10th Mar 2020 09:12
(Alliance News) - M&G PLC on Tuesday reported a rise in assets under management in its maiden results after demerging from Prudential PLC.
Prudential announced plans to demerge M&G - its UK & Europe business - back in March 2018, resulting in two separately listed companies. The 332-year old insurer now operates in Asia, Africa and the US.
In October, Prudential completed the demerger of M&G and shares of M&G were admitted to trading on the London Stock Exchange's main market.
Shares in M&G were 2.7% higher in London on Tuesday morning at 177.10 pence each, but still down from its initial public offering price of 220p.
As at December 31, the investment management firm had assets under management and administration of GBP351.5 billion, 9.4% ahead of the GBP321.2 billion seen at the end of 2018, and 2.8% ahead of the consensus market expectation of GBP342.30 billion.
"Total assets under management and administration increased, largely reflecting investment returns over the year. Across Savings and Asset Management, we saw modest total net client outflows of GBP1.3 billion. Flows into our UK Retail Savings business, including PruFund, largely offset flows out of our Retail Asset Management business. This demonstrates the value of our diversified business model and the appeal of our smoothed investment propositions," Chief Executive John Foley said.
M&G's Institutional Asset Management and Retail Savings funds added 8.9% and 26%, respectively, pushing group assets under management higher, but this was partially offset by Retail Asset Management funds slipping 2.0% over 2019.
As a result, total Savings & Asset Management funds grew 9.2% to GBP215.9 billion.
M&G's Total Heritage funds added 8.5% to GBP134.0 billion, with particularly strong growth from Shareholder Annuities.
Total net outflows hit GBP8.9 billion in 2019, worse than market consensus of GBP7.2 billion, and slightly worse than the GBP8.7 billion net outflows recorded in 2018.
M&G's savings and asset management net client outflows topped GBP1.3 billion in 2019, improved from GBP1.7 billion in outflows in 2018, but worse than the GBP700 million expected by the market.
This was offset by a positive GBP39.2 billion added by market and other movements.
Foley commented: "We have achieved much in 2019. As well as executing a successful demerger, we have maintained a clear focus on the day-to-day management of our business as indicated by a positive set of financial results in a challenging market. Adjusted operating profit before tax and total capital generation for the year represent a resilient performance in line with our expectations."
M&G adjusted operating pretax profit was down 29% year on year in 2019 at GBP1.15 billion, from GBP1.62 billion in 2018, but was slightly ahead of consensus.
Total capital generation was GBP1.51 billion, down 37% from GBP2.37 billion in 2018, but was 29% ahead of consensus predictions of GBP1.17 billion.
Pretax profit was sharply higher at GBP1.75 billion from GBP597 million in 2018, as total revenue - net of reinsurance - saw a dramatic rise to GBP32.13 billion from a GBP2.15 billion loss in 2018.
This was due to earned premiums swinging to positive GBP11.19 billion in 2019 compared to a GBP76 million loss the year before.
M&G's Solvency II surplus rose to GBP4.5 billion at the end of 2019 from GBP4.0 billion at the same point a year before - as a result, its coverage ratio improved to 176% from 170%.
M&G declared an ordinary dividend of 11.92 pence per shares, plus a special demerger dividend of 3.85p, giving a total annual dividend of 15.77p. Consensus estimates hoped for a 17.9p payout.
Looking ahead, M&G believes the deadly coronavirus outbreak will continue to "unnerve" markets. It noted the "significant uncertainty" but was confident in its "resilient" balance sheet. M&G's Solvency II coverage ratio stood at 166% at March 6.
M&G also noted it has launched a voluntary redundancy scheme, with which it hopes to reduce staff costs by 10% in 2020.
"We have made a good start to life as an independent business and we are strongly positioned for growth. Our diversified investment capabilities, coupled with our client relationships in 28 markets, mean we are well positioned to meet the growing global demand for savings and investment solutions, supported by favourable long-term economic and social trends that offer growth opportunities for many years to come," Foley added.
By Paul McGowan; [email protected]
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