M&g Plc · LSE:MNG
M&g — H1 2023 Earnings Presentation
56 slides from M&g's earnings presentation, Sep 20, 2023
Slide 1: 2023 Half Year Results
Financial Strength Simplification Growth 2023 Half Year Results 20 September 2023 1
Slide 2: Disclaimer
M&G plc 2023 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 2022 HY 2023 Net client flows1 (£bn) 1.2 0.7 AUMA and Flows Assets under Management and Administration (£bn) 3422 333 IFRS 17 Adjusted Operating Profit (£m) 298 390 Adjusted Operating of which Asset Management 124 118 Profit of which Retail & Savings 294 374 of which Corporat
Slide 4: Business review
Business review Andrea Rossi, Group Chief Executive
Slide 5: Good progress on our core priorities
Good progress on our core priorities 1 2 3 Financial Simplification Growth strength On track to achieve Transformation programme Positive net flows despite capital generation target advancing at pace challenging markets Interim DPS of 6.5p, Driving operational efficiency High-value propositions up 5
Slide 6: Financial strength
1 Financial strength Strong Operating Capital Generation, interim DPS up 5% Growing Capital Generation and DPS, Strong Solvency and liquidity, on track for £2.5bn target for 2022-24 focus on leverage 7 Solvency ratio1 Leverage ratio2 750 6.5 Interim Target range Target <30% over 650 6.1 6.2 DPS6.5 o
Slide 7: Simplification: Transformation programme underway
2 Simplification Transformation programme underway Programme objectives Target £200m cost savings by lever Good progress in just 6 months c. 30% c. 20% • Successfully migrated nearly 2m Streamline the Operational Sourcing and policies to new admin system operating model efficiency location strategy
Slide 8: Aligned leadership structure to business model
2 Simplification Aligned leadership structure to business model Life Insurance Asset Manager Wealth Retail & Savings Retail & Savings Risk and investment solutions, International active investment manager Integrated Wealth proposition, providing scale and resilience with differentiated high-value in
Slide 9: Growth: Asset Management international presence
3 Growth: Asset Management Continuing to build on our expertise and international presence Built manufacturing capabilities Steadily adding external clients Expanding distribution supported by the internal client delivering positive net flows across EMEA and Asia • 2020: Added Japanese and Asian Equ
Slide 10: Further improving Wholesale Asset Management
3 Growth: Asset Management Further improving Wholesale Asset Management Turned around performance1 Turned around flows Diversified the proposition Over 70% of assets above median Continued positive trend Winning across multiple strategies 4 6 months 11 1.3 Japan Equity 2.0 0.5 only 9 32 44 Top Infra
Slide 11: Positive momentum in high-value Private Markets business
3 Growth: Asset Management Positive momentum in high-value Private Markets business Private Markets at M&G Strong capital queue Launched European Living Six centres of excellence fund with €580m internal £5bn of committed assets Real and external seed capital Estate Structured Credit Launched a new
Slide 12: Growth: Wealth
3 Growth: Wealth Operational improvements and strong flows Launched PruFund on Network of controlled Strongest PruFund UK sales All PruFund digital platform in May advisers growing steadily since 2020 (in £bn) solutions now on platform 510 3.3 434 2.9 2.9 245 252 2.5 Surpassed 500 advisers through a
Slide 13: Successfully re-entered the UK DB de-risking market
3 Growth: Life Insurance Successfully re-entered the UK DB de-risking market Market entry Closed two deals Extend lifetime capital generation of in-force book c. £290m deal Achieve attractive returns on capital deployed OUR with an existing client moving to full buy-in OBJECTIVE Leverage M&G’s Pursu
Slide 14: Key messages: Financial Strength, Simplification, Growth
Key messages: Financial Strength, Simplification, Growth 1 Positive net client flows despite persisting market volatility 2 Growing internationally and in high-value segments, i.e. Private Markets, Wholesale, PruFund 3 Re-entered the DB de-risking market, leveraging M&G business model to drive profi
Slide 15: Financial review
Financial review Kathryn McLeland, Chief Financial Officer
Slide 16: Positive flows, strong Operating Profit and Capital Generation
Positive flows, strong Operating Profit and Capital Generation Financial highlights Net client Adjusted Operating Shareholder SII flows1 Operating Profit Capital Generation coverage ratio £0.7bn £390m £505m 199% 3rd straight year of net inflows Up 31% on H1 2022 Up 17% on H1 2022 In line with FY 202
Slide 17: Third consecutive year of positive net client flows
Third consecutive year of positive net client flows1 AUMA, net flows and market movements Movement in AUMA (£bn) Net client flows1 (£bn) 342 0.8 333 H1 2022 H1 2023 Change (0.1) (3.2) (6.7) 99 Institutional Institutional 94 Asset Mgmt. 0.3 (1.4) (1.7) Asset Mgmt. Of which Wholesale £(3.8)bn 54 52 in
Slide 18: Operating profits up by 31% Year-on-Year
Operating profits up by 31% Year-on-Year Adjusted Operating Profit by source (£m) H1 2022 H1 2023 • H1 2023 Asset Management Revenues and Costs include £20m and £(19)m Asset Management respectively for responsAbility3 AM Revenues 492 496 • On a like-for-like basis, revenues are down 3% due to advers
Slide 19: Asset Management result
Asset Management result Impact of lower AUM partly offset by improved margins, costs being actively managed End of period AUM (£bn) Fee margins1 (bps) Revenues and costs (£m) -5% Performance 320 5 11 11 fees 303 Investment income 282 60 8 (12) 5 57 58 and minorities2 Wholesale Average 492 496 AUM 46
Slide 20: Retail & Savings: Wealth, focus on PruFund UK
Retail & Savings: Wealth, focus on PruFund UK Highest gross inflows and net flows in over three years, earnings up 16% Adjusted Operating Profit PruFund Growth net returns1 PruFund (£m) 20% 20% 17% H1 2022 H1 2023 13% 6% CSM release and Risk Adjustment 79 101 +28% 31/12/2020 30/06/2021 31/12/2021 30
Slide 21: Retail & Savings: Heritage, Traditional With-Profits and Annuities
Retail & Savings: Heritage, Traditional With-Profits and Annuities AOP up 39% due to higher CSM release and returns on excess assets Adjusted Operating Profit Adjusted Operating Profit Traditional With-Profits (£m) Shareholder Annuities & Other (£m) H1 2022 H1 2023 H1 2022 H1 2023 7% run- CSM releas
Slide 22: CSM growth driven by PruFund and Traditional With-Profits
CSM growth driven by PruFund and Traditional With-Profits Each product shows specific CSM dynamics CSM movements CSM movements by product line Annuities and With-Profits (£m) Subtotal £m FY 2022 A B C D A to D E H1 2023 88 29 339 Total 5,716 339 88 29 (271) 185 (137) 5,764 5,716 5,764 (271) (137) An
Slide 23: Underlying Capital Generation of £352m
Underlying Capital Generation of £352m Continued strong result albeit 9% lower than H1 2022 Underlying Capital Generation (£m) H1 2022 H1 2023 • Broadly in line with the AOP1 result, year-on-year Asset Management 142 119 reduction predominantly driven by adverse market movements impacting revenues •
Slide 24: Operating Capital Generation of £505m
Operating Capital Generation of £505m Continued strong contribution from asset trading Operating Capital Generation (£m) H1 2022 H1 2023 Underlying Capital 386 352 Generation Asset trading, • Asset trading contribution in line with H1 2022, optimisation 124 135 mainly driven by a more conservative W
Slide 25: Strong OCG result supported solvency ratio at 199%
Strong OCG result supported solvency ratio at 199% Capital Generation impacted by £280m capital restrictions and £310m dividend 13% 2% Solvency II (1%) (6%) (1%) (7%) ratio1 (%) 199% 199% 0.5 0.1 Solvency II (0.1) (0.3) (0.1) (0.3) surplus Mostly £310m (£bn) 4.6 Mainly due to lower for the 2022 than
Slide 26: Small movement in the Solvency II leverage ratio
Small movement in the Solvency II leverage ratio Focus on deleveraging remains unchanged Solvency II leverage ratio IFRS 17 leverage ratio FY 2022 HY 2023 HY 2023 We remain 11.3 committed to reducing the Nominal 9.3 9.11 value of 3.2 leverage ratio to debt <30% by 2025 29% 35% 36% At the same level
Slide 27: Key messages
Key messages 1 Positive net client flows despite persisting market volatility 2 Strong start on simplification agenda and £200m cost savings target 3 31% higher earnings with improved contribution from Retail & Savings and higher interest income 4 17% higher Operating Capital Generation, both strong
Slide 28: Wrap up
Wrap up
Slide 29: 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 Manager CIR <70% by 20252 >50% earnings from the 3 Growth Asset Manager and Wealth by 20253 1. Refers to the
Slide 30: Appendix
Appendix Additional financial information
Slide 31: Our asset base: Asset Owner and Asset Manager
Our asset base We are an Asset Owner and an Asset Manager Group View: £333bn AUMA Asset Owner view3 Asset Manager view 3 Corporate Assets1 Other Group Assets 30 £303bn 90 Assets managed and With-Profits Fund Heritage administered on (£126bn) 187 behalf of Group Internal Assets customers2 157 managed
Slide 32: Assets under Management and Administration
Assets under Management and Administration FY 2021 to H1 2023 Net Net Market / Market / FY 2021 Inflows Outflows client H1 2022 FY 2022 Inflows Outflows client H1 2023 Other Other (£bn) flows flows Institutional Asset Management 103.1 5.2 (4.9) 0.3 (1.2)1 102.2 99.2 7.4 (8.8) (1.4) (3.8) 94.0 Manage
Slide 33: AUMA by asset class
AUMA by asset class H1 2023 On-balance sheet AUMA External AUMA S/H Annuity Corporate With-Profits Unit linked Total Wealth Wholesale Institutional Total Total AUMA (£bn) & Other Sh assets Equity securities 69.7 9.5 - 0.2 79.4 4.4 24.0 9.7 38.1 117.5 Debt Securities 34.4 1.9 11.8 1.1 49.2 1.1 26.9 5
Slide 34: Wholesale Asset Management: Mutual funds performance
Wholesale Asset Management Mutual funds performance Mutual funds performance as of FY 2021, 2022 and H1 2023 (as % of AUMA) 5 4 22 29 39 36 32 45 44 48 44 23 21 31 16 44 44 22 27 20 26 15 10 7 14 23 39 31 22 25 23 26 20 16 6 1 FY-21 FY-22 H1-23 FY-21 FY-22 H1-23 FY-21 FY-22 H1-23 5-year 3-year 1-yea
Slide 35: 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 2022 SALE REDEMPTION NET FLOWS H1 2023 by AUMA OTHER 1 OEIC + SICAV Bonds Optimal Income 9.72 0.92 1.51 (0.60) (0.05) 9.07 2 OEIC + SICAV Equities Global Dividend 4.76 0.69 0.
Slide 36: Largest SICAV mutual funds
Wholesale Asset Management Largest SICAV mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND FY 2022 SALE REDEMPTION NET FLOWS H1 2023 by AUMA OTHER 1 SICAV Bonds Optimal Income 8.34 0.82 1.32 (0.51) (0.09) 7.75 2 SICAV Equities Global Dividend 2.52 0.50 0.32 0.19 0.10 2.81 3 SIC
Slide 37: Largest OEIC mutual funds
Wholesale Asset Management Largest OEIC mutual funds AUMA and Flows (£bn) RANK MARKET/ PRODUCT ASSET CLASS FUND FY 2022 SALE REDEMPTION NET FLOWS H1 2023 by AUMA OTHER 1 OEIC Equities Global Dividend 2.24 0.19 0.18 (0.00) 0.05 2.29 2 OEIC Equities Global Themes 2.29 0.06 0.12 (0.06) 0.03 2.26 3 OEIC
Slide 38: With-Profits Fund: Strategic Asset Allocation
With-Profits Fund Strategic Asset Allocation Asset allocation evolution between 2013 and H1 2023 Asset allocation as of 30 June 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. Ja
Slide 39: 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)1 135% Cash SONIA Cumulative Rate 20% UK RPI Cumulative Rate PruFund Growth Fund 88% ABI Mixed Investment 20-60% shares
Slide 40: From IFRS Adjusted Operating Profit to IFRS Profit After Tax
From IFRS Adjusted Operating Profit to IFRS Profit After Tax (£m) H1 2022 H1 2023 AM Revenues 492 496 Management AM Cost (367) (394) Asset Performance fees 11 11 Investment income and minority interest1 (12) 5 Total Asset Management AOP 124 118 Wealth 93 91 o/w PruFund UK 103 119 Retail & Savings o/
Slide 41: Adjusted Operating Profit additional details
Adjusted Operating Profit additional details (£m) H1 2022 H1 2023 Asset Management H1 2022 H1 2023 AM Revenues 492 496 Investment income (4) 13 AM Costs (367) (394) Minority interest1 (8) (8) Performance fees 11 11 Total (12) 5 Investment income and minority interest1 (12) 5 Total Asset Management A
Slide 42: Asset Management results by client type and asset class
Asset Management results by client type and by asset class Steady margins and improving quality of revenues Results by client type Results by asset class End of period AUMA Revenues Margins End of period AUMA Revenues Margins (in £bn) (in £m) (in bps)1 (in £bn) (in £m) (in bps)1 492 496 298 57 58 28
Slide 43: Key drivers of CSM movements
Key drivers of CSM movements Annuities, PruFund and Traditional With-Profits H1 2022 FY 2022 H1 2023 Legend: categories as per slide 22 Opening Annuities CSM 1,171 1,171 1,206 A Interest accreted and expected returns A Interest accreted 10 24 14 B New business Annuities B New Business 2 6 3 C Assump
Slide 44: Total Capital Generation
Total Capital Generation H1 2022 H1 2023 (£m) Own Funds SCR Total Own Funds SCR Total Asset Management Asset Management Underlying Capital Generation 129 13 142 101 18 119 Retail & Savings Wealth 124 (37) 88 128 (53) 75 o/w PruFund UK 127 (32) 95 156 (53) 102 - of which: In-force 95 11 106 115 3 118
Slide 45: Solvency II position
Solvency II position1 M&G Group H1 2023 (£bn) Shareholder view With-Profits Fund view Regulatory view Eligible Own Funds Restriction of £280m 11.1 Eligible Own Funds 2.0 Restriction of £280m Surplus = 4.4bn 8.8 8.8 6.4 8.6 Surplus = 4.4bn 2.0 Surplus = 6.6bn 4.4 4.4 2.0 Own Funds SCR Own Funds SCR O
Slide 46: Capital restriction of £280m triggered by reduction in regulatory SCR
Capital restriction of £280m triggered by reduction in regulatory SCR No restriction present at FY 2022 Capital tiering Regulatory SCR Restrictions FY 2022 H1 2023 • Tier 2 and Tier 3 capital 7.2 Tier 2 + Tier 3 restriction can jointly contribute to 6.4 With- Value of subordinated debt 2,998 2,877 O
Slide 47: Solvency II sensitivities
Solvency II sensitivities Estimated impact on % ratio and surplus Shareholder Solvency II market sensitivities With-Profits Solvency II market sensitivities H1 2023 H1 2023 Solvency ratio Surplus Solvency ratio Surplus (%) (£bn) (%) (£bn) Base Shareholder position 199 4.4 Base With-Profits position
Slide 48: Diverse risk exposures
Diverse risk exposures Breakdown of the shareholder Solvency II SCR by risk type H1 2023 (£bn) 8.8 0.6 Sectoral Operational & 1.2 expense 0.5 Lapse Longevity 0.8 1.1 Currency 4.4 Credit 1.6 (4.4) 0.7 Interest rate Property 0.8 1.6 Equity Undiversified SCR Diversification, SCR deferred tax, and other
Slide 49: 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 • Our diversified and actively Outer circle shows H1-23, inner FY-22 Outer circle shows H1-23, inner FY-22 managed Annuity portfolio contin
Slide 50: 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 51: Parent company liquidity
Parent company liquidity Cash and liquid assets at £0.8bn Parent company cash and liquid assets H1 2023 (£bn) 0.3 1.0 (0.2) 0.8 (0.3) FY 2022 Cash dividends from subsidiaries Corporate costs and other Cash dividends and shares H1 2023 1 movements purchased by EBT 1.Cash dividends paid to equity hold
Slide 52: Our international footprint
Our international footprint 9 2.5 Corporate Assets £333bn AUMA 20 50 UK 37 locations 90 £256bn 27.1 85 Europe 26 markets 26.4 £54bn 2.3 8.5 0.7 Middle East Asia-Pac & Africa £11bn 1.3 £11bn Americas £2bn 3.0 7.5 Wealth Heritage Wholesale Asset Management Other Retail & Savings Institutional Asset Ma
Slide 53: IFRS Review
IFRS 17 Review Update on our FY 2022 figures presented in July 2023
Slide 54: 2022 movements in the With-Profits CSM
2022 movements in the With-Profits CSM (PruFund + Traditional WP) Introduction of expected real world rate of return FY 2022 FY 2022 (£bn) Notes as presented in July 2023 updated AOP methodology Opening With-Profits CSM 3.17 3.17 Of which £2.53bn attributable to Shareholder and £0.64bn to Policyhold
Slide 55: 2022 Adjusted Operating Profit
2022 Adjusted Operating Profit IFRS 4 IFRS 17 £m FY 2022 FY 2022 FY 2022 Notes as presented in July 2023 updated AOP methodology Asset Management AOP 264 264 264 Wealth 96 136 158 Reflects increase in CSM amortisation rate and impact of o/w With-Profits (PruFund UK) 128 167 190 expected real world r
Slide 56: 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 Amrita Jairaj Investor Relations Senior Manager +44