British investment manager M&G has posted £1.05bn of international financial reporting standards (IFRS) loss after tax in the first half of this year.

The loss widened from £248m recorded in the same period last year.

M&G attributed the loss to short-term fluctuations in the fair value of the extra assets in the firm’s annuity unit. The derivatives employed by the company to hedge the Solvency II balance sheet also contributed.

Operating capital stood at £433m in H1 2022, up 40% from £309m a year ago period. M&G aims to generate £2.5bn in new operating capital by the end of 2024.

The firm’s assets under management and administration dropped by £21.1bn to £348.9bn in H1 2022 due to adverse market conditions.

Net client flows (excluding Heritage) totalled £1.2bn in H1 2022, compared to £2bn in outflows in the prior year period.

Wholesale Asset Management also returned to net client inflows for the first time since 2018 with £0.8bn. In H1 2021, the unit recorded £3.4bn in net client outflows.

Institutional Asset Management business also reported growth with net client inflows of £0.3bn.

M&G chief executive John Foley said: “Improved client flows underpinned a resilient operational and financial performance despite a period of volatility when many investors reduced their exposure to markets.

“The turnaround in flows builds on the progress we made in 2021. In only 12 months, we have reversed our position from being £2bn in net client outflows, to achieving £1.2bn in net client inflows excluding Heritage.”