm on top of this integration work and on top of the divestiture work. So incredibly proud of the teams and what they’re getting done. And again, we’re on target for those ambitions. Let’s go to cash and capital for a second. So very, very stable asset base. Coming from the nature of the, again, the products offered, the level of risk in them, the types of clients that buy, the markets they raise money in. It’s very good, very stable AUM. Also well-balanced earnings, multiple sources. The current model in the UK is to have a couple. This has clearly got engines that competitors don’t have. On the capital side, again, you’ve got the excess capital and the with-profits fund, the normal things you’d see in a capital stack. And obviously, from today’s results, you see its ability to generate cash and capital. So very, very healthy company on all key metrics. Very cash-centric in its earnings, which I know in the insurance world at times can be -- there can be some distance between accounting and cash flow. With this one, actually, the two are quite tightly aligned, and I think it creates a very unique combination for multiple shareholders. And then why is it doing that? It’s producing proper results for the consumers. I mean, it -- you cannot -- I’ve said this before: you can’t build good product -- you can’t build companies without good products. So the client propositions have performed well. M&G’s performance, the fund management team, research team has done an outstanding job and both on the institutional and the retail side. And so not surprising, you’re seeing good net inflows. PruFund up 4.4 billion, another 3.5 billion in M&G between retail and institutional. You all know the challenges in the market now, but the consistency and the performance clearly drives those flow numbers and they’ve got a healthy queue of clients on some of the funds that have, again, committed but not funded. So all the operational performance metrics look great. The international business. So what can you -- why -- what can you expect there? Why U.S. and Asia? What’s up with Africa? All these sorts of things come up again in the one-on-ones, right? So we see it as a very well-diversified player in the best choice of markets right now. So very simply, Asia being where the largest growth of population, largest growth of new wealth is occurring. The U.S. -- and that’s life insurance as well as wealth management. United States is the largest market for life insurance and wealth management. Africa is the most underserved market for wealth and insurance, okay? We have leading positions, materially leading positions in two of those three. We have a good -- so already five countries now in Africa. We’ve got a lot of good things going on there. But at the end of the day, we’ve got leading platforms to capture the opportunity set in the U.K. and Asia. And we think that creates diversity that’s unique by product, by risk, by credit, by FX. I mean, just by age cohort of clients, where clients are in their lifestyle. All those things that give us the ability to diversify our risk and maintain our return thresholds. The geography helps. I mean, I’ve said this before, probably our biggest risk as a company is political because as things change, that creates uncertainty with consumers far more than economic change does. And we’re well -- the only way you can manage that is diversification. Voice -- certainly a voice in the process, but diversification. And we’ve got great diversification. So all those things give it kind of a unique footprint. And then synergies. There’s financial synergies from the size and strength of the balance sheet, the diversification of earnings. Again, the timing of earnings, some of the longer cash flows versus shorter, equity exposure versus the other types of risks we’re taking. All of that comes from scale. And then that scale gives you the ability to do larger M&A, more unique partnerships with key vendors. All of the things that we need to do that you have to be of a size, right, to credibly be a player in those dialogues. So -- and again, both very -- the two major markets. Africa is still developmental for us, but the U.S. and Asia are producing very high returns on the capital, very quick returns of the capital. So we like all of those characteristics. We recognize in each of those markets greater markets. You’ve had people that have had different results than that, okay? We haven’t. And in Asia, you need a portfolio. In the United States, you need to start correct with pricing and stay correct with pricing, okay? If you don’t do those things, you take different risks that are more concentrated than we’ve done as a group and have different outcomes than we’ve had as a group. So we like what we’ve got, and it’s growing well. The other question I’ve been getting is, well, why leave the headquarters in London? Okay, fair question. I get that from people in the headquarters in London. The -- and it’s not because they’ve got a flat here in, like, London. I do have a flat here and I do like London. I like Hong Kong and I like the U.S. And most of the markets we do business in, I’d live in. But the issue is this: the role of group, right, has never been the operation of the business. I’ve been here 23 years, okay? The role of group is the correct allocation of capital, the correct measurement of risk, the governance models, forcing the business units to find synergies, okay, the challenge, okay, the strategic work, the interaction with stakeholders, yourselves, regulators, the debt issuance, the balance sheet work, the consolidated financials, all those sorts of sovereign functions. We have an outstanding team here capable of doing that and where our primary listing is and our largest group of shareholders are, okay? There’s absolutely no reason for us to disrupt that, nor do I think it’s reasonable to believe you could pick that up and move it anywhere, okay? So you would add operational risk, you’d add other dynamics to it that simply don’t add any value to our shareholders and would only disrupt a key set of our stakeholders, our employees, who are doing a fantastic job, okay? So there’s a lot -- it doesn’t matter what the business mix has been since I’ve been here, the role of group has never been to run an individual business. That has always been delegated to the management teams locally. So that doesn’t change. Someone asked me, do we travel more? We travel now, okay? Just for the record, we travel about 2/3 of the time now. So that’s not going to change a whole lot and often it’s to where you are as investors and often it’s to where the business units are. I was in China twice, Hong Kong and the U.S. last week, right? That’s part of the job, and it’s an interesting and challenging fun part of the job. So there’s no -- that doesn’t change how we do business, just to be very, very clear. All right. So let’s go to how we do actually operate the business. So Asia. So drilling down on the group numbers a little bit. You had double-digit growth across the key metrics. New business profits, up 11%; IFRS, up 14%; free surplus generation, up 14%. Again, 8 countries with double-digit growth in new business profits. The one that I’m probably most pleased with is not the -- not just the year-over-year change in health and protection NBP, but also the percentage of NBP that’s now health and protection, the percentage that’s now recurring relationships with consumers and the persistency of that. We have -- the biggest opportunity we have, as we’ve talked before, is to continue to do a good job for the 15-plus million clients we have in Asia. So they not only stay with us and continue to fund those relationships and we provide the benefit, but also so they think about us on that second and third transaction. So one of the key metrics to how we’re doing is the clients that are coming back year after year. And so when we’re talking to Nic and his team and the CEOs, it’s a big part of that. Of course, we want to grow the relationships. Of course we want to grow new business relationships, we want new distributors, new agents, new bank relationships. You’ll see some of that, okay? But the key driver now to our success I think in Asia is our ability to work -- to protect what we have and grow what we have as well as, at the same time, in parallel, grow new relationships. But we’ve got to keep focused on that it’s large enough that it’s well worth the time and energy, and they’re doing a great job there. Hats off to Asia, first time they’re over GBP 1 billion of IFRS profits in the first half of the year. Again, there’s a number of records in this. But another good performance for the team, again, in an interesting climate. So let’s go to that. So you had lots going on in Asia this first half of the year. A lot of political change, some economics, market volatility, as, we’ve talked about this for numerous meetings. But what you see is nothing changes structurally, okay? If you’re in Malaysia and you saw a historic election, right; if you’re in China, and you, I was there in the early meetings in the, was it China Development Forum in [indiscernible] when there was this early discussions on the trade war when the order of magnitude they thought would be in like the [10 billion to 15 billion] range. I was there last week when you’re talking hundreds of billions, right? These are real occurrences now and again, to a person in the street, to a person who is our client, what they care about is the certainty of their job, how much they’re taking home, how much things cost in their market. And that’s true in Beijing, that’s true in KL, that’s true in Hong Kong. There’s no, I’ve said this earlier today to somebody, I rarely meet anyone any place that can tell you the GDP of their country and what has changed quarter-over-quarter. What they can tell you is what they read. And so if they see a lot of news about political instability, they’re a little slower to make a decision, but they’re more worried where risk off trade. These sorts of climates tend to be good for us. And in Asia, as in the U.S., the structural drivers don’t go away when there’s political noise, okay? So we’re not a quarter-to-quarter business, and none of this changed in the last 6 months. Lots went on, fast [indiscernible] travel first half year in Asia [ph] but nothing changed in the structural drivers. 1 million people still under the workforce every month, okay? You meet young people that are worried about their future, how they, they’re wondering endlessly how they’re going to take care of parents, retirement has risen as an issue now in multiple markets in Asia. Demographically, it was always there, you could’ve measured it, but it’s getting, it’s starting to be more front of mind and more media covered and things. But the structural drivers have not changed at all. So the performance, I think, reflects that. A couple of stats on the retirement side. This was a number that came out earlier that I thought I’d throw in here, 450 million additional people will be 65 between now and 2050, right? So retirement, we’re getting questions in China. You see us launch the pilot with, are approved to do a pilot in 3 markets there with a handful of insurers for the Chinese government on effectively a tax-deferred pension product. You hear about it in Thailand when you’re there. You hear about it in Singapore when you’re there. And you certainly hear about it in Hong Kong when you’re there. And again, there’s no difference than you see in some of the Western markets, people are worried about how they’re going to fund this. The out-of-pocket health care numbers, currently, USD 40 trillion. The last estimate that just came out says by 2030, it’s USD 146 trillion. But again, [0.40] of that in Asia being paid by the patient out of pocket of every dollar, right? Roughly 9 of it here, 11 or so in the U.S. So the structural demand for the core products is there. It’s our job to make sure we’re in front of how the consumer wants to be serviced, that the service levels meet their expectation, that the products are unique enough. All those sorts -- those challenges are real so that goes to capability. And then wealth creation, you’re just shy of 12% now on mutual fund ownership across Asia. So that’s still in its infancy where the wealth creation is growing at tremendous rates disproportionately into cash. So you’ve seen this slide. This is how we address it. So portfolio across the region. 15 million clients, I mentioned. Top 3 positions in 9 of the 12 markets. We were kidding earlier, it took us 94 years to build this, right? Disproportionately built in the last 2 decades. But there’s somebody, I promise you, at a pension meeting I’m going to do later this year, that’s going to say, I was the first one that, I’ve actually met people that were deployed in Asia that worked for us that were told to only call the headquarters every 90 days with a 15-minute update on the country they were in. And they were the early pioneers. So it’s fascinating to hear what their stories were when they were sent out with a team of 5 60 years ago to run where our business is. You all know the scale of these businesses now. It’s very difficult for someone to come in and assemble not just the licenses, that’s an overly simplistic look, but the relationships we have in the market, the brand, the talent, the distribution we have. So it’s a very unique portfolio, and it gives us the ability to not only weather those political storms I was talking about as they come up in various sizes, in various markets, but also to choose where and when we want to deploy capital, country, product, channel, all of the various dynamics because of the optionality it gives us. So very, very happy with what we’ve got, continues to execute. On capabilities, what’s Asia been doing? Well, we have to keep moving forward. We have to keep doing new things, we have to keep adding capabilities to the group. And certainly, to our Asian model, it’s a fast, consumer expectation there rise as fast as any place we do business. There’s 4 major objectives we’ve given the Asia team. One is enhance the core. The other is make sure we have best-in-class health care. Accelerate Eastspring. And expand our presence in China. And there’s been material presence, a material pickup in all of those in the new bank partnerships in multiple markets; the digital, both agency and bank aside as well as supporting consumer activity. The Eastspring, I mentioned. The Thai Military Bank transaction, getting them into, as well as WFOE in China, moving to China. We now were just approved as a province, that’s the seventh largest, 68 million people. And then the top right there in China, the pension pilot with a handful of government-approved insurance companies in China to try a new product in 3 markets. So there’s lots of important subpoints here that I’m not going to go through one at a time. But Nic and [indiscernible] and the team can walk you through any one of them individually. But tremendous amount of work about expanding the capabilities there. Babylon fits in that, in the health care piece. We’ll show you more what we’re going to do with that as it’s built. But if you haven’t seen that, there’s a really interesting project today with the NHS here. It’s an artificial intelligence doctor. Remember, most of our markets in Asia, there isn’t a GP front-end on hospitals. People go right to the hospital when they’re sick. So this has a great social purpose. They’re aligned with us in their view of helping clients stay healthier. That’s a very interesting capability. And I think it’s going to be a great add for our clients. And candidly, to develop some of our markets more thoroughly in line with the governments and other stakeholders in those markets. The U.S. So a lot of noise this first half year in the U.S., some of it is settling down. The effect of the tax has settled down. You had, you got some regulatory things finally getting put to bed. NAIC has finally voted, I guess, officially. So we’re waiting for final SEC rules on client best interest. We’re pretty much out of industry issues until the new set arrive. But again, all of which weathered well by the company. And I just want to spend a couple minutes on why. So Jackson started with a different, again, different and better product design. It was give the client a chance to get access to reasonable portfolios from top fund companies, but only ones we could hedge. So there are firms in this room and firms watching this that have very large positions in us that are very high-quality funds but, for whatever reason, the nature of the fund turnover, characteristics of what they buy were not deemed as something we could actually put in a product because they were unhedgeable; even if they appeared elsewhere. So the selection and management of the fund process is critical. Then you have to hedge from day one, as we’ve discussed, to offset that risk, make sure you’ve got that correctly balanced. And then the funds have to be managed for performance so the consumers do well. So you stay aligned with your stakeholders. So the consumers in this product have done better, as we’ve shown you, than every other product in the industry. So they’ve owned it disproportionately for accumulation, tax-deferred accumulation. They also have the safety net of knowing, as they slowly withdraw their own money, the guarantee kicks in if they withdraw all of it and they’ve got a floor on their income. So it’s not heroic, this capability, but it’s well priced, it’s balanced and it produces a very good outcome for the consumers as well as for our shareholders. It’s a simple strategy that could have and should have been copied many times, and it wasn’t, candidly. So it produced a very different outcome. I put in this time one of my favorite slides from my old role, which is the unhedged cash flows. This is just the guarantee fees. Just again to show you what the current cohorts look like. Again, this doesn’t count the other fees, this doesn’t count the value of the hedges, this assumes every counterparty doesn’t pay off, all those sort of normal cash flow stresses we do, being skeptical; but the book is very, very healthy. And how do you measure that with all the noise in that market right now and the various -- so the stability and resilience of the capital across the cycle I think is a fair measurement. We don’t do mid-years, but I will tell you that after the tax changes and after the dividend, we’re still above yearend 2017. So again, this firm is resilient from a capital creation, capital point of view and has distributed 4.9 billion of cash in that period of time. So profitable book good outcome for the consumers, well hedged. And then the capabilities of the firm position it for what comes next. The demand is still there. There’s been a lot of noise in this market for the last three years. So it’s important that the SEC finalize what their expectations are on client best interest because that gives the compliance departments of the broker-dealers an understanding of what should go advisory, what should go commission. A lot of work being done there, a lot of work being finalized. And then of course, we’ve got best product; 50% of the industry’s average expenses, so cost advantaged; largest best wholesaling team, that’s measured externally; top service, and again compared with mutual fund companies as well as insurers, we got second this year for BlackRock. I’m sure Laura’s enthusiastically tying for number one, reminding everyone it’s going to be number one this year. Again, we won most years. And then the product innovations there, the ability to develop product that’s appropriate. Appropriate being good for the client, good for the shareholder. And then Barry’s been instrumental in putting together the Alliance for Lifetime Income, which is dozens of the industry’s firms coming together to support both publicly and politically the narrative on why clients want assured income in retirement for some portion of their assets. And there’s some good early successes with that, that I’ll let him tell you about in the Q&A. My last slide, another cohort of again consistent performance by the team across the key metrics. And with that, I think I’ll turn it over to Mark, and then we’ll take Q&A at the end.

Thanks, Mike, and good afternoon to you all. I will cover 3 main topics in my presentation to you today. Firstly, a deeper look at the first half financials and the major moving parts. Secondly, a reminder of the key financial attributes of each of our businesses. And then thirdly, some pointers to help you think about the capital structure of M&G Prudential going forward to the point of demerger. So let’s get started. Moving into my first topic, a deeper look at the first half financials for the businesses and the main overall metrics. At a headline level, the group has delivered good progress across a broad range of measures, even though conditions generally remained challenging, emphasizing the quality of our delivery through the cycle. As usual, I will comment on a constant currency basis, as this provides a better view of the underlying financial trends. And on this basis, all of our profit measures have moved forward and continue to be led by high-quality growth in Asia, with group IFRS profit up 19% -- up 9% rather; new business profit, up 13%; and EEV operating profit, up 29%. The first interim dividend is 8% higher at £0.156, in line with growth of the 2017 full year dividend and is underpinned by remittances from each of our business units. We continue to operate with a strong balance sheet and solvency position, with Solvency II cover of 209%, up 7 points since the year-end. This slide shows the long-term consistency in the group’s performance is ultimately driven by our ability to keep building the base of earnings by writing good-quality business in the first place and then actively managing the in-force book to ensure we are able to retain it. In Asia, this can be measured by the stock of recurring premium income; and our businesses in the U.S. and in the UK in the accumulation of assets under management. Across all 3 businesses, the progression against prior year is clear and continues a long-standing trend. I’ll come back to these themes again in a moment. Turning to the performance of our businesses, starting with Asia. Here, the benefit of our persistent focus on improving the mix of our new business is clearly evident, with new business profit increasing by 11%. We are seeing both a higher proportion of health and protection sales and a better mix within health and protection as we shift to higher-margin products. As a result, new business profit from the segment was up 19%. While yields moved up in most markets, the overall impact on new business profit was relatively benign, reflecting the broad mix of products across the portfolio. However, the scale of increase in yields we saw in Indonesia, up 100 bps versus prior year, represented a headwind for new business profit in the period. While first half APE sales are down, we are starting to see some normalization in Hong Kong volumes following the recent reduction in industry sales from Mainland China. This, combined with improving performance in China, has resulted in a return to growth in the second quarter. Asia IFRS operating profit was up 14% overall, with growth of 14% in life and 13% in asset management. The pivot towards higher-value products is demonstrated here also, with insurance margin up 17%, reflecting the growing proportion of regular premium health and protection sales in recent years. This business also generates an improvement in the quality of earnings as it is not sensitive to investment volatility. In asset management, Eastspring’s earnings benefited from a higher level of average assets following favorable net flows and market appreciation since June 2017. Although external funds were an outflow overall in the first half of 2018, this primarily reflects redemption from a single institutional mandate with better net flows in retail business and equity funds. Moving on to the U.S. in Jackson. Jackson continues to attract a consistent level of underlying VA sales despite the ongoing disruption at industry level. To ensure the business is well placed for the future, we remain focused on building product and distribution relationships in the advisory markets as a source of longer-term growth opportunity. At the same time, we are closely monitoring developments in the commission-driven market following the recent vacation of the DOL rule. We believe that in the future, differences in customers’ preferences and circumstances will mean that there is a role for both advisory and commission business in the market. The uplift of 17% in new business profit reflects a benefit of higher rates and lower taxes, in line with published sensitivities and prior guidance. The U.S. IFRS result is roughly the same as last year, with three main moving parts. In our VA-focused fee business, income increased by 13%. This benefited from the positive catch-up in average AUM growth following strong investment performance in the second half of 2017. However, this was largely offset by the impact of higher asset-backed -- based commissions and less-favorable DAC adjustments. And the DAC adjustments have made a lower contribution this time as a result of the mechanics of the mean reversion calculation. These have accelerated amortization compared to favorable deceleration in the prior period. These trends are likely to persist for the full year as the balance of 2015 rolls off. Lastly, spread earnings from the fixed account declined 5%, reflecting the anticipated decline in both portfolio yields and contributions from swaps, detailed in the chart on the right. We expect these trends to persist, and we reiterate our guidance for an ongoing moderation in the market towards 150 basis points, absent a significant uplift in rates. M&G Prudential continues to make good progress, driven by demand for its differentiated life and asset management product offerings and its investment performance. On the life side, the PruFund investment option remains the key underpin of sales and retirement products, such as income drawdown and individual pensions. These were up 16% and 13%, respectively, driving growth in new business profit of 11%. M&G has continued to benefit from inflows from European retail customers and institutional clients who are attracted to its multi-asset and private asset opportunities. Notwithstanding adverse market effects, the strength of these inflows saw external AUM increase to £165.5 billion and now accounts for 58% of total M&G funds under management. M&G Prudential’s operating profit has increased 5% in the first half of the year -- in the first half of the year for the year as we define as core earnings. I’ve shown the prior year on a like-for-like basis after taking out the proportion of the annuity book that was sold in March this year. PruFund’s contribution continues to grow in importance, up 25% in the period and supported an 11% increase in the overall transfer from the with-profits fund. Management actions totaled £63 million compared to £188 million in the first half of 2017. This was driven by asset optimization with no further longevity reinsurance. We currently do not expect any meaningful benefit from the management actions in the second half of this year. The U.K. life results also included £166 million of insurance recoveries related to the review of past annuity sales. Our previous growth provision of £400 million is unchanged. In asset management, M&G has continued to deliver strong results with core earnings up 9% and overall earnings up 10% after performance fees. Continued healthy net inflows into external funds have improved the revenue margin and mix, another sign of our focus on higher-quality earnings. M&G Prudential remains focused on its transformation to a modern savings and investment business and is on track to deliver by 2022 the £145 million annual savings we set out this time last year. Moving on to equity shareholders’ funds, and there are 3 main areas of note I’d like to share with you this morning. Firstly, IFRS operating profit after tax is up 17%, reflecting the underlying performance in the period and the benefit of lower U.S. tax rate. It includes costs of £41 million relating to demerger and transformation of M&G Prudential, partially offset by lower interest costs following a net reduction in debt last year. Secondly, the sale of the U.K. annuity portfolio generated a pretax loss of £513 million, in line with our guidance when we announced the sale in March, and this is contained within the loss on corporate actions line. And lastly, overall investment variances are much reduced in the period, with positive marks in the U.S., mainly driven by favorable revaluation of guarantees following the rise in yields. This was offset by unrealized losses on bond portfolios in Asia due to higher interest rates and in the U.K., on widening of spreads. Higher rates also led to unrealized losses on U.S. securities held as available for sale. Shareholders’ equity on an embedded value basis increased to £47.4 billion at the end of June, equivalent to 1,830p per share. Moving now to cash and capital generation, and looking first at free surplus generated. To capture the underlying progress, I’ve analyzed out the expected return from the in-force life business and the contribution from the asset management businesses. These have each increased given the growth in the life portfolio and the higher base of AUM in our asset management operations. We continue to invest, to reinvest a significant portion of our free surplus in new business. Asia remains the primary destination of our investment here, accounting for roughly half the total given the relative returns and growth potential that our superior market positioning and capabilities provide. After investment in new business, the underlying movement in the first half of 2018, before variances and restructuring costs, was an increase of 9% compared to prior year. The overall result of GBP 1.863 billion included very favorable variances of GBP 350 million, mainly related to M&G Prudential management actions and the insurance recoveries, which I’ve already mentioned. This slide shows how cash and capital generation moves through to central cash. On the left, you can see that the net organic free surplus generated of the GBP 1.863 billion from the previous slide comfortably funds remittances to group. Market and currency movements were negative in the period. However, our approach to maintaining strong local capital positions allows us to absorb these effects without impacting business operations. The chart on the right shows how cash remittances of just over GBP 1.1 billion from all of the businesses were used to cover corporate and other costs as well as the growing dividend. We retain the flexibility of bringing funds up to the businesses to the center as required. My final slide on capital generation covers the Solvency II position. We continue to run the group to a robust solvency capital position, with a shareholder Solvency II surplus of GBP 14.4 billion, up from GBP 13.3 billion at the end of last year, at a cover ratio, up 7 points to 209%. The strength of our operating capital generation at GBP 1.7 billion in the first half remains, the key underpin of our solvency position and resilience, absorbing market movements, which in this period were minimal, as well as funding the dividend. In the U.K., PAC’s Solvency II ratio has increased to 203%, which includes the benefit of the reinsurance of annuities sold to Rothesay Life. Now you will see at the back of the IFRS statements in your packs, on Page 77, that we have reproduced the pro forma 2017 year-end position to adjust for the completion of the annuity Part VII transfer and the transfer of Hong Kong to Asia. On this basis, PAC’s Solvency II ratio increased from 150% to 153%. So that brings me to the end of my first topic, overall a good performance across all our profit measures, with our focus on driving quality growth yielding benefits. So my second topic is to revisit some of the key financial attributes for each of our businesses that underpin and characterize our performance in any period. Beginning with Asia. So what really defines Prudential’s Asia operations from a financial lens is the quality of the new business that we write year-after-year. To put some numbers around that, using half-year data, 94% of APE sales are regular premium and 95% of the business is retained from one year to the next. This overwhelming concentration of regular premium business with high levels of persistency means that through the cycle, Asia generates income that is both recurring by nature and sticky over a long time period. The outcome of this is a highly compounding base of profitable premium income that has been resilient and growing with every new cohort of business. Another feature of our growth in Asia is the increasingly attractive profile of the earnings that we generate. As we continue to focus on growing the proportion of sales that are health and protection, so the mix of our IFRS earnings has improved towards insurance margin, which is more resilient and typically offers higher returns. Together with capital-efficient fee income from life and asset management, this now accounts for 84% of total IFRS operating income. The consistency of our financial performance in Asia is also the outcome of the strong portfolio effects of our regional business. This provides very effective diversification across multiple factors, such as country, channel, product and customer. In addition, as our businesses scale up, they benefit from the collective power of the overall Asian business. And it’s the combination of all of these attributes, through compounding growth and increasing quality, that it’s generated a substantial stock of future cash flows. As at the end of 2017, a total of GBP37.8 billion is expected to emerge from the in-force portfolio into free surplus over the next 40 years. And crucially, the contributions from new business are adding more to the stock than is coming out from the in-force. So repeated year-after-year, this creates a powerful growth dynamic that drives a highly attractive outlook. In Jackson, the financial performance is a combination of its differentiated product structure, customer outcomes and disciplined management. Over the last decade, Jackson has built an enviable position in the U.S. VA market. It has remained consistent in its approach and as you can see on the left, has resulted in an even spread of sales and a well-diversified portfolio mix, with no outsize years. And better still, it has remained profitable through every cohort, in contrast with most of the industry. This profitability reflects disciplined pricing and timing; superior product design, as Mike mentioned; and our industry-leading capabilities around distribution and low-cost operating platform. Throughout this period, Jackson has operated with a healthy level of capitalization. The profitability of the VA portfolio underpins the consistent organic capital generation. This is key to its capital resilience, together with its conservative approach to protecting capital by hedging deep into the tails. This approach has ensured that Jackson’s capital has remained well protected through the more volatile investment markets of late. Overall, in the first half of 2018, statutory capital increased from GBP4.3 billion to GBP4.6 billion, driven by 6 months of capital generation and a much reduced level of negative marks on equity derivatives in a period with more modest gains in the S&P index. This has more than covered the remittances to the group, which to date has typically been weighted towards the first half of the year. It is also worth reiterating that Jackson’s capital position is significantly understated by the statutory regime. This is because reserves are currently floored out at a cash surrender value that is materially higher than the true economic reserve. And there’s a limit on the recognition of DTAs, both of which produce a drag on operating capital generation. Notwithstanding these effects, the payment of the remittance and the impact on required capital of U.S. tax reform, Jackson’s estimated RBC ratio remains above its half year position of 409%. The NAIC reform of the variable annuity reserve and capital framework has begun making its way through the necessary committee approvals with a targeted 2020 implementation date. We believe the agreed framework represents a good outcome and should result in a more stable capital regime. Turning to M&G Prudential, a business providing customers with reliable, long-term returns in a volatile world. Now it does this through the with profit funds, which is meeting customer’s preference for smooth, consistent returns; and by M&G developing asset management solutions which address both retail and institutional needs in a range of different markets. And putting out a few of the key factors that will influence the profile of this business moving forward. In asset management, earnings are cash-rich and well diversified by asset class, fund strategy, geography and source. In the with-profits fund, which is both scale and financial strength, the transfer to shareholders represents a high quality profit stream, benefiting from smooth returns, consistent investment performance and an increasing contribution from the growth in PruFund assets. And the annuity portfolio also provides a highly valued and dependable earning stream. Different characteristics of these blocks also provide good revenue diversification, which brings increasing scale. The combination of its insurance and asset management businesses has resulted in a large stock of seasoned assets which drive earnings with a high degree of visibility and security. The full advantages of bringing these complementary businesses together are expected to emerge over the transformation and merger period and beyond, as M&G Prudential becomes a stand-alone listed business in its own right. So as you can see from that, each part of the group demonstrates strong underlying attributes that we believe will continue to serve us well as we move forward. And we’re looking forward to talking to you more about these at the investor conference in November. So on to my third and final topic today, namely that of the capital structure of M&G Prudential at demerger. And my intention here is to provide you with some of the building blocks on how we are approaching it at this point, building on some of Mike’s earlier comments around debt. So to help you as you begin to think about the financial position of M&G Prudential as a stand-alone business, it’s fair to say that the business segment UK and Europe in the half year and last year’s full year accounts represents a close proxy to what the new company will look like before any debt rebalancing or additional central costs. Our capital management principles for this are unchanged. Firstly, we will ensure both businesses are appropriately capitalized at demerger with a buffer above regulatory requirements. Secondly, we will retain sufficient liquidity with regard to interest cost, central expenses and dividends. And thirdly, we expect each business to maintain strong credit ratings. At the group level, we have begun the process of managing our debt, including starting dialogue with holders of two of our senior bonds. I’m referring to the chart on the right-hand side of this slide and, in particular, the 2 larger dotted blue boxes. At demerger, we expect that the debt rebalancing will result in M&G Prudential holding subordinated debt at an amount that is up to 50% of the group’s current outstanding debt. A portion of the debt held by M&G Prudential will, in turn, be used by Prudential PLC to redeem some of the existing plc debt. It is important to note that, in combination, this is expected to be a net positive for the M&G Prudential balance sheet and would provide a liquidity buffer position for the new Holdco. Taken together and assuming no material change from current market conditions, we would expect the components of M&G Prudential’s capital position to generate a Solvency II ratio that is, therefore, in excess of the pro forma subsidiary PAC position that I just mentioned. As you would expect for this stage in the demerger process, we are not yet in a position to provide the detailed financials for the future M&G Prudential listed entity. As these begin to fall into place, we will be able to disclose more along the way. So to wrap up, we have delivered a good performance in a more challenging environment. Asia continues to demonstrate the strength of its broad diversified portfolio. Across the group, we remain focused on executing with discipline, underpinned by careful management -- capital management of our group. And we look forward to updating you further as we progress towards the demerger of M&G Prudential. And with that, I’ll hand you back over to Mike.

So, if I could ask my colleagues to join me. Okay. Questions? Up there. Who would like to start?

It’s Jon Hocking from Morgan Stanley. I’ve got 3 questions, please. Firstly, on the plc, the pre plc go-forward business, the Hong Kong relation. Wonder if you could talk a little bit about what methodology the Hong Kong regulator might use in terms of the group capitalization or are they just the lead supervisor? Is there going to be some additional buffer capital held in Hong Kong at the group level? And how that interplays with [Indiscernible] London listed entity. So the first question. Second question, on the health and protection business, is that a first-time disclosure in terms of what proportion of new business profit health and protection is? And can you give us a little bit of a color, please, in terms of how that’s trended as a proportion specifically within the products. You mentioned you’re changing to more profitable products within health and protection, can you talk a little bit about that, please? And then finally, just in terms of the U.S. Now that the DOL rule is dead, what are your expectations going forward about the ultimate mix of distribution between fee-based and commission? Thank you.

So John, I’ll take a couple -- and Mark, I’ll flip the health and protection trend piece to you and Barry, would you also offer comments? But on Hong Kong, so that’s breaking news. That was -- we’re meeting with key regulators in the region last week. And the -- I think there was 2 -- the early discussions are they are open to working on a transitional structure, so again, so our key stakeholders have metrics that they’re used to seeing. Again, this is all post demerger, to be very clear. We’re working with the Bank of England and PRA. This will be a very carefully orchestrated hand off, and both agencies are committed to that. And I would say their bias is more on a statutory regime; to me that’s fair. So deduction aggregation sort of basis. But they intend to develop a more fulsome group model as well as the domestic model. And again, I’d rather wait until they get that further developed before I say anything publicly ahead of that. They are -- I may have mentioned this earlier, apologies if I didn’t, they are soliciting input from the balance of the regulatory college. So the major jurisdictions we’re in are contributing what they see as key discussion points and metrics in that conversation. And we think it’ll be a productive dialogue. And again, the PRA is in that dialogue and currently is coordinating that. So it’s -- it’s a cooperative sort -- I think well orchestrated process. And as I said earlier, in my view, they’re a bit ahead of schedule, everyone is on that, and that’s very helpful. So they can staff up now that it’s public. And the team, they’ll need to work on that and they can have the interactions with the other regulators they need to make sure everyone’s concerns are met globally. On the health and protection piece, I’ll let Nic answer that one on the trends. I’m not sure it’s the first time we disclosed that. I think...

No. I think it may be the first time that we put it on a slide outside of investor, a regular Investor Conference. I think when I was CFO, I used to provide the figure regularly. It has inched up in the time that I have been here. It used to be somewhere around the 64, 65, 66, 67. We’ve seen a big uptick, up to, as I said, 19% growth, which makes it a healthy proportion of the mix. How have we achieved that? It’s pretty broad across the region. We refresh our product set regularly. We had more than 20 either new products or refreshed products. A lot of that tends to take place in Hong Kong, where we are adding kind of multi -- multi -- different chronic diseases, multi-care propositions. There’s been a refresh in the products in Singapore. Also in China. But pretty much across the piece. What we’ve seen is kind of a big step-up in the agency-driven H&P content. That was around 35% in the first half of last year. That stepped up to 37%. In fact, in the second quarter specifically, agency -- this is the mix of business coming from agency in the second quarter, it was up to 38%. So the focus is coming through clearly in absolute increase in NBP and it’s a healthy proportion of the total.

And the only other thing I’d say, Jon, is in some of the markets we’re in, it’s the first product that we’ve discussed the clients ever bought. So I think some of the persistency in things you see is, is just the nature of it. It was a very big decision. And again, I think, we’re executing -- we are keeping the products current. We clearly have markets like Singapore where you’re closer to 2.5 products per household and the continued to increase that. But it’s a little different in each market, Nic, is that fair to say, and the client relationship, depending on per capita income, what financial products they bought before all those sorts of dynamics as well. So it’s not just -- it’s actively managed. On the U.S., the DOL, so just one general comment, I’ll flip it to Barry. The SEC has had a view, let me back up even further, the perception that was going from sort of no client interest is an inaccurate one. There was always a requirement on suitability for a sale of a security in a separate purchase of a security and variable annuities have always gone through that. So that standard is raised to best interest in the proposed DOL language. The SEC was looking at it, by our understanding, as early as the DOL was looking at it as FINRA. So it’s not a new work stream for the SEC. They picked it up, and we are running in parallel with it. I don’t think we believe the courts activity changed the industry’s ambition to have an outcome that is best interest for the client. But Barry I’ll let you...

That’s exactly right. I think -- I wouldn’t put too much emphasis, as you think about this, on the DOL rule, and it was there and now it’s not. So things are going to change dramatically. The tipping point, if you look more broadly at the industry and you look at the number of advisers out there who accept commission versus those who work exclusively on a fee basis, and perhaps more importantly if you look at the total scale of assets that are managed on a fee basis versus a commission basis, the tipping point was a couple of years before the DOL rule and with the advisory space exceeding the commission space and growing more rapidly. So in a lot of respects, saying we need to have an advisory set of products, we need to focus on these advisers, which we’ve never done, who work only on a fee basis and who hold themselves to a fiduciary standard is -- I mean, having a set of products with them is just following the money and recognizing that this is increasingly what consumers want and that consumers ought to have a choice on how their adviser is compensated. In some instances, people are very comfortable having a commission paid. In others, they prefer pure transparency and they want to be able to decide what the adviser makes and pay that to them directly. As Mike said, we are strongly in favor of a heightened standard. We think it is very important. As people retire, in many instances under saved, it’s very important that they choose very carefully investment vehicles that will make their money work harder than it’s ever worked before and last as long as it’s going to last, which is probably longer -- it probably needs to last longer than they anticipated it would need to. So we are very much in favor of that heightened standard. And as Mike said, the SEC is in the final stages, actually the comment period ended yesterday I think on their proposed best interest standard. So there will be a new heightened standard very soon. Your question, what will the mix be? I think it will follow the trajectory of commission-based assets versus fee-based assets. And commission-based assets are gradually declining and fee-based assets are growing at a pretty healthy clip. So I don’t think you will see a dramatic shift in the mix over the next 2, 3, 4 years. But if we look back at this 10 or 15 years from now, there’ll be a significant percentage of these products that are sold on a fee basis.

Jon, it took about 15 years my view for the fund industry to move to predominantly fee-based or in that structure. And then the other comment I think I’d just throw in on it is the -- a best interest standard implies best product, implicitly best product, which we have. So you can imagine we are more than supportive of a formalized process that says the best product should be recommended.

Absolutely. And one thing that wasn’t called out directly on the slide that we probably ought to point out to you, when we talk about the consumer centricity of this product is the investment returns that we’ve generated versus our competitors which are superior. So it’s best in terms of a lot of perspective. Mike talked about our, and Mark as well about our industry-leading cost of operation, the high level of service and so forth. But the actual returns generated from the funds on the platform is superior.

It’s Blair Stewart from BAML. I’ve got 2 Asia questions. The first one, just picking out a couple of markets in Asia, I wonder if you can comment, Nic, on China where I think some of the headline growth rates that you’ve been showing have slowed, maybe a mix of business effect, but that would be interesting. And then on the other side, Indonesia, which remains quite sluggish, you talked a little bit about what’s going on there if possible. That’s one question, 2 parts. And then moving into the U.S. Barry, I don’t know if you want to comment on the NAIC, Oliver Wyman latest paper that was described earlier as a positive move, I don’t think that was always the case, so some of the tail risks there alleviated somewhat. And then on to capital generation, which I guess will get Chad involved, which is always a good thing. I think GBP 0.8 billion of RBC Capital of statutory capital generation, I think only GBP 0.4 billion of that is operating though. So you just talk about what about the GBP 0.8 billion of statutory capital generation from the U.S. business?

So, Nic, China and Indonesia?

Okay, just an update then on China. Really, the key message for our business in China is that in the course of 2018 so far, we improved the quality and mix of the business whilst adding to the footprint. Now on the latter point, Mike has already covered that, so I won’t expand on it. So quality and mix, clearly a big factor in China this half, has been the circular 1 through 4, which has impacted certain type of products. And when you look at some of the returns or the sales results that many of our competitors there are posting, they are down this year. Now our JV did do some business, but modest amounts. They were equivalent to 7 points -- 7% of the sales mix in half-year ‘17. Clearly, that business wasn’t repeated. But what it did mean is that we are able to concentrate the entire bank distribution channel and the agency channel on writing regular premium for protection or into business. The outworking of that was that the regular premium, as a mix of the total sales, increased by 6 points to 98%, so it was good as any of the markets that we have now in terms of the regular premium mix. And H&P sales were up 18% in the course of the first half with double digit both in 1Q and 2Q, so much so that the mix that’s coming from H&P increased from 35% this time last year to 41% this year. And in fact, in discrete 2Q, it was 55%. Really as high as we would typically see in places like Malaysia and Indonesia. We launched some new products in the second quarter, an education product, to supplement many of our health and protection strategies. And all of this pushed sales, overall sales in the second quarter, up by 21%. All of this really net-net has seen our market share go up. Okay, it’s not a lot, from 80 basis points to 1%. But we’ll take that. But more importantly, overall NBP was up 15% and overall IFRS profits were up 22%, helped by, not least helped by a 97% customer retention ratio. So we feel like all the quality metrics are kind of coming through once you look beyond the top line. On Indonesia, I mean, candidly what you -- again what you’re seeing come through in the first half is a continuation of trends that you’ve observed in the past 3 or 4 years. As you can expect, Raghu and I have had a close look at that business from a strategic and market perspective, and really the performance this half, the performance in the previous 2, 3 years is a reflect, has a strategic and a market dimension and an operations dimension. Let me say a bit more on each. Now the strategic market dimension, what it, what we do in Indonesia is we are a very big player in the agency-driven linked part of the market, okay. We have 36% market share in that particular part of the market. That part of the market has been declining at a rate of 3% CAGR in the last 4 years. And the part of the market that has been growing has been the bancassurance piece, at plus 12% CAGR over the last 4 years, and the traditional piece, which has been growing at around 9% CAGR. Now bancassurance traditional, we have a 3% market share. So we’ve done very well in a part of the market that isn’t growing. And that’s kind of one area that we are looking to see whether we can shift those, some of the capital allocations decisions that we’ve made in the past to put ourselves into that space. It won’t be an instant fix, but at least it’s a big opportunity as we go forward. Now on the operational space, candidly, we’ve probably been a bit too slow in segmenting our agency force. If you like, creating an elite team, giving them the appropriate products, we’ve been a little too slow in broadening our product, our product set and segmenting the product set between the high net worth, the mass market and the affluent. And operationally, yes, we should have been a lot faster in investing in the infrastructure to give agility to that business. Now we’ve diagnosed all of those elements. We know what we need to do. We’ve had, we’ve done it, and we’ve had to do it in other markets successfully. And we are putting a lot of effort behind addressing all of that. There are no quick fixes. But it’s an important market for all of the structural reasons. We’ve got a fantastic footprint in that particular market given our presence, our scale, the sheer number of customers that we have and the reach. And we are going to work hard to effectively to plug those 2 areas that I’ve just commented on.

Nic, why don’t you give them an idea of the success of the Sharia product and the new, [indiscernible] just to give them a little…

Yes. I mean, the, we are, as I said earlier, we have a big market share in Indonesia. We’ve got about 22% of the market, biggest share of course in unit-linked. Sharia is another area, which is a core strength for us in that business. At the last count, we had around 25% of the AUM for that market. It’s an area which we are pushing very, very hard. It’s very important for the business to appeal broadly to all segments, whether they are kind of with a social dimension as well as an economic dimension. We’re growing our sales strongly. The sales in the first half in the Sharia space grew at 19%. And this is on top of a 16% growth last year. So it’s an area where we’re getting quite a lot of traction and putting more effort to recruit agents, to train them to sell those particular products. And the other area where we’ve done well, even though we have a very small market presence, is on the banker side. We grew 4% in the course of this year on top of 18% last year, but we have a very small footprint. We are adding to this through a new relationship with OC BC, which is nonexclusive, but it’s important. And we’re adding to it with as the Vietnamese private finance company sale completes later in the year. We will get [indiscernible] presence, branches in that market, but it would still be [indiscernible]. I think it would still be small, and we would need to do more in that space.

Next question. Oh, I’m sorry, U.S. Please, apologies.

Let me touch on this and then we’ll turn it over to Chad for the gory details. Mark called this out, and I think it’s worth emphasizing the work really is largely done, it’s backed on NAIC, and we’re happy really with where it came out. It was a good process, we engaged diligently throughout the process with leaderships across the country. Within NAIC, I think we have good relationships, so we don’t have a number to throw out yet because we have not seen the actual wordings yet, we want to wait until get we get specificity before we give you more granular detail. But we don’t think this is a material impact to us at all. We think it’s quite manageable, fairly limited. And the outcome, even though it’s been a complicated process to go through, ultimately, the outcome is positive in that while everybody in the sector, you’ll see the RBC rates go down not by a huge amount, but they will go down. But at that new level, then you’ll see a level of stability and a lack of volatility that we’ve not seen before, and I think that’s a good outcome actually for the industry. I don’t know if you want to add any more color on NAIC, but certainly on the capital generation [indiscernible], we’ll throw that to you, Chad.

Yes, sure. I guess just one clarification on the NAIC would be you probably saw we were a little defensive about this or a little cautious about this over the last year or so when it was being developed. I think our bigger issue there was there was an impetus underneath it to potentially try to push it to a more market consistent type of regime. And that was as we saw [indiscernible] that’s just not something that works well in the U.S. That was resolved earlier this year, with the [indiscernible] generators being, I think, put in a sensible place. We’re really not changing that. So once we got past that, that was the big piece of caution. You may have also seen that we had written a letter to NAIC just on the standard scenario. We were not so much concerned the standards scenario was specifically binding to us, but we were a little bit concerned about the breadth of the policyholder behavior studies that they had done, which didn’t include us, for instance, as the largest GMWB provider. So more of a technical issue. We’re more, let’s say, more subject matter experts than the policyholder behavior for GMWBs given size of our book. And so there was, I think, some just some concern about the robustness of that data, more of a technical point as opposed to something we were overly concerned about. But we are comfortable with it going forward and it is more stable and tails, which is good. Moving on to capital formation. I think, part of what we saw this year was really the opposite of what we saw last year. I think we talked last year about the fact that the reserves on the statutory side had floored out with the market being as healthy as it was. And so we are effectively, as Mark mentioned earlier, we are at the cash surrender value floor, which has become relatively onerous relative to more of a principles based view of the economics. The fact that the market didn’t move up much in the first half just tells you that you really -- we didn’t have any reserves go up because the market really didn’t move much, but it was slightly positive. And we had lower derivatives’ losses because the market was relatively flat. So that was very helpful. And again the opposite effectively of what happened last year. Higher rates helped because even with the market flat, it means you don’t really have a reserve build there. Higher volatility, realized volatility on the margin helps us because we own a large option book. Last year we saw no volatility in the market to speak of, lowest in 50 years. So buying options is really kind of a losing proposition in that type of environment. Having options in a very volatile first quarter obviously is helpful because you get payoffs. And then I’d say, finally, as Mark also talked about, we are limited on DTA, so the deferred tax assets that we can bring through are limited. As capital expands or contracts, basically, we get a 15% benefit or detriment of that. So as capital moved up from operating as well as from some of the net reserve position, we got a little bit of tailwind off of that as well.

Thanks, Chad.

Yeah, hi. Thank you Ashik Musaddi from JP Morgan. First question is, I mean, there’s a bit of noise that Alliance is looking at Prudential. And I think I’m not sure if you have looked at the tape it says that [Indiscernible] is looking at your Asian business as well. I think one of the issues or concerns would be the involvement of U.S. with the Asian bit. So I’m sure you won’t comment on rumors, but any thoughts that if someone is interested on your Asian business only, is it -- how do you see entangling U.S. from your Asian bits? Any thought on that? And would you consider such an option? So that’s the first one. Secondly, going back to the previous question on the capital generation on U.S., which is just looking at the operating earnings. I mean, it’s not just a phenomena for this year, it has been kind of stable for past say, 5, 6 years, it hasn’t moved up a lot, whereas IFRS earnings have moved up quite a lot. So any thoughts on that? What is the dynamic that’s playing out? What are we missing? Why the operating earnings on RBC basis is not moving up? So that’s the second. And lastly to Mark, thank you for sharing the debt structure for the UK part. Any thoughts on what do we do with the £3.8 billion debt that will be left with the group ELC. I mean is that a sustainable level of debt? Do you want to increase it? Do you want to decrease it? Any thoughts on that would be great. Thank you.

So, Ashik, we usually don’t comment on M&A merger, comments but let me get a little clarification on 2 things. There’s clearly, as we are shining more light on the quality of each of these businesses, people in board rooms are sitting around saying, hey, we don’t have growth and they have growth, and I’m sure that there is an investment banker or 2 in the city who’s thinking I can possibly get paid on this trade if I do a good job, not that it ever would [Indiscernible]motivation. I’d be very clear, my trips to China were, one, to see my son perform 2 concerts outside of Shenzhen; and second, to meet with the key regulators and the folks of the China development forum. So we are in no current talks with anybody, that’s the last time we’ll comment on specifics. But I want to since I mentioned the China trip, I felt like I want to make sure that I’m transparent with you on I did meet with Hong Kong, did meet with the Chinese regulator. I do on almost every trip. We need to stay close to the regulators that we work with in those jurisdictions as we do in all of our jurisdictions. So that’s not a unique behavior on my part as Group CEO or our teams. Just to make sure I am not adding to the rumor mill. And in general context, we are a growing firm with a very high-quality set of businesses around the world. And I’m sure people are trying to figure out, is there a -- you see it with the new entrants in Asia. They -- I kidded you earlier, it took us 94 years to get the portfolio we have of businesses in Asia. I think you can replicate it faster than that from scratch, figure if you’ve done it once. But not quickly. And so these are highly valuable businesses, they are running well, you see the results. Am I surprised someone’s -- if someone is sitting in a boardroom? No. Are we having conversations right now? Not currently. Okay? And again, in the future, we won’t comment on that. But I just want to be specific since I made those my snarky comment on China, the China trip, I don’t want that confused to be part of the rumor process. General comment on capital generation, and you mentioned AXA. So keep in mind, I can’t I haven’t done a cumulative math on their dividend out of their U.S. business, but I don’t believe other than the that final withdrawal they did when they spun it, they have taken a whole lot of cash out. So you’ve got to start with a 4.9 billion of distributions just in the last 10 years alone proves in it 600 million on its U.S. business quite a different cost than some of the than ING access, some of the other players that came in there, and thought it was a land race. So I think there is a -- you have to look at all the metrics. And then we controlled the level of sales we accepted in every given year, particularly post-crisis. In doing that, that flattens the shape of the earnings in the business. And that’s a -- it’s a -- we saw it as risk management. And it being in the business, generally it was difficult, that was my role at the time, because you’re saying to advisers with very, very little notice that the product is not available, they’ve already presented to a client in the first couple of a meetings, and it was damaging there’s some very important relationships we cost departments of financial groups. And I know in New York year-end bonuses, because we surprised them, we were the number one product in most firms. So there’s a lot of elements to that, that go to the shape of the characteristics. But I think the fairest way to look at it is the total return over the long haul that includes capital injections, losses they’ve taken, how the consumers have done, how the balance sheet has grown, how the earnings have grown, all those things. And I think that business stands up against anybody’s. Including where it is now. I mean, the distribution it’s making versus the proposed buybacks and things of those books, it’s multiples of that. So -- and I would be curious if any of them can stand up and say every single cohort is profitable. So that would be the other challenge. I saw the decks that were circulated when I did the road shows, and the unnamed dots and all that, and that’s U.S. hardball, that’s how people play. But those were on scenarios that were generated. These numbers are off historical actuals to our shareholders, and I think there is an important distinction there. Do you want to -- Barry, do you want to add anything to that?

I think you did a pretty good job.

Question in terms of the debt. So we’ve set up the building blocks at this stage for M&G Pru and we’re going to also set up this morning in terms of the key capital management principles that we are looking at. So we and one of those is making sure that we have appropriate liquidity. And the other one in terms as well making sure that we have an appropriate credit rating. We want to make sure that we have a good standing. And as you can imagine a lot of the work we have done behind the scenes in terms of looking at the various scenarios in terms of where we are coming out, we believe it is appropriate, and we believe that we will have all the cash flows to manage the appropriate levels of debt.

It’s Andrew Crean from Autonomous. Three questions if I can. Firstly, I think the amount of debt that M&G Pru will have will give it on an IFRS basis leverage pretty high in the sort of 40%. Do you have any plans post demerger to sell off the other £21 billion, £22 billion of shareholder annuities which would release substantial amounts of capital to counter that? Secondly, could you talk a bit about the outlook for variable annuity sales over the next 2 or 3 years? And thirdly, having watched the AXA Equitable spin earlier in the year, do you have any belief that if you were to spin your Jackson that you would ever get a proper valuation, although it’ll just be linkage to a sort of bright house valuation?

You want another rant, I guess, is the question.

Can I do this one?

Let me do the last one first. We’ve been pretty clear there is no plans that we’ve got currently to spin the U.S. business. And I think for a lot of the reasons I mentioned earlier, I like the combination of the 2 from risk-wise. I think the board -- I mean the board and the management team, we like the scale it gives us. Asia is at a point now where it funds its organic sales comfortably, even some minor M&A, and you see its expansion capability comfortably. But on the bigger strategic stuff, it’s nice to be a bigger firm and have more earnings and more capital. And I do think the some of the dispositions and transactions that have taken place on what were predominantly GMIB books, a product that we were not fans of, certainly would affect valuation of any quality business coming to market with that -- in that space. So it’s not a short-term plan, and it’s -- it’s back to Ashik’s question, I think, which is, if we run these businesses well, we have structural options. And the better we run them, the more options we have. And that’s a reasonable outcome of doing a good job with the individual businesses, and we are not, I think, we can stand here credibly and say we’re not trying to run this for absolute size. We wouldn’t be spinning off the U.K. businesses, it’s total shareholder return, so I made it very clear. If something came that created massive value for our shareholders, we would look very seriously at it. I don’t believe spinning the U.S. into the climate that was created there would do that. I can’t personally. And I think the kind of multiples we’ve seen would not make sense, and you probably do a management led buyout and I am kidding at that. But it is multiples that anyone of us would want to own it. So I don’t think that’s a viable option for us. But we are not precious as to how to create value for shareholders. I hope that’s very clear by the amount of work going into the demerger. Mark, do you want to comment on the debt level and the coverage?

So in terms of the coverage, I suppose, the underlying question, Andrew, is one of sell off annuities, there is no plan to sell off further annuities at this stage. And when you look at the degree of leverage in terms of the IFRS, clearly, that misses out a very large component of the business, which is the with-profit fund. And if you start taking some of that with-profit fund and some of the shift asset or related elements, you see their ratios start coming well down into market normal levels that it would be far more acceptable, and it is a very important, very important component of that business going forward.

Barry, VA sales outlook?

Can I have a little go at him on the other part as well?

Sure. Go ahead.

I will confess to you, and I probably done so privately, but I’ll do it again here in public, that it is frustrating to be compared to a "peer set" whose performance, Mike has alluded to this, has been very different historically than ours. We’re being compared to companies and our valuation is in some respects been driven that puts pressure on our valuation. Because we’re compared to companies who have made on multiple occasions product design and pricing problems that have created existential issues for their businesses. Please don’t under estimate, the word on Mark’s slide was disciplined management. Please don’t understand, underestimate the value of that, because it is gigantic. We have, you’ve seen us come through the crisis. We had a good crisis. Our ALM policies did exactly what they were meant to do. Our customers have never been disadvantaged, quite the opposite. And our shareholders have not been disadvantaged, quite the opposite, they’ve been rewarded handsomely for the disciplined, sensible creation and operation of this business. So I, I would not, it would seem like hubris to sit here and say, we have no peer in the United States, because there are other companies that are trying to do what we do. But we have performed at a level that no one else has. And that rightly should be reflected in our valuation and in the way people think about this business. Now you had a sensible question, I think. Where will VA sales be in the next 2 to 3 years? Mike mentioned this alliance for lifetime income, that we were instrumental in forming. And what this is meant to do, it’s a broad array right now, it’s 27 companies and growing, who are making financial contributions to an Alliance who is, we are influencing public policy and consumer sentiment around the importance of having guaranteed income in retirement. Because most Americans are trying to live through retirement by investing in mutual funds, which do a great job for them most of the time, but there are moments when they are volatile and many of these consumers, they’re under-saved and they are unsophisticated, and so they really urgently need a guarantee of some sort. And income guarantees are not sensible, the marketplace has spoken on that. But withdrawal benefits are actually very sensible and have enormous social value for consumers and candidly for public policymakers as well, because failure to help Americans in retirement, failure to help them navigate the straits of retirement and the volatility that’s inherent in being, investing in the market, failure to do that becomes public policy issue. If you have a generation of Americans in their 80s running out of money, the public pocketbook will have to be opened to sort it out. So because of that, there is this enormous drumbeat building in the United States that, gosh, we really ought to have a very strong look at these products and how they work and what they do for consumers. So it’s a long way of saying to you, I suspect in 2 or 3 years, particularly when the alliances media campaign start in full force, which happens next month, middle of next month, I think you will see greater consumer interest. I think there is the prospect that what has always been sort of a push product sold by commission-based advisers to customers, I think you will see more and more pull, you’ll see consumers seeing these ads going to their advisers, saying, gosh, I didn’t realize I could get a guarantee, I’d like to have a look at one of those. And so 3 years out, I think you’ll see a growing market, and you’ll see it growing at a faster clip than it’s grown in some time.

And legislative, the current…

Legislative, I mean I know you’re all dazzled by the coherence of everything happening in Washington. It’s a wonder to behold. The one thing that actually has made it through Congress, that made it through the Senate on a voice vote and is now working its way through the house under the leadership of Chairman Brady of House Ways and Means Committee is a legislation called RESA, which does a variety of things to make it easier for Americans to get sensible advice and access to products that will help them in retirement. Literally, it passed the Senate 96-0. We, it’s moving more slowly in the house, because it’s been tied to additional tax reform, which I think is not, in a midterm election year in the autumn is not likely to get through, it’s I think, perhaps, it’s more something for Republicans to run on and Democrats to run against. But the element of that bill, the RESA element that’s retirement-focused, we do expect, we are optimistic that it will get through the house, we are pushing very hard for that.

And why does it matter?

It matters a lot because it will make it, it matters at a variety of levels. It opens new opportunities, potentially new channels for us, to get to people at younger ages, people who are participating in 401(k) plans, introduce the prospect of offering these guarantees to participants of 401(k) plans as they are accumulating as opposed to getting to them when they’ve already finished the accumulation process and basically they’ve kind of baked their cake at that point, most retire with not enough money. And it just introduces a more sensible rate of regulatory regime in a lot of respects around these problems. It’ s very helpful.

Thanks, Barry.

Greig?

Greig Paterson, KBW. Michael, comment about Asia self-financing organic but only being able to do a little bit of M&A. If you look to the next 10 years, what do you think about what sort of capital amount that will have to come from the U.S. to finance the M&A in Asia as it’s done in the past? That’s question one. Second, if you could update on the Malaysian minority sale, given the new political context there. And the third thing is that there was a mention about credit ratings being strong, do you mean the rating agency’s strong, i.e., M&G will be targeting a single A credit rating or AA as in just the terminologies there wasn’t sure? And finally, in terms of the residual circa GBP22 billion UK annuity book, given that you are not planning to sell it but you are doing continuous ALM and longevity swaps. I was wondering what’s the potential for reserve release on that GBP22 billion cumulatively over the next few years? How far along the journey have we gone?

Okay. Thanks, Greig. On the U.S. capital piece, there is a couple of dynamics. It’s not predictable, we’re not going to say we need GBP400 million to do this sort of acquisition. It’s opportunistic. And I would say it’s M&A, its capability, it’s contracts,

[Inaudible]

Yes, I know, I know, U.S. financing Asia, I appreciate that. So I think it is opportunistic, and I think there’s 2 ways to think, it could be acquisition, it could be capability, it could be partnership structures that are more attractive to the counterparty because of the size and scale of the business, we get different price or different transaction we might not have got. And then it is risk tolerance. So if you think about, I mean, one of the we’ve always seen this, I know a lot of you have followed us for a long time, it is not unusual in Asia that we get one market that has a pop for whatever reason, and you need the appropriate size, balance sheet and earnings to handle the successes as well as if you have an incremental failure. And if you had a smaller company and one market runs, you want to have earnings from other sources to be able to accept that and not have it be disproportionate out of balance sort of part of your business. So the more large engines we have for earnings and growth that are noncorrelated, the more we can accept successes or if there is a problem in the market. So, there’s a lot of attributes to the U.S. earnings and the nature of those earnings, and they’re so materially different than as you see, than the developing nature of what we have in Asia that we just like some of the diversification benefit age. You saw the -- I was kidding Anne the -- this is the actuarial side, sorry. But when I see Hong Kong at 95% and 90% and China at 97% renewals, statistically, somebody should pass. I mean, the mortality levels, that would imply that’s incredibly healthy group or a young group, right? That’s so when our renewal rates would tell you that if you think about natural renewals, you’re going to have some folks die just by the normal age distributions we get. So what you see out of these those Asian metrics is how young the book is. I mean, that’s one of the dynamics that comes across in that. And the U.S. is more where we did this a few years ago, probably four years ago, we showed you the age distribution of the U.S. book looks like just the baby boomers, I mean, we haven’t done it in a few years, we’ll turn it up for Singapore, but the book is very, very similar to the age distribution in the U.S. retirees. So it’s an older crowd than our Asian clientele. Not every market in Asia, but most. So that’s again these things don’t matter until something goes wrong, and then they’re hugely valuable, to have the diversification. And it also means the earnings looking out have a different life to the cash flow signatures, not just the shape, right, when we get paid.

[Inaudible] If you look over the last five years, about circa £3 billion have been transferred from the U.S. to Asia to finance the renewal of bancassurance deals, new bancassurance deals. That’s an ongoing requirement of Asia and something you cannot finance by way it is today. I was wondering, because people often ask the question could Asia stand by itself? The answer is no. It needs a cumulative X over the next five, 10 years to renew bancassurance, to get new bancassurance deals, I’m trying to get a feel for what management is thinking of that sort of budget? [indiscernible]

Yes, so it’s a fair question. So we’ve never disclosed the actual specs on any of the bancassurance deals. But they are, I would say it’s a couple of things. They are changing, some of them are big, and you’re right, you need scale for those source events and you need scale to be credible on one of those processes. They got to believe you can cut the check. It can’t be seen as a strain that or I often get the challenge, we could go to the market, you could raise debt or you could raise equity if you had a renewal an SCB or something. I can tell you from our side, John’s team, Jack and the folks who worked on the Rothesay transaction, if someone didn’t have the capital in-house and said we have to go to the market, we have to go raise debt, we have to go -- you diminish the value of their bid. So we want to be a strong bidder on distributional relationships, on consolidation in the industry, on -- when we bought an asset manager in Thailand. We want them to know that we can deliver on that transaction. So that is a dynamic to it, you’re absolutely right. They are also unpredictable what’s going to come up and when, there’s certain ones I’m not going to tell you we have targets, but there are certain targets we’d love on the bank side. The other is the nature of bank transactions in the markets is changing. Nic, why don’t you comment on some of the ones you guys have done first half of the year. I mean, they are quite different than what we did 5 years ago.

Sure. I mean, clearly we are very happy to operate with banks on an exclusive basis, and you’ve seen the success that we delivered over the years with SCB, one of the most enduring, and most successful relationship, we’re replicating that with UOB, with [Indiscernible]. But we are equally happy operating on an open-source basis. We’ll -- we will always back ourselves to put the product on the shelf, to properly train and push product. The Siam Commercial Bank relationship in Thailand is key. That went through a competitive process. It did result into a successful bid. They invited us, alongside others, to effectively pitch to provide unit-linked products to their high net worth. Customer set around 400,000 people. We were the winning bid. And then we rolled out all the things that will make us great when dealing with banks. Within 2 months, we trained 1,700 of their RMs. We put 4 products on the shelf literally within months of agreeing the deal and added 26 different funds behind those with an open architecture way, so much so that in the first 5 months since launch at the beginning of February, this particular relationship, which is nonexclusive, we are working alongside their captive life company, is contributed to 15% of the sales that we are getting from Thailand. So it just shows how on a open-source basis, we can equally compete now. That’s new. And all the other, with the exception of [Indiscernible], which is yet to come into the second half of the year. All those deals that we put up there are on that particular basis. Smaller term, nonexclusive, go in and compete on the quality and the power of our delivery. And that, of course, then opens the door for broader discussions once you are able to demonstrate that you can deliver on that basis. And of course, those are happening alongside delivering on sales.

And Greig, the China bank model is, from a regulatory point of view, the bank should have a reasonable offering and product, so that’s an entirely different dynamic, so you’re not doing an exclusive. So those are varying in duration and how you pay pay-as-you-go versus pay more upfront. So it’s a -- we wouldn’t -- we don’t have a chart of what we think each renewal or each contract would cost -- it’s one-off. And then the last dynamic is or I guess last 2 is how successful the banks become on digital, because that’s going to matter on a 12-, 15-year contract, we don’t have a traditional contract. And then what’s traffic. And that varies very much culturally by country on the banks you see is probably advice provider in the future versus saying all banks in Asia will continue to grow. And I’m sure you all see the branch count number and the foot traffic numbers. So some are working incredibly well. We have to stay agile in that. We have to adjust. So I think it is -- there is not a clear draw -- I appreciate your historic look at, but there’s not clear draw on what that is going forward. But thematically, you’re right. We need, as a group, the firepower to go into the large transactions and be a credible player. If that’s distribution, if that’s acquisition, if that’s a unique asset on technology, whatever it happens to be. The combined U.S. Asia has much more firepower to do that and much more credible than either business standalone. And then do we hit credit rating and the residual, John the residual on the back book and the management actions?

Yes, well, I’m not sure if I understood your question very well, Greig, but clearly we’ve been active even this half-year on management actions, what we lump into the noncore part of our business. It’s been pretty core for the last couple of years, we’ve been very busy. Obviously, smaller book, fewer the number of opportunities to actively manage it. And I think that’s part of the impact going forward when we think about releasing capital by selling more of the book, what is the impact across the business and there are other impacts that perhaps aren’t clear at first blush. So if that’s what you’re asking about, that would be my answer.

Over the years, you’ve released quite a bit. Just trying to figure out, is there 1 billion to come? 2 billion? 3 billion? Just layman terms?

Well, that depends. I mean it really depends on the market and what the different valuation of each of the opportunities in the cohort. So for example, longevity depends what people want at any given time. We have a team of people who actively manage that. And if fact we’ve -- I think we’ve enhanced that team over the last couple of years, particularly on the asset side. Putting a number on what might emerge, I think, is not something we...

What we could say is that, as we mentioned the time we did the transaction, any of their [Indiscernible] benefits are gone. This is a more capital-intensive book. It’s not homogenous. There are short- and long-term sort of cash flow signatures, if you think about it that way, average age of participants, those sort of metrics. So I don’t think there is a simple read across what we’ve done historically as part of capital release were what we could towards what we could do. I think we have set about 40% of the book as longevity insurance, to give you an idea. So it’s quite a capital intensive book. But as Mark said right now, there is no current plans to doing anything with it. And the question of what we would do later post-demerger would belong to that board and that management team, that would not be our call. Malaysia, Nic?

[Inaudible] targeting in the U.K.? Financial strength ...

I’m sorry. So, Nic and then Mark.

Now in Malaysia, we’re waiting to hear kind of what the view of the new government is on the divestment policy. I mean, what is clear is that timeline has now been pushed back. And as you can appreciate, they have other priorities at this particular juncture. I mean, in the meantime, the business is performing well, okay, the sales headline was a little soft But similar to what we’ve seen in other parts of our business. There’s a strong product mix focus. NBP was up in the first half in Malaysia, 8%, within that. The NBP that’s generated from agency was up 13% and profits were up 11%. So happy with the performance, and we are waiting to see what the new government has in store on that policy.

Mark, on the credit ratings.

And then in terms of credit ratings, Greig, not necessarily going to be drawn on the individual things at this stage. The general sense is we want both businesses to be well capitalized -- have the right mix of capital at the point of demerger. And we’ve got the board of M&G Prudential that still to be created and set up. And as Mike mentioned, when the chairperson’s onboard, it will be one of the many things that they will be looking and considering.

Oliver Steel, Deutsche Bank. So 2 questions. First, obviously, in Asia, the health and protection side is going very well indeed. But by implication, the savings side is possibly quite well down. You talk about Indonesia and China. But I wonder if you can just talk a bit more generally about the sort of softness of the savings sales. How much of that is deliberate? How are you expecting that to change over the course of the next sort of 6 to 12 months in terms of sort of any indications of consumer confidence, perhaps improving? Secondly, if you’re going to retain the U.K. annuity book, can you tell us what the difference is between the profits currently coming off that book and the free capital coming off that book, because obviously that’s going to be an quite an important issue for the U.K. business going forward?

Nic, on the health and protection versus savings in Asia?

We -- I mean, clearly, savings continues to be a major driver, not least because as you saw in some of the structural trends, you have an aging population, people are living longer. There is a need to save not only for education but increasingly so for retirement. It’s an important part. What -- what we haven’t talked about is that in our numbers, we’ve also seen a switch out of with-profits [indiscernible] business and into unit-linked. Unit-linked has been a main beneficiary of a switch in mix in the first half. In fact, unit-linked sales were up 29%, not least aided by the example that I gave you on Thailand. But we’ve seen switch to unit-linked in places like Vietnam, as we diversify the product range. In Taiwan, as we also diversify the product range. And in India as well. So within savings, there are some interesting trends. And the other thing, as to what will happen over the next few years, I think structural would trump cyclical. I think that kind of goes without saying, particularly when you see the wealth creation that Mike has put up on the slide. But if I can take this opportunity, yes, the half-year numbers may have been on the sales side sort of below the quality shift. But we had a very strong rebound in Q2, and maybe I can say a couple of things. Yes, sales were up 6%, but 6 of those markets were double-digit. And behind that, Hong Kong was up 13% and China was up 21%. Hong Kong, specifically, we saw a rebound in the sales of coming back for Mainland China. Mainland China sales were up 20% in the second quarter, which was kind of a reversal of the trend that we’ve seen over the last 4 or 5. That’s an interesting development. And actually what we’ve seen is we’ve sold the highest health and protection level of sales to Mainland Chinese customers than at any point in our history, even at the time of the peak. We had best-ever banker quarter. Again, it’s interesting to see, and banker tends to be, to your point, more savings-oriented, although a lot of that came in a unit-linked guise. So no, we are pleased with the second quarter, particularly with Mainland China coming across and increasing. And one other stat on the Mainland China, what is interesting to see is that about a third of the sales that we get from Mainland China in the first half into Hong Kong were repeat sales. What this is telling us is that people aren’t just coming in and buying a first product. A lot of the customers that we sell to are coming back and dialing up either in protection or doing some top up on the saving side as we refresh the product set. So some very interesting dynamics there as well.

Okay, so with that, we’ll wrap up. I just -- I’m sorry, what did I miss? Oh, have we disclosed, John, no, we don’t disclose that, right? Not yet. You might.

I was just going to say that we’ll get to that, but I mean, we don’t disclose those numbers.

I mean the general sense is that if you look at the capital that frees up as the annuity book runs off, that capital that runs off is greater than the IFRS earnings that go along side that. So therefore, you would expect to see the free surplus coming through more strongly than the annuities just by virtue of the capital intensity of the annuity book.