M&G beats profit expectations as rising interest rates boost retail and savings divisions

M&G has reported higher-than-expected profits off the back of improved market conditions and rising interest rates.

The investment firm revealed a jump in adjusted profits before tax from £298million to £390million in the six months to the end of June. This came well ahead of the expected £284million.

It said it ‘reflects a strong contribution from [the] retail and savings segment, driven by an improved result from with-profits business and higher returns from excess assets in the shareholder annuity portfolio following the rise in interest rates.’

Investment firm M&G beat profit expectations as rising rates helped its savings business

On Tuesday, Hargreaves Lansdown also reported higher profits as rising rates give its savings division a boost. 

M&G shares were up 4.20 per cent to 207.79p on Wednesday morning, having gained 9.53 per cent year-to-date.

Net client flows, excluding the illiquid Heritage portfolio, fell from £1.2billion to £700million, but remained positive for the third consecutive year despite headwinds from UK institutional clients.

M&G said it had expected redemptions from UK clients because of the mini-Budget, with net outflows of £1.4billion, up from £700million on 31 December 2022.

M&G’s assets under management and administration totalled £333billion in the first half, down three per cent this year and £9billion below forecasts. 

But the investment group said it was on track to achieve its target generating £2.5billion of operating capital by the end of next year, and was making good progress on its 2025 financial targets.

Group chief executive Andrea Rossi said: ‘Today’s results demonstrate the underlying strength of our business model, the resilience of our balance sheet, the attractiveness of our propositions as well as the hard work and commitment of our colleagues to deliver for our clients and execute on our strategic ambitions.

‘As we look ahead, I remain confident we have the right ingredients for success that will enable us to continue to deliver attractive outcomes for our clients and shareholders. 

‘We are, however, not complacent and will continue to focus on ensuring that our balance sheet remains strong and we deliver on our purpose and strategic objectives.’

Elsewhere, M&G said it had a renewed focus on its asset management and wealth businesses, with wholesale Asset Management net client inflows of £1.3billion. 

M&G also said it had re-entered the defined benefit pension market through two deals with a combined premium of £617million.

Matt Britzman, equity analyst at Hargreaves Lansdown said: ‘This marks the first business it’s done in the area since closing the annuity book back in 2016 – it’s becoming a hot spot for some of the big insurers so competition is likely to heat up, but nonetheless provides another string to M&G’s bow.’

This post first appeared on Dailymail.co.uk