Thank you for joining us for 2015 Results. And we’ve got a little different format today. I am going to give just a couple of quick comments, turn it over to Nic to do the financial overview, and then I am going to come back to give contexts and address some key points about various businesses and some of the challenges we have and some indication where we are, heading into 2016. So with that, we think the performance was strong and broad based, obviously all the business units contributing effectively. I think if you look at the balance sheet, I think it’s in great shape, defensive, well capitalized. The operating performance again underpinning the shareholder dividend; this was something we talked about in January. We’re earning it first, we’re stressing it, and we’re paying it. You see that as well, the extraordinary dividend. We got asked this morning on the investor call. So first one since 1970 for those of that are into Prudential history, so if you’d like a context for the last extraordinary dividend. Execution, the key to what we’re doing; the strategy is holding obviously very well, opportunity is there and it’s our responsibility to turn that opportunity into tangible results for you. So, we’ll talk about that in detail today. And then again, our relative position to peers and the marketplace to potential challenges et cetera we think is in very, very good shape. So, I am going to turn it over to Nic now to give you a granular look at the financials and then I am going to come back after and put some color and context around where we are as a business unit.

Thank you, Mike. Good morning, everyone. In my presentation, I will firstly run through our full-year results and highlight the drivers of our performance for 2015 and then as usual, I will go on to cover the Group’s capital position and the balance sheet. So, starting with our financial headlines, at the time when companies in many sectors are having to choose between growth or cash, Prudential has been able to deliver both in tandem, yet again. All of the Group’s key profitability and cash generation measures have improved by 15% or more, making 2015 our most successful year ever. We achieved this by making the most of our structural advantages in markets -- in the markets that we operate and by executing with discipline and with focus. The 22% increase in our IRFS profit to £4 billion was broad-based as Mike said, and is underpinned by larger portfolio of in-force business. To this, we continue to add valuable new business flows of 20% in NBP terms to over £2.6 billion and this metric is led by Asia. Our capital disciplines ensure that sales translate to profits and then to cash relatively quickly across all our businesses. The success of this approach generated over £3 billion of free surplus, up 15% year-over-year. Operating profitably is the first and most important source of capital. Our performance in 2015 has increased our Solvency II surplus to £9.7 billion and has added to our EEV shareholders’ capital, which was up 11% and is equivalent to £12.58 per share. Our enhanced financial resources are a source of strength and resilience and provide additional headroom to weather the effects of the market volatility that we have seen in the early part of this year. They have also provided -- allowed us rather to increase the…

So, looking at the Group and nine months into the role, I think there is a couple of points I’d like to make today. One is I think we’re showing that we can compound a business at that scale, at rates that you’d see of a much smaller company. And I think one of our goal as a management team is to continue that trend. I think the other couple of points I want to make and delve into a bit is the quality of the delivery, as Nic mentioned, it’s extremely consistent across all key metrics and there is a lot of good reasons for that. The resilience of the sales model I think is misaligned with perceptions externally and particular that fact we’re selling low beta product into high beta markets, if you think about it. That misalignment creates tremendous opportunities for us and the macro noise actually creates demand for us in a lot of markets. So, come back to that a bit. And then finally, the dividend reflects a view on discipline that we’ll earn it, stress it, and pay it in the context of what our various options are as far as growth. We’ll balance that growth and income agenda. There is no other message beyond that. There is a lot of comments this morning, if it was too high or too low or too confident in our growth opportunities, too low. We have plenty of growth opportunities, we actually have more than we have capital at attractive returns, no message in that either. It’s a great place to be as a business, and we’re going to execute efficiently with what we have. So, let me dive a little deeper. Our strategy, this is well rehearsed in this room and it’s no reason to get…

Thank you very much. Good morning. It’s Blair Stewart BofA Merrill. Two questions please. On the dividend, Nic, you talked earlier this year about performing a 1 in 25-year stress on profits and looking at how the cover looks. I wonder if you could provide a little bit more detail around that. Everything about the Company is growing at double-digit, yet there is a 5% base growth in the dividend, and you talk about two times cover. So, there is maybe some mixed messages around the dividend. So, just any color you can give on the stress aspect of that would be really helpful. And secondly, I guess also for you, Nic. Can you give us an indication of what you think the organic Solvency II available capital generation is for the business, so that’s everything including, in-force, creation, et cetera; what’s the organic Solvency II available capital generation of the business?

Okay. What the dividend cover is, once you take the special dividend into consideration is around 2.5 times that’s where we’ve ended the year. And as you say, and I’ve said this before, that there are number of things that we take into consideration as what happens in the stress and also what other prospects going forward in terms of how much capital we’re gaining to need. We think 5% is a very good rate to continue to compound. I’ve said before that that is -- we’re looking to grow at 5%, no matter what. And that’s really important because even in a downturn or even if something doesn’t go with plan, then we look to our shareholders to feel confident that we can sustain that level. On the organic generation, the £2 billion that I have referenced, unless I’ve misunderstood your question, is what the Company was able to flow out in this year, that’s roughly 2.4 on own funds and the negative 0.4 on the SCR. I’m not sure if that is addressing your question. Clearly about 2.4 on own funds, it comprises a big block that it relates to the in-force, why, because we bring everything effectively on an MCV basis and then margins unwind and of course we deliver the equity and the risk premium that is available there. And a good chunk of t also comes from new business which we also generate organically. So, the entire 2 or 2.4 and the numerator is organic, unless I misunderstood your question.

Good morning. It’s Jon Hocking from Morgan Stanley. I’ve got three questions please. Just going back to the dividend, I know it seems little bit churlish because it’s special. But what should we be looking for in terms of the triggers, when that cover starts coming in because the stress element I guess is related more to the what you’ve earned in the year relative to prospective use. Is it actually just the outlook in terms of visibility and we need to see clear before cover starts coming in, because you’ve been talking about this I guess for two to three years now in terms of the cover? Second point on DoL. Can you talk a little about where we are on the policies; is there anything that could happen to actually derail the whole rule change? And if you could give us some color on where you base case is for the change? That will be helpful. And then just finally, there is couple of sort of minor regulatory issues, I think, one with PRA on the back books and second with CRIC in China. I was wondering, if you could comment on those please. Thank you.

So, I’ll start with the cover. When I covered this in January, I said that whilst dividend policy is anchored on IFRS cover, we use a number of other metrics to assess that. Candidly, if you are growing company and the assets and liabilities that you ride, grow as well, you need to put risk capital aside. And IFRS is imperfect in terms of capturing that which is why we use free surplus as well, which is something else that we assess cover against. And it’s something else that we stress and of course now we do have the Solvency II and a number of other metrics, capital -- ratings capital for example. So we take the full suite of capital metrics. I hope -- I wish it was as simple as managing this business by reference to one metric, it would make my job a lot easier. Unfortunately it’s not; we have to balance all these things. And interestingly, the slide I’ve put up, as said, the operating formation of capital is different numbers on the different bases; these is different mechanics under each. We have to take all of the into consideration. Most of these KPIs, we are covered strongly but of course in a stress will come off a little that. The way we make the decisions is that in a stress, we can sustain the growth of the dividend at 5%. And that’s what we judge alongside the growth prospects. And as you heard today, those are intact. And particularly in Asia, we are seeing growth, we’re seeing great opportunities for growth that ultimately needs financing as well.

DoL, Barry, do you want to give us some color on -- you are closes to politcs?

Yes. With respect to the politics, I mean in some respect, the politics is kind of scaling back and it’s more focused on implementation, which doesn’t mean to say that there is not still some politics at play. So, right now the rule is sitting with the Office of Management and Budget. They are tasked with trying to measure the cost, the economic impact of the implementation of the rule change. Now there is the prospect that OMB would come back to Department of Labor and say you’ve massively underestimated the cost of doing this and economic disruption will be created by this, the odds of that happening are approximately zero. I mean that is run by political appointees, and so they are going to come back and say the rule is fine. So, they are going to publish I would guess, within the next 30 days at the outside, probably less than that whatever they are going publish. And we reach probably from every source to get a sneak preview of where it’s landed. It’s very difficult to do. The ranking minority member, the ranking democrat on house labor committee demanded basically from Secretary Perez that he be allowed to see the bill or the rule change before it was issued. They refused to share that with him. Their alternative was to go to Capitol Hill and brief the opposing Democrats principally because about 100 Democrats on Capitol Hill that are opposed to the change or at least have some level of concern about the change. The briefing as far as we can tell consisted of don’t worry, this is going to be very consumer centric; it’s going to ensure that people get better advice than they’ve been getting in the past, so you should be for this. And…

So, there was two other questions and they’re both regulatory. Tony do you want to comment on the -- I assume, Tony, CIRC, do you want to take the UnionPay?

So, I think maybe this is what you are referring to, CIRC conducts a review or inspection of the life companies operating in China every five years, recently went through that, not only for us, for the entire sector. And the results of that get published; that’s a good thing I think. Broadly the results, the finding is nothing, no material issues, just some tightening up of certain controls within the company, ties in nicely though with all the work being done. And the implementation effective January 1st of China Solvency II [indiscernible] so, it’s kind like it ties into the operational side of that. Worth noting, we were in Beijing last month I think with the Chairman of CIRC and having dealt with these folks for many, many years now, they consistently hold us out as the gold standard of operating environment and controls within the China insurance sector, so no major concerns about.

And John, do you want to just -- I mean there is very little to be said, but the PRA -- I’m sorry not the PRA, FCA.

I assume you are talking about the FCA recent press release on the reviewing to longstanding customers. There is not much we can say. We are obviously working very closely with them. We’re taking it very seriously. But it’s on to enforcement, so they are using their enforcement powers to conduct further review. This has been going on for maybe two years now. So, going for a while longer. I think in their press release they have stated that they will make no further comments, and I they expect us to make no further comment either. Because it’s going through the enforcement route. So, there is nothing we can say.

Good morning. It’s Greig Paterson, KBW; two questions. One is just in terms of Indonesia, in January you spoke about consumer confidence and other leading indicators. I mean this is an oil and energy poor country. You must be benefiting from lower oil price et cetera, just wondered to get some kind of feel for the outlook for Indonesia. And in terms of U.S., you mentioned impairments but I’m saying to -- what was the cost of downgrades in terms of 2015, so we can get a feel for the total cost of the wider spreads of the downgrade theme? And then, Nic, just in terms of the 180 coverage you mentioned, I think you said on the 6th of March. I wonder if you can give us a bit of waterfall. Is that ex the dividend? Have you just marked to market, is including operating elements et cetera, and just want to know there’s been reduction?

So Tony, why don’t you start with Indonesia, and maybe absolute level of sales and earnings?

Sure. While the business did de-grow slightly in 2015, it was still a very good year for new business, generating essentially a third of £1 billion of new APE sales at about 17% margin, IFRS around a third £1 billion as well. So highlights some good. There have been a lot of economic headwinds there. But notwithstanding that we have been pushing forward with expansion of the business. We opened 25 new branches, we call them Gas. We recruited right around 10,000 new agents every month. We onboarded 410,000 new customers in the year, that’s 1,100 customers per day, so pretty vibrant growth in the business. Where we are today? I mean does look like there might be some signs of economic turnaround there. The JCI is up, I think about 4%, 5% year to date. The rupiah seems to be stabilizing. We are pushing forward with all our activities. One example is last month, we were in 30 cities in 30 days in front of 50,000 of our top agents. And let me just say, morale is quite good. And yes, feel pretty good.

Okay, just to give you some stats for 2015, in the UK, the annuity book we had £2.4 billion of various securities being downgraded and we have £0.9 billion being upgraded. In the U.S., we had across our portfolio $4.7 billion downgraded and $3 billion upgraded. So, those were -- those are the numbers that are flowing through our accounts today. And clearly the impact that that has on capital and earnings has been captured in the ratios that we put out today. So, the 481 for RBC obviously clearly fully factors the impact on that. And £3.3 billion on the shareholder account in UK on the Solvency II also captures the effects of those. I was asked in January, what is the sensitivity to the downgrades on the UK ratios. We have added some additional sensitivity in the appendices, you now have that. So, hopefully that answers that question. On the 180, what’s driven that predominantly is the drop in yields and to a certain extent a drop in the equity markets. That does impact, if you like, the transfers that come out from the profit, because bonuses are ultimately linked to that. So that’s had an impact on that. And of course it’s had an impact in one or two other places, where we have interest rate risk. Offsetting that was a positive FX effect. So, the 180 or the 8.6 billion reflects that. It is before the dividend, because the dividend will come through the numbers at the point of which it’s effectively declared. And the impact of that is 7 points on the -- it’s £900 odd million, so 7 points on the final and another couple of points on the special.

[Question Inaudible]

Not one quarter; it includes two months.

Thanks it’s Lance Burbidge from Autonomous. I have couple questions, firstly on Asia. Hong Kong is obviously crucial part of the business. I just wanted to understand are you seeing any impact in terms of capital flights in China coming through in terms of explaining why the sales are so strong? And then on China, your new business margin is actually pretty low compared to some of your peers, I wonder if you might talk about that? And then I am afraid I am going to get back to the dividend again. You do talk obviously about moving towards that two times cover, and on 2015 taking out the special, taking out your one-offs. You are three times covered on the ordinary dividend and you are certainly three times covered, I think on the underlying free surplus generation. And you talk about obviously through your presentation how defensive your earnings are. And I guess even the fee income on Jackson, a lot of it’s based on guarantee account value, not on the account value. So, I suppose where do you see actual stress that kind of come through in terms of getting you to the point where you feel uncomfortable with that 5% growth?

So first one Asia, Hong Kong and China. Tony, do you want to grab those two?

Sure. I think as you’ll know from the results, Honk Kong had a fairly respectable year in terms of new business, about 50% of the new business is coming from mainland Chinese who buy in Hong Kong. As I think we mentioned before, this is in no way a new phenomenon. We started selling to mainland Chinese in Hong Kong over a decade ago and have built infrastructure, Mandarin speaking capabilities, simplified Chinese et cetera to deal with these customers. And I think we have a bit of a first mover advantage there. A lot of the growth in that business can actually be fairly well correlated with the growth in the agency force. The agency force, I think in the last -- I am looking at Lilian, I think in the last 3 or 4 years has almost doubled. We’re now at about 14 -- close to 14,000 agents in Hong Kong and continue to -- that we continue to recruit and license new agents and we continue to onboard new customers, both domestically and from the mainland. It’s worth nothing that the business in 2015 from let’s call it domestic with honky -- Hong Kong people buying in Hong Kong also grew by about -- I called them honky, sorry. Grew by -- it’s local term, grew by about 35% to 40% domestic growth and also then coming through with the mainland piece. And again business continues to do well in that regard. In China, I think we had a fairly respectable year. The business grew by about 28% in terms of top line APE. The NBP grew slightly higher, not as significantly as maybe some of our competitors. And the growth in that margin came from two things, a shift in distribution, and within the shift in distribution a shift in product. We have deliberately grown our agency force. I think we have pretty good intellectual property when it comes to building agency force. And our CEO in China Mr. [indiscernible] has spent a lot of time in other countries studying the Prudential agency model, has taken that back to China, and we’ve been building out the agency force very strongly. We are now at record levels. I think we’re at over 20,000 in terms of China agency. It’s more by China terms sort of a lot of headroom, and the agency force has been selling more health and protection and that has increased the margin. We’re very happy with the quality, direction growth of that business.

And Dividend, I am not sure if there is more to say...

Maybe just two, you’re right that we are -- the potential for earnings growth in Asia is robust. I would agree that. Your point on the U.S., just to correct maybe one statement that you made. You are right the fees -- some of the fees are linked with the guaranteed asset base but that’s a component of the fees that pays for the guarantee. So, the 192 basis-point doesn’t include any of that. That utilized, if you like, to hedge and is reported with the hedge results. And in the UK, in M&G, sort of I guided you down. I don’t know how else to answer the question; it’s a reflection of discipline; it’s a reflection of the opportunities that we have elsewhere to direct the money. In the end, the payment that made is a 40% payout. Yes, we haven’t used the special dividend mechanic before but it’s a talk that we decided to use this time and we may use going forward.

Oliver Steel with Deutsche Bank. Two questions, the first is, I was bit surprised to see that health and protection new business profits in Asia were up only, I say only 20% against the 28% increase across the whole of Asia. So, what was grown by more than that? And I suppose linked to that question is, if it’s the par with-profit, if it’s the with-profit new business profits, how does that link through then to IRFS because historically the with-profit firms in Asia have not actually driven much in the way of IFRS earnings? So that’s sort of question one and half. And second question is, if you do see a slowdown in new business or even a fall in new business sales in the states over the next year or so, what are you going to do? I mean the free capital generation of that business is going to look pretty impressive in the next year or two; what are you going to do with that free cash that’s developed?

20% is a pretty good number for the health and protection. And I look at how the team has to look to deliver that. There is -- I mean we’ve cautioned you a little about the susceptibility of NBP with health and protection to interest rates. I know it’s discussion that Adrian and I have constantly, if only we were on stable assumptions like some of our competitors, you’d be able to see the underlying growth without if you like the noise that comes through from that we’re on active, if you want us to change capacity, we are happy to do that. Bu what’s held it, we’re working against the H&P total was 100 basis points increase in interest rates in Indonesia and a lot of H&P comes from there. It’s 60% of the sales. There was also an increase in interest rates between start and end of the year in Singapore of 32 basis points again with the reorientation of the focus of our Singapore sales force into H&P. Kind of the economics worked against that underlying growth and of course in Malaysia is the third place, we sell a lot of H&P and interest rates were up, there as well little by 10 basis points. So, that’s what held it back and it’s only 20, somewhat it is optical because of that particular mechanics. Now, free surplus generation, yes, that’s a nice problem to have. If and when we -- if it turns out as you predict. And then, we’ll decide how we use it at that point.

Alright, thanks very much. Andy Hughes from Macquarie. Three questions if I could, and the first one is on the UK. And obviously you’ve got a 170 million benefit from longevity reinsurance and 8 billion of liabilities, but you still have 22 billion of liabilities which is still on CMI ‘14. Now if you move to CMI ‘15 at the end of the year, which is quite lower in terms of the improvements, presumably you’ll get a big IFRS benefit then as well. So, how should we think about that? Second is follow-up question is on the FCA and investigation and work you’re doing there. If there was any compensation to be paid, would a large proportion of that come out these states? Could you just confirm that? And a general question on Asia. I guess, the commentary you’re giving us on Asia now is very strong start to the year, December was the strongest period of time for a long time. It all seems very positive. Any numbers you can put around this or is that just as far as you can go in terms of how Asia is performing in the current market? And final question on M&G. And obviously you talked about institutional pipeline of inflows. Is that not enough to offset the continued outflows from the overall income? And on the cost income ratio guided up, are the cost savings embedded in that or is that something you’ll consider? Thank you.

So Andy, on Asia, that was my decision. No, that’s about as much detail as we can get and it’s a similar answer on the FCA. There’s zero upside and us commenting about a regulatory process, we have an ex-regulator in the front row nodding his head going, yes, Mike, stop talking now. We take it very seriously. We interact with the regulators in all our markets frequently. This was an industry wide look, underlying product has done extremely well for the client one, three, five or ten years. So there’s -- so we’ll do everything we need to do to work with the regulator to get this true. But publically commenting on the process is something they asked us not to do so, as far as we go. You asked about -- one other I missed there, CMI and change of assumptions too.

Okay. CMI ‘14, CMI ‘15, there are many in the industry that believe that CMI ‘14 and ‘15 are aberrations and do not reflect true underlying trend.

Due to changes in longevity…

Improvements in the -- or rather reductions in the rate of improvement, which longevity is increasing. So, there are many in the industry that believe ‘14 and ‘15 are aberrations as opposed to a signaling, if you like, a true change in the life expectancy or improvement in the life expectancy of people. Our reserving last year was on CMI ‘12, we looked at CMI ‘14. We’ll move -- we have moved to CMI ‘14 but we did it in -- if I could describe a CMI ‘14 minus, minus basis because in line with that conservatism and the caution that you would have heard from us throughout the whole presentation, we want more data before we can declare victory on that particular point. So, there is a small benefit coming through around this but it’s not significant. We’ll see, if there are more studies and they confirm the trend, then we will move our assumptions but we haven’t moved them; we’ve moved them modestly at the moment. As regards, extrapolating from the 8.7 billion of reinsurance that we’ve done to the 31 billion of liabilities, look it’s not -- there were very specific circumstances kind of why we did this in the course of 2015. Clearly you only do transactions where they have value and that’s the prerequisite. We wouldn’t do something that is bad for value. But the circumstances were that we have the uncertainty surrounding Solvency II. We were only going to know for sure in December, candidly, if at that point we had a downward -- a negative surprise, then there would have been no time to react. So, you do the responsible thing on behalf of your shareholders, which talks to discipline to try and pull those levers us, to try and optimize their position in the event that you have to rely on that. As it happened, the outcome was fine. So, I wish I could turn back the clock and unwind those but it’s not possible. So, we did it, they were a good value. We have no plans to repeat that. Of course, other than to say, if we ever needed to, we would, the market is there. And of course we do -- there is a trade of ultimately by how much you can bring upfront versus ultimately what you lose in profits going forward. Those were the circumstances, they were unique i.e. as I said, there is no plans necessarily to repeat that, which is I guided you to look at that core line in the UK results and project from there. Cost income ratio, I was very specific in my words, I said everything else being equal. So to the degree that there are further cost actions we can take or management actions we can take on the cost savings, those are not in 2016.

Hi there, thank you. Farooq from Citigroup. Can you just give a little bit more guidance on what you mean by the contingency plans with Department of Labor? I mean you talked a bit about product, so I know you don’t want to share your full economics and plans obviously, but just to give us a bit more comfort. And secondly, if in the U.S. we move to kind of lower churn type of model in the VA market, so we have kind of more stable AUM. And in the UK, it looks like we are going to have potentially net out flows unless you really ramp up in the bulk market. So, are we ever going to move to situation where you see better remittance ratios in both of those two markets? So, it’s a way of sort of growing remittance above surplus capital generation. And lastly, very quickly, I mean do you have an update to review on the fourth coming RBC changes of credit risk in U.S.?

On the U.S. regulation, it’s a bit of a same answer on some of the other questions. So, we can’t discuss product fillings for both approval reasons and competitive reasons. We are not looking to coach competitors on direction they should go at this point. But I think it’s -- from the worse case DoL proposal, we’ve backed into what would be effective strategies and how do you get those to market. I think the piece that’s key in this when you think of our U.S. platform is one of the absolute critical elements will be who is going to help the most heavily -- and in a worst case as written DoL implementation, no softening whatsoever. Broker dealers really get hit hardest. Their business models take the biggest hit, and their disproportionate amount of the IT and the biggest change in their role and position with the consumer. So, there will be a need for someone to get those advisors and those firms technically up to speed and have systems and products that are compliant et cetera that’s something we’re very good at. So, the planning is operational as well as product as well as training; it’s multidimensional but again not desire to get competitors of UK to where that’s going. And regulators don’t allow us to comment on fillings in the U.S. as they wouldn’t here either. So, the comment on churn, I’m not sure where you’re going at. So, the VA products in the United States, Jackson is the net sales, to be very clear. If you look at net sales tables, it’s us. So, we don’t have a retention and consumer issue with Jackson. I think that goes to quality of products, it goes who do you business with, and it goes to the returns the…

I think the point that Farooq was making, if there are less moving parts, would there be more stability in free surplus or profit and therefore, can there be higher remittance ratios? That was the question. Well, I kind of admire your optimism. I hope you’re right. Yes, there may be less moving parts but there is still a lot moving parts, which is why in the past we’ve resisted from giving you targets, financial objectives for any parts of our UK business because there we are selective or any parts of our U.S. business because it’s cyclical. So, all we promise is that to do the best in the circumstances as we find them. And as I said a minute ago, there are still many moving parts that could influence those KPIs. Now, as it relates to the remittance ratios, they are not the top numbers that they can be. We never said that that’s the case. We have them in a place where it’s comfortable in order to leave enough capital behind to buffer any market events. And they are also informed by what we actually need at the center. So, if you like, they are not indicative of the best percentage that at any given point in time we can deliver. They have gone up and down. They have been higher actually at a time of crisis which is exactly what you want. You want that flexibility at that point. On RBC, Chad, I don’t know if you have that?

The changes in RBC?

Yes. The changes on RBC, they are still not defined at this point. So, it’s a slow moving entity. So, I think we don’t know yet exactly what they are going to do. It’s going to take typically a few years to implement. Generally speaking, the direction they are heading would tend to across the industry move RBC a little bit lower, really depends on how they shake out. There is some differences between what’s in the investment grade, non-investment grade world too. So, they are just making it more granular. I think wherever it shakes out, it’s going to be similar to what we’ve seen in the past which is if RBC becomes -- the charges become more onerous and RBC drops, the industry will adjust, and I think the rating agencies will adjust to the new normal there. It shouldn’t really change anything in the long run.

Thanks. Gordon Aitken from RBC. Just on the reinsuring of annuities. You’ve reinsured some in-force annuities there, just wonder what the difference is with reinsuring new business because obviously you’ve said you’ve stepped away from that. And the second question is on, just if I can understand the thought process behind the special because it’s quite unusual for you to do this. If it’s a one-off gain then, and pay a special but this is a little bit different, in that, I sense you’re giving some profit away to the reinsurers and it’s a change in shape of the cash flows, so it’s more upfront. And you mention a £25 million drag. So, is it to do with this, or is it just a signal that our balance sheet is strong enough?

Let me address the one-off and then cover the reinsurance in-force. I think the discussion around the boardroom is as Nic said, we -- the reinsurance was precautionary going into Solvency II. This was a work in progress until approval. And so that being the motivation for this piece. It effectively, to your point pulled forward earnings, earnings belong to the shareholder, if you look you, you adjust for tax, and they’ve been paid out. It also goes to the general view though if we have excess capital, if we’ve earned it, we’re open to paying it out. But again, it’s earning it first, it’s having it in house first and then paying it. I have not seen a piece on risk adjusted dividends. I think it will be an interesting; somebody’s bored on a Sunday, it’d an interesting work stream on. But, I think, as long as we make our earnings from -- our earnings driving dividend and cash is driving dividend, we have a highly sustainable dividend relative to peers and we are doing that while we are growing the Company at the numbers we’re seeing. That balance is critical. But the first piece, I’ve been here when we had an unsustainable dividend. So, part of that’s personal experience. We want you to be able to count on that. So there is an element of -- you keep hearing this conservative conservatism up, it’s real, but we also understand at a point it’s unnecessary. So there is a balance in here and we’ll keep working to that. But if we have excess earnings, we’ll pay them out. And I don’t think -- there’s multiple mechanisms we could have used. The U.S. there would have been a share buyback. That drives other metrics that may or may not be things you want to move. Cash is a simple, clear message. Your earnings, you pull forward, here you go.

Post January 1, given that we cannot use -- we don’t have the benefit of a transition, the capital that has to be priced into -- actually utilized and then priced into an annuity contract going forward is very, very onerous. Where the interest rates were at the end of last year, it would have been somewhere between 20% and 25% of premium. Where interest rates are today, it’s greater than that. Now, in order to get the thing to work, even if you wanted to deploy the capital, you are reliant on huge increases in price and you’re reliant on quite a lot of engineering, both in terms of removing parts of the risk margin through longevity and reinsurance or asset side engineering as well. Candidly, I think there are easier ways for us to deploy our capital than to enter into that particular race. And that’s why we haven’t done it. On the back book, candidly it was to increase, clearly, if you pass all the -- there are many factors, the fees will attract it. The tradeoff between the fee that we ended up paying to the reinsurer, and if you like, the pads that were released under the various capital bases were sufficiently attractive, at the same time, it increased our resilience. Part of the reason that the sensitivity when interest rates are a lot lower in the UK, the sensitivity is unchanged in the UK, is because having pulled the levers, we’ve muted that sensitivity to the impacts of the market effects. And that’s part of the reason why at the end of February we were only down less than -- about 1 billion. So, you take all that into consideration, we think it was the right thing to do for the back book. But for the front book there are easier ways of using our capital than generating return. And that’s what underpins our stance in that particular space.

It’s Abid Hussain, SocGen. Two questions, if I can, firstly, on China and Hong Kong. Is there a risk the Hong Kong business is cannibalizing the JV in China, especially if I can just jump on a plane and go across the border and the rule of law -- the trust in the rule of law is higher across the border? That’s the first question. And then secondly, on the U.S., what is the minimum crediting rate on the fixed annuity back book or put it another way, where would U.S. long-term rates need to be before you start making a loss on that book?

It’s a risk that Hong Kong’s cannibalizing China, with 1.3 billion people there, I’m not sure there is at this stage. I think it’s probably worth noting that the mainland Chinese consumers who were purchasing products in Hong Kong are slightly different. The lion share of them come from Guangdong province, which is the neighboring province, formerly Canton, where the JV, most of the business is actually coming from the eastern seaboard, Shanghai, Beijing, we just opened a new branch in Hunan. And so actually it’s a different geography and it’s also slightly different socioeconomic. So, don’t see any cannibalization at this stage.

Okay. On crediting rates?

Two or three things to say on that. Firstly, in relation to the proportion of the VA premium that goes into the fixed account option that goes in at 1% guarantee. So the guarantee level is modest there. And we’re able to effectively back it with assets that yield comfortably in excess of that. In relation to the in-force book, again it’s difficult to generalize, but on average, the guarantees are around the 3% level. The assets backing -- there is around -- the crediting rates on average have about 20 to 25 basis points headroom against that guarantee level. And they are backed by assets that deliver 240 odd basis points on top of that, which is ultimately what drives after an RMR deduction. It would only be an issue, and of course, they are backed by securities that are where you do -- that produce that and there is a good level of cash flow matching their duration. The only issue would be is if for whatever reason, all these holders decided to extend well beyond the point at which we hold the assets. There are trades that we do to lengthen, if you like, the duration of that and we’ve done that in the past where we needed to. So no, we’re a long way away from that being a problem. I don’t know Chad, if there is anything you want to add to that? And actually people save for a reason. They don’t save -- they can’t extend ultimately forever.

Thanks. Alan Devlin from Barclays. Just one question on the Department of Labor. I know nobody knows what’s going to happen to sales,[ph] but have you got any concerns on the in-force? You mentioned grandfathering because that would materially impact earnings.

There is no clarity on it. But if you think about, earlier in a previous life actually around retirement services for one of the brokers [indiscernible] you had art, antique cars, people’s mortgages, oil and gas, some of the partnerships REITS, all these products have been allowed over the years and retirement accounts. It is unimaginable, it’s possible -- but when Barry talked about a political reaction, if you said that all of these clients by year-end, whatever the timeframe is, this all has to be put into a fee based asset management relationship, the political reaction to that would be severe. And I don’t think the White House is looking for -- even the most extreme advocates are anti-advice, anti-active management would see that as a good thing, but that would be the implication. So that’s the question on grandfathering. And it’s clearly an issue in the market. People are very concerned about it. The single best thing with DoL now is get it out. We can deal with whatever changes they make. I hope they are more consumer centric than the first draft. But, it would be nice to know the rules and we’ll go from there. It’s not helpful for the industry to be in limbo. And it’s certainly not helpful politically for [indiscernible] and means than in finance, particularly committees to be in limbo. That’s not an efficient process. So it’s clearly coming to an end. But the grandfathering element would be, I think you’d see the other bill probably passed.

What you’d end up with -- and this piece of legislation was introduced in December with a broad Democratic support, called Roskam-Neal. If that legislation were passed, then survived the presidential veto, which would be almost certain, it would completely undo the rule change. But again, the key there is that it’s difficult, even with Republican majority, it’s difficult to override a presidential veto. If you had grandfathering, you would probably, the speculation is you would see Roskam-Neal attaches as an amendment to the Puerto Rican financial bailout, which the President cannot veto. So basically, it would be okay. If we’re going to play nuclear options here, here is the nuclear option from the other side. I don’t think it’ll go there. That’s a very inelegant last thing to happen in the last 12 months of any presidency, and I’d be surprised if they went there.

If you think about Alan some of the securities that can be legally owned, it’s forcing a client to sell at this point in the cycle and some will effectively would be forcing into realized losses for no reason other than an arbitrary policy change. So, it’s possible but again, I think it’s fairly remote. We’ll see. But the best thing for us, we’re ready; let’s get it out there; let’s react; let’s get back to business, see what opportunities it creates, go from there.

Hi, good morning. Ashik Musaddi from JP Morgan. Just a couple of questions, one on UK. Can you give us some thoughts about where your UK capital ratios are at the moment? You gave the Group number 180%, but where would the UK number be; would it still be above your comfortable level which I think is around 130%? I think that’s what you said at the Investor Day. That’s number one. Secondly, what is the fundamental spread on the UK annuities book that is currently baked in, in the Solvency II and how does that compare to Solvency I? Just wanted to get a better sense about what the numbers are. And thirdly is can you give us some thoughts on where the variable annuity hedging costs are at the moment? It looks like there has been a recent spike because of lower rates and high vols. So, how does that compare with the guarantee fees that you are collecting?

On the UK, it’s in our range; it’s in the range that I highlighted in January. On the percentage of spread, it’s 45%. That’s what’s coming through in the surplus -- I mean it’s 58 basis points in the base; it’s 172 basis points in the SCR in the stress. So, when you translate that into percentages, it’s around 45% in the SCR. What was the other question on -- the hedging costs.

Chad, do you want to give us or anyone?

As you would expect, hedging cost has gone up a little bit for certain transactions, nothing so significant that it’s impaired our ability to put the hedges in place that we think need to be in place and the program still performs well. In terms of the scale of the increase, I don’t know if it’s that easy to quantify actually that.

I guess two things there, on rates because we’re tending to be and have been for years on the shorter end, call it two years and then on most of the hedges we’re buying, the fact that long rates have come down has really not affected anything. Actually, two-year rate is actually higher than it’s been for a while. So the rate side of it’s been somewhat helpful. Volatility has actually been a fair bit lower than we saw last year. So, it’s manageable in the short-term spike and we adapt and I’d say a very minimal impact.

Okay. So, with that, I want to thank everybody for your time today, your questions and appreciate your support. And we’ll see you in six months. Thank you.