M&g Plc · LSE:MNG
M&g — H1 2022 Earnings Presentation
52 slides from M&g's earnings presentation, Aug 11, 2022
Slide 1: 2022 Half Year Results
2022 Half Year Results 11 August 2022 1
Slide 2: Disclaimer
M&G plc 2022 Half 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: Financial highlights
Financial highlights HY 2021 HY 2022 Assets under Management and Administration (£bn) 3701 349 AUMA and Flows External net client flows2 (£bn) (2.0) 1.2 Adjusted Operating Profit (£m) 327 182 Adjusted • of which Asset Management (£m) 147 124 Operating Profit • of which Retail & Savings (£m) 296 226
Slide 4: Business review
Business review John Foley, Chief Executive Officer
Slide 5: Continued operational and financial delivery: key messages
Continued operational and financial delivery Key messages 1 Strong investment performance across Institutional, Wholesale and PruFund range 2 Improved flows – Wholesale Asset Management returning to growth 3 PruFund live on UK digital platform and in two European countries 4 Solid start to new £2.5b
Slide 6: Turnaround in flows and strong Operating Capital Generation
Turnaround in flows and strong Operating Capital Generation AOP impacted by non-cash negative accounting one-offs External Adjusted Operating Shareholder net Operating Capital SII coverage flows1 Profit Generation ratio £1.2bn £182m £433m 214% £3.2bn better than H1-21 £308m when excluding £2.5bn tar
Slide 7: Strong investment performance
Strong investment performance c. 40% of wholesale funds in top quartile Institutional Wholesale Asset Management Asset Management PruFund Institutional funds performance as % of AUMA1 Mutual funds performance as % of AUMA2 % returns above capital invested after charges3 5-year 3-year 3-year 1-year P
Slide 8: Driving synergies through our 'One M&G' strategy
Driving synergies through our ‘One M&G’ strategy Financial and operational benefits from unique business set-up Asset Manager One Retail & Savings M&G Internal client contribution to Operating Capital Generation Asset Manager Revenues (in £m) from Asset Trading (in £m)2 Continuous product innovation
Slide 9: Delivery across all open franchises
Delivery across all open franchises Setting foundations for growth Business growth supporting progress towards new target: Asset Manager Institutional Asset Wholesale Asset Management Management £2.5bn Extended growth track record Stabilised franchise and Cumulative Operating adding positive net flo
Slide 10: Institutional Asset Mgmt. – Consistent delivery
Institutional Asset Mgmt. – Consistent delivery Why we expect Distinctive capabilities and strong performance continued growth External net flows Ability to tailor to client needs Distinctive capabilities with values in £bn 1 breadth and depth of expertise Lead with: • Investment excellence to drive
Slide 11: Wholesale Asset Mgmt. – Continuing turnaround
Wholesale Asset Mgmt. – Continuing turnaround What we did to drive Comprehensive action plan generating results positive momentum External net flows Key drivers of improved flows Refreshed proposition values in £bn 1 diversifying from heritage funds 0.8 Performance Proposition AUMA above median2 AUM
Slide 12: M&G Wealth – Building an integrated UK Wealth proposition
M&G Wealth – Building an integrated UK Wealth proposition PruFund as key differentiator UK Wealth Managers have different business models… … but all increasingly aim to serve clients along the full value chain • Direct Advice-led Discretionary Pension and Savings • Hybrid • Restricted • Independent
Slide 13: M&G Wealth – Targeted investments in growth markets
M&G Wealth – Targeted investments in growth markets Accelerating strategy through organic delivery and inorganic actions Advice D2C Digital platform Investment Solutions Top 25 UK Wealth Mgr. AUM1 AUA on direct platforms2 AUA on adviser platforms3 Model Portfolios AUM4 910 317 701 81 Target markets
Slide 14: PruFund in Europe – Attractive growth opportunity
PruFund in Europe – Attractive growth opportunity, pilot on track Ireland as second market after Italy, launch expected for September Market opportunity: PruFund UK gross sales after launch (in £m): Future+1 live in Italy and soon Ireland Read-across for European roll-out 1,952 Household cash deposi
Slide 15: Business priorities
Business priorities Continuing to build on positive momentum Asset Manager Retail & Savings Institutional Asset Management M&G Wealth • Add distribution and investment staff • Continue to drive recovery in sales, outside the UK also through PruFund on platform • Expand European partnerships with • S
Slide 16: Capital generation drives total shareholder returns
Capital generation drives total shareholder returns Balancing investments for growth and returns 1 Strong delivery 3 Clear framework for deployment Operating Capital Generation (in £m) 1,276 1,312 Half Year 1,117 only £300m set aside to DPS increased every 433 Financial provide flexibility on debt A
Slide 17: Paid back 35% of market cap in under three years
Paid back 35% of market cap in under three years Buyback expected to lift 2022 total DPS Returned Strong capital returns Growing dividend per share £2.0bn as % of £5.7bn market Buyback expected to lead to an increase in the 2022 total DPS capitalisation at demerger (quantum depending on average pric
Slide 18: Continued operational and financial delivery: key messages
Continued operational and financial delivery Key messages 1 Strong investment performance across Institutional, Wholesale and PruFund range 2 Improved flows – Wholesale Asset Management returning to growth 3 PruFund live on UK digital platform and in two European countries 4 Solid start to new £2.5b
Slide 19: Financial review
Financial review Kathryn McLeland, Chief Financial Officer
Slide 20: Strong Operating Capital Generation and positive external net flows
Strong Operating Capital Generation and positive external net flows Financial highlights External Adjusted Operating Shareholder SII net flows1 Operating Profit Capital Generation coverage ratio £1.2bn £182m £433m 214% • Asset management net • AOP impacted by c. £126m • Underlying Capital • Driven b
Slide 21: Resilient AUMA despite negative market movements
Resilient AUMA despite negative market movements Assets Under Management and Administration Movement in AUMA (£bn) External net flows3 (£bn) 370 1.1 0.1 349 (3.1) 1.2 (19) 2.2 Institutional AM 103 Institutional Asset 0.3 102 Wholesale AM Includes £(24.5)bn from Mgmt. 0.1 0.8 Wealth and Other R&S mar
Slide 22: Positive net flows across all franchises despite challenging markets
Positive net flows across all franchises despite challenging markets External net flows External net flows3 (£bn) 1 Institutional growth continues 2 Positive Wholesale flows 3 Improving Wealth flows Positive net flows through cycles underpin Wholesale flows positive in H1, for the first Higher PruFu
Slide 23: Earnings impacted by mismatching and FX accounting one-offs
Earnings impacted by mismatching and FX accounting one-offs Adjusted Operating Profit by source (£m) H1 2021 H1 2022 • Asset Management revenues increased due to the consolidation of Asset Management the South Africa JV, resilient margins and positive flows AM Revenues 460 492 • The cost base increa
Slide 24: Asset Management results by client type
Asset Management results by client type Strong Institutional and improving Wholesale franchise End of period AUMA (£bn) Revenues and cost (£m) Fee margins5 (bps) Performance 3 5 11 325 fees 305 Investment income 298 (4) 8 (12) 68 317 53 320 and minorities2 51 52 60 57 492 103 466 460 90 Average 102
Slide 25: Retail & Savings: Wealth
Retail & Savings: Wealth Focus on With-Profits (PruFund UK) Adjusted Operating Profit PruFund Growth net returns1 PruFund (£m) 22% 18% H1 2021 H1 2022 10% 2% 4% 5% Shareholder 53 76 Transfers (3)% FY18 HY19 FY19 HY20 FY20 HY21 FY21 HY22 Hedge (7) (16) result One-off provision PruFund UK net flows in
Slide 26: Retail & Savings: Heritage
Retail & Savings: Heritage Traditional With-Profits and Shareholder Annuities & Other Adjusted Operating Profit Adjusted Operating Profit Traditional With-Profits (£m) Shareholder Annuities & Other (£m) H1 2021 H1 2022 H1 2021 H1 2022 Return on excess Shareholder 126 150 asset & margin 87 76 Transfe
Slide 27: Credit quality of the Shareholder Annuity book
Credit quality of the Shareholder Annuity book £16bn1: 98% investment grade Breakdown by rating Breakdown by capital ranking 2% 1% 14% 19% 18% 20% 29% 36% 61% AAA AA A BBB <BBB Risk free 1 Secured Senior unsecured Subordinated 1. Front office data. Cash and cash equivalents, derivatives and junior n
Slide 28: Sources of Operating Capital Generation
Sources of Operating Capital Generation H1 2022: £433m pre-tax Operating Capital Generation (£m) 370 671 433 386 (20) (126) 142 Asset Management Retail & Savings Corporate Centre Underlying Capital Asset trading, Other Operating Capital Generation optimisation and Generation hedging H1 2022 142 370
Slide 29: Sources of Total Capital Generation
Sources of Total Capital Generation H1 2022: £24m before ‘dividends & capital movements’ 12% 12% Solvency II (1%) (4%) (23%) ratio1 (%) 218% 214% 0.4 0.1 Solvency II (0.5) (0.1) surplus Includes full (1.0) (£bn) 6.2 £500m from ongoing buyback 5.2 Operating Capital Market Other Dividends & FY 2021 Ta
Slide 30: Shareholder Solvency II coverage and leverage ratio
Shareholder Solvency II coverage and leverage ratio £300m set aside to provide flexibility on debt bring pro-forma leverage to 31% Solvency II coverage ratio Solvency II leverage ratio H1 2022 (in £bn) H1 2022 (in £bn) 11.4 9.7 Reduction driven by buyback and adverse 9.7 214% market movements SII co
Slide 31: Sources of earnings – Expected development
Sources of earnings – Expected development1 Key drivers of Adjusted Operating Profit Asset Management Institutional Wholesale Other Asset Management Expect continued positive flow momentum and resilient Improved outlook for flows; fee review now complete, Performance fees historic average is £15m-£2
Slide 32: 'One M&G', a diversified business model delivering attractive returns
‘One M&G’, a diversified business model delivering attractive returns Key takeaways 1 Strong underpin to capital generation from Heritage 2 Capital-light growth opportunities in Asset Management, franchise back to net inflows 3 Access to attractive and rapidly growing markets with M&G Wealth 4 Diver
Slide 33: Appendix
Appendix Additional financial information
Slide 34: Our asset base
Our asset base We are an Asset Owner and an Asset Manager Group View: £349bn AUMA Asset Owner view Asset Manager view 3 Corporate Assets1 41 Other Group Assets £308bn With-Profits Fund 102 Heritage Assets managed and (£133bn) 196 administered on behalf of Group Internal3 Assets 155 managed by M&G cu
Slide 35: Assets under Management and Administration
Assets under Management and Administration FY 2020 to H1 2022 Net Net Market / Market / FY 2020 Inflows Outflows client H1 2021 FY 2021 Inflows Outflows client H1 2022 Other Other (£bn) flows flows Institutional Asset Management 85.5 7.3 (5.1) 2.2 5.8 93.5 103.1 5.2 (4.9) 0.3 (1.2)1 102.2 Management
Slide 36: AUMA by asset class H1 2022
AUMA by asset class H1 2022 On-balance sheet AUMA External AUMA S/H Annuity & Total balance With-Profits Unit linked Wealth Wholesale Institutional Total external Total AUMA (£bn) Other Sh sheet Equity securities 67.6 9.6 - 77.2 3.5 22.1 17.0 42.6 119.8 Debt Securities 36.6 2.9 14.5 54.0 2.2 25.0 54
Slide 37: Wholesale Asset Management: 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 FY 2021 SALE REDEMPTION NET FLOWS H1 2022 by AUMA OTHER 1 OEIC + SICAV Bonds Optimal Income 13.2 1.0 (2.8) (1.8) (1.3) 10.2 2 OEIC + SICAV Equities Global Dividend 4.1 1.1 (0.4)
Slide 38: Wholesale Asset Management: Largest SICAV mutual funds
Wholesale Asset Management Largest SICAV mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND FY 2021 SALE REDEMPTION NET FLOWS H1 2022 by AUMA OTHER 1 SICAV Bonds Optimal Income 11.4 0.9 (2.6) (1.7) (1.0) 8.7 2 SICAV Equities Global Listed Infrastructure 1.2 1.5 (0.3) 1.2 0.0 2.4
Slide 39: Wholesale Asset Management: Largest OEIC mutual funds
Wholesale Asset Management Largest OEIC mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND FY 2021 SALE REDEMPTION NET FLOWS H1 2022 by AUMA OTHER 1 OEIC Equities Global Themes 2.4 0.1 (0.1) (0.0) (0.2) 2.2 2 OEIC Equities Global Dividend 2.2 0.2 (0.2) (0.0) (0.0) 2.2 3 OEIC Bon
Slide 40: With-Profits Fund Strategic Asset Allocation
With-Profits Fund Strategic Asset Allocation Asset allocation evolution between 2011 and H1 2022 Asset allocation as of June 2022 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Equities Real Estate Alternatives Fixed Income LEGEND UK Asia ex.
Slide 41: With-Profits Fund Historical returns
With-Profits Fund Historical returns Annualised 5-year rolling returns1 PruFund Growth returns vs. peers 129% PruFund Growth returns after charges 25% (% returns above capital invested)1 Cash SONIA Cumulative Rate 20% UK RPI Cumulative Rate PruFund Growth Fund 15% ABI Mixed Investment 20-60% shares
Slide 42: Shareholder transfer hedge programme
Shareholder transfer hedge programme Programme features and estimated impact on AOP Cash-flow hedges Estimated AOP impact from hedges1 Negative AOP impact (£m) Minimise cashflow volatility by locking-in -120 Scope equity market value at time of purchase -100 -80 Up to 6-year programme based on Matur
Slide 43: From IFRS Adjusted Operating Profit to IFRS Profit After Tax
From IFRS Adjusted Operating Profit to IFRS Profit After Tax (£m) H1 2021 H1 2022 AM Revenues 460 492 Management AM Cost (326) (367) Asset Performance fees 5 11 Investment income and minority interest1 8 (12) Total Asset Management AOP 147 124 Wealth 5 65 o/w PruFund UK 18 74 Retail & Savings o/w Pl
Slide 44: Adjusted Operating Profit additional details
Adjusted Operating Profit additional details (£m) H1 2021 H1 2022 Asset Management H1 2021 H1 2022 AM Revenues 460 492 Investment income 5 (4) Minority interest1 3 (8) AM Costs (326) (367) Total 8 (12) Performance fees 5 11 H1 2021 H1 2022 Investment income and minority interest1 8 (12) Mismatching
Slide 45: Diverse risk exposures
Diverse risk exposures Breakdown of the shareholder Solvency II SCR by risk type H1 2022 9.2 (£bn) 0.6 Sectoral Operational & 1.4 expense 0.3 Lapse Longevity 1.1 1.0 Currency 4.5 2.1 (4.7) Credit 0.2 Interest rate Property 0.9 1.6 Equity Undiversified SCR Diversification, SCR deferred tax, and other
Slide 46: Solvency II position
Solvency II position1 M&G Group H1 2022 (£bn) Shareholder view With-Profits Fund view Regulatory view 12.5 2.8 Surplus = 5.2bn 9.7 9.7 9.7 7.3 Surplus = 5.2bn Surplus = 6.9bn 2.8 4.5 4.5 2.8 Own Funds SCR Own Funds SCR Own Funds SCR Solvency ratio 214% Solvency ratio 347% Solvency ratio 171% 1. All
Slide 47: Operating Capital Generation
Operating Capital Generation H1 2021 H1 2022 (£m) Own Funds SCR Total Own Funds SCR Total Asset Management Asset Management Underlying Capital Generation 140 4 144 129 13 142 Retail & Savings Wealth 85 (67) 18 124 (36) 88 o/w PruFund UK 94 (67) 27 127 (31) 96 - of which: In-force 90 (40) 50 95 11 10
Slide 48: Solvency II sensitivities
Solvency II sensitivities Estimated impact on % ratio and surplus Shareholder Solvency II market sensitivities With-Profits Solvency II market sensitivities H1 2022 H1 2022 Solvency ratio Surplus Solvency ratio Surplus (%) (£bn) (%) (£bn) Base Shareholder position 214 5.2 Base With-Profits position
Slide 49: Parent company liquidity
Parent company liquidity Cash and liquid assets at £1.4bn Parent company cash and liquid assets H1 2022 (£bn) 0.3 1.7 (0.2) 1.4 (0.4) FY 2021 Cash remittances from Central costs & Cash dividends and shares H1 2022 subsidiaries other movements purchased in buyback 49
Slide 50: Financial debt structure
Financial debt structure Subordinated debt (all Tier 2) ISIN Currency Nominal (£m) 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 XS1
Slide 51: Our international footprint
Our international footprint 9 3 Corporate Assets £349bn AUMA 19 60 UK 25 locations 102 £274.9bn 83 24 Europe 28 markets 27 £50.5bn 1.7 8.8 0.6 Middle East Asia-Pac & Africa £10.4bn 1.0 Americas £11.5bn £1.6bn 2.5 9.1 Wealth Heritage Wholesale Asset Management Other Retail & Savings Institutional Ass
Slide 52: 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 Nicola Caverzan Head of Credit and Rating Agency Rel