M&g Plc · LSE:MNG
M&g — H1 2020 Earnings Presentation
48 slides from M&g's earnings presentation, Aug 12, 2020
Slide 1: 2020 Half year results
2020 Half year results 12 August 2020
Slide 2: Disclaimer
M&G plc half year 2020 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 H1 2019 H1 2020 Assets under Management and Administration (£bn) 3521 339 AUMA & Flows Savings and Asset Management net client flows (£bn) (1.4) (4.1) Adjusted Operating Profit (£m) 714 309 Adjusted - of which Savings and Asset Management (£m) 262 162 operating profit - of which
Slide 4: Business Review
Business Review John Foley, Chief Executive
Slide 5: Resilient performance in a challenging market
Resilient performance in a challenging market Financial highlights Adjusted Total Capital Shareholder SII AUMA Operating Profit Generation coverage ratio £339bn £309m £(202)m 164% We remain committed to: Our dividend policy £2.2bn Total Capital £145m savings confirming our 2020 Generation for the p.
Slide 6: The impact of COVID-19
The impact of COVID-19 Stepping up to continue delivering to customers and shareholders ON OUR BUSINESS ON CUSTOMERS Resilient Robust Greater Operations Financials Uncertainty • Accelerated digitisation of interaction • Maintained a robust balance-sheet • Financial constraints push with advisers and
Slide 7: Investment performance is key to the success of our business
Investment performance is key to the success of our business Solid performance for PruFund and Institutional, weaker in Retail Institutional Asset Mgmt. Retail Asset Mgmt. PruFund Segregated and pooled mandates performance as of Mutual funds performance as of December-18, PruFund Growth returns afte
Slide 8: Our strategy priorities and delivery
Our strategy priorities and delivery Positioning M&G plc for sustainable growth Our priorities What we delivered in H1 What we are working on communicated at FY despite the COVID crisis to deliver next • Broaden proposition and bring all tax • Agreed Ascentric acquisition, expanding • Begin to integ
Slide 9: Revitalise the UK: Expanding reach and proposition
Revitalise the UK: Expanding reach and proposition Building our offering to access the wealth market Our core areas of strengths: Current focus Market Wrappers Offering Grow share of Decumulation Retirement PruFund, PruFolio BROADEN REACH w wallet from existing and drawdown Account and Bonds and M&G
Slide 10: Grow Europe: Three priorities to capitalise on existing strengths
Grow Europe: Three priorities to capitalise on existing strengths Leveraging established relationships and investment proposition Areas of strength Accelerating growth Current focus Unique With-Profits • Structure PruFund proposition within a Complete launch of flexible Lux SICAV fund solution 1 off
Slide 11: Build international investment expertise
Build international investment expertise: An integrated capability-led team Broadening capabilities and geographic coverage Changes completed so far Achievements Current focus Expanded Built a single Complete set-up of In-housed £6bn Asian Emerging Public Fixed US office (dealing 1 mandates, expect
Slide 12: Expand institutional: A successful, growing franchise
Expand institutional: A successful, growing franchise Currently focused on the UK market and Private Pension funds External institutional clients Current focus: Broadening client base 1% 7% 6.6 Steady 4.1 2.8 US 1.2 positive flows 18% 1 Net flows in £bn Asia (6.5) (0.1) Europe 74% UK 5.5 4.5 4.0 Hea
Slide 13: Key messages
Key messages Relentless delivery Diversified and resilient £2.2bn total capital despite challenges business mix and generation for the from Covid-19 sources of earnings 2020-22 period Innovative Broaden Resilient Robust Strong and Ambitious and flexible capabilities in high-quality ways of investmen
Slide 14: Financial Review
Financial Review Clare Bousfield, Chief Financial Officer
Slide 15: Financial highlights
Financial highlights Positive performance in a challenging market Adjusted Total Capital Shareholder AUMA Operating Profit Generation Solvency II ratio £339bn £309m £(202)m 164% • 4% decline in AUMA vs. 2019 • Lower contribution from • £539m Operating Capital • £9.9bn Own Funds1 and closing of £352b
Slide 16: Net client flows and AUMA
Net client flows and AUMA Movement in AUMA £bn Savings & Asset Management net client flows £bn 352 (1.4) (4.1) 339 0.8 Retail Savings 77 (4) (3) (5) Institutional 81 Asset Mgmt. 3.2 2.8 Institutional Asset Mgmt. 75 Retail Asset (0.8) 64 Mgmt. (3.8) 63 o/w o/w 62 Retail Savings (7.7) Retail Asset Mgm
Slide 17: Adjusted Operating Profit by source
Adjusted Operating Profit by source £m H1 2019 H1 2020 YoY% Savings & Asset Asset Management 216 163 (24)% Management With-Profits (PruFund1) 29 24 (17)% Other 17 (25) n.m. Total Savings & Asset Management 262 162 (38)% With-Profits 97 110 +13% Heritage Shareholder Annuities & Other 379 188 (50)% To
Slide 18: Sources of earnings: Asset Management
Sources of earnings Asset Management Savings & Asset Management AuM (£bn) Profitability1 (£m) Key ratios Average fee margin2 (bps) 267 Retail 58 261 Adj. Op. Profit 50 Adj. Op. Profit 124 123 Average 39 36 126 216 28 163 Institutional 26 Revenue Revenue H1 2019 H1 2020 514 79 75 64 469 Expenses Expe
Slide 19: Sources of earnings: With-Profits / PruFund
Sources of earnings With-Profits / PruFund Savings & Asset Management PruFund AUMA (£bn) Adjusted Operating Profit (£m)1 36 3.2 53.8 52.3 29 28 (2.6) (2.1) (7) 24 (4) Shareholder Shareholder Op. Profit Op. Profit Hedge Hedge Adjusted Adjusted result result FY 2019 Inflows Outflows Market & H1 2020 T
Slide 20: Sources of earnings: Traditional With-Profits
Sources of earnings Traditional With-Profits Heritage Traditional WP AUMA (£bn) Adjusted Operating Profit (£m) 128 124 110 84.8 0.2 97 80.0 (18) (2.5) (27) (2.5) Shareholder Shareholder Op. Profit Op. Profit Hedge Hedge Adjusted Adjusted result result FY 2019 Inflows Outflows Market & H1 2020 Transf
Slide 21: Sources of earnings: Shareholder Annuities & Other
Sources of earnings Shareholder Annuities & Other Heritage Adjusted Operating H1 2019 H1 2020 Nature of earnings Profit (£m) £379m £188m Investment income from assets not backing Return on excess assets 118 94 insurance liabilities and gradual release of & margin release prudence in actuarial assump
Slide 22: Shareholder Annuity book – Credit quality
Shareholder Annuity book – Credit quality £23bn1: 98% investment grade, no defaults to date Breakdown by rating Breakdown by capital ranking <BBB Subordinated 2% 1% BBB Risk Free2 Senior Unsecured Risk Free2 15% 19% 20% 19% AAA 8% A AA 39% 17% Secured 60% 1. Front office data. Cash and cash equivale
Slide 23: Capital Generation: H1 2020 Total Capital Generation
Capital Generation H1 2020 Total Capital Generation Shareholder Solvency II surplus, £bn 0.5 (0.6) (0.0) (0.1) (0.4) 4.5 3.9 Total Capital Generation £(0.2)bn Operating Dividends & Market Other FY 2019 Capital Tax capital H1 2020 movements movements £bn Generation movements Own Funds 10.3 0.4 (0.3)
Slide 24: Sources of Operating Capital Generation
Sources of Operating Capital Generation H1 2020: £0.5bn pre-tax Operating Capital Generation, £m 87 539 48 169 141 263 40 155 39 13 (132) (21) Savings & Asset Management Heritage Underlying Corporate Total Other Operating Capital Generation Total Underlying Capital Generation Capital Generation Cent
Slide 25: Shareholder Solvency II coverage ratio
Shareholder Solvency II coverage ratio H1 2020, £bn 9.9 £3.3bn debt at nominal value 33% Solvency II 164% Solvency Ratio Leverage Ratio1 £3.9bn surplus Own Funds 6.0 7.9 0.5 Other Own Funds, including: Sectoral £1.7bn TMTP2 £(2.4)bn risk margin 4.3 Shareholder Annuities & Other Present Value of futu
Slide 26: Parent company liquidity
Parent company liquidity 1H 2020 cash and liquid assets at £1.2bn Parent company cash and liquid assets H1 2020, £bn 0.5 Covers parent company outgoings for > 1 year 1.3 (0.1) (0.4) 1.2 FY 2019 parent company cash Cash remittances from Central costs & other movements Cash dividends paid to equity 1H
Slide 27: Sources of earnings – Expected development
Sources of earnings – Expected development1 Key medium term drivers of Adjusted Operating Profit Savings & Asset Management Asset Management With-Profits Other • Institutional: Expect continued good momentum, • Positive net client flows expected in UK. Aiming for • Result from minor other businesses
Slide 28: Priorities for H2 2020
Priorities for H2 2020 Business Transformation Capital growth programme management • Delivering PruFund to Europe • Continue to improve customer • Continue to deliver capital while maintaining UK momentum experience optimisation • Continue building Institutional • Deliver a more modern, efficient •
Slide 29: Appendix
Appendix Additional financial information
Slide 30: Our asset base
Our asset base We are an Asset Owner and an Asset Manager Group View: £339bn AUMA Asset Owner: £193bn AuA Asset Manager: £271bn AuM Corporate Assets 1 Other Heritage 14 PAC1 Assets not Shareholder Annuities managed by M&G 36 68 Assets administered With-Profits Fund Traditional With-Profits £271bn on
Slide 31: Savings & Asset Management: Assets under Management and Administration
Asset under Management and Administration Net Net Market Market FY 2018 Inflows Outflows client H1 2019 FY 2019 Inflows Outflows client H1 2020 / Other / Other £bn flows flows Institutional Asset Savings & Asset Management 70.5 5.0 (5.8) (0.8) 4.7 74.4 76.8 6.5 (3.7) 2.8 1.6 81.2 Management Retail A
Slide 32: AUMA by asset class
AUMA by asset class H1 2020 On-balance sheet AUMA External AuM S/H Annuity Total on- Corporate Total With-Profits Unit linked & other balance Retail Institutional Total AUMA Assets external £bn shareholder sheet Equities 50 11 0 0 61 25 3 28 89 Public fixed income 41 3 20 0 64 35 44 79 143 - of whic
Slide 33: Limited exposure to Investment Risk
Limited exposure to Investment Risk Shareholder Annuity, Corporate Assets and Other FY2019: £30bn + £11bn • o/w £30bn Investment risk fully borne by shareholders • o/w £11bn Reinsurance assets backing liabilities transferred to Rothesay Traditional WP 1. Shareholder support may be required in extrem
Slide 34: Retail Asset Management: Largest SICAV and OEIC mutual funds
Retail Asset Management Largest SICAV and OEIC mutual funds AuM and Flows in £bn RANK MARKET/ PRODUCT ASSET CLASS FUND YE 2019 SALE REDEMPTION NET FLOWS H1 2020 by AuM OTHER 1 OEIC + SICAV Bonds Optimal Income 20.4 2.3 6.6 (4.3) (0.1) 16.2 2 OEIC + SICAV Multi Asset Dynamic Allocation 5.0 0.3 (1.5)
Slide 35: Retail Asset Management: Largest SICAV mutual funds
Retail Asset Management Largest SICAV mutual funds AuM and Flows in £bn RANK MARKET/ PRODUCT ASSET CLASS FUND YE 2019 SALE REDEMPTION NET FLOWS H1 2020 by AuM OTHER 1 SICAV Bonds Optimal Income 17.1 2.1 (5.9) (3.7) 0.2 13.6 2 SICAV Multi Asset Dynamic Allocation 5.0 0.3 (1.5) (1.2) (0.2) 3.6 3 SICAV
Slide 36: Retail Asset Management: Largest OEIC mutual funds
Retail Asset Management Largest OEIC mutual funds AuM and Flows in £bn RANK MARKET/ PRODUCT ASSET CLASS FUND YE 2019 SALE REDEMPTION NET FLOWS H1 2020 by AuM OTHER 1 OEIC Bonds Optimal Income 3.3 0.2 (0.7) (0.5) (0.1) 2.6 2 OEIC Bonds Strategic Corporate Bond 2.4 0.2 (0.4) (0.2) (0.0) 2.2 3 OEIC Bon
Slide 37: With-Profits Fund Strategic Asset Allocation
With-Profits Fund Strategic Asset Allocation Asset allocation evolution between 2010 and H1 2020 Asset allocation as of June 2020 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Equities Real Estate Alternatives Fixed Income UK Asia ex. Japan UK Pri
Slide 38: 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 25% (% returns above capital invested)1 Cash SONIA Cumulative Rate 82% 20% UK RPI Cumulative Rate PruFund Growth Fund 15% ABI Mixed Investment 20-60% shares 5
Slide 39: Shareholder transfer hedge programmes implemented in 2015-2018
Shareholder transfer hedge programmes implemented in 2015-2018 2015 to 2018 hedges Estimated AOP impact from 2015-18 hedges1 Negative AOP impact in £m Minimise cashflow volatility by -80 Scope locking-in equity market value at time of purchase 5-year programmes based on -40 Maturity FTSE 100 Total R
Slide 40: From IFRS Adjusted Operating Profit to Profit After Tax
From IFRS Adjusted Operating Profit to Profit After Tax (£m) H1 2019 H1 2020 Savings & Asset Asset Management 216 163 Management With-Profits (PruFund1) 29 24 Other 17 (25) Total Savings & Asset Management 262 162 With-Profits 97 110 Heritage Shareholder Annuities & Other 379 188 Total Heritage 476
Slide 41: Focus on AOP Other items
Focus on AOP Other items H1 2019 H1 2020 H1 2019 H1 2020 (£m) International business 13 11 Investment income 16 (10) Savings & Asset Other (12) (26) Management Total 17 (25) Other 17 (25) H1 2019 H1 2020 Mismatching profits 30 28 Other assumption and model changes (13) (15) Experience variances 8 11
Slide 42: Solvency II position
Solvency II position M&G Group H1 2020, £bn Shareholder view With-Profits Fund view Regulatory view1 4.9 Surplus = 3.9bn 11.8 4.9 9.9 9.9 Surplus = 3.9bn Surplus = 6.9bn 6.0 6.0 4.9 Own Funds SCR Own Funds SCR Own Funds SCR Solvency ratio 164% Solvency ratio 241% Solvency ratio 136% 1. Including the
Slide 43: Diverse risk exposures
Diverse risk exposures Breakdown of the shareholder Solvency II SCR by risk type £bn 11.6 0.5 Sectoral As of H1 2020 Operational & 1.5 expense 0.1 Lapse Longevity 1.9 1.0 Currency 6.0 (5.6) Credit 4.0 0.3 Interest rate Property 0.9 1.4 Equity Undiversified SCR Diversification, SCR deferred tax, and
Slide 44: Solvency II Sensitivities
Solvency II Sensitivities Shareholder Solvency II market sensitivities (%) With-Profits Solvency II market sensitivities (%) As of H1 2020 As of H1 2020 Base Shareholder SII ratio 164 Base With-Profit SII ratio 241 20% fall in equity markets 158 20% fall in equity markets 233 20% fall in property ma
Slide 45: 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 46: Operating Capital Generation
Operating Capital Generation H1 2019 H1 2020 £m Own Funds SCR Total Own Funds SCR Total Asset Management 216 - 216 163 (8) 155 Asset Management With-Profits 70 (66) 4 87 (69) 18 Savings & - of which: In-force 55 (18) 37 76 (37) 39 - of which: New business 15 (48) (33) 11 (32) (21) Other 24 (1) 23 16
Slide 47: Our international footprint
Our international footprint 1 Corporate Assets £339bn AUMA 62 UK 27 £281bn 22 locations 130 60 14 Europe 28 markets 30 £44.1bn 2.4 5.7 0.3 Middle East Asia-Pac & Africa1 £8.1bn 0.8 Americas £4.5bn £1.1bn Retail Savings Heritage Retail Asset Management Distribution centres Institutional Asset Managem
Slide 48: Our Investor Relations contacts
Our Investor Relations contacts Spencer Horgan Luca Gagliardi Director of Investor Relations Head of Investor Relations – Equity +44 (0)203 977 7888 +44 (0)203 977 7307 +44 (0)797 381 5837 +44 (0)752 559 7694 spencer.horgan@prudential.co.uk luca.gagliardi@prudential.co.uk Nicola Caverzan Maria Baine