M&G delivers profit growth and capital gains despite market headwinds

M&G plc has reported a 5% increase in adjusted operating profit before tax, reaching £837 million in 2024, demonstrating the company’s ability to navigate economic volatility while maintaining financial strength. The asset management and insurance group has also announced a new progressive dividend policy, beginning with a 2% increase in total dividend per share, reflecting confidence in its long-term profitability.

Despite a challenging macroeconomic environment, M&G continues to drive capital efficiency, operational cost reductions, and strategic business expansion across both its asset management and life insurance divisions. The company is now setting ambitious profit and capital generation targets for 2025–2027, aiming for sustained growth in earnings and shareholder returns.

How Has M&G Maintained Profit Growth Despite Market Headwinds?

M&G’s financial performance in 2024 was marked by resilient capital generation and strategic cost efficiency, ensuring the company remained on track with its long-term business objectives. The 5% rise in adjusted operating profit was fueled by a 19% increase in asset management profits, reinforcing the strength of its diversified business model.

Capital management remained a priority, with operating capital generation totaling £933 million, contributing to a cumulative £2.75 billion in capital generated since 2022. This surpassed the company’s initial three-year target of £2.7 billion, highlighting its ability to optimize capital flows while managing financial risks effectively.

The Solvency II ratio improved to 223%, up from 203% in 2023, reflecting the company’s enhanced financial stability and risk management strategy. This improvement was driven by strong underlying earnings, a reversal of £216 million in capital restrictions, and favorable tax and market conditions.

However, M&G reported an IFRS loss after tax of £347 million, compared to a £309 million profit in 2023. This was primarily due to investment fluctuations and accounting mismatches under IFRS 17, though the company emphasized that these were short-term impacts and not indicative of a broader structural issue.

What Role Has Cost Efficiency Played in M&G’s Strategic Growth?

M&G has pursued an aggressive cost reduction strategy to improve its operational efficiency and financial resilience. The company has already delivered £188 million in cost savings since launching its transformation programme in early 2023, allowing for continued investments in business growth while offsetting inflationary pressures.

The company’s Asset Management Cost-to-Income ratio improved from 79% to 76%, reflecting a combination of lower operating costs and a modest revenue increase. With continued progress on cost management, M&G has raised its 2025 savings target from £200 million to £230 million, signaling its commitment to sustained operational efficiency.

Streamlining initiatives have included integrating its Life and Wealth divisions under a single leadership structure, a move aimed at enhancing service delivery and maximizing operational synergies. The company has also focused on improving customer experience, with faster processing times and an increase in its Net Promoter Score to +22, up from +15 in 2023.

How Is M&G Expanding Its Market Presence and Growth Strategy?

M&G has prioritized expanding its asset management and insurance businesses, ensuring a more diversified and stable revenue base. The company’s Assets Under Management and Administration (AUMA) rose to £346 billion, reflecting positive market movements and the integration of recent acquisitions.

Although net client outflows from UK Institutional Asset Management declined to £3.8 billion—an improvement from £6.1 billion in 2023—market conditions remain challenging for active investment strategies. Meanwhile, the International Institutional Asset Management segment recorded £2.9 billion in net inflows, underscoring M&G’s continued success in global markets.

M&G has also strengthened its presence in private markets, completing the acquisition of BauMont Capital and securing a 70% controlling stake in P Capital Partners. These deals bring expertise in value-add real estate and non-sponsored lending strategies, further diversifying the company’s investment portfolio.

The firm completed £0.9 billion in Bulk Purchase Annuity (BPA) transactions, including a Value-Share BPA structure, an innovative alternative to traditional buy-in agreements. Additionally, M&G has continued to expand its capital-lite life insurance solutions, with a planned launch in the Middle East pending regulatory approval.

How Have Investors Responded to M&G’s Latest Financial Results?

M&G’s latest financial results have been met with a positive market reaction, with its stock rising 1.99% on March 19, 2025, closing at £2.26. This outperformed the FTSE 100 Index, which saw only a 0.02% increase on the same day. However, M&G’s share price remains 6.43% below its 52-week high of £2.41, reflecting investor caution amid broader market uncertainty.

Analyst sentiment on M&G remains neutral, with most ratings falling into the “Hold” category. The average 12-month price target stands at GBX 223.75, with expectations ranging between GBX 220 and GBX 225, indicating limited short-term upside potential. While the company’s profit growth and cost efficiencies have strengthened investor confidence, concerns over net client outflows and global economic conditions persist.

What Are M&G’s Long-Term Financial and Strategic Goals?

Looking ahead, M&G has set two new financial targets for 2025–2027, aiming for sustained profitability and capital generation. The company intends to grow adjusted operating profit before tax by an average of at least 5% annually, ensuring a steady increase in earnings. Additionally, it has committed to cumulative operating capital generation of £2.7 billion over the next three years, reinforcing its focus on capital efficiency and financial resilience.

M&G’s progressive dividend policy marks a significant shift in its shareholder return strategy, starting with the 2% increase in 2024’s total dividend per share to 20.1p. This move highlights management’s confidence in future earnings growth and its ability to deliver consistent value to investors.

With global market volatility and geopolitical risks persisting, M&G remains focused on maintaining capital strength, expanding its asset management footprint, and driving operational efficiencies. While short-term investment fluctuations may continue to impact IFRS results, the company’s strong capital generation strategy and disciplined cost management position it for sustained long-term success.