M&G Sees Increased Client Inflows but Reports Loss on Ground Rent Reform
M&G's Financial Performance and Impact of Ground Rent Reform
LONDON, Sept 3 (Reuters) - British insurer and money manager M&G drew in more client cash to beat half-year operating profit forecasts on Thursday although a one-off £325 million ($439 million) hit from British reforms to ground rent assets led to a bottom-line loss.
Its stock was down 1.3% compared to 0.1% gain for wider FTSE 100 by around 0930 GMT.
Client Inflows and Profit Growth
M&G said clients had poured money into its equities and credit funds. Net inflows from open business were £2.4 billion, up from £2.1 billion a year ago.
The company posted adjusted operating profit of £435 million for the six months ended June 30, up 15% and above analyst expectations.
Ground Rent Reform and Restructuring Costs
Rising Cost of Ground Rent and Restructuring
The bottom-line loss of £165 million, compared to a £248 million after-tax profit last year, followed a previously-flagged hit from ground rent reforms and higher restructuring costs.
Details of Ground Rent Cap
Britain is capping ground rents on flats at £250 a year as part of measures to help ease cost-of-living pressures, impacting investors, including M&G that held ground rent assets.
Analysts at RBC said it viewed the results as broadly neutral.
Strategic Partnerships and Growth Initiatives
Asset Management Growth with Daiichi Life
M&G, under CEO Andrea Rossi, has leaned on its tie-up with Daiichi Life to drive asset management growth, after the Japanese insurer took a 15% stake to become its biggest single shareholder.
Performance Targets and Asset Management Inflows
M&G reiterated its performance targets and said it forecast low double-digit annual operating profit growth this year, while it pulled in £1 billion into its asset management unit in July.
Bulk Purchase Annuity Deals
The company also said it struck £1.7 billion of bulk purchase annuity deals in the period as companies continue to offload pension schemes to insurers.
Industry Outlook and M&A Strategy
Industry Consolidation
As the wider industry consolidates in pursuit of scale to better compete with U.S. rivals, Rossi told Reuters the company would not rule out M&A deals.
Focus on Organic Growth
He said, however, it would be "extremely careful" and the focus was on organic growth. "We have the right strategy, the results speak for themselves," he said.
Exchange Rate Information
($1 = 0.7407 pounds)
Reporting Credits
(Reporting by Yamini Kalia and Simone Lobo in Bengaluru, and Iain Withers in London; Editing by Rashmi Aich and Barbara Lewis)
