Legal & General Group H1 2025 Earnings Report

Legal & General Group EPS Results

• Actual EPS: GBX 4.48
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Legal & General Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Legal & General Group Announcement Details

• Quarter: H1 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 5:00AM ET

Legal & General Group (LON:LGEN) provides various insurance products and services in the United Kingdom, the United States, and internationally. It operates in Legal & General Retirement Institutional (LGRI), Legal & General Investment Management (LGIM), Legal & General Capital (LGC), and Retail segments. The LGRI segment offers annuity contracts with guaranteed income for a specified time; and longevity insurance products. The LGIM segment offers index fund management; active fixed income funds and liquidity funds; active equity management; solution and liability driven investment; multi-asset funds; corporate pension scheme solutions; and real assets. The LGC segment provides investment strategy and implementation, and direct investment and structuring services. The Retail segment offers protection products, such as health, disability, critical illness, and accident; individual term assurance; reinsurance; savings and death benefits; annuities; lifetime mortgages; lifetime care plans; retirement interest only mortgages; and workplace savings scheme that provides corporate pension scheme solutions. It is also involved in the unit trust and institutional fund management, mortgage finance, treasury, building project and modular housing development, general insurance, and open-ended investment businesses. In addition, the company engages in the investment, operation, management, trading, and letting and operation of leased real estate; and construction of commercial buildings, financial intermediation, pension tracing and transfer, insurance agents and brokers, fund general partner, commercial lending, venture capital investing, contractual scheme, investor alternative investment fund, collective asset-management, and investment management activities; and provision of investment advisory, business information consultancy, and technology services. Legal & General Group Plc was founded in 1836 and is headquartered in London, the United Kingdom.

Legal & General Group H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong H1 Results: Core operating EPS rose 9% at the top end of guidance, core profit up 6% to £859 m, with a 217% Solvency II ratio and a 2% interim dividend increase.
• Positive Sentiment: Institutional Retirement Momentum: PRT volumes reached £5.2 bn in H1 with a £42 bn active pipeline, keeping the £10–13 bn annual target through 2028 firmly in sight and supporting long-term market growth.
• Positive Sentiment: Asset Management Turnaround: Annualised net new revenue hit £15 m—exceeding the last two years combined—while average fee margins climbed toward double digits and Private Markets AUM rose to £65 bn.
• Positive Sentiment: Retail DC Growth: Workplace DC net flows surged 21% to £4 bn, AUA topped £100 bn and the Group now covers about 25% of the UK DC market, aided by early private markets integration and pension dashboard access.
• Positive Sentiment: Strategic Execution & Returns: Divestments, the Blackstone partnership and Proprium acquisition sharpen focus, while over £5.1 bn is earmarked for dividends and share buybacks through 2027.

Presentation

[Michelle Moore, Non-Executive Director and Group Strategy & IR - Director at Legal & General Group]

Good morning and a warm welcome both to those of you in the room and to those joining online. I'm Michelle Moore, Group Strategy and Investor Relations Director. To start, a few housekeeping points. To those of you in the room, please make sure you've turned your devices to silent. And in the event the fire alarm sounds, colleagues will guide you to the nearest exit and the normal forward looking statements apply.

[Michelle Moore, Non-Executive Director and Group Strategy & IR - Director at Legal & General Group]

So our running order for today will be as follows. Antonio will open with a summary of our first half results and an update on the progress we are making in delivering against our strategy. Jeff will cover the financial results in more detail and then Antonio will make closing comments before opening to Q and A, at which point he will be joined on stage by Jeff and the CEOs of our three businesses to take your questions. Antonio, over to you.

[António Simões, Group CEO at Legal & General Group]

Thank you, Michelle. Good morning. So, welcome everyone. It's great to have you here with us. We've had a great first half of the year with strong, good earnings and growth and continued momentum in the execution of our strategy.

[António Simões, Group CEO at Legal & General Group]

So let me first take you through the headline numbers. Our core operating EPS is up 9%. That's at the top end of our six to 9% range. Our core operating profit is up 6% at £859,000,000. Our OSG is up 3% to £279,000,000, and we continue to have a very strong balance sheet with a Solvency II coverage ratio of 217%.

[António Simões, Group CEO at Legal & General Group]

We are delivering more to shareholders with a 2% increase in our interim dividend per share, and our 500,000,000 share buyback is now nearly complete. Look, these are great numbers, but the progress on our strategy is even more encouraging. Last year, we outlined a strategy to be a growing, simpler, better connected LNG, which becomes more capital light over time. We've been busy executing that strategy to deliver sustainable growth across our three businesses, sharper strategic focus, and enhanced returns for shareholders. I'm particularly positive about the growth potential for each of our businesses.

[António Simões, Group CEO at Legal & General Group]

Last December, Andrew Cale presented a deep dive on our largest business, Institutional Retirement. A month and a half ago, Eric Adler presented his vision to grow our asset management business, and today we are announcing that our next deep dive into retail with Laura Mason will be on the October 23. So now looking at the past six months, here are the highlights. First, sustainable growth. In institutional retirement, we have had good volumes at low strain, and we have a very good pipeline.

[António Simões, Group CEO at Legal & General Group]

In asset management, we have seen a step change with positive revenue momentum and a further increase in our average revenue margin. In retail, we've had strong workplace DC flows, up more than 20% compared to last year. Then we have a sharper strategic focus with the sale of The U. Protection business and partnership with Meiji Asuda, and we're getting on with the disposals in our corporate investments unit. We have announced, as you've seen, the acquisition of Proprium Capital Partners and a new partnership with Blackstone.

[António Simões, Group CEO at Legal & General Group]

And earlier this year, Katie Worgen joined us as the group COO, and she's already driving operational improvements and cost discipline across the Group. And finally, we are on track to deliver our three year targets and return more than 5,000,000,000 to shareholders through combination of dividends and share buybacks. So now let me give you a bit more detail on each one of the businesses, starting with Institutional Retirement. As you can see, PRT continues to grow strongly with over 5,000,000,000 written in the first half of the year. You can see there the 5,200,000,000.0.

[António Simões, Group CEO at Legal & General Group]

Here in The UK, we have written new business at attractive margins with a new business strain of 1%, continuing basically the capital light investment strategy that we deployed last year. Our international business is down on the prior year, given a slower start to The U. Market. But in any case, this business tends to be weighted towards the second half. Actually, fact, since the June 30, we have won three U.

[António Simões, Group CEO at Legal & General Group]

S. PRT deals, including a $285,000,000 transaction which we won just last night and which is therefore not included on the 5,200,000,000.0. So well done, Andrew and the U. S. Team.

[António Simões, Group CEO at Legal & General Group]

Looking forward, I'm extremely optimistic about the prospects for our PRT business. Client demand remains high with 42,000,000,000 of an active pipeline here in The U. K. And you can see they're including nine schemes that are over 1,000,000,000 So now thinking of the markets. Look, we continue to see significant interest, as you've seen, in the sector, which for me validates its attractiveness.

[António Simões, Group CEO at Legal & General Group]

PRT will continue to be a key driver of our growth and deliver reliable earnings for many decades to come. You can see on the chart, but from now to 2028, we are confident we can write volumes in line with the guidance that we gave you. If you remember, that was 10,000,000,000 to $13,000,000,000 per year, or basically 50,000,000,000 to 65,000,000,000 over five years. I said that this can be lumpy and we will continue to be disciplined on pricing and profitability. And then beyond 2028, the market will continue to grow with more than €500,000,000,000 of inflows over the following fifteen years as the percentage of insured DB assets continues to increase.

[António Simões, Group CEO at Legal & General Group]

I showed you that chart before where more and more of the total DB assets in the market continue to the percentage continues to come to insurance companies and increase. What does that mean for us? This means that our profits will continue to grow for more than two decades, as the volume that we write outpaces annuity flows, and importantly, we have greater capacity for portfolio optimization. And this picture here is only The UK. We anticipate even higher volumes in The US and potentially further opportunities in new PRT markets like Japan.

[António Simões, Group CEO at Legal & General Group]

And finally, as the DC market matures and the demand for guaranteed retirement income increases, the retail annuities market will continue to grow for decades and decades. So that's a healthy market. Why do we win in this market? Here are the five competitive advantages that we have in this business. By the way, this is the same slide that Andrew presented last December at our institutional retirement investor deep dive.

[António Simões, Group CEO at Legal & General Group]

There are five key areas. First, our scale and origination capabilities allow us to price competitively. And we do this in two ways, through our own asset management capabilities and also through partnerships like the one we announced with Blackstone. Second, we have a strong brand and a track record built over thirty five years of writing PRT. Third, we have strength of our asset management relationships as the largest asset manager in The UK.

[António Simões, Group CEO at Legal & General Group]

Over 80% of our PRT volumes come from our own asset management clients. Fourth, we offer bespoke solutions for the whole market, both large clients and small schemes. And lastly, we support these clients through high quality service. There are a series of live deals right now where the trustees are visiting our client service teams in Hove to see this in action. So over more than three decades, we have experienced major swings in the global economy and market changes, but we have consistently written PRT business and made money in all market conditions.

[António Simões, Group CEO at Legal & General Group]

So I'm confident we will continue to be a leader in this space. In asset management, these last six months were a clear turning point with real revenue momentum. Our annualized net new revenue, you can see it there, at 15,000,000 is really encouraging and higher than what we have generated over the past two years combined. This is consistent, by the way, with the run rate required for our 100,000,000 to 150,000,000 cumulative four year target. One particular highlight for me is the growth of UKDC.

[António Simões, Group CEO at Legal & General Group]

For the first time, our UKDC revenue generates more revenues than our UK DB business. So UKDC is now bigger than UK DB from an asset management perspective. We have continued to grow our average revenue margin, if you remember what I've said to you before, now from eight nine basis points, which is now close to double digits, which we announced our target we announced just in June. An important part of that margin improvement in the six months is the growth in Private Markets, now at £65,000,000,000 and on track to exceed £85,000,000,000 by 2028. This growth is on the back of good fundraising in private markets.

[António Simões, Group CEO at Legal & General Group]

One year on, our private markets access fund has grown to £1,600,000,000. And we've also had a series of other private market launches. You can see there. I'm actually particularly excited of the last the one before last bullet point there, which is our new digital infrastructure fund. So good growth.

[António Simões, Group CEO at Legal & General Group]

We've turned a corner. How are we doing this? This growth is the result of deliberate investments that we've made in the business. As Eric said at management deep dive, we are doing this in one of three ways: either we build or we buy or we partner. You can see the specific examples of that momentum on the slide.

[António Simões, Group CEO at Legal & General Group]

So in terms of build, we have been growing our active fixed income and climate transition strategies organically, in addition to the digital infrastructure fund I had just mentioned. In terms of buy, over there in the middle, our investments in Taurus and Proprium Capital Partners complement our existing UK real estate capabilities. In the space of just twelve months, we've gone from a primarily UK real estate manager to having now a global real estate platform that we can grow and leverage. And finally, we are partnering with Blackstone to create public and private hybrid products. It's worth actually spending a minute more on Blackstone, because this is a broader relationship.

[António Simões, Group CEO at Legal & General Group]

It cuts across all of LNG, not just asset management. Before I do that, I'd like to say that our thoughts are with the Blackstone team following the devastating news that one of their partners was killed last week, as you saw, in their New York office. I spoke to both Steve Schwartzman and John Gray, and I know this was the darkest day in their history. So we've got to know the Blackstone team really well over this last year and have really enjoyed the interactions that led to the announcement. We are extremely positive about the potential for the partnership, which covers two main areas which you can see on the slide.

[António Simões, Group CEO at Legal & General Group]

So on the left hand side, first in asset management, as I've just mentioned, we will create hybrid products for our clients, bringing together LNG's active fixed income, multi asset and U. K. Private credit capabilities with the best in class market capabilities of Blackstone. So we bring all of this together, and we will then distribute these hybrid products to our existing clients, but also target new geographies and new segments like wealth. Then on the right hand side, for our annuity businesses, this partnership gives us access to Blackstone's scale and therefore to an attractive pipeline of matching adjustment eligible assets, predominantly in U.

[António Simões, Group CEO at Legal & General Group]

S. Private credit. These assets complement our own existing asset origination capabilities, and basically they increase our price competitiveness and profitability. If you put the two opportunities together, we have an ambition to generate $20,000,000,000 of business, and I'm looking forward to what we will deliver for many years to come starting in the second half of this year. And finally, retail.

[António Simões, Group CEO at Legal & General Group]

Jeff will cover the performance of our different retail businesses shortly, but I wanted to focus particularly on workplace, which, as you know, is one of the most exciting growth areas in the market and of our strategy. We now have more than £100,000,000,000 of assets under administration. This was driven by £4,000,000,000 of net flows in the first half, which is a 21% increase compared to 2024. Overall, this means that we have close to €200,000,000,000 of DC assets. This is across asset management and retail, not just the part that you see here, but across both businesses.

[António Simões, Group CEO at Legal & General Group]

And that's circa 25% of the total DC market in The U. K. As you also know, the DC market is projected to grow. It will be 1,400,000,000,000.0 by 02/1933, and we are really well positioned to take advantage of that growth. We were one of the first to provide access to private markets as part of our DC default funds, and we were the first provider early in the year to connect to the government's pension dashboard, which is a tool that increases transparency for DC members, and therefore improves engagement with the members.

[António Simões, Group CEO at Legal & General Group]

I'm very positive about this, and we will tell you more about the prospects for this business and its profitability at the investor deep dive on the October 23. So stepping back, all of this means that we are on track to return more than £5,000,000,000 to shareholders through a combination of dividends and share buybacks. Here are the different components on the slide. First, our dividend, which is growing at 2%, accounts for 3,600,000,000.0 of the total over the next three years. Second, the €500,000,000 share buyback I announced back in March at our full year results is now 90% complete.

[António Simões, Group CEO at Legal & General Group]

And third, after the major SUDA transaction completes, we intend to return 1,000,000,000 of the £1,800,000,000 of proceeds. If you add all of that together, you get to 5,100,000,000.0. And then on top of that, you have the ongoing buybacks, which is that last little box. So overall, we are doing exactly what we said we would do, which is to return more to shareholders. I will now hand over to Jeff, who will walk you through the financial highlights and then I'll come back for some closing remarks and to answer your questions. Jeff?

[Jeff Davies, Group CFO at Legal & General Group]

Thank you, Antonio, and good morning, everyone. Our businesses continue to grow and deliver increased earnings and enhanced value creation for shareholders. Core operating profit is up 6% to £859 driven by the predictable release from our growing Store of Future profit and the benefit of increased back book optimization on our annuity portfolio. Growth in core operating EPS is 9%. And as Antonio mentioned earlier, this is at the top end of our three year target range.

[Jeff Davies, Group CFO at Legal & General Group]

And capital generation is up 3% against the prior year with the expectation of higher growth for the full year. The solvency coverage ratio of 217% remains strong and reflects the impact of the dividends and buyback in the first half of the year. So now moving on to the performance of our businesses. Institutional Retirement operating profit is up 11% to £618,000,000 Our growing and maturing annuity book is driving a larger release from the CSM and risk adjustment resulting in increasing and predictable profits. Backbook optimization has generated over £150,000,000 of profit across our annuity portfolio, which we believe is sustainable level for the medium term.

[Jeff Davies, Group CFO at Legal & General Group]

This reflects greater capacity to rotate into direct investments as we continue to write new business using a gilt based investment strategy as well as taking advantage of volatility in the market to switch out of those gilts. Investment variance largely reflects modeling improvements and an action to optimize our reinsurance. This has added £139,000,000 to our store of future but generated day one adverse investment variance in the same way as longevity releases. This effect will unwind as the CSM and risk adjustment release into profit over time. As Antonio mentioned earlier, we have made a strong start to the year with £3,400,000,000 of total new business completed and a further £1,700,000,000 in exclusivity.

[Jeff Davies, Group CFO at Legal & General Group]

In The U. K, we continue to optimize pricing with new business investment strategies that adapt to current market conditions, delivering a high return on capital deployed and a new business strain of around 1%. New business margins remain attractive at 7.1%. And the greater capacity for back book optimization increases the future upside potential as we've already demonstrated this year. In Asset Management, fee revenues were up 2% in the year despite lower average AUM as our conscious shift to higher revenue margin business takes effect.

[Jeff Davies, Group CFO at Legal & General Group]

The £15,000,000 of annualized net new revenue demonstrates the significant progress we have made. Total Asset Management operating profit includes £79,000,000 from our balance sheet investments. This is broadly flat on the prior year. A lower valuation uplift on Pemberton is offset by higher returns from a growing portfolio as we warehouse assets to support future growth strategies and seed commitments to catalyze new funding. Over the past five years, on average, valuation uplifts on Pemberton have contributed less than £50,000,000 per annum to operating profit.

[Jeff Davies, Group CFO at Legal & General Group]

And Pemberton currently makes up less than 30% of the £1,400,000,000 portfolio. Around 50% of the £124,000,000 investment variance reflect unrealized mark to market impacts versus the expected return in operating profit. The remainder is from exceptional items related to organizational restructuring and the write down of a small number of assets, which did not meet the criteria to continue funding. Across the group, we're taking a disciplined approach to both cost management and investment and this can be seen in Asset Management. We continue to keep underlying growth below inflation, demonstrating cost control.

[Jeff Davies, Group CFO at Legal & General Group]

In turn, we are considered about our investment spend as we focus on opportunities that we are confident can generate higher revenues and support our growth strategy. Our costincome ratio has marginally increased from 74% as at the end of last year to 75% as we have chosen to deploy £13,000,000 of incremental investment spend despite market volatility. We remain confident that with continued cost discipline and revenue growth from the investment we are making, we can reduce our costincome ratio to below 70% by 2028. And now in Retail. Operating profit increased by 3% to £237,000,000 with predictable earnings from our Store of Future profit and the benefit of back book optimization.

[Jeff Davies, Group CFO at Legal & General Group]

Lower volumes in Retail Annuities follow exceptional performance in 2024 where we materially increased our market share resulting in record volumes. However, we do expect continued growth and we are confident in our ability to maintain a leading market share. Protection gross written premiums are up 4% driven by a particularly strong first half for our Group Protection business and our Retail Protection margins continue to grow. Our Workplace DC net flows are up 21% to £4,000,000,000 And as Antonio said, our total assets have now passed £100,000,000,000 generating revenue in both Retail and Asset Management. We will continue to invest in our DC proposition to ensure we maintain our competitive position and gain operational leverage as we scale.

[Jeff Davies, Group CFO at Legal & General Group]

The compounding effect of winning DC new business today will be a sustainable source of future growth. Our Solvency II coverage ratio remains strong with surplus of £8,000,000,000 notwithstanding the payments of the largest part of the full dividend and allowing for the £500,000,000 buyback. The coverage ratio of 217% excludes 6% in respect of temporary impacts from non retained U. S. Business that will unwind when the transaction with Meiji Yasuda completes.

[Jeff Davies, Group CFO at Legal & General Group]

This is predominantly new business strain on U. S. Protection and U. S. Dollar hedges on the proceeds of the transaction.

[Jeff Davies, Group CFO at Legal & General Group]

The transaction remains on track to close in 2025. And as a reminder, when we announced the sale back in February, we said we would generate a further £1,200,000,000 of capital and it would increase the solvency ratio by around seven percentage points after the anticipated share buyback. This is on top of today's 217%. Now this slide looks at OSG in a bit more detail. In the first half, we generated £729,000,000 growing by 3%.

[Jeff Davies, Group CFO at Legal & General Group]

We anticipate this growth to be higher for the full year, reflecting the timing of some items in 2024 being more weighted to the first half. This includes management actions of greater than 300,000,000 which are sustainable in the medium term following increased confidence in back book optimization. In 2025, we expect full year OSG to broadly cover the cost of the dividend and new business strain. At the same time, the OSG per share will be growing at greater than 5% creating headroom over the 2% DPS growth. This will be further enhanced by the additional buyback we intend to complete next year.

[Jeff Davies, Group CFO at Legal & General Group]

This buyback would increase OSG per share by over 9% and in absolute terms reduce the cost of the dividend by around £100,000,000 As our core businesses continue to grow and we execute our management actions, this gap will widen further providing greater capacity for investment for future growth or greater returns to shareholders. Our strong balance sheet and growing surplus generation makes us well positioned to capitalize opportunities in each of our core markets as we move into what we expect will be a busy second half. I will now hand back to Antonio for some closing comments.

[António Simões, Group CEO at Legal & General Group]

Thank you, Jeff. So we have delivered great financial performance this first six months, and I'm pleased with the execution of our strategy. We have a clear vision to become a growing, simpler, better connected business. And as we deliver that strategy, we will become more capital light. We have good growth momentum, as we've just discussed, in each one of our businesses.

[António Simões, Group CEO at Legal & General Group]

And on the October 23, we will run the last of our three deep dives on retail with Lori Mason. So what will we cover in October? You can see it here on the slide first, the growth potential for each of our retail businesses, particularly given the growing market opportunity across DC and savings. Second, that we have a series of well positioned businesses with clear propositions to address growing customer needs. And finally, make the case that we can generate good economic returns that improve as we scale and leverage the synergies with the rest of LNG.

[António Simões, Group CEO at Legal & General Group]

Now in terms of outlook, look, we all know we are living through complex geopolitical and macroeconomic environments, and we all need to navigate that. I'm sure you do that in your businesses as well. But against that backdrop, I am confident in the immediate prospects for and their long term growth trajectories. If you look at each one of our three businesses, you have them on the slide. In institutional retirement, we have an active pipeline that I described earlier, which we expect this to convert over the coming months.

[António Simões, Group CEO at Legal & General Group]

And importantly, we have increased capacity for back book optimization, as Jeff just mentioned. In Asset Management, the recent client wins, the fund launches, the revenue momentum will continue to come through in our financials. And I'm looking forward to the results of the partnership with Blackstone and the first co investment with Meiji Asuda. And finally, in retail, we have growing retail annuity sales and therefore expect a stronger second half, and we will continue to grow our workplace business and its profitability. So in summary, we have high confidence in achieving our overall targets, including the full year core operating EPS growth of 6% to 9%.

[António Simões, Group CEO at Legal & General Group]

So with that, I would like now to invite Andrew, Laura and Eric onto the stage to take your questions together with me and Jeff. Andrew, Laura, Eric. So yes, I will start. You all stay at the end. It's well done.

[António Simões, Group CEO at Legal & General Group]

Please state your name and your company. And if you can, limit your questions to three, please.

[Abid Hussain, Equity Analyst - MD & Head - Insurance Coverage at Panmure Liberum]

Thank you for taking my question. It's Abid Hussein from The Benel first question is on Asset Management and net flows. So look, firstly, good to see the revenue margins tick up there to nine bps and trending in the right direction. But just wondering on the net flows, obviously, still negative. When do you think they might turn positive?

[Abid Hussain, Equity Analyst - MD & Head - Insurance Coverage at Panmure Liberum]

I know you've got a number of initiatives across the private markets and elsewhere. So just net flows, when do you think they might turn positive? And then the second question is on PRT. Just wondering if you're seeing any evidence of increased competition or indeed trustees looking to delay their transactions in the hope of possibly accessing any pension surplus they might have in their schemes? And then the final question is on the management actions.

[Abid Hussain, Equity Analyst - MD & Head - Insurance Coverage at Panmure Liberum]

How would you define the management actions? Is it just back book optimization as anything else? And can you help us understand why they are repeatable and why is the $300,000,000 the right level? And then sort of subpart to that is how did you increase your capacity? I think you called out that you've increased your capacity to do more. So just any color on that, please.

[António Simões, Group CEO at Legal & General Group]

Great. So I think that's pretty straightforward in terms of the net flows. If I can ask Eric to do this. I think, Andrew, if you can give some color on the PRT and then Jeff, management actions. So maybe just two quick comments.

[António Simões, Group CEO at Legal & General Group]

Just on management actions, we did the GILT strategy and therefore that's providing more capacity. Jeff will give you the actual answer in terms of the management actions. Just on PRT for a second, I've had many discussions over the last weeks and months. As you see, we feel pretty good about the 5,200,000,000.0 that we have written. And the 42,000,000,000 of active pipeline gives you confidence that the trustees are coming to the market, Right?

[António Simões, Group CEO at Legal & General Group]

So I alluded to it on my slide, but we see actually new entrants coming in and that competitive dynamic. Actually, I feel very good. I've talked in the past about a trillion opportunity globally over the next decade and another trillion after that. So I feel pretty good about that. It's always been a competitive market.

[António Simões, Group CEO at Legal & General Group]

But we're not seeing that dynamic of trustees themselves holding back because of the surplus point. We see much less of that and much less. There's a bit of chatter six months ago around that. Andrew will give you more of but why don't you start with the net flows first?

[Eric Adler, CEO - Asset Management at Legal & General Group]

Yeah, no, thanks for that question. This is a really key point. ANNR is a net flow number. We have to think about that. It's weighted by revenues, and that's why we're so focused on it.

[Eric Adler, CEO - Asset Management at Legal & General Group]

So very excited. Obviously, it speaks for itself in the inversion of that tendency, and you mentioned that. And I think we're in a unique position. The reason why in a market where you are seeing fee compression that's a market phenomenon we're actually targeting a growth over time in our fee revenue. And all that is linked to the importance of us thinking about this revenue weighted.

[Eric Adler, CEO - Asset Management at Legal & General Group]

Because if we're just thinking about what is a very important leveler so I will add that the net flow is a number. It matters. It's the way you can kind of look at the industry in a quick way. So it is an important number. But we need to focus on the AN and R, because if we were just chasing net flows, we wouldn't be as focused on that change of product mix, which is a unique opportunity we have.

[Eric Adler, CEO - Asset Management at Legal & General Group]

That said, I'm actually quite pleased with where the net flows are given where it's been in the past. I think first half was one of our best net flow numbers. We all know we have a tailwind in what has historically been our largest market. From an asset management perspective, we are the absolute leader in UK LDI. And as Antonio mentioned, that is shifting.

[Eric Adler, CEO - Asset Management at Legal & General Group]

Now DC is symbolically now above the LDI number. But two things. It shows that in our non LDI businesses, we're in a really good space, even in that more generic net flow number. But importantly, we're still winning in the LDI space. We're a leader in that space.

[Eric Adler, CEO - Asset Management at Legal & General Group]

And what we're seeing is in the smaller mandates, there's still a lot of movement. And we're not vacating that market. We're actually getting wins there, which again is going to have a marginal positive impact on the ANNR number that's so positive. But it does kind of keep that net flow number, which is a benchmark. Everybody looks at it.

[Eric Adler, CEO - Asset Management at Legal & General Group]

I don't want to predict when that could go positive, but the first half is extremely encouraging in terms of our overall momentum. So even the net flow number, I think, is a positive development. And what's really key to keep our eye on the ball on is that ANR, which is our weighted net flow number.

[António Simões, Group CEO at Legal & General Group]

Yeah. And we mentioned the run rate of 15. You multiply the 15, right? And so you do the math, right? So thirty, thirty times four, one hundred and twenty.

[António Simões, Group CEO at Legal & General Group]

So we're within the 100,000,000 to $150,000,000 target of cumulative ANNR. And that's really good seed because this is the first six months for that specific target. Thank you. Andrew, PRT.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

Yes, sure. Well, what I said, we've been in this market nearly forty years. We are definitely used to new entrants entering the market. It's always been the way. And as Antonio says, that's a huge vote of confidence in the market.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

And of course, the recent transactions will change the competitive dynamic again for sure. So we're well used to that. Why do I remain very confident? Two reasons. One, the market continues to The market expands and Antonio gave some data earlier about just the size of the market that we can expect to see in the near term and then going out into many years.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

So the market strength and the continued growth that's hugely empowering. But also then why do we win? The reason we continue to have record results in the years as competition increases because of the strength of our asset origination, our asset management relationships, the propositions that we deliver to clients and the service levels we give both to trustees and to individual members. So I remain really confident that despite the competition, those capabilities and the growing market means that we're in a strong position. Specifically to your trustee question and their options, we have seen no evidence of any of our transactions or any of our pipelines, if you like, pivoting away from moving to buyout and reverting.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

So there's been no evidence of that. I think for sure there'll be trustees out there thinking about their options and their strategies, particularly around surplus. I have a personal view that actually using the calculation around a buyout value is a catalyst to crystallizing what that surplus might be. So we are aware of trustees who are thinking exactly along those lines as to what's really under my sort of funding level, the options I have around surplus distribution and buy out as well.

[António Simões, Group CEO at Legal & General Group]

Effectively doing both, right? So doing the PRT transaction, as Andrew says, and doing the surplus extraction at the same time. Management actions, Geoff.

[Jeff Davies, Group CFO at Legal & General Group]

Yes. So before we come on to the latter half, yeah, mean, there's a range of actions within management actions. As you know, some of the more material are reinsurance, both internal and external. We've talked before about, for example, warehousing some deferred lives, especially where not we're using too much capital at the moment so we can take on a few of those. That gives us a lot of optionality around reinsurance in the future, for example.

[Jeff Davies, Group CFO at Legal & General Group]

There's structuring that we do assets and just generally the whole structure of the group. Even some hedging can have significant impacts if you effectively optimize that under Solvency II. But then the largest for the reinsurance is the back book optimization that we've talked about, which takes a number of forms. There is the capacity that we're creating by bringing on so many liquid assets to simply put more direct investments in the back book. So that's just a straight through benefit, if you like.

[Jeff Davies, Group CFO at Legal & General Group]

We then can trade around things like the shape and along the curve, etcetera. And we're definitely more active around that. And then there is the sort of volatility or even hopefully maybe a long term shift to slightly wider credit spreads where you simply move the gilts into credit and capitalize on that. And that was something that we did post Liberation Day during April and made some of the additional profit. We still have the option then to move that credit into direct investments in due course as well.

[Jeff Davies, Group CFO at Legal & General Group]

And so that sort of never ends, if you like, and you keep optimizing. It is a bigger part of the business now. And Andrew's World has been put in a sort of framework around this. We executed very easily in April. Antonio and I were both at the office actually.

[Jeff Davies, Group CFO at Legal & General Group]

I mean, it was all done very easily. We had a framework. How do we optimize this? What do we do? There are processes being built around it, which makes it all much more part of business as usual and sustainable than it was previously.

[António Simões, Group CEO at Legal & General Group]

And a bit the upgrade on the management actions. I really like this point that Geoff is making, is more of it is on the back book optimization, which I think also high quality management actions, if you think about it that way. Thank you, Abeet. Mandeep?

[Mandeep Jagpal, Director - Equity Research at RBC Capital Markets]

Hey, good morning, everyone. Thank you for taking my questions. Mandeep Jagpal, RBC Capital Markets. Three for me please. Two on asset management and one on PRT.

[Mandeep Jagpal, Director - Equity Research at RBC Capital Markets]

The GBP 15,000,000 ANNR, you've given a breakdown of that, but can you provide a simpler split between internal versus external? Also confirm if the ANNR includes M and A as the waterfall chart you showed at deep dive didn't have a column for M and A, but presumably this adds to revenue. Second question on asset management on the private markets fundraising pipeline. You mentioned the digital infra fund. What is the target fund size and when will you be raising?

[Mandeep Jagpal, Director - Equity Research at RBC Capital Markets]

Are there any other new funds which we'll be thinking about contributing to privates in the near term? And then on PRT margins, can you help build a bridge from the 7.1% that you reported as the new margin compared to the accretion to the CS7 risk adjustment, which was closer to 3.5%? And on the optimization that you include in here, does it include items that have actually already occurred between contract initiation and the period end? Or is it some or is it, I think you mentioned, an element of expected optimization that you might be able to do in the future?

[António Simões, Group CEO at Legal & General Group]

How much of that is in the 7.1%, is that what Yes. You're So I think, Geoff, you should take that unless Andrew really want to jump in, but I think he should do that. And then come to you first, Eric, on the two S and and A questions. So the $15,000,000 internal and external M and A and then the digital infrastructure fund and other exciting new funds.

[Eric Adler, CEO - Asset Management at Legal & General Group]

Yeah. So $15,000,000 and again, rough breakdown in terms of the synergistic business model, it's less than half. So it is a big part of what we do well, whether that's moving some of our LDI business into PRT. Of the $15,000,000 less than half of that is really internally driven. There's a big chunk of it that's part of the synergistic model because it's working in partnership with our retail business.

[Eric Adler, CEO - Asset Management at Legal & General Group]

So our DC part of that is quite significant as well. But that's true third party money. And then the remainder, which again I think is extremely it bodes very well. It's a bit in keeping with the first question. We are positive on all the rest of the business.

[Eric Adler, CEO - Asset Management at Legal & General Group]

So I think we've got some good momentum across all aspects. If you were to break down our business really simplistically, and I think the way you asked the question is a good way of doing that. We have the truly internal synergistic business model, which is our competitive advantage. So that's humming. That's doing really well.

[Eric Adler, CEO - Asset Management at Legal & General Group]

I think specifically the third party business that's linked to the synergies, which again, DC is a big part of it, that's going really well. And when you take all the rest, we've got positive A and R in the first half on the back of a pretty different picture we've had over the last few years, as Antonio said. So it's quite broad based. Not surprisingly, in the near term, we're seeing our real strengths come to the fore, our real synergistic model strengths, our real third party, what makes us a leader in The UK, and what makes us able to go after certain channels in a way that's pretty unparalleled, like in DC. So not surprisingly, that's driving most of it.

[Eric Adler, CEO - Asset Management at Legal & General Group]

But I'm extremely encouraged by you take that out, we're positive on the rest. So it's a really good start. Second question the second question is

[António Simões, Group CEO at Legal & General Group]

still There was a 1B, which is, is M and A included? So at the moment M and A hasn't made a difference because actually what did we do from an M and A perspective? An investment in Taurus, which provides and the acquisition of Proprian Capital Partners, that's not included in those numbers. The second question was on the digital infrastructure fund.

[Eric Adler, CEO - Asset Management at Legal & General Group]

Yeah. So again, this is pretty hot off the press. So I think we feel we're to the point where we can talk about it. I think it's not unfair to say that an ideal target is somewhere well above the half a billion pound mark. I feel really good that if that were a low target, we're going to be largely there in the short term.

[Eric Adler, CEO - Asset Management at Legal & General Group]

I really can't say more, but the fact that I'm saying that should give you some confidence. These fundraisers, as you know, these fundraisers, they happen in multiple series, and they can last in today's world, because it is a challenging equity private markets environment. These can drag out over eighteen months to two years. So I'm feeling really good, a, that we were able to get this off in this environment. I think that quite rare.

[Eric Adler, CEO - Asset Management at Legal & General Group]

There's the big names that are still hitting headlines with equity privates funds, but everyone else has been struggling. So I think this really shows a competitive advantage. And I feel pretty good that in the near term we're going to be announcing initial numbers that are very much in keeping with what I just said. So that's really strong. Continued momentum on some of our existing products.

[Eric Adler, CEO - Asset Management at Legal & General Group]

Antonio mentioned PMAV in the private space. Frankly, every time we talk about it, the number's a little higher because flows are just coming in continuously. So that is a very strong, best in class product we have. We're taking full advantage of it. I think the living sectors that we've been talking about for a while, they continue to show momentum.

[Eric Adler, CEO - Asset Management at Legal & General Group]

UK living sectors, we are a leader in that space. And we are soon going to launch the latest in our Clean Power Energy Fund in partnership with NTR. So we're in the process of marketing that. On the back of a final close that was above expectations, we hit almost €600,000,000 to close the last fund. We had a good pipeline, so we should be back in the market by the end of the year because a lot of that money is already earmarked.

[Eric Adler, CEO - Asset Management at Legal & General Group]

So those are the near term ones, and that's before we talk about some of the M and A that you can imagine. We're going to be very focused on Propium. We're very focused right now on Taurus. So the whole theme of irons in the fire we talked about at the CME, I think we're starting to show the beginnings of that. We have multiple routes we

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

can go through.

[Eric Adler, CEO - Asset Management at Legal & General Group]

And that's before talking about our private credit business, which I'm very pleased with momentum on separate accounts. Insurance, going after insurance, we've had the Admiral win, but we have a very good pipeline of continuing to grow that third party business and investment grade private credit.

[António Simões, Group CEO at Legal & General Group]

The series of client wins is very impressive. I'd say Eric has just arrived, it's amazing what the momentum is in the business. We've included some of those here in the pack. And you can expect more of that to come. On the first question, we talked last time about an underpin.

[António Simões, Group CEO at Legal & General Group]

And that's how I think about it exactly as Eric said. There's an underpin, which is the strength of the two businesses sitting to his left. So the underpin of the PRT business and the underpin of the amazing DC business we have. But actually, the excitement bit comes then with the third party money. So I think you can see that in the that's why I'm saying it's a turning point.

[António Simões, Group CEO at Legal & General Group]

In this six months, you see that working properly the first time. Jeff, the 7.1% and what's included and the

[Jeff Davies, Group CFO at Legal & General Group]

Yeah, that's right. And we recognize I know the teams can help you guys on this. We recognize you can't calculate that number from it. We gave some of the information. So the biggest element that's not happened is the reinsurance that is not yet signed at the half year.

[Jeff Davies, Group CFO at Legal & General Group]

And so we're using funded re for some of that new business. We say that we have allowed for $511,000,000 of funded re in that 7.1. That is because we can't allow for it in the IFRS because we haven't signed it. Accounting doesn't let you do that. But this is the realistic view of the profitability of this business.

[Jeff Davies, Group CFO at Legal & General Group]

We do the same on the Solvency II strain because this is what we will execute, how we price the deals, etcetera. And then the other part on the back book optimization is, as I talked about earlier, the fact we're using the gilt strategy means we can deploy direct investments, private assets immediately to the back book. And I'll use some made up numbers just to illustrate. Let's say we're targeting 40% of private assets. The fact that maybe on a deal we might put 20% private assets and make it up completely, 80% for the rest is gilts, etcetera, and liquid assets, what we do is we say, well, that means we've brought on so much liquidity that we can deploy 20% the leftover 20% of direct investments immediately in the back book.

[Jeff Davies, Group CFO at Legal & General Group]

And we are doing that on an ongoing basis. So we've effectively done it straight away. And so this is extra capacity that we've got that we immediately do as Eric's business simply flows through. We tell them how much we need for the year and it simply flows through. And again, we have rules around that about are we up to speed, have we got the assets, the amount that we're using, etcetera.

[Jeff Davies, Group CFO at Legal & General Group]

And the split is it's not quite fiftyfifty, but it's roughly that. I mean, I can take you through the calculation with a funded REIT and then you can see how it comes through.

[António Simões, Group CEO at Legal & General Group]

I think there are two reassuring points on these numbers, which is the 7.1%. There's been lots of chatter of business being less profitable. It continues to be as profitable as it was last time we showed you the numbers. And second, exactly to Jeff's point, there's all of the back book optimization, we're not including that in the margin upfront. We are including the bits you described.

[António Simões, Group CEO at Legal & General Group]

But that's from a pricing discipline perspective. Talking with my team, we tend to price it between the three of us. There is an element of we don't want to give that pricing away. Like the back book optimization that we do later on, that's not in the upfront margin, which is really important. Tom.

[Thomas Bateman, Director - Equity Research at Mediobanca]

Hi. Good morning. Thomas Bateman from Mediobanca. Could you just update us on the outlook for U. S.

[Thomas Bateman, Director - Equity Research at Mediobanca]

PRT given the litigation in that market? And in particular, I'm interested in does the sale of your U. S. Entity and having to write out a Bermuda entity impact your ability to do business or could impact your ability to do business there? Second question is just on the DTC transition.

[Thomas Bateman, Director - Equity Research at Mediobanca]

So towards your 15% target in private markets, how much of your 100,000,000,000 has transferred already? I remember you talk new allocation. And then finally, it was just on Slide 24 and how you were talking about OSG and the dividend, how the OSG would broadly cover the dividend. But I guess I'm thinking there's new business strain and I assumed at the Capital Markets Day you committed to some level of recurring buybacks when you changed the dividend policy. So how should I think about it as NSG versus total capital return? Or should I think about it as OSG versus the dividend?

[António Simões, Group CEO at Legal & General Group]

Yes. Perfect. So Andrew, on the outlook for U. S. PRT.

[António Simões, Group CEO at Legal & General Group]

I'll say a word on DC transition. Maybe actually it's an opportunity for Laura for you to talk a bit more about DC from a workplace perspective. And then, Jeff, can you come back on slide 24, which is I feel very good about that slide. We worked a lot on it. So just on DC transition.

[António Simões, Group CEO at Legal & General Group]

So Tom, the overall so we are a sign of signature to Dimension House Accord. This is putting the default fund into a 15% investment in the private markets access fund. But this is a simplistic way of putting it. Each one of the funds so you have the master trust, you have the different scheme arrangements they are progressively that's why Eric was saying that each time we talk about the number, it's kind of exponentially going up because each one of the schemes is moving to that default. But the simple answer is the fund is 1,600,000,000.0.

[António Simões, Group CEO at Legal & General Group]

So the bit that we have that is in the fund is the $1,600,000,000 But you can expect more and more of the overall DC. So think about it. We have $200,000,000,000 of DC at the moment. And we are 25% of the market. You just do simple math.

[António Simões, Group CEO at Legal & General Group]

The DC market's going to be 1,400,000,000,000.0 by 02/1933. We hope and in October we'll talk to you about the ambition that we have in DC. We hope to be a quarter of that market. So there's much more to come. Not all of the schemes will allocate to the private market access fund.

[António Simões, Group CEO at Legal & General Group]

Because in some cases, have some employers that immediately have decided that they want to move because they feel this is the right thing for their employees and their members. Some other schemes, they themselves don't want to move into private markets. And so we are doing what the clients want. I think the good thing from a mansion house accord perspective is there's a momentum in the market, whereas the employers themselves you probably saw this there was an employer's pledge where the employers themselves are committing to allocating more to private markets. So you wouldn't expect the full $200,000,000,000 for 15% of that to go into private markets.

[António Simões, Group CEO at Legal & General Group]

But you can see, just do a simple math, there's a lot of upside. That's why the Private Market Access Fund and the fact that we were one of the first in the market to have that, we feel really good about that. So Andrew, U. S. PRT, then maybe, Laura, you can say a bit more about the DC market and how excited we are about that. And then, Jeff.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

Yes. A few comments on The U. S. PRT market. Generally weighted to the second half anyway, so that's structurally where that market's been for many years.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

We definitely though sensed a slowing down in the first half from a pipeline perspective at an overall market level, I think for two reasons. One, just the general U. S. Economic environment means that and don't forget, The U. S.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

You don't have the trustee interface. It's corporate sponsors doing it directly and therefore I suspect boards were had other things on their minds than a pension transaction. So there were less jumbo deals in the first half than you might have seen typically. That said, that's not our typical market. We would write at a smaller end of that, so sub the 1,000,000,000 deals.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

Litigation comes up in certain conversations, but it's again, it's typically at the big jumbo end of the market, not at the sub-one billion dollars where we play in that market. And as Antonio said, we've had good pickup literally overnight on The U. S. Market with transactions coming through in the last few days. So I think we're feeling very good about that.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

To your point about Bermuda, not really a huge change for us. I think the sale of Banner to Meijay means that we become a reinsurer, not a direct insurer. Banner will be under Meijay control. We've actually, even our own structure though, used the Bermuda Reinsurer as part of that structure. So we just, in many ways, just replicating the structure we have already and so are Meijay. So I think structurally, the way that team are being set up is in a partnership where Meijer will write the direct business and we will reinsure 80% of that, but the team are effectively working as one and will use a very similar Bermuda structure to what we've had in place already.

[António Simões, Group CEO at Legal & General Group]

Thank you. Laura, DC?

[Laura Mason, CEO - Retail at Legal & General Group]

Yes. I mean a couple of things to say really. You'll have seen that we our net flows into our workplace business significantly picked up over the first half of the year. A number of reasons for that. We have very deliberately put a new leadership structure in in place, which reaches across both asset management and retail.

[Laura Mason, CEO - Retail at Legal & General Group]

And we think this is a real differentiator in the market compared to our competitors. Sort of even just thinking about the investment side of things, we're seeing the people that we sell to, effectively employers of these schemes, increasingly interested in the investment solutions that we're able to offer to their end members. We've also made significant investments in the front end, the digital side of things, which we will talk a little bit more about in October. But really, I think from having launched some of our digital applications, we've seen incredible uptake from members. And I think, I suppose, just finishing, and again, we'll talk a little bit more about this in October, the pensions reviews have really played, I think, to the strengths of LNG in terms of really encouraging scale members.

[Laura Mason, CEO - Retail at Legal & General Group]

And again, linking back to your private markets question, all providers of default scheme arrangements will need to have some $25,000,000,000 of assets under management by 02/1930. We are already there with our defaults, and our defaults are now having quite a significant part of the private markets access fund as part of those defaults. So as Eric says, as well as the sort of new money coming into those, the sort of contributions from the current defaults, just each month the amount amount is ticking up.

[António Simões, Group CEO at Legal & General Group]

Great. Thank you. And slide 24. Maybe we can put it up, actually, if over there can put it up. So Jeff.

[Jeff Davies, Group CFO at Legal & General Group]

Yeah. So I can tell you how we think about it. We very much look at the OSG that's been thrown off, what's been generated over the plan period. And we look at that OSG against the dividend first and foremost. So clearly, there's coverage over that.

[Jeff Davies, Group CFO at Legal & General Group]

What is left is for us to deploy across the business, put into our capital allocation framework, make sure the businesses are meeting the hurdles, etcetera. And so we use what is left for new business strain but don't feel constrained by that. So in any year, in particular PRT could be quite lumpy. We are happy to eat into our surplus capital position for that new business strain because we're starting from a very strong position. And we've always said part of that is to allow us to write significant volumes should it they arise in any particular period.

[Jeff Davies, Group CFO at Legal & General Group]

As we get more clarity over that, we'd be comfortable running down those solvency levels. So we have always said that. And it's not dissimilar on the buybacks. Again, we've never said that it's covered from the flow necessarily. It's a capital allocation decision with the added benefit of reducing the cost of the dividend.

[Jeff Davies, Group CFO at Legal & General Group]

And so we will always look at that and assess against it. We clearly have modeled out that we believe it's sustainable given a starting capital level, given expectations for, in particular, PRT volumes and strain that those are sustainable. And that's why we made the statement, but not from flow necessarily in any given period and comfortable that we can again eat into a very strong surplus position. We have the same happening with the Meiji transaction, which significantly reduces the cost of the dividend, gives us more flexibility around that and increases that solvency position by another 7% and so gives us more capital allocation decisions to make in the future. So that's the waterfall we go through and the way we think about it.

[Jeff Davies, Group CFO at Legal & General Group]

It just so happens that because of the very low strain, it will be there or thereabouts covering NSG will cover the dividend in this period and improve from there. But we wouldn't guarantee it to the point where if there are larger volumes or we decide to deploy a bit more on strain. But I don't think we're ever returning either to the 4% strain days. We've never actually been there. We say less than 4%.

[Jeff Davies, Group CFO at Legal & General Group]

We haven't been there for many, many years, even when credit spreads were wider and we weren't using gilt strategies.

[António Simões, Group CEO at Legal & General Group]

Yep. And we are very comfortable actually. You have the as Jeff says, we do this ourselves. We do this with our board. We do this with the PRA.

[António Simões, Group CEO at Legal & General Group]

They approve our share buybacks. Pretty comfortable with that. Thank you, Tom. Larissa, and then I'm going to do a question online because we have Farooq online. So after Larissa, please.

[Larissa van Deventer, Equity Research Analyst at Barclays]

Thank you. Larissa Pandeventer from Barclays. Three questions, one on bulks and then two on shareholders' equity. On U. K.

[Larissa van Deventer, Equity Research Analyst at Barclays]

Bulk annuities, what needs to be in place to maintain your current margins? They were similar now to FY 2024. What needs to stay in place for that to continue? And then on shareholders' equity, a decline from just over ZAR3 billion to about ZAR1.9 from FY 'twenty four into 1H. Can you help us understand the main reasons for the component parts for the decline?

[Larissa van Deventer, Equity Research Analyst at Barclays]

And how much of that you expect to unwind due to market over time? Thank you.

[António Simões, Group CEO at Legal & General Group]

Andrew, on the margins and PRT and bulk annuities and then Geoff clearly on equity.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

Thanks, Rasha. I think on margins, as you say, we've maintained them in a competitive market. That's partly because, as Antonio said before, we stay very focused on pricing discipline. It's not about chasing volumes and where we don't see the margins we want in deals. And then obviously, we wouldn't compete.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

It really comes down asset origination, including Funded Re as well to make sure that we can competitively price. The price in the market is often set by the competition and we need to make sure that we're originating assets that can generate as the margin of the capital return we do. So it tends to be a decision that we take transaction by transaction, looking at the available asset sourcing, the nature of like duration, etcetera, of the transaction and that could influence our decision around funded reinsurance and coming up with a strategy on a transaction basis that gives us the margin that we're looking to preserve and not chasing the market down on margins that aren't attractive to us.

[António Simões, Group CEO at Legal & General Group]

Thank you. Geoff?

[Jeff Davies, Group CFO at Legal & General Group]

Yeah. Thanks. Yeah. I mean to some extent looking at it is the same a bit like the Solvency II waterfall that I showed.

[Jeff Davies, Group CFO at Legal & General Group]

Looking in the half is a bit skewed. We paid out the largest part of the dividend. We paid out 500,000,000 buyback all in a single period. So clearly that in itself has an impact. There is of course the items I mentioned where we're effectively transferring some of the equity to CSM and risk adjustment which comes back as profit like happens with the longevity.

[Jeff Davies, Group CFO at Legal & General Group]

And that was €150,000,000 or so of the investment variance that we had. And that's one of those things from accounting. And then broadly, I mentioned the exceptional items in Eric's business with him coming on board, but also the half of it then of the investment variance is really just flat markets as much as anything. We have an assumption for returns. Equities at 6%, 7%, as it would.

[Jeff Davies, Group CFO at Legal & General Group]

But private markets, which a lot of our investments, were broadly flat. There weren't many transactions. There wasn't much mark to market. And so the assumption in Europe profit is a negative. Over time, you obviously assume that that should trend to a zero over time.

[Jeff Davies, Group CFO at Legal & General Group]

You should have offset in items. And so we're very confident and happy with the position. We're very confident with the modeling we've done around all my answers to the previous question. And so we're happy with that. We're happy with the portfolio.

[Jeff Davies, Group CFO at Legal & General Group]

We've done some trimming. We did set up the corporate investments. Eric himself has looked at some of the assets that we hold on the balance sheet and whether they're for the future and will actually ever go into funds. So we're being honest about those where we take the write downs. The rest is just a mark to market, which has broadly been flat to be honest, over the period.

[Jeff Davies, Group CFO at Legal & General Group]

But because you're assuming returns above the line, you get a negative that goes with it.

[António Simões, Group CEO at Legal & General Group]

Yes. And if you want, Larry, so we can give you some more details. As you I've said to some of you when we were meeting outside, we've tried to get as much feedback from you and tried to improve disclosure. Hopefully, as you've seen, we're trying to be more transparent. And each time you ask us a question, next time we try to give you information on that.

[António Simões, Group CEO at Legal & General Group]

Let me answer the question from Farooq and then I'll come here to the middle section. So what concerns, if any, do you have around increased competition from private market players and others in The UK PRT market? And this is from Farooq, as you know, from JPMorgan. So look, any concerns? I'm not concerned.

[António Simões, Group CEO at Legal & General Group]

If we think about it from an overall perspective, it's good to have a healthy market. So that's the first thing to say. Second, it does validate the fact that this is an attractive market that continues to grow with good returns. And it is a validation of that that very sophisticated investors want to come into the market. In some cases, it's different the two transactions we've seen.

[António Simões, Group CEO at Legal & General Group]

One, we have one new entrant, if you think about it that way, that bought Pick. And therefore, from that perspective, Pick is already a great competitor of ours, already writes a lot of business. And so one situation. In the other case, we already had Brookfield as an organic new entrant. And they've just bought just as you've seen or are about to buy it.

[António Simões, Group CEO at Legal & General Group]

And therefore, we have one less competitor, you think about it that way. So when we think about what are we here to do to execute our strategy, we are the leader in the market, as I said earlier. We feel that we have the right competitive advantages. We are the largest asset manager in The UK, which is different from any other player in this market where 80% of our volume comes from our asset management clients and then goes back to asset management where Eric is originating the assets for the PRT business. And then on top of that, the partnership we did with Blackstone complements that, particularly in matching adjustment eligible U.

[António Simões, Group CEO at Legal & General Group]

S. Private credit. So we believe that we already had all the it's a competitive market. It's always been, as Andrew said earlier. But we believe we have all the levers.

[António Simões, Group CEO at Legal & General Group]

And now we have one additional lever, which is the partnership with Blackstone. Good. Andrew. Andrew in the second row rather than the ones in the first row.

[Andrew Baker, Head - European Insurance Research at Goldman Sachs]

Yes. Andrew Baker, Goldman Sachs. So yes, the first one, just on the Blackstone partnership. The asset management benefit's pretty clear. On the annuity side, you made the comment that it improves your pricing power.

[Andrew Baker, Head - European Insurance Research at Goldman Sachs]

I guess I'm just struggling to see how you get that because it feels like you're giving away some margin there. So any comments around that would be really helpful. The second one, again, sorry to come back to these investment variances. So I appreciate the market dynamic that you mentioned. A decent amount was on modeling improvements.

[Andrew Baker, Head - European Insurance Research at Goldman Sachs]

Do you have any line of sight into that for the second half? Is there anything you can flag ahead of time on that? That would be helpful. And then thirdly, just a clarification question. So the 7.1%, I don't think you're saying that we just stick 7% well, if market conditions stay as they are today, we don't just stick 7.1% as a normalized margin into the CSM roll forward because essentially that's split between back book and front book.

[Andrew Baker, Head - European Insurance Research at Goldman Sachs]

So we just need to take a view of how much of that goes in the CSM versus how much is in the back book. Is that a correct way of looking at it?

[Jeff Davies, Group CFO at Legal & General Group]

100%, yeah. And whether it's exactly fifty-fifty, 100%, we can it will depend on the amount of funded read at any point. But yes, if you split the difference between 7.1 and whatever than 3.5, then the bigger five ish, six, whatever the number would be, would go to CSM. But there's always going to be some left over, which is the DI to back book, which then will come through it has to come through the P and L somewhere, so that comes through in our back book optimization. It's the only place it can appear because it doesn't go in the CSM.

[António Simões, Group CEO at Legal & General Group]

Thank you. Were those the three? So first, margin in Blackstone. I think we should give that one to you, Andrew. So just to we're very excited about the Blackstone deal, as you see.

[António Simões, Group CEO at Legal & General Group]

You made a point that asset management is very obvious, so we could touch on that. But on the institutional retirement part, which actually is our full annuity book, which by the way is retail and PRT, how does this give us pricing? That was the first point I made, Andrew. You're right in the slide. Gives us additional pricing competitiveness.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

Yeah. We've talked about putting up to 10% of our new business assets into Blackstone. Unsurprisingly, they weren't paying for originating assets for us. That's a perfectly reasonable request of theirs. And so when we've looked at the mandate we've agreed with them and the commitment, Of course, we factored in those charges to the effective that the net yield we need to accrue from originating those assets.

[Andrew Kail, CEO - Institutional Retirement at Legal & General Group]

And again, they've got a fantastic reputation, as Antonio said, in originating MA assets at scale, particularly in markets that are complemented to what Eric already originates for us. So if you like, commitment they've given to us up to the value of the partnership is post charges. It's hitting our hurdles and giving us the assets we need, reflecting the fact that, of course, they weren't compensating for doing that. Very excited.

[António Simões, Group CEO at Legal & General Group]

And it is and this was we were months discussing this. And I think why Blackstone is probably worth just rehearsing that for a second. Yes, we have lots of capabilities ourselves to do lots of things. But the scale of originating that private credit in The US at scale so that the sliver of it that is matching adjustment eligible from a U. K.

[António Simões, Group CEO at Legal & General Group]

Perspective, you need to have that scale. There's very few count them in less than one hand players that could do that. And clearly, we felt very strongly. And we also felt very strongly that that came with a partnership on the asset management side that helps us get into new channels and to new products. There's a really growing client demand for hybrid public and private markets. Investment variance?

[Jeff Davies, Group CFO at Legal & General Group]

Yeah.

[Jeff Davies, Group CFO at Legal & General Group]

So the simple on the modeling is hopefully not. The teams tell me. But there's always work ongoing. And a $90,000,000,000 portfolio, you don't have to change much to get a change in the CSM. But we're not looking at big changes for modeling in the second half that we're aware of today.

[Jeff Davies, Group CFO at Legal & General Group]

There are investigations on an ongoing basis in a model that complex, which can go either way, of course. We are there is, of course potential for longevity releases. We do look at that in the second half. And so that will the impacts of that will depend where the longevity kicks in. If it's very old individual annuities, it has more of an impact than if it was more recent PLT at higher discount rates, it would have less of an impact.

[Jeff Davies, Group CFO at Legal & General Group]

But so there is scope for that. But we've not landed on that. We don't know is it a modest number or a more material number at this stage. But it shouldn't be huge. But it would naturally flow in the same way.

[Jeff Davies, Group CFO at Legal & General Group]

But either way, shouldn't be many hundreds of millions or anything.

[António Simões, Group CEO at Legal & General Group]

Thank you. Andy, Andrew, and Don. Thanks.

[Andrew Sinclair, Managing Director at Bank of America]

Andy Sinclair from Bank of America. So first was just on buybacks. You did a bigger buyback this year, full year 2024 results because PRT was incurring less strain with the gilts based strategy. Should we be expecting similar for full year twenty twenty five's buyback given that you're still using that strategy? Second, you generously gave me a cash generation figure for private assets at full year results.

[Andrew Sinclair, Managing Director at Bank of America]

I couldn't find that today. So what are you getting for cash generation year to date on private assets? I think it was GBP $850,000,000 for the full year last year. And third was just apologies for missing the Asset Management Day, but one thing that you said quite a few times during that day was Asset Management is a higher ROE business compared to the rest of LNG. Maybe a pretty simple question, but what are the ROEs across your different business units? Because I can't really see that.

[António Simões, Group CEO at Legal & General Group]

Good. Thank you. You're excused. You were getting married, so it's Okay. It was a great event for everybody else.

[António Simões, Group CEO at Legal & General Group]

Look, on the buyback, I've been pretty clear about this, which is we will look at the full year results with our board. If you're one of my board members, we will look at what are the opportunities in front of us in terms of additional business. What has been the strain that we have incurred? What is our solvency position? And with the growth opportunities and our position, we will determine what's the right buyback.

[António Simões, Group CEO at Legal & General Group]

That's absolutely the sort of the framework. It will continue to be the framework. As you know, and Jeff put it on one of his slides, we have €1,000,000,000 earmarked for the transaction with Meiji Asuda and we have the €200,000,000 ongoing share buyback. So we need to think about what is the right quantum and how many shares you can actually buy back. But so that is something we will do.

[António Simões, Group CEO at Legal & General Group]

And I couldn't tell you today. Is a decision we'll take in March. And it will depend on the rest of the pipeline for PRT and how much strain we will see continuing going forward. My commitment though is exactly what I said to you over a year and a half ago, which is every single pound that we cannot deploy internally and where we have that excess, we will return that to shareholders. And when I said it the first time, it was a bit of a theoretical thing.

[António Simões, Group CEO at Legal & General Group]

We did the first 200,000,000 last year and we've just done 90% of the €500,000,000 So hopefully by now you trust us that this is what we will do. In terms of cash, I think both questions for you, Geoff, really.

[Jeff Davies, Group CFO at Legal & General Group]

Yes. Cash generation, obviously, had the CALA proceeds in the previous period. So of the $850,000,000 or so was 500,000,000 of that was Kala and a few other disposals of wells. So there actually hasn't been as many disposals hardly any activity in the first a very small number in corporate investments in Quantum. So it's more in the 100,000,000 to 100 and range, which is basically half of what's left over when you take the Carla out and some of the other disposals.

[Jeff Davies, Group CFO at Legal & General Group]

We would expect that to be higher in the second half. We said we think the majority of the value from corporate investments will be gone in the twelve to eighteen months. And so we are hopeful of things under offer, etcetera, in the second half. But there's no chicken counting going on at this stage.

[António Simões, Group CEO at Legal & General Group]

Yeah. So we have $700,000,000 left of the corporate investments unit, 700,000,000.0. We should both answer on the return on equity. Think, yeah, we did make that comment, of course, a month and a half ago that asset management is a really profitable business. But it's in the context of we have a disciplined approach.

[António Simões, Group CEO at Legal & General Group]

Return on cash and return on capital needs to be above 14%. And the reason why we say capital and cash is because the return on equity, if you think about it that way, Andy, from an asset management perspective is extraordinarily high because it consumes almost no capital. I think the bigger point from a profitability perspective is what is always in my strap line of the strategy, which is we become more capital light over time. Becoming more capital light over time is growing the asset management earnings. And so I think you should add, Jeff, you had a slide at the deep dive where why do we really like these earnings?

[António Simões, Group CEO at Legal & General Group]

We like these earnings because they are capital efficient from that perspective, really high return. But they make the entire company more capital light over time, which is a pretty tall order when our PRT business continues to grow very strongly over decades to come, as I said, kind of an hour ago. So Jeff?

[Jeff Davies, Group CFO at Legal & General Group]

Yeah.

[Jeff Davies, Group CFO at Legal & General Group]

I mean, there isn't a huge amount to add, to be honest. I mean, vast majority of our businesses don't have any capital or equity of note to them, so have very high returns. It's actually about return on cash. It's really the annuity businesses where we monitor for a pure return on capital to make sure that we are, for each portfolio over the year, really almost every deal, hitting those hurdles. But obviously with the low strain at the moment, those hurdles are not an issue for us.

[Jeff Davies, Group CFO at Legal & General Group]

So they're all going to be high returns, very high returns for the vast majority of business because they don't have capital. And then it's more or less sensible numbers but still high at the moment because of the low capital strain that's in those businesses.

[António Simões, Group CEO at Legal & General Group]

Yeah. But at the moment, the binding constraint is what the previous question from Andrew was, which is well, your question as well on the buybacks, which is how do we think about we're not trading off a pound in each one of the three businesses. We're saying we have a hurdle for all the businesses and they all need to meet that 14% return on capital and return on cash. And therefore, if we can't then hit those hurdles, the rest we're returning to shareholders. Andrew.

[Andrew Crean, Senior Analyst - Insurance at Autonomous Research]

Good morning. It's Andrew Crean at

[Andrew Crean, Senior Analyst - Insurance at Autonomous Research]

Autonomous. Can I go back to Slide nine and just get some of the modeling which lies behind it? I think you're using the LCP models. I mean LCP has sales peaking in 2018 and then drifting down. So by 02/1933, what sort of market share are you looking at?

[Andrew Crean, Senior Analyst - Insurance at Autonomous Research]

And what sort of net flows to start your assets are you looking at? Are you because by that stage, would think you're moving more towards a neutral position? That's the first question. Second question is on the retail annuities, what are the outflows per annum relative to the sales? And then thirdly on management actions, clearly you've upped the asset optimization and you're looking for management actions of over £300,000,000 In terms of asset optimization, what yield improvement on the portfolio?

[Andrew Crean, Senior Analyst - Insurance at Autonomous Research]

How many basis points does that compute to? And how long does can you just keep I think it's about three points, but how long can you just keep lifting the yield basis for, I. E, what does medium term mean?

[António Simões, Group CEO at Legal & General Group]

Got it. Let me start on this slide nine. I think Laura, you should talk about retail annuities outflows. And we are in a position where we're actually writing more than the outflows. But Laura will go into that.

[António Simões, Group CEO at Legal & General Group]

And then Jeff, can you talk about management actions? Thank you for not asking the Pemberton question. It was one of those we asked as a question and we put it on the slide also for you earlier in terms of disclosure. No, seriously, we're listening to all you and your questions and we're trying to reflect that at results. So in terms of this slide, you're right.

[António Simões, Group CEO at Legal & General Group]

We are looking at so we are using industry assumptions, LCP. So that is the underlying. We actually have a version of this, which we don't have here, with the flows themselves. This is our own book from a UK perspective. So the sixty four billion dollars As I said, it doesn't include international PRT or the retail annuity.

[António Simões, Group CEO at Legal & General Group]

We wanted to focus this specifically on UK PRT. And the net flows do continue to increase. Of course, the total 1,400,000,000,000.0 number keeps on coming down in terms of overall DB. But on the percentages, we get to 50% of the assets being insured within and then it continues to grow. We can give you the underlying assumption all of you the underlying assumptions.

[António Simões, Group CEO at Legal & General Group]

We feel that there's two things happening. One is the new business and when do we cross that point where the annuity outflows are bigger than the new business. Our view if you look at some of the numbers you did for us, that's later. We continue to write and then you have this chart, which that's why we wanted to show this up to 2023. Our actual book will be growing between 68%.

[António Simões, Group CEO at Legal & General Group]

And the difference between the 68% is 6% is the lower assumption of LCP. 8% is the higher assumption of LCP. What are we assuming in terms of market share? We are assuming a consistent market share to what we have. So historically, we've had a higher market share up to 24.

[António Simões, Group CEO at Legal & General Group]

We're typically around 20. So we're assuming that we're not assuming that our market share increases. We're also looking at putting some pressure on Andrew. We're definitely not assuming that our market share decreases. But there's an important point there, which is we target the profitability of the business.

[António Simões, Group CEO at Legal & General Group]

And therefore, to some questions that were asked earlier, if the market moved in a position where we felt the profitability of the business wasn't right, I don't have a volume target. This is what we're assuming. If the market gets tougher and there's lower profitability, we're very happy to walk away from transactions as we have over the years and including in my tenure over the last year and a half. But Andrew, this is assuming the same as maintaining that same rough market share. Retail annuities, Laura, and then come to Jeff.

[Laura Mason, CEO - Retail at Legal & General Group]

Yeah. So a couple of comments. I can't remember what slide it's on, but we wrote 2,000,000,000 of retail annuities last year. So you can see the increase over the year from that slide. So you'll be able to work out.

[Laura Mason, CEO - Retail at Legal & General Group]

That will give you some indication of what's sort of rolled off. I think the other thing to say is that the majority sorry? Slide 22. So the majority of our we can give you a bit more information on this afterwards. But just to give you some high level numbers, if you see where we've gone from 17,400,000,000.0 to 19,800,000,000.0 we wrote about $2,000,000,000 of new business last year.

[Laura Mason, CEO - Retail at Legal & General Group]

The majority of our business is lifetime annuities, so the longer duration. And we can follow-up with a bit more information on that afterwards. But that should give you a good high level picture.

[António Simões, Group CEO at Legal & General Group]

But what's happening in our case, Andrew, is we're looking at that number. We continue to write more new business than what rolls off because you can see it from the stock perspective. We can give you the inflows and outflows. But the dynamic for us, different than from other players, is that we are with the amount of retail annuities that we're writing, the book keeps on growing. So the $19,800,000,000 we expect that book to continue to grow. Whereas, without commenting on competitors, but in many of our competitors, are in actual structural outflows because the book is much bigger. So we're a very large retail annuities player.

[António Simões, Group CEO at Legal & General Group]

The first half of the year was a lot of people woke up to the fact that we kept on gaining market share. The market has been more competitive. The pipeline that Laura has for now actually is really helpful, so it's really encouraging. So in the second half of the year, we're expecting a better second half compared to the first half in terms of Retail annuity, which means that definitely by the end of the year our book will be bigger again. So it keeps on going.

[Jeff Davies, Group CFO at Legal & General Group]

That's exactly right.

[António Simões, Group CEO at Legal & General Group]

Management actions?

[Jeff Davies, Group CFO at Legal & General Group]

Yeah. I mean, I went through there are a number of different back book optimization options that we're deploying. So there isn't a single answer to them. But they will all be giving greater than 50 bps uplift. But some of those could be hundreds because if we sell a gilt and move into a direct investment, you're going to get a very large lift on yield.

[Jeff Davies, Group CFO at Legal & General Group]

We have areas where we've been selling corporate bonds and putting gilts in because of the relative spreads at the moment, the amount of profit we've made on corporate bonds. And of course, if we're selling the gilts just simply, sorry, on that one, we've always said we can get 50 to 150. I mean, we wouldn't trade if it's below 50. It just doesn't make sense. And then you've got the selling of gilts to go to corporate bonds when you get volatility in that, which is the sort of optionality that we've saved up.

[Jeff Davies, Group CFO at Legal & General Group]

And clearly you get quite an advantage from that. But we need to look at those in the round around strategy. We certainly think that's very sustainable over the medium term. We call it a planning period whatever. And then so we are comfortable that we can continue to execute on a book our size, the 300,000,000 back book optimization set up with processes and a structure in Andrew's team is very sustainable.

[Jeff Davies, Group CFO at Legal & General Group]

We went to the talked it through with the board what's in the plan, what we're planning to do over that period. So we're very comfortable for across €90,000,000,000 that we can trade and we will trade with the optionality from the GIL strategy to get to that €300,000,000 plus.

[António Simões, Group CEO at Legal & General Group]

Dom and then I will come to Farooq again because I guess online he gets one question at a time. So I'll come to that, which I think it's for you, Jeff, you can look at it. Dom.

[Dominic O'Mahony, Managing Director at BNP Paribas]

Hi, thanks. Hello. Can you hear me? Hi. Dom Omani, BNP Paribas.

[Dominic O'Mahony, Managing Director at BNP Paribas]

I'm afraid I've only got techy capital generation questions remaining, so apologies in advance. One hopefully simple one, really encouraging to see the guidance on the OSG growth greater than 3% for the full year. What's the baseline, the full year '24 number normalized for the disposals? If you could give us that, that be very helpful. Then help me not get too excited on the asset trading.

[Dominic O'Mahony, Managing Director at BNP Paribas]

Your guidance here is set in an environment where public spreads are as tight as they've ever been more or less. If they normalize, presumably you're very, very geared into that. One of your peers is much is extremely ambitious on the asset trading opportunity. Is there any reason I shouldn't be thinking actually this could be a very large source of capital generation for you as you think more about you talked earlier about some of the processes that you put in place around taking advantage of spread dislocation. And then sort of the flip side, if I go back to that slide where you have the 6% to 8% growth in the size of the book, my hypothesis is that the book that is running off, a, is more capital requirement rich because you have more longevity risk and b, is more spread and risk margin rich because you had more credit risk than the book the stuff you're putting in.

[Dominic O'Mahony, Managing Director at BNP Paribas]

So I would hypothesize that the OSG coming out of that book is not growing at 6% to 8%. It's probably growing lower if we exclude management actions. Does that make any sense? Or is that wrong? I'm judging from your reaction.

[António Simões, Group CEO at Legal & General Group]

I'll give you one second, Jeff, to think about that. Just on OSG, yes, can give you the normalized number. Jeff may have it. But just on the I think when it normalizes actually Andrew made this point. We have the first half of this year is a good example because as much as I talked about geopolitical and economic uncertainty, we haven't had that much volatility.

[António Simões, Group CEO at Legal & General Group]

We had it very concentrated around Liberation Day. And so most of the back book optimization for the first half was done around those days, those days that we were both out of the office and coordinating. But it's a good thing, because we have a very disciplined framework that allowed us to very quickly act on that. You're right that the bigger upside is if and when the markets normalize, whereas here it was just the volatility we had for a week and it went back. But Geoff, you should comment on that and also on the six to 8% on that Slide nine.

[Jeff Davies, Group CFO at Legal & General Group]

Yes. So the OSG growth, you are basically after the full year number. It is exactly what you said. It's the removal of The U. S.

[Jeff Davies, Group CFO at Legal & General Group]

Protection and the 20% of The US PRT. I don't have the number off the top of my head. But I'm pretty sure we published it in the March results and what that would have been with and without

[Dominic O'Mahony, Managing Director at BNP Paribas]

it.

[António Simões, Group CEO at Legal & General Group]

The number exists.

[Jeff Davies, Group CFO at Legal & General Group]

I'm pretty sure it's in there. If it is, we do need to sell people because if you don't know what the number is, you can't do the growth off it. So we'll find a way of getting that out if that's the case. But I'm pretty sure I know in February we only give guidance of x million would be taken off. And then we said what the exact number was.

[António Simões, Group CEO at Legal & General Group]

In the full year results. In the full year normalize it. If not, we'll send it to everybody. Yeah.

[Jeff Davies, Group CFO at Legal & General Group]

But for taking off the non retained business. Agreed. Yes. Yeah. Antonio covered we don't want people to carried away with the you do need some market volatility.

[Jeff Davies, Group CFO at Legal & General Group]

We are sourcing assets. We'll keep the strategies going. We believe it's a very strong underpin to the OSG. But yes, there is clearly upside for the back book trading in a situation where you get a prolonged period of wider spreads. It would equally change the way that we price new business, which we think would probably be beneficial to everyone, make a lot more sense.

[Jeff Davies, Group CFO at Legal & General Group]

But your assessment of that is right. It's just a case when will that happen, what will that look like, what will happen to other markets at the same time. And DI, of course, in those situations tends to lag and take a bit longer to come through. And so we almost certainly would be moving into credit at that point in time.

[António Simões, Group CEO at Legal & General Group]

On that, Jeff and I debated this a lot. We actually said explicitly more than $300,000,000 on management actions, uncapped to some extent, rather than giving because we have numbers that could be much higher. But again, we want and hopefully trust us that way. We want to be realistic. We're doing effectively an upgrade to the guidance, but in a way that is thoughtful.

[António Simões, Group CEO at Legal & General Group]

I don't think we're in the game of giving you very big numbers. But I think there is substantial upside. That's what we said, more than 300,000,000. And we'll keep on updating you as we do it. That's the logic. The 6% to 8%?

[Jeff Davies, Group CFO at Legal & General Group]

So the OSG capital runoff really was the question. I mean, capital itself takes a very long time to run off on annuity business. It's very, very long. And especially with the amount of deferreds that we have written over the last probably five years at least, as those have been more and more coming to market in PRT. And so there is it's actually quite a slow runoff of the book if you think of pure capital runoff and what's happened in that.

[Jeff Davies, Group CFO at Legal & General Group]

There's been more of an impact to some extent with some of the discount rate changes and higher yields and what's happened around that as anything else. But because it is very, very long and only accelerates towards the end. It's even longer than, I think, the IFRS 17 because that has accelerated a bit more with the higher interest rates. And so there isn't anything particularly funny going on in any of that, I would say. It's very predictable.

[António Simões, Group CEO at Legal & General Group]

It's not fundamentally different, the older book versus the more recent book. Thank you. Let me go to Farooq online. So it says your CSM new business margins in institutional retirement and retail are low, even taking into account your guild space strategy. What is the outlook for this?

[António Simões, Group CEO at Legal & General Group]

And how do we balance what appears to be a low level of CSM growth against higher guidance for asset optimization in terms of net earnings impact? Jeff?

[Jeff Davies, Group CFO at Legal & General Group]

Well, think this pulls together everything we've been

[António Simões, Group CEO at Legal & General Group]

You probably wrote it a few minutes ago before we To be honest, said yes.

[Jeff Davies, Group CFO at Legal & General Group]

So I think we've covered a lot of this. I mean, some of it is the new business margins that we state are actually in line with what we said would happen under the Gilt strategy, in line with what we had last year. We think there's probably some improvement we can make around the retail new business margins on annuities with some of the investment strategy, things we look at and deploy more of the Gilts type strategies in that. We're improving the retail protection margins as well. That market got very, very competitive a couple of years ago, as we said.

[Jeff Davies, Group CFO at Legal & General Group]

And it's good to see the improvement coming through on that. But certainly then in terms of earnings growth, our guidance, we're very comfortable with that. We're seeing the back book optimization come through, which to some extent is either embedded in what we assume in new business, as we discussed earlier, or is upside that is giving us more and more confidence in the earnings projections that we've given, if you like, and the targets that we're looking at. So I think it is everything coming together around that.

[António Simões, Group CEO at Legal & General Group]

Great. Thank you. Other questions, Nassim?

[Nasib Ahmed, European Insurance Equity Research Analyst at UBS Group]

So this is similar to what Farooq just asked. On the new business CSM, if I look at just PRT, it's about 3% of PRT volumes in the first half. Geoff, when you presented IFRS 17, I think you guided to GBP 800,000,000.0 to 900,000,000.0 for 10,000,000,000 of PRT. That included risk adjustment, I think. But that's eight to 9% including risk adjustment versus three percent now.

[Nasib Ahmed, European Insurance Equity Research Analyst at UBS Group]

It can't just be guilt based. There's something else going on, think. Can you kind of if you go back, try and explain what's happened on the new business CSM relative to volumes? Secondly, on investment variances, it seems like you're not of the view that you need to change the assumptions within operating profit. I mean you've had negative variances for a few halves already and real estate has not been returning returns.

[Nasib Ahmed, European Insurance Equity Research Analyst at UBS Group]

So when do you change it? Or have you already changed it for 2025? And then finally, the £300,000,000 management actions for 2025, how much have you done in the first half?

[António Simões, Group CEO at Legal & General Group]

Geoff, squarely with you.

[Jeff Davies, Group CFO at Legal & General Group]

Yeah.

[Jeff Davies, Group CFO at Legal & General Group]

So actually, the 8% to 9% is more comparable to the 7.1%, I would say, the actual IFRS new business margin that we're talking about. That's the way we think of the business, the way we're looking at it. Because some of it is just you make less pounds through the gilt strategy. That obvious. And so you're simply not adding as much CSM as you were.

[Jeff Davies, Group CFO at Legal & General Group]

But we make up for some of that with the DI tobacco. We don't then allow for some of the future surplus. Some of it is it was quite hard to predict when we were just moving into IFRS 17 as well. I wouldn't say there's anything more fundamental happened there overall. IV actually it's interesting you say we are we constantly look at this as part of our accounting policy, etcetera.

[Jeff Davies, Group CFO at Legal & General Group]

And we are looking and we'll continue to look at this. It won't be wholesale across the piece because it is supposed to be through cycles, etcetera. You look at one hundred and fifty years data to decide what equity returns are and you don't change them because they've been different for even five years, similar for property as an asset class. But we will look at is it segmented? Are other asset classes suitably segmented?

[Jeff Davies, Group CFO at Legal & General Group]

Is there something fundamental going on? And we do that on an ongoing basis and we will continue. So we have a couple in mind that we may do that for, but nothing that's material that we need to tell everyone about that impacts the results, etcetera. And the $300,000,000 well, we talked about the management action sorry, the back book optimization IFRS greater than $150,000,000 Quite a lot of that flows straight through into Of course, net of tax, slightly different number.

[Jeff Davies, Group CFO at Legal & General Group]

Some of those don't because they're in the new business strain as part of what we've assumed. And then we have executed some of the type of reinsurance, etcetera, in the first half as well. But generally, it's better to look over the whole year that we are safely going to be in that 300 plus for the management actions. And I think given what we've stated, the targets will give more breakdowns of some of these. But it's sort of a million miles off halfway of what we need, to be honest.

[António Simões, Group CEO at Legal & General Group]

Yes. And going forward, we're giving the same guidance. We say that they'll be consistently above 300,000,000 So sometimes it's more skewed to 1.5 than the other. Any other questions? Also no questions online.

[António Simões, Group CEO at Legal & General Group]

So thank you. Thank you for coming today. As As I said, I'm very happy with the performance of the first six months, but I'm particularly pleased with the momentum on the execution of our strategy. Thank you for coming today and I'll see you on the October 23 with Laura, if not before, for the final of the deep dive onto the three business. In the meantime, if you're having a break I know that there's lots of insurance people reporting, so apologies for that but if you are having a break, I hope you enjoy the summer holidays. I know that I will. Thank you.

Participants

Executives

• Michelle Moore, Non-Executive Director and Group Strategy & IR - Director
• António Simões, Group CEO
• Jeff Davies, Group CFO
• Eric Adler, CEO - Asset Management
• Andrew Kail, CEO - Institutional Retirement
• Laura Mason, CEO - Retail

Analysts

• Abid Hussain, Equity Analyst - MD & Head - Insurance Coverage at Panmure Liberum
• Mandeep Jagpal, Director - Equity Research at RBC Capital Markets
• Thomas Bateman, Director - Equity Research at Mediobanca
• Larissa van Deventer, Equity Research Analyst at Barclays
• Andrew Baker, Head - European Insurance Research at Goldman Sachs
• Andrew Sinclair, Managing Director at Bank of America
• Andrew Crean, Senior Analyst - Insurance at Autonomous Research
• Dominic O'Mahony, Managing Director at BNP Paribas
• Nasib Ahmed, European Insurance Equity Research Analyst at UBS Group