M&G PLC · LSE:MNG
M&G — FY2021 Earnings Presentation
63 slides from M&G's earnings presentation, Mar 8, 2022
Slide 1: 2021 Full Year Results
2021 Full Year Results 8 March 2022
Slide 2: Disclaimer
M&G plc 2021 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: Key messages
Key messages 1 Achieved all the key targets set out at demerger 2 Continued to deliver strong financial and operational results 3 Accelerated strategy in priority areas through targeted acquisitions 4 Announced £1.1bn returns via dividends, share buyback and management of leverage 5 Outlined balance
Slide 4: Financial highlights
Financial highlights FY 2020 FY 2021 Assets under Management and Administration (£bn) 367 370 AUMA and Flows External net client flows1 (£bn) (6.6) 0.6 Adjusted Operating Profit (£m) 788 721 Adjusted - of which Asset Management (£m) 330 315 Operating Profit - of which Retail & Savings (£m) 701 660 -
Slide 5: Business Review
Business Review John Foley, Chief Executive Officer
Slide 6: Within two years as an independent business, we have achieved all priorities
Launched PruFund in Europe in partnership with local institutions 1 Obtained regulatory approval in December 2021, already started distribution in Italy Within two years as Stabilised Retail asset management franchise an independent 2 Started 2022 with net inflows, after reducing net outflows by c.
Slide 7: Another year of strong financial performance
Another year of strong financial performance Operational delivery translating into financial delivery Adjusted Total Shareholder AUMA Operating Capital SII coverage Profit Generation ratio £370bn £721m £1.8bn 218% 7
Slide 8: Balanced capital allocation and a new three-year target
Balanced capital allocation and a new three-year target Capital generation £1.1bn returns announced today, in addition to £260m invested in the business Equates to final dividend Expected to complete of 12.2p per share1 within 12 months Follows 2021 interim DPS of 6.1p (£156m) £311m £500m Reduction
Slide 9: Aligning our business to customers needs
Aligning our business to customers needs Setting a clear vision and priorities for each segment Asset Management One Retail & Savings (Asset Owner) Leading international player focused on active, M&G A trusted partner offering end-to-end high value-add investment capabilities, and support to custome
Slide 10: 'One M&G' – The competitive advantage at the core of our strategy
‘One M&G’ – The competitive advantage at the core of our strategy Leveraging collaboration and combined scale across segments Asset Management Retail & Savings (Asset Owner) Powers the With-Profits fund with a With £169bn AUM, gives the Asset broad range of private, public and Manager scale and brea
Slide 11: Meeting operational milestones
Meeting operational milestones Highlights from 2021 Asset Management Retail & Savings (Asset Owner) Aligned new organisational structure to investment capabilities Launched PruFund in Europe, commencing distribution in Italy in partnership with Intesa Sanpaolo Scaling US and Asia capabilities comple
Slide 12: The growth opportunity from PruFund in Europe
The growth opportunity from PruFund in Europe Case study for Italy: Future+ The right market The right proposition The right partner The opportunity to tackle large … helping savers take a … supported by one of the and growing cash deposits… ‘first step in investments’… largest Italian banking group
Slide 13: Investing to accelerate corporate strategy in priority areas
Investing to accelerate corporate strategy in priority areas Targeted acquisitions supporting M&G’s ongoing business transformation Asset Management Retail & Savings (Asset Owner) International active capabilities with Scaling Wealth Management proposition, focus on private assets and sustainability
Slide 14: Scaling capabilities and presence in high-value add markets
Scaling capabilities and presence in high-value add markets Growing in areas with healthy and resilient margins Leader in private asset sustainable investing Comprehensive Wealth offering in the UK Catalyst responsAbility Advice D2C 8% Moneyfarm Hybrid Independent Tied Ignite Sandringham PFP and TAP
Slide 15: Capital management framework
Capital management framework
Slide 16: Delivering long-term growth and attractive returns
Delivering long-term growth and attractive returns Our approach and framework for capital management Approach Capital management framework Our priority is to maintain appropriate financial strength and reward shareholders with Considers: Financial Stable or increasing 1 attractive dividends Solvency
Slide 17: Financial strength covers solvency, liquidity and leverage
Financial strength covers three dimensions: Solvency, liquidity and leverage Countercyclical buffer allows flexibility in managing Solvency II ratio Financial strength Solvency coverage ratio Assessing our position relative to: Consideration given to returns 3 Solvency ratio1 Leverage ratio2 and com
Slide 18: Investments in the business and returns are competing uses of capital
Investments in the business and returns are competing uses of capital Allocation is based on strategic, financial and risk considerations Strategic rationale Financial Risk fit with business strategy attractiveness Profile • Buy vs. build scenarios • Ability to retain and BUSINESS FOCUS Higher Asset
Slide 19: Planned uses of capital bring SII ratio to top of target range
Planned uses of capital bring SII ratio to top of target range Capital allocation and pro-forma SII ratio Capital allocation Pro-forma Solvency II ratio 218% 5% Allocation of £311m £500m 6% 2021 final Share any surplus dividend1 buyback 10% 192% capital will £1.1bn 6% Capital be reviewed Returns on
Slide 20: Key messages
Key messages 1 Achieved all the key targets set out at demerger 2 Continued to deliver strong financial and operational results 3 Accelerated strategy in priority areas through targeted acquisitions 4 Announced £1.1bn returns via dividends, share buyback and management of leverage 5 Outlined balance
Slide 21: Financial Review
Financial Review Paul Cooper, Chief Financial Officer (Interim)
Slide 22: Strong financial performance and positive external net flows
Strong financial performance and positive external net flows Financial highlights Adjusted Total Capital Shareholder SII AUMA Operating Profit Generation coverage ratio £370bn £721m £1.8bn 218% • External net inflows1 of • £315m contribution from • Operating Capital Generation • Up from 182% at FY 2
Slide 23: External net flows improved from £(6.6)bn to £0.6bn
In 2021, external net flows1 improved from £(6.6)bn to £0.6bn vs. 2020 AUMA and External net flows Movement in AUMA (£bn) External net flows1 (£bn) 0.6 367 2 19 370 (1) (7) 86 (10) 103 Institutional 5.1 5.8 Institutional AM Asset Mgmt. 0.2 58 Retail (1.4) Wealth and Other R&S 53 Asset Mgmt. (2.0) Re
Slide 24: Adjusted Operating Profit by source
Adjusted Operating Profit by source (£m) FY 2020 FY 2021 Asset Management AM Revenues 947 953 • Asset Management Revenues increased despite headwind from implementation of Retail fee reviews (now complete) AM Costs (669) (672) Performance fees 42 23 • Cost base has remained stable despite capability
Slide 25: Asset Management: Strong Institutional and improving Retail flows
Asset Management: Strong Institutional and improving Retail flows External flows and AUMA External flows (£bn) End of year AUMA (£bn) 1 Steady Institutional growth 3.6 325 2.8 2.3 2.2 Continued positive net flows underpin 0.7 Institutional 284 strong growth of institutional franchise 275 53 Retail 3
Slide 26: Asset Management: Stabilised top line and absorbed Retail fee reviews
Asset Management: Stabilised top line and absorbed Retail fee reviews Margins, revenues, costs and AOP Fee margins1 (bps) Revenues and cost (£m) Performance 20 42 23 1 Completed Retail fee reviews fees Inv. Income Do not expect new major fee reviews 40 10 11 77 & minorities 2 following the changes a
Slide 27: Retail & Savings: Wealth
Retail & Savings: Wealth Focus on With-Profits (PruFund UK) Adjusted Operating Profit PruFund Growth net returns1 (£m) 34% 61 20% 8% 9% 63 4% (9) (8) (5)% FY18 HY19 FY19 HY20 FY20 HY21 FY21 19 Net flows in £bn 3.0 2.8 0.5 (0.2) (0.7) (0.7) FY 2020 Shareholder Hedge result Expense FY 2021 AOP Transfe
Slide 28: 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) 497 (16) 75 415 (49) (92) 202 6 205 (3) 0 FY 2020 Shareholder Hedge result Other FY 2021 FY 2020
Slide 29: Sources of Operating Capital Generation
Sources of Operating Capital Generation FY 2021: £1.1bn pre-tax Operating Capital Generation (£m) 1661 1,117 89 378 459 484 313 (288) Asset Management Retail & Savings Corporate Centre Underlying Capital Asset trading, Longevity Other Operating Capital Generation optimisation and Generation hedging
Slide 30: Sources of Capital Generation
Sources of Capital Generation FY 2021: £1.8bn post-tax Total Capital Generation Solvency II surplus (£bn) 0.9 1.1 (0.2) (0.0) (0.4) 6.2 4.8 Total Capital Generation £1.8bn Dividends & Operating Capital Market Other FY 2020 Tax capital FY 2021 Generation movements movements £bn movements Own Funds 10
Slide 31: Shareholder Solvency II coverage ratio
Shareholder Solvency II coverage ratio Leverage ratio measured on a capital basis reduced to 28% FY 2021 11.4 (£bn) £3.2bn debt at nominal value 28% Solvency II Leverage ratio1 218% Solvency ratio 7.9 £6.2bn surplus Own Funds Other Own Funds, including: 5.2 £1.4bn TMTP2 0.6 Sectoral £(1.8)bn risk ma
Slide 32: Delivered target cost savings and continuing to focus on efficiencies
Delivered target cost savings and continuing to focus on efficiencies Reduced absolute costs, while absorbing inflation and investing for growth M&G cost base Transformation 2017 to 2021 (£m) programme 1,312 1,234 1,182 Retail & Savings 9 Achieved £145m shareholders cost 397 314 269 Policyholder cos
Slide 33: Sources of earnings – Expected development
Sources of earnings – Expected development1 Key drivers of Adjusted Operating Profit Asset Management Institutional Retail Other Asset Management Expect continued positive flow momentum Improved outlook for flows; fee review now complete, Performance fees historic average is £15m-£25m; and resilient
Slide 34: Key takeaways
Key takeaways 1 Institutional asset management continues to deliver strong flows and revenues 2 Significant progress in Retail asset management and Wealth management 3 Highly cash generative operations with long-term underpin from the in-force business 4 Strong capital position with a Solvency II ra
Slide 35: Appendix 1: Additional financial information
Appendix 1 Additional financial information
Slide 36: 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 45 Other Group Assets £325bn With-Profits Fund 118 Heritage Assets managed and (£143bn) 214 administered on behalf of Group 169 Internal3 Assets customers2 manage
Slide 37: Assets under Management and Administration
Assets under Management and Administration FY 2019 to FY 2021 Net client Market / Net client Market / FY 2019 Inflows Outflows FY 2020 Inflows Outflows FY 2021 (£bn) flows Other flows Other Asset Management Institutional Asset Management 76.8 13.0 (7.9) 5.1 3.6 85.5 16.2 (10.4) 5.8 11.81 103.1 Retai
Slide 38: AUMA by asset class
AUMA by asset class FY 2021 On-balance sheet AUMA External AUMA S/H Annuity Corporate Total balance With-Profits Unit linked Wealth Retail Institutional Total external Total AUMA (£bn) & Other Sh Assets sheet Equity securities 72.4 10.7 - 0.3 83.4 3.9 21.3 19.5 44.7 128.1 Debt Securities 42.6 3.3 18
Slide 39: Credit quality of the Shareholder Annuity book
Credit quality of the Shareholder Annuity book £20bn1: 98% investment grade Breakdown by rating Breakdown by capital ranking <BBB Subordinated 2% 1% BBB Risk Free2 Senior Unsecured Risk Free2 18% 20% 17% 20% AAA 7% AA A 16% 37% Secured 62% 1. Front office data. Cash and cash equivalents, derivatives
Slide 40: Institutional Asset Management
Institutional Asset Management Strong performance, resilient margins and healthy pipeline Performance Pipeline, margins and asset base (as % of revenues1) 5.5 4.5 5.0 Healthy 3.0 4.0 3.8 pipeline Capital queue in £bn 103 86 Resilient 74 71 77 margins 64 Public 55 34 35 37 36 Assets Avg. fee margin i
Slide 41: Retail Asset Management: Mutual funds performance
Retail Asset Management Mutual funds performance Mutual funds performance as of December 2019, 2020 and 2021 (as % of AUMA) 5 4 11 10 23 4 22 34 34 9 29 32 47 23 29 49 57 25 35 16 21 44 44 24 33 19 18 39 31 29 22 17 20 13 13 15 FY-19 FY-20 FY-21 FY-19 FY-20 FY-21 FY-19 FY-20 FY-21 5-year 3-year 1-ye
Slide 42: 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 FY 2021 by AUMA OTHER 1 OEIC + SICAV Bonds Optimal Income 15.1 4.0 (5.4) (1.4) (0.4) 13.2 2 OEIC + SICAV Equities Global Dividend 4.0 0.6 (0.9) (0.
Slide 43: 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 FY 2021 by AUMA OTHER 1 SICAV Bonds Optimal Income 12.9 3.8 (4.8) (1.0) (0.5) 11.4 2 SICAV Multi Asset Dynamic Allocation 3.2 0.2 (1.2) (1.0) (0.1) 2.1 3 SI
Slide 44: 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 FY 2021 by AUMA OTHER 1 OEIC Equities Global Themes 2.1 0.1 (0.2) (0.1) 0.4 2.4 2 OEIC Equities Global Dividend 2.3 0.2 (0.6) (0.4) 0.3 2.2 3 OEIC Bonds Opti
Slide 45: With-Profits Fund Strategic Asset Allocation
With-Profits Fund Strategic Asset Allocation Asset allocation evolution between 2011 and 2021 Asset allocation as of December 2021 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Equities Real Estate Alternatives Fixed Income LEGEND UK Asia ex. Japa
Slide 46: With-Profits Fund Historical returns
With-Profits Fund Historical returns Annualised 5-year rolling returns1 PruFund Growth returns vs. peers 122% PruFund Growth returns after charges 25% (% returns above capital invested) 1 Cash SONIA Cumulative Rate 20% UK RPI Cumulative Rate PruFund Growth Fund ABI Mixed Investment 20-60% shares 71%
Slide 47: 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 -140 Scope equity market value at time of purchase -120 -100 Up to 6-year programme based on Matu
Slide 48: From IFRS Adjusted Operating Profit to IFRS Profit After Tax
From IFRS Adjusted Operating Profit to IFRS Profit After Tax (£m) FY 2019 FY 2020 FY 2021 AM Revenues 1,013 947 953 Management AM Cost (651) (669) (672) Asset Performance fees 20 42 23 Investment income and minority interest 1 40 10 11 Total Asset Management AOP 422 330 315 Wealth 34 (11) 41 o/w Pru
Slide 49: Adjusted Operating Profit additional details
Adjusted Operating Profit additional details (£m) FY 2020 FY 2021 Asset Management FY 2020 FY 2021 AM Revenues 947 953 Investment income 4 17 Minority interest1 6 (6) AM Costs (669) (672) Total 10 11 Performance fees 42 23 FY 2020 FY 2021 Investment income and minority interest1 10 11 Mismatching pr
Slide 50: Breakdown of the shareholder Solvency II SCR by risk type
Diverse risk exposures Breakdown of the shareholder Solvency II SCR by risk type FY 2021 10.5 (£bn) 0.6 Sectoral Operational & 1.4 expense 0.3 Lapse Longevity 1.6 1.0 Currency 5.2 (5.3) Credit 2.7 0.3 Interest rate Property 0.9 1.7 Equity Undiversified SCR Diversification, SCR deferred tax, and othe
Slide 51: Solvency II position M&G Group
Solvency II position1 M&G Group FY 2021 (£bn) Shareholder view With-Profits Fund view Regulatory view 15.3 3.8 Surplus = 6.2bn 11.4 11.6 11.4 9.1 Surplus = 6.2bn Surplus = 7.8bn 3.8 5.2 5.2 3.8 Own Funds SCR Own Funds SCR Own Funds SCR Solvency ratio 218% Solvency ratio 302% Solvency ratio 168% 1. A
Slide 52: With-Profits excess surplus distribution
With-Profits excess surplus distribution £1.5bn distributed to eligible policyholders With-Profits Fund view • £1.5 billion excess surplus capital £bn within the With-Profits fund 302% distributed as part of the 2022 288% 242% Solvency Ratio Pro-forma bonus declaration/price Solvency Ratio 0.8 7.8 S
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 FY 2021 FY 2021 Solvency ratio Surplus Solvency ratio Surplus (%) (£bn) (%) (£bn) Base Shareholder position 218 6.2 Base With-Profits position
Slide 54: Operating Capital Generation
Operating Capital Generation FY 2020 FY 2021 (£m) Own Funds SCR Total Own Funds SCR Total Asset Management Asset Management Underlying Capital Generation 320 (9) 311 308 5 313 Retail & Savings Wealth 151 (75) 75 117 (68) 49 o/w PruFund UK 163 (75) 88 128 (68) 60 - of which: In-force 151 (52) 99 169
Slide 55: In-force business underpins the long-term sustainability of dividend
Our in-force business underpins the long-term sustainability of dividend Annuities and With-Profits cumulative UCG1 is £10bn2, net of tax UCG1 for in-force Shareholder Annuities and With-Profits business £10bn cumulative (incl. PruFund) UCG does not include: (£bn) £10bn Underlying Capital Generation
Slide 56: Parent company liquidity
Parent company liquidity Cash and liquid assets at £1.7bn Parent company cash and liquid assets FY 2021 (£bn) 1.5 (0.3) 1.7 (0.5) 1.0 FY 2020 parent company cash Cash remittances from Central costs & Cash dividends paid FY 2021 parent company cash and liquid assets subsidiaries other movements to eq
Slide 57: 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 58: Our international footprint
Our international footprint 9 3 Corporate Assets £370bn AUMA 21 65 UK 0.2 Wealth 25 locations 118 £299.9bn 84 21 Europe 28 markets 27 £48.3bn 1.7 7.8 0.6 Middle East Asia-Pac & Africa £9.5bn 0.7 Americas £11.0bn £1.3bn 2.4 8.6 Wealth Heritage Retail Asset Management Other Retail & Savings Institutio
Slide 59: Appendix 2: Reconciliation between old and new segmentation
Appendix 2 Reconciliation between old and new segmentation
Slide 60: New segment reporting: Key changes
New segment reporting Key changes OLD segmentation NEW segmentation AUMA and flows allocated between All AUMA and flows included in Retail and Institutional based on client type; 1 South Africa Wholesale Asset Management c. £3bn AUMA moved from Wholesale to Institutional but, comparatives have not b
Slide 61: New segment reporting: AUMA and net flows
New segment reporting AUMA and net flows Net flows (£bn) New segments (FY 2020) Old segments (FY 2020) Asset Management AUMA Flows Notes Savings & Asset AUMA Flows Management Institutional AM 85.5 5.1 Institutional AM 85.5 5.1 Lower AUMA and flows reflect the transfer of c. £6bn of the Retail AM 58.
Slide 62: New segment reporting: Adjusted Operating Profit
New segment reporting Adjusted Operating Profit Adjusted Operating Profit (£m) New segments (FY 2020) Old segments (FY 2020) Asset Management Delta Notes Savings & Asset Management Includes investment income and profits from associates Asset Management 330 14 Asset Management 316 (2020 figure also b
Slide 63: 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