M&G to pay dividends as it works to save costs
By Josh White
Date: Wednesday 27 May 2020
(Sharecast News) - M&G updated the market on its position amid the Covid-19 coronavirus pandemic on Wednesday, reporting that it remained "financially strong", with its shareholder Solvency II coverage ratio said to be "comfortably above" its risk appetite throughout the crisis, standing at 168% as at 31 March.
The FTSE 100 firm said that, given its financial strength and the importance of dividends to investors, it would pay its dividends of £410m - comprising an ordinary dividend of 11.92p per share and a special demerger dividend of 3.85p - on 29 May, as it had previously announced
It said its 6,000 colleagues would continue to serve customers and manage assets from their homes until it is safe for them to return to the offices.
No colleague had been put on furlough, the company confirmed, and it had not taken any government financial assistance related to Covid-19.
Total assets under management and administration came in at £323bn as at 31 March, down from £352bn at the end of 2019.
M&G said the fall largely reflected the shock to markets in March from the disruption associated with the outbreak of Covid-19.
Its institutional asset management business was still performing well through the crisis, the board said, attracting net inflows of £2.1bn during the first quarter.
Similarly, in the UK, its retail savings franchise saw net inflows of £0.7bn, although those positive movements were offset by retail asset management net outflows of £5.6bn in the quarter.
The company's adjusted operating profit of £134m reflected strong underlying business performance, offset by negative mark-to-market impacts.
Looking at its heritage segment, M&G said the Prudential UK life insurance and annuity book, which is closed to new customers, was still generating steady cash flow.
The board said it had a "high quality" credit book, with 98% of its shareholder annuity debt portfolio being investment grade.
It added that it was still "sharply focussed" on costs, and remained committed to its target of £145m of annual shareholder cost savings by the end of 2022.
The rating agencies Moody's and Fitch affirmed M&G's insurance financial strength ratings at 'Aa3' and 'AA-' respectively, with stable outlooks, following the assessment of the coronavirus impact on UK insurers.
At the same time, M&G also announced an agreement with Royal London to acquire its digital wrap and wealth management platform for UK independent financial advisers, Ascentric.
The acquisition would bring £14bn of assets under administration to M&G, as well as relationships with more than 1,500 advisory firms acting on behalf of over 90,000 individual customers.
"I've been through a number of financial crises, but none has been like this terrible pandemic," said chief executive officer John Foley.
"It is testing all of us, in many different ways.
"Fortunately, M&G is a resilient business and I am proud of how my colleagues have risen to the challenge of continuing to serve, from their homes, the millions of customers we have around the world."
Foley said the company;s financial strength meant it could also "do the right thing" by its shareholders, and make good on its announced intention to pay dividends totalling £410m.
"Many of our shareholders are income funds or individual savers who rely on these payments for part of their retirement income.
"While markets have recovered from their March lows, I expect volatility to continue, but as an asset owner of scale we are well positioned to acquire assets at competitive prices.
"In the meantime, we will continue to manage the business in a prudent way, with our usual disciplined approach to capital management."
At 0830 BST, shares in M&G were up 6.79% at 135.95p.
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