Abrdn PLC

LSE:ABDN

Earnings Call Analysis

Revenue Rises Amidst Strategy Shift and Buyback

In the first half of 2023, operating revenue grew to £721 million, marking a 4% increase, while expenses rose 2% to £594 million due to acquisitions. Excluding acquisitions, revenue would have dropped by £77 million (11%) and expenses would've been 5% lower, reflecting cost savings within Investments. Adjusted operating profit hit £127 million, up 10%. The cost/income ratio improved slightly by 1 percentage point to 82%. Notably, after rising interest rates and share buybacks, adjusted diluted earnings per share (EPS) surged by 68%. Moreover, they're on track to save £75 million within Investments. Enhanced by multiple revenue streams and higher net interest margin, adjusted operating profit in the Adviser and Personal segments increased by 29% and £54 million respectively, with notable efficiencies in the Personal vector as its cost/income ratio improved by 28 percentage points to 60%. Capital surplus grew by roughly £300 million, buoyed by disposing of stakes for a capital impact of £576 million. As an expression of confidence in their strategy and commitment to delivering shareholder value, the company doubled its share buyback program from £150 million to £300 million.

A Story of Resilience Amidst Market Challenges and Strategic Growth

As we gathered for abrdn's 2023 Half Year Results Presentation, it became clear that the prevailing challenging market conditions hadn't stifled the company's strategic vigor. With geopolitical risks, inflationary pressures, and industry dynamics in asset management wielding influence, abrdn showcased a deft control over its business model, bolstering its resilience.

Strategic Simplification and Perseverant Profit Performance

Not one to be bogged down by market adversity, abrdn embraced simplification, merging funds and upgrading technologies to enhance client experiences, while also realizing gains from capital management practices like strategic sell-offs. These efforts not only streamlined operations but also supported a declaration of an additional share buyback program, reflecting confidence in the company's direction.

Investments Division: Outperforming the Odds

The Investments business, under scrutiny given the industry's overall outflows, stood firm with a respectable net inflow in the second quarter and strong sales traction in specialist funds. Notably, the partnerships with Phoenix yielded fruitful results, and efforts to consolidate and rationalize product offerings signaled conscientious trimming for efficiency and profitability.

Fixed Income and Alternatives: The New Frontiers of Growth

abrdn's fixed income segment emerged as a beacon of growth, wielding assets of £125 billion and showcasing robust investment performance metrics. Furthermore, the alternatives franchise, including standout performers in listed real estate funds and burgeoning private credit strategies, continued to draw attention with significant new business wins, underpinning the company's diversified strength.

Cost Management and Profit Uplift in a High Inflation Environment

Cost management remained a central theme, with the company marching towards its ambitious cost saving targets, aligning products with current market demands, and reducing front and middle office headcount. Despite the challenging high inflation and high interest rate environment that adversely affected customer savings and investments habits, abrdn's Adviser and Personal verticals demonstrated robust profit growth and operational efficiencies.

Personal Division: Harnessing Change for Transformation

The Personal business vector marked a transformative half-year, achieving sizable gains in net operating revenue and operating profit, aided by base rate increases and strategic shifts such as the disposal of non-core businesses. This segment's update underscored abrdn's agile transformation efforts and hinted at an ambition to integrate more closely with its Investment colleague to offer broader solutions to clients.

Consolidated Financial Outcomes and Capital Allocation

The cumulative financial narrative of the first half of 2023 revealed a sturdy 10% uplift in adjusted operating profit, powered by the ii contribution. With an improved cost/income ratio, enhanced earnings per share, and commendable capital generation growth, abrdn outlined a firm capital position ready to seize value-creating opportunities and extend shareholder returns.

Outlook and Strategic Positioning

As the headwind-laden landscape persists, abrdn's focus remains undeterred on empowering its 3 investing businesses, optimizing capital allocation, and harnessing synergies for sustainable growth. With a capital generation that reflects improved margins from liquid assets and strategic collaborations with entities like Phoenix, abrdn's story is as much about weathering current storms as it is about navigating towards a thriving future.

Earnings Call Transcript 2023-Q2

[Stephen Bird, CEO]

Good morning, everyone, and welcome to abrdn's 2023 Half Year Results Presentation. It's great to see those of you who have joined us here in our new offices in London and welcome also to those listening remotely. I'm delighted to have our Executive Leadership team with us. We'll be taking you through our strategy and progress. Ian Jenkins, our Interim CFO, will take you through the financials. And then we'll open up for questions. At our full year results in February, I described 2022 as one of the hardest investing years in living memory. Well, 2023 has been a continuation of those challenging markets. We're facing geopolitical risks, stubborn inflation, driving interest rate rises, emerging credit risk and the evolving industry dynamics in traditional asset management such as the continuing growth of passive and index investing, the democratization of technology and finance and the rapid expansion of alternatives. Against this backdrop, we are focusing on the things we can control in building a stronger business model. Our first half results for 2023 demonstrate the resilience that we built into the group. We've delivered a 4% increase in revenue and a 10% increase in profits thanks to the six months contribution from ii. We're committed to reducing costs as a percentage of revenues by streamlining and refocusing on our areas of strength in the Investments business. We are on track to achieve our net £75 million cost reduction target with £30 million delivered in the first half.

We've made significant progress in simplifying our business, closing or merging 43 funds bringing the total to 101 out of an upsized target of 143. In our U.K. savings and wealth businesses, we've implemented two critical platform and technology upgrades to enhance the user experience for clients; a complete redesign of ii's front-end technology and a full platform upgrade within Adviser. We've also been diligent in managing our capital. We sold our remaining stakes in HDFC Life and HDFC Asset Management during the first half generating £535 million in cash and further streamlining our group structure. The discount on these transactions were kept tight at around 1%. As promised, we've continued to return excess capital with the initial £150 million buyback nearly complete and today, we're announcing an extension of this program to a total of £300 million. With the shape of the group now settled through the acquisition of ii, our focus is on the Investments business. We've made strategic moves such as the acquisition of U.S.-based Tekla Capital and the sale of a noncore U.S. private equity business. Changes in our portfolio will seek to capture the most attractive mega trends that will shape the future of the investment industry with health and biotech being one of them. Tekla Capital is positioned at the forefront of this trend and strengthens our closed-end fund business where we are already a Top three global player with £27 billion of assets once the Tekla deal closes in the second half. You can expect to see us execute against strategic bolt-on investments like this as we seek to grow and strengthen our Investments business.

As you're aware, we're transforming abrdn from its traditional insurance and asset management heritage to a customer-centric investing business fit for the future. We have positioned ourselves for growth across the three businesses; Investments, Adviser and Personal. Our diversified model caters to our clients' needs and gives us many more ways to win their trust and help them be better investors. In another challenging year for investing; Investments flows, Personal and Adviser have offset the reduced revenue within investments. ii has already surpassed the original investment case that we set out at the time of the deal in 2022 and it has much more growth potential ahead of it. Together, Personal and Adviser accounted for over 85% of abrdn's adjusted profits of £127 million in the half. Our investment to achieve this diversification has improved our operating margin mix as platforms have a considerably lower cost to serve than asset managers. We've had a busy year so far making significant operational and strategic process across the group as you can see here on the slide, Focusing on our Investments business, we've continued to move swiftly taking decisive action that was necessary to achieve a more satisfactory level of profitability and to establish a solid foundation upon which we can grow.

Looking at our strategic and operational progress over the last six months, we've built a team of talented and driven leaders as we simplified and embedded our structure and we continue to attract top talent to the company. René Buehlmann has been appointed as sole CEO of Investments and Peter Branner has joined as Chief Investment Officer. Xavier Meyer was promoted to Head of U.K. and EMEA as well as Chief Client Officer. And we recently announced that Jason Windsor will join us as Group CFO in October. The Tekla acquisition exemplifies our commitment to investing in solid businesses with strong track records of growth. The Tekla team has an impressive 20-year record in specialized health care and biotech thematic closed-end funds with $3.2 billion of assets and $32 million of revenues. The Tekla investment team will join us and support the launch of new products into this high growth theme.

Now I'll hand over to the Vector CEOs, who will discuss their progress and future positioning beginning with René.

[René Buehlmann, CEO, Investments]

Thank you, Stephen. Good morning, everyone. As this is my first results presentation since taking on the expanded role of sole CEO of the Investment business, I'm glad to be here in person not somewhere back on the screen anymore. The current environment is challenging for everyone with the industry seeing well over £200 billion in outflows from cross-border mutual funds in the first half year of this year. I want to begin outlining how I think about this business. Firstly, how are we performing in terms of flows compared to peers? Secondly, are our capabilities and product pipeline competitive to succeed? Thirdly, are we improving our overall profitability and quality of earnings? Starting with the flows. Our sales traction is in line or even outperforming the industry in some areas. The slide shows you our gross sales, redemptions and net flows over the last 2.5 years excluding the historical Lloyds withdrawals and liquidity flows. We have maintained consistent gross inflows reaching £22.1 billion in the first half. Our largest gross inflows have been in specialist funds in our key areas of focus. £750 million gross inflows into our China specialist equity fund, which has a strong long-term performance and the recent Morningstar Silver rating; £300 million gross inflows into our APAC Sustainable Equity Fund; and £350 million gross inflows into our Euro Corporate Bond Fund.

Our Phoenix partnerships continues to produce results with £3.2 billion of gross inflows in the first half year from the bulk purchase annuities business and we expect this to continue. We are committed to Phoenix as our largest client. The strategic alignment between our firms is probably fair to say has never been better. abrdn is the leading beneficiary of Phoenix bulk purchase annuities and the new open business growth, both areas that are strategic priorities for Phoenix and where they continue to make strong progress. Legacy products, including GARS, contributed to over £500 million of outflows in the first half. As part of our continuing rationalization, as Stephen mentioned, we have announced merging the residual GARS assets into our top quartile diversified asset strategies. Total net outflows from Investments, excluding liquidity, were £5.7 billion in the first half or 1.6% of opening AUM. However, and I want to stress that, we returned to a net inflow of £200 million in quarter two evidencing our solid sales teams and client relationships. So in summary, we are selling well and we're defending our position effectively in a highly competitive market. Now if we move to our offering shelf. At our full year results, we have outlined our strategy to reorganize the Investments business into public markets and alternatives. We have a very robust pipeline across these core strengths and we're confident in winning new business as we deliver value for our clients and the firm.

In public markets, our most significant current growth opportunities lies in fixed income where we manage £125 billion in assets, including assets managed for Phoenix. Fixed income is a core competency rooted in our heritage and with the recent market shift towards fixed income as interest rates rose, our pipeline is encouraging. This has not been the case quite frankly for many years. Our confidence in our capabilities here is demonstrated by our investment performance with 77% outperforming over three years. In credit, 99% of our assets are outperforming over three years. Key funds like emerging market debt, euro high yield and our new climate transition bond were top quartile performance in the first half year. With the current high interest rate environment, we therefore see strong demand in credit where we have a robust pipeline. We have recent mandate wins in emerging market corporate debt and euro investment grade bonds that are yet to be funded. In specialist equities, we are focusing our established strengths; Asia, emerging markets, small and midcap, equity income and sustainability. 78% of our emerging market assets is outperforming over three years. We are also aiming to widen the distribution of our top quartile global emerging markets income capability and we believe our strong sustainability credentials position us particularly well in this area of client demand. Now our £81 billion alternatives franchise has scaled and has recently undergone a repositioning to better serve client needs. In a market with variable performance, our listed real estate funds performed particularly in quarter two. So even as we restructure, we continue to win notable new business such as the notable £4 billion allocation from the Border to Coast Pensions Partnership, which also has not yet funded.

As a matter of fact, real assets make up the majority of our won not funded pipeline, including within our real estate multimanager business. As a leading player in the logistics space through Tritax, we manage two of the largest listed logistics funds in the European market. Also our private credit strategies amounting to £8 billion of AUM have built a very strong demand pipeline, including commercial real estate debt, fund finance and tailored opportunities with insurers. To help drive this business forward in particular, we have recently appointed a new head of private credit too. Our alternative investment solutions business includes our U.S. commodity ETF range with £5.7 billion assets, our fund of funds and hedge fund indexes and our emerging digital asset capabilities. In the first half, we have also reached a milestone in our digital asset strategy with Archax creating tokenized representations of interest in our abrdn Sterling flagship liquidity fund on their platform, which will actually start trading today, pretty good timing I have to say. As part of rationalization of our strengths, we have also reviewed our private equity business, which is largely a fund-of-fund business and as a result, we have recently announced the sale of our U.S. private equity assets. So I hope these examples highlight for you the solid product and performance foundations that we are establishing and will help us to grow our business going forward.

Now if we move to costs. As we pursue the simplification necessary to improve our cost/income ratio, we are refocusing our business on areas of strength through noncore exits and our ambitious fund rationalization program, which is on track. We recognize that there is still significant work to be done to address performance headwinds in subscale parts of our business and we are taking appropriate actions. Let me illustrate this with two examples. We have consolidated our developed market equity strategies to focus on delivering in four areas of client demand: sustainability, income, small cap and thematics. This realignment helps our teams to concentrate on equity outcomes where clients continue to value an active approach. We've also reshaped and refocused our multiasset offerings, an area of historical strength for abrdn. Our goal is to create products that meet today's market needs. As more wealth and saving responsibilities have devolved to private individuals or their advisers, there is a demand for outcome-oriented model portfolios, which we view as a key offering going forward. Our new CIO, Peter Branner, will play a significant role in this process for sure. As Stephen mentioned, we are on track to deliver our net £75 million cost saving targets. We have achieved £30 million of savings so far partially driven by a 9% reduction in front and middle office headcount. Additional actions in the second half are on track to deliver the full £75 million of savings this year. And we don't intend to stop here and are actively exploring further opportunities to simplify our business and improve efficiencies.

I will now hand over to Noel to discuss the Adviser business.

[Noel Butwell, CEO, Adviser]

Thanks very much, René, and morning, everybody. Well, despite a challenging market given the impact of the cost of living increases on savings and investment, we've achieved P&L growth for the business with revenue up 12% at £103 million and adjusted operating profit up 29% at £49 million. Now this success comes from a disciplined cost management and increased cash margin for abrdn and our customers. As a consequence, we achieved one of the best platform cost/income ratios in the market at 52%. In addition to this, we also maintained our A rating for financial strength from AKG and remain the only platform in the market to have this rating. Now customer activity in the advise market has been significantly impacted by the shift from a low inflation, low interest rate environment to the high inflation, high interest rate environment. And this change has reduced both customers' propensity and also ability to save. In the first half, we saw a 25% decrease in inflows from our large back book of existing customers. Additionally, we also experienced a 20% increase in outflows from customers in drawdown as they also adjusted to the increased cost of living. As a result, Adviser has been focusing on assisting clients through the current economic challenges. But both of these trends align with the broader market dynamics. In February of this year, we launched the most significant technology upgrade since the Wrap platform's debut in 2006 initiating the next stage of our Adviser Experience Programme. Now this development has transformed our service proposition and has laid the foundation for future growth with a modern modular tech stack that enables more frequent upgrades and improvements to get ahead of the market trends.

So moving forward, the next stage of our Adviser Experience Programme, will be the introduction of adviserOS later this year. This will be launched alongside our new on-platform pension proposition. What has already been delivered laid the technological groundwork for adviserOS allowing us to launch without any substantial new investment. I'm confident that adviserOS will reinforce our market-leading position in content and experience and act as a real differentiator for us. Replacing Wrap and Elevate, it will offer a single flexible proposition to advisers. adviserOS extends our existing services allowing us to go well beyond traditional platform offerings to provide broader solutions for advisers to assist them to grow their businesses. We're also working very closely with our colleagues in Investments to ensure our model portfolio service propositions are tailored to meet the needs of the adviser market. Despite the current market conditions, the midterm market opportunity remains very attractive with forecast market AUA growth of 11% per annum. So through leveraging our technology upgrade and with the upcoming launch of our new on-platform pension, we're well positioned to drive new business through our three pillars of growth; existing customers, new customers and new clients; building on and reinforcing our leading position in this expanding market.

With that, I'll now pass over to Richard to talk us through Personal.

[Richard Wilson, CEO, Personal Wealth]

Thank you, Noel. As Stephen mentioned, we're moving at pace to build and reinforce foundations for change and growth, all of which is evident in the Personal vector's performance during H1. At our Spotlight on Personal event in Manchester last month, which many of you attended, we highlighted the changes we've already implemented and our plans to realize our market potential. In terms of financials, Personal delivered a net operating revenue of £152 million in H1 '23, up 27% compared to H1 '22 on a six month pro forma basis driven by the rapid pace of base rate increases and the interest yield earned on client cash balances. We delivered an adjusted operating profit for H1 of £61 million, a 79% increase on a six month pro forma basis resulting in a cost/income ratio of 60%. AUA ended the half at £67 billion, 4% higher than the opening AUA after adjusting for the MPS service transfer to the Adviser business in April. Our focus this year is on delivering a swift transformation to the desired end state model. We announced the sale of discretionary fund management business to LGT Group in February and are restructuring our financial planning service, both expected to be completed in H2. The restructured financial planning business will improve its cost performance and allow us to broaden our service proposition by offering financial planning services to the ii customer base. On July 31, ii announced updated subscription and commission pricing to broaden our competitive positioning to a wider audience. From being the best value platform for portfolios from £50,000, we are now the best value in the market from £15,000.

As discussed during the Spotlight session, we will position our subscription plans and pricing more actively in the market with increased brand investment in the coming months. We continue to invest in our technology platform, deploying new website infrastructure in February and enhancing our mobile app's functionality. A well-defined road map of further developments is planned for later this year and into the next. These will include offering an enhanced research hub, ii community and portfolio planner as demoed during the spotlight session; all designed to improve our customers' experience and access to leading investment solutions. Since joining abrdn over 12 months ago, ii has begun to leverage abrdn's broader capabilities. For example, the upcoming portfolio partner offering benefits from the Investment vector's product engineering capabilities. We've also started migrating abrdn's existing DTC customers on to the ii platform, a process that will be completed over the next 12 months as part of abrdn's broader ongoing business simplification and focus. As Stephen mentioned earlier, interactive investor has exceeded the investment goals abrdn set when acquiring the business in May '22. In the first half of the year, ii contributed £115 million to group revenue and £67 million to adjusted operating profit achieving a cost/income ratio of 42%.

While market conditions have been challenging impacting new customer numbers and trading levels, our diversified revenue streams and subscription-based pricing model continue to ensure a resilient performance. In H1, net treasury income was £66 million with an average margin of 229 basis points. ii has increased the rates at pace to customers 4x since the start of the year. Although new customer numbers were lower than planned, if we adjust for the expected higher runoff from recent client acquisitions notably share center EQI in '21, our base has grown by 1% in the first half. Net new flows have remained positive at £1.9 billion, representing 3.5% of opening AUA. Encouragingly also, we improved on the number of customers holding their SIPs through ii up 11% in H1 and our market continues to progress. Now I'll hand you over to Ian.

[Ian Jenkins, Interim CFO]

Thank you, Richard. Good morning, everybody. So in H1, you can see the benefits of a full six month profit contribution from ii of £67 million compared to only £6 million for the one month in H1 2022. Our net operating revenue grew to £721 million, a £25 million or 4% increase. And excluding ii, revenue would be £77 million or 11% lower. Adjusted operating expenses rose to £594 million, up £13 million or 2%. And excluding ii, expenses would have been 5% lower largely reflecting the cost savings within Investments that René set out. The headline adjusted operating profit of £127 million is up 10% driven by the increased contribution from ii exceeding the reduction that we've seen in Investments. The cost/income ratio of 82% improved marginally by 1 percentage point reflecting the benefits from the efficient Adviser and Personal cost models. The IFRS loss before taxes improved to £169 million loss, including £181 million reduction in the fair value of our listed investments and restructuring and transaction costs of £113 million. Adjusted diluted EPS is up 68%, largely reflecting the benefit of both higher interest rates in our liquid assets and the share buybacks that we've undertaken. Adjusted capital generation has improved to £142 million, which results in a dividend cover of just over 1 times and the absolute cost of the interim dividend has reduced 10% due to those buybacks. And the interim dividend of £0.073 aligns very much with our dividend policy. So turning to assets under management. During H1 these decreased by less than 1% from £500 billion to £496 billion. This reduction arises from net outflows excluding liquidity of £4.4 billion in the period, which are lower than the H2 of the previous year.

Within Investments vector, our assets have fallen from £376 billion to £368 billion in the first half and net outflows excluding liquidity were £5.7 billion in the period and showed an improvement over H2 of the previous year. The downward market movements of £2.5 billion in the half reflected adverse FX movements and a decrease in real assets, but an improvement in both equity and fixed income markets. And looking forward, the sales of our U.S. private equity and discretionary fund management businesses are expected to complete in H2 as well the Tekla acquisition. In operating revenue, it is £721 million, up 4% on last year benefiting from a full six months of ii and the higher net interest margins in both Adviser and Personal. Net flows, yield and market levels which drove lower average AUM; all had negative impacts on our revenue in H1 2023. Across our vectors, more than 35% of the revenue now arises from Adviser and Personal. Focusing on operating expenses and excluding ii, we've seen an 8% reduction over a two year period and we will continue to prioritize efficiency. Excluding ii, expenses were 5% lower at £546 million compared to H1 2022. Staff costs decreased by 7% benefiting from 11% lower FTEs whilst variable compensation aligns with business performance. Non-staff costs have also fallen by 4% as we continue to simplify the organization. And as Stephen mentioned, we're on track to deliver the net £75 million savings within Investments.

Moving on. As René has covered within Investments, adjusted operating profit was £26 million with a cost/income ratio at 94%. This reflects the outflows and market performance impacting average AUM whilst operating expenses have reduced by 6%. Within Adviser, adjusted operating profit of £49 million represents a 29% improvement benefiting from the higher net interest margin, which increased revenue yield by 3.3 basis points. And operating expenses, as Noel has outlined, have remained broadly stable. And finally, as Richard outlined, within Personal, our adjusted operating profit of £61 million is up £54 million compared to H1 2022. However, this obviously, as we've mentioned, reflects the inclusion of ii for a full six months as opposed to only one month in H1 '22. ii revenues continue to benefit from multiple revenue streams with net interest margin contributing £66 million in H1 due to the rising interest rates whilst trading revenue was at £25 million and subscription revenue at £27 million. The cost/income ratio of 60% improved by 28 percentage points reflecting the higher efficiency within ii. And finally, turning to capital. Our capital position remains strong. The H1 2023 surplus is up approximately £300 million to over £1 billion. The disposal of our remaining HDFC Life and AMC stakes had a capital impact of £576 million. And we have today, as we've mentioned, announced the extension of our share buyback of £300 million.

I'll now hand back to Stephen.

[Stephen Bird, CEO]

Thank you, Ian. As Ian said, we are disciplined allocators of capital. Our focus is on investing in high quality businesses that generate long-term sustainable growth and deliver sustainable dividends and we can return excess capital to shareholders. Today, we are announcing an extension of the £150 million buyback program to a total of £300 million. When we identify value-creating bolt-on opportunities such as Tekla, you can expect us to execute against them in a disciplined fashion. As part of our capital allocation approach, we maintain a £500 million buffer to provide management flexibility, capital strength and resilience during periods of volatility. As I said at the beginning, the macro environment continues to be challenging, but we are focused on what we can control. We've delivered a strong profit performance in Adviser and Personal in the period while we continue to focus on transforming the Investments business. These investing businesses complement each other and we're starting to see how they can work together to create further value. There is more work to do and we're under no illusion about that, but we are confident in the trajectory that we have created and the progress that we are making. With our 3 investing businesses, we're building a stronger abrdn with a diversified business model that positions us for success through the cycle.

Now we're happy to take your questions. Please wait for a microphone in the room and we'll also then turn to take questions from the call. Let's start with the room.

[Mandeep Jagpal, RBC Capital Markets]

Mandeep Jagpal, RBC Capital Markets. Just three for me, please. The first is on capital. Adjusted capital generation over the half worth £142 million and this is used as a measure of dividend affordability. But what is the conversion of capital generation to cash generation over the period? So trying to get a better understanding of the contribution of noncash items into adjusted capital generation. Secondly, on net flows, you've hopefully provided a more granular disclosure on the Investments vector flows and you reported an improvement in flows in institutional year-on-year and more specifically in Q2. What was the driver there and how sustainable do you see that improvement? And what are you seeing within -- what trends are you seeing within the DB space in the U.K.? And the final one is just on Phoenix. You mentioned, René, that abrdn was best placed to benefit from Phoenix growth in BPA and workplace. So if Phoenix is writing around £5 billion to £6 billion in BPA and at least £2 billion in workplace, what proportion of that flow can you take?

[Stephen Bird, CEO]

Let me begin. I'm going to hand to Ian to talk about the capital and cash generation.

[Ian Jenkins, Interim CFO]

So just very briefly on H1 '23, we generated £142 million in terms of capital generation and that compares to £107 million for H1 '22. So that's up and that's predominantly up from the margins that we've made on our liquid assets, particularly underperformance. If that's any help.

[Stephen Bird, CEO]

If you need more detail on that, perhaps we'll take that offline.

[Ian Jenkins, Interim CFO]

And that's obviously the main sort of -- and then you've obviously got the stake sales generating into the capital. So those are the two additions over the period into the capital.

[Stephen Bird, CEO]

Let me ask -- you're right that we've made more granular disclosure on the Investments business. We felt it was appropriate to do so, particularly given the fact that on a total asset basis we grew in the second quarter. And let me turn to René to give a little bit more texture on what we're seeing there and perhaps he can cover the Phoenix growth question as well.

[René Buehlmann, CEO, Investments]

I will answer your question a bit broader on flows in the first half year and I think it's important to understand the overall context. You see in Q1 still pretty much a risk-off environment. So if you look at our overall investment book, 62% of our equity holdings are in emerging markets and Asia. In the fixed income space, that's about 30% is emerging market debt. So what you have seen in Q1 is still pretty much a risk-off trade. So if you actually look at our £5.6 billion outflows in the first half year, it's deriving from pretty much five clients; a very large part which were asset allocation calls that have a risk-off. And then what you see in the second quarter to your point, the biggest contributor to net flows was actually Phoenix. So we have seen significant inflows through their BPA activities and we see actually both trends improve. So we have seen now and we showed you before, right, that our largest inflows were in China equity. So that's a risk-on trade again that you see and we see this across emerging markets and that's coming back. And in the context of Phoenix, we do absolutely foresee that we majority participate on the flows that you will see. I cannot give you an exact percentage number, but rest assured, we work very closely with Phoenix to also participate in those flows on the upside.

[Stephen Bird, CEO]

Yes. And just on Phoenix. Phoenix are our largest client and we are committed to their growth and their success. They're driving 2 things: growing their open book and growing BPA. And if you look at -- it's interesting to compare the 2 years because gross inflows H1 '22 for Phoenix were £8.8 billion and they increased to £11.2 billion in H1 of '23 and that reflected £3.2 billion of BPA wins. And we were a net flow for Phoenix in the half and that compared to £1.9 billion of outflow actually in H1 2022. So there was a £2.1 billion improvement over the piece. Now the BPA pipeline is very strong, it's at the highest levels as you all know. So we're focused on helping them in both BPA and growing the open business and we're committed to their success where we think they are having considerable success.

[Nicholas Herman, Citigroup]

It's Nicholas Herman from Citigroup here. Three questions for me as well if that's okay, please; one on cost, one on Investments and one on Personal. On costs if I take the first half cost of £594 million, annualize that and subtract £45 million of outstanding net cost savings, it implies around £1.14 billion of full year '23 costs but presumably there will be extra investment spend. So just curious how you think about full year costs, please. But I guess as a part of that, you are, as you said, well on track to deliver the targeted savings and René mentioned that you're not stopping there either. So just how should investors frame the potential to potentially upsize efficiencies in Investments, please? On Investments, I guess not unexpected to see a deterioration in absolute performance in real assets, but there was also quite a stark deterioration in relative performance too. I guess do you expect any -- just curious where that's come from and any expected impact on flows, please? And finally, on Personal. On consumer duty, I guess the value you're providing to your customers from a subscription-based model is not in question. But I guess equally do you see potential for the regulator to argue that high level of interest margin that the industry is making on cash balances and maybe other ancillary fees like FX fees could be not in consumers' interest and therefore there could be scope for those to come down, please?

[Stephen Bird, CEO]

So let's take those in turn. I'm going to start with sort of a broader picture on efficiency. Our ambition for the group, we talked about getting the group to a 70% cost/income ratio. Our ambition for the group is to have three cost competitive, margin competitive businesses. That ambition hasn't changed. Now we've allocated capital to be able to grow revenues and earnings to two very efficient businesses. The new abrdn is a different business from the traditional life and pensions business that we inherited, very different. That's why 85% of our earnings are accruing from Adviser and Personal. Adviser, 52% cost/income ratio in the piece and interactive investor improved to 42% and Richard is integrating the balance of the Personal business; think financial planning, think discretionary fund management; in order to make the overall division both a better growth business and more efficient business. So you got to think about the PLC because our shareholders own one share. The PLC is focused on having three cost competitive businesses. Within the Investments business, we made a commitment in the period £75 million and that's on track. You can see the run rate is on track and René has confirmed that, but we're not stopping there. This is a continuous improvement journey and the joys are a combination of driving the right products, the revenue growth and driving the cost down. So in an uncertain environment, it would be foolish to give you a timeline. I'm not going to do that. But our ambition is undimmed and you should know that. Let me ask Ian, do you want to comment on the full year cost?

[Ian Jenkins, Interim CFO]

Well, just on the full year cost particularly in Investments. Remember, the £75 million was a net figure and that was year-on-year so that was 2022's cost base compared to 2023's cost base. It would be sort of wrong to take the costs for the first half and multiply it by two, but you're not a million miles away probably for what it's worth. But the saves we banked so far at £30 million and we are absolutely on track to bank the remainder to make it £75 million net save year-on-year.

[Stephen Bird, CEO]

And of course we were able to give you the number, but what we are really focused on is what is the exit rate of December into 2024 because that's going to set up next year. I'm going to turn to René and then turn to Richard on the consumer duty question. But first of all to René to talk about Investment performance because it's important to understand the texture and the timeline. We've come through a pandemic and there's various factors that influence Investment performance there. René?

[René Buehlmann, CEO, Investments]

So you asked on the real assets, particularly the valuation gap, right, and what you have seen is an incredible repricing of particularly U.K. real assets particularly second half of last year. So, as you know, the valuations always have a lag roughly of a quarter in this business, right? So we went into it with an overweight around industrial and logistics, which has corrected the most. I will tell you, however, if you look now at the repricing particularly in the second quarter, it's also that area that recovers the fastest. Now in our particular logistics business, as you know, Tritax runs the two largest closed end funds in Europe. So you have seen AUM and revenue drop, but you have not seen an outflow, right? So we expect to participate also then on the upside again when AUMs comes back. So we're actually not worried about that in particular and if you look at our open ended funds, they have actually performed just fine in the line. So that's a bit as a context. Maybe just one add-on to the costs that Stephen mentioned. We have been very decisive in restructuring in Investments our structure. We have told you that we sharpen our shop window where we reduce capabilities. This is important because it has an impact on the back office costs, the whole operational value chain that you then have in terms of not just fund costs; but operations, infrastructure in the back. We have also highlighted to you that our multiasset simplification that we have just announced. So as of last year and with those changes, we are down over 10% in headcount. And then lastly, just to give you a few more examples. You have seen us announce that we moved in Edinburgh our office spaces. So we've closed our office and moved out to one George Street in Edinburgh. So there are quite a few of those examples. But these cost actions, they don't go straight to the bottom line, they take a bit time to implement. So rest assured that we are fully on this one.

[Ian Jenkins, Interim CFO]

I mean we've reduced our square footage by 121,000 square feet, which is about £8 million on an annualized basis. So just worth mentioning.

[Stephen Bird, CEO]

And it's interesting, we're sitting here in our new offices in London. For those of you who used to go to the old offices, you can see these are far, far better offices. Our colleagues really enjoy being here and it's important that we made them attractive to encourage the collaboration that drives growth. Although we have reduced our estate by 121,000 square feet, we've closed the six St Andrew Square office because we had two offices in Edinburgh and we have relocated already to one George Street original office, a significant saving. Let me turn to Richard to talk a little bit about consumer duty.

[Richard Wilson, CEO, Personal Wealth]

As everyone knows, consumer duty went live at the end of July so we're now all subject to that new obligation. For us we see that largely as an opportunity relative to the market and it's a very useful lens, frankly, to make sure that through all of our processes in terms of customer journeys and outcomes that the consumer is front and center. Why is that an opportunity for us? Well, fundamentally our business is built on a subscription-based business, which is driven around good outcomes for the customer; that's about value, it's about informed choice and it's about transparency. In terms of value, as I mentioned earlier, we're now the best value platform for anybody with above £15,000 of investable assets subject to obviously any specific behaviors or needs. We don't have front and back book pricing, we don't charge exit fees, we don't promote special share classes. So in terms of choice, it's something which is front and center in our business model and if you presume that the regulator will not become a price regulator and that is a cliff edge there, which would be a curious one. In terms of specific questions on interest rates, we pay market leading rates. We've increased rates 4 times so far this year. The reality is that we have the fastest acceleration of rates in the history of this country, which obviously has some side effects. And notwithstanding that, our business is to promote choices for our customers. We've increased materially with the help of our colleagues in the Investments vector, our fixed income promotion offering and to make sure that there's the best outcome for the consumer.

And on foreign exchange, we're the only major platform that offers a multicurrency service. So we don't require you to actually do foreign exchange. You can choose to buy and sell investments in currency and make a foreign exchange transaction when you choose to. Everyone else compels you to do that. So in terms of where we are whilst we're continuously evolving, we're in a competitive environment clearly and you'll have seen from our announcement of the day that our commission rates have now -- we've reduced those to £399 for five months and that's another 33% reduction, which puts us in again a market-leading position in terms of frontline price. That environment we expect to price lead in some areas. We're not interested in being cheap. It's about value and our job is to take market share and win whilst providing the best outcome for the consumer and that all sits within the interest of consumer duty.

[Hubert Lam, Bank of America]

It's Hubert Lam from Bank of America. I've got three questions. Firstly, a follow-up on the cost question. How should we think about cost into next year either in terms of absolute cost base or cost income ratio? I know René's talked about further efficiencies with Investments. But for the other two vectors, I think you're still investing. I was just wondering how we should think about next year compared to this year.

[Stephen Bird, CEO]

So first of all, you focused on Adviser and Personal?

[Hubert Lam, Bank of America]

The whole thing.

[Stephen Bird, CEO]

The whole business. So we improved by 1% in this half to 82% and that's not where we want to be. We're focused on selectively growing the businesses and reducing the cost of the Investments business to drive further improvements. We're not going to give you a cost/income number because it's a product of assets, revenues and costs. So we are controlling the part that we can control. We've made significant tech upgrades in Adviser and interactive investor already in the previous half. We don't have to do those conversions again and we expect those changes to accrue benefits going forward in terms of being able to grow more quickly. So really the story is about Investment and the support costs of the group. So within the group, we have a program to reduce expenses of everything that supports the three businesses because we're on a journey. The abrdn model is one where we want to have the highest level of devolved capability in each business. So each of these CEOs controls their tech stack, controls their operations, controls their product roster. So people, process, technology within their business. And of course we as a group are focused on remapping all of those services into those businesses and lowering the cost of overhead. We're not there yet. And as we go on this journey during the balance of this year and into 2024, the group will mature such that there is more muscle in each of those businesses and there is a lower shared infrastructure.

So think about governance, 1 brand, a light governance model, risk management, cyber protection at a group level; but all the motor power within the businesses. That's a journey which we'll continue over the next few years. It's one where we've got incredibly detailed work underway. We've talked a little bit about the buildings; but it's buildings, it's boxes, it's geographies, it's strategies, it's funds, it's FTE, it's technology research. It's a rich area for us to be able to extract further value from the group and it's what you would expect when you go from a single business into three divisions that are serving clients in different ways. I don't know whether you want to add anything on Adviser?

[Noel Butwell, CEO, Adviser]

Look, as I said in the presentation that we're approaching the [investing] market in terms of our cost/income ratio. We are in a highly efficient business. And as always, there's two elements to the cost/income ratio. Their customer's income and we've done what we've done and built the platform now in a position so that we can accelerate our revenue streams and grow the business going forward. So we'll continue to make efficiency gains as you would expect. But actually the real impact for my business and where I'm focused is the income element and the growth element and that's what you can expect to see in the second half and through into next year as well.

[Hubert Lam, Bank of America]

Just had two more questions. Firstly on capital. I think if you look at your surplus capital position, you still have a few hundred million above the surplus. I know you talked about, Stephen, bolt-on M&A. If you can talk about what you're looking for in terms of bolt-ons either whether it's still more Investments or are you going to look more into Adviser as well as Personal or even more buybacks. Just wondering what you think about that on top of the existing one used today. And one final question for Richard on ii. If you look at the interest income or interest margin, you had 229 basis points in H1. You're expecting 180 basis points, 190 basis points for the full year, that assumes -- or 180 basis points or 200 basis points in the full year. That seems a pretty big stepdown in H2. Just wondering what's driving that and how should we think about 2024? That's it.

[Stephen Bird, CEO]

So I'll hand to Richard in a moment to talk about cash margin. On capital, I think it's important to look at the whole capital picture because we have been incredibly disciplined in the management of capital and I hope that that's now really recognized by the marketplace because the divestments we've made, we've done very judiciously at the right times with very tight discounts. I know that historically people had applied very large discounts to those stakes, which always confused me given the fact that we were able to divest them within 1% of the listed value, which is what we actually did. We told you we would and we did. And then we've deployed capital and really got terrific returns on it. So if you think about the acquisition of Tritax, the acquisition of interactive investor, the acquisition of Tekla. We are very disciplined that where we've invested, we made the model stronger. So we think that we've earned the right to be able to make those judgments and make the group stronger. Where would we do it? We want to continue to invest in the Investments business because René's used a few words about being a specialist global investor. The Tekla is a very good example because we weren't big in health and life sciences and the team that's going to join us in September when we close the deal become the basis of a global health care and life sciences offer, which we think is a mega trend. So we will look to invest and it will rhyme with that type of investment. There are three big trends that we think are important in the investing world. Number one, the world will continue to move east and the bearishness in emerging markets is a very oversold trade. It remains an oversold trade until the rotation happens. So the world will continue to move east and it's driven by demographics, it's driven by economic stage of development, it's driven by the urbanization and the wealth effect within those economies.

Secondly, the energy transition. The energy transition is going to be the largest capital reallocation that we're going to see for the balance of our careers and it affects every building, every home, every factory, every production line, every form of mobility. We are already invested in it, but we're very, very intent on making sure that our investors are going to be positioned right for the energy transition. And the third trend is evidenced by the shape of the group. The democratization of technology and finance, the increased personal responsibility that comes when governments are overburdened by debt and people are living longer. So if you look for -- I'm giving you a real channeled focus on where you can expect to see us deploy capital. It's where we've done it, you can judge us by it and it's where we'll continue to do it. Why? We're building a long-term investing business here and it doesn't happen in one half. It happens over a series of years, but you should judge us by each step. Richard, do you want to talk about cash margin?

[Richard Wilson, CEO, Personal Wealth]

Yes. Also there are two features in cash margin, one is revenue and the other is interest paid. We know we live in today the most uncertain environment in terms of rates. Every new data point is the monetary position under control or out of control. It's not our job to predict that. Our job is to be prudent, prudent in terms of how we administer our customers' assets including their money and prudent in terms of how we make projections. So our projection as was made at the time is the best view that we have. None of us predicted the rates environment we have today. Our job will be to monitor our liquidity position, our commercial competition with the marketplace and adjust rates over time and clearly that will respond to what the Bank of England does, which is obviously highly uncertain today.

[Stephen Bird, CEO]

Now can we go -- we'll come back to the room. My apologies. We've taken a lot from the room, but I've been negligent in not going to the phones. Could we have a question from the phones, please?

[Operator]

[Operator instructions] The first question comes from the line of Arnaud Giblat from BNP Exane.

[Arnaud Giblat, BNP Exane]

Can I have two, please? If I could follow up on the question on capital. So you've got £1 billion and you want to have £500 million in surplus, you've earmarked £150 million for buybacks plus some further deals you've talked just right now about a few areas where you'd like to position. I'm just wondering if you do have any buffer over and beyond that to continue doing buybacks. And my second question is on the Adviser business. They've turned negative in Q2 or in H1, any sign of them turning around in the near future?

[Stephen Bird, CEO]

So firstly on capital, I think we've been pretty clear in the capital walk. We increased our capital surplus from £718 million at the end of last year to £1.17 billion at the end of June and that includes having paid for the first £150 million of the buyback and it also includes the dividends that we paid in the first half. We are committed to having a strong balance sheet and we're committed to continuing to invest in the business and we're committed to ensuring that we give our shareholders a good return. Our shareholders have enjoyed a very good return over the last year-to-date and last 12 months both combination of dividends and buybacks and share price appreciation. We think that the market -- these things that are waves of recognition where people start to recognize that the business model is getting traction, we think we're getting traction. We think that the business model in this part of the cycle has shown that diversification works. Interest rates go up, did we benefit from that? Yes. Did it mitigate some of the challenges in the risk businesses? Yes. What happens in the next part of the cycle when rates peak? Then risk comes back on, money moves into fixed income, money moves into equities. What we want to be able to show is that the business model of abrdn is built to create a through cycle return and I think we can do that. And we are mindful of making sure that we give capital back that is surplus to requirements in the business. But we're only sitting here in August 2023. We've just announced the share buyback increased to £300 million. Let's digest that and get to the end of the year before we make any further comments. Noel, Adviser?

[Noel Butwell, CEO, Adviser]

Thanks very much for the question. I mean as we mentioned at the finals back in March, '22 was one of the lowest years in record in terms of flows and that continued into 2023. So the Q3 '22 was the lowest quarter for a decade. We saw the lowest level of ISA flows in Q1 since the financial crisis so there's a whole host of market dynamics here that we talked about. As I said in the presentation, we had one of the largest and longest standing platforms with a significant amount of customers on. We had an impact in terms of the people's ability and propensity to save, 25% reduction in the flows from existing customers. And in addition to that, obviously we also saw an increase of 20% in the income, the drawdown to customers were taking. So you've got inflows and outflows impact there. As I said, we did the biggest, most complex technology upgrade in our history. We anticipated a short period of impact of that and actually we've worked through that with our advisers. And what that means now, therefore, then is we emerge from H1 in a much stronger position with the platform operating absolutely as expected, delivering all the benefits that we actually communicated to advisers particularly around capacity creation, which therefore then gives me a great deal of confidence in terms of our growth trajectory in a market that still remains to be still obviously quite uncertain particularly when it comes to client investment sentiment. But I think we're very well positioned to actually grow from this point.

[Operator]

The next question comes from the line of Haley Tam from Credit Suisse.

[Haley Tam, Credit Suisse]

If I can have just a quick 1 on the buyback again and then a couple on interactive investor, please. First of all on the buyback, it's a simple question. We saw the announcement. Can I confirm that that share buyback will start immediately so tomorrow? And then the questions on interactive investor if I can. Should we expect the positive impact of the 1st of September price increases on the subscription fees for the main public account from £999 to £1,199? Will that feed straight through to the bottom line or perhaps you can guide us to the extent to which that will be used to fund the investments in marketing, et cetera, that you flagged? And then a second question again just on net interest margin, perhaps I'll ask it a different way. The 229 basis points, is that a level you expect to be sustainable as rates go up from here or do you think it's going to expand?

[Stephen Bird, CEO]

So two questions that will come to Richard in a moment. Before that, I can confirm that the buyback does begin immediately. Richard, do you want to talk about the price point and net interest margin?

[Richard Wilson, CEO, Personal Wealth]

Just two or three points on the repricing. Number one, the effect in '23 is revenue neutral. Number two, it has the effect of adjusting revenue towards subscription and away from the kind of more volatile trading commission. And number three, it has the effect of broadening our appeal to a much larger audience and we become compelling not at £50,000, but at £15,000, which is kind of aligned to our increased ambition on brand and penetration in '24.

[Stephen Bird, CEO]

Interest margin?

[Richard Wilson, CEO, Personal Wealth]

Interest margin? Was there a question on the interest margin? I missed that. It's the same. Well, we've got a full suite there. So interest margin again our current you is as we present the guidance. Clearly everyone is trying to figure out where the top is and what the shape of the curve is. That's just not our job to speculate on that. So we'll continue to deliver what we believe is a compelling market leading proposition. Inevitably if rates accelerate, there's an upside in terms of short-term revenue. And if they don't accelerate and the shape of the curve switches, clearly we've got an 18-month kink in the yield curve out there, then they'll start to revert. Everyone's now talking about a longer for higher environment where rates are not expected to come down. It was lower for longer before, now it's higher for longer. Clearly with a normalized rates environment, we expect to have a sustained higher return compared to what was a historic low over the last 10 years. Part of the conversations or the questions that we get is gosh, compared to three years ago, rates have gone up. That's really not the exam question. The exam question is what are you comparing to? Because the rates three years ago are the lowest in history and now they're reverting to what would be a more normalized view.

[Stephen Bird, CEO]

So now we'll hand back to the room. I noticed Andrew.

[Andrew Crean, Autonomous]

It's Andrew Crean with Autonomous. Could I ask a question on revenue margins in the Investments business, two areas? Do you see within the different product categories further contraction in margin? And secondly, your margin on the Phoenix business, revenue margin has gone up but you're trading the fact that it's going to come down quite materially. Can you give us some numerical guidance around that because it's quite confusing?

[René Buehlmann, CEO, Investments]

So two things. The margins actually within the asset classes were pretty stable so the overall margin came down through the change of asset mix, right? So we had in the first half year the highest outflows in equities, in particular as I highlighted Asia and emerging markets, so that was the higher margin business. But other than that, actually the margins are pretty stable within the asset classes. We think actually this is what we have done in terms of repositioning the business, right? We've seen Asia and emerging markets. I think that's where the margins stay where they are because it's a special skill. In the developed market equity, that's what we have done in reshaping the business to really go to specialist capabilities globally, which are really focused around sustainability outcomes so income and small and midcap. Those are areas where you still see the margins staying higher. When you look at Phoenix, the margin business, you have seen some mix of new flow business and where the margins are coming down is in the runoff business and that's where they have moved more to sustainable passive indexing and that's where you have seen a shift in margins. So I would say you win new business at a certain margin, but you lose some of the outflows and some of the runoff business that goes and has converted into passive. So it's a mix of the two. But I would say that our margin outlook is pretty stable for the business around for Phoenix, yes.

[Rhea Shah, Deutsche Bank]

Rhea Shah, Deutsche Bank. Two questions for me. So the first is on Personal wealth, when do you expect this to turnaround and start to break even? And then second on Phoenix, you're listing the stake value at around £550 million. Under what circumstances would you look to reduce the stake and what could the impacts be on the agreement that you have with them?

[Stephen Bird, CEO]

So let me ask Richard to talk about Personal Wealth.

[Richard Wilson, CEO, Personal Wealth]

When we talk about Personal wealth, we're talking about the legacy abrdn business, which was made of both the discretionary fund management business and financial planning. As we've talked about previously, the discretionary fund management business, we announced the sale of that which we expect to complete presently certainly in Q3 and that then remains in-house the remodeled financial planning business and we expect that to make a positive contribution from January 1, '24.

[Stephen Bird, CEO]

And then in Phoenix, I think we'd like to say a lot about Phoenix but at the risk of repeating it. Phoenix is our largest client. We're committed to them as our largest client. They've got two main objectives of growing their open book business where we've assessed that with Standard Life and we've helped them grow their BPA business. We are the leading beneficiary of their success in those two strategies, which is value to us. We recorded growth in the first half and the pipeline is strong. So our view is that there are benefits and returns that come from that investment, they pay a very strong dividend. The benefits and returns are being invested with them and having a Board seat with them and helping them achieve their goals as our largest client are of value to us. That's our position in Phoenix.

[Steven Haywood, HSBC]

Steven Haywood from HSBC. Just two questions. Obviously Phoenix is benefiting and you're benefiting from the bulk annuity side of things. But on the institutional investment business considering the BPA business is pension fund money, do you have a lot of potential higher redemptions to come because of pension funds withdrawing out of the investments institutional business? And secondly, on the Adviser business, you're talking about obviously elevated drawdown and redemptions I guess because of higher inflation, cost of living, et cetera, and people having used up all their savings from the pandemic. So is this sort of higher redemption drawdown the new normal to be expected going forwards?

[Stephen Bird, CEO]

So you're right to point out something. Phoenix is the largest pension business in the U.K. and every year there is a substantial deaccumulation. But if you analyze that, you can expect to see something like £3 billion to £4 billion of deaccumulation in any given year. But then if you take the open book business and the BPA business, we should be able to see £5 billion to £6 billion so a net £1 billion to £3 billion growth through the cycle from Phoenix. And that's been Andy's focus and the team's focus at Phoenix to be able to grow their open book business and win BPA and we win when they win in doing that. So the net effect of the deaccumulation offset by the growth of those two other factors should result in a consistent pattern of growth. That's their focus and that's our focus and we showed you that it happened in the first half and we're pretty confident in the second half.

[Steven Haywood, HSBC]

But investors expect it as well [Indiscernible]?

[Stephen Bird, CEO]

We do. René, do you want to comment on that?

[René Buehlmann, CEO, Investments]

So I think it's the same pattern you observe in this, right? So as you may appreciate given our insurance expertise, one of our big focus is to leverage that insurance skills actually not just across the U.K., but take this globally. And you have seen a lot of efforts in our first half year. We have hosted for example across Asia Pacific insurance roundtables where we bring these capabilities globally now. So to your point, you have absolutely the same trend, but we would expect on both sides that dynamic to play out as well in the Investment vector business.

[Noel Butwell, CEO, Adviser]

Just on the outflows question. So I think the first thing to say that obviously that's very much a market trend currently and we're seeing that right across the market and much commentated on as well. I wouldn't classify it as a new normal. I think it's a period of adjustment driven obviously largely by inflation and the consequent impact on interest rates. Important to note as well we operate in a high net worth element of the market. So I think what you'll see is as that we turn back to a normal position, you'll see the increase in inflows as well. So the two actually at the moment being impacted so the propensity and ability to save the drawing down more assets I think it's a period of adjustment and we will return back to a situation where they're much more normalized and stable.

[Stephen Bird, CEO]

Well, terrific. Thank you very much, Noel. That was the answer to the last question. We are actually out of time. We're in broadcast mode here. We're two minutes over. Thank you very much for joining us in the room and thank you very much for joining us online. Thank you.