Mike Wells - Group Chief Executive Nic Nicandrou - Chief Financial Officer Barry Stowe - Executive Director Tony Wilkey - Executive Director Jackie Hunt - Executive Director Michael McLintock - Executive Director.

Oliver Steel - Deutsche Bank Blair Stewart - BofA Merrill Gordon Aitken - RBC Abid Hussain - Société Générale Ming Zhu - Canaccord Andy Hughes - Macquarie Lance Burbidge - Autonomous.

in some of my meetings in the City, it’s been interesting the questions about, should we have a UK asset management business in the UK life company, or when are we going to do that, et cetera? We have asset management capability that’s competitive, I think, with the best firms in London and globally in M&G.

And if you combine that with our UK business, which, again, can compete with any life company here in the UK or Europe, the combined results, our IFRS profit is up 16%, which, again, competes with any firm or firms combined into that space.

So our capabilities in this market rival anyone’s and, again, that matters if the landscape changes or as the opportunities are merged. We’ve got the tools we need to capture those. Sources of earnings and sources, more importantly of Group capital, our discussion lately on capital, Solvency II, et cetera.

Let me start by just reminding you sources of capital for the Group, and I’m using in-force free surplus generation for this. 81% of the Group’s free surplus generation comes from outside the UK life business.

So when we think about Solvency II, the binding constraint for dividend and capital movement within the Group is local regulation in those markets. In the case of the asset management piece, Michael’s team, that’s less relevant, obviously.

But if you’re trying to back into what’s the impact of Solvency II on the movement of cash throughout the Group, you’d still need to look to local regulation. Nic’s going to do a deep dive into Solvency II in his presentation, so I want to leave some of the content to him on the details around this.

But for us, it adds another risk and regulatory screen to our metrics we use already as a management team. We are going to maintain the Group’s management and allocations of capital on a multiyear ECap model.

We’re not moving to Solvency II as a single metric, but it is for us, and the UK business and with our primary regulator, a regulatory capital model that we’ll respect and manage to and track closely. We submitted, earlier this summer, our IMAP. We work very closely with the regulator; lots of detailed work on that.

I think one of the things I’ve learned in the last 90 days or so here in London is just how much work they have to do between now and December. You’ve heard Sam Woods’ comments about both the release of all of the UK companies at once in December; keep in mind, that’s almost 300 firms they’re reviewing between now and then.

So I think there’s a tremendous amount of work to be done there. We’re doing everything we can to assist them with ours. We had a lot of dialogs prior to our submission to make sure we incorporated their comments and concerns. And again, Nic will give you a little more color on this in a minute.

But I don’t want you to confuse our previous and current conservative comments about disclosure on this with any sort of capital weakness. We just generally think it’s a good policy not to comment too much on regulation and process.

Our submission is being reviewed now, and there’s a finite amount of information we want to comment on that, given where we are in the process. Turning to 2017 objectives, obviously, a very strong first half moved these along.

And given the numeric nature of them, the underlying Asian free surplus, the Asian IFRS operating profits and the cumulative underlying free surplus, the answers here are mostly numeric, and going further gets into forward-looking statements. So, again, great progress, good percentage gains, good absolute gains against the targets.

And then my last slide in this section. I think it’s important to put the first half results in context of the Group’s track record; how are we growing relative to ourselves, and I think that’s a worthy benchmark. I think the numbers, again, are compelling.

I think they show the consistency of the Group’s capabilities, our ability to create earnings, create future value and convert those to cash. Obviously, very pleased with the historic trend as well, and I think they set us up well for where we’re going second half of the year and beyond.

I’m going to turn it over to Nic now and I’ll come back at the end with some comments on strategy and some of our opportunities.

Nic?.

this debate is not about producing an outcome which constrains capital flows from Asia. From the regulator’s perspective, it is about not coming up with an answer which is so positive that it tempts us, somehow or for some reason, to over-distribute.

Either way, as this is about what additional credit we can take under Solvency II at Group, the local solvency regimes will remain the biting constraint and our free surplus approach, which in Asia is based on the local regimes, will continue to determine both capital generation and remittances to Group.

Therefore, to conclude, for 81% of our business there will be no change to our current approach. In relation to the UK, transitionals will effectively mean that capital generation of the existing business will continue to operate on a broadly similar basis to the one we have today.

Capital consumption for new annuity business will be greater but, as you have seen earlier, its contribution to our results is not significant and it can be managed through reinsurance, we are therefore confident that Solvency II will confirm the highly cash and capital generative nature of our business.

We believe that the most reliable source of capital is the sustainable delivery of a growing level of high quality earnings. Our performance in the first six months of the year demonstrates exactly this.

By operating in markets where consumer demand for our products is both strong and enduring, and by executing our strategy with discipline, we have grown NBP, the key lead indicator of future earnings, by 18% year on year.

The capital velocity of the highly profitable business written in recent years, combined with our value-based approached to managing the back book, has enabled us to deliver one-quarter more profit than one year ago and improve its quality.

This operating profit has driven a 27% increase in both the free capital held in our businesses and in our Group’s IGD surplus after financing new business and paying dividends. All this reinforces our confidence in the future prospects of our business. And with this, I will hand you back to Mike..

switching now to IFRS income by source; Nic highlighted this. Across the cycle, how resilient are our earnings? Well, one, you can measure by source and I think they’re well diversified. Two, you can measure by currency.

If there is a global crisis, unimaginable scale, what are the go-to currencies? Well, they’d be the dollar and the pound, and you’d see a link, the dollar linked products behave accordingly. Again, I think this is -- in the [IFR] currencies markets have done exceptionally well.

I don’t think they’re all correlated; I don’t think you’re going to get every market that we have out of the US, including Africa behaving the same way at the same time. But that said, if that’s your starting thesis, that’s the resilience of the earnings from a currency point of view.

And then last, and most importantly is what percentage of our earnings are recurring versus coming from new sales? So what happens if we just run the business, sell nothing, that sort of level.

For us, it’s a dramatic level that creates creation of capital to reinvest in the business, to pay dividends, to look at new opportunities, often at a time -- if you’re thinking of a very cyclical market when competitors may not have access to that capital. Again, it gives us optionality a key element of our business plan and our capabilities.

So the basic summary, I think we have leading franchises in all the markets. We’ve obviously a very strong management team, strongly capitalized and cash generative businesses, and I think we’re well positioned to take on whatever challenges are coming.

And again, thematically I think the major challenge that we’re dealing with is getting to investors, and to middle-class households, the solutions they need as they’re handed more of that responsibility. And, again, that’s a global trend for us.

There is far more demand in that space than we can provide supply, but we will scale that up, focus on the execution and get more of it.

There’s plenty of room for us to lever our capabilities internally as a Group, from technology, from people, from capital management, tools we are using in one area that we haven’t exported in another, you will see all of that, but it’s all, again, at the execution level. The strategy we have is the correct one.

And I wanted to finish with a slide that we used earlier and I apologize for bringing it back up, but I think it makes another point. We were talking last night about this. So when I got here -- you see new business profits was 80 million at the half-year, 20 years ago.

50 million of it will be somewhere over here, I’m not pointing to this, that chart, if we brought that line down, right, somewhere around here. It was 80 million, 50 million of it from the UK. There was no M&G.

The US business had been bought because it was a very attractive product called single pay whole life, which was a tax free annuity at the time which, by the way, the Federal Government in the US changed, in one day, the tax status of that product and eliminated it. Asia was where we sent people to retire.

That was a nice way of saying you had two years left and you were going to go to one of our outposts where folks from the UK were retired, or military were based, or whatever it was. It was not the cutting edge of our growth as an entity. There is a couple of things you should take away from that. The people that created this are here.

A disproportionate amount of the performance on those charts comes from people that are either in this room, this team, or in the various buildings and field offices we have today while we’re sitting here. We have built this collectively. It’s a very unique Firm with very unique capabilities and, candidly, it’s why I took this role.

So I think we’ve got a lot ahead of us, and I don’t see anything in front of us, disruption-wise or competition-wise. Our challenge here will be to compete with ourselves and our track record. Stop there and take questions. I’ve asked my colleagues, if you would, to join me up on the stage..

All right, just wait for the mike to come to you before you ask the question and then please state your name and you firm’s name.

Can I start with Oli?.

Yes. Oliver Steel at Deutsche Bank. Two questions, both around the DOL proposals. You said a few months ago, actually I think it might have been Tijane who said a few months ago, that you thought an industry worst case would be down 15% to 20% in terms of sales. How are you feeling about that now? I appreciate it’s still uncertain.

And then secondly, it doesn’t sound as if you’re expecting a huge sales fall in your own situation, but if there was a sales pull-back, for yourself, how would you be considering what you would do with the capital thus released from the U.S?.

Well, I think, Oliver, there’s a couple of -- I’ll put this to Barry in a second, but let me just give of my time for DOL and the U.S. Let me take a shot at this first.

We now know what the details of the proposal are and, again, I don’t think the proposal -- I think it’s unlikely -- predicting politics is not something that I’m paid to do or I don’t think anybody is good at right now in the US. But I think the DOL’s intentions are good and clear.

I’m not sure that this current proposal gets them there, and I think that’s been the universal feedback they’ve got from both sides, the IR regulators and the marketplace. So again, they tend to adapt well to new information. So I think we’ll get something different. But if you said, [a lot of life] commissions, that effect, that’s one element.

Transparency is not material. We have broker dealers now that have full disclosure of all commissions paid on variable [notaries] and products and, again, that doesn’t change the marketplace any. I think it’s good practice. The question becomes, I think, two things out of the current proposal.

If it passed in kind the level -- there’d be a preference for a level of commissions, no question. That’s the only product that would work in the structure.

So there’s an element of, what is your current qualified sales? Now, that’s a different question for Jackson versus peers, because we have excess demand for that product than we are willing to fulfill on the marketplace.

So you’d have to add that excess demand back on and then say, well, how much of that would have been qualified and then say how much of that would you lose? It’s a little more complex, little more convoluted, really. Some competitors have a different play, so I’ll let them answer for you.

I think one of the key things in it is, does your product stand alone, ex commission? And that’s a harsh bright light on some variable annuities. I think ours does well, and I think those of you that talk to advisor firms in the US on some of those tours know that it’s generally viewed as the best client proposition in the marketplace.

And I think that’s -- again, we’ll deal with the pricing issues on structured commissions. So the second part, how does it affect sales? It does affect sales; I think it affects the timing of sales in Jackson.

So you release some of the leverage you’ve pulled to control volume, depending on how much notice you get on what the structure of the product is, and they’re generally pretty good about that. The regulators in the U.S give you some indication of where they’re going to go. But how fast do we react? We know how fast we can get product to market.

We know it’s faster than competitors and, if it’s a simple change, we know we can do it very quickly. If it’s a material new product, that may take better part of a year. But I think the more important issue always, it changes the shape in a year of the sales.

So we may have a bigger first half and a flatter, lower second half while we retool, that kind of thing. We’re dealing with that now in the U.S franchise.

There is no question, as we turn on and off the core product, you’ve seen each year it changes quarter to quarter, the shape and that’s when -- years ago, first one of these, it was 15 years ago, we talked about the fact we would do most of our sales in the first five months.

And part of that was because competitors weren’t tuned up in January and February and we always had a really good start, when we were smaller than them, in the first part of the year and we always tried to take an edge there.

Well, that’s changed as we’ve controlled volumes because we have to rebuild those volumes as we’ve turned off product at year-end. So that was a very long intro to what Barry wanted to say, and my apologies, Barry..

I agree with everything he said. Seriously, Mike covered the landscape pretty well, and so I think I can understand why some competitors would be very concerned about this.

We are less concerned and, as Mike said several times through the presentation, that has to do with the quality of our team and the platform that they have built, the infrastructure that they’ve built. We do a better job at lower cost and we have a track record.

You have seen it time and again with the lead access being one of the most recent examples of this organization thriving on disruption, and actually turning it to commercial advantage. It is a characteristic you see throughout the Group. We’ve done it in Asia; we’ve done it in the UK; we certainly do it in the United States.

It wouldn’t be right to say we’re not worried about this, but we think we have it fully in hand. I am encouraged about the outcome of the hearings which began this week and continue.

I think a lot of people, including the White House and the Department of Labor, have been surprised at the level of concern that has been expressed about this and the bipartisan nature of that concern that’s been expressed. It doesn’t happen very often in Washington right now.

And, to Mike’s point about it being difficult to predict politics, I don’t think, even two weeks ago anyone would have predicted that we’d now have 13 Democratic senators who have come out and made some pretty harsh comments about this. So I absolutely believe that there is scope to change the shape of this.

We are working hard to -- we are involved in that shape-changing exercise. We’re spending time in Washington.

We’re making the case about how hostile this is to, particularly middle-class Americans, which is exactly -- this is another one of these perverse things where the government comes up with a well-intended proposal to focus on and protect the middle class, and the outcome of what they design would have the exact opposite effect.

Because, as Mike alluded to what would happen is advisors would run from qualified money. That could be one of the impacts. So just say, you know what? I’m not going to bother with it. I’m going to the high net worth customers with lots of unqualified money and I can advise them on that and that’s what I’ll do.

If you look at middle-class Americans, they are overwhelmingly in qualified money. Most of these people, they don’t have lots of assets outside of their 401K or their IRA or something like that. That’s where the preponderance of their cash is and they’re going to have increasing levels of difficulty getting advice on that.

So again, fingers crossed, lot of work to be done, but I think this is more than survivable, more than survivable..

Blair Stewart, BofA Merrill. Three questions please. The first is on Asia; perhaps an update on the Indonesian business which is where sales are quite flat, just an outlook statement there would be great, helpful.

And then on Hong Kong, where the opposite is happening and sales are going through the roof; the impact from Mainland China and the disruption there, I guess, could be argued in two ways. It either negatively affects the business or you see even more Mainland business trying to diversify out of the country and the currency.

So a Hong Kong update would be really useful, too. On economic capital, Nic, could you comment qualitatively on what’s happened to the economic capital in the first half of the year, given the earnings and the interest rate moves? It would seem that that figure should have gone up, although I appreciate you don’t want to put a number on it.

And finally, I think on some of the headlines on the screen, Mike, there was a comment about the Group moving towards the 2 times dividend cover, over time. Could you perhaps clarify that comment, please? Thank you..

Okay. I think, on the dividend cover, that’s one of the easier ones. The statement stands for itself. I think we should maintain 2-plus-times dividend cover and, depending on where we are in the cycle, we’ll allow it to go a bit higher than that.

I think one of my bigger surprises, candidly, in the new role was looking at dividend cover and some of the stocks in the FTSE. I think a growing dividend is a key discipline of any good management team, but I also think a proper level of conservatism in our industry is appropriate from a cash and resource point of view.

So our role is to balance those two all the time, and I certainly think our dividend cover and our targets are appropriate for it. On Asia, Tony, I’ll go ahead and flip the first Indonesia question and the Hong Kong to you..

as Mike mentioned, we met with Bill Winters last week, the new Group Chief Executive, who’s very appreciative, respectful of the relationship and very bullish on doing more with us. So that segment is also growing well. The Mainland business is growing at a faster rate within that. It’s important to note that we’re not new to the Mainland business.

We started this initiative over 10 years ago when we had less than 3,000 agents. We now have, in Hong Kong, over 10,000 agents and survey says it’s the most productive agency force in Hong Kong.

The Mainlanders who come and typically buy our products, these are not day trippers, these are people who, on average, come six or seven times a year; they look and sound a lot like Hong Kong people. In fact, the majority of them come from the neighboring province of Guangdong.

And to put that in context, Guangdong is about the size of the United Kingdom geographically, but it has 120 million people. So in terms of demand, I think we have quite a significant amount of headroom.

We have not seen anything to indicate any slowdown in -- we’re always looking at leading indicators and we’ve not seen anything to indicate a slowdown in the Mainland business at all..

Nic, did you want to…?.

On economic capital, qualitatively, we continue to produce a strong operating performance. You’ve seen that come through other metrics. You see the contribution on IGD. But typically, we’ve produced somewhat between 16 points and 20 points each year, so I’ll let you rate that.

Market effects were positive, albeit a little negative on the FX because currencies closed a little lower, or sterling was a little stronger than the point at the beginning of the year. We raised some debt. Of course, we paid the final dividend, but we feel good about the formation of solvency through capital in the first-half..

Gordon Aitken, RBC. Just a question, Mike, you said there was no need for a change in strategy.

I was just wondering, though, there must be some areas, some products, geographies, distribution channels which you maybe were looking at over a number of years, or looking at now and say, I think we’ll just put a little bit more emphasis on that one and a little bit less emphasis on that. So if you can talk about that.

And just in the UK, do you have a panel of reinsurers that you would use? And are they all based in the U.S?.

On the reinsurance question, there’s multiple reinsurers we use and they’re based globally; they’re not all based in the U.S. We have a variety of players. And reinsurance is not a new tool for us in the UK, or even in the U.S. It’s opportunistical sometimes and it’s strategic and risk managed with others, so it continues to be available.

The bulks that the UK business attracts, if you think of that market it tends to cut into different pieces, some on size, some on credit. And we tend to be the desired home for the larger or credit sensitive, brand sensitive bulks, so that continues. Is that fair, Jackie? There’s not a -- so yes, we’re not seeing anything unusual there.

So reinsurance is available to us. We’ve used it, as you’ve seen. There’s not any difference there or any concentration with a given counterparty in it. On strategy, I probably neglected the African team a bit. We’re continuing to expand there.

I think it is the next iteration of what we’ve learned and I think, from an earnings point of view, it’s not material to this meeting, but it is a chance for us to take a new market with emerging middle class and digital and emerging bank trends and go in there, with everything we’ve done in Asia and other markets, to produce good solutions for clients and build something that we know is scalable.

So there isn’t an appetite to artificially accelerate that, but we’re looking at lots there. From a product point of view globally, it depends on the partner. I referenced this earlier.

I think we have to be careful that the well-earned relationships we have, with distributors and with clients, that we don’t let somebody else come in and take as they mature in assets and in demands. So we don’t intend to let that happen.

So part of that is some big data work where we take a look at our clients, at some of our relationship clients, and make sure we have the right product set in front of them to keep those relationships. That’s true of agency; that’s true of bank; that’s true in the U.S. that -- I use the term sometimes share of wallet.

But there’s also a household share of wallet. If they have made a selection to trust us on something very emotional like protection, and we have asset management capabilities or we have some protection products that they’re not buying, we are the logical place for that advice provider to go again. So I want to make sure we cover that.

I don’t want to get in to specifics; I don’t want to brief competitors on this as well. But you’ll see us follow the clients. I think there’s a fair expansion of the strategy.

And again, part of that is by channel and part of that is how you do it technology-wise; there’s a lot of elements to that and we’ll keep you abreast on what we’re doing there as we do it..

Abid Hussain, Société Générale.

Just one question, please, just coming back to the Department of Labor, what are your options if the Department of Labor decides to abolish the payment of upfront commission, especially given that VAs are a push product?.

So B share mutual funds are a push product, I think if you asked their broker dealers at the time. And I think, again, one of the things that define what an advisor sells is our alternatives.

So if there aren’t -- and I think one of the pieces of advice that the DOL got I thought was from a regulator was, let’s come up with a set of standards that apply, qualified or non-qualified, which is, we shouldn’t have better advice for qualified money than socially is allowed outside.

It’s an interesting discussion; the federal letter [ph] is fascinating to them. But if the commissions are levelized, the question is, does the consumer see value in what we’re offering. We have advisors now that are effectively on a trail.

Some of our other share, L share products and things, they could clearly pull those assets out and roll them into a frontend commission product if -- it’s not good business, but if that was their character they could do that to a competitor; they couldn’t do it with us. But you’re not seeing that behavior.

I think the product has tremendous value and, if the advisor gets paid differently on it, and that’s the only option in the market for qualified plans, then that’s what will happen. Will there be a change? Yes. Will it require good wholesaling to change it? Yes. Mostly on process; this is very material.

These changes have infrastructure implications, so those who’ve done the US tour, those boring tours of the data center and the IT people talking about having one product, that’s a lot easier to address if you need to do a pricing change than if you’ve got dozens, just the reality of technology.

So who’ll get there? Who can design a product correctly? Who can get it back into the advisors business? Barry’s team is already working with all of our key distributors on plans, some more detail?.

the living benefit guarantees that we’ve put on these products are extremely important and the further you go down the socioeconomic food chain the more important those guarantees are. These products will exist and I’m convinced, again, back to the political point that what’s going to happen is not going to be extreme.

I think there is too much bipartisan acknowledgement that the way this initial draft has been pulled together is, there’s a little overreach here and it has unattended consequences..

Ming Zhu, Canaccord. Two questions, please. First one is on the UK. You’ve had very strong retail new business growth and because of the delaying decisions from the retirees.

I just would like to have a picture in terms of going forward, what’s the sustainable growth you think you can achieve, and how much growth you think you need in order for the new business profit to be sufficient to offset the runoff and back book, please? And my second question is on M&G.

With the outflow you’ve experienced in your optimal income fund, you’ve guided further outflow in H2.

Could you give some sort of feel in terms of when do you think the outflow will normalize, and what actions are you taking in terms of, are you launching new funds for the growth of your focused market in Europe?.

Jackie, do you want to take the first part of this question and then Michael the general outlook?.

So you’re right, we have had very strong retail growth; on a net basis that’s up 25% half-year on half-year. Actually, if you break it down, the new product and the savings and investments product that we had in situ are generating about 40-odd-% growth being offset by the 56% reduction in retail annuities.

In terms of the outlook for the business, we did see some pent-up demand in 2014, as you say. Some customers did delay their decisions more generally. Most of those customers, my view, and it’ll a take a while for the trends to stabilize, most of those customers will be individuals looking for cash.

So like much of the industry, we saw a quick uptick in the dash for cash in the few months and that’s starting to slow down quite considerably. Actually, if you look at 2014 and then early 2015, we’d seen such low levels of people actually exiting products across the industry.

But I think some of that pent-up demand was really just 2014 demand working its way through the market as a whole. In terms of outlook, if you’re going to look at, in terms of our own positioning against pension freedoms, I think my colleagues have talked about making an opportunity out of change and that’s what we’ve done.

We’ve really said, change is coming, how do we best position ourselves? We’ve got the [fabulous] franchise, great retail band, really good investment proposition, huge love amongst our existing customers and external customers.

So how do we best position ourselves for that? And so we focused on a range of savings investment type products and we’re having considerable success in those. You would have seen income drawdown, those who are no longer [annuitizing] tend to go into an income draw down product.

We issued a flexible version of that drawdown product back end of last year. It is advised only at the moment, there’s a plan to move on to non-advised version later this year, and our sales are up about 228% against the product. We are attracting new customers, new advisors and new intermediaries.

Equally, you look at our existing bonds product, 20% growth, individual pensions I think about 125%. So there’s very broad-based attraction around the existing savings and investments products as people change the way in which they look at retirement and they no longer look at it as a point in time but a transitional period.

The other thing I would point to is, alongside, there’s been a lot of focus on pension freedom and what it meant for annuities and the reduced need to annuitize. This focused on the ISA allowances and those were obviously raised very significantly.

We talked about PruFund ISA so we wrapped in a different savings form to our existing PruFund product, and that’s had an incredibly fast launch. So GBP260 million of assets under management after we launched in February. That’s not just new savings into an ISA form, a lot of that is actually transfer business.

And that’s attracting, in majority, actually, money that’s sitting currently in cash ISAs. So actually, if you step back from all of that and say, what is the outlook? I’m very bullish, actually, about the amount of momentum in the business.

I think, as the comparatives start pulling back with retail annuity fall off, the first quarter obviously still had the pre-budget changes in it, you will see that growth rate continuing to escalate..

Michael, on funds?.

Yes, on optimal income, particularly, the bond bandwagon has run out of steam and we are not alone. You’ll have seen other large players in the market having significant net redemptions from this asset class.

It’s very difficult to say when this is going to stop and, to some extent, I could bounce the question back to you, which is, what do you think is going to happen with long-term interest rates and fixed income markers generally because, of course, they started to yield negative returns.

And you can construct a range of scenarios from, markets staying roughly where they are, to actually having falling out of bed yields backing up quite significantly and suddenly perceptions of value reemerging. And it’s very difficult to know what is going to come to pass.

At the moment, I have to say to you, we don’t see any change in the trend in relation to optimal income.

But ,of course, it’s a game at M&G, not only of what happens to funds where net outflows have been experienced, but what also happens with other funds, which are going well; for example, our multi-asset range of funds are performing extremely well, property fund is still seeing a lot of interest.

Frankly, our equity fund range is performing disappointingly, on the whole, with some bright spots at the moment.

And that’s another question which you have to ask because, of course, we’re living in markets where equities that deliver perceived safe growing income streams are being -- stocks that do that, are being driven to very high value levels which is actually not where we’re playing. And that’s why we’re getting some poor performance in some of our funds.

Again, we’d expect that to change at some point, but I can’t say when. So I’m afraid it’s an uncertain picture. We are seeing some good areas of interest away from the Optimal Income Fund, but I can’t actually give you any precise prediction on timing of when this will all come back into balance..

Andy Hughes, Macquarie. Couple of questions, if I could? The first one is on the DOL stuff and what it does for the product. I’m not sure I completely understand what you’re saying because my understanding of the product is it’s kind of reliant, in the U.S, on lapse rates.

And so, if you move to a levelized commission structure with much lower lapse rates across the industry, presumably you have to drop what you offer the consumer dramatically under the current product. Second question is on Asia and the trapped capital.

I’m trying to understand what that means; is that the reason behind the 2 times coverage on IFRS? What is the statutory surplus coming out of Asia in H1? And what options do you have to access this retained surplus in Asia? I presume you can use it for M&A, but is there any other options to unfree the surplus there? Thank you..

I’ll take the DOL one and, Nic, do you want to take the financials for the [generic] question. Perhaps you could address the dividend piece as well. Andy, there are now registered advisory based with living benefit products in the U.S.

One of the larger distributors, Linsco Private Ledger, asked five companies -- five or six companies to build them one. It hasn’t had material traction yet, it requires different pricing, different option strategies, which, again, are not outside of our core capabilities.

But there are other structures that -- let’s get the rule and then we can tell you what structures work in it, but on a levelized product you have a couple of new variables but they’re not difficult to -- think of it as a product with its rental charge expired. Similar characteristic, to oversimplify it, is that -- Chad, is he wincing? No, he’s not.

Yes, I think that’s the simplest way to think about what it gives us from a liability point of view. So again, it’s not something we haven’t seen before or can’t deal with. Is it the optimal structure for value for the consumer? No.

In any product, fixed index annuities, VA, the longer the client gives up liquidity, the more we can provide in the terms of value. And again, that’s a discussion that’s part of the case for the DOL. So we’ll see how that turns out. On dividend cover, it’s not related to Asia.

It was a pre-Solvency II, so it’s not a -- do you want to address the [IFRS] context?.

Yes, let’s just be clear, there is, subject to a small caveat which I’ll come back to in a moment, there is no trapped capital in Asia. If you look at our free surplus disclosures, you will see that we have, in our life businesses, 2.6 billion of net worth, backing our own levels of required capital of 1.2 billion.

The accumulation of local regulatory is under 1 billion; we tend to use a high measure. So all of that 1.4 billion is available, why do we keep it there? We keep it there to fund business; we keep it there because we like nicely capitalized businesses.

And I have said before, if you want regulators to allow you to move capital freely then you have to be responsible. When times are good you don’t take everything out so that when times are less good they allow you to take stuff out. That’s the responsible behavior.

The only caveat is that there are a small number of businesses, and we’re talking of a couple of hundred million of that 1.4 billion, where the accounting reserves are negative because they are growing, so in the start-up phase they will incur losses.

Eventually, profits will come through and remove those losses and, therefore, you’ll have distributable reserves on that basis. But given the very strong growth that we’re seeing in IFRS, within 18 months or so we will grow ourselves out of that little constraint. If we needed to access that very quickly, we could restructure the capital.

So there are no constraints, capital can flow freely..

It’s Lance Burbidge from Autonomous. I’m afraid I’ve got some questions on the DOL as well. This is a relatively simple one; you talk, Mike, about releasing the levers to control sales. I just wondered, presumably those levers are increasing the price, so reducing the price presumably would reduce your profitability of new business.

And I just wondered, as a follow-on to that, if the price comes down in a market that much, what threat is there for your in-force book, which is obviously the big driver across it currently. And the second one is for Tony on Hong Kong.

What is the major driver of Mainland Chinese actually buying a product in Hong Kong? Is it price, is it product that’s better than in China, or is it diversification from a currency perspective?.

Okay. So, Lance, on the DOL, some of the in-force levers, if you remember, is we pulled down available guarantees, so that actually increases the profitability of the product, if we were to go back that direction.

And, again, not trying to do a primer for what competitors should do in this climate, but if you think about some of the things we’ve done in the last three years, if we reverse some of those, it actually improves the margin on the product. So it’s a little counterintuitive.

It’s going to depend on what makes sense for the consumer and the structure we have, but I think that’s directionally the way to think of it.

On the in-force, there has not been, in my 30-plus-year career, a retroactive treatment of policy and so, again, that’s an interesting question of would the DOL do that for the first time, possible, highly disruptive.

If you think of if I had a real estate partnership in my retirement account, I can’t meet some of the requirements in this for liquidity, dealing advice, etc., so am I supposed to sell an illiquid asset, pay the tax on it. It’s hard to imagine that that will be the intent or the outcome.

It’s possible, again, in details but I don’t think it’s the realistic outcome that we’ll get. So this comes back to, why does the quality of product matter? Why does how you service the client matter? Why does having the advisors feel like you protect their reputation? We have a very happy back book.

These clients have made a lot of money with us and done far better than they would have any place, and the value of the variable annuity has been demonstrated to them.

So we don’t have attention of the clients where they’re, a looking for a way out or, as we’ve told you, we want them out or don’t view any of the relationships as particularly profitable. Measurement of that would be our openness to additional premium in the various vintages.

So it is a little more payback for having done the right thing for the consumers across the cycle. It gives us options that, again, I think some folks may be a little more challenged with. But I don’t think you’ll see retroactive legislation. It’s very, very rare in the US.

It’s happened one time and, again, in the fund space and it was on share class application and it wasn’t -- it was just an enforcement ahead of policy, just said go back and give your clients whatever you should have, sort of thing, once. And it was a very odd, very political heated climate on who was the proper regulator and we all complied.

But that’s the only one I’ve seen in my career. So I’m not anticipating that it’s disruptive for our back book. On Hong Kong, they’re just general -- that’s for Tony. The vast majority of our premium there is recurring. You’re talking about 8,000 to 9,000 average transactions.

You want to go -- you’ve all heard the film -- the process is well established, both from a consumer and our side, but can you provide a little color around that..

Yes. I think you might have answered your own question, why are they buying. They’re diversifying away from other assets that they may hold in the Mainland. They are buying other assets as well. It’s not just insurance that they’re buying in Hong Kong, they’re buying real estate and so on and so forth.

Do not underestimate the power of a trusted brand to the Mainland Chinese. Our name in Chinese is, which is UK Prudential, and that is a very important component of our value prop to these people and they’ve been -- so, its diversification and it’s a trusted brand..

Okay, great. Well, thank you very much for your time and your attention and appreciate the questions. We’ll see you January 19; we’re going to host an Investor Day. I hope you’ll be able to join us. We’re going to be here in London, give a little more depth into the strategy and some other elements of the business.

We’ll be able to give you details on Solvency II at that point. So again, thank you for your time and attention..

Ladies and gentlemen, this concludes today’s call. Thank you for joining, you may now disconnect your lines..