M&G reported broadly flat full year underlying operating profit of £838mn (£820mn expected).
Assets under management rose 8.7% to £376bn. Net flows from open business turned positive with an inflow of £7.8bn.
The Shareholder Solvency II coverage ratio, a measure of balance sheet strength, rose from 223% to 242% over the year.
A second interim dividend of 13.8p was announced, taking the total to 20.5p, up 2%.
Underlying operating profit is expected to show a ‘meaningful acceleration’ in 2026 and grow at an average annual rate of 5% or more over the three years to the end of 2027.
The shares were broadly flat in early trading.
Our view
M&G delivered a good second half to the year with plenty of positives to take into 2026. Net flows into the parts of the business open to new investment were strong, and while profits were flat over the year, an acceleration is on the cards.
There are two arms to the business: an asset manager with around £376bn of assets under management and a life insurance division that houses both annuities and some more specialist products. These funds blend traditional investments with insurance business. There are several benefits to this complex structure, but the downside is that it’s tricky for retail investors to understand, and that can weigh on demand.
A chunk of the Insurance business is managed by the asset management arm, and so the circle completes. Asset Management is seeing good inflows from institutional and retail clients, a trend that needs to continue if M&G wants to achieve its ambitious targets. Insurance products remain in gradual decline overall - though newer offerings like PruFund are starting to show improvements.
To help stem the run-off from its book of existing business, M&G is back in the bulk annuity market after stepping away back in 2016. Current deals are at much smaller volumes compared to some of the leading players, but M&G can’t go headfirst as the capital required to back these deals is needed to support other endeavours, namely capital generation targets and a growing dividend program.
Rather than chase volume, M&G is trying some novel deal structures and early commentary suggests things are going well, having recently completed its first transaction. We’ll be watching to see if they can innovate their way to snapping up business in the competitive market.
The revamped M&G Wealth platform looks to offer advisers an all-in-one platform, funnelling assets from customers into M&G or with-profits products. Progress is good and if it continues, with-profits solutions will be more accessible helping flow growth for years to come.
Capital levels look good, and there are targets in place to reduce relative debt levels and cut costs. Simplification has been a key driver of profit growth, and there’s still more to be squeezed. All of this leaves us relatively confident that the 7.1% forward yield is achievable.
M&G is making progress across several key areas, and, as an income name, the yield looks attractive. Medium term guidance points to a material improvement in performance, which is achievable on current trends but adds a layer of execution risk to be mindful of.
Environmental, social and governance risk
The financials sector is medium-risk in terms of ESG. Product governance is the largest risk for most companies, especially those in the US and Europe with enhanced regulatory scrutiny. Data privacy and security are also increasingly important risks for banks and diversified financial firms. Business ethics, ESG integration and labour relations also contribute to the industry’s ESG risk profile.
According to Sustainalytics, M&G’s overall management of material ESG issues is strong.
Executive compensation is tied to ESG performance targets, and M&G has assigned responsibility for overseeing ESG issues to the board. The responsible investment policy in place includes commitments to engage with investees on ESG issues. There’s a strong whistleblower programme and above average management of data privacy and cybersecurity risks.
M&G key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.