M&G PLC · LSE:MNG
M&G — H1 2021 Earnings Presentation
58 slides from M&G's earnings presentation, Aug 10, 2021
Slide 1: 2021 Half Year Results
2021 Half Year Results 10 August 2021
Slide 2: Disclaimer
M&G plc 2021 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 H1 2020 H1 2021 Assets under Management and Administration (£bn) 3671 370 AUMA & Flows Savings and Asset Management net client flows (£bn) (4.1) (2.0) Adjusted Operating Profit (£m) 309 327 Adjusted - of which Savings and Asset Management (£m) 162 161 Operating Profit - of which
Slide 4: Business Review
Business Review John Foley, Chief Executive Officer
Slide 5: Continued delivery of resilient performance through the pandemic
Continued delivery of resilient performance through the pandemic Strong capital generation and solvency ratio Adjusted Total Capital Shareholder SII AUMA Operating Profit Generation coverage ratio £370bn £327m £869m 198% We remain committed to: Our dividend policy Our 2020-2022 target £145m annual r
Slide 6: Our strategy pillars and how they support our ambition
Our strategy pillars and how they support our ambition Positioning M&G for long-term, sustainable growth Support the culture of One M&G: One team, aligned One M&G around one purpose, one vision and one mission; putting sustainability at the heart of everything we do Protect Revitalise Heritage UK Re
Slide 7: One M&G: Continuing to progress at pace on our sustainability journey
One M&G: Continuing to progress at pace on our sustainability journey With the values of care and integrity forming the basis of our culture Our values… … and sustainability at the heart of everything we do Care We act with care, treating Catalyst: Approved 21 investments, committing £1.2bn, in H1-2
Slide 8: PruFund Planet: The next generation PruFund for a sustainable future
PruFund Planet: The next generation PruFund for a sustainable future Built thanks to the collaboration between the Asset Owner and Asset Manager Proposition Investment capabilities Diversity & Inclusion A range of five risk-managed, Leverage existing M&G high component multi-asset funds offering: qu
Slide 9: What we have delivered: Key achievements so far in 2021
What we have delivered Key achievements so far in 2021 Protect Revitalise Protect Revitalise Protect Revitalise Protect Revitalise Protect Revitalise Heritage UK Heritage UK Heritage UK Heritage UK Heritage UK One M&G One M&G One M&G One M&G One M&G Build Expand Build Expand Build Expand Build Expan
Slide 10: Continuing to develop a retail fund offering fit for the future
Continuing to develop a retail fund offering fit for the future Innovation to drive new business and performance to support existing one Innovating, building Purpose expertise, recruiting talent, Launching new solutions with a and expanding our thematic strong focus on sustainability and sustainable
Slide 11: Revitalise UK: Building an integrated savings and investments business
Revitalise UK: Building an integrated savings and investments business Launched in Sep-20, M&G Wealth has already achieved several milestones Ambition Achievements to date Priorities Build an integrated • Completed transition of existing network of advisers to self-employed model (c. £35m savings) G
Slide 12: Expand Institutional: Positive flows, resilient margins, and healthy pipeline
Expand Institutional: Positive flows, resilient margins, and healthy pipeline Growing Private Asset capabilities and European presence are the key priorities Performance Flows, margins and asset base Priorities Segregated and pooled mandates Half-year only Private Assets and Europe performance as %
Slide 13: Private Assets: A key differentiator and area of growth
Private Assets: A key differentiator and area of growth We already are the 2nd largest private credit investor in Europe1 Breadth and depth of resources Strong track record Supportive trends Private and Alternative Assets AuM (£bn) Market size ($Tn) and expected growth %2 200+ highly skilled investm
Slide 14: Catalyst: Tailored capital solutions to support innovation and drive impact
Catalyst: Tailored capital solutions to support innovation and drive impact A flexible approach across geographies, asset classes, and impact spectrum Capital deployment Vaccitech Angel Oak MEF Spin-out from Largest non-bank Microfinance 0.5 Oxford University originator of US Enhancement and co-inve
Slide 15: Grow Europe: Well positioned to expand asset management presence
Grow Europe: Well positioned to expand asset management presence Positive momentum expected to continue Retail Asset Management Institutional Asset Management Recovery in performance and flows Continued progress in building European footprint Retail net flows in Europe Institutional net flows in Eur
Slide 16: Key messages
Key messages Continued delivery of business priorities 1 Putting sustainability at the heart of everything we do, incl. PruFund Planet and Catalyst 2 Growing our institutional franchise leveraging our private asset capabilities 3 Capitalising on positive momentum for Retail Asset Management 4 Creati
Slide 17: Financial Review
Financial Review Clare Bousfield, Chief Financial Officer
Slide 18: Strong and resilient performance in a challenging market
Strong and resilient performance in a challenging market Financial highlights Adjusted Total Capital Shareholder SII AUMA Operating Profit Generation coverage ratio £370bn £327m £869m 198% • 1% increase in AUMA vs. • £161m contribution from • Operating Capital Generation • Up from 182% at FY 2020 an
Slide 19: AUMA and Net client flows
AUMA and Net client flows Movement in AUMA (£bn) Savings & Asset Management net flows (£bn) 367 8 370 (4.1) (2) (3) (2.0) 90 Institutional 86 Asset Mgmt. 2.8 2.2 Institutional Asset Mgmt. Retail Asset 0.8 64 63 (0.8) Retail Savings Mgmt. (1.6) Retail Asset Mgmt. (underlying) 82 o/w o/w 85 Retail Sav
Slide 20: Retail Asset Management flows improved in H1 2021
Retail Asset Management flows improved in H1 2021 One-off impacts from Prudential Hong Kong and reopening of property fund Retail Asset Management monthly flows H1 2021 (£m) Fee review of OEIC >50% of retail funds range implemented performing above Six-month total: >50% of retail funds performing me
Slide 21: Continued positive momentum in our mutual funds range
Continued positive momentum in our mutual funds range 1-year and 3-year performance has returned above median Portion of mutual funds performing above median (last twelve months, weighted by fund size) 100% 90% 80% 73% 70% 71% 63% 59% 56% 60% 53% 58% 50% 45% 43% 40% 32% 32% 23% 24% 26% 30% 22% 17% 1
Slide 22: Adjusted Operating Profit by source
Adjusted Operating Profit by source (£m) H1 2020 H1 2021 Asset Management 163 140 • Asset Management AOP decreased as slightly Savings & Asset Management higher revenues were offset by higher costs With-Profits (PruFund 1) 24 46 • H1 2021 Other AOP driven by expected loss Other (25) (25) from Ascent
Slide 23: Sources of earnings: Asset Management
Sources of earnings Asset Management Savings & Asset Management AUMA (£bn) Revenues by client type and cost (£m) Average fee margin3 (bps) 79 282 68 264 514 65 63 2 469 473 Retail 64 Performance 64 3 4 1 90 Retail 282 333 215 188 333 39 81 86 306 38 35 36 Institutional 33 Average 37 36 152 Instituti
Slide 24: Sources of earnings: With-Profits
Sources of earnings With-Profits Savings & Asset Management Heritage Adjusted Operating Profit1 Adjusted Operating Profit With-Profits/PruFund (£m) Traditional With-Profits (£m) 110 0 108 (2) 25 46 24 (3) H1 2020 Shareholder Hedge result H1 2021 H1 2020 Shareholder Hedge result H1 2021 AOP Transfer
Slide 25: Sources of earnings: Shareholder Annuities & Other
Sources of earnings Shareholder Annuities & Other Heritage Adjusted Operating Profit • Lower return on assets due to (£m) lower surplus following dividend 188 payment to parent company 52 174 (7) • Lower Asset trading due to (36) optimisation of assets in the (23) annuity portfolio which was not rep
Slide 26: Sources of Operating Capital Generation
Sources of Operating Capital Generation H1 2021: £0.3bn pre-tax Operating Capital Generation (£m) 0 193 182 309 (100) 216 176 (142) Savings & Asset Heritage Corporate Centre Underlying Capital Asset trading, Longevity Other Operating Capital Management Generation optimisation and Generation hedging
Slide 27: Continued delivery of management actions over time
Continued delivery of management actions over time Development of Other Capital Generation from 2017 onwards Other Operating Capital Generation Management actions (£m) Levers available: 735 657 Model changes 473 493 278 459 Changes in non-market assumptions 189 435 Asset trading 379 304 276 93 ALM o
Slide 28: Capital Generation: H1 2021 £0.9bn Total Capital Generation
Capital Generation H1 2021: £0.9bn Total Capital Generation Solvency II surplus (£bn) 0.6 0.1 0.3 (0.1) (0.3) 5.4 4.8 Total Capital Generation £0.9bn Dividends & Operating Capital Market Other FY 2020 Tax capital H1 2021 Generation movements movements £bn movements Own Funds 10.6 0.2 0.3 (0.1) 0.1 (
Slide 29: Shareholder Solvency II coverage ratio
Shareholder Solvency II coverage ratio H1 2021 (£bn) 10.8 £3.2bn debt at nominal value 29.6% Solvency II 198% Solvency ratio Leverage ratio1 £5.4bn surplus Own Funds 7.5 Other Own Funds, including: 5.4 £1.1bn TMTP2 0.5 Sectoral £(1.8)bn risk margin 3.5 Shareholder Annuities & Other Present Value of
Slide 30: Well positioned vs. target of £2.2bn Total Capital Generation by 2022
Well positioned vs. target of £2.2bn Total Capital Generation by 2022 £2.6bn target for 2021-2023 shifts focus to Operating Capital Generation Possible pathway to the 2020-2022 target 2021-2023 target (£bn) • H2-21 and 2022 mgmt. actions (net of tax) • Growth in Underlying Target does not Capital Ge
Slide 31: Financial strength is the primary lens of our Capital Mgmt. Framework
Financial strength is the primary lens of our Capital Mgmt. Framework Economic uncertainty remains high as government scales back support Uses of capital Continued economic uncertainty Bank of England CPI inflation projection1 6% Solvency, Financial Stable or Attractive liquidity and strength and in
Slide 32: Continued progress on the Transformation programme
Continued progress on the Transformation programme On track for completion of key objectives by 2022 Modernise and Strengthen the Broaden capabilities Improve efficiency digitise the business control environment and proposition and scalability • Digitised all new • Migrated most • Expanded Wealth •
Slide 33: Delivering on the cost objectives of the transformation programme
Delivering on the cost objectives of the transformation programme Reducing like-for-like cost basis while building additional new capabilities M&G overall cost base 2% inflation on target cost base corresponds to 2017 to H1 2021 (£m) c. £25m per year, implying that c. £100m of costs have been absorb
Slide 34: Sources of earnings – Expected development
Sources of earnings – Expected development1 Key drivers of Adjusted Operating Profit Savings & Asset Management Asset Management With-Profits Other • Institutional: Expect continued positive • Net flows expected to be positive over the medium-term but • Result from minor other businesses including f
Slide 35: Key takeaways
Key takeaways 1 Diversified and resilient business model delivering strong results despite volatile environment 2 Growing the institutional franchise while transforming our Retail and Wealth proposition 3 Highly cash generative operations with long-term underpin from in-force business 4 Strong capit
Slide 36: Appendix
Appendix Additional financial information
Slide 37: Our asset base
Our asset base We are an Asset Owner and an Asset Manager Group View: £370bn AUMA Asset Owner view Asset Manager view 3 Corporate Assets1 14 Other Heritage 33 Shareholder Annuities 74 Other Group Assets With-Profits Fund £296bn 84 Assets administered (£145bn) Traditional With-Profits 218 on behalf o
Slide 38: Assets under Management and Administration
Asset under Management and Administration FY 2019 to H1 2021 Net Net Market / Market / FY 2019 Inflows Outflows client H1 2020 FY 2020 Inflows Outflows client H1 2021 Other Other (£bn) flows flows Savings & Asset Management Institutional Asset Management 76.8 6.5 (3.7) 2.8 1.6 81.2 85.5 7.1 (4.9) 2.
Slide 39: AUMA by asset class
AUMA by asset class H1 2021 On-balance sheet AUMA External AUMA S/H Annuity & Corporate Total balance With-Profits Unit linked Retail Institutional Total external Total AUMA (£bn) Other Sh Assets sheet Equity securities 70.3 11.1 - - 81.4 27.1 10.0 37.1 118.5 Debt Securities 43.1 2.7 18.5 1.2 65.5 3
Slide 40: Limited exposure to Investment Risk
Limited exposure to Investment Risk Shareholder Annuity, Corporate Assets and Other H1 2021: £28bn + £10bn • o/w £28bn Investment risk fully borne by shareholders • o/w £10bn Reinsurance assets backing liabilities transferred to Rothesay Traditional WP 1. Shareholder support may be required in extre
Slide 41: Credit quality of the Shareholder Annuity book
Credit quality of the Shareholder Annuity book £22bn1: 98% investment grade Heritage Breakdown by rating Breakdown by capital ranking <BBB Subordinated 2% 1% BBB Risk Free2 Senior Unsecured 17% Risk Free2 20% 18% 20% AAA 8% A AA 37% 16% Secured 61% 1. Front office data. Cash and cash equivalents, de
Slide 42: Retail Asset Management: Mutual funds performance
Retail Asset Management Mutual funds performance Mutual funds performance as of December 2019, 2020 and June 2021 (as % of AUMA) 4 11 10 16 20 23 4 34 34 9 34 29 39 36 44 44 47 54 29 47 16 49 57 46 25 26 35 29 19 43 28 21 34 16 33 21 17 24 13 19 18 22 26 22 9 31 26 29 16 18 17 21 15 13 13 13 15 11 1
Slide 43: Retail Asset Management: Largest SICAV and OEIC mutual funds
Retail Asset Management Largest SICAV and OEIC mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND FY 2020 SALE REDEMPTION NET FLOWS H1 2021 by AUMA OTHER 1 OEIC + SICAV Bonds Optimal Income 15.1 2.3 (3.2) (0.9) (0.1) 14.1 2 OEIC + SICAV Equities Global Dividend 4.0 0.3 (0.5) (0.
Slide 44: Retail Asset Management: Largest SICAV mutual funds
Retail Asset Management Largest SICAV mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND FY 2020 SALE REDEMPTION NET FLOWS H1 2021 by AUMA OTHER 1 SICAV Bonds Optimal Income 12.9 2.2 (2.8) (0.6) (0.2) 12.1 2 SICAV Multi Asset Dynamic Allocation 3.2 0.2 (0.7) (0.5) (0.0) 2.6 3 SI
Slide 45: Retail Asset Management: Largest OEIC mutual funds
Retail Asset Management Largest OEIC mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND FY 2020 SALE REDEMPTION NET FLOWS H1 2021 by AUMA OTHER 1 OEIC Equities Global Themes 2.1 0.0 (0.1) (0.1) 0.3 2.3 2 OEIC Equities Global Dividend 2.3 0.1 (0.3) (0.2) 0.1 2.3 3 OEIC Bonds Opti
Slide 46: With-Profits Fund: Strategic Asset Allocation
With-Profits Fund Strategic Asset Allocation Asset allocation evolution between 2010 and H1 2021 Asset allocation as of June 2021 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Equities Real Estate Alternatives Fixed Income LEGEND UK Asia ex.
Slide 47: 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) 1 107% Cash SONIA Cumulative Rate 20% UK RPI Cumulative Rate PruFund Growth Fund 67% 15% ABI Mixed Investment 20-60% sh
Slide 48: 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 Up to 6-year programme based on -80 Matur
Slide 49: From IFRS Adjusted Operating Profit to IFRS Profit After Tax
From IFRS Adjusted Operating Profit to IFRS Profit After Tax (£m) H1 2019 H1 2020 H1 2021 Savings & Asset Asset Management 216 163 140 Management With-Profits (PruFund1) 29 24 46 Other 17 (25) (25) Total Savings & Asset Management 262 162 161 With-Profits 97 110 108 Heritage Shareholder Annuities &
Slide 50: Focus on AOP Other items
Focus on AOP Other items H1 2020 H1 2021 H1 2020 H1 2021 (£m) International business 11 15 Investment income (10) 5 Savings & Asset Management Other (26) (45) Total (25) (25) Other (25) (25) H1 2020 H1 2021 Mismatching profits 28 (15) Other assumption and model changes (15) 33 Experience variances 1
Slide 51: Diverse risk exposures
Diverse risk exposures Breakdown of the shareholder Solvency II SCR by risk type H1 2021 11.0 (£bn) 0.5 Sectoral Operational & expense 1.5 0.3 Lapse Longevity 1.7 1.0 Currency 5.4 (5.6) Credit 3.1 0.4 Interest rate Property 0.9 1.6 Equity Undiversified SCR Diversification, SCR deferred tax, and othe
Slide 52: Solvency II position
Solvency II position1 M&G Group H1 2021 (£bn) Shareholder view With-Profits Fund view Regulatory view 14.5 3.6 Surplus = 5.4bn 10.8 11.0 10.8 9.1 Surplus = 5.4bn Surplus = 7.4bn 3.6 5.4 5.4 3.6 Own Funds SCR Own Funds SCR Own Funds SCR Solvency ratio 198% Solvency ratio 301% Solvency ratio 159% 1. A
Slide 53: Solvency II sensitivities
Solvency II sensitivities Estimated impact on % ratio and surplus Shareholder Solvency II market sensitivities With-Profits Solvency II market sensitivities H1 2021 H1 2021 Solvency ratio Surplus Solvency ratio Surplus (%) (£bn) (%) (£bn) Base Shareholder position 198 5.4 Base With-Profits position
Slide 54: Operating Capital Generation
Operating Capital Generation H1 2020 H1 2021 (£m) Own Funds SCR Total Own Funds SCR Total Asset Management 163 (8) 155 140 4 144 Asset Management With-Profits 87 (69) 18 93 (67) 26 Savings & - of which: In-force 76 (37) 39 89 (39) 50 - of which: New business 11 (32) (21) 4 (28) (24) Other 16 (3) 13
Slide 55: Parent company liquidity
Parent company liquidity Cash and liquid assets at £1.7bn Parent company cash and liquid assets H1 2021 (£bn) Covers parent company outgoings for > 1 year 1.1 (0.1) 1.7 (0.3) 1.0 FY 2020 parent company cash Cash remittances from Central costs & Cash dividends paid H1 2021 parent company cash and liq
Slide 56: 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 57: Our international footprint
Our international footprint 3 Corporate Assets £370bn AUMA 85 UK 0.2 Retail Savings 25 locations 130 27 £306.5bn 62 20 Europe 28 markets 28 £47.6bn 1.6 7.4 0.4 Middle East Asia-Pac & Africa1 £9.0bn 0.7 Americas £5.8bn £1.1bn Retail Savings Heritage Retail Asset Management Distribution, operations an
Slide 58: 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