Earnings Call: H2 2016

Mar 17, 2017

Welcome to Standard Life's results presentation. With me on the platform are Luke Savage, our Chief Financial Officer, Colin Clark, our Head of our Global Client Group, and Paul Matthews, Chief Executive of Pensions and Savings. Unfortunately, for the last time, Paul has chosen to retire after 28 years at Standard Life. I thought I would give you plenty of advance notice. This is your last chance to ask questions of Paul. We would be grateful if you can make sure your phones and other devices are switched off. Once you have read the compliance slide, I will get the presentations underway. Over the next 40 minutes or so, I will give a brief overview of our 2016. Luke will go through the results in some detail, and I will come back and set 2016 in its strategic context. We will then move to question and answer, where Luke, Paul, myself, and a whole bunch of executives in the front row will do our level best to answer your questions. 2016 was a year when Standard Life made good progress towards creating a world-class investment company. As we promised at the interims, we increased our pace of strategic delivery. We continued with our targeted investments in diversification and growth. We improved our financial discipline with a focus on driving greater cost efficiencies. We also strengthened our long-term relationships with clients and customers, including the longstanding customers in our mature books. Our focus on strategic delivery strengthened the resilience and sustainability of our simple capital light business model, which continued to deliver for clients, customers, our people and shareholders. Okay. We grew assets by 16% and fee-based income by 5%. The benefits of the investments we made in diversification were most visible in our growth channels. Here we saw asset growth of 20%, revenue growth of 10%, and net inflows of GBP 4.1 billion. This robust and well diversified growth was more than enough to offset the impact on revenues of both the GBP 4.3 billion outflows from GARS and the continued long-term runoff of our mature book of business. We also improved our financial discipline. We lowered the cost income ratio to 62% through careful cost management. We delivered the integration of Ignis early, enabling Standard Life Investments to deliver the 45% EBITDA margin one year ahead of schedule. The benefits of a well diversified customer and client base, combined with the improvements in our operating leverage, helped us deliver a 9% increase in operating profit and cash generation. That provided support for continued dividend growth. Our final dividend of 13.35p takes the total to the year to 19.82p and marks a decade of unbroken dividend growth at Standard Life. With that, I will hand over to Luke, who will go through the detail, and I will come back and talk about 2016 in its strategic context. Luke. Thank you. Good morning, ladies and gentlemen. As Keith said, this is a strong set of results. If we turn first to the summary P&L, you can see in the first two rows that that growth in income has been driven by our fee business, which represented 95% of our GBP 1.75 billion of underlying income. Income from our spread risk business remains steady at GBP 92 million. It is a reflection of our move towards a capital light business that does not tie up balance sheet that the PRA have recategorized Standard Life from a major life group to a retail life group. We will look at the individual components of our profit in more detail later. Before I move on, I would point out how the growth in fee revenue, combined with a sharpened focus on efficiency, has allowed us to increase the underlying performance by 8% to GBP 681 million. Behind that sits an 11% increase in the underlying performance of our fee business, now standing at GBP 596 million. You can see we continue to benefit from favorable assumption changes, largely with respect to longevity, adding GBP 42 million, almost unchanged on last year, helping to drive that operating profit, as Keith said, up 9% to GBP 723 million. A strong set of results. What about our non-operating? We said a year ago we expected non-operating costs to fall in 2016. Annuity provision aside, which I will come back to, you can see that we have delivered on that with non-operating costs down GBP 158 million from GBP 257 million down to GBP 99 million this year. In terms of the annuity provision, you remember that we announced in October that the FCA's review of annuity sales showed that a number of sales that we made since July 2008 did not adequately explain to customers that they may have been eligible for an enhanced annuity. To us, that is obviously disappointing. What we also said at the time was that we would be undertaking a past business review of these non-advised annuity sales. As a result of that commitment, we have made a provision of GBP 175 million to cover both the possible customer address together with the sizable program costs of undertaking the review itself. I would, however, stress that we are not at this point taking credit for any PI insurance recovery. We are aiming to recoup up to GBP 100 million. Let us look now in more detail at the first component of our business model, increasing assets. Despite volatile markets, we gathered over GBP 4 billion in net new flows through our growth channels, helped by the diversity of our business. We also completed on the acquisition of Elevate, adding a further GBP 11 billion of assets. While our mature fee businesses, which are in long-term structural runoff, saw net outflows of GBP 6.2 billion, down from GBP 8 billion last year, helped by the winning of a GBP 1.2 billion mandate from Phoenix in the fourth quarter. A combination of rising markets and the weak pound helped to add over GBP 40 billion through market movements to give us total assets under administration of GBP 357 billion, up 16% on the year. Within that market movement, roughly one-third was FX and two-thirds from other market movements. Before we take a look at the drivers behind the GBP 4 billion of net inflows across our growth channels, we can see how they break down here. We've shown not just the strong net flows, but the strong gross inflows that we generated by channel at GBP 38.6 billion, little changed year-on-year. If we turn now to institutional and wholesale, it's worth starting off by saying that gross flows here have also remained strong at GBP 27.7 billion this year, compared to GBP 30.5 billion last year. At the net level, we've delivered GBP 1.1 billion of net institutional flows from a business increasingly diversified by geography, by customer type, and by investment solution. In wholesale, along with most of the entire industry, which according to the Pritam report was the worst the industry has seen for 20 years, we've had a challenging time. The uncertainty over the euro, the U.S. elections, and so on, has driven a trend of investors taking risk off the table, with us seeing net outflows of GBP 1.7 billion. To put that into context, that is against closing wholesale assets of GBP 50 billion and a U.K. market share that remains strong at 4.7%, a testament to the strength of our franchise across a broad range of asset classes. We're seeing the benefits of our investment in our capabilities and global distribution that we've been making with growing demand for an increasingly broad range of investment solutions. Whilst demand for GARS was weaker in 2016, with, as Keith said, GBP 4.3 billion of net outflows, largely from the more active wholesale channel, demand for our other products continued to grow. In 2016 alone, we launched 16 new funds, many in the new active space, and attracting average margins broadly in line with the rest of the book of business. As you can see from the chart on the left, we've more than doubled both gross and net flows into products other than GARS over the past three years. Despite the changing environment, in 2016, we saw gross inflows into those products increase by 30% to GBP 17.5 billion, with strong net flows of GBP 3.7. On the right-hand side, you can see that we delivered strong gross and net inflows in areas such as other multi-asset, fixed income, private equity, and MyFolio. MyFolio has now broken through the GBP 10 billion mark of assets under management. Our long-term diversification agenda is clearly delivering. Let's turn now to our workplace and retail channels, which continue to attract steady and resilient net flows. In 2016, these amounted some 7% of opening assets, and were also boosted by the acquisition of Elevate and the GBP 11 billion of assets that came with it. Our total AUA is up an impressive 33% year-on-year, breaking through the GBP 100 billion mark, up from just GBP 45 billion five years ago. In terms of retail color, we've continued to sign up new auto enrollment schemes, around 8,000 in total, and that has increased our regular Workplace contributions to GBP 3.1 billion per annum. These are very sticky and very steady flows, and they now constitute about 75% of our gross flows into Workplace. As the minimum contribution rates in auto enrollment increase in April 2018 and then again in April 2019, we expect that to perpetuate the ongoing growth. Furthermore, our Workplace business continues to feed assets into our retail business. Some GBP 2.2 billion in 2016 alone, GBP 0.3 billion of which went into drawdown. In total, we've now grown our assets in drawdown by 21% to GBP 16.4 billion. In retail, our award-winning Wrap platform continues to attract strong net flows, and in 2017, we expect our already leading market position to be boosted by our acquisition of Elevate, itself another award-winning platform. Now, as we've indicated previously, the total cost of acquisition and integration for Elevate will be in the order of GBP 100 million. That is a little over GBP 30 million for the acquisition and the balance for the integration. As we said before, we expect that to take about two years, and by the time we finish, we'll have turned around a business which had been losing close to GBP 20 million a year into a business making a profit of a similar amount. Largely through cost reduction, and we're already making progress in that direction. The second component of our business model is also delivering. In 2016, we grew revenue by 5%, with growth channel revenue up 10%, while fee revenue on our mature books was 8% lower, impacted by lower performance fees down GBP 14 million, as well as lower premium-based income in Europe. That said, our mature fee business in the second half was 6% up on the first half off the back of market movements in FX, which also helped drive closing assets in our mature books up by some 8% versus opening AUA. Over time, revenues from our growth channels, the dark blue bars on the left, are up over 70% in the past four years, whilst revenue from our mature books in the light blue bars has remained relatively constant, boosted a little by the Ignis acquisition in 2014. In terms of revenue margin across our growth channels, we continue to see little pricing pressure, and that comes through in the stable margins on the right-hand side of the chart, with the small year-on-year movements being up one basis point for both SLI and Workplace and down one basis point in retail. As I say, the small moves we do see are a function of mix, not of pricing. By channel, we expect SLI third-party revenues to remain stable in the low 50 basis points. Workplace has stabilized as a function of our success in the auto-enrollment market. Retail margins are supported by increasing volumes of drawdown and the build-out of 1825. It is worth noting that the Elevate pricing, as we've said before, is lower than our own Wrap pricing. All other things being equal, we can expect the average retail yield to drift down by about two basis points in 2017. Turning to spread risk margin. As I said earlier, it's only 5% of our underlying income comes from spread risk activities. As announced at the half year, we had a one-off gain of GBP 22 million from changes to the scheme of demutualization arising from the adoption of Solvency II. We'd guided ALM activity to be down from GBP 30 million last year to around half that this year. As it was, we took advantage of periods of market volatility to generate GBP 25 million of income, only down GBP 5 million in the end. Once again, we would guide towards up to GBP 15 million of ALM activity in 2017, although as in 2016, that will be very much subject to market conditions. Finally on this slide, the negative other at 26 is made up of a host of small items, the most notable being related to negative mortality experience in the year of GBP 8 million. The third component of our business model is our focus on lowering unit costs, where we previously articulated a commitment to see the cost-income ratio trend down to below 60% over time. On the left is the result of our efforts in 2016, down one percentage point to 62%. That improvement is after the drag from taking on Elevate and building out 1825, our advisory proposition. In part, that reduction has been achieved by strong cost discipline in SLI as we responded to the challenging market conditions over the course of the year. On the right-hand side, you can see we've broken out Elevate and 1825. Excluding which, you can see that our underlying costs are up just 2%. Let's not forget that that 2% includes the significant ongoing investment in other aspects of our business beyond 1825 and Elevate. If we pull all that together, we've given an 11% increase in our fee-based performance. Within the second and third bars, you can see a drop-through rate for between revenue down to profits of over 60%, and that's the GBP 64 million in blue versus the GBP 24 million in gray. It's a sign of our financial discipline and operational leverage inherent in our scalable business, and proving that we are delivering results. If we look back over five years, we can see that our fee revenue has grown by 60% to GBP 1.7 billion, driven by a near doubling in our fee revenue from our growth channels, now standing at GBP 1.2 billion. That revenue growth, combined with our scalable business model, has fueled a threefold increase in profits from our fee business, which now stands at almost GBP 600 million. It's this fee business growth that is the driver for underlying performance more than doubling to GBP 681 million. Let's look now at how this breaks out by business unit. I'll go into SLI and U.K. pension savings in more detail on the subsequent slide. Let's just deal with other minor items before moving on. In Europe, we saw a GBP 4 million gain on the move to Solvency II, together with GBP 5 million of positive experience in year. In combination, they helped drive profits to GBP 39 million. The Solvency II gain will not repeat, and we do not presume to gain from positive experience. Over the medium term, we will continue to guide towards a GBP 30 million profit level for Europe, although this is a market where we do see good long-term growth opportunities. Our associates and joint ventures included on the slide here are our life businesses because we include HDFC Asset Management within SLI. You can see underlying performance is up over 60%. HDFC Life benefited from both our stake increase from 26% up to 35%, as well as us growing underlying premium income by 18%. While in Heng An Standard Life, our Chinese joint venture, sales were up 39%, helping to drive increasing profitability. In both of these markets, we see strong growth opportunities going forward, given both demographic changes and the nascent pensions markets in each of those countries. Turning to our major business units. In SLI, we've grown assets by 10% to GBP 278 billion, on the top right-hand corner. Fee revenue is up GBP 42 million, a 5% increase. Our discipline in pricing and focus on new active investment solutions has enabled us to lift revenue yield up one basis point to 53 basis points, three quarters of the way down the right-hand side. Importantly, through the effective integration of Ignis and strong cost discipline, we've delivered that target EBITDA margin, as Keith said, of 45% a year ahead of our original guidance. Now, as we said before, we don't expect revenue yields to go any higher. Alongside our ongoing investment in growing the business, it means we maintain our previous guidance that the EBITDA margin should track in the low to mid 40 basis points going forwards. Finally, across the bottom of the slide in the yellow dots, our short-term investment performance has been mixed, although it remains strong at the all-important three and five-year time horizons that our focus on change methodology targets so effectively. In our pensions and savings business, we've grown total fee AUA up by 23%, in part through the acquisition of Elevate, in part through sustained strong net inflows into our growth channels, and in part through favorable market movements. That is despite the long-term run-off of the mature books of business within those figures. Again, good pricing discipline and a more favorable mix of business, including the success of things like Good to Go, the build-out of 1825, and things like Click2Switch, has allowed us to maintain the average revenue yield across our growth channels, with the overall total coming down by just one basis point. The proportion of fee assets from growth channels has increased from 69% to 74%. While the headline cost to income ratio in the bottom right-hand corner of the slide has nudged up from 59% to 62%, if you exclude the impact of our start-up activities in 1825 and Elevate, the cost to income ratio of our underlying business has remained largely flat and would have come down if not for the reduction in spread risk margin. Keith will touch on some of the initiatives we have in place to continue that downward drive when he comes back to speak in a moment. When it comes to balance sheet, we continue to run a strong Solvency surplus. As we explained back in August, we focus on investor view of capital, which eliminates dilutions arising from the anomalies within the Solvency II framework. We've repeatedly said that given the fee-based nature of our business, that our surplus was relatively insensitive to markets. That's demonstrating the result unchanged year-on-year at GBP 3.3 billion and a ratio of some 214%. From a pure regulatory perspective, much of the capital that we previously did not recognize at Group is now recognized off the back of our work to agree methodology changes with the PRA, together with changes to the Companies Act that recognize the Solvency II regime. As a result, we've increased our regulatory surplus view by GBP 1 billion to GBP 3.1 billion. The lack of volatility in our surplus is demonstrated here. When we apply the same univariate stresses that we've used in previous reporting, the surplus is stable across a wide range of scenarios. You can see it moves by a maximum of GBP 200 million in the second blue bar along, which is equities down, and in the penultimate bar on the right-hand side, which is a reduction in mortality rates. As we've said, we believe it's very stable. However, as we've also repeatedly said, regulatory cap is not a constraint on us. Our focus is on cash generation. It is cash generation that funds reinvestment in organic growth. It is cash generation that funds inorganic growth, and importantly, it's cash generation that underpins our progressive dividend policy. On the left, we show that we've tripled the cash generated in just the past six years, now breaking through the GBP 500 million mark. As you would expect from a fee-based business, our cash generation is closely aligned to our IFRS earnings. On the right, our PLC level liquid reserves at GBP 0.9 billion remain strong, down a little on 2015, primarily because of our stake increase in HDFC Life. It's the strength of our cash generation, the strength of our cash reserves, that once again enable us to increase the dividend by 8% for the full year to GBP 0.1982 per share. That gives us an unbroken record of a decade of progressive dividends and confidence that our fee-based model should enable us to maintain that policy going forwards. Thank you. Keith, back to you. Thanks, Luke. Despite all the headwinds that buffeted the industry and the markets in 2016, we continued to deliver growth in assets, revenue, and through our increased financial discipline, profits. That was most visible in our growth channels that increasingly drive long-term value at Standard Life. Our strategic focus, I believe, has positioned us well to benefit from the global trends we see as shaping the savings and investment market. The big four trends I identified a year ago have, if anything, intensified and reinforced, I think, three important elements of Standard Life's strategy. First, Standard Life's purpose. To invest for a better future, to make a difference for clients, customers, our people, and our shareholders. Second, the importance of innovative investment management and our new active componentry at a time when I think active management's going to become more important. Finally, the importance of a global approach. We need to compete at home with world-class as well as abroad. As we move into 2017, I and my executive team are intensely focused on our strategic priorities because we believe it's those strategic priorities that will deliver a world-class investment company. It's a world-class investment company that will sustain growth in assets, revenues, and profit, and deliver value for shareholders, and actually a promising future for our people. We will continue to invest in diversification and growth by broadening and deepening our investment capabilities and attracting and retaining talented people. We will continue to improve our financial discipline by building an efficient and effective business. We will continue to grow, but also diversify our sources of revenue and profit. By ensuring the strong relationships we develop with clients and customers are right at the center of everything we do, that's how we'll improve the resilience and sustainability of our capital light business model. Over the next 10 minutes or so, I'm going to look at each of these strategic priorities in turn so I can set 2016 in its strategic context. We're making good progress, I believe, on deepening and broadening our investment capability. As you can see from the chart on the left-hand side, we continue to roll out a suite of new active funds throughout the risk/return spectrum. We launched 16 new funds in 2016, including the SICAV version of MyFolio for the German market. We have a good track record, not just of extending our product range, but also commercializing it. If you look beyond the GARS outflows of GBP 4.3 billion for a moment, we saw net inflows of GBP 3.7 billion from elsewhere in our product range. Indeed, if we want to look back as far as 2012, we've attracted gross inflows of GBP 58.3 billion in funds other than GARS, 150% increase over the previous five years. Put another way, GARS accounted for 40% of gross flows in 2013, its peak. In 2016, it was 26%. There's evidence in my view that the investments we've been making in diversification are paying off. For example, we've attracted GBP 19 billion into the new active funds we've launched over the last six years. More importantly, these funds have an average revenue yield of above 50 basis points. That allows us to maintain our mantra, a premium product for a premium price. A key part of our financial discipline. Ensuring we have an innovative pipeline to meet changing client needs has been the bedrock of our diversification agenda for some time, we saw the benefits continue to emerge in 2016. I say continue advisedly. That's because, as I've said many times, the product cycle in asset management is a lot longer than people think. It can take up to seven years to get full scale in terms of profitability, so you can reinvest in the rest of the business. Have a good idea? Two to three years to develop a track record. Years three, four, five, you'll see flow. Years four and five, you'll generate profitability. Years five and six, you get payback. By year seven, you have enough scale to be throwing off profit to reinvest in the business. Little surprise if you look on that slide, that the bulk of the GBP 19 billion is from product that was launched five and six years ago. I would expect momentum to continue to build over the next couple of years in the new active funds we have recently launched. I think we will make progress in private markets, the insurance segment of the market, and we'll continue to build out our Integrated Liability Plus Solutions. Let there be no doubt, I and the team are equally focused on the other component of financial discipline, driving down unit costs to unlock the operating leverage inside a world-class investment company. This focus ensured the early delivery of the 45% EBITDA margin associated with the integration of Ignis. With the acquisition of the Elevate platform complete, the integration of the platform and the business is underway. We will apply a similar focus to the delivery of both the strategic and the financial benefits. Far, actually, so good. Business has been good, with better than expected flow and better than expected asset levels. We will also continue to search out greater efficiencies across the rest of our business. We are streamlining our customer operations through the continued use of automation and straight-through processing. We continue to make progress on the re-engineering of our legacy IT systems. As we build an efficient and effective business, we will push our cost income ratio below 60% in the medium term. Investing in our diversification agenda and improving our financial discipline requires not just focus, but high levels of cooperation and collaboration throughout our organization. World-class companies have world-class people, they need to invest in their talent. Standard Life Investments and Standard Life are no different. We have made, I think, good progress in 2017. Our strategic delivery in part reflects increased cooperation and collaboration across the group. Our engagement scores did improve, especially on respect and recognition, which suggests our efforts to improve diversity are being recognized. We also have made progression, I think, on the world-class front. Our sponsorships can speak for themselves. One of the things that I and the team are particularly proud of was the fact that the Boston office was named as the best place to work in the U.S. for a medium-sized asset manager. No mean feat when you look at the track record of most U.K. firms operating in one of the toughest markets in the world. Our particular blend of global and local, I believe, augurs well for the Singapore and Tokyo offices that we opened in 2016. One area where we expect to make a good deal of progress in 2017 is across the distribution teams at Standard Life. Colin Clark has been leading the drive to greater levels of cooperation, collaboration, and improved efficiency across our distribution networks to help even stronger relationships with clients and customers. Whilst 2016 undoubtedly brought its challenges for active managers, we actually continued to see strong levels of activity, where either through pitches or our RFIs. A notable beneficiary of that activity has been our broad multi-asset offering, and that's already resulted in a new partnership with Challenger announced a week ago. Challenger is a major Australian post-retirement house. The partnership with Challenger comes on top of the benefit that we're receiving from the partnership with Becerra, which was announced earlier in 2016. We have an increasing global presence. 29 locations serving clients and customers in 45 countries. Our increasingly well-diversified customer and client base is a major strength for Standard Life. I think as 2016 illustrated, clients and customers react in different ways to the same set of events. That was clearest in our pensions and savings business. Consolidation is accelerating. Low interest rates and historically high transfer values are triggering increased activity by wealthier individuals, and they're moving from DB to DC to take advantage of pension freedoms. The advice market is now almost totally platform-based, and we are a clear beneficiary because our Wrap and Elevate platforms lead the market and serve over 3,000 advisor firms. We also continue to see regular and predictable flows into workplace. We've auto-enrolled more than a million employees since 2012. Interestingly, we're also seeing some evidence that so-called pensions fatigue is ending. It's pleasing that even the biggest schemes appear to be impressed with the breadth of the functionality that Standard Life can offer. It might be too early to claim a major change in client attitudes, but it does feel like the workplace pensions market is changing in a way that plays to Standard Life strengths. As Luke and I have said many times, the benefits of our strong relationships are most visible in the growth channels that drive long-term value. Here, assets grew by 20% to GBP 237.6 billion and represent two-thirds of assets under administration. More importantly, fee-based revenue rose 10% to GBP 1.2 billion, and that is 73% of total fee-based revenue. Furthermore, as you can see from this chart, revenue is well distributed across our four largest channels. The largest channel, institutional, represents GBP 360 million out of GBP 1.2 billion, so around about 30%. Wholesale and retail are around 20% each. Wholesale, of course, was where we experienced the bulk of GARS outflows, GBP 3.9 of the GBP 4.3 billion. Note that total outflows were GBP 1.7 billion, only 4% of opening assets. As we continued to see inflows into areas where we had good performance, in particular MyFolio and GILB, Global Index Linked Bonds. It's also, I think, quite important to note that not all channels are as sensitive to short-term performance as wholesale. The institutional channel where we saw positive inflows, we saw positive inflows in five out of seven asset classes. That reflects the strength and depth of our ratings from consultants. One of the great benefits of our well-diversified business and strengthening relationship with clients is the stability of our revenue yield. The investments we have made in diversification and growth, together with our improved financial discipline, is delivering well-diversified growth across our business. The strength of the growth channels, which you can see on the left-hand side, is offsetting the runoff in our mature books. This is a feature I'd expect to persist over the next couple of years. We also get diversification benefits from our Life Associate and JVs, which you can also see from the chart on the left-hand side. These now account for 10% of operating profit, and we will see further progress when HDFC Life is able to merge with Max Life. In summary, 2016 was a year when, once again, Standard Life increased assets, grew revenue, lowered unit costs. We generated a 9% increase in operating profit and cash flow to support our progressive dividend. Our strategic focus has helped us make good progress in delivering a world-class investment company, and that's where the focus of I and my executive team will remain in 2017. When it comes to targeting investment in diversification and growth, I can assure you we are as focused as we ever were on investment performance. Investment performance is recovering, and that does include GARS. We are due to launch around about a fund a month in 2017, and we will probably hit the 16 number again as we continue to build out private markets and Integrated Liability Plus Solutions. Focusing on driving cost efficiency, you should be in no doubt, absolutely no doubt, we are very firmly focused on delivering a cost-income ratio which falls below 60% in the medium term. Strengthening long-term relationships with clients and customers. It started, I think, pretty well in 2017. Better than expected flows on the Elevate platform, better retention. Of course, we've announced a new relationship in the post-retirement market down in Australia. Making world-class our standard. I think 2017 has also started well. Very dangerous to extrapolate from a single month. So far, reflecting markets, reflecting the pickup in performance, we have seen positive net flows across our business. I can assure you that rather than focusing on the long term, my focus and that of my team will remain on delivering for customers, clients, and shareholders. Thank you. With that, Luke, Colin, myself, the executive team, and particularly Paul, will be more than happy to try and answer your questions. Thank you. John. I think the mic will come around in a moment. I'll go in the center, move over here, and then move. John. Thank you. Good morning. Jon Hocking from Morgan Stanley. I've got three questions, please. Firstly, on performance, can you update us on where GARS is tracking versus benchmark? Also the funds you highlighted on the slide that are relatively recent launches, how are they tracking relative to their respective benchmarks? That's the first question. The second question, you seem to be adding a lot of complexity to the platform given the number of fund launches. Is there a sort of negative cost implication here that you end up with a cluttered platform and actually distribution finds it hard to focus on your best product? Then the third question, what are the potential cost implications of MiFID next year? Thank you. Thanks. GARS is actually tracking reasonably well, with Rod in the front row, Chief Investment Officer, I think it's sensible for Rod to pick up the questions on performance. Can we have a mic down here? Yes. You can hear, yeah. Yeah. The first one was in terms of GARS performance. It is actually tracking well. In effect, we've been raising our risk levels post-Trump, and I think we're seeing the return of more fundamentally driven markets, which actually plays to our focus on change philosophy, which is a fundamentally driven philosophy. That is definitely starting to come through, I would say, in performance not just of GARS, but across the entire franchise. I think these markets are much kinder to, as I said, active, fundamentally driven approaches. I think going back on GARS, we ran quite low levels of risk, actually, going into Trump, as you might imagine, at that stage. I think only now are we starting to see those risk levels getting back to an area where we will start to regain our performance momentum. You asked, I think, a very pertinent question about performance as it impacted some of our new active solutions. There, I'm actually pleased to say, performance is holding up very well from 2016 and into this year. That would be around a lot of our absolute return bond funds, which are selling well, our total return credit. Those sorts of activities, which have played to, if you like, volatility-controlled new active solutions, are very much on target and are performing. That's precisely what the relationship with Challenger is about. An interesting question about the complexity of the platform. One of the great things that we've done over time is built an effective and scalable platform, so these funds do not bring massive additional cost in terms of the delivery of the administration behind them or the manufacture of a new wrapper. Whether it's institutional or wholesale, we're already manufacturing in most of the key wrappers around the world. Marginal costs are relatively light and fully worked into, clearly, our business plans for those new product launches. Costs of MiFID, I think are, in terms of man-hours, quite expensive given all the things that we need to do. We're on track. There's a little bit of MiFID that has to be completed. I don't think MiFID is going to have a meaningful impact on the cost profile at Standard Life Investments. It's something we can easily cope with. Sorry, Ravi. Oliver. Thank you. It is Ravi Tanna here from Goldman Sachs. I had three questions, please. The first one was on your reference to the EBITDA margin from SLI, which I think you, correct me if I have misheard, but I think you referenced low to mid-40%. I wanted to understand a bit more about how you plan to get there or what the moving parts are. Clearly, the group cost income target is to come down below 60%. I just wonder, have we exhausted the cost reductions within SLI, or is this more a statement around declining revenues margins going forward? The second one was just around Elevate and if you could perhaps talk a little bit about how the adviser market has responded since that acquisition, and generally, what experience you have had there. The third one was just a clarification, really, on the annuity provision that has been taken, if you could give any sense around pending sensitivities to that GBP 175 million and what is assumed in that calculation. Thank you. Okay. If I do the EBITDA, Paul, if you do Elevate, and then Luke, the annuity question. The guidance on the EBITDA margin at Standard Life Investments is relatively straightforward. We do not think it is structurally going to get any higher because we do not think the revenue yield will structurally get a lot higher. There will be some years when actually it could bounce a little bit above because markets are favorable and beneficial. There may be other years when markets are more difficult, or we need to accelerate investment in our platform. By and large, I think what we are trying to signal is it will oscillate somewhere around current levels. Some years it will be lower, some years it may be a bit higher. I think that is where we are. Paul, Elevate. Elevate's gone exceptionally well, actually. I think one of the things the AXA advisors themselves have been impressed with, as well as the IFAs, is we have got a greater investment choice. They get a far more range of investment options and at far better pricing than AXA managed to negotiate. They have greater functionality options now with both Wrap and the Elevate platform, so they have got more choice. They have greater support. We expected probably to get about GBP 1 billion less than we got. We got GBP 1 billion more come across. We thought some would flow off with the purchase. We had expected probably negative outflows to start with because some of these IFAs traditionally have not dealt with Standard Life. We did think there might be some issue about the ownership. In fact, we have had very strong inflows. I think the whole financial stability and the whole support around what we provide has been much better than we had anticipated. On model sensitivity, probably the easiest thing for me to do is to refer you to the annual report and accounts, page 175. We list out there all of the key assumptions and a table with the sensitivity of those assumptions in there. Rather than me reading it out, page 175. Okay. Oliver. Oliver Steel, Deutsche Bank. One of your sort of key tenets is rebuilding trust in financial services, the FCA seems to be doing quite a lot to actually sort of kick out at the margins being taken by fund managers at the moment. I just wonder if you're seeing any impact from that at all or how you're thinking about it, and particularly you're making quite a strong case for active fund management, whereas actually they're making a strong case for passive, it seems. Secondly, what percentage of the GARS outflows are you actually winning back in some of the new funds? Thirdly, perhaps Luke, could you just remind us of the transitionals? I think I saw one and a half billion of transitionals. Is that all relating to the annuity book or is there something else in there? Okay. I'll do the trust question. Colin, if you can do the GARS and then Luke, obviously, the transitionals. You can see from that launch of new products, we're not actually seeing any impact on revenue yield. It is absolutely clear to us that in the market, clients and customers will pay for the combination of performance and innovation. There was a survey a few years ago that looked at, I think it was about 400 fund buyers, and they made exactly that point. Price is a bit further down on the list. I think where the FCA is having a go, and quite rightly in my view, is where there's lack of transparency, where there are old-fashioned closet index or benchmark plus, and they're big high commodity funds and they're still charging active funds and they don't have an active componentry, then that's going to come under pressure. That's just not simply the business we've been in, nor is it the set of funds that we're launching. We're not seeing any pressure. Colin, GARS. Yeah. I think it's in its early stages now that we're increasing the multi-asset platform to include more different products. We are benefiting from some switching from GARS, as you sort of allude to. I think two examples that spring to my mind in the last six months. One of the interesting things we've done is we've taken GFS to the U.S. marketplace in the Cayman structure. One of our bigger clients in the U.S. that had a large exposure to GARS has actually seeded that Cayman fund through the switching from one to the other. They're looking to rebalance their portfolio or reblend their portfolio now that they have an exposure to LIBOR plus five and now LIBOR plus seven in the shape of GFS. That's happening. Another good example I think that's just beginning, in the last six months, we've launched the Integrated Liability Plus Solutions in the U.K. market, which is our response to defined benefit plans that want to hedge or de-risk. I think a number of the clients in the U.K. institutional market in DB plans that have had GARS exposure for the last seven, 10 years are looking now to switch out of that into ILT. Another example of where that switching is taking place. The first example is about reblending in multi-asset. The second is about switching into something that's more appropriate for a de-risk scheme. In terms of the actual GBP number, I'll come back to you on that. Luke. Yeah. In terms of transitionals, it does relate predominantly to annuities. It was recalculated as at the year-end off the back of some model changes that we got approved during the second half of the year. We've also taken the first annual deduction, which as it winds down over 16 years, we've effectively taken off 1/16th, which technically we could have waited till the 1st of January. If you're trying to compare us with others, you need to look at what date did they recalculate their transitionals and have they or have they not taken that deduction? Okay. Elliot, up at the- Hi, good morning. Just three question. First of all, can you give us some clarity on U.K. cost? It went up around GBP 12 million, which you flagged as around 2%-3%. Is that sort of a cost level increase in U.K. pension business that we should expect? I remember in past you are kind of saying that you are trying to maintain it on a flat on absolute cost basis. Any thoughts on that? Second thing is, flows into workplace pension and retail was relatively lighter compared to last year. What's going on there? Because it should be a bit higher given the growth in the asset side. Thirdly, any color on cross-selling from your pensions flows into MyFolio into SLI? Thank you. Okay. Luke, do you want to do U.K. cost and then Paul can pick up the other two? I think the story with U.K. cost is that we have been building out the 1825 proposition, we've said that as we build that out, it is initially loss-making, that adds to the cost. We've also taken on Elevate. Within the cost base for Elevate, we've both got a couple months of operating costs, plus some of the costs in the run-up to that acquisition closing. If you look behind at the underlying business, for example, the running cost of our back book over the course of the year have gone down 5%. Some of the indirect costs of running our technology across the pensions and savings platform generally, that Keith alluded to, a multi-year program, we took out, I think it was 90 heads in 2016 out of our technology team off the back of some of those initiatives coming through. In the short term, depending upon timing of programs and where things like Elevate costs come through, you do see some bumps in the road or some noise. We're confident the underlying trend is downwards. Paul? I think I got the question. Was that less flows through on workplace you were looking at? It was retail. Oh, sorry, retail. Workplace last year. Okay. On the workplace side, we've seen still the regular premiums through. Our regular premiums are coming through quite strongly still. We saw less single premium lumps of business come across. We're starting to see a number of inquiries this year, but last year we didn't see as many lumps come through as the previous year. If you take the regular premium, our regular premium business was up on workplace. On the retail side, again, it was impacted a bit by retail and workplace on pensions freedom. In some areas here where people are exercising their pensions freedom monies, they are taking some of their tax out. If you take on things like Wrap net flows, et cetera, I think the last statistics I saw, we're something like 50% up on any other company. If you combine all the net asset flows onto Wrap, we would look pretty strongly when I think you see the results. The other question I think was. Cross-selling. Cross-selling into SLI funds. Cross-selling into SLI funds. To give you an example, in Wrap, something like 20% of our funds on Wrap would go into MyFolio. I was looking at some figures the other day. I think it's something like we've got over 200,000 customers on our Wrap platform, and we've got sort of 142,000 of those will be in a MyFolio type proposition. The cross opportunities for us with Elevate is a good example. Elevate typically have had around 2% of investments with Standard Life Investments. Already, the account managers that come across with them are now seeing the opportunities that Standard Life Investments offers. I think there's quite a big opportunity for us to offer the clients of Elevate far greater fund capability with our Standard Life Investments. There's a good opportunity there. Thank you, Andy. Hi. Thanks so much. Andrew McDonald-Hughes from Macquarie. Three questions if I could. The first one, just some clarification on kind of capital. The 100 million recovery, if you get it, presumably that net of tax would just be added to the capital Solvency II position. You've not included that in the capital, that would be a one-off benefit when you get the insurance recovery. If I understand correctly, on page 53, there's no capital in India. If you were to progress the Max Life merger and ultimately sell your shares, the GBP 0.90 or so you would get back would be all capital. There'll be no credit in the group capital now from India Life. I guess the third question is really about how we should think about GARS. Obviously, GARS outflows picked up in Q4. We can all see that. You're distinguishing between the wholesale parts, which is the retail part, and the institutional part. I'm just curious, absence any recovery in GARS performance, which may happen as you've highlighted, how we should think about the GARS flows going forward. Should we think of the institutional as a relatively sticky part of GARS? Should we think about the kind of wholesale as a less sticky part, which is where the effectively, the pattern of outflows should slow down over time as the kind of wholesale bit runs off faster if things don't change. Thank you. If Luke takes the first two, and then what sounds like a piece of very complex guidance, Colin. On the insurance point, you're right, we haven't taken any credit for it. If we do recover, that will come to us as a credit through non-operating. That will translate into cash, and that will flow into capital. On India is on our books at cost. I think it's a little preemptive to talk about selling our shareholding in a combined entity where we're still working on getting the regulatory approvals. Technically, you're right in terms of how that would flow through. Perhaps a little premature. Colin. You make a couple of points, interesting points. The first thing is in terms of institutional outflows towards the end of last year I should note that we categorize the John Hancock relationship as an institutional relationship. That's the way we manage it, that's the way we handle it, and that's the nature of that relationship. Clearly, some of the flows have the characteristics of retail. I think in that sense, we're slightly understating the strength of the institutional picture on GARS. I think to your second point, I think the institutional franchise is very strong. Generally, we've got very strong consultant support. Not only across the board, we've got 22 products that are categorized as buy. Within the multi-asset suite, we've got four buys and six holds from investment consultants. I think there's a lot about that institutional franchise that is very stable and is very strong. As we see recovery, I think we're already seeing it in terms of the nature of the client relationship discussions we're having. As we're starting to see some stability come back into the performance and some improvement in the performance, I think that franchise ought to move forward quite well. I don't think we're at all planning or see the world in the same way as you're alluding to in terms of wholesale outflows. I think last year, the vast majority of the outflow was to do with the wholesale retreat. We see that stabilizing, combining that with a stabilization of investment performance in GARS. I think we could see the wholesale exposure, both in the U.K. and elsewhere around the world, start to recover. Whether it's going to go back to the heydays of where we were 18 months, two years ago, I don't know. I think we're planning on seeing some sort of stability and recovery in that market as well. Clearly much more sticky and institutional. Clearly well-endorsed by consultants and a recovering picture in wholesale, I think. Okay. There's a gentleman Sorry, Andy. A gentleman. Yeah. You sure are. It is Andy Sinclair from BofA Merrill Lynch. 3 questions, if that is okay? Firstly, it was on India, which has become an increasingly important part of the valuation, but a relatively small portion of the update today. Just wondering if you could give us any update on the merger process, how things are going along. Finally, if you could say how much of a lockup there would be after the merger completes. Second point was on development expenses. You mentioned that these have been reducing year-on-year. Just wonder if you have got any guidance for that going down further in 2017. I know you mentioned some development IT costs that might be coming through. Third and finally, I realize it is a small part of the business, but on the spread risk book, you mentioned an adverse mortality experience of negative GBP 8 million. I was a little bit surprised. I thought that most annuity writers were seeing positive mortality experience at the moment. Just wondered if you could give us any update on what you have seen that might be different there. If I do India, I spoke to colleagues in India two days ago. We are waiting for the approvals to come through for the structure which would allow the merger of HDFC Life and Max Life to come through. We have always said that getting regulatory approval in India is a long, slow, sometimes torturous process, and it is living up to expectations. My colleagues in India tell me there is nothing to worry about. It is on track. Luke? Expenses in 2017, we have a lot of moving parts around investments, Stan, which is why we have not and are not giving specific guidance for any one year, and why we talk about driving cost-income ratio below 60% in the medium term, recognizing that it isn't going to be kind of a straight line reduction, and we would stick with that guidance. On the mortality point, there's a difference between the experience we've seen in the year, which was GBP 8 million negative, versus assumption changes looking forward, which was a large part of the GBP 42 million positive. In terms of the overall longevity expectations, we are, I think, in line with the market and seeing positive numbers coming through. The in-year experience is a larger function of particular policies during the year. It's amazing how a few people with high annuities or high life cover can actually shift that number within a year. Sorry, just one final point going back on India. Are you able to say what sort of lockup there would be after the merger completes? Or is it Oh, sorry. Yeah too early? There's a lockup on the 9% that we acquired to take us to 35, and I think, Luke, that lockup's three years. Yeah. Interestingly, the proposed merger structure sort of hasn't been envisaged in any of the regulations. It's actually not quite clear around the merger what lockup that will create. Once the approval comes through, assuming the approval comes through as we expect, there is then a point for us to clarify how the rules get interpreted around that lockup period. Gordon. Thanks. It's Gordon Aitken from RBC. Three questions, please. First, just to follow up on the mortality point. You're now using CMI 14. You were using CMI 13. You're already coming from a more prudent place than the U.K. life stocks who last year were using CMI 14. Now, when you move to CMI 15, that's got a four-month drop in life expectancy. Move to CMI 16, when it's published, that's going to be another three-month drop. Should we expect another positive in 12 months' time and then another positive in two years after that? Second question for Paul. Budget's less than two weeks away. What do you expect the Chancellor to say? Finally, for Keith, you mentioned that active fund management you feel will now become more important. I'm just wondering how to square that with the interim asset management study. The FCA seem to have a problem with all sorts of areas in fund management. What effect do you think that survey and the FCA will have? On the mortality, I would perhaps refer you to Jonathan after the meeting for the detail. I know some LPs just go straight to the tables. We don't. We have our own causes of death model. Mortality improvements that come through in those tables are just one of the inputs to that model. We believe that our modeling approach is prudent. If you get a sudden jump from one table to the next, it's unlikely that you'll see all that come through in our numbers straightaway because we're being prudent. I wouldn't want to say any more than that without it becoming forward guidance. On the budget, we're not expecting a huge amount. We've been signaled that they're going to give us an update on FAMR. I think on the whole area of advice and guidance, we're expecting to have some clarity as to the sales process of how we might be able to go forward with providing more information on a simplified guidance approach versus an advice approach. Other than that, I don't think we're expecting too much at the moment. On the asset management review, a couple of takes on that. I think they're quite rightly asking people to make sure that where you have active management, that, and you're charging a premium price for a premium product, you get that in place advisedly. Get that the wrong way around, you've got problems. All I can say is the contact we have continually with clients and customers is as long as you're innovating, as long as you're doing things to meet their liability and their changing needs, then you can price that appropriately. Of course, you need the innovation and the performance in the right place. If there's an increased spotlight on that, I actually have no problem at all with that issue. The other thing the asset management review is focusing on is the governance of really some of the mutual funds, pointing out that they need also to be focused on customer benefit. Now, for those that are familiar with what went on in the U.S., there was a large leap from active to passive because the DOL legislation said that you had to demonstrate a fiduciary duty of care. Actually, quite a lot of IFAs in the U.S. did that by basically moving the same way as everybody else, and that generated an increase in passive. One of the things that Trump is talking about rolling back is precisely that DOL legislation. It'll be quite interesting to see whether he does that, and actually whether that starts to have an impact in the U.K. The one thing I can say is whether it's our SICAV funds, whether it's our OEIC funds, we already have mutual fund boards in place that take really seriously their fiduciary duty of care to the customers in our mutual funds range. Yeah, it raises issues, but it's life and you need to get on with it. I actually think that the more volatility, the more clients will actually start to want, as Rod says, absolute return volatility dampening solutions. Our experience is, you can see from the GBP 19 billion we've launched, that actually clients are quite attracted by those solutions. If I could just follow up with a few words about Paul. It's not often in our sector that we have the benefit of someone on the podium with your sort of years of experience. I'm not just talking about reading about insurance or managing people who do it, but you've worked right through the heart of it. It's been a huge benefit to us. I've been lucky enough to work with you, and I particularly remember the credit crunch period where financial services companies were getting a bashing. The work that you did with the IFAs, the work you did with the customers of Standard Life, but also probably more importantly, the people, enabled Standard Life to come through that period even stronger. I think from behalf of all the analysts here, just to wish you all the best in your retirement. Thank you. That's it. Thank you, Gordon. This gentleman. Hi, Colm Kelly from UBS. Thank you for taking my question. Just on GARS, you talk about the strength of pension consultant ratings, which obviously will be a key determinant to institutional flow resilience for the fund. Can you, just in the context of one large consultant changing their rating in the second half of last year, can you give some color on how the broader ratings of pension consultants have moved through the year? Maybe just some color on dialogue that you're having with them vis-a-vis what type of concerns they have or what areas they're confident in. Thank you. Yeah. Colm? Certainly. Just looking for my list of ratings. I mentioned that we have 22 across the house. We have four- Multi-asset ratings. We had six hold ratings. We only had one downgrade to a sell last year, and that was from an important but not leading, if I can put it that way, not large investment consultant in the U.K. Clearly, that was disappointing. I think the nature of the conversations that we're having with investment consultants is ongoing. They focus on the things I think that are important, which are about people, and processes, and methodology, and risk construction in the portfolio. I think as ever, if they have endorsed a product and got clients in that product over a number of years, then they want to see a continuation of those processes and people and product. I think we've been able to demonstrate that, and that's why we've continued to enjoy their support. I think as Keith has sort of alluded to earlier, it's a little early to tell over the last three or four months that performance has stabilized. I think that sticking to our knitting, sticking to our processes is definitely to some degree being vindicated. I don't detect in any of the consultant conversations that we've had that there's any imminent change to that sort of picture. Barry. Morning. It's Barrie Cornes, Panmure Gordon. Just one question, really. I'm thinking about your cost income ratio and your potential PI claim. You had one a few years ago, as I recall, a very large one as well. Do you think the renewal going forward is going to have a material impact given the likely cost? Sorry, I missed the actual question at the end there. The professional indemnity, your renewal going forward, having had two particularly large claims. Will it have any impact on? On the cost. on your cost income ratio. The cost of insurance going forward. Yeah. Will that impact on the cost income ratio? That'll be a discussion Ian and our brokers will be having with the underwriters. Is there any co-insurance or any large excess being introduced? There is a GBP 25 million excess on the policy. Okay. Thank you. Hi. Ben Bathurst from SocGen. I was just wondering, could you give us your view on what the demonetization impact might be on your JVs in India, the life and asset management businesses there? Secondly, in the U.K., Keith, you made quite a positive comment about workplace. I think you said you thought the market was starting to play more to your strengths. I wondered, revenues have been stabilizing there. Do you think that we can think positively about revenue margins as well going forward? Maybe just give some color on outlook on revenue margins for workplace. Thanks. Yeah. If Paul takes that. Demonetization in India, for those that are not aware, was this announcement by Modi that suddenly removed some rupee notes from circulation. For those of us that traveled to India, it was quite a difficult period. You had a wodge of money that you could no longer use. Actually, I think the charities benefited quite a lot from that. In terms of the impact on the insurance business, in terms of flow, I don't think it's having a major impact. Where it will start to have an impact is that one of the real issues in India has been the constant battle against fraud, one of the things demonetization is doing is creating a competitive advantage with those that are strong adopters of digital technology, and HDFC Life is in the front of that. When you go and you look at the way in which they sell life insurance now. They will take a tablet, and if you have a PAN number, which is a national insurance number, you have a fingerprint, and it has a camera. They will get security from that. You can get an electronic signature with ID verification on an iPad, and actually, it does away with all the issues that people have had to cope with over the years. And actually, if you think about that in terms of cost benefit and cost income ratios, actually, it helps have a major improvement. As far as I can see, and I'm quite impressed with the digital suite of technology at HDFC Life, they should be a major beneficiary, and I think you will see in the life assurance market there, more flow probably going to the bigger players. Paul. The workplace one's an interesting one because I've been sitting here for quite a few years talking about the potential opportunities here. There's GBP 950 billion, I think, in DB. About 43% of that is unbundled. That means the admin's done separately to the investment. And Keith mentioned there are some inquiries in the market today. You're now starting to see companies are through auto-enrollment, a focus on costs. The cost of running unbundled is high relative to what you can get in the market today. You're paying an administrator, and you're paying an investment manager. You will start to see GBP 300 billion in DC The predictions are there'll be GBP 900 billion in DC in the next 10 years. You're going to see some big lumps and chunks moving. As far as margin's concerned, I don't think the pricing is going to change hugely, but the cost to serve is going to reduce. And I'll give you an example here. We've taken 6,000 to 7,000 schemes over the last few years auto-enrollment. They've all self-served. We have about 28 people are looking after that. Over the next two years, the work we're doing on simplification of our systems, we'll be putting around 14,000 employers through that same system, and that'll be looked after by 10 people. The movement in what we can do in how we service employers is moving well, and the demand for large employers to reduce their cost base by simplifying their pension solutions as to the way it's run, is something that the market's been talking about for a number of years, and we're just starting to see a few inquiries at the moment with companies starting to look at that. Lady up at the back. Hi, Luisa Santos from Goldman Sachs Asset Management. A couple of questions. The first one is, I was wondering if you'd give some more guidance on the development of the regulatory view of the Solvency II ratio. I think you said that a large part of that was due to approval and changes by the regulator. Also, are the sensitivities similar to those shown for the shareholder view? The second question is just on the development in the AUA. A large part of that was due to market movements. I think you said that a third of it was due to FX. Can you give us some clarity on the other two thirds of it? Was that mostly from U.K. rates decreasing? On the first point, on the regulatory view of the solvency ratio. From our perspective, I've said it before, I will say it again. We have a strong solvency ratio, but it is not something we focus on. It's distorted by a number of anomalies, such as the stronger our pension scheme gets and the more asset risk there is in our pension scheme surplus, the more the ratio gets diluted. There are a few things within it which are anomalous and end up providing a distortion to any comparison whatsoever strength between us and our peers. It has improved substantially because of the recognition of the capital that was previously trapped down within Standard Life Assurance Limited that we didn't recognize at group. Whilst the number has bounced significantly, I would steer people away from using it as any kind of measure, and certainly looking at how that measure moves over time. If you want to think about any kind of solvency strength, look at the investor view. Our strong preference is that you look at us like you would any other fee-based business. Look at our ability to generate cash, because that's what funds investment and dividends and so on. On the AUAs? The question was about the market, and if I understood Yes, correctly, the impact of currency on AUAs as well. Currency was about one third. Off the top of my head, I haven't memorized the breakdown of the other movements. That's something which we can give you a feel for afterwards. I think it's actually, the detail is pretty much in the back of the press notice in the annual report and accounts. Andy. Hi, guys. Andy Hughes, Macquarie. I guess the bit I don't really understand about the kind of comments about the 45% cost income ratio. EBIT margin guidance in SLI moderating, because if I think about SLI's assets during the year shown on page 21, sorry, the fee revenue obviously grew with markets during 2016. One of the components in there is HDFC Asset Management, which I'm expecting to grow very rapidly next year as well. Given you've launched these 16 funds last year, and you're saying that GARS outflows are going to moderate from the wholesale side, what am I missing? Why are the costs? Presumably it's the costs that are going to increase next year in SLI. It's not MiFID II, you've ruled that out. What's the kind of missing element here? I think you're missing the point. Okay. I'm sorry. That's why I asked the question. I made the point that structurally it wasn't going to go much higher, yeah? Structurally. As much as I'd love to, and I think I've said this before, it is very difficult on a six-monthly basis to control all of the elements that allow you tightly to target an EBITDA margin. What you can get yourself in is the appropriate level and territory. If you look at a 45% EBITDA margin, is it sustainable around those levels? It probably is. Actually, for our mix of business, institutional wholesale at Standard Life Investments, that's pretty close to up Well, it is in the upper quartile, if not the upper decile. The actual movements are going to depend on the blend of the mix of business and revenue yield that comes in. Will there be a significant disturbance away from that? We think not. We think it's sustainable, it will fluctuate. Hi, it's Anicia Yale from Jefferies. My first question was just on MyFolio. I think you launched a SICAV a few months ago. I just want to understand if there's any significant impact you could see from that? Or, for example, if you could tell us how flows changed when you launched your GARS SICAV after the OEIC. The second question was just on platform consolidation. Do you think there's more platform consolidation that could happen in the U.K.? If so, will you participate or do you need to focus on the Elevate acquisition? Thanks. Okay. Colin on MyFolio, then Paul on platform consolidation. You're quite right. We launched it a couple of months ago. We're in the early stages of discussions, in one particular country, which is Germany, where we see some disruption to the advisor market, and we think we can help that disruption, with a product like MyFolio, which has been very successful. Although I should emphasize, of course, that it's a MyFolio SICAV, and therefore it's available in multiple jurisdictions, Canada, Asia, all sorts of different places. I think that's a very good example of taking an existing capability, an existing sort of innovation that was some years ago now, five or six years ago, and taking it into a pooled vehicle in an efficient way in the U.K. market for the advisor market, and then thinking about taking that same intellectual capital, if you like, and rewrapping it into other products that you can then take to lots of other markets. I think that's a characteristic of our new product development activity over the last couple of years. Last year, for example, in addition to MyFolio SICAV, we had the enhanced diversified growth fund, which we put into a SICAV. We had emerging market debt unconstrained into a SICAV. We took GFS, as I was mentioning earlier, and put it into a Cayman fund. We took GFS and put it into the Hancock platform. These are multiple examples, and back to the earlier point about efficiency in the platform. These are multiple examples of where you can take a capability and rewrap it into different markets. Specifically, I think MyFolio SICAV in Germany could be quite interesting, if we can extrapolate what we've been doing in the U.K. with it. Paul, platform consolidation. Platform market. There are too many platforms out there, I suspect, to survive, and we look after around 3,000 firms, IFA firms today. 3,000 firms. I think there's about a crossover of about 300 between the Elevate platform and ourselves, that we both served. What you will see today is a number of IFAs that have multiple platforms, probably two or three, maybe have some of the old-fashioned supermarkets. They've typically had some clients on certain platforms and some on others. I think the old-fashioned supermarkets will cease to exist. I think you'll need a full Wrap functionality. I think you will see IFAs just reduce the number of platforms they're using, to use a fully functional one platform. The other market that's worth keeping an eye on is the DFM market. I think there's probably around GBP 500 billion, GBP 600 billion out there in DFMs. I think we have 71 DFMs now use our Wrap platform to market their portfolios. I think, again, the Wrap platforms do offer a lot to the market. I think if you've got a strong business with a platform, you're in a good place. If you've got a weak platform and a weak business, you're in a poor place. Probably room for a couple of questions. Yeah. Hi, David here from Santander. I'd like to know a little bit more about your strategy in the U.S. Given your earlier comments as well on the relaxation, potentially, of the regulation, how do you see that benefiting SLI? We really have, I think, a dual strategy in the U.S., where we have worked with platforms and wholesalers like Hancock. I think, Colin, we now have four funds on the Hancock platform, and we're looking at putting a couple of more on, that helps us extend. That's a really useful platform, not only to put your funds on, but as you work with these people, you get a really good understanding of changing client needs. We have extended onto other platforms as well. We have some emerging markets funds on the Nationwide platform. As well as working with wholesalers, we are also working quite hard with consultants and going direct to institutions as well, because one of the benefits of the retail and wholesale platforms is it gets your brand name out there, and that's really what the Ryder Cup sponsorship was all about. If you'd have been at Hazeltine, you'd have seen Standard Life Investments plastered all over the course. Made me quite proud, actually. What made me even happier was the fact the name recognition was getting out amongst U.S. institutions, and we ran seminars and investment seminars around that time. One of the things that's perhaps less visible is some of the flow that comes from the big institutions around the U.S. We run money for several large, what here would be described as public sector pension funds. They typically are in a combination of stuff, including multi-asset strategies, and that stuff is actually quite stable. We'll continue to work, grow, build up the Boston office. Boston office has raised about GBP 13 billion of flow over the last four or five years. It now employs 100 people. We will continue to build it out. Let me stress, we are firmly focused on taking the world to the U.S., and very firmly focused on a medium-term outlook rather than chasing flow in what's one of the more competitive markets in the world. Just two things to add, really. Keith's given you a flavor of the channel diversification, if you like, moving away from wholesale into institutional. We've won clients in the Taft-Hartley insurance sector and in the endowment and foundation. Beginnings of quite a nice spread in terms of channels of distribution. The other thing I think is that don't lose sight of the fact we now I think have nine products, investment products, live in the U.S. with U.S. investors. Clearly things have moved on quite a bit from three or four years ago when the entry point was with GARS and was with Hancock. It's now a much more diversified client footprint and a much more diversified product exposure into the U.S. Any more? No. Okay. Well, I think it just remains for me to do two things. One, thank you for coming and listening and in particular, thank you for your questions. Also to add my plaudits to that of Gordon's for Paul. I've been at Standard Life 18 years. It's been a pleasure to work with Paul. Actually, I think we were working out, we've been on the platform together here since 2008. It's been a real pleasure. I should add, Paul is retiring, he's stepping down off the board. He will be around at Standard Life for a few more months to help both me and Barry. We're not totally losing his expertise in the short run, it is the last time he'll be appearing on this platform. On behalf of your colleagues, Paul, thank you very much for all your-