M&G’s chief executive said the business “has what it takes” to push ahead as a standalone company amid speculation of a takeover approach from Australian group Macquarie.
Andrea Rossi told the Financial Times that M&G is focused on “organic growth” of the business as he unveiled a new cost-cutting strategy to remove £200mn of expenses over the next couple of years.
His comments come after reports that Macquarie was in the early stages of exploring a £5bn acquisition of M&G. Rossi said: “I do not comment on market speculation.”
M&G’s larger rival Schroders also considered a bid for its investments division in 2021 to create a £1tn asset manager, before abandoning plans later that year.
Rossi said: “I know there is speculation about consolidation in the asset management sector, but we have what it takes in order to grow organically and that’s what we’re going to be focused on.”
M&G reported net inflows into the business despite turbulent markets last year and announced a plan to slash costs by the end of 2025.
The FTSE 100 company’s wholesale fund management arm posted £500mn of net inflows for 2022, the first since 2018, which it said reflected “improved” investment performance among its managers.
Its wealth management division also reported net inflows of £200mn, largely as a result of “strong performance” from its multi-asset PruFund, which Rossi described as “the jewel in the crown.”
However, total assets under management fell from £370bn to £342bn, which the group blamed on the “adverse” market conditions. Equity and bond markets tumbled last year amid a difficult macroeconomic environment of soaring inflation and rising interest rates, exacerbating customer outflows and piling pressure on asset managers.
Rossi described last year as one of “exceptional market volatility” but cautioned that there was still “uncertainty of the external environment”.
The group’s profit before tax fell by a quarter to £529mn, although beat analyst expectations by 11 per cent. The decline was largely the result of losses in its annuities book and a foreign exchange hit to its US dollar-denominated subordinated debt.
Rossi said the cost savings plan is focused on removing unnecessary “layers” within the business, which could involve closing or merging smaller funds and digitising manual processes.
The group returned nearly £1bn through dividends and share buybacks last year, and said it was on track to generate £2.5bn of operating capital by 2024.
It is also looking to increase the share of earnings from its asset management and wealth divisions to more than 50 per cent of the group total by the end of 2025, which is currently dominated by its Heritage business of annuities and with-profits funds.
James Pearse, analyst at Jefferies, said asset management and wealth “should trade at a higher multiple to M&G’s Heritage business”. Shares in M&G rose by 2 per cent in early morning trading.
Prudential bought M&G in 1999 but demerged the business in 2019 after opting to focus on pursuing growth in Asia and Africa.