M&G shares slip on profit drop, announces streamlining

Investing.com -- Shares of M&G (LON:MNG) fell on Wednesday after it reported a drop in profits following plans to streamline its operations. 

At 5:55 am (0955 GMT), M&G was trading 1.9% lower at £212.05.

For the first half of the year, M&G reported a 4% fall in operating profit to £375 million.

The company reported net client outflows of £2.4 billion from UK institutional asset management, a decrease from £3.8 billion in the same period last year.

UBS analysts noted that underlying capital generation fell short of expectations due to increased strain from new business and reduced returns on annuity surplus assets. 

The lower returns were attributed to these assets being predominantly invested in gilts at the start of the year. Additionally, new business strain did not benefit from longevity reinsurance, the analysts added.

The British insurer and asset manager announced on Wednesday that it will merge its life and wealth divisions as part of its ongoing simplification strategy. 

The company is midway through a cost-reduction initiative aimed at enhancing profitability amidst recent economic pressures, including high inflation and interest rates. 

M&G has revised its cost-saving target upwards to £220 million by the end of 2025, surpassing the previous target of £200 million. In addition, M&G has increased its capital generation goal to £2.7 billion by the end of 2024, up from £2.5 billion. 

“Our Simplification agenda continues at pace, delivering £121 million in cost savings so far,” said M&G’s chief executive, Andrea Rossi in a statement.

The asset management sector has been challenged by inflationary pressures, with investors increasingly favoring passive funds over actively managed ones. M&G also announced an interim dividend of 6.6 pence per share.