M&G plc

Good morning and welcome to M&G PLC's Half-Year Financial Results. I will now transfer you over to Luca Gagliardi, Director of Investor Relations, to begin.

Good morning, everyone, and welcome to M&G's 2024 Half Year Results. Thanks for those joining through the webcast and those in person here in the room. Today, we're going to go through a brief presentation with Andrea Rossi, our CEO, and Catherine McLeland, our CFO. And after that, we'll wrap up with a question from the room. And obviously, those online can also submit their questions. So without further ado, over to Andrea. Thank you very much.

Good morning and welcome to MNG's half-year results. I am very happy to be here with you today to share the progress we have achieved so far in 2024 as we continue to deliver on our strategic priorities and to lay the foundations for sustainable business growth. Over the last six months, we have taken meaningful steps forward, both from an operational perspective and towards all our financial targets. Despite a high rate environment, which subdued new business sales, we delivered a good performance with both operating profit and capital generation, nearly matching last year's record results. And thanks to our strong investment performance, we achieved some of the best flows among active managers. With market trends improving, we are well placed to capitalize on growth opportunities. Let me now take you through the key business highlights. We began our strategic journey 18 months ago, when I outlined my three priorities for M&G. Financial strength, simplification, and growth. We continue to relentlessly focus on them, and I'm proud of how much we have already achieved. So, first, let me talk about financial strength. In March, I told you that deleveraging was our top priority. Today, M&G has a very strong capital position and the lowest level of debt since becoming an independent company back in 2019. Thanks to the deleveraging actions announced in June, we bought back 461 million of debt, reduced ongoing interest by 21 million per annum, and lowered our capital restrictions to zero. Secondly, let's discuss simplification. Our transformation program is progressing well. We have increased the pace of cost reductions and already delivered 121 million of savings. Looking ahead, we remain committed to absorb inflationary pressures and improve profitability across the whole business. And simplification isn't just about costs, of course. It is also about focus and making tough choices about where we deploy our capital. After a strategic review, we concluded that our competitive position in the wealth market is not sufficiently strong to ensure profitable growth without committing significant further resources. This is why we have decided to focus and rationalize our wealth strategy. We will exit our digital platform and bring together the wealth and life operations under Clive Bolton's leadership. Through this change, we remain committed to the UK retail market, which offers a compelling growth opportunity for M&G. But we will focus and coordinate our efforts, complementing Proof Fund with the life insurance solutions that our customers want. We will also stop non-value-adding activities, reduce duplication and improve operational efficiency. Underpinning all of this is our ongoing focus on delivering improved service. And finally, on growth. 18 months into our journey, we have successfully navigated a challenging macro environment. Despite headwinds in the UK, the asset manager continued to expand internationally, with nearly 2 billion of net inflows in the first half. And we have also seen positive traction over the summer. With over 700 million of net inflows in July and August, we are confident about our momentum for the second half of the year. I'm also pleased with the ongoing progress in the live segment. After re-entering the BPA market, we are now working on a number of exciting opportunities we can unlock through our With Profits Fund. Our live team is developing new investment and guaranteed products, which we expect will drive greater flows into the Group from 2025 onwards. To do so, we will also leverage the meaningful excess capital in the With Profits Fund. For M&G, this means participating in the life insurance market through capital light solutions. A unique competitive advantage. I already mentioned a strong progress we had made across all our financial targets in just six months. You can see a summary of that progress on this slide. The half a billion operating capital delivered in EH1 means that we have almost reached our three-year cumulative target. This is why we have decided to upgrade it from 2.5 billion to 2.7 billion, reflecting our confidence in a continued strong operating result. Earlier, I spoke about how we tackled leverage. Considering the actions already taken and the strength of our balance sheet, we are on track to reach our target through organic owned funds growth. And on simplification, given the progress of our transformation program, we are increasing the cost savings target to 220 million. And this is before any additional benefits from the rationalization of wealth. In doing this, we reaffirm the importance of a culture of responsible cost discipline across the entire organization. I also welcome the improvement in the asset management cost-to-income ratio from 79 to 77%. This is an important achievement by Joseph Pinto and his team. Thank you, Joseph. But we know we need to do more. And finally, the share of capital light earnings increased from 42% to 45%, thanks to the 9% improvement in the asset management result, as we continue to pivot our business towards capital light growth. Let's now look at each priority in a bit more detail, starting with financial strength. The key message I want you to take away is that M&G has never been in such a strong financial position. M&G's balance sheet is in great shape and well positioned to support the business. Our leverage ratio improved from 35% to 32%, and all of you that are familiar with M&G will know how conservative our definition of this metric is. Using the definition adopted by some of our peers would give us a leverage ratio of just 23%, the lowest one in our sector on a like-for-like basis. Having already reduced debt interest costs and showing the lowest leverage ratio amongst peers, we do not anticipate redeeming any further debt in the near term. And we expect to achieve our targets through owned funds growth. Next, look at our second priority, simplification. In 2023, we maintained a flat cost base in spite of significant headwinds from inflation. And through strategic cost actions, we freed up resources that we then reinvested to expand our international distribution footprint and to add the capabilities we needed to re-enter the BPA market. This year, we have gone a step further. Despite continued inflationary pressures, we have reduced costs by 4% year on year. This achievement is a direct result of the commitment of all teams across the business, as cost discipline and value for money are kept firmly at the top of the Executive Committee agenda. But let me be clear. We will deliver sustainable earnings growth over time. And we will do this by growing the business. But our growth focus will always be paired with a strong commitment to efficiency and improved client outcomes. And if markets pose headwinds to our growth, we won't hesitate to take a stronger stance on costs. Our transformation is a key enabler of this journey. We are just halfway through the program, but we have already delivered over 60% of the original target. Thanks to this strong progress, we confidently increase our cost savings ambition to 220 million. And now, let's talk about our third priority, growth. Here, we have clear objectives for each segment. In asset management, we have delivered a resilient result, outperforming most peers in challenging markets. As macro trends begin to normalize, our focus remains the same. Maintain strong investment performance, continue to expand internationally and in private markets. In the light business, we're scaling our BPA capabilities and developing capital light solutions to drive more flows towards the asset manager. Delivering our first Capital Light BPA this year will be a key proof point as we expand our offering both in the UK and internationally. And finally on wealth, Proof Fund is still one of the UK's leading retail propositions, but flows were impacted by high interest rates. With many customers choosing to invest in cash or opting for annuities, we expect to see a similar trend in the second half of the year. Nonetheless, we're working hard to reduce costs and support sales, taking proactive steps to improve client access to Proof Fund and to complement it with guaranteed solutions created by our live business. I will now hand over to Catherine to take you through our financial results. And afterwards, I'll speak in more detail on the business operations before we open up to Q&A.