Ladies and gentlemen, thank you for standing by, and welcome to the Aviva PLC full year 2020 results and strategy update. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press Star and One on your telephone keypad. I must advise you, this conference is being recorded today on Thursday, the fourth of March, 2021. I will now hand the conference over to your Group CEO, Amanda Blanc. Please go ahead.
Good morning, everyone. Thank you for joining us for our 2020 results presentation. As usual, I'm joined today by Jason Windsor, our CFO. I know I've said this at previous financial updates, but it's worth repeating, so I do hope you are all staying safe and keeping well. Before we get into the detail of today, let me start by saying how incredibly proud I am of Aviva's response to COVID. Our people have consistently stepped up and delivered beyond expectations since we sent them home to work remotely in March last year. They've continued to deliver for our customers during what I think we can all agree have been the most challenging of circumstances. And Aviva has also stepped up the support we provide to our communities, from GBP 43 million of charitable and community donations to providing support to highly deserving NHS staff.
I would like to take this opportunity to say thank you to each and every one of our employees. Turning to today's agenda, shown on slide 3. First, I will provide an update on the progress we are making towards our strategic priorities. Second, Jason will take you through the full year results. And finally, I will provide you with further color on how we are transforming performance and accelerating growth in the U.K.. We'll then open the lines for your questions. So let's turn to slide 5. 7 months ago, I set out 3 strategic priorities for Aviva, which, to remind you, were: focus the portfolio, transform performance, and financial strength. I'm pleased to report that we are making excellent progress on all fronts.
We said we would focus on the strongest businesses in the U.K., Ireland, and Canada, and manage our international businesses for long-term shareholder value. That is exactly what we have done. In less than seven months, we have announced the exit of France, Singapore, Italy, Hong Kong, Indonesia, Vietnam, and Turkey. The sales of France and Italy are, of course, the most significant steps forward in Aviva's strategic transformation. We have strengthened our capital and liquidity, materially reduced our balance sheet exposure to macro risks, and realized significant value for our shareholders. We have also made good early progress on the critical task of transforming the performance of our core markets, effectively, the new Aviva, but there is still much to do. More on this in a moment. Central to the delivery of our strategic priorities is the financial strength of the business.
We continue to benefit from a robust balance sheet with a healthy capital surplus of GBP 13 billion, cover ratio of 202%, and central liquidity of GBP 4.1 billion. These will further strengthen as we complete the announced disposals in 2021. In November, we set out our clear intent to deliver a sustainable ordinary dividend to our shareholders, covered by capital generation, cash remittances, and growth from our core businesses . Today, we are announcing a full year 2020 dividend of 21 pence per share, with a final dividend of 14 pence per share. Now, moving on to discuss our trading performance on slide 6. Despite the challenges we all faced in 2020, our financial and trading performance has been robust, with record trading results in the key growth areas. 8% year-on-year commercial lines growth.
GBP 6 billion of BPA new business sales is a record for Aviva. GBP 8.5 billion of savings and retirement net inflows. There were less than pleasing performances in personal lines, where top line fell, and Aviva Investors with weak profitability. Rest assured, we're honest, and these issues are being addressed. We are ahead of our plans in delivering GBP 300 million of cost savings by the end of 2022, with GBP 180 million achieved to date. All of which contributed to GBP 2.5 billion operating profit from our core markets and GBP 1.4 billion of cash remitted to the group, a much stronger second half performance. However, turning to slide 7, it is clear to me we need to do a lot more to truly transform the performance of the new Aviva,
This is crucial to our future success and to deliver value to our shareholders. We currently serve 18 million customers across our core markets , and our business must be built around each one of them, serving their needs seamlessly and efficiently, regardless of whether they're an individual, a business, or an intermediary. My intention is to focus Aviva on serving more of our customers' needs, especially where we have leading positions and clearly have the capabilities to win. We will be targeting growth. We have an absolute focus on execution, with the goal of building upon these leading positions and creating further value for our shareholders. As I've clearly said before, we will not be holding a capital markets day. This is not what is needed here. You may even be relieved that you won't have to sit through one.
Instead, we will be providing you with regular strategy updates and occasional deep dives into our businesses. Consistent with this, today, I will be providing an update on the U.K., our largest and our home market. In future sessions, we will provide you with updates on Canada, Ireland, and Aviva Investors... Let's move to slide 8. A key part of delivering the necessary transformation starts at the top of the house. In my first 8 months as CEO, I have made 7 appointments to my leadership team, and we are now strengthening the next layer. All our leaders have a very clear understanding of what is expected of them, from what they need to do, to how they need to do it. When I arrived, 90% of employees had no performance ratings or even simple conversations on how they were performing.
How on earth can we raise our game if we're not having honest conversations on performance? I have made immediate changes so that everyone has simple, clear, aligned objectives and understands how they are performing. This will help us to deliver and develop and retain our people, deliver on our objectives, and attract the critical talent we need into the organization. I am breaking down the silo mentality and establishing a unified, collaborative approach and culture across the business. If we want customers to see Aviva as one business capable of serving more of their needs, we need to think, behave, and act as one business. Nothing less than this will do. So now let's talk about where we are heading and our targets. Turning to slide 9. Aviva has been a recognized leader on ESG issues for many years, but we are going further.
As you will have seen earlier this week, we have elevated our ambition. We intend to be Net Zero by 2040. This is the most ambitious goal set by any U.K. financial institution. And yes, we do mean the carbon emissions we produce ourselves, those contributed by our suppliers, and the investments we make for our customers and shareholders. It is a clear direction of travel that I know our employees, partners, and customers will want to get behind and enthusiastically support. Meeting these commitments will be hard, I make no apology for that. But what became clear to me when I arrived at Aviva, is that we cannot wait for everything to be neatly laid out before we move the organization on the right direction. Let me be clear that we are not doing this just because we believe it's the right thing to do.
We're doing this because we believe it makes sound commercial sense. Ultimately, we are focused on creating value for our shareholders. Today, I am providing further clarity on how we will achieve this by setting out our new financial targets, which are set out on slide 10. We are targeting GBP 5 billion+ of cash remittances to the group over the next three years, with the ambition to grow annual cash remittances to GBP 1.8 billion by 2023. In November, we upgraded our cost savings target to GBP 300 million from the core markets by the end of 2022. Today, I am reconfirming this target and going further.
Once the GBP 300 million savings have been achieved, we will expect all our business lines to go on and deliver top quartile efficiency versus their peers, and this will give us a more stretching and dynamic goal to target over time. And I'm reconfirming our target debt leverage ratio to be below 30%. As you will appreciate, against the backdrop of ongoing national lockdowns and economic uncertainty, we are not announcing specific targets by line of business today. However, we are confident in our plans to grow the overall cash generation of the business and the targets I have just laid out. Turning to deployment of excess capital. In November, I set out our capital framework with the priorities for deployment being: debt reduction, investing to grow our core businesses, and shareholder returns.
As a result of the rapid progress we have made with disposals, I am today announcing that we will redeem GBP 1.7 billion of debt during the first half of 2021. As we promised, this accelerates our delivery of the debt reduction, and Jason will provide more detail on this shortly. Following the completion of the remaining disposals, we will then also be in a position to make a substantial return of capital to our shareholders. While we have made excellent progress in reshaping the portfolio quickly, and I think we really have, we understand the substantial long-term value creation will mostly come from returning to growth and transforming Aviva's performance. I will return to this topic shortly. But at this point, let me hand over to Jason to take you through our full year 2020 financial results and to provide further detail on these targets.
Thanks, Amanda. Good morning, everyone. I'm going to start on slide 12 and spend a few minutes to take you through what has been a very busy year with resilient financial performance, setting us up well as we move into 2021. Before I do that, I'll spend some time looking at how we're delivering against our strategic priorities. We've delivered strongly against our strategy. With the recently announced investment in France and today's announcement of the sale of our remaining Italian businesses, we've made decisive progress on focusing the portfolio. Our Solvency II position and central liquidity is strong, providing us significant financial flexibility. Today, we're announcing plans to reduce debt by GBP 1.7 billion in the first half of this year, including a GBP 800 million tender offer on our debt.
This is an important first step in delivering against our capital framework, providing a clear path to returning excess capital to shareholders. As Amanda just mentioned, we're also announcing a new three-year cash remittance target from our core businesses. This GBP 5 billion+ target will underpin growth in our sustainable dividend.... We're setting this new target with strong momentum across our core markets of U.K., Ireland, and Canada. Even in a turbulent year like 2020, we have delivered, absorbing the impact of COVID-19 and making good progress on transforming our performance. But there's a lot more to do, and we're committed to better performance. Moving to Slide 13, the sales of France and Italy are the most important steps in our strategic transformation, which allow us to focus the group, and they also reposition the balance sheet.
The transactions significantly strengthen our capital and liquidity, with excess capital above 180%, expected to increase by GBP 3 billion and central cash by GBP 3.9 billion. France and Italy were each predominantly traditional guaranteed savings businesses, and this is why the group capital release is so significant. Despite the loss of diversification benefits, freeing up capital for investment and return to shareholders. Following the sales, we will still retain around GBP 2.5 billion in diversification across the group, with over GBP 2 billion relating to our core life and GI markets, a clear benefit of our business model. We expect the transactions to complete by the end of 2021, so there is still some time before we book the benefits in our capital and cash position. Let's now turn to an important first step in the progress against our capital framework on Slide 14.
As a recap, under our capital framework announced in November, we are targeting leverage below 30% and a Solvency II working range of 160%-180%, and we target double A credit rating metrics. We've also said that we will invest to grow our core business and that capital above 180% was excess. We're announcing today debt reduction plans of GBP 1.7 billion, including a GBP 800 million debt tender offer, together with maturities and calls of GBP 900 million. This will lead to a reduction in our leverage ratio of 4 percentage points to 27% by the first half of 2021, significantly less than our 30% target. The tender will result in us having to pay a premium to par .
However, the targeted bonds are relatively short-dated, and we estimate the cost is around GBP 100 million. At the same time, we expect an ongoing annual interest saving of around GBP 100 million from this overall debt reduction. Turning to the next slide, we can see on the left that our deleveraging actions will utilize a large proportion of our excess capital above the 180% Solvency II ratio, approximately 12 percentage points. On the right, we can see that we will use a large proportion of the excess central liquidity, approximately GBP 1.8 billion. So clearly, before we take any significant further actions against our capital framework, we will need to wait for completion of the France and Italy transactions in the second half of the year. But this step today unlocks a clear path to substantial future returns to shareholders.
However, longer term value creation for shareholders must be sustainable and not just driven by capital actions. To that end, we're announcing today a new cash remittance target for our core markets, as you can see on Slide 16. This target is over GBP 5 billion of cash for the three years, 2021 to 2023. It's an ambitious target, but one that's achievable given the strong cash generation of our business and the improvements in performance we are pursuing. While we're not setting individual annual targets, we're guiding you to GBP 1.8 billion of cash remittances by 2023. This, combined with lower center cash outflows as we reduce interest and other costs, should help us grow excess center cash flow available for dividends and reinvestment.
Let's now turn to one of the levers that will help us achieve these cash remittance targets, our ability to reduce costs. Our GBP 300 million cost reduction represents a significant improvement in efficiency, but as we mentioned at Q3, we're now aiming to deliver it solely from our core markets, increasing the cost reduction from 7.5%- 9.5% of the 2018 cost base. As a reminder, it's an absolute cost reduction target, so we are also absorbing 4 years of inflation. We are now more than halfway through the program and have delivered GBP 180 million of cost savings to date. Over the last 12 months, we've seen a 4% reduction in our workforce, largely through natural attrition. We've also seen a 30% reduction in the use of more expensive contractors.
Product simplification within general insurance is also paying off. We've further migrated our IT to the cloud, and our experience with working from home will allow us to rationalize our property footprint, accelerating some savings, which Amanda will cover in a moment. While this is a good start, we have more to do as we strive for top quartile efficiency across the business. Let's now turn to the 2020 results, which have been resilient over the year with a strong second half. This is on Slide 18. Group operating profit was stable at around GBP 3.2 billion, while IFRS profit after tax improved 9% to GBP 2.9 billion. Cash remittances were much stronger in the second half, totaling GBP 1.5 billion for the year across the group, with the vast majority of this coming from the core markets.
Operating capital generation showed similar resilience, with core markets up 5% to GBP 1.95 billion. At group level, OCG was lower, primarily owing to changes to the French Life model, and these changes also had a negative impact on the group's Solvency II return on equity, which reduced to 9.8%. However, underlying ROE improved from 8.1% to 9.8%. So let's look in a bit more detail at how each of our core markets has performed, starting with U.K. and Ireland Life. Overall, the U.K. and Ireland Life operating profit was 3% lower at GBP 1.9 billion. There was good growth in savings and retirement, BPAs, and group protection, as well as a GBP 98 million higher benefit from management actions and other.
This is partly offset by lower new business profits in individual protection and equity release. We'll come back to each of these areas in more detail in a moment. Profit from Heritage was GBP 68 million lower, reflecting the run-off of the book, broadly as we would have expected. Ireland Life made a small loss owing to transformation spend and higher protection claims. Operating capital generation was stable at GBP 1.26 billion, with new business strain also stable, despite the increase in BPA volumes. We continued to focus on expense efficiency, which helped reduce costs by 5%. There's more that we can do as we pursue our goal of being top quartile for efficiency. So let's now turn to the areas that will drive quality growth.
These, as Amanda will come back to in a moment, are large and fast-growing segments of the market, where we already have leading positions and capabilities. So on slide 20, you can see that savings and retirement achieved a 35% increase in operating profit in 2020, up by a 17% increase in revenue to GBP 571 million. The cost-income ratio in the business remained high at 79%. This is a business which will benefit greatly from operational leverage, and we expect this to be more evident in future years as we grow revenue and focus on efficiency. The strong revenue growth benefits from higher average assets, which rose 13%, driven by market movements and record net inflows of GBP 8.5 billion. These strong flows were underpinned by Workplace, which added almost 250,000 new members.
Our platform also performed well, achieving GBP 3.7 billion of net flows, ranking second in the market, increasing its assets by 18% in the year. Moving on to annuities and equity release, where we had a good year, particularly in bulks, which grew new business by 48% to GBP 6 billion. Operating profit of GBP 815 million was 6% lower, as higher profit from bulks was offset by lower profits from individual and equity release in particular. In terms of profitability, BPA VNB increased by 33%. However, new business operating profit was more muted, owing to the greater impact of quota share reinsurance. We expect to continue to grow in BPAs, albeit not always at the rate seen in 2020, and the growth may be lumpy year-to-year.
We maintained our number one position in individual annuities with sales of GBP 1 billion, as demand was impacted by historic low interest rates. However, we also managed to double VNB to GBP 65 million. Equity release new business was most directly impacted by the lockdown restrictions, with sales and new business profits down. Looking forward, we expect our strong position in this market to deliver growth as people increasingly access the significant value locked up in their homes. Moving to another of our leading franchises, protection and health, with a number two position in group and individual protection and number three in health. The strength of our offering has helped drive a 2% increase in sales, driven by a record year for group protection, with sales up over a third to GBP 0.7 billion.
However, our individual protection business saw a reduction in sales of 11%, as lockdown measures impacted the housing market, as well as some of our distributors. This was the main reason for the reduction in operating profit across protection and health. Health sales were flat, with growth in corporate offsetting a more subdued market in SME and consumer. Before I move on to GI, I wanted to take you through management actions and other. The benefit of these items increased by GBP 98 million to GBP 469 million, and as I signaled at Q3, this was above our longer-term guidance of up to GBP 200 million a year. We continue to see benefits of longevity releases, although these halve compared to 2019, GBP 390 million. The benefit in 2020 stems from our detailed analysis of trends.
It is not an effect of COVID-19, the impact of which is still too early to predict. Importantly, we also benefited from improvements in efficiency, which have led to a GBP 123 million expense reserve reduction compared to an expense reserve increase of GBP 60 million in 2019. We continue to expect the benefits of management actions and assumption changes to be approximately GBP 200 million per year on average. Let's now turn to the core GI businesses in the U.K., Ireland, and Canada. As you know, this part of our business has been most directly impacted by COVID-19, so it is reassuring to see that despite a GBP 84 million impact on claims and commissions from COVID and lower investment returns, the business delivered a 2% increase in profit to GBP 500 million.
This increase in profit has been driven by a strong improvement in the underwriting result, with core improving to 96.8%. COR, based on average weather losses and excluding the impact of prior year development and COVID-19, improved by five percentage points to 95.8%.... Premiums remained stable, reflecting a buoyant commercial lines market and more challenging conditions in personal lines. So let's look at this in a bit more detail, starting first with the U.K.. In personal lines, premiums declined by 7% as COVID lockdown impacted our distribution partners, including the U.K. banks. We also exited some unprofitable lines of business. Personal lines underwriting improved significantly, partly boosted by prior year development and weather, as well as the impacts of COVID on claims frequency and other commissions.
The COR , excluding these items, also improved, but at 101.6% remains too high. We must continue to improve the efficiency of the business. Turning to commercial lines, we can see that it's part of the business which is really moving ahead at pace, with double-digit top-line growth. The business has benefited from rate hardening and high levels of retention, cementing our number one position. It was also very encouraging that despite the backdrop of the pandemic, our trust score with brokers remained significantly ahead of our nearest competitors, and even increased over the last 4 months to 95%, despite the challenges posed by business interruption claims. Let's now turn to our Canadian business on slide 24.
Within personal lines, we saw largely flat premiums of around GBP 2.1 billion, as customer relief measures and COVID-19 impacted our distributors, as in the U.K. The underwriting margin improved strongly, building on the profitability actions we initiated in 2018 and 2019, and we saw favorable weather and lower claims frequency. Our business is well positioned for the future, and we're investing in our product range, including a digital direct-to-consumer offering. Commercial lines continued to see good top-line growth, with rate hardening partly offset by focus on more profitable business. In contrast, the underwriting result worsened, mainly owing to the business interruption claims. While 2020 has been a tough year for profitability in commercial lines, the underlying performance has improved significantly, and we expect this to continue with tailwinds in the rates environment. Turning now to Aviva Investors on page 25.
Overall, the business had a tougher year, with lower revenues, and partly offset by lower costs. However, it was pleasing to see that in contrast to many asset managers, the business continued to attract assets, although some of these came from lower margin liquidity funds. Total net flows were GBP 8.5 billion, of which GBP 1.7 billion was from third parties. As announced last week, Aviva Investors France is part of the perimeter of the France divestment. We've therefore highlighted separately the operating profit for Aviva Investors France. So let me spend a moment on the crucial role Aviva Investors plays in our strategy and the growth ambitions under the new leadership of Mark Versey, who has recently taken up the reins. First, its investment solutions help millions of customers save for retirement through our workplace pension business.
Second, its capabilities will continue to be pivotal to help us grow in the wealth and annuity space. We see huge potential in leveraging our decades-long track record at the forefront of ESG and sustainable investing for the benefit of the wider group and third-party clients. We intend to build on significant success with strong momentum in real assets, liability management, and credit, areas that are close to our insurance heritage. We also know that we can become more efficient. The actions we are taking to drive efficiency, combined with future growth, will enable us to significantly improve our cost-to-income ratio. I'll touch quickly on the performance of the Managed Value markets set out in slide 26. In France, profit was stable as we saw improved product mix, which offset adverse protection claims.
However, as we indicated in Q3, OCG reduced as a result of a correction to a misapplied rule in the French life model that was exacerbated by the low interest rate environment. The impact on this on Group OCG, owing to diversification, was much lower. This impact on capital, together with the regulatory restrictions on the payment of dividends as a result of COVID, significantly impacted cash remittances from the Managed Value markets, which fell to GBP 127 million, or just 8.5% of group remittances. Our Polish business delivered a resilient performance despite the impacts of COVID, while in Italy, higher AUM, as well as favorable claims experience, resulted in profit growth. With the announcements regarding France and Italy, as well as the sale of Turkey, we're making excellent progress in refocusing the group on our strongest markets.
So in summary, as I've just mentioned, we've made decisive progress on focusing the portfolio just seven months after announcing the new strategy. We've accelerated execution against our capital framework with action on debt that will reduce leverage below 30% by the half year, and that will bring us closer to returning excess capital to shareholders. Most importantly, our business is well positioned for growth, with new cash remittance targets underpinned by further efficiencies and winning positions across the U.K., Ireland, and Canada in savings and insurance, we can deliver sustainable long-term growth. With that, I will hand back to Amanda, who will outline in more detail why and how we can win in the U.K.
Thanks, Jason. As I said earlier, we are making tremendous progress in focusing the portfolio on the new Aviva of U.K., Ireland, and Canada. In this and in subsequent sessions, I intend to set out for you our key strengths, how we will grow the business, how we will transform performance, and ultimately, how we will create value for our customers, our shareholders, and our people.... I will start today with the U.K., our largest business and our home market. In future presentations, we will provide detail on the other core markets. Okay, so let's turn to slide 29 and get going. For Aviva to be successful, we must win in our home market. We have a unique opportunity here that we must capitalize on.
I have a big vision for the U.K.: to be the leading insurer by establishing ourselves as the go-to customer brand for all our customers' insurance, protection, savings, and retirement needs, for individuals, corporates, and their respective intermediaries. Aviva is the only insurer in the U.K. that supports customers throughout their lives, from buying their first car through to starting a family, saving for their future, and securing an income in retirement. Over the next few minutes, I want to share with you my views on the strength of the U.K. business and our strategic priorities to transform performance and deliver growth. Now, I know many of you will have heard this kind of presentation many times before, and you will be skeptical. I get that. But please allow me to step you through this
Hopefully, you are beginning to see that we are delivering what I said we would, and we intend to continue to do this. Slide 30 sets out our strategy, which is ultimately centered on our customers, what they need and what they want from their insurer. From individuals to multinational corporations, they are all seeking financial security, be it saving for the future, securing an income in retirement, or protecting what matters most to them. The insurance industry has typically made the customer experience more difficult and complicated than it needs to be. But what customers want from their insurer is really very simple: fair prices, a trusted brand that delivers on its promises, excellent service, ease of access, and all of this from a company that acts in a sustainable and responsible way. Aviva understands this and can deliver on all of those points. This is unique.
On the next slide, you will see we have been serving customers for over 300 years. We are part of the financial fabric of the U.K., as more than one in seven U.K. adults save and retire with Aviva, and we already serve 15 million U.K. customers. We have a strong platform that we can develop and grow. We are the number one trusted brand. We are recognized for our excellence and leading customer service. We have developed strong digital assets, which customers are using on a more frequent basis. 5 million customers are now registered on MyAviva, and customers are buying more from Aviva, with 30% now holding two or more products with us. And as set out on slide 32, I see our intermediaries as important customers as well. They play a crucial distribution role in this market.
As the chart on the left illustrates, most of our segments are more than 70% intermediated, and this has been consistent over recent years. Given our market position, it's no accident that Aviva has the strongest relationship with these intermediaries. We are consistently ranked number one in broker surveys and won General Insurer of the Year at the Insurance Times Awards in December. What intermediaries value from us is in no different to our direct customers. They want a company with a strong brand and financial strength. They want fair prices and great service. They want their issues resolved quickly, and they want a company that's efficient and simple to deal with. And we can deliver all of those things. These strong relationships are a key underpin to Aviva owning lead market positions across U.K. insurance. Slide 33 sets these out.
Number 1 in general insurance, number 1 in workplace pension, number 2 in protection and health, a top 3 player across annuities and equity release. And these are attractive and growing business lines. Yes, I said growing. We absolutely see opportunities across our key business lines to deliver meaningful growth, and I will go into more detail on this shortly. Now, I'm aware, of course, that there has been talk about whether Aviva can truly be successful as a composite in the U.K. But to my mind, this completely misses the unique opportunity and potential that is right in front of our noses. Aviva is the only insurer in the U.K. capable of serving all customer needs. That is unique, a tremendous asset, and a platform from which we can expand and develop further.
Let me bring this to life for you with a very simple but powerful example on slide 34, one of the many examples that we can demonstrate. You can see on the slide how Aviva's wide offering means that we can meet multiple customer needs from our leading position in workplace pensions. We can offer our 24,000 workplace corporate clients broader employee benefits, for example, health and protection, as well as helping them de-risk their balance sheets through Defined Benefit solutions. For their 4 million employees who are now Aviva customers, we can offer personal insurance, health insurance, protection, and personal savings products. And their workplace pension funds and personal savings can be invested into Aviva Investors, including our market-leading ESG funds. In turn, Aviva can continue to invest in real assets, supporting the wider U.K. economy.
And that's just one example, one of the many opportunities that we have in the U.K. because of the breadth of our coverage. Now, this structure not only delivers benefits in meeting multiple customer needs, it also delivers significant synergies, be they capital diversification, benefits from economies of scale, brand leverage, or capturing more of the value chain. But, and here is the opportunity, it is obvious to me that we are not capitalizing on these strengths as effectively as we should be. Let's turn to slide 35. Aviva has not delivered the growth or the underlying performance that I think it should have done, given these strong foundations and leading positions. Our people deliver amazing service to our customers day in and day out, but it is not consistent enough.
We are hitting trading records, but they are not translating into the market-leading performance that we should aspire to deliver. Therefore, to address this, I have identified four actionable priorities to turn our unique position into a sustained advantage, improving our financial delivery, bring more customers into our franchise, and serve more of their needs. Let's step through each one of these in turn. The first priority on slide 36 is to continue to propel Aviva into the modern world, to ensure we can meet the ever-increasing customer expectations. Being efficient and simple to transact with is a non-negotiable, and we are dialing up our delivery on this. As Jason outlined earlier, we are making good progress on cost savings. You don't just deliver GBP 180 million of savings from trimming around the edges.
However, with our ambition to deliver top quartile efficiency, there is a lot more to do, and we're on it. We're digitizing and automating more of our customer journeys. As of today, we are at 50%, which is increasing our speed of service and delivering better customer outcomes. I am raising that with the ambition to be at 75% by 2023. Helping customers with a complex health claim or supporting a loved one following the loss of a partner will always involve human interaction with an experienced and sensitive Aviva representative. But the reality is, most of our customer interaction should be through digital channels. In general insurance, we have been making excellent progress in simplifying the number of products, delivering a 30% rationalization of the product estate over the past 2 years. We will go further with this.
Tackling the legacy in our IT estate is also vital. Aviva is this year celebrating 325 years, and in some parts of the organization, the IT is a bit too, you know, shall I say, heritage. We have made good progress, cutting 27% of IT applications since 2018, but we intend to go further and faster with this. And as we enable a greater level of digitization and agility across our operations, we will need fewer physical premises, with our employees able to work remotely as they service the needs of our customers. By the end of 2021, we will reduce our property footprint by 30%. All these actions will help deliver better customer outcomes, sustainable cost transformation, and bring greater agility to Aviva's operations. The next key priority, which I've set out on slide 37, is growth.
Some people tell you that the U.K. insurance market is mature with limited growth opportunities. I absolutely disagree with that, and the facts speak for themselves. There are macro trends driving customer needs over the coming years, that present material opportunities to build upon our success and deliver material growth. We will allocate our capital and target our attention towards these opportunities. For example, one in four people in the U.K. are forecast to be over 65 by 2039, presenting a massive opportunity to deliver substantial growth in our individual savings and retirement business. If we consider the BPA market, current forecasts estimate GBP 30 billion-GBP 50 billion of flows per annum over the next five years. That's a tremendous opportunity for Aviva to sustain the record volumes we have delivered in 2020, and to go further.
In commercial lines, we are witnessing one of the hardest rate markets in living memory. We have achieved good growth in 2020, 7% from rate increases and 4% from new business, but we can do more. Our leading positions in SME and mid-market set us up for tremendous success and further growth. Across personal lines, we are targeting areas of profitable growth. For example, we announced earlier this week, we are expanding our high net worth offering, with a market-leading underwriting team joining Aviva from a competitor. The outcome of the FCA pricing review will result in customers moving to stronger brands. And of course, Aviva has the strongest brand in U.K. insurance, 10 points higher than the nearest competitor. Speaking of brand, turning to slide 38.
I said in November we would relaunch, reposition, and weaponize the Aviva brand to go further and ensure we deliver this growth. Our brand needs to be built upon trust with our customers. It must build confidence and reassurance that our product offering will meet their needs at every point in their lives. In April, we will be relaunching the Aviva brand under the title, "It Takes Aviva." This will be supported by a full media campaign. We expect the vast majority of the U.K. population will view the brand at least 21 times within Q2. I make no apologies that you will be seeing a great deal of us. But awareness of the brand is just one measure. We want our brand to work harder to create a more meaningful emotional engagement with our customers. This connects to our final priority, set out on slide 39.
We must drive greater customer engagement. We must service more of our customers' needs, offer them the opportunity to more easily purchase more products from us, and to stay with us for the long term. Ultimately, we need to build an efficient, enjoyable, engaging, and digitally-led customer experience, and to do this consistently across our business. Customers want to purchase and interact with their insurers through mobile-led platforms. If we look at our own experience, MyAviva logins per user are up 45% during 2020. Our Q3 launch of Aviva Connect for our intermediaries has been tremendously successful, with 410,000 logins in January. We need to leverage these digital interactions by connecting the rich data we collect to offer customers the right products and services at the right time in their lives
To sustain our position as the U.K.'s leading insurer, and be here to celebrate another 300 years, we need to continue to lead the U.K. market with innovative products and services. So let me recap and turn to slide 14. Aviva is the only insurer in the U.K. that can serve all our customers' needs at every stage of their lives. That's a unique ability, and we need to make much better use of that than we have in the past. We will achieve this by delivering meaningful growth, simpler and more agile operations, building engaging, digitally-led customer experience, and ultimately, a transformed financial performance. So as we set out to deliver this transformation, how will we measure our success? On slide 42, I summarize the metrics and KPIs that we will focus on as we go forward.
We will be expanding our customer franchise by winning more customers, meeting more of their needs, and delivering meaningful growth. We will modernize our operations, delivering top quartile customer service and an increase in digitization. We will continue to be the U.K.'s financial services leader on sustainability, and seek to grow our share of the U.K. population, saving and retiring with Aviva. And ultimately, we will create value for our shareholders by growing the cash generation of our businesses to support dividend growth over the long term. So turning to slide 43, let me conclude. I am under no illusions that our shareholders expect us to deliver tangible improvements in our financial performance, and to do it at pace. I understand this, and all my senior colleagues understand it, too. I'm confident we have the right priorities in place to deliver this.
We are focusing our attention only on our core markets, and have announced the disposals of France, Singapore, and Italy in less than 7 months. As a result of this rapid progress, we will redeem GBP 1.7 billion of debt during the first half of 2021. We will then be in a position to make a substantial return of capital to our shareholders. I have reinvigorated the senior leadership team. This will have an impact. Our strategy is clear, placing the customer at the center of everything we do, and serving more of their needs throughout their lifetime. We will enhance customer engagement by placing digital at the heart of our business, and there are clear opportunities to accelerate growth in areas where we have leading capabilities. We have actionable plans and a way to exploit them. Transforming financial delivery is our absolute focus.
It will take time, and we will keep you updated as we make progress. Thank you for listening. I'll now pass back to the operator, and we open the lines to take your questions.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. Should you wish to cancel your request, please press the hash key. Your first question comes from the line of James Shuck of Citi. Please ask your question.
Thank you. Good morning, everybody. Two questions from me. First question, so thank you for your commitment to return capital above the 180% Solvency II ratio. I'm just interested to know to what extent the leverage target of below 30% is a binding constraint. So if you have line of sight into that number, kind of, if it can go up above that 30% threshold, if you have line of sight that it'll drop down below 30 given book value growth or future disposals? That's the first question. And secondly, just on Poland, please, would you mind giving us the own funds and the SCR, as well as the diversification benefit for Poland? Thank you.
Okay, thanks, James. I'm gonna let Jason take those questions.
Hey, morning, James. But on the first one, our strategic target for leverage is less than 30%. But that means, you know, it could, you know, in times, go slightly higher or lower than that. But that's the level that we want to be at. I wouldn't expect us to be higher than that for any prolonged period of time. I think if you're touching on, you know, in 2022, where we've got some significant maturities, GBP 1.3 billion, and if we had actions that sort of look forward and look through the redemption of those, then yes, there is conceptually, we could.
If it was very near term, and it was very clear that we had the cash at hand on the balance sheet, and we had, you know, a book leverage figure on a gross basis, we would look at the cash and the debt together. So there's no reason we wouldn't, you know, be able to do that. On the Poland own funds figure, I actually don't have that at my fingertips. It's around GBP 1 billion from memory. I'd actually don't take that as scripture. I'll come back to you with a more precise figure. I think in terms of diversification, it's a much smaller figure for Poland, given the nature of its business. There's not much risk in the Polish business compared to-...
Italy and France, therefore, there is much lower SCR in that business. And the diversification, obviously, is proportionate to that, but it's a small number of hundreds.
Great. That's very helpful. Thank you very much.
Thank you. The next question comes from the line of Oliver Steel of Deutsche Bank. Please ask your question.
Oh, good morning, and, sort of withot sounding too creepy, can I congratulate you on, everything you've achieved so far? First, first question is, just looking at the cash remittance targets you've set, I mean, GBP 1.8 billion by 2023, that's presumably based on the higher tax rates as well. It implies 10% growth from the 2020 core remittance, 10% per annum. And then on top of that, you've got lower central costs and lower debt costs. So I'm, I'm just trying to sort of rationalize in my mind, you know, how that, how that sort of interacts with the, low to mid-single digit dividend growth rate, and what you're planning to do with the excess that implicitly builds up in every year.
Secondly, you talk about sort of investment into the business, and obviously, you know, one of the sort of key topics at the moment is how much excess capital you might want to return eventually to shareholders. Can you give us a bit more guidance on what you're thinking that you'll be investing in, or indeed, the cost of that? And then the third question I've got is, are you considering buying back any of the senior debt? Because obviously, that doesn't count towards solvency.
Okay. Thanks, Oliver. I'll pick up the first two of those questions, and Jason can pick up the third one. So, yeah, on the cash targets and the growth and the generation from the core markets, and the dividend connectivity, look, I think I would like to start by saying sort of one step at a time. We're sort of in the process of resetting the perimeter, and I think we've made quite rapid progress on that. And, you know, for the time being, we're not changing our dividend guidance. We think it's set us at sensible level. Our aim is to sensibly grow the dividend per share over time by low to mid-single digits, and for the time being, you know, we really want to focus on delivery and being resilient.
We are, we are confident on the cash generation of the business, and, you know, coupled with our focus on the transformation of performance, but I, but I think, you know, at, at this point in time, we're just focused on delivery. In terms of the investment, in the business, then I think, you know, obviously, the new cash remittance targets demonstrate that we are confident about the delivery, and we will invest in the core businesses if we see material opportunities to accelerate the growth ambitions. We already have, and I think we've mentioned on various calls before, GBP 400 million annual investment costs across investment, across the group, which is now, of course, being focused on the core markets.
So we, you know, we believe that is a significant investment, and any additional investment that we would put into the business will be directly focused on accelerating growth and continuing the transformation of the business. You know, you saw earlier this week, we made the announcement around the high net worth team, and, you know, it would be in those sort of areas, really. But we're very focused on a long-term view and generating strong shareholder returns. With the disclaimer, Jason?
That's a very easy third question. The answer is yes. We published this morning the tender price across a suite of bonds, which have got varying maturities. The two senior bonds are included in that. We're looking – I think it's got a notional just over GBP 5 billion. We're looking to, as we've said, take GBP 800 million of that.
So sorry, just to save me having to sort of trawl through that document, you're saying the whole GBP 800 million you're accelerating the buyback of is senior, is that right?
No, it's the GBP 800 across a series of bonds. I think there's 6 bonds in total. The senior are 2 of them. I think there's actually 8 bonds. There's 6 priority ones, 2, 2 others in to make sure we get the volume done. It's senior is part of it, you know, and I think, you know, pro rata, it's about 20-ish% of the total.
Great. Thank you very much.
Thanks, Oliver.
Thank you. Your next question comes from the line of Jon Hocking of Morgan Stanley. Please ask your question.
Oh, hi there. Morning, everybody. Just on the first question, please, in terms of the substantial return of capital that Amanda referenced, have you got any views in terms of what form that capital return might take? You know, I think everyone's assuming it's gonna be a buyback, but would a special dividend or any other form of capital return be something you might consider? Secondly, on the GBP 1.8 billion of remittances in 2023, just to sort of follow up on Oliver's point, is that reflected in the new U.K. corporate tax rate, and is that a level which you might expect to grow from or at least maintain? Are there any sort of one-offs in that GBP 1.8 billion?
And then just finally, on the IT spend, Amanda, you referenced some of the sort of heritage IT that you've got. Are you intending to sort of re-platform the business? I think you've still got quite a lot of legacy mainframes and middleware, et cetera. And if so, is that gonna be something which is gonna be contained within the GBP 400 million of investment spend you just mentioned? Thank you.
... Okay, thanks, Jon. I'll pick up one and three, and then Jason to pick up two. So in terms of the substantial return of capital, I guess we were sort of expecting the question around this. I guess we'll get asked it a number of times today. We're not going to outline today in what form that is going to take. You know, we set out the framework last November. We stated that once we completed the restructure of the group, we'd return the excess capital above 180% to shareholders. I think we've made good progress with the disposals. We're clear on the priorities. First is debt reduction. Jason's outlined today what we're going to do.
We've used the collected liquidity so far to deliver the announced GBP 1.7 billion debt reduction. That will be completed by the first half. Then we talked about the investment in the business and the substantial return of capital to shareholders. You know, when we've got more to say on that, you know, we will, we will update you on progress, but we're not, we're not gonna be drawn today on, on what that in what form that will be. On the IT spend and the re-platforming, look, you know, I'm not a massive fan of major IT projects and re-platforming, I have to say. I think that, you know, that you can, you can, confuse the organization massively, spend a lot of money, and perhaps not even get to where you need to get to.
There are, though, areas of the businesses where, you know, we really could invest, you know, in the equity release business, in some of the systems there. We know that the digital is really our key focus. How do we simplify the journeys? Moving more applications to the cloud, we've already done some of that. We can do more of that. So these are the sort of investments that we would consider. Yes, a significant amount of that is in the budget that we've already set. You know, I don't want people to get spooked by what we are saying. What we're saying about investment is, it's to accelerate growth, and it is where we believe in areas where we believe we don't currently have capabilities. Jason?
So tax. So insurance tax is obviously extremely complex across many different features. We are, in 2023, I don't know if Mr. Sunak knew this, but we're bringing in IFRS 17, which will change substantially the profit recognition within insurance as well. So, needless to say, you know, we thought about IFRS 17, we didn't anticipate quite a big rise, but we were expecting a rise in corporate tax. Put a long story short, we don't see significant impacts of tax on the businesses, but we'll just have to work it through.
Absent tax, are there any sort of one-offs you're expecting in the GBP 1.8? Is that a new runway that we can sort of pencil in going forward?
Yeah, sorry to answer that. Nothing beyond the guidance that I gave, that we've got the sort of GBP 200 million approximately for management actions and other, that we, that we expect and we plan for. So no, no, no specials or anything, like I've indicated before.
Okay. Thanks, Jason. Thanks, Amanda.
Thank you.
Thank you. Your next question comes from the line of Blair Stewart of Bank of America. Please ask your question.
Thank you. Good morning. Good morning, all. I've got three questions, I think. The first one's really just to check on my, on my numbers, please, Jason.
You talked about pro forma capital ratio of 236. We then need to knock off, I guess, 12 or so points for the debt. So about 220, so about 40 points over the 180, which by my reckoning is about GBP 4 billion of excess capital. I just wonder, is there anything wrong in those calculations? My second question, just on growth, Amanda, you talked about accelerating growth in the core business. Is it, is that something that you're currently looking at purely organically, or are there inorganic opportunities as well that you might consider? And thirdly, I just wondered how you, how you saw Aviva. Is, is Aviva a dividend stock, in your eyes, you know, from an equity story perspective?
At the moment, you pay out 80% of your net cash as a dividend, which seems like a, you know, a pretty appropriate payout for a yield stock to me. And just coming back to some of the points around, you know, what happens to the dividend as potentially the share count reduces and as net cash goes up from the various actions. I just wonder how you saw that dynamic playing through. Thank you.
Okay, thank you, Jason. Do you want to take it?
Sure. On the first one, so we tried to set out two things here. We'll obviously give an update in Q1, once we've been through the debt tender. But the post-tax and Italy position is the most significant change to the balance sheet, and you can see the big dip in SCR from 12.8 - 10.4 pro forma. And that's, you know, that sets a new baseline. So 180% of that is obviously less than 180% of the higher figure. So you just need to make sure you just sort of work that through when you do your model.
So if you think of the absolute reduction in debt as a percentage, it's gonna be slightly higher off a lower SCR base, the 12 points that I'm indicating there. But I think broadly, your numbers are right, you know, in terms of the proceeds and the debt reduction.
On your second question around growth, and I think you spoke about inorganic. I mean, look, we do see tremendous opportunities to grow Aviva. I think, you know, my confidence has been improved by, enhanced by what we've seen during 2020. Commercial lines, we can see that the market is hardening there, and we've got a really key position. We've seen, you know, GBP 8.5 billion of savings and retirement net flows. I think that's a really, really strong performance, and we know that that would, you know, that, that is going to be, there's a real demand there. GBP 6 billion of the BPA new business. So, you know, we see that the macro trends do support our growth opportunities, and we believe that we've got some capabilities that can meet those.
On your, your sort of inorganic... In the past, I think we've said, "Never say never," to that question. I think as we seek to transform and grow the core business, whilst inorganic activity is not currently a priority for us, you know, we will be thoughtful about where M&A could enhance our capabilities or accelerate our strategic development. But to just reassure everyone, you know, this will be a high bar, and anything that we do must enhance value for our shareholders, and it's a one step at a time. You know, we've got, we've got a lot to deliver. On your question around, what you see, you know, whether I see it as a dividend stock, I mean, obviously, dividend is very important for our shareholders. We know that.
I guess we'll let you decide how you define it, but we are focused on cash generation and growing the customer franchise. That's our key areas of focus.
On the 80% payouts as an appropriate level?
I think, Blair, we've not set ourselves firm targets for that. I was at pains in November to talk about the new DPS, which we've delivered today, the GBP 0.21, and we've set the low to mid-single digit growth rate. So I think, think of that as, as we go through the transformation, you know, that, that's the sort of guidance that I wanted everyone to take away. Earnings coverage in 2020 is clearly quite depressed, you know, relative to that, and, you know, we're expecting that to deliver, but it's sort of one step at a time as we start to think about how we, how we develop from here.
Yeah, I appreciate that, and, you know, I won't push the point, but I do think that low- to mid-single-digit dividend per share growth is the anomaly here. And I think it's already come out in a couple of questions. It doesn't make sense given everything that you're doing. But I do respect the fact that you want to be given time to kind of do what you're doing.
Thank you.
Thanks, Blair.
Thank you. Your next question comes from the line of Andrew Crean of Autonomous. Please ask your question.
Good morning, everyone.
Morning.
Three questions I had. The first one is, I just wanted to dig a bit more on the debt. Obviously, you're looking to pay down GBP 1.7 billion of debt this year. You've got redemptions of GBP 1.3 billion coming up next year. I'm just wondering how much of that is you're going to be tendering this year, and whether you're intending to redeem everything next year, without refinancing, in order to increase the amount of debt that you pay back as you equally reduce the capital through buybacks. That was the first question. Second question is, on slide 13, where the SCR is falling from GBP 12.8 billion - GBP 10.4 billion, could you tell us what the loss of diversification was on the French and Italian businesses?
And also, in the final bullet, you said that, of the GBP 2.5 billion of remaining diversification, GBP 2 billion is from core markets. Does that mean essentially that there's about a GBP 500,000 potential loss of diversification if you sell Poland? And then the third question, a simple one, the legacy book, U.K. legacy book, would there be any intentions to look to dispose of any part of your legacy, U.K. Life business?
Okay, thanks, Andrew. I'll let Jason pick up this question, and I'll pick up the third question. Jason?
So, yeah, morning, Andrew. Thanks for that. So, on the side, the 2022 bonds are in the tender offer. We are not indicating what we'll do more in 2022. It's the wrong thing to do around those bonds. I think our clear statement is to take the GBP 1.7 billion down, and that's the action that we're announcing on debt. You know, we have got some flexibility in 2022, you know, to lower debt. You know, there's quite a few things that need to happen between now and then. On diversification, there was a significant diversifying effect of the French deal, which was a, I think, a feature that we, we've talked, you know, to people around, you know, over a period of time, approximately GBP 1.5 billion for France Life and GI.
I talked in the past about GI, and I've talked in the past about International Life , but, you know, if you take the French business, it's around GBP 1.5 billion. Italy, you know, much, much smaller than that. You know, lower percentage. I can't remember the exact number, around GBP 200-300 million in the Italian SCR. I think of the remainder, it's not all Poland. Other businesses in there, there's China, there's the stake in Singapore, there is Poland, and it's not just the GBP 0.5 billion. The-- this is a little bit of trying to say exactly how it would rerun through the model once we took things out. You know, Poland is a piece of that, but it's certainly not anything like GBP 500 million.
I think the SCR in Poland is only around GBP 400 or 500 million in total.
On your point around Heritage, no, that... It's a key part of the group, and we're focused on serving the many customers that we look after there
So that's core?
Yes.
Okay, thanks!
Thank you.
Thank you. Your next question comes from the line of Colm Kelly of UBS. Please ask your question.
Yeah, morning, and thanks for taking the questions. Most of mine have been asked, but I have one remaining, just on the returns and growth for the core business. So we've seen good progress this year on the underlying Solvency II return on equity. It's increased 1.7 percentage points to 9.8%. It's still a bit below the 12% you're targeting by 2022, so is that still a key target for you? And then related to that-
... I think one of the main levers you've stated to achieving that target was active capital allocation, higher returning segments, which makes a lot of sense given three quarters of the capital you allocate to the core market is the U.K. Life , which is generating an underlying return of 5.1% this year, whereas the other business divisions are generating 3-4 times that, even within a COVID year. So if I look at the mix of capital between 2019 and 2020, that mix across the core businesses hasn't really changed much. So it feels like that's, you know, you've made a lot of progress on cost saves and growth, but it feels like maybe the active allocation to higher returning segments is one of those areas where there's a bit more to do, that you talk about.
Can you articulate a bit more, the actions you're taking to amplify that capital allocation to higher returning segments within the, the target of 12% return on equity? Thanks.
Sure. Thanks, look, you're right, we've made a significant step forward in the underlying return. I know the U.K. Life business, which this metric can sometimes certainly not flatter, has made quite a significant step forward. It's gone from, as you say, from 4 up to 5.1% underlying. But there are, you know, there's the other actions, so it does beat the cost of capital at the overall level. I think the 12% figure that you mentioned needs to be retuned following the reshaping of the group and the reshaping of the balance sheet. And, you know, if you think of U.K. Life being a much higher percentage, you know, that is a lower return, much higher in terms of cash flow.
It's good quality, and it's more predictable, and it's long dated. You don't get, you know, over a period of time, the accounting almost doesn't let you book, you know, that level of return, you have to, you bring it forward. So we will be recalibrating that, and it's not going to be a size 12% for the group in the future.
Okay. And then in terms of allocation of capital to higher returning segments, is there any, anything you can say around taking actions around that? Because that, because it was one of the, the levers you stated to, to getting that, return on equity up.
Yeah, sure. There's a series of sort of more major actions, for example, around cost reduction, which does, you know, drive. There is a more significant piece of work around how we use reinsurance, particularly on BPAs, which allow us, you know, to improve return on capital. And then there's a whole suite of micro actions, as you would imagine, across fine-tuning distribution channels, fine-tuning, you know, different product pricing structures, and dialing up general insurance, which is a higher ROC business. And, you know, we've done that pretty well in terms of commercial lines in 2020, and we expect that to continue in 2021. So we will make sure that the GI business has more than enough capital to make sure that it can continue to grow.
Okay. And just to follow up briefly, I mean, is there any plan to withdraw some capital from the U.K. Life segment and recycle it into those other divisions to, to accelerate that?
I think, you know, you see the sort of heritage runoff as effectively doing that, you know. It's... Amanda mentioned the question a moment ago, but that is producing capital each year. We take that out of U.K. Life, and then we sort of allocate it out as the dividends or to growing the other segments, you know, across the board. But we are trying to grow the U.K. Life business at the same time. So allocating the capital into annuities and protection and savings and retirement, you know, these are cash generative, but we don't want to pull out more capital than they make. We're going to continue to see some growth potential in those segments.
Okay, excellent. Thanks a million.
Thank you. Your next question comes from the line of Ashik Musaddi of JP Morgan. Please ask your question.
Yeah, thank you. Hi, Amanda. Hi, Jason. Just a couple of questions is, first of all, on the cash outflows from the central liquidity. Basically, if I look at your last year, it was about GBP 630 million of cash outflows, which is external debt, internal debt costs, some other incoming as well. So how do we think about that? I mean, the reason I'm asking is basically, I'm just trying to square up the cost-saving number into this central spend, as well as your plan to reduce internal debt, so how that will work out? So that would be the first one. And secondly is U.K. P&C results were pretty strong in second half. Any thoughts on that would be great.
Lastly, as you mentioned, I mean, the manage for value businesses, Poland and other JVs. If you just remind us, what are these other JVs? I remember India is one of them, but any other JVs that you would flag would be great. Thank you.
Thanks. Jason, do you want to pick up the first one?
Sure. I think I got the question. I mean, the cash outflows, you know, are gonna come down for sort of three reasons. First and foremost, lower interest costs, and I flagged, you know, the GBP 1.7 billion relates to about a GBP 100 million run rate reduction. Second, you know, lower central spend as we reshape the group, we'll be taking that down. And third, you know, repayment of the internal loan. At the moment, we're paying off GBP 50 million a year, and that comes out of that. If we make a significant repayment following the French transaction, we wouldn't have to do that. So that would be a sort of GBP 50 million upside to those outflows. So I think that's what I would say on that. In terms of...
I didn't quite get the question on P&C reserves. Sorry, Ashik. Could you say that one again?
Yeah. I mean, if I understand correctly, I think your second half, P&C results in U.K. was pretty strong compared to first half. Obviously, first half was more impacted by-
... by COVID reserving, but what, what was the driving factor of second half? Is it like just frequency benefit without any, COVID losses, or was there anything other major positive as well, like reserve releases?
I mean, yes, I think in the second half, the business continued to grow, so there's good rate increase in there. There is more benefit from frequency, and obviously, no COVID claims are coming in the second half of the year. But we also saw the impact of, as Jason mentioned earlier, the distribution, some of the banking distribution not being open, which has depressed the revenue in personal lines.
Okay. Okay. Thank you.
On your second question-
The JVs.
The JVs. The JVs that we currently have are India, China, and obviously, we have a 25% stake in Singapore, which we announced back in September.
Okay. Very clear. Thank you.
Thank you.
Thank you. Your next question comes from the line of Gordon Aitken of RBC. Please ask your question.
Good morning. Thank you very much. Three questions from me, please. First, on post-Brexit Solvency II reform. So with the ABI published their response last week, what would you do differently if the risk margin reduces? Secondly, on illiquid assets backing annuity liabilities, will you just tell us a bit about what illiquid assets you're keen on and less keen on? I mean, you particularly mentioned infrastructure. In particular, it seems that the U.K. government is very keen for help in ticking its climate change box. And finally, on cross-selling. On slide 34, you talked about cross-selling, and I think somewhere else in the presentation, you mentioned skepticism, and we've heard the cross-selling opportunity from your predecessors and indeed other U.K. insurance CEOs for at least 20 years now.
And if I think about one of the things you showed on the slide, I mean, bulk annuities is very, very price driven in terms of sales in that market. I mean, is it feasible that you would win deals purely because maybe you had a relationship on workplace DC? And maybe what metric will you point to in the future so that we know that cross-selling is actually working? Thank you.
Right. Okay, thank you. I'll pick up the question around the ABI, and Jason can pick up the more specific, specific one around illiquid assets, and then come back to me on the cross-selling. So, yeah, as far as the ABI stance on Brexit, and Solvency II review, obviously, we're completely aligned with the ABI on that. You know, our priority is the rules absolutely reflect the specific characteristics in the U.K. market, which will allow us to provide our products to, you know, customers and value and long-term stable investment in the U.K. So we would like a wider range of assets to be eligible, eligible for the matching adjustment.
You know, for example, by changing the criteria with assets from fixed payments to predictable payments, this increases our scope to invest in long-term infrastructure and climate transition, as you've quite rightly pointed out. We believe that the design of the risk margin should be changed to reduce its size and volatility, and that would support the provision of annuities to business and retail customers, giving them more certainty in retirement. On the cross-selling, you know, what's different? Well, you know, quite a number of things are different. I know, you know, people have talked about this for the last 20 years, but in the last 20 years, we did not have the digital capability that we have today, and we did not have the data capabilities that we have today.
So I think that makes it a lot easier for us to know and understand our customers and understand, you know, what are the most relevant products for them at the time of life that they're at. That is unique to Aviva, because we will be able to have that information across a number of product ranges. In terms of what you said about what will we measure this on, it will be on the multi-product holdings, so we will be you know, that will be something that we will be holding ourselves to account to.
Whether you say it would be feasible to win a BPA deal on the back of getting, you know, more customers, I think the example I used was around workplace pension, and what we do know for a fact is those customers that have workplace pensions with us, and that is the corporate customers, they are extremely keen for their employees to have access to other products, whether they be personal lines or health or protection products. And we've also... You know, we know from our own numbers that those customers are more likely to buy an Aviva product than not. So, you know, we are really quite excited about that. And, you know, those conversations, they're more dynamic. 10 years ago, we would not have been having those conversations, and today, that we are.
Jason, on the-
Sure. On the liquids, 2020 was very different to 2019, as you might imagine. We saw, you know, it much harder for projects to get completed, and the funding did slow down. We filled up the gap with some significant purchases of corporate bonds in 2020, but we expect 2021, 2022 to return to the sort of levels of infrastructure and PFI type origination that we've seen historically. So that's both U.K., and we've sort of dipped our toe in the water in, from the balance sheet perspective in Europe and in North America. We, you know, we started to diversify there.
You know, that as a capability for Aviva Investors, you know, is a key focus, both for the balance sheet of the insurance business, but also for third-party clients, and we continue to see, you know, good growth across real assets. In terms of the new announced infrastructure bank, I think we are not totally clear what that is. It feels, although it wasn't said yesterday, that's a bit of a replacement for EIB in the U.K.. EIB was obviously a big participant in a number of these fundings, so sort of step one. Step two, you know, maybe can produce, you know, more funds for equity-type investments in projects. You know, I think we tend to have much higher appetite on the debt side, just given the annuity business.
But, if you know, they can come in and do that, I think that would be, that'd be helpful.
... Thanks. I'll just follow up on the first question. Would you reduce the amount of longevity reinsurance on new business if the risk margin comes down?
Possibly, but it has come down a lot, it would be the simple answer. I've answered this before. It will come down if rates go up, so that will make a difference, but it would have to be, you know, a material reduction. It's so disproportionate, these are the levels of interest rates, then the level of reinsurance is attractive. It gives us capital benefits and obviously helps us manage the risk though. I sort of await, you know, developments, but I'm not expecting it to come down enough that it would fundamentally change our reinsurance strategy.
ABI saying they're basically 75% reduction, you think that's optimistic?
Well, that's sort of the consultation that's gone in. I actually don't know, to be honest, as to what it could be, but that's... You know, that would be a big reduction. And you know, the regulator has said, you know, that they expect capital overall, you know, not to change dramatically. So if they took away on the risk margin, took away the requirement on the risk margin, you know, you don't know what could come back on the other side. So I think we are pretty cautious on developments in this regard.
Okay. Thank you.
Thank you. Your next question comes from the line of Steven Haywood of HSBC. Please ask your-
Thank you very much, and good morning.
Good morning.
Particularly on the GBP 800 million tender for the debt instruments, can you tell me whether you were considering a fair price market tender for the preference shares or not, or if these are sort of off the table now and can't be redeemed? Secondly, can you give an update on the potential disposals, and the Italian disposal for the amount of assets under management that may disappear from Aviva, from Italy and Poland? And also, you know, where are we standing now on the Polish bancassurance agreement with Santander? And then finally, we obviously saw a big uptick in the management actions at the end of 2020 from the previous guidance.
Do you have any plans or guidance you can share about 2021 management actions, whether they would be slightly higher or excessively higher than the previous guidance? Thank you.
I, I'll pick up the press on the preference share. I think as Jason has said previously on this, this is not a file that we have or are planning to reopen. And we won't say any more on that. I mean, Jason, do you want to pick up the-
Yeah. So I mean, the prefs, just to be clear, are not part of the debt tender, right? We're tendering for institutional bondholders, possibly in the prefs, somewhat institutional, somewhat retail. This is not part of that transaction. In terms of the disposals you call them, Italy, I don't think very much of the assets is managed by Aviva Investors at all. So what is managed by Aviva Investors is in the Aviva Investors France, just sort of is incorporated in that AUM figure and that profit figure that we provided you, as well. Aviva Investors Poland has got a subsidiary actually in the Polish business. It's not very big, but it does manage a lot of the assets itself.
I mean, I'm not going to comment on bancassurance , you know, with Santander, other than to say we have very strong agreements, and we have a very strong relationship, you know, with them. In 2021, I don't have anything further to say at this point other than the general GBP 200 million guidance that I gave, which is an average. You know, I can't predict, sitting here in March, you know, what we'll do on things like longevity, which we tend to look at annually, and we tend to do that in Q4, so... But, across the board, you know, we don't embark on the year with lots of prudence. You know, we do try and keep up with events, but we also expect to find some opportunities.
Okay. Thank you very much.
Thank you. Our final question comes from the line of Larissa van Deventer of Barclays. Please ask your question.
Thank you. 2 quick questions from my side. The first one on bulk annuities. You did have a very strong showing in 2020. Do you have any targets, either related to volumes or, margins, that you would like to write in the bulk annuity space? Basically, are you gonna make a strong play in bulk? And the second question is on cost reduction. On slide 17, you detailed some of what you've done and some of what you're likely to do. The first question is, does that include the lower debt? And the second question is, where else should we expect the remaining GBP 120 million to come from? Is it mainly IT, or are there other aspects we should consider?
Yeah. Okay. So, on BPA, I think, as I said, we, you know, we do see the BPA market as an important market for us, and one that we will seek to growing. We won't be giving specific targets on that. As I also said, we're not gonna give line of business targets today. In terms of the cost reduction, it doesn't include the lower debt costs. The GBP 300 million includes the operational improvements across the business, and they come from areas, you know, as we've spoken about, more simplification, more digitization, legacy platform reductions, product simplification, yeah, you know, and also opening the doors, you know, as we grow the savings and retirement business, improving expense ratios. So, you know, those should reach the upper quartile target that we mentioned.
Thank you.
Okay. Thank you very much, everyone. Have a good day.