ii view: high yielder M&G reaps rewards of change

First-half results to 30 June

• Assets Under Management and Administration up 9% to £387 billion
• Adjusted Operating Profit (AOP) up 15% year-over-year to £435 million
• Capital cushion or Solvency II coverage ratio of 247%, up from 230%
• Interim dividend up 1.5% to 6.8p per share
• A statutory loss of £165 million, down from a profit of £248 million in H1 last year

Guidance:

• Expects to achieve low double-digit growth in AOP over this current full year
• Continues to target average annual growth in AOP before tax of at least 5% between 2025 to 2027

Chief executive Andrea Rossi said:

“I am very pleased with our progress over the first six months of the year. We delivered record adjusted operating profit, strong net inflows and continued growth in Bulk Purchase Annuity volumes, while achieving positive outcomes for our customers and clients.

“M&G continues to grow and transform, becoming a more diversified, efficient, and capital-light business. With a clear strategy, disciplined execution and the right resources in place, I am confident in our outlook for the second half of 2026 and in our ability to deliver sustainable long-term value for customers, clients and shareholders.”

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ii round-up:

Previously separated out of Prudential, M&G  Ordinary Shares (LSE:MNG) today manages money for around 4.2 million retail clients and more than 1,000 institutional clients.  

Its brands include both M&G itself and Prudential brands.

For a round-up of these latest results announced on 3 September, please click here.

ii view:

In business for more than 175 years, M&G today employs over 6,000 people across 38 offices globally. Group partnerships with other financial institutions include Daiichi Life in Japan, AIA in Hong Kong and OCBC in Singapore. Core management focuses include maintaining financial strength, simplifying the business and growing profits. M&G’s many competitors include BlackRock, Vanguard, Man Group (LSE:EMG), Jupiter Fund Management (LSE:JUP) and Ashmore Group (LSE:ASHM).

For investors, intense competition across the asset management industry including many providers of low-cost index tracking funds has placed downward pressure on fees. A reported H1 statutory loss of £165 million came via fund valuation write-downs and UK legal changes imposing caps on pre-existing ground rents, impacting expected future cash flows. Rivals such as Legal & General Group (LSE:LGEN) and Standard Life (LSE:SDLF) are competing hard for Bulk Purchase Annuity business, while an estimated share price-to-net asset value above the three-year average may suggest the shares are not obviously cheap.  

On the upside, management initiatives such as fostering overseas partnerships has aided growth in Assets Under Management and Administration. An ongoing focus on costs has seen the group’s asset management cost-to-income ratio improve to 73% from 75%, with a push to 70% being pursued. Investment in AI is being made to further enhance group efficiency, while a strong balance sheet is evident given the rise in the group’s Solvency II coverage ratio to 247% from 230%.

On balance, and while risks remain, financial strength and a forecast dividend yield of just over 6% should continue to attract interest from both growth and income investors. 

Positives:

• Partnerships aiding growth in assets under management
• Focus on reducing costs

Negatives:

• Uncertain economic and geopolitical outlook
• Intense industry competition

The average rating of stock market analysts:

Strong hold