M&G pleased with first quarter amid volatile markets

The FTSE 100 company said the performance was particularly notable as it absorbed anticipated redemptions from UK institutional clients triggered by the ‘mini-budget crisis’ in September, as it highlighted in its full-year results.

Its wholesale asset management division experienced accelerated momentum, with net client inflows of £1bn in the first quarter, and a continued strong investment performance.

As of March, 68% of M&G's mutual funds ranked in the upper two performance quartiles over one year, and 75% achieved the same ranking over three years.

The wealth and other retail and savings segment also delivered positive net inflows of £0.3bn, driven by strong investment performance.

PruFund volumes further improved in the first quarter, with gross inflows of £1.6bn, following the impressive gross sales of £5.4bn achieved in 2022.

M&G said it remained committed to its transformation programme, reporting significant progress in streamlining the business and achieving cost-saving targets while enhancing client and colleague outcomes.

The voluntary redundancy programme, launched in March, had been successfully closed, with more than 200 accepted applications, representing about 4% of the total workforce.

It said the majority of those exits were expected to become effective between the fourth quarter of 2023 and the first three months of 2024.

The company said it was also actively right-sizing its office footprint to align with its needs, adding that in the first half, it concluded sub-leases on surplus space in its London estate, with further reviews of its footprint planned for the second half.

Despite ongoing volatility in financial markets, M&G said it maintained its strong financial position, with a shareholder Solvency II coverage ratio of 200% in the first quarter, up from 199% at the end of 2022 even after considering the impact of the £310m final dividend announced in March.

M&G's shareholder annuity portfolio performed resiliently in the period, and continued to be conservatively positioned, the board said, with a focus on high credit quality.

A significant portion - 98% - of the assets in the portfolio were described as investment grade, with the firm experiencing no defaults during the quarter.

The level of downgrades remained very low.

Looking forward, M&G reiterated its commitment to disciplined capital management, as well as a stable or increasing dividends-per-share policy.

“M&G started the year building on our strong momentum from 2022,” said group chief executive officer Andrea Rossi.

“At full-year Results we identified three priorities for the group - maintain financial strength through capital discipline, simplify the business, and deliver profitable growth focusing on asset management and wealth.

“I am pleased to say we have made good progress on each of those fronts and are on track to deliver on our ambitious targets.”

Rossi was “particularly encouraged” by the £1bb net client inflows achieved in wholesale asset management in three months.

“Thanks to this success, we more than offset the expected redemptions from institutional clients and drove inflows into high-margin propositions.

“Much of this growth has come from our home market, the UK, where we were amongst the 'top five' managers by net flows in the period, ending a long period of subdued performance.

“In institutional asset management, despite known headwinds in the UK, we have continued to expand our presence in Europe, winning large mandates in the Netherlands and Switzerland, where we secured £0.8bn in funding from the Swiss Investment Fund for Emerging Markets.”

Looking at M&G Wealth, Andrea Rossi said the firm continued to see good momentum, with PruFund sales growing to £1.6bn in the first quarter.

“In May we launched PruFund Growth, PruFund Cautious and PruFund Risk Managed versions on our digital platform, further expanding the reach of this unique proposition.

“Making the wider PruFund range more accessible to financial intermediaries will support flows in the second half of the year and beyond.

“Looking ahead, I'm both confident and excited about the prospects for M&G, as we execute on the strategy outlined at full-year results. “

The chief executive said they were “enthused by the progress to date”, and remained focussed on delivering operational efficiencies to benefit both clients and shareholders.

“Notwithstanding an uncertain external environment, we are building on the inherent strengths of our differentiated business model, delivering profitable growth alongside attractive shareholders returns.”

At 0855 BST, shares in M&G were down 0.83% at 202.3p.

Reporting by Josh White for Sharecast.com.