Ladies and gentlemen, welcome to the Prudential Plc, 2016 Half Year Results Presentation. We’re now going live into the presentation room, where you’ll have silence or background noise until the call begins. [Operator Instructions]

Hi everybody, if you don’t mind we’ll go ahead and get started. Good morning - Mike Wells, Nic and everybody in the room. We’re going to follow the same format as the last presentation, where you’re going to have me go through some high level comments, Nic to a very detailed drill down on the financials. I’m going to come back up and give you some comments on outlook in general and then we’ll bring a variety of the senior management team up here to answer Q&A for you. And we have some other of our key associates in the audience as well. So we’ll get to any level of detail you’d like in the conversation. So that said, let’s go ahead with delivery. I think we - I was commenting with our collogues before, and it was an interesting first half of the year. I mean question, lots of different challenges globally. I’m very pleased with our success in delivering both cash and growth. IFRS up 6, free surplus generation of 10, the dividend as you know is mechanical but up 5, solvency ratio of 175, which again we’ve said; I think it’s a good number. We never consider this subsequently a good fit for us, given about a quarter of our business or less is actually in the original target in solvency structure the local regulators use. They don’t capital regimes [ph], but again I think from a headline point of view, until this number matures in the industry, it’s important we have a strong number and we think that’s the strong number. So thought it was good clear results in a fairly tumultuous period. What I want to focus on the opening today is what I think are going to be three of your key questions. One…

Thank you, Mike. Good morning, everyone. So in my presentation, I will take you through the half-year results, highlighting the key drivers of our performance in the period and then I will cover the Group’s capital position. So, starting with the financial headlines, Prudential has delivered another strong performance across our main growth and cash measures, despite the effect of lower rates and the expected reductions from U.S. spread, PUK annuities and M&G retail which I talked to you back in March. Our progress in the face of these headwinds was achieved by making the most out of our stock source advantages in the countries that we operate by executing with discipline and focus. On a constant currency basis IFRS operating profit increased by 6% to 2059 million. New business profit was up 8% at 1260 million and free surplus generation was 10% higher at 1609 million. Currency FX was positive adding between three and five points to our underlying performance. This performance is entirely driven by the outcome of commercial transactions and did not benefit from any changes to our reserve in Prudent. Furthermore no aggressive actions were taken in any of our businesses to stimulate short term sales as we continue to prioritize long term value creation of our volume. These results demonstrate the benefit of our earning diversity by geography, currency, and source and the power of our Asian platform which continues to compound strongly supported by largely uncorrelated structured drivers. Our ability to deliver growing levels of profit and cash also provide meaningful protection at times of extreme market volatility. Therefore even though interest rates fell to unprecedented levels, our solvency to capital at 30, June was trim back by only 0.6 billion at 9.1 billion. In contract to our embedded value, which is a fairer…

Thanks Nic, I appreciate that. So just a little bit on outlook, we are obviously - we are pretty good about where the Group is, and its ability to capitalize on the market and what’s going on in the sort of this next stage of the cycle. Couple of fundamental reasons, one being strategic, the behavior of the growing age in middle class, the behavior of someone referred to as the graying middle class and the western markets is one getting greyer, I took that slightly personally, but there is a consistency of their behavior which is this de-risking of their financial assets of various concerns, and directly towards products and services that we provide. So the footprint we have, the capabilities we have, the services we have seem to be fitting the major demographic trends and mobile, sure we are getting more investors have started [ph] it’s harder to live on or asset returns on lower levels and more concerning, the more valuable of our solutions consistently seem to be for clients across the globe. There has been a lot of discussion in the industry about cutting, and I want to address this very clearly. This has two issues for us, one we manage expenses very tightly all the time. Can we get better? Always. Is that a challenge to the team up here? Always. But we are actually investing, investing pretty heavily in this company, and we are investing in sort of three levels. Things we do that will improve the relationship we have with existing clients, the service, the technology, their access to lot of products we have, just anything that grows and develops that relationships gets to more likely to buy something to stay with us longer. Again to protect the long term operating results. The…

I’m just going to wait for the team to settle down, but before you ask a question, please do state the name of your firm and your name before firing away. Could I start with Jon, please?

Good afternoon everybody. Jon Hocking from Morgan Stanley I’ve got three questions please, two on the U.S. and then one on the group capital sensitivities. The first question the U.S. just in terms of some deflation you’ve seen in the VA product in the first half, I appreciate we didn’t get the rules on day balance like beginning of the second quarter and got a re-launch I guess in 3Q. How should we think about this side look for flows for the second half of the year because if we don't already have so normal run rate, and also we didn’t get Q1 update, it is first question. Second question the gigs and size of price you are raising, gigs are getting size in the U.S. What are the sort of [indiscernible] capital of that product and is this just an expense bill and what about the general account just depleting second question and then just finally on the Solvency II rates down, sensitivities just the 2.4 billion that Nic run through, it sounded like a long leverage rates and risk margin, but the rate sensitivity give 50-50 diagonal on the right hand side of that slide looks recently smallish, well if you can still talk through how much of that is asset versus liabilities and how much of it is of the risk margin related. Thank you.

So Barry do you want to take the two U.S. comments and Nic, the Solvency II.

The slowdown I mean - it is correct that we did not actually get the rule change until April, but it was it was highly anticipated and because there was uncertainty around grandfathering and we ultimately ended up with an element of grandfathering, which help was not it not for grandfathering, but because there was uncertainty around grandfathering the slowdown and production of new business actually started much earlier back in the second half of the 15. So that’s the reason for the flows. In terms of the through the gigs, we feel it’s opportunistic something we do periodically. I mean. Chad you want to talk about the specific detail or?

Sure, so that's our returns, generally speaking we target about 12% on leverage and on those types of products. So if that that I think that's generally speaking we saw - keep in mind that this used to be a material portion of our overall balance sheet, the ability to actually earn spread that has not been before, I guess financial papers been relatively pricey post-crisis and that's finally start of the go away. So we're actually seeing good opportunity now to lever off of our AA rating and actually bill well against that turn of good spread.

Just coming back on the gigs question because in the start I think you said that you sort of reinvest to make it sort of greater 20% ROI across new business, is that 12% unleveraged return, is not a return on capital rather than on ROI [ph] metric or is the two aren’t the same number?

Return on capital, AA statutory capital.

Sure I means there other advantages suppose if you are maintaining a stable general account level has a lot of benefits across the business, certainly helps with liquidity as well. So we take everything into consideration. Okay on the sensitivities look we - I mean you have to appreciate that Solvency II is only very new, the sensitivities we gave reflect the product with the balance sheet that we had at the time. The balance sheet was not optimal at that time, since we found those sensitivities. We have taken both liability and asset side actions, as referenced one of the liability actions in relation to the longevity, which we've started doing that in any event in the course of last year. On the asset side, there's a key thing here that across our UK business, but also across certainly some of Asian countries, which contribute to the overall Solvency II surplus, we match our assets to the best estimate flows. We don't match the asset for the one in 200 cash flows, but when interest rates fall as they did immediately in the aftermath of the of the first of January and again. You have a mismatch effectively that comes or having shorter assets than the liabilities on the FCR. So what we've done in the course of the year as we look to optimize the position I said both in the UK and elsewhere, we traded a lot of our excess assets if you like and increase the duration. So where did we do that - we did that with some of the excess assets that we have backing - our excess capital in the UK. So we switched 2 billion of them - extended duration by something like 15 years. Opportunistically there was another 2.8 billion that we did elsewhere in the group across the piece, which also gives us economic protection for that. Other areas is the matching adjustment was quite efficient. We entered the year with 95% efficiency. At the end of - so there was some ineligible asset. Now you get to the law diminishing returns, but we effectively sold 400 million ineligible assets, which gave us some further protection against that. With it some general asset trading within the matching adjustment constraint to improve the risk and liabilities of the risk versus yield position that was another 1.2 billion of that. And of course we did some more equity hedging as said elsewhere in the group. So there's a whole host of actions that in effect by 30, June has shifted our matching to not just be affected [ph] in the liabilities, but be best asset and liabilities but not all the way to the 1 and 200 cash flows we don't think that sensible, but enough to bring the sensitivity back.

Andy?

Hi Andy Hughes from Macquarie. I have a first question, 24% strength of single premium for individuals annuities, but the [indiscernible] would be even bigger and presumably I know you are outsourcing some of the new initiatives [indiscernible] just you probably outsourced to Mars instead. That's a huge trend is some improved specific about; these are expensive over a variety of number or is that -

No, there is no expense Andy. The people that we are transferring are to administer the sizable back book. It's what the numbers show, it is what the numbers show, up 17% or so is the FCR, the rest is risk margin. The 18% to 20% depending on where you were, what the interest rates were in the quarter risk is with margin. We dialed up prices as we enter the year. So you come to a point where you run against the constraint or value for money from a customer perspective. So we moved the pricing as much as we can without giving our false presence to the FBA. Of course, it’s without the benefit of any insurance, we - that’s the numbers that we have given you, without even the numbers, it’s on the numbers, if you assume, you reinsure 80% of that and you at a full percent of fee, which is a typical fees, for these type of insurance, and you save a little on the string when you remove the risk margin components, but you are still moving around the teens, right. And you said some capital, but you did give away enough of the returns, to give you a small higher up pickup of the sales, at the adjusted cost of capital, which is why we said we will, we have taken actions to withdraw. We voted down 27 million of APs, 270 million of single premiums, about a quarter of that comes from open market sales, and sales with partnerships that we announced in June that we are selling for the open market, and we have given notice to our partners effective on July, but we will not take any annuities. About half of it comes from the profit fund, because it was effectively which was arranged short on to the shareholder account. We have stopped doing that again from July 1, and that leads us to the guaranteed annuity which we are trying to find a solution. So it is almost and that’s why we still fight, and this is in this recent frustrating environment, you see us pull back.

Okay and my second question is about USBAs, and Mike I know you personally love [indiscernible], obviously there is so many compared to lots of problems in those products, so it’s like an impact, the competitive landscape for the second half of the year, you are going to see the products from GM being pulled. And obviously on net rates, like the investigation there, it’s not tracing your business comes down, and this side is probably positive based on your cash flow disclosures, and so the rates is not posted, right.

Yeah I think just a general comment, you have number of experts in the room. There is a lot like one U.S. competitor rode of 2.1 billion, added 1 billion. So yeah there is an element, we look at our assumption at the year ends, we don’t have - while we don’t have the GMI, the exposures you know that the structures you are talking about, we for lot of years we sit up here and said that was the wrong product, wouldn’t waste our money, let’s say I think the thing the bigger issue in the market would be well, firms need, so you go from this, a regulatory standard historically that was suitable to your product, or you assign a client a product, that will be a good reason, sell it’s a pretty good reason for a buyer, that we just buy in the U.S. pretty well. It’s up now to, it was basically the same as the reasons why that we are here - we are the best product, it’s difficult, but you are signing off, but this is basically the right product, it is much more specific, much more liability, if you are wrong, it’s got a different recourse to it. We think the quality of the VA product if they buy or sell gets even more important. So the performance matters, the flexibility matters and one of the other topics, and we didn’t bring up, we didn’t like what was the ball control, and I will leave you doing your own homework, go back and look at those funds versus the funds we have for our consumers. You know just never been a fan of that model, and if you are paying for that, and paying for guarantee, it’s always been a question on mind. So I think Jackson has got a very good product set to where the market is going and I think snowing with some of the broker dealers, they could see that, we are likely to see more concentration with the broker dealers, because there is more technical support, morality support, the platforms and things. So it’s a good question that travels for the heads of the broker dealers, which products that they would want to invest and how long their platforms, and I think quality will be a major cut, and I think we are in good shape on that.

Let’s go to Lance please.

Good morning, it’s Lance Burbidge from Autonomous. I have got couple of questions on Jackson as well. So in terms of launching the fee based versus what I wondered, Barry if you could talk about, presumably this is attractive for a sales person to sell, because they get the recurring fee, which is applied to the recognition of the product. How does that play with the consumers, that presumably would be worst off, which is you know what I was [indiscernible] first place. And second one is, Mike was talking about in the past, which is that interest rates pull, is there a point where this product from a guaranteed perspective becomes unattractive from yours perspective or from the customer’s perspective, sort of maybe just talk about that as well. And just on the sensitivity, you like other companies to put negative rates into your sensitivity, I just want to look, if you looked at what that sells, there is nothing in that.

The fee based product will be introduced, the perspective of [indiscernible] will be introduced in September, what it really does I think as much as anything else, as it does, it gives an alternative to the broker, to the advisor that does not want to be advised in the equity portfolio. They doesn’t want to deal with the regulatory complexity of operating end of it, so it gives them an alternative that I think from a compliance perspective, a little easier. For a sale that’s made that has long duration, there is a prospect that the agent gets paid more, the customer, typically what companies like ours do in order to suspend if you will the upfront commissions as you build of that 100 basis points in for distribution. So if you except that the standard fees is going to be about 100 basis points, the customers really not going to see an imperial difference, which we talked before the session. There is the prospect that as you move towards more fee based than let’s say 100 basis points gets locked in, it’s the typical fee level that over time, there will be pressure on that to pushed down to 75 basis point or 50 basis points, and that could certainly happen. But I don’t think that it’s going to be, it’s going to disadvantage the consumer in any way, but what it is going to do is they will give a choice to the financial advisor, which is really important. And talking with both the dealers, and talking with the buyer house is what we are hearing overwhelmingly is that they will operate under the hit, they except that they have gotten their heads around that. Some of them view it as a long term proposition, others view it…

Lance, he sounds like an American, is that clear? I think on the interest rate fees, we have got a couple of issues, we have to build the adjusted guarantees down, as you have seen us do, the systems have the flexibility to do that. And on the accounting point of view, [indiscernible] it’s sort of, because we are market consistent element in the drift rate, the discount rate is defined by the current rate, in the equity some performance have declined, right. So you can get quite a ways, the accounting as [indiscernible] quite a ways from what’s a reasonable economics sort of assumptions. So that’s one of the challenges and that’s a discussion as a management team and with the guys, our investors, I will review that, but at the lower levels the drift rate assumptions feel kind of ridiculous that, but a portfolio with every asset class available basically on the globe can produce 100 basis point returns sort of thing is good over 20 years is a bit of a strategy. If you actually believe that you probably would offer different product. So that’s where I think you’ll see the noise, but again the we are looking at - and we do have the flexibility if we believe that the true economics of lowering the guarantees then we have done that on withdrawal rate.

Mike? Can I ask the question on the floor? So you're referring to - our internal model, which lowers interest rates pull shocks at zero.

I'm sorry [indiscernible]

That's okay so we start - just to be clear, so we start with swap cuts into various markets that we operate with and apply the one in 200 shock. In all cases above zero and then we apply the 50-basis points from that, the only place where that drops to below zero is in year one in Singapore, and our cash flows in Asia pretty much across the average 10 years plus average, so immaterial impact. The other place where we dropped to below zero is in the UK between year naught years today and year five back in the minus 50. Our cash flows in the UK are even longer. So they go out 20 years plus. So that impact of them is immaterial.

Thanks you. [indiscernible]. UBS. Two questions, first on Solvency II capital movements, just firstly thank you for your detailed disclosure on page 76 on the movements there. 1 billion of underlying organic capital in generation represents about 10% of your opening SCR, which in-life the 20, which is the top end of your peer range. Is it relatively stable compared to the 2 billion in 2015, so just looking for comment on can we use that as a starting point to build for that is nothing toward in that number. Second question is on Asia in two parts, firstly on Hong Kong obviously there is strong growth has continued there. There's obviously concern around posting ability of growth and also some regulatory tail risk.. Tony if you can give some comments around, the gross side and also in particular on the tail risk the initiatives from the Hong Kong regulator, which I think will help manage all of it. On the non-Hong Kong side, we saw obviously some negative growth in this half, that's partly driven be a strong switch to a premium, best management initiatives in Indonesia, the stock something universal life in Singapore some just curious all the different actions where do you think, are we close to [indiscernible] underlying economic growth headwinds, are we seeing some light in terms of where you see that stabilizing and picking up again?

Nick, do you want to take all these two piece and Tony the

I thank you and I think your analysis is correct. Clearly there are some management actions in there that benefit you accounted for them. Look we have a business that generates capital, when you consider the effects of U.S. comes in on a local basis and we've seen a very strong capital formation in the U.S. that was reported year after year as the business has grown, there is no reason to believe that its contribution to that number is going to do anything other than what it's done in the past the last. Of course the UK is under Solvency II and we gave you the Solvency II risk monetization profile at the year and. On an underlying level we saw 300 or so million come through with 600 million for the year. We have to trim a little of that, as we have withdrawn from, what works against that in new business strength, which will eliminate as we go into the second half and beyond and of course we have a positive experience that contribute. So we were confident in the family as we are against all the metrics that we asked you to judge us again we're confident that we can continue to have a positive slope.

Asia, Hong Kong growth continued strong up 58% at the half again continued driven by mainland Chinese and correlated quite well with the growth in the agency force, which I think is now close to 16,000 in the first half. In Hong Kong we've recruited about 700 to 800 new agents every month and so that feed into nicely. In terms of the actions from regulators and they’ve seen a lot of activity in the first half. I think the most interesting ones are declaration put out by the China regulator CIRC I think towards the end of Q1, early Q2 that they actually put out I guess to the Chinese citizens on their website that was stated if you're going to buy product in Hong Kong These are a couple of things you'd need to be to be aware of. I view this as good news, honestly in part codification of the process, it’s okay for the business to continue on this certain controls. We did as we've always done; we immediately took those CIRC statements and put them in an additional disclosure at point of sale that the agency and customers have had to sign. Now what the Hong Kong regulator OCI has done is taken those standards and created a formal form - disclosure form that effective September 1, all mainland customers purchase in Hong Kong will have to execute. So based on everything we've seen so far not materially concerned about the impact and again and as usual we're ahead of the curve in terms of implementing those standards. In terms of - the rest of Asia, I think you might have answered the question. Yeah, there have been to be economic headwinds most probably most notably in Indonesia where GDP has struggled for an extended…

So, Oliver Steel.

Oliver Steel, Deutsche Bank. Three questions. First one right back to U.S., you were able to give us a sort of indication of how much sales from qualifying accounts actually fell in the first half and mitigation what happened on the non-qualifying accounts and how you see particularly on the qualifying accounts, how that will develop that next, one to three years if you can. Secondly the flows M&G and [indiscernible] my expectations. Each spring can you tell us what's happening there because they were remarkably good this year but they were remarkably good last year, but less than the first half M&G, perhaps an update on particular funds and how much is left in each of these and then third question left field is you talk about raising the dividend in line with earnings but obviously your earnings are beneficial, you got lot form Sterling currency weakness and your dividend is paid in Sterling, how are you thinking about Sterling relative to your dividend decision?

So, Barry Stowe comment on the qualified accounts first.

Lead access [indiscernible] - the lead access sales from qualified accounts have and basically have dropped to essentially zero almost, I mean they’ve fallen precipitously, because as Mike alluded to I think earlier, like in the presentation, most of the broker dealers are now not allowing advisors to sell EEA into qualified, because they feel like the fee in return for the advantage that you get from the tax wrapper, which obviously you don’t get with the whole [indiscernible] on the new advantage. So that’s been hit very hard. Overall sales, do we have that number at our fingertips? Of qualified, how much qualified is down versus not all?

We don’t have the number, it’s just the percentage down below, what I would say is that the mix is about the same as it was last year. So you’re looking at roughly 65-ish percent is qualified and the 98 -

In the 98, so EA has been hit very hard. In terms of how we expect it to develop, broadly we think that a recovery is afoot. It’s not like it’s going to come roaring back in the third quarter or the fourth quarter, I think it’s a gradual thing over series of orders to return to the historic levels of flows across the industry, but I do think that there is based on some of the comments I made earlier about, it’s the way regulators actually are embracing, the product’s concept, and just want to look at distribution I think as we’re successful in evolving distribution I think there is strong prospect that we will see growth and flows they need to be. When you look at the number of baby boomers that are retiring, the assets that are going to be looking for a home the fact that interest rates oriented - our parents and grandparents retired on CDs, which were paying 10% or12% interest, but that’s not an option. So there’s really - there are few alternatives to people that are going into equities and the prospect of a guarantee with the equity upside just I think is becoming increasingly appealing. So don’t look for instantaneous change in sales levels, but over time, I think there’s a real cause for optimism.

If you think of the problem you are solving for the consumer, it doesn’t materially change with the new product structure. We’re going to have some assets already and qualified plans rolling over. They’re going to have supplemental savings for retirement. So they may go fee, they may go commission, but the fundamental problem we are solving is the same regardless of DoL. I wouldn’t just probably I was guessing. I wouldn’t think it’s an immaterial shift in qualified and non-qualified banks in the U.S. The inception of that, that may be in a fee-based lead access you get into a different, [indiscernible] aloud. Now it should be the same problem we are solving with effectively the same tools, it is different optionality, other structure, but if you get the same outcome. Let’s go, we just happen to have the CEO of Eastspring. Guy, do you want to comment on flows?

So if we just [indiscernible] slightly, second half of last year flows started to slow out after China had been hit by currency and the stock market. So since been in Asia started to shift after a very strong ‘14 and for us very strong first half of ‘15, you translated into ‘16 and investor appetite for equity product is that right is largely it’s money market, pockets of high yield. All countries that we look - all 10 countries that we run money in Asia, except two and possibly flows through the first half. So it was confined to Japan where we saw outflow mainly through dividend distributions in Asia equity income product and a very short duration product, which almost money market plus product in China, which management decided to close down, with the two reason, with the only two countries - were an outflow in the first half. So I know the two countries would possibly flow.

And on M&G please.

Yeah so I think of a couple of things to comment on two main reasons, I think what flows have been under pressure for the last 18 months or so first with obviously it’s related to the four month, and I think the second big driver was around Brexit, on stuff with Brexit ahead of that. So we will be touching on performance. There are challenges over the past 18 months, so but if you look back over the last six months, over 60% of funds in the retail range are now above median. So there is a bit of work to do to repair some of the slightly longer term relative performance, but you can see the direction of travel is right and in particular optimal income which is the single biggest funds there, they were not seeing against the European sector, which is the most important sector that funds the European share costs, so we are now [indiscernible], year-to-date one year and five years again we really rebuilt that fair track record and over three years again we’re in second quartile. So direction of travel is very much right, in the right direction there. And if you look at the broader context of flow, actually what is quite encouraging is, it seems that we have got net inflows across quite a few different strategies both on the retail side and importantly on the institutional side as well and quite a range of different things. Real estate, some of the private debt markets and so forth, global macro multi asset. There’s a lot of work to do to turn net outflows into net inflows, but we have some of the building blocks already in place there. I think the Brexit vote, obviously has relevance and particularly the 25 billion or so of asset quality management that we managed across the European client, and I think we still don’t have perfect foresight in terms of how that is likely to progress going forward. So that’s the area where we’re looking at focusing really on client service as we wait to hopefully get a little bit more unraveling and visibility on the extent to which for example we’ll still have European passports and I guess the Brexit negotiation would analyze, but in the line, that’s the picture.

And Nic do you want to comment on dividend of FX 2015?

Yes, is it a factor? Yes, it’s the fact, is it more important when we scrap the dividend to the impact on shocks, no. Is it more important than when we weigh up the growth opportunities, no. And we take the rough with the smooth. Now that being said, we have always maintained that currency and the half of the world that we were exposed to, it’s a tailwind for this business, at the end of the day, over the medium to longer term currency shoots will go into GDP, and if you’re operating in countries where GDP. Is going fast, but well the country in which you are reporting, then over time that will come through into traditional learning. So day-in day-out because of the fact that that’s significant longer term, I think it’s a right tailwind for us.

Now we have historically hedged dividend, not as [indiscernible], but so there is some control over, we were trying to dampen some of that.

Thank you very much. It’s Blair Stewart from Bank of America, three questions please. Nic, you talked about the implemented practice in the U.S., just wondering if you could expand on that, is that something you are looking to explore and could you give us what the RBC in the U.S. actually was, I am thinking if that’s a route to getting more capital and cash over the U.S., it would be the results in presentation, but me complaining about cash coming out of the U.S. Second question on the [indiscernible] 08:15, announced that profit growth has slowed to 12% growth, is that simply a function to investing in the business during a period of time when sales are coming down on a sort of - that it in fact it does. And thirdly on back to management actions, Mike I was wondering what more can be done especially to capture some of that surplus that’s disallowed and particularly on the West profits stay, [indiscernible]. Thank you.

Maybe I will say one or two things and then I’ll pass on to Chad. I mean it was, it’s the practice, it’s something that we carried, put in place after the last financial crisis at the time. And like the balance of the book, it was more on the general account where interest rates up with the predominant risk. The balance of the book is gradually shifting into given where interest rates are, the point at which it becomes the permitted practice is a benefit to us is the further away. That being said, we’ve strong capital formation. We even with this in place over the years, but it’s something that we’re looking at. Chad would do, you want to add anything for that?

I think it’s - the bulk of the answers are there. So with the permitted practice, so we view that as something where, interest rates were low enough and we’re deep enough in the money if you will that there’s a pretty good offset up and down with reserves now so there’s logical reason why you might take a permitted practice off, now before the conversation we had with state. The thing would be you’d still, the reason we’ve had around to begin with is where you have rates move up significantly and there’s going to be an asymmetry between the mark on the slot book and the reserves because the reserves will floor out on the stack and so there's still that kind of tail winds if you will - if you had a big inflation environment or something like that, or we start moving back up rapidly. We'd have a disconnect I think it would be harder for us to get that back on having taken it off, but we wouldn't do so lightly, but it's certainly an active discussion just given the fact what we're seeing now kind of a one sided mark against us even though the economic hedges in place.

Hi, [indiscernible] we use more of treasuries as part of the hedging strategy is considered more efficient, less volatile, but they're also under stat trading book, so you're getting a quite an understatement of the financial strength, it's action. We haven't ever given RBC [ph] other than what we've published year end. But it's still in a very acceptable range for us.

Okay, so it 12% growth in Indonesia

Yeah, I mean Blair you're absolutely right we have been investing in the business we've learnt - Mike often talked about the counter cyclical opportunities we continue to invest; we've expanded new branches; we've hired more agents; we've upgraded our people and we've invested quite heavily in technology to make the whole process more efficient on the back end and the front end. So obviously that has some impact. I don't know Nic if you want to expand on it any further.

Sorry, I’m extremely frustrated that I can’t include there were profit on savings into the ratio. Not least because we've seen we are the only business now that has a sizable amount. Nevertheless we have that debate and the rules have been interpreted in the way in, which they've been interrupted and we excluded. How can we get, how can we access it, we could distribute it but that wouldn’t be, only one we can do, it is the thing that is underpinning, providing the working capital and the risk coverage to obtain best in the way that we do in the deposit fund which is now attracting the phenomenal flows that we're getting. We could - these things you can do from this point, but to get more credit up front, you could monetize the shift, you could hedge the shift further, but you're giving out the upside that that will do if needed to within reason, but on that profit side more difficult to bring more credit on to the ratio.

Mike here please. Thank you very much. Nick Holmes of SocGen, couple questions on the variable annuity book again, just wanted to follow up on the policyholder behavior assumption. Wonder if you could - I know this is an incredibly difficult to take area, but I wonder if you could try to give us a sense of your level of confidence about your assumptions not just laps, but also guarantee utilization perhaps looking backwards what did the last review tell you and what were you pleased about, what are you worried about and then the second question is on notice the very large unrealized lot of the operating line now this we all know is a familiar feature of insurance accounting, but I think in your case quite a lot of it is to do with the hedge program and I just wondered want is you thinking about communicating the performance of the hedging of your variable annuities. Are you total inclined to start reporting an economic type of, I know that subjective in itself, but that is one very large your peer company that does this and puts it in its operating earnings. Now is this something that you would be interested in doing in the future because my sense is that it would be very helpful for people to understand the true performance of the variable annuity guarantees and hedging, thank you.

I'll start with both and leaving it to the few U.S. for help on it. On the hedging, I think this two elements, if you remember the New York meeting a number of you were out we sort of gave you 11.5 hours or you want to know about Jackson one of the things that we did there, we showed you some of the internal we did work with you on cash flow testing. Because of the industry's varying descriptions of metrics, the choices management teams have to define hedging, define risk, part of the reason on those, we've always looked at that remember un-hedged and then we can tell you what the hedge looks like and that shock in terms of value at given point in time. But we are not doing a debate of what type of hedge or how is it structured and is that better than [indiscernible] Lincolns etc. We'd tend to keep it at the various best and will keep showing you those sorts of issues. I think personally that's the single best way to look at a VA block and how it's going to perform. If you remember back that being one of the things we said is it is not just the PV, which again that's one of the that the easy one for us to summarize for you, but it's also as a given your shocked look at versus your capital, insurers fail for cash at the end of the day. So those stresses are important and our intents to keep showing you that I think that gets you a better look at our hedging than anything up our non-hedged liabilities. There was a question that came out of one of the meetings about like net amount at risk versus in the…

Can I comment on the reporting as well? I'm aware of what other companies do in this regard and we thought long and hard [indiscernible] our position on accounting disclosure. We thought long and hard, but have we best project, but you hit on two of the key points. The first challenge you run into is what is economic. Is it real world well or is it market consistent and there can be different judgments that are applied in that regard or something in between. Then you hit the other challenge is to say to you depart from your [indiscernible] and bring in the entire guarantees fees, the calculation of the way you think of the reserves or the element that you brought in on day one, which is when you're locked them in, they produces zero profit on day one. The more you depart it took the view that the more you depart and make judgments from the base U.S. accounting, the less comfortable your numbers are with the way everyone else does it and in the end we decided that it's better to take that volatility and be more comparable and answer your question rather than make judgments that put us out of kilter with the way the rest of the industry is reporting. So yes we will - so what would you be then refer you back to the cash flow on the one side and the other thing is the embedded value because ultimately that does capture all the fees and does factor in the way you move forward how you're hedging program will react them. There are stochastic elements that are all within that to capture some of the ability of some of the assumptions. No, we look at it, but we just thought if we move it would be just not beneficial.

One of the things I want to point out on the interest in Q2 is, around the policy holder behavior and the ability of the assumptions and as Mike has said, we are constantly going to the process of reviewing and we’re - we occasionally tweak as a result of that announcement, but historically that our assumptions had hailed very, very well. And I would argue that given that we’ve provided this is where the probably the most stable consumer experience to beat anyone in the industry around this product. And given the scale of our book, I would say that historical data that we produce on our book is probably the most credible data available in the industry.

Thanks, Alan Devlin from Barclays. Just one question, you mentioned of a bolt-on you referenced to the U.S., can you give some color on what kind of things you’re considering as Department of Labor forcing you declares potentially out of the market. Thanks.

That’s the bolt-ons, we wouldn’t buy - we’re not looking for the A blocks for example, we’ve been pretty clear that that’s not something we have an appetite for. What we look for is life, so life falls, technical revenue, further diversification, just that’s got a nice - there’s coverage benefits, there’s a lot of things we get. The last 24 months you’ve had some interesting new players in the market, private equities, some of the Japanese friends and things that bid things up. Typically what you see is at this point in the cycle, a little more rational pricing. But you got some new players; you got some pension funds, multiple pension funds and vehicles now. Actually very reliability for pension funds, you think about it the cash flow signature that allows the - like the cash flow signature of the underling life time premiums. So there’s competition still, but we’re looking we continue to look for all the years I sit up here, we’re always looking [indiscernible]. But if we see something like we would do it and we’re not in, there’s no obligation or capital allocated specifically for that, it will be opportunistic as it’s always been. But you do own a very low cost platform in the U.S., that can integrate those and produce a return in addition to the return the existing owner is getting, so there’s value there.

One last one Andy.

Thanks so much. A couple of more questions, I think Nic we just pointed of it Africa is [indiscernible] so is Indonesia just to double check the persistency and lapses are okay because that will be our main concern. I guess there is not much EEV hit from lapses in the numbers, so obviously just double check that. And the second point on Asia, obviously sticking with your growth solvency, but obviously Indonesia adds a lot more to the IFRS earnings than it is and then Hong Kong, so is that kind of - the mix going to be a bit of head wind in terms of growth going forward. The third question is on VAs, on regulatory change, so actually looking at holding back some cash with the potential changes in the U.S. VA rule just may or may not happen, obviously they have a big capital and you don’t, but there was something like the - do you expect the rules to come more economic which might lead to high capital requirements. Could you comment on that? Thanks.

No, lapses you’re right. You can see the numbers does not come through. The persistency pretty much across actually the portfolio on the protection side is strong. From time to time you’ll see some spike with effective markets not performing, you’ll see some partial withdrawals, maybe people taking money out, but we’ve seen nothing different this time around to what we’ve seen before. On the impact of Indonesia on the growth rates, I think the answer is that the strength of the platform. Don’t underestimate the growth in Hong Kong. Yes, a little bit comes from the success of our [indiscernible] but the growth within that our health and protection which has a very attractive IFRS signature is not to be underestimated. We’re building some nice momentum in Hong Kong on the back of layering more protection business to what was previously there. Hong Kong was under rated in our earnings before and it’s now gradually drifting up to its appropriate weight. Yeah, there’s some pluses and minuses. In terms of your regulatory question, Andy, there’s - I mean there’s always the prospect of regulations evolve overtime, but we have always had and continue to enjoy a very positive productive relationship with Jackson’s lead regulator which is the State of Michigan. And they’re literally multiple weekly meetings between Jackson and the state and I think they’re comfortable with the existing regulatory regime under which Jackson operates and even more so happy with the manner in which we have complied with that regime. And so I don’t see a huge risk such as you describe.

I just want to thank everybody for a very long session and appreciate the time and the questions and we’re maybe around for a few minutes, if anybody wanted to do one on one. Thank you.

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