M&g Plc · LSE:MNG
M&g — FY2023 Earnings Presentation
65 slides from M&g's earnings presentation, Mar 21, 2024
Slide 1: Driving progress together
Driving progress together Financial strength, Simplification, Growth 2023 Full Year Results – 21 March 2024
Slide 2: Disclaimer
M&G plc 2023 Full Year Results Disclaimer This presentation is made by M&G plc (‘M&G’). For the purposes of this notice, ‘presentation’ shall mean and include the document that follows and any oral presentation, any question-and-answer session and any other written or oral material delivered or dist
Slide 3: Business review
Business review Andrea Rossi, Group Chief Executive
Slide 4: Leveraging our business model to deliver on our priorities
We are leveraging our business model… … to deliver on our priorities 1 Large pool of Asset Broader access patient capital that Mgmt. to and better Financial strength supports innovation understanding of through seeding UK retail clients Disciplined approach to capital management Deep investment …und
Slide 5: Good progress achieved in 2023
Good progress achieved in 2023 1 2 3 Financial strength Simplification Growth Increased Operating Executing new operating Achieved Asset Mgmt. Profits by +28% and Capital model, positive momentum net inflows of £0.8bn Generation by +21% across all Business Units building on a resilient H1 Improved S
Slide 6: Moving forward on our financial targets
Moving forward on our financial targets Targets Status 1 Financial strength 2022-24 cumulative £1.8bn £2.5bn Continued strong Operating Cap. Gen. in 2022-23 cum. by 2024 delivery in 2023 Solvency II 35% <30% Focused on £300m leverage ratio 2023 YE by 2025 bond callable in July 2 Simplification Cost
Slide 7: Clear areas of focus for 2024
Clear areas of focus for 2024 1 Financial 2 3 Simplification Growth strength Asset Mgmt. Life Wealth 1 1 1 Continue to deliver Stabilise the Focus strategy on Continue with Continue to strong investment run-off of the where we can balanced and offset inflation performance annuity book add most value
Slide 8: Asset Mgmt. Continue to deliver strong investment performance
Asset Mgmt. Continue to deliver strong investment performance High-quality client outcomes continues to be a key priority Institutional Asset Mgmt. Wholesale Asset Mgmt. Building momentum on £98bn AUMA £55bn AUMA performance and proposition Institutional funds performance Mutual funds performance as
Slide 9: Asset Mgmt. Achieve positive operating jaws through growth
Asset Mgmt. Achieve positive operating jaws through growth Absorbed UK Institutional headwinds, well placed in Wholesale and internationally Wholesale Institutional UK Institutional international Turned around flows in one of the toughest Improving outlook as negative impact from Winning business ab
Slide 10: Asset Mgmt. Strengthen distribution to drive international growth
Asset Mgmt. Strengthen distribution to drive international growth Investing in and upgrading teams in Europe and Asia Scaling international presence… ... while building a strong distribution team International AUM and 2023 wins by geography New distribution staff dedicated to international markets +
Slide 11: Public Fixed Income case study – £139bn AUMA
Asset Mgmt. Public Fixed Income case study – £139bn AUMA 2024 expected to offer significant growth opportunities Strong expected M&G: … delivering strong … and continuing to demand for Public FI the House of Bonds… performance… grow the business 2024 Asset Owners expected Selection of awards The 10%
Slide 12: Private Credit case study – £29bn AUMA
Asset Mgmt. Private Credit case study – £29bn AUMA Private asset capabilities are a key underpin of our Asset Management success Private Credit market is expected to ... We are well placed to win thanks to strong grow strongly, particularly in Europe… performance and innovation track record2 10 Yr A
Slide 13: Life Stabilise the run-off of the annuity book
Life Stabilise the run-off of the annuity book Disciplined and selective approach to capital deployment Progress so far and Additional considerations main targets for new business on new business • Appetite for schemes with private assets Key Set-up team and completed Private milestones 3 deals for
Slide 14: Life Further build on the partnership with the With-Profits Fund
Life Further build on the partnership with the With-Profits Fund M&G is the operating and investment partner of the WPF What the With-Profit … and how What it gives to the Group Fund is built on… it stands out • Almost £500m of direct contribution to earnings1 One of the best Outstanding financial s
Slide 15: Life Broaden proposition powered by the With-Profits partnership
Life Broaden proposition powered by the With-Profits partnership Examples of how we could deliver growth serving individual and corporate clients Individual Life and Pensions Corporate Risks Opportunities to complement and Support Defined Benefit schemes expand existing PruFund offering with differe
Slide 16: Wealth Target market is large and expected to grow
Wealth Target market is large and expected to grow Clients are looking for advice and multi-asset solutions Growing market supported by structural trends We have got what it takes to succeed UK AUM by client segment (in £tn) and expected annual growth rate Foundations we can build on to deliver valu
Slide 17: Wealth Focus strategy on where we can add most value
Wealth Focus strategy on where we can add most value Clarity on target market and strategic priorities to drive flows into the wider Group A clear view of our expanded target market… … as well as of our strategic priorities Target Savings Grow our Grow our … while broadening our market phase 1 advic
Slide 18: Wealth Scaling Advice business will help meet a wider set of client needs
Wealth Scaling Advice business will help meet a wider set of client needs Academy and clarity of proposition key drivers for success We run a large and rapidly growing adviser business ... and offer a broad range of investment solutions Expect our adviser academy to be a key driver of future growth
Slide 19: Key messages: Financial Strength, Simplification, Growth
Key messages: Financial Strength, Simplification, Growth 1 Positive net client flows1, including turnaround of Institutional Asset Management 2 Well positioned to continue growing across Business Units despite persistent market volatility 3 Taking decisive action on costs, keeping cost base flat whi
Slide 20: Financial review
Financial review Kathryn McLeland, Chief Financial Officer
Slide 21: Continued strong momentum on Flows, Operating Profit and Capital
Continued strong momentum on Flows, Operating Profit and Capital Financial highlights Net client Adjusted Operating Shareholder SII flows1 Operating Profit Capital Generation coverage ratio £1.1bn £797m £996m 203% 3rd straight year of net inflows Up 28% on 2022 Up 21% YoY Up 4 ppts on YE 2022 • Stro
Slide 22: £1.0bn improvement in Asset Management flows
£1.0bn improvement in Asset Management flows AUMA, net flows, market and other movements Movement in AUMA (£bn) Net client flows (£bn) 342 0.8 0.2 6.2 344 2022 2023 Change (5.7) Wholesale 54 55 Asset Mgmt. Wholesale 0.5 1.5 +1.0 Asset Mgmt. Institutional 99 98 Institutional Asset Mgmt. (0.7) (0.7) -
Slide 23: Operating profits up by 28% Year-on-Year
Operating profits up by 28% Year-on-Year Adjusted Operating Profit by source (£m) 2022 2023 • On a like-for-like basis3, Asset Management revenues are down 2% due to lower average AUM in the period due to the timing of market movements Asset Management 264 242 • Average revenue fee margin improved f
Slide 24: Asset Management: Resilient revenues and fee margins
Asset Management: Resilient revenues and fee margins Like-for-like costs up only 1% despite inflationary environment End of period AUM (£bn) Fee margins1 (bps) Revenues and costs (£m) -2% Performance 23 56 30 fees 325 314 Investment income 303 11 (24) 8 59 58 58 and minorities2 53 311 303 55 305 CIR
Slide 25: Asset Management: Taking action to control cost base
Asset Management: Taking action to control cost base Focus on improving quality of spend, freeing up resources to support growth Asset Management cost base (£m) Commitment to maintain the cost base broadly flat in 2024 36 6 791 763 19 (33) Like-for-like costs up only c. 1% despite inflationary envir
Slide 26: Wealth: Focus on PruFund UK
Wealth: Focus on PruFund UK Earnings up 20%, continued strong investment performance Adjusted Operating Profit PruFund Growth net returns1 PruFund (£m) 20% 20% 20% 17% 2022 2023 13% PruFund 6% CSM release and ABI Mixed Risk Adjustment 154 231 +50% 31/12/2020 30/06/2021 31/12/2021 30/06/2022 31/12/20
Slide 27: Life: Traditional With-Profits and Annuities
Life: Traditional With-Profits and Annuities Earnings up due to higher CSM release and returns on excess assets Adjusted Operating Profit Adjusted Operating Profit Traditional With-Profits (£m) Shareholder Annuities & Other (£m) 2022 2023 2022 2023 CSM release and Annuity 89 96 Risk Adjustment 186 2
Slide 28: Operating change in CSM of £355m
Operating change in CSM of £355m Closing total CSM of £5.5bn shows large discounted future value CSM movements CSM movements by product line Total (£m) Op. change £m YE 2022 A B C D in CSM E YE 2023 162 98 685 Total 5,716 685 162 98 (590) 355 (588) 5,483 5,716 (590) 5,483 (588) Annuities 1,206 30 42
Slide 29: Underlying Capital Generation of £752m
Underlying Capital Generation of £752m Continued strong result, 20% higher than 2022 Underlying Capital Generation (£m) 2022 2023 • 2023 broadly in line with AOP1, benefitting from Asset Management 246 246 a £31m SCR reduction due to changes in seeding portfolio, lower market risk and operational ri
Slide 30: Operating Capital Generation of £996m
Operating Capital Generation of £996m £1.8bn two-year cumulative result, 2023 result 21% higher year-on-year Operating Capital Generation (£m) 2022 2023 Underlying Capital Generation 628 752 Optimisation, asset • Mostly asset trading, with reduced With-Profits trading and hedging 160 153 equity expo
Slide 31: OCG result underpins solvency ratio increase to 203%
OCG result underpins solvency ratio increase to 203% Improved coverage ratio despite adverse impact from markets and capital restrictions 28% 2% 3% (14%) (5%) (10%) Solvency II ratio1 (%) 199% Includes £(136)m 203% Mainly due to lower than expected restructuring costs and With-Profits returns, rate-
Slide 32: Strong Solvency II coverage ratio and stable leverage ratio
Strong Solvency II coverage ratio and stable leverage ratio Remain focused on reducing leverage, £300m bond callable in July YE 2023 Solvency II ratio YE 2023 Leverage ratio Solvency II basis IFRS 17 basis We are committed to reduce the Solvency II leverage ratio 11.2 to <30% by 20254 Nominal At the
Slide 33: 2023 managed costs flat YoY thanks to simplification efforts
2023 managed costs flat YoY thanks to simplification efforts Significant cost action offset inflation and freed-up resources to support growth M&G managed cost base1 Growth investments changes over 2023 (£m) £6m to support Asset Mgmt. growth: • Built out Asian Public Fixed 62 Income capabilities in
Slide 34: Transformation programme delivering across four key levers
Transformation programme delivering across four key levers £73m in-year cost benefit including reduction in change spend Transformation Examples of 2023 achievements 2024 - 2025 priorities benefits by lever • Reduced UK office spend by 15% • Further optimise footprint in high-cost Sourcing and • Out
Slide 35: Committed to our existing capital management framework
Committed to our existing capital management framework Financial strength and debt management are the main priority for 2024 Financial Strength and flexibility • Strong Solvency II ratio of 203%, despite lower rates at end of year • Remain focused on reducing leverage, £300m bond callable in July Ta
Slide 36: Key messages
Key messages 1 Positive net client flows1 for the third year in a row despite persisting market volatility 2 28% higher earnings, strong and balanced contribution across Asset Management, Wealth and Life 3 21% higher Operating Capital Generation, benefitting from strong underlying result 4 Improved
Slide 37: Wrap up
Wrap up
Slide 38: Our priorities and targets
Our priorities and targets Priorities Targets £2.5bn Operating Capital 1 Financial strength Generation over 2022-24 Leverage ratio <30% by 2025 2 Simplification £200m cost savings1 and Asset Management CIR <70% by 20252 >50% earnings from Asset 3 Growth Management and Wealth by 2025 1. Refers to the
Slide 39: Appendix
Appendix Additional financial information
Slide 40: Adjusted Operating Profit to IFRS Profit After Tax
Adjusted Operating Profit From Adjusted Operating Profits to IFRS Profit After Tax (£m) 2022 2023 AM Revenues 995 995 Management AM Cost (763) (791) Asset Performance fees 56 30 Investment income and minority interest1 (24) 8 Total Asset Management AOP 264 242 PruFund UK 190 228 Wealth Platform and
Slide 41: Adjusted Operating Profit: IFRS technical modelling guidance
Adjusted Operating Profit IFRS 17 technical modelling guidance PruFund CSM release to the operating result expected to reduce year-on-year due to: • 3% lower opening CSM, due to adverse market impact in 2023 Wealth • Lower CSM expected rate of returns due changes in the Strategic Asset Allocation1 o
Slide 42: Adjusted Operating Profit: Additional details
Adjusted Operating Profit Additional details (£m) 2022 2023 Asset Management 2022 2023 AM Revenues 995 995 Investment income (5) 24 AM Costs (763) (791) Minority interest1 (19) (16) Total (24) 8 Performance fees 56 30 Investment income and minority interest1 (24) 8 Total Asset Management AOP 264 242
Slide 43: Asset Management result by asset class
Adjusted Operating Profit Asset Management result by asset class End of period AUM (£bn) Fee margins1 (bps) Revenues and costs (£m) -2% Performance 23 56 30 fees 325 55 57 314 54 Investment income 303 11 (24) 8 and minorities2 311 73 303 305 CIR with/without 73 69% / 71% 73% / 77% 77% / 79% 77 Avera
Slide 44: Key drivers of CSM movements
Key drivers of CSM movements Annuities, PruFund and Traditional With-Profits Traditional WP Traditional WP PruFund Annuities Other1 Shareholder Policyholder 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 Opening CSM 1,331 1,666 1,201 1,466 635 664 1,171 1,206 696 714 Interest accreted 20 128 28 1
Slide 45: Operating Capital Generation
Operating Capital Generation 2022 2023 (£m) Own Funds SCR Total Own Funds SCR Total Asset Management 268 (22) 246 215 31 246 PruFund UK 233 (53) 179 305 (98) 207 - of which: In-force 187 29 216 223 6 229 - of which: New business 46 (82) (36) 82 (104) (22) Platform and Advice (21) (4) (25) (31) 2 (29
Slide 46: Underlying Cap Gen, expected contribution from in-force insurance policies
Underlying Cap Gen, expected contribution from in-force insurance policies Resilient capital generation and balance sheet £14.5bn Underlying Capital Generation from Continued focus on (£bn) in-force Shareholder Annuities and With-Profits1 Management actions levers available: 2.8 2.4 203% Model chang
Slide 47: Assets Under Management and Administration
Assets Under Management and Administration Our asset base as an Asset Owner and an Asset Manager More details on the following page Group View: £344bn AUMA Asset Owner view3 Asset Manager view 2 Corporate Assets1 30 Other Group Assets £314bn With-Profits Fund 101 Life Assets managed and £129bn admin
Slide 48: Assets Under Management and Administration by asset class, client, geography
Assets Under Management and Administration Asset Management view split by asset class, client, and geography Diversified capabilities A successful external franchise Established footprint1 strong scale in private assets and a supportive internal client with opportunity to grow Infracap and Real 11 o
Slide 49: Group wide flows, market and other movements
Assets Under Management and Administration Group wide flows, market and other movements – YE 2021 to YE 2023 Net client Market / Net client Market / YE 2021 Inflows Outflows flows Other YE 2022 Inflows Outflows flows Other YE 2023 (£bn) Asset Management Institutional 103.1 13.1 (13.8) (0.7) (3.2) 99
Slide 50: Wholesale Asset Management: Mutual funds performance
Wholesale Asset Management Mutual funds performance Mutual funds performance as of YE 2021, YE 2022 and YE 2023 (as % of AUMA) 5 4 22 29 39 32 45 46 48 45 56 23 21 6 18 16 44 44 22 20 13 15 32 7 26 32 39 31 22 25 26 20 17 5 4 1 YE-21 YE-22 YE-23 YE-21 YE-22 YE-23 YE-21 YE-22 YE-23 5-year 3-year 1-ye
Slide 51: Largest SICAV and OEIC mutual funds
Wholesale Asset Management Largest SICAV and OEIC mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND YE 2022 SALE REDEMPTION NET FLOWS YE 2023 by AUMA OTHER 1 OEIC + SICAV Bonds Optimal Income 9.7 2.16 (2.86) (0.70) 0.68 9.7 2 OEIC + SICAV Equities Global Dividend 4.8 1.02 (1.39
Slide 52: Largest SICAV mutual funds
Wholesale Asset Management Largest SICAV mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND YE 2022 SALE REDEMPTION NET FLOWS YE 2023 by AUMA OTHER 1 SICAV Bonds Optimal Income 8.3 1.84 (2.42) (0.58) 0.53 8.3 2 SICAV Equities Global Dividend 2.5 0.70 (0.80) (0.10) (0.62) 1.8 3 S
Slide 53: Largest OEIC mutual funds
Wholesale Asset Management Largest OEIC mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND YE 2022 SALE REDEMPTION NET FLOWS YE 2023 by AUMA OTHER 1 OEIC Equities Global Themes 2.3 0.10 (0.22) (0.12) 0.14 2.3 2 OEIC Equities Japan 0.2 2.15 (0.23) 1.93 0.13 2.3 3 OEIC Equities Gl
Slide 54: With-Profits Fund Strategic Asset Allocation
With-Profits Fund Strategic Asset Allocation Asset allocation evolution between 2013 and 2023 Asset allocation as of 31 December 2023 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Equities Real Estate Alternatives Fixed Income LEGEND UK Asia ex. J
Slide 55: With-Profits Fund Historical returns
With-Profits Fund Historical returns Annualised 5-year rolling returns1 PruFund Growth returns vs. peers PruFund Growth returns after charges (% returns above capital invested)2 25% 135% Cash SONIA Cumulative Rate 20% UK RPI Cumulative Rate PruFund Growth Fund 89% ABI Mixed Investment 20-60% shares
Slide 56: Solvency II: M&G Group position
Solvency II M&G Group position1 YE 2023 (£bn) Shareholder view With-Profits Fund view Regulatory view Eligible Own Funds Restriction of £216m 11.5 Eligible Own Funds Restriction of £216m 2.4 Surplus = 4.5bn 6.8 Surplus = 4.5bn Surplus = 7.2bn 2.4 8.9 9.5 8.9 4.4 4.4 2.4 Own Funds SCR Own Funds SCR O
Slide 57: Solvency II: Sensitivities
Solvency II Sensitivities and estimated impact on % ratio and surplus Shareholder Solvency II market sensitivities With-Profits Solvency II market sensitivities FY 2023 FY 2023 Solvency ratio Surplus Solvency ratio Surplus (%) (£bn) (%) (£bn) Base Shareholder position 203 4.5 Base With-Profits posit
Slide 58: Solvency II: Coverage ratio, Own Funds and SCR by segment
Solvency II Shareholder coverage ratio, Own Funds and SCR split by segment Shareholder Solvency II ratio (£bn) Own Funds and SCR split by segment (£bn) YE 2023 YE 2022 Eligible Own Funds 9.11 Restriction of £216m 9.3 9.1 Corporate Centre 1.3 £4.6bn Asset Management 0.8 203% £4.5bn PVST2 4.0 199% PVS
Slide 59: Solvency II: Capital restrictions
Solvency II Capital restrictions Capital tiering Regulatory SCR (£bn) Restrictions YE 2022 YE 2023 • Tier 2 and Tier 3 capital 7.2 6.8 Tier 2 + Tier 3 restriction can jointly contribute to With- Value of subordinated debt 2,998 3,063 Own Funds only as Profits 2.5 Deferred Tax Asset 598 536 much as a
Slide 60: Solvency II: Breakdown of Shareholder SCR by risk type
Solvency II Breakdown of the Shareholder SCR by risk type YE 2023 9.5 (£bn) 0.6 Sectoral Operational & 2.2 expense 0.4 Lapse Longevity 1.1 1.0 Currency 4.4 (5.1) Credit 1.4 0.4 Interest rate Property 0.7 1.7 Equity Undiversified SCR Diversification, SCR deferred tax, and other 60
Slide 61: Credit quality of the Shareholder Annuity book remains very strong
Credit quality of the Shareholder Annuity book remains very strong 98% of the £13bn1 assets is investment grade Breakdown by rating Breakdown by capital ranking Outer circle shows YE-23, inner YE-22 Outer circle shows YE-23, inner YE-22 • Our diversified and actively managed Annuity portfolio contin
Slide 62: Financial debt structure
Financial debt structure Subordinated debt (all Tier 2) ISIN Currency Nominal Coupon Issue Date Maturity Date Call Date XS2025521886 GBP 300 3.875% 2019 2049 2024 XS1888930150 USD 500 6.500% 2018 2048 2028 XS1888920276 GBP 750 5.625% 2018 2051 2031 XS1243995302 GBP 600 5.560% 2015 2055 2035 XS100337
Slide 63: Parent company liquidity
Parent company liquidity Cash and liquid assets at £1.0bn Parent company cash and liquid assets 2023 (£bn) 0.7 (0.2) 1.0 1.0 (0.5) FY 2022 Cash remittances from subsidiaries Corporate costs and other Cash dividends and shares FY 2023 1 movements purchased by EBT 1. Cash dividends paid to equity hold
Slide 64: Our international footprint
Our international footprint 2 Corporate Assets £344bn AUMA 21 UK 95 50 38 locations £255bn 6 87 27 Europe 26 markets 30 £64bn 3 9 0.7 Middle East Asia-Pac 1.5 & Africa £12bn £11bn Americas £2bn 3 8 Wealth Life Wholesale Asset Management Distribution, operations Institutional Asset Management and inv
Slide 65: Investor Relations contacts
Investor Relations contacts Luca Gagliardi Maria Baines Director of Investor Relations Investor Relations Event Manager +44 (0)20 8162 7307 +44 (0)20 8162 6122 +44 (0)752 559 7694 +44 (0)781 020 3731 luca.gagliardi@mandg.com maria.baines@mandg.com Simran Parmar Amrita Jairaj Head of Investor Relatio