21 March 2024
M&G plc full year 2023 results
STRONG FINANCIAL RESULTS UNDERPINNED BY DIVERSIFIED BUSINESS MODEL
CONTINUED PROGRESS ON STRATEGIC PRIORITIES AND BUSINESS TARGETS
| Net Client Flows (excl. Heritage)i £1.1bn 2022: £0.2bn | AdjustedOperating Profit Before Tax £797m 2022: £625mii | Operating Capital Generation £996m 2022: £821m | ShareholderSolvency II ratio 203% YE 2022: 199% | Total Dividendper Share 19.7p 2022: 19.6p |
Andrea Rossi, Group Chief Executive Officer, said:
“M&G has performed very well in 2023. Today’s results show positive business momentum and meaningful improvements across key financial metrics. Net client flows, adjusted operating profit, operating capital generation, and the shareholder Solvency II ratio are all up materially year-on-year.
“This financial performance underscores the importance of our balanced and diversified business model, with strong growth achieved despite continued macroeconomic uncertainty. The contribution to earnings from our Life and Wealth operations increased meaningfully year-on-year, while Asset Management showed great resilience delivering net client inflows of £0.8bn at a time when the market for active investment solutions suffered significant redemptions.
“I am also very pleased with our operational progress in the first full year since outlining our three strategic priorities: Financial Strength, Simplification and Growth. We took steps forward on our business targets, and in particular, we are well placed to achieve our three-year cumulative Operating capital generation of £2.5 billion by the end of the year.
“As we look ahead, I am confident about the prospects for M&G as we remain focused on executing our strategic plan. Our diversified business model puts us in an excellent position to continue delivering attractive outcomes for both our clients and shareholders over the long-term.”
Financial strength
| – | Adjusted operating profit before tax of £797 million was up 28% year-on-year (2022: £625 millionii), reflecting a resilient performance in Asset Management, and improved contribution from Life, Wealth and Corporate Centre. |
| – | IFRS profit after tax of £309 million improved significantly (2022: £2,055 million lossii), benefitting from higher adjusted operating profit and a meaningful reduction in losses relating to short-term fluctuations in investment returns. |
| – | Operating change in contractual service margin (CSM) of £355 million was up 175% year-on-year (2022: £129 million), primarily due to higher expected real-world return on with-profits business CSM following the increase in risk-free rates during 2022. |
| – | Operating capital generation of £996 million was also up by 20% year-on-year (2022: £821 million), supported by a strong underlying capital generation of £752 million (2022: £628 million) and other operating capital generation of £244 million (2022: £193 million). |
| – | Over 2022 and 2023, we generated £1.8 billion of operating capital, which puts us in a very good position to achieve our three-year cumulative operating capital generation target of £2.5 billion by end of year. |
| – | Shareholder Solvency II coverage ratio improved to 203% (2022: 199%). |
| – | The 2023 total ordinary dividend of 19.7 pence per share (2022: 19.6 pence per share) is in line with our policy of stable or increasing dividends. The second interim dividend of 13.2 pence per share is payable on 9 May 2024. |
i Net client flows (excluding Heritage) consist of net client flows in Asset Management, PruFund and other Wealth and exclude the expected outflows in our Heritage business in Life.
ii 2022 comparative results, which were previously prepared under IFRS 4, have been restated following the adoption of IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments from 1 January 2023.
Simplification
| – | Good momentum in the first year of our Transformation programme, creating a leaner and more efficient organisation and improving our ability to serve clients, reduce costs and unlock growth. |
| – | Maintained 2023 managed costs in line with 2022 level, due to cost savings of £73 million in 2023, offsetting inflationary pressures and freeing up resources to support growth. |
| – | Completed a number of cost-saving initiatives including the voluntary redundancy programme; reduced our UK office spend by 15%; restructured our Private Markets team; and reduced consultancy and contractor spend by 11%. |
| – | Migrated another 2 million clients to our strategic policy administration system, reduced complaints by improving client service levels and reduced average claim processing time in the Life business. |
| – | Appointed Joseph Pinto (CEO, Asset Management), Clive Bolton (CEO, Life Insurance) and Caroline Connellan (CEO, Wealth) now providing dedicated leadership for each of our three businesses. |
Growth
| – | Delivered improved net client inflows (excluding Heritage) of £1.1 billion (2022: £0.2 billion) despite challenging macroeconomic conditions. |
| – | Achieved net client inflows of £1.5 billion in Wholesale Asset Management (2022: £0.5 billion) attributable to the breadth of our proposition and continued strong investment performance. As of 31 December 2023, 64% of our mutual funds ranked in the upper two performance quartiles over three years (31 December 2022: 67%) and 69% over five years (31 December 2022: 60%). |
| – | Experienced £6.2 billion net client outflows in UK Institutional Asset Management (2022: £2.3 billion) triggered by the 2022 mini-budget crisis and the ongoing de-risking of Defined Benefit pension funds, with market conditions expected to normalise in 2024. |
| – | Continued to expand our International Institutional Asset Management operations, delivering net client inflows of £5.5 billion in 2023, and almost £16 billion over the last four years, with key wins in the Netherlands, Germany, Australia and Japan. |
| – | Delivered net client inflows of £0.2 billion in Wealth (2022: £0.2 billion) underpinned by PruFund sales in the UK of £6.3 billion, the highest level since 2019. |
| – | Successfully re-entered the Bulk Purchase Annuity market, completing two deals with a combined premium of £617 million in 2023. Signed a third deal with a £309 million premium on 15 March 2024, and expect to achieve £1 billion to £1.5 billion sales per.annum. going forward. |
Outlook
| – | M&G is well positioned to navigate the current uncertain economic climate due to its diversified business model, international footprint, compelling products and services, investment capabilities and expertise. | |
| – | The 2023 Full Year Results underpin our continued confidence in the delivery of our strategic priorities and financial targets, as we remain focused on transforming M&G to deliver great client and shareholder outcomes. | |
| – | Our strategic priorities are clear: Maintain our financial strength, build on the progress already achieved in simplifying the business, better align to client needs, and deliver profitable growth in the UK and internationally. | |
| – | We are on track to achieving our operating capital generation target of £2.5 billion by end of 2024, and are making good progress on our 2025 financial targets, namely: | |
| – | Generate £200 million of cost savings, gross of inflation, compared to 2022; | |
| – | Reduce core Asset Management cost to income ratio to sustainably lower than 70%; | |
| – | Deliver increased adjusted operating profit before tax from Asset Management and Wealth to more than 50% of the Group total excluding the Corporate centre; and | |
| – | Reduce our leverage ratio to below 30%. | |
| – | Our dividend policy of delivering stable or growing dividends to our shareholders remains unchanged. | |
| For the year ended 31 December | For the year ended 31 December | |
| Performance highlightsi | 2023 | 2022 |
| Adjusted operating profit before tax (£m)ii | 797 | 625 |
| IFRS profit/(loss) after tax (£m)ii | 309 | (2,055) |
| Operating change in CSM (£m) | 355 | 129 |
| Operating capital generation (£m) | 996 | 821 |
| Total capital generation (£m) | 358 | (397) |
| Shareholder Solvency II coverage ratio (%) | 203 % | 199 % |
| Dividend per share (p) | 19.7p | 19.6p |
| Assets under management and administration (£bn) | 343.5 | 342.0 |
| Net client flows (excluding Heritage) (£m) | 1.1 | 0.2 |
i Definitions of key performance measures are provided in the Supplementary information section of the Annual Report and Accounts on page 366 to 367.
ii 2022 comparative results, which were previously prepared under IFRS 4, have been restated following the adoption of IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments from 1 January 2023.
Enquiries:
| Media | Investors/Analysts | ||
| Irene Chambers | +44(0)7825 696815Irene.Chambers@mandg.com | Luca Gagliardi | +44(0)20 8162 7307Luca.Gagliardi@mandg.com |
| Will Sherlock | +44(0)7786 836562Will.Sherlock@mandg.com | ||
| Sophie Redburn | +44(0)7391 227026 Sophie.Redburn@mandg.com | ||