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04 September 2024

M&G plc half year 2024 results

2024

RESILIENT FINANCIAL RESULT ACROSS OPERATING PROFIT AND CAPITAL GENERATION
GOOD PROGRESS ON OUR THREE STRATEGIC BUSINESS PRIORITIES
UPGRADED CAPITAL GENERATION AND COST SAVINGS TARGETS

£(1.5)bn
Net client flows excl. Heritage i
HY 2023: £0.7bn
£375m
Adjusted Operating Profit before tax
HY 2023: £390m
£486m
Operating Capital Generation
HY 2023: £505m
210%
Shareholder Solvency II coverage ratio
YE 2023: 203%
6.6p
Interim Dividend per Share
HY 2023: 6.5p

Andrea Rossi, Group Chief Executive Officer, said:

“Over the last 18 months, we have made meaningful progress transforming M&G by focusing on our strategic priorities: Financial Strength, Simplification, and Growth. Against the backdrop of a challenging market environment in the first half of the year, we have delivered another resilient financial performance with Adjusted Operating Profit and Capital Generation nearly matching last year’s excellent results.

"We have materially improved the Financial Strength of the business lifting our shareholder Solvency II coverage ratio to 210%, a very strong position. And we tackled our leverage too, reducing debt by £461 million. 

“Our Simplification agenda continues at pace, delivering £121 million in cost savings so far. We have made considerable progress across all of our financial targets and, reflecting our track record of delivery and our commitment to strong shareholder outcomes, we are announcing today upgrades to our capital generation and cost savings targets.

“We are continuing to push further on our strategic priorities, combining our Life and Wealth operations to support the acceleration of our growth plan in the UK retail market. We also see growth opportunities in our international footprint and in the broadening of our product offering. 

“As we look ahead, the strong foundations we have built give me confidence in the long-term outlook for M&G.”

Financial strength

  • Resilient adjusted operating profit of £375 million (30 June 2023: £390 million), with a 9% improvement in Asset Management contribution, and a 7% reduction in Life and Wealth due to lower contractual service margin (CSM) amortisation rates and returns on surplus assets.
  • IFRS loss after tax of £56 million (30 June 2023: £75 million profit) was impacted by larger losses relating to short-term fluctuations in investment returns and mismatches arising on application of IFRS 17, although benefitted from lower restructuring costs. 
  • Our CSM increased by 5% to £5.8 billion (31 December 2023: £5.5 billion), a meaningful improvement in the Group’s stock of future value from its insurance operations. This result was supported by a positive operating change in the CSM of £99 million, and a further £180 million largely from the favourable impact from markets. 
  • Operating capital generation (OCG) of £486 million (30 June 2023: £505 million) continues to be strong, taking cumulative OCG since the start of 2022 to £2.3 billion, and enabling us to increase our three-year cumulative target from £2.5 billion to £2.7 billion by the end of the year. 
  • Shareholder Solvency II coverage ratio improved to 210% (31 December 2023: 203%) thanks to the resilient operating result and the reversal of £216 million capital restrictions; the ratio also reflects the 2023 final dividend and deleveraging actions announced in June. 
  • Shareholder Solvency II leverage ratio improved to 32%ii (31 December 2023: 35%) after allowing for all the deleveraging actions announced in June totalling £461 million. These actions will reduce ongoing debt interest cost by £21 million per annum.
  • The 2024 first interim dividend of 6.6 pence per share (30 June 2023: 6.5 pence per share) is in line with our policy of stable or increasing dividends. The first interim dividend is payable on 18 October 2024 

Simplification

  • Delivered good momentum on our Transformation programme at the halfway point of this three-year journey to create a leaner and more efficient organisation; continued to improve our ability to serve clients, reduce costs and unlock growth. 
  • Reduced H1 2024 managed costs by 4% compared with H1 2023, more than offsetting inflationary pressures and freeing up resources to support investment in growth initiatives, thanks to cost savings of £121 million since the launch of the programme in early 2023. 
  • Following a strategic review and given our commitment to operational discipline, we have decided to focus and rationalise our Wealth strategy, combining the Life and Wealth operations under the leadership of Clive Bolton. Through this change, we will better focus our efforts to serve the UK retail market, complement PruFund with life insurance solutions, reduce duplication and improve efficiency. 
  • Increased the cost savings target from £200 million to £220 million by 2025, reflecting the strong progress achieved to date. This increase in the target excludes any additional benefits from the streamlining of our operating model announced today. 
  • Reduced the Asset Management Cost-to-Income ratio to 77% (31 December 2023: 79%) through a 2% reduction in costs to £388 million (30 June 2023: £394 million) and a 1% increase in revenues to £499 million (30 June 2023: £496 million). 
  • Since the start of our transformation journey, migrated a total of 3.9 million policies to our strategic policy administration system, improving client service levels and reducing average claim processing time in the Life business

Growth

  • Successfully navigating a challenging macro environment, delivering a resilient performance while positioning the Group for long-term sustainable growth that is capital-lite across the Asset Management and Life business. 
  • Continued to deliver strong investment performance to our clients. As of 30 June 2024, 62% of our mutual funds ranked in the upper two performance quartiles over three years and 66% over five years; in institutional asset management, over 70% of funds by AUMA outperformed their benchmarks on both a three and five-year basis. 
  • AUMA of £346.1 billion was £2.6 billion higher than at the start of the year, due to positive markets and the consolidation of the Continuum operations offsetting net outflows.
  • Reduced net client outflows in UK Institutional Asset Management to £2.4 billion (30 June 2023: £3.8 billion), and continued net client inflows in International Institutional Asset Management of £1.9 billion (30 June 2023: £2.4 billion). 
  • Delivered flat net flows in Wholesale Asset Management (30 June 2023: £1.3 billion net inflows), a good result in a challenging market for active investment solutions, where there have been £15 billioniii of net outflows in the UK and €18 billioniv net outflows in Europe. 
  • Experienced £0.9 billion net outflows in Wealth (30 June 2023: £0.6 billion net inflows) as protracted high interest rates increased the relative attractiveness of alternative solutions to PruFund, such as cash and annuities.
  • Completed the third Bulk Purchase Annuity (BPA) deal since re-entering the market in 2023 (premium of £309 million) and continued to build our capabilities to grow in this attractive market.
  • Continuing to develop our capital-lite solutions in Life. Expect to complete our first capital-lite BPA transaction by the end of the year, and to imminently launch a PruFund-like solution in the Middle East

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 progress achieved in the first six months of the year 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, and deliver profitable growth in the UK and internationally.
  • We are making good progress on our financial targets, in particular on the upgraded operating capital generation target of £2.7 billion by end of 2024, and the upgraded cost savings target of £220 million by end of 2025. 
  • Our dividend policy of delivering stable or growing dividends to our shareholders remains unchanged.

i.Net client flows (excluding Heritage) consist of net client flows in Asset Management, PruFund (UK and Europe), Platform and Advice and other Wealth and exclude the expected outflows in our Heritage business in Life.
ii. The £300m of subordinated debt redeemed on 20 July 2024 as part of the deleveraging actions announced in June 2024 has been excluded from both the Nominal value of the subordinated debt and own funds to calculate the leverage ratio at 30 June 2024.
iii. Source: Investment Association. Data refers to H1 2024 net flows for active investment solutions excluding Money Market funds
iv. Source: Broadridge. Data refers to H1 2024 cross border Europe net sales, excluding the UK and excluding Money Market funds, Fund of Funds and ETFs

 

Performance highlightsi For the six months ended 30 June 2024 For the six months ended 30 June 2023 For the year ended 31 December 2023
Adjusted operating profit before tax (£m)       375    390     797
IFRS (loss)/profit after tax (£m)        (56)      75     309
Operating change in contractual service margin  (CSM) (£m)         99     151     355
Operating capital generation (£m)       486     505     996
Total capital generation (£m)       813       73     358
Shareholder Solvency II coverage ratio (%)       210%     199%     203%
Dividend per share (p)           6.6        6.5       19.7
Assets under management and administration (AUMA) (£bn)       346.1      332.8     343.5
Net client flows (excluding Heritage)ii (£bn)          (1.5)         0.7         1.1

i Definitions of key performance measures are provided in the Supplementary information section of the Interim Financial Report on page 65.
ii. Net client flows represent gross inflows less gross outflows and provides useful insight into the growth of the business. Gross inflows are new funds from clients. Gross outflows are money withdrawn by clients during the period. Our Heritage business, which is mostly closed to new clients, as it runs off, comprises Life traditional with-profits, shareholder annuities and other

 

 

Media enquiries

Irene Chambers

Media Relations

Will Sherlock

Head of External Relations

Investors/Analysts

Luca Gagliardi

Director of Investor Relations

Notes to editors

Open1
The condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting ('IAS 34'), as adopted by the UK, and the Disclosure and Transparency Rules of the Financial Conduct Authority based on the consolidated financial statements of M&G plc.
Open2
The shareholder view and regulatory view of the Solvency II coverage ratio as at 30 June 2024 assume transitional measures on technical provisions which have been recalculated using management’s estimate of the impact of operating and market conditions at the valuation date.
Open3
Total number of M&G plc shares in issue as at 30 June 2024 was 2,383,780,334.
Open4

A live webcast of the Half Year 2024 Results presentation and Q&A will be hosted by Andrea Rossi (CEO) and Kathryn McLeland (CFO) on Wednesday 4th September at 10:00 BST. Register to join at: https://mngresults.connectid.cloud/register

Or dial in by phone in the UK: 0800 358 1035 or +44 20 3936 2999 Access code: 237635

For global dial-in numbers see: https://www.netroadshow.com/events/global-numbers?confId=69614

The Results presentation will be available to download from 07:00 BST on our Results, reports and presentations web page


Ex-dividend date 12 September 2024
Record date 13 September 2024
Payment of dividend 18 October 2024
M&G plc is a leading international savings and investments business, managing money for around 4.6 million retail clients and more than 900 institutional clients in 38 offices worldwide. As at 30 June 2024, we had £346.1 billion of assets under management and administration. With a heritage dating back more than 170 years, M&G plc has a long history of innovation in savings and investments, combining asset management and insurance expertise to offer a wide range of solutions. We serve our retail and savings clients under the M&G and Prudential brands in the UK and Europe, and under the M&G Investments brand for asset management clients globally.
M&G plc, a company incorporated in the United Kingdom, is the ultimate parent company of The Prudential Assurance Company Limited (PAC). PAC is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in the United Kingdom.
This document may contain certain ‘forward-looking statements’ with respect to M&G plc (M&G) and its affiliates (the Group), its plans, its current goals and expectations relating to future financial condition, performance, results, operating environment, strategy and objectives. Statements that are not historical facts, including statements about M&G’s beliefs and expectations and including, without limitation, statements containing the words ‘may’, ‘will’, ‘could’, ‘should’, ‘continue’, ‘aims’, ‘estimates’, ‘projects’, ‘believes’, ‘intends’, ‘expects’, ‘plans’, ‘seeks’, ‘outlook’ and ‘anticipates’, and words of similar meaning, are forward-looking statements. These statements are based on plans, estimates and projections which are current as at the time they are made, and therefore persons reading this announcement are cautioned against placing undue reliance on forward-looking statements. By their nature, forward-looking statements involve inherent assumptions, risk and uncertainty, as they generally relate to future events and circumstances that may not be entirely within M&G’s control. A number of factors could cause M&G’s actual future financial condition or performance or other indicated results to differ materially from those indicated in any forward-looking statement. Such factors include, but are not limited to: changes in domestic and global political, economic and business conditions; market-related conditions and risk, including fluctuations in interest rates and exchange rates, the potential for a sustained low-interest rate environment, corporate liquidity risk and the future trading value of the shares of M&G; investment portfolio-related risks, such as the performance of financial markets generally; legal, regulatory and policy developments, such as, for example, new government initiatives and regulatory measures, including those addressing climate change and broader sustainability-related issues, and broader development of reporting standards; the impact of
competition, economic uncertainty, inflation and deflation; the effect on M&G’s business and results from, in particular, mortality and morbidity trends, longevity assumptions, lapse rates and policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; the impact of internal projects and other strategic actions, such as transformation programmes, failing to meet their objectives; changes in environmental, social and geopolitical risks and incidents, pandemics and similar events beyond the Group’s control; the Group’s ability along with governments and other stakeholders to measure, manage and mitigate the impacts of climate change and broader sustainability-related issues effectively; the impact of operational risks, including risk associated with third-party arrangements, reliance on third-party distribution channels and disruption to the availability, confidentiality or integrity of M&G’s IT systems (or those of its suppliers); the impact of changes in capital, solvency standards, accounting standards or relevant regulatory frameworks, and tax and other legislation and regulations in the jurisdictions in which the Group operates; and the impact of legal and regulatory actions, investigations and disputes. These and other important factors may, for example, result in changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. Any forward-looking statements contained in this document speak only as of the date on which they are made. M&G expressly disclaims any obligation to update any of the forward-looking statements contained in this document or any other forward-looking statements it may make, whether as a result of future events, new information or otherwise except as required pursuant to the UK Prospectus Rules, the UK Listing Rules, the UK Disclosure and Transparency Rules, or other applicable laws and regulations.
This report has been prepared for, and only for, the members of M&G, as a body, and no other persons. M&G, its Directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it may come, and any such responsibility or liability is expressly disclaimed.
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M&G plc is a company incorporated and with its principal place of business in England, and its affiliated companies constitute a leading savings and investments business. M&G plc is the direct parent company of The Prudential Assurance Company Limited. The Prudential Assurance Company Limited is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in England and Wales.

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M&G plc, incorporated and registered in England and Wales. Registered office: 10 Fenchurch Avenue, London EC3M 5AG. Registered number 11444019. M&G plc is a holding company, some of whose subsidiaries are authorised and regulated, as applicable, by the Prudential Regulation Authority and the Financial Conduct Authority.

M&G plc is a company incorporated and with its principal place of business in England, and its affiliated companies constitute a leading savings and investments business. M&G plc is the direct parent company of The Prudential Assurance Company Limited. The Prudential Assurance Company Limited is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in England and Wales.

M&G plc は、イングランド及びウェールズで設立・登録。本社登録地は10 Fenchurch Avenue, London EC3M 5AG。登録番号11444019。M&G plcは持ち株会社で、その子会社の一部はPRA(健全性監督機構)及びFCA(金融行為規制機構) に認可され、それらの規制対象となっています。

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M&G plc, incorporated and registered in England and Wales. Registered office: 10 Fenchurch Avenue, London EC3M 5AG. Registered number 11444019. M&G plc is a holding company, some of whose subsidiaries are authorised and regulated, as applicable, by the Prudential Regulation Authority and the Financial Conduct Authority.

M&G plc is a company incorporated and with its principal place of business in England, and its affiliated companies constitute a leading savings and investments business. M&G plc is the direct parent company of The Prudential Assurance Company Limited. The Prudential Assurance Company Limited is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in England and Wales.