Business
M&G’s response to Leasehold Reform Bill
M&G PLC has announced its response to proposed changes to ground rents in England and Wales, which are expected to cap existing annual ground rents at £250 from 2028, eventually reducing them to zero. The company is directly exposed to £722 million in ground rent assets through its Prudential Assurance Company shareholder fund. While M&G reconfirms its adjusted operating profit growth and capital generation targets, the proposed changes could lead to a £230 million one-off reduction in Group Solvency II Own Funds and a £140 million reduction in the Group Solvency II surplus. Furthermore, an estimated £15 million reduction in annual adjusted operating profit and capital generation is anticipated from 2028, before any mitigating actions are taken. Disclaimer*
About this update from M&g Plc
[{"type":"text","content":"\n\nM&G's response to\nLeasehold Reform Bill\nThis announcement contains inside information\nM&G notes today's announcement by the Government regarding proposed changes to ground rents in England and Wales.\nUnder the current proposal existing annual ground rents are expected to be capped from 2028 at £250 for a transition period of 40 years, at the end of which all ground rents would be reduced to zero.\nM&G reconfirms the adjusted operating profit growth and capital generation targets announced in March 2025, and our existing progressive dividend policy.\n \nSummary of estimated financial impacts based on 30 June 2025 figures:\nM&G is directly exposed to £722 million of ground rent assets through its Prudential Assurance Company shareholder fund1.\nM&G's strong financial position and our ongoing prudent approach to capital allocation mean we are well placed to absorb and manage this impact. Under the proposed changes, we would expect our Shareholder Solvency II coverage ratio to reduce by c. 1 percentage point.\nShould the proposed changes be approved in the current form, the write down in valuation of M&G's relevant assets is expected to lead to a c. £230 million one-off reduction in the Group Solvency II Own Funds. Before any mitigating actions available to us, the impact on the Group Solvency II surplus would be limited to a £140 million reduction, due to the release of the Solvency Capital Requirement (SCR) allowance already made, and disclosed, in our 2023 Annual Report.\nOnce the proposed changes take effect, likely in 2028, we would expect a c. £15 million reduction in annual adjusted operating profit and underlying capital generation, due to lower surplus assets in our annuity book. This is before any mitigating actions, such as balance sheet optimisation and greater cost control, which we expect to take in the coming months.\nThe table below shows the estimated impact of the proposed legislation on key financial metrics, before any mitigating actions, based on 30 June 2025 financial statements. These initial estimates will be finalised and discussed further at our 2025 FY Results presentation.\n\n\n\nSolvency II one-off impact\n\n\n\nOwn Funds\n\n\nc. £230m reduction\n\n\n\n\nSCR\n\n\nc. £90m reduction2\n\n\n\n\nSurplus\n\n\nc. £140m reduction\n\n\n\n\nShareholder c...