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By Carolyn Cohn
LONDON (Reuters) -British insurer and asset manager M&G said on Wednesday it would combine its life and wealth units in a drive towards “simplification”, following a smaller than expected drop in first-half profits.
M&G is halfway through a cost-cutting programme as it seeks to boost profitability, following pressure from high inflation and interest rates in recent years.
The company upgraded its cost savings target on Wednesday to 220 million pounds ($289 million) by the end of 2025, from a previous 200 million pounds, and said it had made 121 million pounds in savings so far.
M&G also said it was upping its target for capital generation to 2.7 billion pounds by the end of 2024, from a previous 2.5 billion.
M&G has been putting a “relentless focus on capital, on expenses but also on simplifying our business,” Chief Executive Andrea Rossi told Reuters.
“Market conditions are starting to become a bit better,” he added, pointing to signs of falling inflation and interest rates.
M&G’s first-half operating profit fell 4% to 375 million pounds, though this was higher than analysts’ consensus forecast of 355 million pounds in a company-compiled poll.
M&G recorded first-half net client outflows in UK institutional asset management of 2.4 billion pounds, down from 3.8 billion a year ago.
Asset managers who make active decisions on investments have faced tough trading conditions in the past few years due to inflationary pressures. Investors have sought refuge in passive, or index-tracking, funds which charge lower fees.
M&G said it would pay an interim dividend of 6.6 pence per share, in line with forecasts.
Its shares were down 0.8% at 0733 GMT.
($1 = 0.7628 pounds)
(Reporting by Carolyn Cohn; Editing by Sinead Cruise and Mark Potter)
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