Good morning, everyone. Welcome to M&G plc's full year results for 2021. These results demonstrate strong financial and operational performance from our business and are evidence that we are now at an inflection point. Over the past 12 months, we have generated GBP 1.8 billion of total capital and delivered a GBP 7.2 billion turnaround in external net flows. We also launched PruFund in Europe and accelerated our corporate strategy by acquiring high-value capabilities in wealth and asset management.
It is thanks to our continued strong performance and disciplined approach to capital management that today I am pleased to announce a half a billion share buyback program as a means to return capital to shareholders. The quantum of the program is a measure of the health of M&G's financial position and of our confidence in the future prospects for this business.
It corresponds to almost 9% of our market capitalization at demerger and comes on top of an attractive ordinary dividend, which we have consistently paid in full throughout the pandemic. Now, before I run through the numbers, I want to remind everyone of what we have delivered since we listed our shares just over two years ago. In a short period of time, and despite challenging conditions, we achieved all of our demerger priorities .
Let me take you through them one by one. Let's start with our promise to launch a version of PruFund, our leading investment solution outside the U.K. In December, we obtained regulatory approval to market this new proposition, which we have called Future+, to European clients. In January, we rapidly began to roll this out in Italy in partnership with Intesa Sanpaolo, the largest local banking group.
Within weeks, we have started seeing the first inflows. Small volumes for now, but we expect them to increase over the coming months as we ramp up the sales efforts. We strongly believe that Future+ is a competitive differentiator that will strengthen our presence in Europe.
Secondly, we committed to stabilizing our GBP 53 billion retail asset management franchise. 18 months ago, we announced a series of measures to broaden our offering and improve both performance and value for customers. That medicine is working. In the second half of 2021, net outflows were down to GBP 400 million, with our international operations attracting net inflows.
We have seen this positive trend continuing so far this year, with flows breaking even for the first time since 2018. We are pleased with the progress already made, and we remain focused on further strengthening this retail franchise.
Our third priority was to pivot M&G towards sustainability, and we have taken significant steps to embed it across the entire business. The compass for this journey is our 10-point sustainability plan, setting out our commitments to achieve net zero carbon emissions and phase out thermal coal from our investment portfolios.
We are directing more and more of our clients' assets into sustainable and impact propositions, both by seeding new funds and transitioning existing ones. Thanks to the continued collaboration between the asset owner and the asset manager, last year we were able to launch Catalyst and PruFund Planet.
Catalyst invests in sustainable private assets through a GBP 5 billion commitment from the Life Fund. To date, it has completed 29 deals, supporting businesses that help tackle climate change, fight inequality, and drive healthcare innovation.
Finally, in January, we announced the acquisition of a controlling stake in responsAbility, a pioneer in impact investing, particularly in emerging markets. Zurich has become the latest investment and distribution hub for M&G. The fourth demerger priority was to transform and modernize our business, delivering annual cost savings of GBP 145 million by the end of 2022.
We achieved the full savings target a year earlier than scheduled while investing for growth and absorbing four years' worth of inflation. Paul will provide more detail on this in his presentation.
Last, but by no means least, we significantly outperformed on capital generation, delivering GBP 2.8 billion in just two years, compared with an original target of GBP 2.2 billion over three.
Positive markets provided strong support, but even without them, we would have been in touching distance of our target one year ahead of schedule. Now this slide shows the financial highlights for 2021. More evidence that operational delivery is translating into financial delivery.
Assets under management and administration of GBP 370 billion benefited from another remarkable performance from institutional asset management, which generated net inflows of almost GBP 6 billion. Adjusted operating profits were GBP 721 million, largely in line with last year after netting off the difference in contribution from longevity assumptions.
Total capital generation came in at an impressive GBP 1.8 billion, enough to cover almost 4 years of full ordinary dividend costs. It is a result that reflects a balanced contribution from the underlying business, management actions, and economic variances.
Growing the underlying business is our absolute priority, but in parallel, we always seek to improve the efficiency of our balance sheet. The recent performance proves this. In the five years I have been Chief Executive, we have generated GBP 6.7 billion in total capital, GBP 3 billion of which came from management actions. Finally, at 218%, our solvency ratio sets a new record, enabling us to deploy capital with confidence.
Here, I want to show you how we are allocating capital across competing uses, leveraging our strong financial position to offer attractive returns to shareholders, maintain an appropriate leverage ratio, and invest in the business. The top left quadrant of the circle shows the cost of meeting our commitment to pay a stable or increasing dividend.
In line with this policy, we announced this morning a final dividend of GBP 0.122 per share, amounting to GBP 311 million. Through dividend payments alone, we have returned more than GBP 0.52 per share since listing. That's equivalent to 24% of the company's market capitalization at demerger.
The top right quadrant shows the GBP half a billion buyback program, which we have already talked about. We expect it to complete within 12 months and to result in higher earnings and dividends per share. In addition, we are ring-fencing GBP 300 million to manage leverage. Setting capital aside now maximizes our flexibility on timelines, allowing us to act fast if, for instance, interest rates were to change meaningfully and reduce the cost at which we could redeem debt.
Together, these three actions take total capital returns announced today to roughly GBP 1.1 billion. This increases to GBP 2.1 billion if we include the dividends paid so far. It is a truly remarkable achievement in just over two years since becoming independent.
The fourth and final quadrant shows the GBP 260 million we have deployed to acquire strategically important capabilities. This sum covers the acquisition of Sandringham, which completed in January, as well as those of TCF, responsAbility, and of a minority stake in Moneyfarm, the fintech delivering D2C savings solutions to many UK and European customers.
Having met and exceeded our commitment on capital generation, I am also announcing today a new target for operating capital generation of GBP 2.5 billion over the next 3 years, a target that comfortably covers expected dividend costs and that reflects the capital generative nature of our business.
During the year, we have also refined our operational setup to better align to customer needs and drive end-to-end business accountability. Since October, Jack Daniels, our Chief Investment Officer, has become Managing Director of the asset manager, while Clare Bousfield, previously Group CFO, now leads the retail and savings business, our asset owner.
They both have clear visions that complement each other as part of our One M&G strategy. The asset manager powers the differentiated investment solutions that the asset owner leverages to support customers along their savings and risk journeys.
It's worth recalling what the priorities are for each segment. The asset manager focus is on further broadening its GBP 72 billion private asset franchise and its sustainable and impact investing expertise.
The aim is to drive innovation in high-value areas of the market while continuing to internationalize our distribution and investment footprint. In retail and savings, we aim to accelerate the growth of M&G Wealth by developing an integrated proposition that combines the capabilities we have acquired so far.
At the same time, we will continue to focus on improving customer reach and reducing operating costs. Our One M&G structure is at the heart of our competitive advantage. You have heard me talk about the symbiosis between the asset manager and the asset owner before.
Over the past two years, we generated significant efficiencies by fully integrating the infrastructure supporting them while ensuring they retain the freedom that they need to best serve their customers. The collaboration between segments is a fundamental and differentiating source of value for shareholders.
With GBP 169 billion, the asset owner is the largest client of the asset manager and provides both a stable source of revenues, over GBP 300 million in 2021, and continuous seed capital to develop new propositions, PruFund Planet and Catalyst being the two latest examples.
In turn, the asset owner leverages the asset manager's capabilities to generate value through asset trading activities. These delivered roughly GBP 290 million of capital last year. Before the asset manager started serving the asset owner, it did not play in the institutional market.
Today, 20 years on, the capabilities developed for the internal client are at the core of the GBP 103 billion external institutional franchise that has delivered GBP 6 billion of net inflows in 2021. The results speak for themselves. Only a group with M&G's unique structure is capable of producing a GBP 52 billion proposition like PruFund, which has now been made available in Europe through the asset manager distribution network.
The collaboration between the asset owner and the asset manager is clear evidence of the total exceeding the sum of the parts. Here is a recap of some of the operational milestones passed in 2021. On asset management, I've spoken before about the almost GBP 6 billion in net new wins for our institutional business.
These strong flows have come hand in hand with significant improvements in our retail franchise, which we look forward to continuing this year. I also want to draw your attention to the success of our Catalyst team. Its latest investment is the acquisition of Greencore Construction, which designs and builds ultra-sustainable homes that are climate positive, locking up more carbon than they emit over their lifetime. On the retail and savings side, we have mentioned the launch of Future+ in Europe and of the sustainable version of this proposition, PruFund Planet. To this, I would add the expansion of our advisor force with the acquisition of Sandringham, increasing our numbers of advisors from roughly 250 to 440.
Plus, our partnership with technology company Ignition Advice means we are now rolling out robo-advice in the U.K., offering a cost-effective option to all those falling in the affordable advice gap, a potential market of up to 6 million people. Talking about operational delivery, I want to remind you of the growth opportunity that Future+ offers.
This is a compelling proposition, giving customers access to a globally diversified multi-asset fund that leverages the with-profits smoothing mechanism, as well as the distinctive private and public capabilities of our asset manager. We chose Italy as a pilot market because of the large amount of deposits, EUR 1.8 trillion, that we target by helping customers take a first step in investments. The strength of our local team was also a key driver behind the decision.
It enabled us to partner with Intesa Sanpaolo, the largest Italian banking group with almost 4,000 branches and over 6,000 financial advisors and private bankers. The growth opportunity here is enormous. We play in an attractive market and have both the right proposition and the right distribution platform to scale our operations.
We have complemented ongoing operational delivery with inorganic actions that add high-value capabilities in a targeted and strategic way. Starting with the acquisition of the emerging markets investment team, Pomeroy , back in 2019, we have diligently sought out opportunities that accelerate our strategy by filling capability, proposition, or distribution gaps.
The acquisition of responsAbility is a classic example. It brings new expertise in emerging market private assets, strengthens our impact investing capacity, and augments international distribution. Moneyfarm is a great fit too.
This partnership gives us access to the rapidly growing direct investing market at a very modest outlay. The aim of these investments is very simple: support long-term capital generation and help us deliver sustainable growth to shareholders. Now, we don't think of inorganic actions in isolation.
They must fit within our strategic priorities and complement organic efforts to grow the business. Within asset management, Catalyst and responsAbility are both instrumental to our ambition to become an international leader in sustainable private investing.
In retail savings, the investments in Moneyfarm, Sandringham, and Ascentric contribute to the creation of an integrated U.K. wealth manager that can tailor to different needs. We can now serve customers across the full distribution spectrum, from digital to face-to-face, from self-serve to advised.
Once fully integrated with our digital platform and investment solutions, this waterfront coverage will help us scale M&G Wealth and build back PruFund sales in the U.K. Our approach to investing in the business should now be clear. We selectively deploy capital to grow in markets where we have a right to play, that show supportive dynamics, and that have resilient and attractive margins.
I promise to expand on our approach to capital management. The next few pages outline our framework, the guiding principles that underpin the capital allocation decisions we have discussed so far and that will guide future ones.
When considering how to deploy capital, our framework factors in four elements. Our first absolute priority is to maintain appropriate financial strength and flexibility at all times. To assess this, we focus on three primary factors, solvency, leverage, and liquidity.
Secondly, we have a duty to honor our commitment to shareholders and reward them with attractive dividends. Here, we expect to pay stable or increasing ordinary dividends, with any growth dependent on the development of the underlying capital generation of the business. When deploying additional capital, we prioritize investments that can generate long-term sustainable earnings growth.
To achieve this, as we have demonstrated, we combine organic and inorganic investments that have an attractive financial and strategic rationale. Whenever considering inorganic actions, we favor targeted acquisitions over large scale deals. The final element of our framework is capital returns.
We are disciplined custodians of shareholders' capital, and our announcements today prove exactly that. We will always weigh the benefits of any investment against the financial attractiveness of capital returns. As mentioned earlier, financial strength and flexibility are determined by three factors.
Solvency coverage ratio, leverage ratio measured on a capital basis, plus holding company liquidity. We manage our solvency to include a counter-cyclical buffer, effectively cushioning the business from market volatility by strengthening the ratio where markets are supportive and allowing it to reduce when they deteriorate.
You can see from the page that we expect the buffer to range between 160% and 190%. These boundaries are not hard lines that trigger immediate action, but rather indicative thresholds that inform our approach to capital management. If we expect solvency to exceed 190% for a sustained period of time, we will consider capital returns and competing uses. Conversely, if the ratio were to fall below 160%, we would start assessing the viability of de-risking actions. Let me reiterate this.
We would start assessing, not immediately act, as we can operate below the lower boundary depending on specific circumstances. It should also be clear that we will always consider investing in the business even if we are not outside the upper end of the range. Turning now to the leverage position.
This was 34 when we demerged in October 2019, and has since fallen to 28%. Over the long term, we aim to retain the ratio below 30%, albeit we can accept short-term deviations. From a liquidity perspective, we want to retain enough liquid resources at holding company level to cover expected central outflows. I've talked about being good custodians of shareholders' capital and about investments in the business and capital returns being competing uses of financial resources.
This slide shows how we assess and compare different options to make the best possible decisions in the interest of our business and of our investors. We evaluate opportunities from a strategic, financial, and risk perspective.
Earlier, we covered the strategic priorities for our business, and you can see them reflected in the leftmost column on this page. We aim to grow our presence in asset management and wealth management, adding capabilities in private assets, sustainable investing, and distribution.
The middle column sets out the financial criteria we consider. We assess buy versus build scenarios, as we did with Ascentric, and review a range of valuation metrics, IRR criteria, and the potential for synergies. Our aim is clear, to ensure that any investment contributes to earnings and capital accretion over time.
The right-hand column captures the risks and opportunities we assess, most importantly, our ability to retain and scale earnings of the acquired companies. Cultural fit, execution and integration hurdles are other key considerations, as well as the impact of any investment on our financial strength.
Having covered our capital management framework, I want to show you the impact of our capital allocation decisions on the solvency ratio. Together, the actions we talked about take the ratio from 218% to 192% on a pro forma basis.
This excludes market movements that have occurred since the beginning of the year. As you can imagine, the unfolding of the Ukraine crisis had an impact on markets and on our solvency ratio. Nonetheless, we remain in an extremely robust capital position, close to the upper boundary of the range.
Given this strength, you can expect us to build on the actions announced today in line with our capital management framework. We will continue to assess opportunities to invest in the business while always monitoring the attractiveness of further capital returns. To wrap up, 2021 was a year of strong delivery for M&G, as we met or exceeded all of our major demerger commitments.
We put in place a new organizational structure that reinforces our One M&G strategy and enables us to deliver continued strong financial and operational results. It was a year in which we accelerated our strategy through focused acquisitions and took decisions to return more than GBP 1.1 billion of capital, including a GBP 500 million share buyback.
We provided you with greater insight into our capital management framework and announced a fresh operating capital generation target of GBP 2.5 billion for the period from 2022 to 2024. Thank you.
Thanks, John, and a warm welcome to everyone. Today, I'm pleased to present a set of financial results that demonstrate, once again, the strength of our business and the progress we have made against all of the priorities we set out at de-merger. Total AUMA remained broadly stable at GBP 370 billion. This high-level metric hides a much more important message. External net flows were positive at GBP 0.6 billion.
These are the first external net inflows since June 2018, which we delivered thanks to yet another excellent year of institutional asset management and continued improvements in retail.
Adjusted operating profit of GBP 721 million demonstrates a resilient and improving performance of our underlying business once we factor out reduced contributions from volatile sources of earnings, such as asset management performance fees, longevity assumptions and fluctuations in foreign exchange.
The most impressive result is the GBP 1.8 billion of total capital generation. In just 12 months, we generated enough capital to cover almost four years of full dividend costs. The operating result of GBP 1.1 billion was the primary driver, further supported by favorable markets.
With this performance, we have over-delivered on our GBP 2.2 billion of total capital generation target and did so one year ahead of schedule, and we have increased our shareholder Solvency II ratio to 218%. Thirty-six percentage points higher than at full year 2020, despite paying GBP 466 million of dividends.
Taking a closer look at asset under management and administration, you can see that positive market movements have more than offset expected outflows in Heritage and the completion of the Part VII transfer to Rothesay, which reduced AUMA by about GBP 10 billion.
As I said before, the important metric to focus on here is net flows from external clients. These were positive at GBP 600 million, driven by strong institutional net inflows of GBP 5.8 billion and by a reduction in retail outflows from GBP 11.9 billion to GBP 3.8 billion. This marked improvement came despite two large negative one-offs, jointly accounting for GBP 1.8 billion. Excluding them, underlying retail net outflows were GBP 2 billion for the year, of which only GBP 400 million occurred in the second half.
Wealth and other retail and savings net outflows of GBP 1.4 billion mainly relate to PruFund in the U.K., where sales have not yet recovered to pre-pandemic levels. Outflows have gradually increased as the book matures, but in 2021, we also saw some higher transfers out to other products which continue to abate so far in 2022. I'll provide more color on this in later slides.
In summary, external net flows improved by GBP 7.2 billion. This is a significant step forward that we expect to build on in the coming months as we continue to stabilize the retail franchise, grow institutional, and roll out Future+ in Europe. Here you see a breakdown of adjusted operating profit, the segmentation of which has been updated to reflect the new corporate structure announced at the end of last year.
You'll find a mapping from the old to the current structure in the appendix. We closed the year at GBP 721 million versus GBP 788 million in 2020, as we experienced headwinds from volatile sources of earnings. For example, asset management was impacted by GBP 19 million lower performance fees as some carried interest from infrastructure funds did not reoccur.
Within retail and savings, the review of longevity assumptions yielded GBP 92 million, less than the previous year. Finally, in corporate center, a 2020 GBP 15 million benefit from FX movements turned into a GBP 4 million loss. If we look at the underlying business drivers, though, we can see how operational delivery has begun to translate into financial delivery across all the segments.
Asset management revenues increased for the first time since 2018, despite having to absorb the full impact of the retail fee reviews announced in August 2020 and February 2021. These reviews are now complete, and we do not expect to undertake similar sized action on pricing again over the short to medium term. While stabilizing asset management revenues, we kept costs under control.
Retail and savings, and wealth in particular, benefited from a much improved contribution from PruFund, GBP 44 million higher year-over-year. The value of the shareholder transfer increased significantly as we delivered strong investment returns to customers. Finally, within corporate center, head office expenditures reduced GBP 101 million-GBP 95 million. Looking more in detail at the asset management results, there are three clear trends on flows.
Firstly, institutional had yet another fantastic year, attracting GBP 5.8 billion of external net new money. Flows have been consistently strong for some time, with positive contributions from both public and private asset mandates. While we performed strongly in our home market, Europe was the main driver of growth, with assets increasing from GBP 16 billion-GBP 21 billion in the year.
The institutional franchise has been predominantly U.K.-focused so far, and we see substantial opportunity to continue growing internationally as we are underweight in a number of large European markets.
We are very confident about growth prospects here, thanks to strong investment performance, distinctive private asset capabilities, and a healthy pipeline of new business. Secondly, the direction of travel of retail asset management is very encouraging, though with work still to do.
As you can see on the left of the page, outflows markedly improved every six months for the last two years. In the second half of 2021, net outflows were only GBP 400 million, compared to GBP 4.3 billion for the same period in 2020. This result was driven by improved performance, better pricing, a new generation of sustainable funds, and growth in the sub-advisory space.
As John covered in his presentation, the positive momentum in retail has continued so far this year. We are encouraged by these results, but not complacent, and remain focused on further improving performance and broadening our offering. Finally, in 2021, we completed the repatriation of GBP 25 billion of internal mandates from our former parent company, increasing the assets managed on behalf of the asset owner to GBP 169 billion.
Moving now on to Asset Management adjusted operating profit, which ended the year at GBP 315 million. Revenues showed an improvement year-on-year. This is not a minor achievement. In 2021, we reversed the trend of declining revenues that started in 2018, despite having to absorb the full cost of the retail fund reviews, which are now complete.
Here again, the continued growth of institutional and internal volumes played a crucial role, offsetting the pressure from retail. The continued growth of these franchises now accounting for about two-thirds of revenues also improves the stability of our top line, as their assets tend to show much greater persistency than retail.
From a margin perspective, institutional and internal margins have remained substantially stable. The compression in retail was expected following the proactive action taken to reduce fees on the CCAR and OEIC range announced last year.
The full impact of these actions is now materially earned through, and we don't expect to undertake new major reviews in the near future. Costs at GBP 672 million were broadly stable compared to 2020 and lower than 2019 on a like-for-like basis. This shows our continued commitment to improve efficiency even as we invested to grow our capabilities in North America and Asia.
As a reminder, it is as a result of these capabilities that we successfully in-housed GBP 25 billion of assets previously managed by Prudential plc. Cost control remains a key area of focus, and we also see it as a means to free up resources to continue to invest in attractive growth opportunities. Having covered asset management, we turn to retail and savings, starting with the wealth segment and its largest contributor to earnings, PruFund in the UK.
Adjusted operating profit climbed to GBP 63 million as the shareholder transfer more than doubled year-on-year, only partially offset by higher cost of hedging that resulted from strong equity markets. The higher shareholder transfer was driven primarily by greater investment returns delivered to customers and to a lesser extent by higher claims experience.
As mentioned in the past, we expect gross outflows to increase gradually over time as PruFund matures and the older cohort of customers start accessing their savings. PruFund performance has been consistently strong since launch in 2006. As you can see from the chart on the right, it has continued to show positive momentum over the last 18 months, triggering several upward unit price adjustments.
These adjustments increased investment returns and in turn lifted the shareholder transfer, which is broadly calculated as one-ninth of the net returns delivered to customers that redeem their policies. An additional factor that will benefit customers is the recent decision to distribute GBP 1.5 billion of excess With-Profits Fund surplus to PruFund and traditional with-profits policyholders.
This action, due to the strong capital position of the fund, will further improve customer outcomes and in turn the shareholder transfer. Given lower PruFund gross inflows, we have been experiencing an expense overrun on new business since the second half of 2020. The negative impact from the overrun was GBP 33 million in 2021. This impact will gradually reduce over time as we work to improve sales and reduce acquisition costs.
We expect that recent investments in expanding, integrating, and digitizing our wealth franchise will play a key role in supporting PruFund sales. Staying within retail and savings, this page covers Heritage and its two components, traditional with-profits and shareholder annuities. Traditional with-profits continued to deliver a stable underpin to our earnings with a result almost identical to 2020.
The shareholder transfer here is not as volatile as for PruFund, since policyholder bonuses are declared once a year, further smoothing volatility, while PruFund more closely tracks markets through unit price adjustments. Shareholder annuities earnings of GBP 415 million were around GBP 80 million lower than prior year, mostly due to lower benefits from asset trading and longevity assumptions.
These headwinds were only partially offset by a number of positives in the other line, such as improvements in expense assumptions, favorable short-term mortality experience, and the release of legacy provisions. Asset trading was impacted by a couple of transactions that, while being capital and cash generative, had a negative impact on IFRS profits due to different valuation methods.
The 2020 longevity result benefited from long-term assumption changes, but also from improvements in our base mortality model that did not reoccur to the same extent in 2021. The last CMI table we implemented was CMI 2019, and we will review CMI 2020 in the second half of 2022, continuing to retain a prudent approach to mortality assumptions. The annuity book remains conservatively positioned from a credit perspective, with only 18% of the assets rated BBB and 2% below investment grade.
Downgrade experience in 2021 was limited and better than in 2020, while we also experienced no defaults. Detailed information on the annuity book by credit rating and capital ranking is available in the appendix to the presentation. Now on to capital generation, starting with the operating result.
Underlying capital generation was GBP 484 million, compared to GBP 577 million the year before, driven by the lower contribution from retail and savings, and in particular from the annuity book. The primary driver here was lower expected returns on excess assets. These expected returns are locked in at the beginning of the year based on the interest rates on the first of January, which were extremely low in 2021.
As rates rose through the year, we generated greater returns than initially expected, but this had to be recognized as a positive economic variance and not underlying capital. We expect this effect to partially reverse in 2022, as yields at the start of the year were higher than in 2021.
Over the longer term, we estimate that the in-force book of annuities and with-profits policies will deliver GBP 10 billion of underlying capital generation after tax, providing a solid underpin to our dividend policy for the foreseeable future. The run-off profile of the in-force book is very long dated, and you can find more details in the appendix. Other operating capital generation was again very strong at GBP 633 million.
The largest contributions being GBP 287 million from asset trading and GBP 153 million release of counterparty risk capital following the completion of the Part VII transfer to Rothesay. This was included in the other line. We continue to see management actions as a key area of value generation, and we have a clear pipeline of initiatives that will contribute to capital generation in the coming years without impacting the level of prudence in our balance sheet.
We do not provide specific guidance around their quantum and timing, as they can be influenced by external factors that are not under our direct control. Nonetheless, our track record should give you the confidence that proactive management of the balance sheet will continue to be an important driver of shareholder value in the future.
Total capital generation reached GBP 1.8 billion on the back of the strong operating result and favorable economic variances of GBP 0.9 billion. The impact of economic variances roughly translated into a 21% benefit to our Solvency II ratio, driven by positive equity markets, higher interest rates, and tighter credit spreads.
Thanks to these impressive results, we significantly outperformed our capital generation target one year ahead of schedule, in line with our commitment to deliver strong capital generation to shareholders over time.
Thanks to the capital generation result, our solvency ratio strengthened further to 218%, up by 36 percentage points from the 2020 year-end level. The Solvency II debt leverage ratio reduced to 28% from 30% one year ago, continuing the downward trend that started when we became independent in October 2019 with a 34% level.
We continue to remain comfortable with the debt quantum, given our resilient capital position, the capital light nature of our new business, and the strong expected capital generation of the in-force business. As John has referred to, our strong financial position also gives us optionality when considering call dates as they arise in the coming years. The last theme I want to cover today is our transformation program.
Over the past four years, we have modernized the business, strengthened the control environment, and improved the efficiency of our operations. We started this journey in 2017, and as John mentioned, we have achieved GBP 145 million of overall cost savings one year ahead of schedule.
Thanks to our efforts, we have reduced the absolute cost base while absorbing four years worth of inflation and broadening our distribution and investment capabilities to pursue growth opportunities in wealth and asset management. After achieving the original cost target, we continue to invest to generate additional savings.
Cost control remains firmly at the top of the management agenda, and amid a constantly changing environment, we will continue to drive operational efficiency to free up resources that can be reinvested to broaden capabilities and expand our propositions.
Before wrapping up, we want to provide the usual indications of how we expect the business to develop in the near future. In asset management, we expect the institutional book to continue to deliver consistent growth in assets and revenues, building on the strong demand for our capabilities in the U.K. and internationally.
Retail flows remain sensitive to market conditions in the short term, but we are optimistic about longer term prospects given the significant work we have undertaken over the past years to improve and broaden our proposition.
Within retail and savings, we know that PruFund is a compelling proposition, but we recognize it will take some time for U.K. sales to recover. In Heritage, we expect that traditional with-profits will continue to deliver steady earnings. We have the same expectation for the annuity book, albeit noting that returns on excess assets will gradually decline over time.
We will review longevity assumptions in the second half of this year. Future+, our version of PruFund in Europe, is clearly a new compelling growth opportunity. Having just launched, it will take some time before it can deliver a meaningful uplift to earnings.
Nonetheless, it is worth noting that Future+ is structured like an asset management product with recurring yearly fees as opposed to the backend loaded shareholder transfer mechanism we have for PruFund UK. Finally, expectations for corporate center remain unchanged going forward. To conclude, I want to reiterate today's key messages.
Over the past 12 months, we've delivered continued operational improvements and strong financial results, growing our institutional franchise and making significant progress in both wealth and retail asset management.
We delivered GBP 1.8 billion of total capital, strengthening our solvency ratio to 218%, and allowing us to deploy capital with confidence, as John has spoken about. We have also set a new target of GBP 2.5 billion operating capital generation for the 2022-2024 period. This is yet another ambitious target, comfortably covering our ongoing dividend cost.
To achieve it, our priority is to grow underlying capital generation while we continue to drive management actions to generate additional capital. I would like to thank all our stakeholders for their continued support, recognizing that these results would not have been possible without the commitment of our people, customers, and investors. Thank you.
2021 was a good year for M&G as we delivered strong financial results and further operational improvements. This continued progress makes us confident that the business is now at an inflection point.
We have built positive momentum on fund flows, extended our distribution reach through strategic investments, launched Future+ in Europe, and continued to drive competitive advantage from our unique asset owner-asset management structure.
Our actions on capital allocation demonstrate that we are disciplined custodians of investors' money, balancing long-term investments in the business with attractive shareholder returns. Thanks for watching.