M&G plc

half-year results. Thanks a lot to those joining in the room and those following us online. We're here with Andrea Rossi, our CEO, and Catherine McLelland, CFO. As usual, we're going to go through a short presentation, briefer than a full year, and then we'll have all the time needed for Q&A. So without further ado, thank you very much, and over to you, Andrea.

So good morning, and welcome to MNG's half-year results. It is a pleasure to be here with you today. In March, we announced a new set of targets and dividend policy for the group, aligned to our long-term ambition. Today, Catherine and I will cover the operational and financial progress we have achieved since then, as we position M&G for long-term profitable growth, which is diversified across business units, products, and geographies. I'm pleased to say that we continue to drive positive momentum in both asset management and life and to deliver strong client outcomes. It's been a busy first half, so let's review the main highlights of the year so far. You notice we have three priorities for the group, financial strength, simplification and growth. and we are relentlessly focused on execution. We strengthened the balance sheet and reduced our leverage. We simplified our organizational structure and tackled costs. And now we are growing the business. In the first half of the year, we attracted 2.6 billion of net inflows in asset management. This is a strong result powered by a market-leading investment performance and the continued success of our European and Asian operations. Every day, M&G becomes a more international, resilient, and diversified business. Today, 58% of our external assets come from international clients, up from just 37% in 2019. While growing in asset management, we are also becoming more efficient and more profitable. In H1, asset management fee-related earnings increased by 14% year-on-year, reducing the cost-to-income ratio to 75%. This is the third consecutive improvement since launching our transformation program in 2023, when it stood at 79%. And while we have already made significant progress, we know there is more to do. We will remain disciplined on costs and drive top-line growth. Our new strategic partnership with Daiichi Life will support this growth by giving us a strong platform to expand in Asia and to attract flows into our private market solutions. In life, we continue to broaden the distribution of proof fund, Here in the UK, we have successfully integrated Profund onto FNZ technology, opening up digital platforms as new potential distribution channels. Tapping into this market of nearly 700 billion will further support Profund sales next year and beyond. Finally, we continue to make meaningful progress on the development of a with-profits BPA solution. which we expect to launch in the first quarter of next year. This will give us a unique proposition and a competitive advantage to win business in an increasingly crowded market. Delivering on our strategic priorities means we're also making good progress on our targets. First, the 443 million of capital generated in H1 is a good start to our new 2.7 billion three-year ambition. underpinned by an 11% increase in the underlying results. Second, the cost to income ratio improved by two percentage points year on year, and we have achieved nearly 95% of the cost savings targeted by the transformation program. On both these areas, we expect further improvements in H2. And finally, we continue to drive positive momentum in adjusted profits. The headline result is up 1% year on year, despite 16 million of unexpected headwinds, which we do not expect to recur. Without these, our growth is already in line with our targets. We expect the growth in profits to accelerate over time as we remain firmly committed to our 5% average annual target. Catherine will provide more details on this later. By continuing to generate capital, tackle costs, and grow profits, we underpin our new progressive dividend policy and deliver strong outcomes to our shareholders. MNG's integrated, balanced, and synergistic business model continues to give me confidence in MNG's future. It remains our competitive advantage to serve clients across their different investment needs, With the support of our life operations, we have built a first-class asset manager, delivering superior investment performance and consistently winning external business. And thanks to the insurance balance sheet, we continue to seed innovative investment solutions, particularly in private markets. This year, we have seen a renaissance of active asset management with a reviewed focus on Europe, This plays to our strengths and to what we do well. Our strong credentials are what has attracted leading financial institutions of the caliber of Daiichi Life to partner with us and invest in M&G shares. Every day, we're making our asset manager stronger, more profitable and more international. And by bringing together asset management and life, public and private assets, we offer clients what they need at each step of their savings journey. For UK retail customers, we're building a holistic retirement proposition with Proof Fund at its core. And for corporate clients, we continue to strengthen our BPA capabilities and offerings. Let me now tell you why I'm confident about the future of our asset manager. Our investment performance is consistently excellent. The UBS analysis on this page shows that for the third year in a row, we rank as a top performing publicly listed asset manager in Europe. Furthermore, at 2.6 billion, net flows are the highest since listing. and we continue to improve the profitability of this business. I am very pleased of how we have turned around our asset management operations. Since launching our transformation program, we have remained focused on improving the quality of our cost base. We have soared inflationary pressures, freed up resources, and reinvested them to support our growth agenda, expanding our investment and distribution capabilities. In under two years, our cost to income ratio has reduced from 79 to 75%. A meaningful improvement in a short period of time. And we are not done yet. The flow data also shows three positive trends. First, the headwinds in the UK institutional segment are gradually reducing. Defined benefit schemes continue to de-risk, but the pace at which they do so has slowed, and we are less exposed to these segments than in the past. Secondly, we're achieving strong net flows in wholesale, thanks to the outstanding investment performance we deliver to clients across both equity and public fixed income. And finally, we continue to grow at pace internationally across a number of different countries. The international growth of M&G is a compelling story. Since 2019, we have consistently grown at double digit rates. Having invested in and strengthened our distribution teams, our hard work is now paying off. Today, 58% of our third party assets come from clients based outside the UK, up from just 37% five years ago. We are now a leading international manager with an established footprint in Europe and growing access to attractive Asian markets. And this means that our asset manager is more resilient thanks to a broader client base and has greater access to more growth opportunities. On this page, you can see our progress country by country. The Netherlands, Germany and the Nordics are key institutional markets for us. In Italy and Spain, we have outstanding relationships with local banks and wholesale distributors. And in Asia, we have a good footprint that we will build on, also thanks to the partnership with Daiichi. We are very pleased with our international expansion so far and the opportunities ahead. This is a top priority for M&G, and we are committed to build on this strong track record. Our other priority in asset management remains private markets. After completing the acquisition of key capital partners, our private markets franchise stands at 77 billion, with an additional 6.5 billion in the capital queue. These are committed client funds that will start to generate fees as soon as they are deployed. It is a healthy pipeline that gives us confidence in the outlook of this franchise. You can see on this page the breadth of our proposition. We have a strong 20-year track record and all the key components for a holistic private markets offering. With critical mass across asset classes, we continue to broaden our fund range. Given the needs of our insurance balance sheet, we first focused on core strategies, which are on the conservative end of the risk-reward spectrum. We have since launched a number of successful high alpha strategies, as you can see on the slide, across all asset verticals and in line with client appetites. One client that is keen to allocate capital to our high alpha solutions is Daiichi Life. In May, we announced a long-term strategic partnership with them, which we expect to be a key driver of asset management growth, both in Asia and in private markets. By becoming their preferred asset manager for Europe, we expect to generate at least $6 billion of new business over the next five years, of which $3 billion will be allocated to high alpha strategies. We expect the first mandates to be awarded before the end of the year, with detailed fund level due diligence already underway. In July, I spent a week in Tokyo with the Daiichi leadership team. I returned energized and optimistic about the prospects of this partnership, which has significantly increased the profile of MNG in Japan and Asia. This collaboration proves that institutional investors are looking to increase their exposure to European assets. And when they do that, they want to partner with strong active managers like ourselves. The presence of our large insurance balance sheet is another key attraction for Daiichi, as it proves we have real skin in the game. Once more, this is clear evidence of the value of our unique business model. And as you know, Daiichi is acquiring a 15% stake in M&G, aligning our interests in making this relationship a strong success. Let me just drink a little bit because my voice is going away. Good time to move to life. RuFund flows were soft in H1, with the April events impacting retail sentiment. Nonetheless, sales rapidly improved in May, June, and July as Proof Fund continued to deliver strong outcomes and to protect customers from market volatility. This recent trend is encouraging and we expect to see continued progress. Improving Proof Fund sales is only part of the solution as we build a holistic retirement proposition around this unique product. In doing so, we're broadening both client access and our product offering. From an access perspective, we hit a major milestone this year, integrating Proof Fund on FNZ technology. This gives us better access to the large and rapidly growing digital platform market. From a new product perspective, we have launched our fixed-term retail annuity, and we remain on track to launch a lifetime retail annuity next year. Within life, we also continue to invest in our BPA capabilities. Having reentered this market two years ago, we aim to generate annual sales of 3 to 4 billion by 2027. To do that, we have been scaling our capabilities across our origination, proposition, and pricing teams, investing in the talent needed to achieve our ambition. In a short period of time, we have improved our chances of success, scaling our ability to quote deals and implementing new longevity reinsurance capabilities. And in what is becoming an increasingly competitive space, we are building a truly differentiated offering. Last year, we launched a value share BPA, an innovative solution where capital requirements and rewards are shared with our clients. Early next year, we will launch our With Profits BPA. The product development is progressing well and is on track for Q1 delivery. Benefiting from the With Profits Fund's lower cost of capital, this solution will be extremely competitive and will be a powerful tool to attract flows to the group. Having a differentiated offering also means we can remain disciplined on deal pricing and not compromise our financial returns. While market activity has been relatively subdued this year, we have closed 300 million of new business so far, with a further 200 million in exclusivity and a healthy pipeline for the remainder of the year. So, to conclude, M&G has financial strength. We continue to simplify our business and we are growing again. In the first half of the year, on the back of consistently strong investment performance, we have delivered fantastic asset management net flows of 2.6 billion. And we continue to expand internationally, improving the diversification and resilience of our business. The partnership with Daiichi will take our international journey to the next level. We also continue to broaden our proposition, both in asset management and in life, including the launch with profits BPA early next year. All this work opens up additional avenues of growth for the group. In parallel, we remain absolutely focused on simplification and we'll continue to deliver meaningful progress on the transformation program and the cost to income ratio. We have now set the group up for long-term profitable growth across products, segments, and markets. And with that, I will hand over to Catherine, who will take you through our financial results in detail. Thank you.

Thanks, Andrea, and good morning, everyone. I'll now go through the details of our first half results, which I'm pleased to say reflect the continued delivery against our priorities. Covering first the key highlights, net flows from open business of 2.1 billion improved by 3.2 billion pounds year on year. This is a great result, underpinned by 2.6 billion of net inflows from external clients in our asset management business. And this achievement is particularly noteworthy given the volatile external environment we saw in the first half of this year. And it was made possible by the market leading investment performance and by the continued international expansion that Andrea talked about. In our life business, Proof Fund saw net outflows of 600 million pounds. However, we are encouraged by the improvement we've seen recently with flows turning positive in the months of June and July. Group-adjusted profit of 378 million reflects the positive momentum across our business. Asset management fee-related earnings were up 14% during the first six months of this year. While in life, growth improved on a traditional with profits more than offset lower earnings in annuities. At 408 million pounds, the operating capital generation benefited from a growing underlying result of 331 million pounds. And with both asset management and life contributing strongly, this result demonstrates once again the value of our diversified business model. And finally, management actions of 77 million pounds in the first six months of this year are in line with our guidance of one to 200 million pounds for the year. So thanks to this strong operating performance, the solvency to ratio reached 230% as at the 30th of June. Turning now to flows. Closing AUMA of 355 billion pounds was nine billion pounds higher than the opening balance supported by the 2.1 billion of net inflows from our open businesses and by 11 billion of impacts from markets and other items, which does include the 2.7 billion from the acquisition of P Capital Partners. As I mentioned, net flows from our open business improved by 3.2 billion pounds year on year. Asset management net inflows were driven by 1.9 billion from the institutional segment where continued strong international growth more than offset UK headwinds, which I'm pleased to say are gradually abating. And also contributing to the positive picture, we achieved 700 million of net inflows in our wholesale business as we continue to deliver excellent client outcomes with over 70% of our assets ranking in the top two performance quartiles. live flows remain broadly unchanged year on year. However, we are confident that there will be a stronger second half as proof on flows have gradually improved since April and as activity in the annuity market picks up after a quieter first half. At £378 million, our group operating profit was up by 1% year on year. And the key features of this result are first, higher revenues and stable costs in asset management, leading to a two percentage point reduction in the cost income ratio year on year. Secondly, an increase of 14 million pounds in pre-fund and 12 million pounds in traditional with profits, mainly driven by higher opening CSM balances. Third, reduced annuity earnings of £113 million, driven by lower returns on excess assets, as we flagged at our 2024 full year results, along with an £8 million headwind from a legacy contract. And finally, a stable corporate centre result, as lower debt interest costs offset reduced investment income, and with head office expenses remaining stable. Not on this page, but worth noting, our statutory result increased meaningfully year on year from a 56 million pound loss to a 248 million pound profit after tax. And this turnaround was driven by the strong operating result and by significant improvements in short-term investment returns and IFRS 17 mismatches. Let us now look at the asset management result in a little bit more detail. At 324 billion pounds, AUM entered the period up by 11 billion, reflecting strong flows and favorable markets and the acquisition of P capital partners. Our average fee margin continued to be resilient at 32 basis points, despite a competitive environment as we continue to focus on high value add solutions for our clients. So thanks to higher assets and stable margins, our revenues were up by 3% year on year. We also kept a tight control on costs and improved the operational efficiency of our business, leading to a two percentage point reduction in our cost income ratio to 75% or 74% when including performance fees. And I'm very pleased with the continued improvement in the cost-income ratio, as it demonstrates our relentless focus on delivering positive operating jaws. But we know we've more work to do and remain committed to maintaining strong cost discipline and to drive sustainable, profitable growth. Performance fees of seven million pounds were down six million from last year due to lower carried interest, and the five million pound loss in investment income was largely attributable to an eight million pound FX revaluation loss due to the weaker US dollar. So in summary, High-quality fee-related earnings rose by 50 million pounds year on year, offset by a lower contribution from performance fees and investment income. And this led to the stable operating result of 128 million. Let's now turn to our life business. Peru fund operating profit increased by 14% to £112 million due to higher opening CSM balance, marginally higher attrition rates and a much improved new business strain. Profits from traditional with profits were up by 11% year on year, also benefiting from the same dynamics of a higher opening CSM and attrition rates. We are pleased with this growth as it occurred despite the lower expected returns and risk-free rates that we've previously flagged at our full year results in March. We expect this new and improved level of profitability to be sustainable for the second half of this year. Let's now turn to shareholder annuities. Our annuities result was down 14% year on year, and this was driven by a lower opening level of annuity surplus assets and lower rates of expected return, which we guided to in March. This was partly offset by a higher CSM release due to higher opening balances, supported by last year's large longevity benefit. The results also include an £8 million headwind from a legacy book, excluding which the annuity results would have been broadly in line with expectations. OtherLife was a small £1 million loss compared to a £2 million profit in the previous period, impacted by sterling Euro FX headwinds and slightly higher losses in our advice business. Before turning to underlying capital generation, I wanted to remind you of the meaningful size of our CSM balances, which ended the half-year period at a strong six billion pounds. And you can find more detail on the operating change in CSM in the appendix. Our underlying capital generation in these six months of 331 million was up 11%, all 34 million, year on year. though with some SCR impacts that may not repeat. The asset management contribution was £18 million higher thanks to an improved fee-related earnings and a £12 million SCR reduction due to lower market risk requirements. Life delivered a £6 million increase to £289 million, and within it, both Proof Fund and Traditional With Profits benefited from a higher opening PVSD balance of £4.3 billion and lower new business expense overruns in Proof Fund. This more than offset the headwind from a lower rate of expected returns on their PVSD of 7.8 versus 8.2% in the prior period. Annuity's result saw a modest increase versus the prior period, thanks to a lower strain of 30 million pounds from new BPAs, which more than offset the lower return on surplus assets. Our corporate center benefited from an 18 million pound SCR release, primarily relating to lower treasury lending activities. I'll now turn to operating capital generation. Our operating capital result was a resilient £408 million, or £443 million, excluding new business strain, which is a good start to achieving our £2.7 billion cumulative target by 2027. Management actions of £77 million were lower year on year, as the first half of 2024 benefited from £62 million of one-offs from excess surplus distributions in our with-profits business. However, they are in line with our guidance for the full year. And the main components of the management actions we saw were £118 million primarily reflecting equity hedging activities, 35 million of adverse experience and assumption changes on expenses and investment management costs, and a small £6 million adverse impact from model refinements with our traditional with profits products. So thanks to this strong operating result, our solvency two ratio improved by seven percentage points to 230%, and the solvency surplus remains stable at 4.7 billion pounds, despite the payment of the final dividend for 2024 in May. Owned funds of 8.3 billion pounds, of which 4.2 billion relates to the with profits PBSD, are slightly lower than the opening balance of eight and a half billion, predominantly reflecting the dividend payment. I am pleased with the strength of our balance sheet as we continue to carefully manage our risk exposures in the volatile macroeconomic environment. I'll now cover the progress we've been making in our cost transformation program. So as at the end of June, we've achieved £213 million of savings under our transformation program, which means we've already over-delivered on the original £200 million target we set in March of 2023. And given our strong progress, we're confident that we will meet our upgraded target of 230 million by the end of the year. And I would like to reiterate that when we do achieve this target, our efforts to drive further cost transformation and simplification will continue. We will remain focused on improving the quality of our cost base, freeing up resources to invest in and grow our business. The strong progress achieved to date reflects the actions taken to create additional capacity and enhance our operational efficiency, as shown on this slide. And for example, since the start of the program, we have transformed the operating model of our private markets teams, delivering 20 million pounds of savings. And with similar levers, we've achieved another 18 million pounds of cost reductions in our life business. And we've also improved the efficiency of our tech environment by decommissioning over 500 applications and outsourcing IT services for further cost opportunities. Through these actions, we were able to fully offset inflation, invest to grow our businesses, and end the period with a cost base that was £8 million lower and of a better quality. We will continue to focus on improving our operational efficiency over the second half of this year and beyond as we transform the cost base of the group, deliver better customer outcomes, and of course, drive profitable growth. So in summary, the first half of 2025 reflects a period of disciplined execution, strategic progress, and financial resilience. We will continue to deliver for our clients and our shareholders with our diversified business model positioned for long-term success. I'm pleased with the results in the first six months of the year, which showed record net inflows in asset management and encouraging trends recently for pre-fund. strong operating profits despite nearly 16 million pounds of adverse headwinds, positive operating jaws in asset management, a resilient contribution from life with a double-digit growth improve fund, and finally, a good start on our 2.7 billion operating capital generation target. Thank you very much. Andrea and I will now take your questions.