M&G reports £5.5bn net client inflows for international operations

M&G today (21 March) reported continued expansion of its international institutional asset management operations, delivering net client inflows of £5.5bn in 2023, and almost £16 billion over the last four years, with "key wins" in the Netherlands, Germany, Australia and Japan.

The UK headquartered international financial group specifically highlighted the importance of its international business in its outlook comment saying it was "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".

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."

Rossi continued: “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.”

– Adjusted operating profit before tax of £797m was up 28% year-on-year (2022: £625m), reflecting a resilient performance in asset management, and improved contribution from Life, Wealth and Corporate Centre.
– IFRS profit after tax of £309m improved significantly (2022: £2,055m loss), 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 £355m was up 175% year-on-year (2022: £129m), 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 £996m was also up by 20% year-on-year (2022: £821m), supported by a strong underlying capital generation of £752m (2022: £628m) and other operating capital generation of £244m (2022: £193m).
– Over 2022 and 2023, M&G generated £1.8bn 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 its policy of stable or increasing dividends. The second interim dividend of 13.2 pence per share is payable on 9 May 2024.

M&G further said it had 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.
– 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.

M&G concluded: "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."