M&GMar 9 2023

M&G profits fall amid annuity losses

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M&G profits fall amid annuity losses
Market volatility impacted M&G's profits in 2022 (Luke MacGregor/Bloomberg)

M&G’s profits fell 27 per cent in 2022 after market volatility increased its annuity losses.

In a full year results statement this morning (March 9), the investment manager reported pre-tax adjusted operating profit of £529mn, down from £721mn a year before.

M&G attributed most of this loss - £172mn - to duration mis-matching losses in its annuity portfolio, and foreign exchange losses on its dollar-denominated debt.

The dollar rose 12 per cent in 2022 against the pound, and at its highest point in September $1 was worth £1.08.

The volatility in markets contributed to a £28bn reduction in the value of assets under management, dropping to £342bn at the end of the year and partially offset by a number of acquisitions made in the year.

However, M&G’s wholesale asset management division saw net inflows for the first time since 2018.

Some £500mn was invested in the year, compared with £3.8bn in net outflows in 2021.

The PruFunds range contributed to £200mn in inflows to the wealth business, though the group’s institutional business saw net outflows of £700mn.

The popularity of the PruFunds drove the operating profit of M&G Wealth to £96mn, more than double the figure for the year before.

M&G’s chief executive Andrea Rossi said the company has launched a ‘transformation’ programme targeting £200mn in cost savings by the end of 2025.

“To meet our £200mn cost savings target we will improve client journeys through digitalisation; remove management layers and streamline governance, enhancing our approach to shared services and outsourcing; and optimise our operating model.”

M&G is also investing in its “digital capabilities” to ensure financial advice is more accessible to the UK market.

Earlier this year the group’s wealth division launched a direct-to-consumer investment platform called “&me”.

It is designed for younger investors, and will provide them with access to consultants on their investments.

It comes a year after M&G Wealth led a funding round in digital investment app Moneyfarm.

M&G also bought a number of financial management firms, including Continuum, Sandringam Partners and DFM business TCF Investments.

M&G Wealth was launched in September 2020 to bring together Ascentric, a platform acquired from Royal London, Prudential Financial Planning, The Advice Partnership and the M&G Direct funds business, the direct-to-consumer part of M&G Investments, to expand the adviser-based side of the company.