M&G : Annual Report and Accounts 2020

24 March 2021

Annual Report and Accounts 2020

Following the release by M&G plc (the "Company") on 9 March 2021 of the Company's 2020 Full Year Results Announcement for the year ended 31 December 2020, the Company announces that it has today issued the 2020 Annual Report and Accounts ("Annual Financial Report").

The document is available to view on the Company's websitehere and, in accordance with Listing Rule 9.6.1, a copy has been submitted to the National Storage Mechanism and will shortly be available for inspection athttps://data.fca.org.uk/#/nsm/nationalstoragemechanism

Printed copies of the Annual Financial Report are expected to be mailed to shareholde rs on or around 14 April 2021, together with the Company's 2021 Notice of Annual General Meeting, in line with shareholder communication preferences.

-ENDS-

Enquiries

Alan Porter, Group General Counsel and Company Secretary Helen Archbold, Head of Group Secretariat

Jonathan Miller, Head of Media Relations

Sophie Redburn, Senior External Communications Manager

Information required under the Disclosure & Transparency Rules ("DTR")

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The following information is extracted from the M&G plc Annual Report 2020 (page references are to pages in the Annual Report) and should be read in conjunction with M&G plc's Full Year Results announcement issued on 9 March 2021. Together they constitute the material required by DTR 6.3.5(1) to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the M&G plc Annual Report 2020 in full.

LEI: 254900TWUJUQ44TQJY84

Classification: 1.1 Annual Financial Report

Principal risks and uncertainties

1 Business environment and market forces
Principal risk	Management and mitigation	Outlook	Strategic Pillarsi	Change from last
Changing customer preferences and economic and political conditions could adversely impact our ability to deliver our strategy and have implications for the profitability of our business model. The markets in which we operate are highly competitive while customer needs and expectations are changing rapidly. Economic factors, including those resulting from Brexit and the COVID-19 pandemic, may impact the demand for our products and our ability to generate an appropriate return. In addition, increased geopolitical risks and policy uncertainty may impact our products, investments and operating model. Our key savings proposition, PruFund, accounts for a high proportion of our total sales and we are also heavily reliant on the intermediated channel for sales of savings solutions. This heightens our	We conduct an annual strategic planning process, which is subject to oversight by the Risk and Resilience function and the Board, and results in an approved strategy. The process considers the potential impact of the wider business environment and, throughout the year, we monitor and report on the delivery of the plan. We continue to diversify our savings and investments business to respond to developing customer needs in terms of products, distribution and servicing. We are also implementing a significant digital transformationprogramme to deliver a more diversifieddistribution strategy. We have expanded our operations in Europe to ensure that we can continue to grow and service our European customer base following the UK's departure from the European Union.	We believe competition will intensify in response to consumer demand, technological advances, the need for economies of scale, regulatory actions and new market entrants. We have launched a number of new products and the acquisition of Ascentric broadens our coverage of the Independent Financial Advisor market and accelerates our move into high value wealthmanagement. Work is ongoing to develop new propositions and expand our institutional and international businesses. We continue to focus on minimising the impact of COVID-19 pandemic on the service we provide to our customers. We had prepared for a "no-deal" Brexit to manage the risk that the process and outcomes compromisedour business model and strategy. In the run- up to, and immediatelyafter 31	2 3 4 5 6	year Increasing

exposure to changing economic conditions and customer preferences.

Our success depends upon our capacity to anticipate and respond appropriately to such external influences.

December 2020, potential impacts were monitored with no material issues identified. Monitoring will continue in 2021 noting that there are residual risks in respect of temporary equivalence arrangements and that discussions continue between the UK and EU with regards to financial services.

2 Sustainability
Principal risk	Management and mitigation	Outlook	Strategic Pillarsi	Change from last
Our stakeholders increasingly expect that we meet the needs of the present without compromising the ability of future generations to meet their own needs. In additionwe recognise that sustainability, including issues concerning the climate, diversity and inclusion, corporate governance and biodiversity, is crucial to our success and that of the companies in which we invest. Sustainability risks, along with other risk types, are identified, assessed andmanaged under the M&G plc Risk Management Framework and specific emphasis on the management of this risk will be outlined within the M&G plc ESG Risk Management Framework, which is currently under development. Consideration of ESG Risk is built into the decision- making processes and a requirement of key strategic board risk assessment papers. Climate change risk is being integrated into ourscenario analysis process with both top down and bottom up consideration over a range of time horizons. A failure to address and embed sustainability within our products, business and operating model could adversely impact our profitability, reputation and plans for growth. 3 Investment performance and risk We have made specific firm-wide public commitments in respect of Sustainability issues and we continue to address and embed sustainability within our products, business and operating model. As 2020 demonstrated, responding effectively to climate-related incidents such as flooding, world health issues such as the COVID-19 pandemic and the increase in	1 2 3 4 5 6	yNyNeawr
Principal risk	Management and mitigation	public activism and demonstrations on Outlook	Strategic Pillarsi	Change from last
The investment objectives and risk profiles of our funds and segregated mandates are agreed with our customers and clients. A failure to deliver against these objectives (including sustained underperformance of funds), to maintain risk profiles that are consistent with our customers and client's expectations, or to ensure that fund liquidity profiles are appropriate for expected redemptions may all lead to poor customer outcomes and result in fund outflows. If these risks materialise for our larger funds or a range of funds, our profitability, reputation and plans for growth may be impacted.	Our fund managers are accountable for the performance of the funds they manage and the management of the risks to the funds. An independent Investment Risk and Performance team monitors and oversees fund performance, liquidity and risks, reporting to the Chief Risk and Resilience Officer. Such activities feed into established oversight and escalation forums to identify, measure and oversee investment performance, investment risk and fund liquidity risks.	iFsusnudeslisquucihdiatys will ereqmualiintya, rkeqyutihresmtehats wreegumlaeteotrtyhaend market edxepveclotaptmioennsts impact ofufnadws'iidneverasntmgeeontfs in sutnaqkueohtoeldearngdrohuaprds.- to- trade assets. The impact of the COVID-19 pandemic may continue to cause sharp movements in market values, interest rates, dividendlevels, rental income and defaults, all of which could adversely impact investment performance and fund flows. While market	2 3 4 5 6 7	yInecarreasing

4 Credit
Principal risk	Management and mitigation	Outlook	Strategic Pillarsi	Change from last
We are exposed to the risk that a party to a financial instrument, banking transaction or reinsurance contract causes a financial loss to us by failing to discharge an obligation. In the case of invested assets this relates to the risk of an issuer being unable to meet their obligations, while for trading or banking activities this relates to the risk that the counterparty to any contract the business enters into is unable to meet their obligations. Our solvency is also exposed to changes in the value of investedcreditassets arising from credit spread widening and/ or credit rating downgrades. Our Credit Risk Framework sets standards for the assessment, measurement and management of credit risk, which are monitored by a dedicated, independent team. We set and regularly review limits for individual counterparties, issuers and ratings, and monitor exposures against these limits. Our policy is to undertake transactions with counterparties and invest in instruments of high quality. We have collateral arrangements in place for derivative, secured lending, reverse repurchase and reinsurance transactions. 5 Market Our credit risk exposure is expected to reduce over time as our annuity business runs off. In the near term, there is a risk of a material deteriorationin credit conditions as a result of the market effects of the COVID-19 pandemic.Through our annuity portfolios in particular, we are exposed to excess downgrades and defaults, and to credit spread widening.	2 4 6 7	yIyInecarreasing
Principal risk	Management and mitigation	However, trading over Othuet loaostkdecade has	Strategic Pillarsi	Change from last
Our profitability and solvency are sensitive to market fluctuations. Significant changes in the level or volatility of prices in equity, property or bond markets could have material adverse effects on our revenues and returns from our savings and investment management businesses, while exchange rate movements could impact fee and investment income denominatedin foreign currencies. Furthermore, material falls in interest rates may increase the amount that we need toset aside in order to be able to meet our future obligations.	Market risk appetite is set and monitored to limit our exposure to key market risks, and we have prescribed limits on the seed capital provided for new funds. Our established approach to managing market risk was successfully utilised and adapted to monitorand respond tothe impact of the COVID-19 pandemic on markets, funds and operations. Where appropriate, and subject to risk limits and procedures, we use derivatives for risk reduction, for example, to hedge equities, interest rates and currency risks, and we carry out regular reviews of hedging and investment strategies, including asset-liability matching, informed by stress testing.	lOeudrtmo arskiegnt irfiisckant ienxcproesausreeinistehxepected tporoinpcorretiaosne oafsstehceured agsrosewttshanodf tahdeePfreunFusinvde abnudsindeivsesrosiufitewdecigrehdsit pthoertrfeodliuoc.tion in market risk that occurs from the run-off of the Heritage book. Additionally, there is the potential for further market volatility as the COVID-19 pandemic continues to impact markets. However, the risks are actively managed and monitored. As such,	2 4 5 6 7	yInecarreasing