11 August 2022
M&G plc half year 2022 results
Improved fund flows underpin a resilient operational and financial performance
Solid start to new £2.5bn operating capital generation target by 2024
John Foley, Chief Executive, said:
“This is an encouraging set of results and provides evidence that M&G is continuing to build momentum. Improved client flows underpinned a resilient operational and financial performance despite a period of volatility when many investors reduced their exposure to markets.
“The turnaround in flows builds on the progress we made in 2021. In only 12 months, we have reversed our position from being £2 billion in net client outflows, to achieving £1.2 billion in net client inflows excluding Heritage.
“Importantly, Wholesale Asset Management achieved net client inflows for the first time since 2018 totaling £0.8 billion.
“Our continued investment in M&G Wealth positions it to become a major player in the UK wealth market. In addition to recently announcing an agreement to acquire Continuum Financial Services, M&G Wealth has also launched PruFund Planet on its digital platform, the first time that PruFund has been offered as a choice on any investment platform in the UK.
“The current macro-economic environment is creating uncertainty in the markets in which we operate. However, our diversified sources of earnings and strong shareholder Solvency II coverage ratio protects our ability to invest in the business and, as today's interim dividend of 6.2 pence per share shows, deliver attractive shareholder returns.”
H1 financial highlights
- Operating capital generation of £433 million, up 40% on the same period last year, representing a solid start to the achievement of our new operating capital generation target of £2.5 billion by the end of 2024
- Shareholder Solvency II coverage ratio remains very strong at 214% despite total capital generation falling to £24 million (30 June 2021: £869 million) as a result of increasing yields and falling equity markets
- Adjusted operating profit before tax decreased to £182 million, impacted by current market conditions
- IFRS loss after tax of £1,045 million; impacted by short-term fluctuation losses in the fair value of the surplus assets in our annuity portfolio and derivatives used to hedge the Solvency II balance sheet caused by increasing yields
- Assets under management and administration decreased by £21.1 billion to £348.9 billion, driven mainly by adverse market movements, with net client inflows (excluding Heritage) of £1.2 billion
- We are well on track with our buy-back programme having deployed almost £150 million to date
- Interim dividend of 6.2 pence per share, in line with our policy of paying one-third of the previous year's total dividend, with the dividend per share up 2% as a result of the share buy-back programme
H1 operational highlights
- Wholesale Asset Management returned to net client inflows for the first time in four years with a total of £0.8 billion, compared to £3.4 billion of net client outflows in the same period last year reflecting the measures taken to improve investment performance and offer better value to customers and clients
- Improved performance in Wholesale Asset Management, with 62% of funds in upper two performance quartiles over one year (31 December 2021: 45%) and 61% over three years (31 December 2021: 36%)1
- Source M&G plc and Morningstar Inc.
- Continued growth in our Institutional Asset Management business with net client inflows of £0.3 billion
- Improved net client flows for M&G Wealth, with gross inflows into PruFund increasing to £2.5 billion (30 June 2021: £1.9 billion) following strong investment performance, digitisation, with PruFund Planet being launched on the M&G Wealth platform, and better service levels
- Roll out of PruFund-type products in Europe progressing with the launch of Future+ in Italy in February, and in Ireland later this year
- Further strengthened M&G Wealth with the recently announced agreement to acquire Continuum Financial Services which broadens our independent advice footprint
- Completed the acquisition of Swiss impact investor responsAbility and published our position on thermal coal, which included our intention to phase out investment in thermal coal by 2030 for OECD and EU countries and 2040 for developing countries
Outlook
- Cautiously optimistic about the turnaround in Wholesale Asset Management in light of continued action on investment performance and net inflows into our new generation of thematic funds but remain mindful of the challenging external environment
- Institutional Asset Management well-placed given consistent strong performance with £4.4 billion of committed client capital for private assets and further client wins yet to be funded
- Following recent acquisitions and partnerships, we believe M&G Wealth now has all the building blocks required to progress on its journey to become a major player in the UK wealth market
- On-going macro economic uncertainty has the potential to disrupt markets further and impact our results
- Strong Solvency II ratio of 214% underpins dividend policy