Financial highlights
i
Assets Under Management and Administration (AUMA)
£345.9bn
(2023: £343.5bn)
Net flows from open business
£1.9bn outflow
(2023: £1.7bn inflow)
Adjusted operating profit before tax
£837m
(2023: £797m)
Operating change in Contractual
Service Margin (CSM)
£294m
(2023: £355m)
IFRS result after tax
£(347)m
(2023: £309m)
Operating capital generation
£933m
(2023: £996m)
Total capital generation
£1,108m
(2023: £358m)
Shareholder Solvency II coverage ratio
223%
(2023: 203%)
Non-financial highlights
Female representation on the Group
Executive Committee and direct reports
36%
(2023: 37%)
Find out more about our gender diversity on pages 41-43
Ethnic diversity within the Group
Executive Committee and direct reports
6.9%
(2023: 7.4%)
Find out more about our ethnic diversity on pages 41-43
Net Promoter Score (Life)
+22
(2023: +15)
Find out more about our Net Promoter Score on page 15
Employee sustainable engagement score
69.0
(2023: 70.7)
Find out more about our employee engagement on page 40
Operational carbon emissions:
Scope 1, 2 and selected scope 3
ii
9,101 tCO2e
(2023: 7,964 tCO2e restated)
Find out more about our carbon emissions on page 76
i
All financial measures are defined in Supplementary Information
on page 341.
ii
When reporting totals, market-based emissions are used. Note that
the 2023 figure has been restated, see page 76 for further details.
Key
KPM
Key performance measure (defined in glossary)
APM
Alternative performance measure (defined in glossary)
REM
Linked to remuneration measures for Executive Directors
Performance highlights
How we performed in 2024
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Pages XX-XX
1–85
Strategic Report
2
M&G at a glance
3
Chair’s statement
4
Group Chief Executive Officer’s statement
6
Our business model
9
Market and industry trends
10
Our strategy
12
Asset Management
14
Life
16
Business and financial review
30
Our approach to sustainability
34
Section 172 Statement
37
Our stakeholders
40
Our colleagues
44
Risk management
54
Non-financial and sustainability information statement
60
Our social commitment
64
Climate-related disclosures
82
Responsible business practices
84
Viability statement
85
Basis of preparation
Stay up-to-date with more information at:
mandg.com
86–160
Governance
87
Chair’s introduction to governance
89
Board of Directors
92
Board leadership and company purpose
94
Division of responsibilities
96
Composition, succession and evaluation
101
Audit, risk and internal controls
102
Nomination and Governance Committee Report
104
Audit Committee Report
110
Risk Committee Report
112
Directors’ Remuneration Report
120
Directors’ Remuneration Policy
129
Remuneration at a glance
138
Annual Report on Remuneration
157
Directors’ Report
160
Statement of Directors’ responsibilities
161–354
Financial information
162
Independent auditors’ report
179
Consolidated financial statements
331
Company financial statements
341
Supplementary information
355–366
Other information
356
Supplementary climate information
360
Shareholder information
361
Glossary
365
Contact us
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Contents
1
What we do
We are an internationally recognised active asset manager and an
established life business, with a well capitalised With-Profits Fund.
We use our strong investment capabilities to help our customers
and clients invest for the long term.
Our purpose
To give everyone real confidence
to put their money to work
Our strategic pillars
Maintain our
financial strength
Simplify
our business
Deliver
profitable growth
Ensuring our clients
can depend on us, while
rewarding shareholders.
Becoming more nimble and
efficient in how we work to
best serve our customers.
Building on our strengths
to better anticipate and
address our clients’ needs.
Our values
Care
Integrity
We act with care – treating clients
and colleagues with the same level of respect
that we would expect for ourselves.
We also invest with care, making choices
for the long term.
We empower our colleagues to do
the right thing, honouring our commitments
to others and acting with conviction.
Our business is built on trust and we don’t
take that lightly.
Our international reach
Our size
Who we serve
39
6
£345.9bn
4.5m+ 900+
Offices
worldwide
Continents
Assets under management
and administration
Individual
customers
Institutional
clients
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
M&G at a glance
Who we are
2
Find out more about our behaviours on page 40
Find out more about our strategy on pages 10-11
Throughout 2024 M&G continued to transform, innovate and deliver
I am proud of how M&G has continued to support our
customers and clients during 2024, while delivering strong
financial results for our shareholders and positively impacting
our communities. This year saw progress across the whole of
M&G as we continue to transform the business, including
developing new innovative propositions such as the Value
Share bulk purchase annuity and further globalising our
investment capabilities.
This success comes from having a balanced and integrated
business model, solid foundations, clear strategic direction,
customer focus and an inclusive culture.
Whether it’s new acquisitions to build our capability, increasing
the profile of our brand, improving our culture, winning new
investment management mandates or enhancing our customer
and client offering, our results show the power of what can be
achieved by all of our colleagues coming together to deliver on
our purpose; to give everyone real confidence to put their
money to work.
And we want to go further, by improving the way we support
our clients and customers, transforming their experience and
continuing to capitalise on opportunities to deliver new
products and services to meet their needs. We are aiming to
support more people in more places.
M&G’s business model is based on investing for the long-term
and we are well positioned to support economic growth and
the transition to a sustainable economy. However, we
recognise that we cannot do this alone. We therefore continue
to engage actively with a range of stakeholders including
Government, regulators, shareholders, trade associations and
Non-Governmental Organisations (NGOs) to ensure we can
deliver the best outcomes for our customers and clients.
I am privileged to work alongside a dedicated and talented
management team led by Andrea, and I am continually grateful
to my Board colleagues for their ongoing contributions and
support. My personal priority remains to ensure we have a
diverse set of skills and experiences on the Board to support
the delivery of our strategy. I was delighted to welcome
Elisabeth Stheeman and Paul Evans as independent Non-
Executive Directors and to confirm Clare Thompson as Senior
Independent Director.
Due to our strategic progress, the Board is today announcing a
refresh of our dividend policy, with the declaration of a second
interim dividend of 13.5 pence per share resulting in a total
dividend of 20.1 pence per share for 2024. The Board’s
intention for the future is to maintain a progressive and
sustainable dividend policy, reflecting the Group’s expected
business growth and long-term financial performance.
Finally, a special thanks also goes to everyone who has
contributed to M&G’s achievements in 2024. Delivering for our
shareholders, customers and clients is only possible due to the
dedication and skill of our 6,000 colleagues. I have confidence
that with the strength of the business model and the expertise
of our people, the Group will continue to grow and deliver for
our shareholders, as well as continuing to best serve the
interests of our customers, clients and communities.
Sir Edward Braham
Chair
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Chair’s statement
Delivering for all our stakeholders
3
“
The Board’s intention
for the future is to
maintain a progressive
and sustainable
dividend policy.”
Sir Edward Braham
Chair
The strength of our business model underpins our progress over 2024
In 2024 we delivered meaningful progress across our three
strategic pillars of financial strength, simplification and growth.
Our balanced and integrated business model, based on
gathering assets and investing for the long term remains a
source of competitive advantage, underpinning progress
across our business and enabling us to thrive together with our
colleagues, customers, clients, shareholders and communities.
Financial strength
In September this year we announced an upgrade to our three
year cumulative operating capital generation target for 2022 to
2024 to £2.7 billion reflecting our effective capital management.
I am delighted that we exceeded this upgraded target by
generating £2.75 billion over the three years and improved our
Shareholder Solvency II coverage ratio to 223%. We also
completed our deleveraging actions to reduce our debt by
£461 million resulting in a lower Solvency II leverage ratio
of 33%.
Given our confidence in the outlook of the business we are
announcing a new three year cumulative operating capital
generation target of £2.7 billion. This excludes the new
business strain of the Life business to reflect our strategic
growth plans over the period.
Simplification
We have continued to simplify our business to provide a better
level of service to our customers and clients. This is reflected in
the increase in our Life Net promoter score to +22 over 2024.
Dividend per share (ordinary)
20.1p
(2023: 19.7p)
The Board has agreed to pay a second interim dividend
of 13.5p per share on 9 May 2025, meaning a total
dividend of 20.1p per share for the year.
Find out more on page 236
In September, we announced our decision to focus and
rationalise our Wealth strategy. Our new focus is to continue to
grow the distribution of our own solutions through our
restricted advice channel and independent advisers, and make
our propositions more accessible on third party platforms. We
have simplified our operating model by bringing together
Wealth and Life under the leadership of Clive Bolton.
Underpinning this decision is our ongoing drive to deliver
improved client outcomes.
Over the course of the year we have moved at pace on our
transformation efforts, delivering £188 million of savings in the
first two years of the programme. Given this progress, we are
upgrading our cost target, again, to £230 million by end
of 2025.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Group Chief Executive Officer’s statement
A year of transformation and growth
4
“
Our balanced and
integrated business
model remains a
source of competitive
advantage.”
Andrea Rossi
Group Chief Executive Officer
“
Through innovative
propositions such as
the Value Share BPA
we can offer
customers a
compelling product
range.”
Andrea Rossi
Group Chief Executive Officer
Growth
I am pleased with our adjusted operating profit, up 5% year-on-
year, driven by a strong Asset Management result, which
improved by 19%. We achieved this improvement in Asset
Management adjusted operating profit while continuing to
invest in internationalising the business and expanding our
private markets capabilities. Through acquiring BauMont Real
Estate Capital in 2024 and the agreement to purchase a 70%
controlling stake of P Capital Partners at the start of 2025, we
are making selective acquisitions that fit with our overall
strategy of investing in areas with high growth potential for our
asset management business.
We continued to deliver strong investment performance with
63% of our Wholesale funds ranked in the upper two
performance quartiles over three years and 59% over five years
as of 31 December 2024. In Institutional asset management,
over 75% of funds by AUMA outperformed their benchmarks
on a three and five year basis.
In Life, we continued to build our presence in the Bulk Purchase
Annuity (BPA) market. We increased new business volumes for
BPAs by 50% year-on-year, reached £0.9 billion of premiums,
and helped to offset the run-off of the in-force book. Through
propositions such as the innovative Value Share BPA and our
Fixed Term Annuity recently launched at the start of 2025, we
can offer customers a compelling product range combining
guaranteed, smoothed and unsmoothed solutions.
We remain well positioned to address client needs and
capitalise on key market dynamics to drive growth
opportunities in a disciplined and controlled way.
To support our growth priority we have set a new financial
target for the three years 2025-2027 to grow adjusted
operating profit before tax by 5% or more on average per
annum.
Empowering our colleagues
and making a difference
We continue to build a workplace where everyone can flourish
in a safe and inclusive environment. A particular focus has been
the embedding of our new behaviours launched in 2024,
including through a series of well-attended colleague-wide
learning experiences offered throughout the year. We have
also focused on how the Group is fostering opportunity in hiring
practices, development pathways and increased diversity to
enhance business performance. Our inclusive culture continues
to make a positive impact in enabling our colleagues to deliver
on our priorities and making a real difference to wider society
through community initiatives. During 2024 we have also
evolved our sustainability strategy to better align with what
matters to us as a business, with a particular focus on our
investment and social impact expertise.
Employee sustainable engagement score
69.0
(2023: 70.7)
Our colleague OneVoice surveys over 2024 highlighted
that our culture is a strength, with colleagues treating
one another with respect and dignity.
Find out more on page 40
After a successful year, I would like to say thank you to our
M&G colleagues for all their hard work and dedication and to
my leadership team who continue to drive the business
forward. We welcomed Shawn Gamble, Group Chief Risk and
Compliance Officer and Chris Cochrane, Chief Information and
Technology Officer, to the Group Executive Committee (GEC),
who are already making a significant contribution. I also want to
thank Caroline Connellan, who left the business in 2024, and
wish her the best for the future.
Outlook
As I look ahead to 2025, the environment we operate in
remains challenging. Increased geopolitical uncertainty and
market volatility continue to weigh on customer and client
sentiment and pose a significant challenge to financial
institutions across the globe. At M&G, we are confident that we
can navigate this uncertain environment by leveraging the
strength of our business model which we believe will remain a
source of competitive advantage.
As we move into the next phase of our transformation we
remain focused on delivering sustainable, profitable growth for
our shareholders and attractive outcomes for our customers
and clients.
Andrea Rossi
Group Chief Executive Officer
M&G plc Annual Report and Accounts 2024
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Group Chief Executive Officer’s statement continued
5
What we do
Our business model is to gather assets and invest for the long-term
to deliver attractive financial outcomes for our customers and clients,
as well as superior returns for our shareholders.
We leverage our capital strength and investment expertise, allowing us to
develop innovative savings and investment propositions that meet customer
and client needs through our Asset Management and Life businesses.
We are an internationally recognised active asset manager with market-
leading expertise in private assets, public fixed income, and multi-asset
solutions, alongside our expanding range of sustainability-driven thematic
equity products.
We are an established Life business with a strongly capitalised
With-Profits Fund. With a heritage of over 170 years and a strong brand,
through our advice business and distribution network, we’re well-positioned
to understand and meet the needs of customers and advisors. We have a
long-standing track record of successfully managing a scaled balance sheet
to provide security to our customers.
Our strong investment capabilities underpin all that we do.
M&G plc Annual Report and Accounts 2024
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Other information
Our business model
Our balanced and integrated business model
6
Attract inflows and invest for the long term
We create value by attracting net client inflows across our business and leveraging
our strong investment capabilities to invest for the long term.
How do we attract
net inflows?
Through our expertise
in Asset Management and
Life solutions we develop
innovative propositions to
meet real needs of customers
and clients, who can access
these solutions through our
wide distribution network.
Underpinning this is
our consistently strong
investment performance.
How does this create value?
Flows into our business drive
our earnings and long-term
capital generation. Flows also
allow us to scale the business.
How do we invest
for the long term?
Using the scale of the business
including our well capitalised
With-Profits Fund, combined
with our expertise across
public and private markets, we
are able to make long-term
investment decisions.
How does this create value?
By making investment
decisions for the long-term,
we can provide our customers
and clients with guaranteed,
smoothed and unsmoothed
solutions. This also allows
us as a business to support
the transition to a
sustainable economy.
Working for everyone
Shareholders
Our strong balance sheet and the diversity
of our earning streams support our dividends.
Our strength across two businesses means we
can deliver growth and attractive returns.
Find out more about our financial
performance on pages 16-29
Colleagues
We are committed to ensuring our colleagues’
working lives are engaging and fulfilling,
in a safe, inclusive and diverse environment,
so they can contribute to our success.
Find out more about our
colleagues on pages 40-43
Customers and clients
Our model allows us to invest for the long-term and deliver
attractive financial outcomes for our customers and clients.
Our investment and insurance expertise combine to
deliver best-in-class propositions.
Find out more about our
customers and clients on pages 12-15
Society
Our long-term horizon allows us to invest
in what society needs, including real estate, infrastructure
and technology. Our Group sustainability framework is
aligned with our purpose.
Find out more about our approach
to sustainability on pages 30-33
M&G plc Annual Report and Accounts 2024
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Other information
Our business model continued
How we create value
7
£158.9bn
Third party assets managed
(2023: £153.2bn)
£156.1bn
Life assets managed by our
Asset Management business
(2023: £160.3bn)
£29.0bn
Life assets not managed by our
Asset Management business
(2023: £27.7bn)
Note: Diagram excludes corporate assets of £1.9bn (2023: £2.3bn),
of which £0.9bn (2023: £1.0bn) is in Asset Management
40 Leadenhall development
The value of our business model is that we can use our
financial strength and investment expertise together to
develop long-term investment solutions, and deliver attractive
financial outcomes.
Our recently completed office development project in the City
of London, 40 Leadenhall demonstrates this in action.
Using capital from the With-Profits Fund, the Life business
invested £875 million in the development in 2019 in a deal
structured by M&G Real Estate, our specialist internationally
recognised property manager.
M&G Real Estate have successfully managed the development
through to completion, the largest office project to complete in
London’s Square Mile in 2024.
The 900,000 square foot development is over 90% committed
and achieving above average rents. It showcases M&G’s ability
to deliver, invest for the long term and create attractive returns
for customers and shareholders.
The building is also among the UK’s first buildings to achieve the
NABERS certification, an energy efficiency standard that measures
how a building is designed to operate and how it performs in use.
M&G plc Annual Report and Accounts 2024
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Our business model continued
Our business model in action
8
We are well placed to support our customers and clients
and deliver value for all our stakeholders
Client needs are continually
changing in response to the
macroeconomic environment
Savings and advice gap
highlights the need for a
holistic range of savings
solutions that can be tailored
to meet client needs
Financial sector funding is
required to support growth
and transition to a
sustainable economy
Economic uncertainty and geo-political
tension globally continue to drive
market volatility, creating
unpredictable financial conditions for
savers and investors.
Clients are increasingly demanding
solutions that deliver reliable returns
against the evolving macroeconomic
back drop.
Across most major financial markets
with an increasingly ageing population,
people are at risk of making insufficient
financial preparations for their future
including in retirement.
Savings and investment needs evolve
throughout an individual’s lifetime from
building wealth through to, and in
retirement. Therefore they need advice
and the right savings solutions to help
them secure their future.
Shortfalls in traditional sources of funding
are creating opportunities for the
financial sector including private assets
and sustainable funds to fill this gap.
There is increasing recognition that
private sector investment is critical to
funding infrastructure, investment in the
real economy, fuelling growth in private
businesses and to support the significant
investment required in transitioning to a
more sustainable economy.
35%
34%
70%
Increase in market volatility in last
5 years (vs previous 10-year period)
Source: MSCI World Index
of European household wealth is held
in low return currency and deposits
Source: Bruegel, April 2024
of the $300tn investment required
to meet net zero goals by 2050 is
expected to come from private
markets investment
Source: Goldman Sachs
M&G positioning
Our business model, broad capabilities
and expertise enables us to develop
distinctive investment strategies that
meet the evolving needs of our
customers and clients.
Our differentiated offering combines
Asset Management and Life
capabilities, including guaranteed and
smoothed solutions, helping our clients
and customers manage market
uncertainty.
M&G positioning
We continue to expand our savings
and investment proposition to offer a
wider range of products that support
our customers' needs throughout their
lifetime as requirements change.
We are making our savings and
retirement solutions more accessible
by refining our distribution channels to
enable customers to access the
savings solutions that best meet their
needs.
M&G positioning
Our private markets business
leverages our Life balance sheet to
invest for the long term across
infrastructure developments and
private companies, with dedicated
investment strategies focusing on
sustainable and impact investments.
Our balanced and integrated business
model enables us to optimise our
capabilities to deliver investment in the
real economy with sustainable
outcomes.
M&G plc Annual Report and Accounts 2024
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Market and industry trends
Opportunities and challenges
9
We have made progress in delivering our strategy, using the strength
of our business to meet the needs of our stakeholders
Our purpose is to give everyone real confidence to put their money to work and the three pillars of our strategy are centred on
ensuring we meet this clear purpose.
The strength of our business model is helping us to deliver our strategy. By combining our deep understanding of customer and
client needs, compelling products and services, investment capabilities and expertise, and our growing international footprint, we
are continuing to transform M&G. As we transform we are targeting good operational and financial performance, and attractive
financial outcomes for our customers and clients, as well as superior returns for our shareholders.
We take a long-term approach to growth and value creation. This incorporates how we address environmental and social
challenges through the investments we manage on behalf of our clients, as well as how we run our business operations. Over 2024
we have reviewed our sustainability strategy, drawing on the strengths of our business model and broad investment capabilities.
The updated approach focuses on areas that are material to us and where we can make a positive contribution.
Our strategic pillars
Maintain
our financial
strength
Ensuring our clients
can depend on us, while
rewarding shareholders.
Simplify
our
business
Becoming more nimble
and efficient in how we work
to best serve our customers.
Deliver
profitable
growth
Building on our strengths
to better anticipate and
address our clients’ needs.
M&G plc Annual Report and Accounts 2024
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Other information
Our strategy
Continued momentum to deliver our strategy
10
Maintain our financial
strength
Our financial strength gives our
customers, clients and shareholders
confidence that we are the right long-
term partner for them. We help our
customers and clients put their money
to work and achieve their financial
goals. For shareholders, we carefully
allocate capital to invest in high-
potential growth opportunities and
reward them with attractive,
dependable dividends.
Our Group priorities
– Proactively manage our financial
position to create capacity to invest
in growth.
– Maintain a disciplined approach
to capital allocation.
– Build on the strength of our
business model to grow and
diversify revenue across our two
businesses.
2024 Group highlights
– Exceeded our three-year cumulative
operating capital generation target of
£2.7 billion over 2022-2024.
– Completed deleveraging actions to
reduce our debt by £461 million,
reducing our leverage ratio by 2%.
– Announcement of new progressive
and sustainable dividend policy,
with the declaration of a second
interim dividend of 13.5 pence per
share resulting in a 2024 total
dividend of 20.1 pence per share.
Simplify our
business
We are transforming the way in which
we operate, so that we can better serve
our customers and clients in the UK and
internationally and deliver our growth
strategy more efficiently. We want to
unlock M&G's potential by enabling our
colleagues and business partners to
work together more effectively and
improve the way we engage with
clients.
Our Group priorities
– Streamline our business model to
enable us to work more effectively
across the Group and deliver our
growth priorities.
– Simplify and automate our
processes to make it quicker and
easier for our customers to do
business with us.
– Continue to modernise our
technology estate.
2024 Group highlights
– We delivered cost savings of £188
million by the end of 2024 and have
raised our cost saving target under
our transformation programme to
£230 million by the end of 2025.
– We continued to evolve our
business model, including the
decision to combine Life and
Wealth to improve operating
effectiveness and make it easier for
customers to do business with us.
Deliver profitable
growth
Our business model gives us distinct yet
complementary capabilities that work
closely together to leverage the
strengths of our Asset Management
and Life businesses. This creates a
competitive advantage as we develop
solutions and deliver outcomes for our
clients and advisers, and helps us unlock
the growth potential of the combined
M&G group.
Our Group priorities
– Continue to strengthen our
presence in our target markets to
engage more closely with our
customers and better address their
needs.
– Expand our range of investment
solutions to meet a broader range
of outcomes.
– Strengthen our distribution
capabilities to enable more
customers and advisers to access
our solutions.
2024 Group highlights
– In Asset Management we have
strengthened our international
presence by building on our
distribution channels and
broadening our investment
capabilities with over 56% of our
third party AUMA from non-UK
clients.
– In Life, we have written £0.9 billion
in new Bulk Purchase Annuity (BPA)
business in 2024 and as part of this
we launched an innovative Value
Share BPA proposition in the UK
market - this allows pension
trustees to insure member benefits
while enabling corporate sponsors
to share in the risk and reward.
For detailed updates on 2024 progress and key priorities for 2025
in our Asset Management and Life businesses see pages 12-15
For details on our approach to sustainability please see pages 30-33
M&G plc Annual Report and Accounts 2024
Strategic Report
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Other information
Our strategy continued
11
We continue to expand our range of investment capabilities, providing
solutions to meet the needs of our Life business and our third party clients
Business overview
We are an international asset manager focused on active
management across public and private markets. Our business
is underpinned by deep and broad investment expertise across
both fund management and extensive in-house
research capabilities.
Our Asset Management business manages £315.0 billion
AUMA, which is over 90% of the Group total. £156.1 billion of
this is managed on behalf of our largest client, our Life
business, and £96.1 billion is managed on behalf of over 900
third-party institutional clients and £62.8 billion on behalf of our
wholesale clients.
Our clients are at the heart of everything we do and we have a
global network of investment and distribution teams, which
enables us to be a local partner to our clients wherever they are
in the world.
We offer a broad range of savings and investment solutions to
help our clients navigate their investment needs.
We work closely with our Life business to build and deliver end-
to-end investment solutions, ensuring a strong alignment of
interest and a deep understanding of our clients’ objectives.
We offer these same solutions to our third-party clients
enabling us to scale new strategies and attract third party
flows.
We are leveraging this client insight to develop a suite of
investment solutions for our target insurance clients
across Europe.
Wholesale clients have access to a family of UK-domiciled
mutual funds, as well as a similar range of Luxembourg funds
for international clients. We also offer access to private assets
through our European Long Term Investment Fund (ELTIF) and
sub-advised solutions.
Asset Management
Joseph Pinto Asset Management CEO
For Institutional clients we provide investment propositions
covering both private and public assets through a variety of
formats, from pooled funds to segregated mandates.
We offer clients investment solutions across our two business
areas:
Public Markets, managing £240.9 billion of assets, focused on
public fixed income, active equity and sustainability focused
funds. Within Public Markets, M&G is recognised as one of
Europe’s leading Fixed Income investors, managing
£137.8 billion of assets.
Private Markets, managing £74.1 billion of assets, M&G is a
leading player in Europe, with capabilities focusing on real
estate, private credit and impact investment.
Sustainability and impact are key focus areas and we have a
range of capabilities to meet our client demands including
through responsAbility and our Catalyst strategy.
Expanding our public market capabilities
through our Sustainable Bond Strategy
In October 2024, through our responsAbility business, we
launched our Sustainable Solutions Bond Strategy, an SFDR
Article 9 fund.
This strategy targets sustainable corporate bonds, addressing
six areas: health, work & education, social inclusion, circular
economy, environmental solutions, and climate action.
It aims to align investments with the UN Sustainable
Development Goals and was designed following active
engagement with institutional and wholesale investors.
This demonstrates how we can leverage the expertise of our UK
investment team and responsAbility, to create a diversified
portfolio of global investment-grade bonds driving positive
change.
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Our businesses
Asset Management
12
Progress against our strategy
The progress we have made in 2024 is aligned to our Group
strategic objectives (as set out on pages 10-11) delivering
growth in our international presence and expanding our
capabilities to meet our client needs while strengthening our
operating model.
Simplify our business
– Continued to make progress in reducing the Asset
Management Cost-to-Income ratio from 79% in 2023 to
76% in 2024.
– Strengthened our public and private markets leadership teams
with our three Chief Investment Officers now in place and a
dedicated Chief Operating Officer model to support our
leadership teams to grow our business efficiently.
– Enhanced our global investment model to enable us to more
efficiently scale internationally, including streamlining our
middle and back-office functions.
Deliver profitable growth
– Continued to deliver consistent investment performance
with overall performance of 63% of wholesale funds
continuing to be above median over 3 years.
– Continued to strengthen our international presence, with
56% of our £158.9 billion third-party AUMA from
non-UK clients.
– Built upon our distribution capabilities including
strengthening our access to the Singapore wealth market
and have been actively building our relationships in the
Middle East.
– Further globalised our investment capabilities, building on
the success of our Asian equities franchise by launching
Indian and Chinese equities and developing our Japanese
Large Cap equities.
– Broadened our capabilities in private markets through the
acquisition of BauMont Real Estate Capital to expand our
origination capabilities in Europe while continuing to build
upon our existing capabilities with success in
structured credit.
Key priorities for 2025
Improve third party flows across our target markets in the UK
and internationally and continue to improve client experience:
– Build on our strong momentum in scaling our international
franchise by continuing to grow in Europe and targeting
growth in Asia. Globalise our offering by developing our
public fixed income platform and Asian Equities to broaden
our client relationships.
– Continuing to broaden our UK proposition and client base
aligning with structural market trends to deliver the right
solutions for our clients, including developing run-on
solutions for pension schemes, leveraging the capabilities of
our Life business.
– Expand our private asset capabilities by growing our
presence outside of the UK, taking a selective approach to
bolt on acquisitions and partnerships. Continue to develop
our capabilities through externalisation of existing strategies
and launching new innovative products.
– Enhance and improve our client experience to ensure we
deliver consistent, high-quality service as we scale
internationally.
Expanding our private market origination
capabilities in Europe
During 2024, M&G Real Estate acquired a majority stake in
BauMont Real Estate Capital Limited, a European
investment manager with €1.5 billion in assets and offices in
London and Paris.
This acquisition, focusing on value-add strategies involving
redevelopment or refurbishment, expands our client
offerings beyond core real estate, providing our clients with
the potential for higher returning opportunities. It aligns with
our strategy to enhance our asset management capabilities
in Europe and build on our private markets track record.
Our With-Profits Fund invested €200 million in BauMont’s
latest closed-ended fund - BauMont Real Estate II.
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13
We are repositioning the Life business to accelerate the current
momentum and continue driving profitable growth
Business overview
We currently serve over 4.5 million customers in the savings
and pensions market. Our customers are increasingly looking
for support across a broad range of savings and investment
needs and our four core markets are aligned to support them
throughout this journey:
Individual Life & Pensions addresses the needs of UK retail
clients for investment growth, smoothed returns and
guaranteed income through a range of solutions, including our
PruFund proposition, with £64.0 billion of AUMA.
International Life includes our savings businesses in Ireland
and Poland, with a further focus on international diversification
of our With-Profits Fund and broadening the distribution of our
PruFund proposition to new markets.
Corporate Risk Solutions services our corporate clients, with a
focus on scaling our presence in the UK market through Bulk
Purchase Annuities (BPAs).
Advice provides holistic financial planning services to help
retail customers plan and save for the future, with a national
footprint of over 550 advisers, making us one of the largest
advice businesses in the UK.
We continue to strengthen the partnership between the
shareholder and the With-Profits Fund, by drawing on their
respective capabilities and leveraging the strong capital
position of the With-Profits Fund to launch new solutions and
scale our existing business.
Life
Clive Bolton Life CEO
This will allow us to reposition the With-Profits Fund to be the
primary writer of new business, helping address customer
needs, and diversifying our product suite while driving top-line
growth and stable, fee-like earnings in the Life business.
We have a unique relationship with the Asset Management
business and work closely together to meet client demands for
smoothed income and multi-asset investment solutions. This
relationship continues to provide strong investment returns for
our customers - our PruFund proposition has had another year
of resilient net performance, with our flagship PruFund Growth
Fund returning 4.0% pa over three years, comfortably
outperforming the ABI Mixed Investment 20-60% shares
sector.
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Life
14
20 years of PruFund
– Truly diversified global multi-asset fund, providing clients with access to a
wide range of investments, including private markets
– Established smoothing mechanism which balances short term market
fluctuations, providing customers with stable, predictable returns
– 20-year track record of robust investment returns, helping customers grow
their money while mitigating the unpredictability of investment markets
Progress against our strategy
In 2024 we have made real progress against our Group
strategic objectives (as set out on pages 10-11). We have
focused on repositioning for new business growth beyond
PruFund, by developing new propositions, while evolving our
business model:
Simplify our business
– We have aligned our Life business model across our four
core markets, including integrating our Advice business. We
have established leadership teams in each market with a
clear focus on growth, facilitating easier interactions for both
customers and advisers, and enhancing efficiency.
– We have continued to develop our Consumer Duty
programme to deliver better outcomes for our customers.
We recognise that delivering great outcomes and service is
a constantly evolving process and we have refined our
customer outcome management information and insights to
identify and improve customer processes.
Deliver profitable growth
– Individual Life & Pensions: we are focused on adding annuity
products and broadening our distribution network, including
widening access to PruFund by launching the proposition
on third party platforms.
– International Life: we continue to evolve our proposition and
are exploring opportunities to internationalise PruFund in
Europe, the Middle East and Asia.
– Corporate Risk Solutions: we have written £0.9 billion of
new BPA business, focusing on selective cases where our
capabilities in private assets can make a material difference
to customers. As part of that, we also launched a ‘first of its
kind’ Value Share BPA proposition in November 2024.
– Advice: we have generated £0.9 billion in PruFund gross
inflows through our Advice business in the year.
Net Promoter Score
+22
(2023:+15)
Net Promoter Score (NPS) is a measure of the willingness
of a company’s clients to recommend its products or
services to others. It is measured across a rolling six-month
period. The Net Promoter Score for our Life business is one
of the key non-financial performance measures impacting
Director’s remuneration.
Performance in 2024
We are pleased that the NPS score has improved year on
year, demonstrating that by continuing to focus on
simplification, stabilisation and excellent service, it makes it
easier for customers to do business with us.
Key priorities for 2025
Continue to reposition our business for growth, generate flows
and deliver sustainable capital generation:
– Take a targeted approach to developing our investment and
annuity propositions to meet customer needs including
continuing to grow BPA volumes and internationalising
PruFund.
– Broaden the distribution of our recently launched Fixed Term
Annuity product, underpinning our re-entry into the annuities
market.
– Build on the partnership between the shareholder and the
With-Profits Fund to deliver growth, with the With-Profits
Fund writing the majority of new business, and the
shareholder balance sheet continuing to selectively
participate in attractive insurance risk.
– Continue to enhance our service model across each of our
core markets including the automation of key processes to
ensure we are well positioned to meet our growth ambitions
and service our customers as we scale.
Launching our Value Share BPA
During 2024, we launched an innovative Value Share Bulk
Purchase Annuity proposition, allowing trustees to insure
member benefits while enabling corporate sponsors to
share in the risk and reward.
Our first Value Share proposition was a £0.5 billion
transaction insuring 3,200 members, aligning with M&G’s
growth ambitions in the UK pension de-risking market and
showcases our ability to create innovative solutions for our
clients’ complex needs.
Since re-entering the market in September 2023, M&G has
written £1.5 billion of total new bulk annuity business,
building on its history as a founding member of the BPA
market.
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15
Our results demonstrate further progress across our three strategic pillars
despite challenges on flows
I am pleased to present our 2024 results which demonstrate
further delivery on our strategy. My highlights for the year
include reducing the leverage ratio to 33% and delivering
cumulative operating capital generation of £2.75 billion since
2022, enabling us to beat our upgraded three year target of
£2.7 billion.
Our transformation programme has continued to move at pace
as we progress towards our objective of building a stronger,
simpler and more efficient business. Across the whole business
we have delivered cumulative cost savings of £188 million to
date, and we have upgraded our three year cost saving target
to £230 million savings by end 2025. But our simplification
journey won't end there. Our Asset Management Cost to
Income ratio improved to 76% from 79%, benefitting from both
lower costs, as well as revenue growth. We remain committed
to achieving a 70% Cost to Income ratio through further
operational discipline and profitable growth.
AUMA and net client flows
Total AUMA has increased to £345.9 billion (2023: £343.5
billion), benefitting from the acquisitions of BauMont Real
Estate Capital Limited in Asset Management and, in Life, a
further stake in Continuum, alongside positive market
movements.
Following the announcement during the year to combine our
Life and Wealth segments and recognising the repositioning of
the Life business to deliver growth, we have revised our flows
key performance measure to Net flows from open business.
Net flows from open business, which primarily includes flows
from asset management, PruFund, shareholder annuities and
advice, were outflows of £1.9 billion (2023: £1.7 billion inflows).
Wholesale net flows were neutral (2023: £1.5 billion inflows)
with strong investment performance helping to counter
challenges seen in the market over 2024 primarily due to high
yields. In Institutional, we experienced net outflows of
£0.9 billion (2023: £0.7 billion), with continuing net inflows in
our International channels, offset by UK net outflows. Now
more than half of our third party assets are from clients outside
of the UK.
In Life, PruFund net outflows of £0.9 billion (2023: £1.0 billion
inflows) were also impacted by the high interest rate
environment. Over the second half of 2024 we have started to
see some positive momentum in PruFund flows. After writing
three new BPA deals in the year, including our first Value Share
BPA, a unique proposition, we have now written £1.5 billion of
new annuity business since we re-entered the market in 2023.
Earnings
Despite the headwinds I set out in March last year, adjusted
operating profit before tax (AOP) increased by 5% to
£837 million (2023: £797 million) reflecting a significant 19%
increase in AOP from Asset Management and a modest
decrease in Life AOP. Looking forward we are now targeting
AOP annual growth of 5% or more on average over the three
years 2025-2027.
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Demonstrating our financial strength
16
“
Our cumulative
operating capital
generation since
1 January 2022
exceeded our
upgraded target
of £2.7 billion.”
Kathryn McLeland
Chief Financial Officer
Our 2024 IFRS result has been significantly impacted by the
continued increase in yields over the year, with the unrealised
fair value losses on the surplus assets in the annuity portfolio
and the fair value losses on the interest rate hedging we have in
place to protect our Solvency II capital position leading to a
significant loss after tax attributable to equity of £347 million
(2023: £309 million profit). The loss from mismatches arising on
application of IFRS 17 increased to £333 million (2023:
£41 million) driven by an reduction in the fair value of the non-
profit annuities in the With-Profits Fund.
Operating Change in Contractual Service Margin (CSM)
decreased to £294 million (2023: £355 million), benefitting from
positive longevity assumption changes in shareholder annuities
partly offset by the impact from lower expected rates of return
and the rebuild of the prospective with-profits modelling in
relation to the PruFund and traditional with-profits businesses.
The CSM was also impacted by positive market movements
leading to a 10% increase since the start of the year to £6.0
billion (2023: £5.5 billion).
Capital and liquidity
As at 31 December 2024, our shareholder Solvency II coverage
ratio increased to 223% (2023: 203%) including the impact of
deleveraging actions totaling £461 million taken during the
year. These actions had the effect of reducing our leverage
ratio to 33% (2023: 35%).
Operating capital generation for 2024 remained strong at
£933 million (2023: £996 million), with an improved result from
Asset Management partly offsetting a lower contribution from
Life, meaning our cumulative operating capital generation since
1 January 2022 exceeded our upgraded target of £2.7 billion
that we announced in our half year results.
“
I am confident that
we are well positioned
to maintain our capital
strength and deliver
profitable growth over the
long term.”
Kathryn McLeland
Chief Financial Officer
We are now targeting a further £2.7 billion cumulative
operating capital generation (excluding new business strain)
for the three years to 2027. Total capital generation of
£1,108 million (2023: £358 million) benefited from an improved
result from market movements and the impact of removing the
eligible own funds restriction in place in 2023.
Dividend
We paid an interim ordinary dividend of £157 million equal to
6.6 pence per share on 18 October 2024. A second interim
dividend, under our new progressive dividend policy, of
£321 million equal to 13.5 pence per share will be paid on
9 May 2025, which means 20.1 pence per share of total
dividends will be paid to shareholders in relation to 2024.
I am confident that we are well positioned to navigate the
uncertain external environment and maintain our capital
strength and deliver profitable growth over the long term,
following the momentum seen in Asset Management over 2024
and the repositioning of the Life business, alongside the actions
we are taking to simplify the business and increase efficiency.
Kathryn McLeland
Chief Financial Officer
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17
We use a range of key performance measures to track
how we are executing against our strategy
Assets under management
and administration (AUMA)
£345.9bn
(2023: £343.5bn)
AUMA is a key indicator of our scale, and
demonstrates our potential earnings from
investment return and fee income.
Performance in 2024
AUMA increased by £2.4 billion, predominantly
from favourable market movements.
Find out more on pages 19-20
Net flows from open
business
£1.9bn outflow
(2023: £1.7bn inflow)
Net flows from open business indicate how our
business grows, and how successful it is at
retaining and attracting new clients.
Performance in 2024
International Institutional Asset Management
and Bulk Purchase Annuity inflows partly offset
PruFund and Wholesale Asset Management
outflows driven by challenges in the market.
Find out more on pages 19-20
Adjusted operating
profit before tax (AOP)
£837m
(2023: £797m)
AOP demonstrates our longer-term performance
to equity holders, as it is less affected by short-
term market volatility and non-recurring items
than IFRS profit before tax.
Performance in 2024
AOP increased by 5% on 2023, driven by an
increase in Asset Management and
improvement in Corporate Centre with broadly
stable performance in Life.
Find out more on pages 21-23
Operating change in
Contractual Service Margin
£294m
(2023: £355m)
Includes changes from new business, interest
accretion, experience changes and release of CSM
but excludes the impact of short-term market
movements, mismatches and restructuring costs.
Performance in 2024
Operating change in CSM decreased by £61m
to £294m in 2024, due to reductions in with-
profits partly offset by shareholder annuities
which benefitted from assumption changes.
Find out more on pages 23-24
IFRS result
after tax
£(347)m
(2023: £309m)
Profit/(loss) after tax demonstrates our financial
performance to shareholders during the year on
an IFRS basis.
Performance in 2024
Loss in 2024 driven by adverse short-term
fluctuations in investment returns and an
increased loss in the mismatch arising on
application of IFRS 17.
Find out more on page 25
Operating capital
generation
£933m
(2023: £996m)
Operating capital generation demonstrates the
longer-term view of the movements in our
surplus capital. It is less affected by short-term
volatility than total capital generation.
Performance in 2024
Operating capital generation remains strong
with lower expected returns partly offset by
benefits from management actions.
Find out more on pages 26-27
Total capital
generation
£1,108m
(2023: £358m)
Capital generation is an integral financial metric
that measures the change in surplus capital
during the period, before dividends and capital
movements.
Performance in 2024
Capital generation has increased from 2023
reflecting a robust operating performance,
improved market movements and removal of
regulatory restriction.
Find out more on pages 26-27
Shareholder Solvency II
coverage ratio
223%
(2023: 203%)
The shareholder view of the Solvency II
coverage ratio provides a more relevant
reflection of our capital strength than the
regulatory Solvency II coverage ratio.
Performance in 2024
Strong operating capital generation and the
impact from deleveraging activity during the
year has contributed to an increase in solvency
ratio.
Find out more on page 28
Dividend per share
(ordinary)
20.1p
(2023: 19.7p)
Dividend per share is the return of value
to shareholders for each share held.
Performance in 2024
The Board has agreed to pay a second interim
dividend of 13.5p per share on 9 May 2025,
meaning a total dividend of 20.1p per share.
Find out more on page 236
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Financial highlights
18
AUMA increased over the year with positive market movements offsetting
net client outflows
Assets under management and administration (AUMA) increased by £2.4 billion to £345.9 billion (31 December 2023: £343.5
billion) as a result of favourable market movements which offset total net outflows of £9.5 billion (2023: £4.7 billion). The acquisition
of a further stake in Continuum in March 2024 increased AUMA by £2.0 billion and a further £1.1 billion was a result of the
acquisition of BauMont Real Estate Capital (BauMont) in October 2024.
Net flows from open business primarily includes flows from Asset Management, PruFund, Shareholder annuities and advice which
have fallen to net outflows of £1.9 billion (2023: £1.7 billion inflows) mainly due to challenging market conditions. Net outflows from
Shareholder annuities have improved following £0.9 billion of bulk purchase annuity (BPA) inflows.
The following table shows an analysis of AUMA and net client flows by segment:
Net client flows
For the year ended 31 December
Net flows
from open business
Net flows
other
Total net
client flows
AUMA
i
As at 31 December
2024
2023
2024
2023
2024
2023
2024
2023
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Institutional Asset Management
ii
(0.9)
(0.7)
—
—
(0.9)
(0.7)
96.1
98.2
Wholesale Asset Management
ii
—
1.5
—
—
—
1.5
62.8
55.0
Other Asset Management
—
—
—
—
—
—
0.9
1.0
Total Asset Management
(0.9)
0.8
—
—
(0.9)
0.8
159.8
154.2
With-profits: PruFund
(0.9)
1.0
—
—
(0.9)
1.0
64.0
61.2
With-profits: traditional
—
—
(4.8)
(4.2)
(4.8)
(4.2)
61.6
65.0
Shareholder annuities
(0.2)
(0.4)
—
—
(0.2)
(0.4)
15.1
15.8
Other Life
ii
0.1
0.3
(2.8)
(2.2)
(2.7)
(1.9)
44.4
46.0
Total Life
iii, iv
(1.0)
0.9
(7.6)
(6.4)
(8.6)
(5.5)
185.1
188.0
Corporate assets
—
—
—
—
—
—
1.0
1.3
Total
(1.9)
1.7
(7.6)
(6.4)
(9.5)
(4.7)
345.9
343.5
i
£18.0 billion (31 December 2023: £14.1 billion) of total AUMA relates to assets under advice.
ii
£5.7 billion AUMA relates to M&G Direct, transferred from Life to Asset Management and £2.1 billion Group Investment Linked Plan business transferred
from Asset Management to Life. Both transfers took effect from 31 December 2024.
iii
£156.1 billion of AUMA of Life is managed internally by the Group’s Asset Management business (31 December 2023: £160.3 billion).
iv
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. Comparatives for 2023 are presented on the
new segment basis. PruFund includes both UK and non-UK.
Asset Management
Asset Management remained resilient with net client outflows of £0.9 billion (2023: £0.8 billion net client inflow) reflecting net
neutral flows in Wholesale despite challenging market conditions and an improvement in net client outflows in UK Institutional as
we continue to grow the International business.
International Institutional Asset Management net client inflows were £2.9 billion (2023: £5.4 billion). A focus on strengthened
performance for the international business, particularly in fixed income channels, attracted net client inflows but this was impacted
by one-off larger redemptions in South Africa and Australia. The net client inflows in International were offset by net client outflows
from Institutional Asset Management in the UK, which reduced to £3.8 billion compared to £6.1 billion in 2023, with ongoing de-
risking in defined benefit corporate schemes driving continued outflows. Poorer performance in Real Estate across UK and
International dampened flows with net outflows £0.5 billion (2023: £0.2 billion).
Institutional AUMA reduced £2.1 billion to £96.1 billion as at 31 December 2024. As part of the reorganisation of the business to two
segments, £2.1 billion of Group Investment Linked Plan business transferred from Asset Management to Life, which combined with
the net client outflows of £0.9 billion more than offset the increase of £1.1 billion AUMA from the acquisition of BauMont.
Our expertise in private assets, which offers private fixed income, alternatives, real estate and infrastructure equity offerings, is a
key component of our Institutional investment capability, and represents a resilient, high-margin source of revenues. Our private
assets under management increased modestly to £74.1 billion of AUMA as at 31 December 2024 (31 December 2023: £73.4 billion)
strengthened by our acquisition of BauMont.
In Wholesale Asset Management, challenges seen in the market throughout 2024 are reflected in the net nil flows (2023: £1.5
billion net inflows). We continue to feel the impact of some clients adjusting their investment strategy to low risk alternatives,
particularly in the UK. This has been offset by growth in our specialised Investment Solutions channel, which secured further
mandates and net inflows during 2024.
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AUMA and net client flows
19
Our Wholesale funds performance continues to be strong, with 53%, 63% and 59% of our Wholesale funds ranked in the upper
performance quartiles over one, three and five years as of 31 December 2024 (2023: 51%, 64% and 69% over one, three and
five years).
Wholesale AUMA increased £7.8 billion to £62.8 billion as at 31 December 2024, benefitting from the transfer of M&G Direct
business with AUMA of £5.7 billion at 31 December 2024 from Life as part of the reorganisation of the business. Wholesale AUMA
also benefitted from market and other movements of £2.1 billion due, in particular, to stronger equity markets in the UK, US and
Europe.
Life
As we reposition our Life business for continued growth, flows were bolstered by gross client inflows from bulk purchase annuity
(BPA) transactions in 2024 of £0.9 billion (2023: £0.6 billion) including inflows from our first Value Share BPA transaction, which
is unique in the market. However, total net client outflows from open business for Life were £1.0 billion (2023: £0.9 billion net
client inflows) due to outflows from PruFund. Life net client flows from open business includes PruFund, Shareholder annuities
and advice.
PruFund, our insurance-based smoothing solution offering a blend of public and private investments to clients, had net client
outflows of £0.9 billion (2023: £1.0 billion net client inflows) with the continued higher interest rate environment contributing to the
outflows as clients are attracted to cash and guaranteed solutions. Over the second half of 2024, we experienced improvements in
both gross inflows and outflows to PruFund leading to a narrowing of net outflows.
Shareholder annuities net client outflows of £0.2 billion (2023: £0.4 billion) include the gross client inflows from BPAs offset by the
expected outflows from annuities in payment of £1.1 billion (2023: £1.0 billion).
Other Life includes advice net inflows of £0.6 billion (2023: £0.7 billion) including £0.3 billion net inflows following the acquisition of
a further stake in Continuum in March 2024.
Total net client flows from the Life business were £8.6 billion outflows (2023: £5.5 billion) with expected net outflows for our
traditional with-profits business and other small closed books of business of £7.6 billion (2023: £6.4 billion) adding to the net client
outflows from open business.
Total Life AUMA reduced £2.9 billion to £185.1 billion due to the net client outflows which were partly offset by positive market and
other movements of £5.7 billion, including £2.0 billion following the acquisition of a further stake in Continuum.
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20
Adjusted operating profit grows 5% with IFRS result impacted
by high interest rates
Adjusted operating profit before tax
Adjusted operating profit before tax increased by 5% to £837 million for the year ended 31 December 2024 (2023: £797 million),
an increase of 19% in Asset Management was partly offset by a small reduction in Life.
The following table shows an analysis of adjusted operating profit before tax by segment:
2024
2023
For the year ended 31 December
£m
£m
Asset Management
289
242
Revenue
i
1,008
995
Costs
(774)
(791)
Performance fees
35
30
Investment income and minority interest
20
8
Life
ii
746
755
With-profits: PruFund
226
236
With-profits: traditional
222
263
Shareholder annuities
308
331
Other Life
(10)
(75)
Corporate Centre
ii
(198)
(200)
Adjusted operating profit before tax
837
797
i
£324 million of the revenue is in respect of assets managed on behalf of Life (2023: £309 million).
ii
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. The comparatives for Life and Corporate
Centre have been restated to reflect the revised segments and the adjustment of some advice-related costs.
Asset Management
Asset Management adjusted operating profit before tax increased to £289 million for the year ended 31 December 2024 (2023:
£242 million) driven by the combination of a 1% increase in revenue to £1,008 million (2023: £995 million) and a 2% reduction in
operating costs to £774 million (2023: £791 million). We are starting to see the impact of the actions to grow and simplify the Asset
Management business as part of our strategy. Cost reductions from the delivery of initiatives that are part of our transformation
programme more than offset the impact of inflation and demonstrate the continued focus on cost discipline. This is reflected in the
improvement in the cost/income ratio for the Asset Management business to 76% (2023: 79%).
Revenue earned by Institutional Asset Management was £594 million (2023: £588 million). This increase primarily reflects higher
fees earned on public fixed income investments driven by higher average AUMA across the year, partly offset by reductions in
revenue from the Real Estate business as a result of lower property valuations. In Wholesale Asset Management, revenue
increased to £414 million (2023: £407 million) due to higher AUMA.
The average fee margin for Asset Management of 32 bps for 2024 was marginally down from 33 bps for 2023. Average fee margins
in the Institutional Asset Management business decreased to 38 bps for 2024 from 39 bps for 2023, while Wholesale Asset
Management fee margins reduced to 56 bps in 2024 from 58 bps in 2023 mainly due to the concentration of new flows in lower
margin funds.
Asset management adjusted operating profit before tax has also benefited from an increase in investment return of £12 million to
£36 million (2023: £24 million) reflecting foreign exchange revaluation gains. Investment return relates to returns on seed
investments, units held to hedge management incentive schemes, interest income on cash balances and any foreign exchange
revaluation impacts.
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Earnings
21
Life
Adjusted operating profit before tax from our Life business reduced by £9 million to £746 million (2023: £755 million) with
decreases in with-profits and shareholder annuities, offset by an improvement in the result in Other Life.
With-profits: PruFund
The table below shows a further analysis of the adjusted operating profit before tax from PruFund:
2024
2023
£m
£m
CSM release to adjusted operating profit
221
242
Expected return on excess assets
i
18
33
Other
(13)
(39)
PruFund adjusted operating profit before tax
226
236
i
Excess assets net of financial liabilities.
The Contractual Service Margin (CSM) for PruFund is primarily
based on the expected value of future shareholder transfers. A
decrease in the CSM amortisation rate, driven by strengthening
of persistency assumptions at the end of 2023, results in profit
being spread over a longer period and is the main driver of the
reduction in the amount of CSM released to adjusted operating
profit. The CSM release of £221 million (2023: £242 million) is
10.8% (2023: 11.6%) of the opening CSM attributable to the
shareholder for this business.
The expected return on excess assets decreased by £15 million to £18 million (2023: £33 million). As the expected rate of return is
set at the start of the reporting period, a rise in risk-free rates over 2023 and a reduction in the excess assets allocated to cash
resulted in a higher expected rate of return in 2024 of 6.8% compared to 6.0% in 2023, which resulted in a £7 million increase in
the expected return on shareholders’ share of excess assets allocated to PruFund. However, this was more than offset by an
increase of £22 million to £31 million (2023: £9 million) in the loss from the swap arrangement to monetise a proportion of future
shareholder transfers entered into between the With-Profits Fund and the shareholder in 2023 due to the timing of the transaction.
The reduction of other losses by £26 million to £13 million (2023: £39 million) is primarily due to 2023 including a one off loss of £28
million at the date the swap arrangement between the With-Profits Fund and the shareholder was transacted due to the valuation
difference between the real world valuation of the swap liability created relative to the IFRS 17 measurement basis.
With-profits: traditional
The table below shows a further analysis of the adjusted operating profit before tax from traditional with-profits business:
2024
2023
£m
£m
CSM release to adjusted operating profit
198 238
Expected return on excess assets
36 35
Other
(12) (10)
Traditional with-profits adjusted operating
profit before tax
222 263
The CSM for traditional with-profits at the start of 2024 is lower
than at the start of 2023, largely as a result of negative market
movements over 2023. There has also been the reduction in the
CSM amortisation rate for PruFund as outlined above. Both of
these factors result in a reduction in the amount of CSM released
to adjusted operating profit to £198 million (2023: £238 million).
This represents 12.8% (2023: 14.0%) of the opening CSM
attributable to the shareholder. The amortisation rate of the
traditional with-profits business is greater than PruFund as this
business is more mature and is running off faster.
The expected return on the shareholders' share of excess assets in traditional with-profits has increased by £1 million to £36 million
(2023: £35 million). The expected rate of return is set at the same rate for all the With-Profits Fund excess assets and therefore, has
increased for excess assets allocated to traditional with-profits in line with PruFund. The impact from the increase in expected rate
of return to 6.8% largely offsets the impact from the slight reduction in excess assets allocated to the traditional with-profits
business due to it being in structural run-off.
The other loss of £12 million (2023: £10 million) primarily relates to expense overruns on group pensions new business.
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Shareholder annuities
The table below shows a further analysis of the adjusted operating profit before tax from shareholder annuities:
2024
2023
£m
£m
Expected return on excess assets
147 205
CSM release
113 96
Risk adjustment unwind
21
19
Asset trading and portfolio management actions
—
2
Experience variances
2
9
Other provisions and reserves
25
—
Shareholder annuities adjusted operating
profit before tax
308 331
Shareholder annuities adjusted operating profit before tax has
decreased by £23 million to £308 million (2023: £331 million).
The recurring sources of earnings from the annuity book are
primarily the returns on excess assets over and above the IFRS
17 insurance liabilities based on long-term expected investment
returns and the release of the CSM.
The expected return on excess assets, has decreased by £58
million to £147 million as a result of a reduction in the expected
rate of return and in the value of the excess assets. The expected
rate of return is set at the start of the reporting period and
reduced from 6.6% for 2023 to 5.6% for 2024, driven by a
reduction in expected risk premium above the risk-free rate. The
expected risk premium has reduced due to a move into more
liquid assets in the annuity portfolio to support writing of BPAs.
The release of the CSM to adjusted operating profit for shareholder annuities was £113 million compared to £96 million in 2023,
benefitting from a higher CSM. The CSM release is calculated based on the opening CSM adjusted for new business, interest
accreted and assumption changes during the period. The main driver of the higher CSM arises from changes to our assumptions
on future mortality improvements which contributed £244 million. The CSM released represents 7.6% of the 2024 CSM before
amortisation (2023: 7.2%).
Other provisions and reserves of £25 million (2023: £nil) in 2024 relates to a change in persistency assumptions to reflect
experience on the lifetime mortgages book. The experience shows an overall expected increase in early redemptions however the
loss has been more than offset by a reduction in the value of the guarantee provided to protect against negative equity on this
book, resulting in an overall gain of £25 million.
The credit quality of fixed income assets in the annuity portfolio remained strong in 2024. 99% of the debt securities held by the
shareholder annuity portfolio are investment grade and only 18% are BBB. In addition, over 82% of the shareholder annuity
portfolio is held in debt securities categorised either as Risk Free or Secured (including cash). The downgrade experience (defined
as movements in BBB notching and, otherwise, letter downgrades) in 2024 has been relatively light, with less than 3% of bonds in
the shareholder annuity portfolio subject to a downgrade, and overall a net upgrade in bonds has occurred in 2024.
Other Life
The improvement in Other Life of £65 million to £10 million loss (2023 £75 million loss) is primarily due to a number of differing one-
off items in 2023 and 2024. These include the loss of £24 million in 2023 due to an increase in the provision in 2023 under an
agreement to reimburse the With-Profits Fund for its contribution to the costs for growing the business written in Poland that did
not repeat in 2024 and a £4 million benefit in 2024 following the exit of our digital wealth partnership with MoneyFarm at the end of
2023. Additionally, actions taken to improve profitability of our platform and advice businesses and the cost base in our service
companies contributed to the reduced loss in 2024.
Corporate Centre
The loss in Corporate Centre has decreased by £2 million to £198 million (2023: £200 million) as a reduction in finance costs on
subordinated debt, following repurchase and redemption of the subordinated notes in June and July 2024, was partly offset by a
reduction in interest income and profit from our treasury operations. Underlying Head Office expenses remained broadly flat on
2023.
Operating change in Contractual Service Margin (CSM)
Operating change in CSM decreased to £294 million in the year ended 31 December 2024 (2023: £355 million). The reduction in
contribution from with-profits is driven by a change in the value of projected future shareholder transfers and is partly offset by an
increase in shareholder annuities, primarily due to a large benefit from longevity assumption changes. The CSM also benefitted
from positive market movements leading to a 10% increase since the start of the year to £6.0 billion (2023: £5.5 billion).
The following table shows a breakdown of the operating change in CSM:
2024
2023
i
For the year ended 31 December
£m
£m
With-profits: PruFund
99
244
With-profits: traditional
23
67
Shareholder annuities
172
36
Other
—
8
Operating change in CSM
294
355
i Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. Comparatives for 2023 are presented on the new
segment basis. PruFund UK and non-UK business were previously presented separately in ‘Wealth’ and ‘Life’ operating segments, respectively.
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With-profits: PruFund
The following table provides an analysis of the key drivers of the operating change in the CSM for PruFund:
2024
2023
For the year ended 31 December
£m
£m
Expected real-world return
320 339
Release of CSM to adjusted operating profit
(221) (242)
New business
71 108
Assumption changes and variances
(71) 39
With-profits: PruFund operating change in CSM
99 244
The expected real-world return on the CSM for PruFund
business more than offset the release of the CSM to adjusted
operating profit, resulting in a net contribution to operating
change in CSM of £99 million (2023: £97 million). The expected
rate of return is determined at the start of the year and is
applied to the Variable Fee
i. The expected rate of return
decreased to 8.2% for 2024 (2023: 8.5%), driven by our view of
long-term excess returns on equities above risk-free rates
falling. The impact of this on the expected real-world return is
partly offset by the impact of the increase in the opening
Variable Fee, reflecting the growth of the business over 2023.
PruFund new business contribution to the CSM reduced to £71 million (2023: £108 million), the decrease relative to 2023 mainly
reflects the lower levels of new business consistent with the reduction in inflows for PruFund.
The loss from assumption changes and variances of £71 million (2023: £39 million gain) in 2024 is primarily a result of a reduction in
projected future shareholder transfers, mainly due to a reduction in expected future investment return assumption changes
following a full rebuild of our prospective with-profits modelling. The gain in 2023 was driven by a reduction in expected future
investment management expenses on PruFund business.
With-profits: Traditional
The following table provides an analysis of the key drivers of the operating change in the CSM for traditional with-profits:
2024
2023
For the year ended 31 December
£m
£m
Expected real-world return
272 309
Release of CSM to adjusted operating profit
(198) (238)
Assumption changes and variances
(51)
(4)
With-profits: traditional operating change in CSM 23
67
The expected real-world return more than offsets the release
of the CSM to adjusted operating profit, resulting in a net
contribution to operating CSM of £74 million (2023: £71 million).
The expected rate of return decreased to 8.2% pa for 2024
(2023: 8.5% pa), for the same reasons as noted for PruFund.
However, there was also a reduction in opening Variable Fee
for traditional with-profits reflecting the structural run-off of the
business. Both the reduction in expected rate of return and
lower opening Variable Fee contributed to the fall in the
expected real-world return to £272 million (2023: £309 million).
The loss from assumption changes and variances was £51 million (2023: £4 million) in 2024. Similar to PruFund this has been
impacted by the full rebuild of our prospective with-profits modelling, largely explaining the movement. The impact is smaller than
for PruFund as the traditional book is less sensitive to changes in future investment return. The 2023 loss was primarily due to
negative persistency experience compared to our long term assumptions.
Shareholder annuities
The following table provides an analysis of the key drivers of the operating change in the CSM for shareholder annuities:
2024
2023
For the year ended 31 December
£m
£m
Interest accreted on the CSM
37 30
Release of CSM to adjusted operating profit
(113) (96)
New business
17 42
Assumption changes and variances
231 60
Shareholder annuities operating change in CSM
172 36
The increase in the interest accreted on the CSM, new
business contribution and the benefit from assumption
changes have more than offset the release of the CSM to
adjusted operating profit resulting in a net contribution to
operating change in CSM of £172 million (2023: £36 million).
Assumption changes and variances have increased to £231
million (2023: £60 million) due to changes to our assumptions
on future mortality improvements which contributed £244
million partly offset by an increase in short-term expense
assumptions. In 2023, the impact from longevity assumption
changes was lower and also benefitted from favourable
experience variances.
The contribution from new business to the operating change in CSM includes the bulk purchase annuity transactions completed
and other top-ups on existing business.
Interest accreted on the CSM is calculated based on the opening CSM including new business and assumption changes. The
impact of assumption changes has led to a £7 million increase in interest accreted on the CSM. The interest rate is based on the
forward curve ‘locked in’ at IFRS 17 transition date (1 January 2022) and has remained at 2.3%.
i
The Variable Fee is the amount of the Group’s share of the fair value of the underlying items less fulfilment cash flows that do not vary based on the returns
on underlying items. Further information is provided in Note 1.5.
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IFRS result after tax
The following table shows a reconciliation of adjusted operating profit before tax to IFRS result:
2024
2023
For the year ended 31 December
£m
£m
Adjusted operating profit before tax
837
797
Short-term fluctuations in investment returns
(643)
(171)
Mismatches arising on application of IFRS 17
(333)
(41)
Amortisation and impairment of intangible assets acquired in business combinations
(115)
(39)
Profit on disposal of business and corporate transactions
11
—
Restructuring costs and other
i
(106)
(141)
IFRS (loss)/profit before tax and non-controlling interests attributable to equity holders
(349)
405
IFRS profit attributable to non-controlling interests
17
16
IFRS (loss)/profit before tax attributable to equity holders
(332)
421
Tax charge attributable to equity holders
(15)
(112)
IFRS (loss)/profit after tax attributable to equity holders
(347)
309
i
Restructuring and other costs excluded from adjusted operating profit relate to transformation costs allocated to the shareholder. These differ to
restructuring costs included in the analysis of administrative and other expenses in Note 7 which include costs allocated to the policyholder.
The IFRS result after tax attributable to equity holders for the year ended 31 December 2024 is a loss of £347 million (2023: £309
million profit). Adjusted operating profit before tax has been offset by losses on non-operating items predominately from short-
term fluctuations in investment returns and an increased loss in the mismatches arising on application of IFRS 17.
Losses from short-term fluctuations in investment returns of £643 million (2023: £171 million) primarily comprise a £247 million loss
(2023: £121 million loss) from the difference in actual and expected long-term investment return on surplus assets backing the
shareholder annuity portfolio, which has increased due to a rise in yields during 2024 and a £227 million loss (2023: £4 million gain)
on interest rate swaps purchased to protect the Solvency II capital position against falls in interest rates driven by rises in risk-free
rates in 2024. There were also losses of £98 million (2023: £123 million loss) on hedging instruments held to protect the Solvency II
capital position from falling equity markets, due to rises in equity values during the year.
Mismatches arising on application of IFRS 17 primarily relates to a mismatch which occurs in relation to non-profit annuity business
in the With-Profits Fund generating a £239 million loss in 2024 (2023: £18 million loss). This mismatch increased in 2024 due to a
reduction in the fair value of non-profit annuity business in the With-Profits Fund driven by a revised fair value calibration of the
business to allow for the UK reforms to Solvency II and longevity assumption changes. Over the expected term of the contracts this
mismatch is expected to slowly unwind as the profit on non-profit business in the With-Profits Fund is recognised. Additionally, the
mismatch for annuities due to divergence between locked-in rate used to value the CSM and valuation discount rate of £89 million
in 2024 (2023: £24 million) increased mainly due to a higher longevity assumption impact in 2024.
Amortisation and impairment of intangibles assets of £115 million (2023: £39 million) includes in 2024, £79 million impairment in
relation to platform, advice and model portfolio service businesses following the refresh of our Wealth strategy and reassessment
of growth forecasts in the current macro-economic environment, and £30 million impairment of responsAbility due to changes in
forecast revenue synergies (see Note 13).
Profit on disposal of business and corporate transactions includes gains resulting from the repurchase of subordinated notes in
June 2024 (see Note 26) of £29 million, partly offset by the increase in a provision for redress to customers in the platform business
relating to matters which occurred prior to the Group’s acquisition of the relevant business.
In the year ended 31 December 2024, restructuring costs and other of £106 million (2023: £141 million) mainly relates to £44 million
in relation to actions taken to reduce our cost base and £21 million of investment spend in building out capacity in our Asset
Management business.
The equity holders’ tax charge for the year ended 31 December 2024 is £15 million (2023: £112 million tax charge) representing an
effective tax rate of (4.5)% (2023: 26.6%). Excluding non-recurring items, the equity holders’ effective tax rate is 12.0% (2023:
28.7%). The equity holders’ effective tax rate of (4.5)% (2023: 26.6%) represents a tax charge on the equity holders’ pre-tax loss.
This rate diverges from the anticipated tax benefit at the UK statutory effective rate of 25.0% (2023: 23.5%), mainly due to the
adverse effects of non-deductible expenses and differences in the taxation of the life insurance business.
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25
Operating capital generation cumulative 3 year target of £2.7 billion
exceeded and improved leverage ratio of 33%
Capital generation
Operating capital generation of £933 million (2023: £996 million) continues to be strong, taking cumulative operating capital
generation since the start of 2022 to £2.75 billion, and enabling us to beat our three-year cumulative target of £2.7 billion. Total
capital generation was £1,108 million for the year ended 31 December 2024 (2023: £358 million) with lower operating capital
generation being more than offset by a much improved result from market movements and the impact of removing the eligible own
funds restriction.
The following table shows an analysis of total capital generation:
2024
2023
For the year ended 31 December
£m
£m
Asset Management
261
246
Life
616
726
Corporate Centre
(233)
(220)
Underlying capital generation
644
752
Other operating capital generation
289
244
Operating capital generation
933
996
Market movements
(59)
(507)
Restructuring and other
(135)
49
Tax
153
36
Eligible own funds restriction
216
(216)
Total capital generation
1,108
358
Underlying capital generation
Underlying capital generation reduced in the year ended 31 December 2024 to £644 million (2023: £752 million), mainly due to a
£170 million reduction in shareholder annuities which was partly offset by an improved result from Asset Management.
2024
2023
For the year ended 31 December
£m
£m
Asset Management
261 246
Life
i
616 726
With-profits: PruFund
239 240
– In-force
264
261
– New business
(25)
(21)
With-profits: traditional
190
182
Shareholder annuities
197 367
Other life
(10)
(63)
Corporate Centre
i
(233) (220)
Underlying capital generation
644 752
i
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced
with one new operating segment, ‘Life’. The comparatives for Life and
Corporate Centre have been restated to reflect the revised segments
and the adjustment of some advice-related costs.
In Asset Management, the impact of higher adjusted operating
profit resulted in an improvement in own funds. This is partially
offset by a reduction in the capital released in 2024.
The contribution to underlying capital generation from PruFund
remained stable at £239 million (2023: £240 million). In-force
business generated £264 million (2023: £261 million) reflecting
the impact of reductions in the expected real-world return on
shareholder transfers from 8.5% pa in 2023 to 8.2% pa in 2024,
offset by the reduction in the impact from equity hedging
following a decrease in exposure over 2023. New business
strain from the PruFund business has increased to £25 million
(2023: £21 million) due to a reduction in long-term risk free
rates over 2023, which reduces the value of shareholder
transfers, and more than offsets the reduction in new business
strain from lower sales.
Traditional with-profits business generated underlying capital
of £190 million, a slight increase on the prior year (2023: £182
million). The small improvement in underlying capital
generation is driven by a fall in equity hedges over 2023,
reflecting lower exposure to equity markets.
Underlying capital generation from shareholder annuities decreased to £197 million (2023: £367 million). A reduction in the surplus
assets in the annuity portfolio, and a lower expected rate of return on the surplus assets, contributes £53 million of the reduction. A
one-off reduction in underlying capital generation of £42 million in 2024 is due to the regulatory change at 31 December 2023 to
remove a restriction that applied in relation to the transition from Solvency I to Solvency II. Underlying capital generation also
includes the £64 million (2023: £12 million) capital strain of writing new bulk purchase annuities in 2024.
The negative contribution from Other Life has reduced in 2024 to £10 million from £63 million in 2023, mainly reflecting the
movement in adjusted operating profit.
Corporate Centre negative contribution increased mainly due to higher costs.
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Capital and liquidity
26
Operating capital generation
Operating capital generation decreased to £933 million (2023: £996 million). The reduction in underlying capital generation is partly
offset by an improvement in other operating capital generation.
2024
2023
For the year ended 31 December
£m
£m
Underlying capital generation
644 752
Model improvements
160
126
Assumption changes
163
(10)
Management actions and other
(incl. experience variances)
(34)
128
Other operating capital generation
289 244
Operating capital generation
933 996
Other operating capital generation has increased to £289
million (2023: £244 million) with model improvements and
assumption change benefits offsetting reductions in
management actions and experience variances.
Model improvements of £160 million (2023: £126 million)
include the impact from the full rebuild of the prospective with-
profits modelling which took place in 2024. This rebuild
reduces future shareholder transfers offset by a larger
reduction in capital backing the shareholder transfers. Overall,
the rebuild reflects that fewer management actions are taken
to protect the With-Profits Fund which means under the 1-
in-200 scenario shareholder transfers remain higher, reducing
capital requirements. This has no impact on policyholder
protection. The model change benefit in 2023 was largely a
reduction in operational risk capital.
Assumption changes of £163 million (2023: £10 million loss) reflect the positive impact from changes to longevity assumptions
consistent with the benefit seen in adjusted operating profit, due to lower assumed level of future mortality improvements.
Management actions and other largely reflect the £43 million beneficial impact of changes to the strategic asset allocation of the
With-Profits Fund and £62 million contribution from distribution of excess surplus from the with-profits inherited estate which
increases future shareholder transfers. These benefits are more than offset by £54 million increase in capital requirements on
future new business and £77 million unfavourable non-market experience variances (2023: £55 million loss from experience
variance). Asset trading in the annuity portfolio contributed £11 million in 2024 (2023: £52 million contribution).
Total capital generation
Total capital generation was £1,108 million for the year ended 31 December 2024 (2023: £358 million).
Market movements over 2024 have resulted in a negative impact of £59 million (2023: negative £507 million). The main drivers of
market movements include a loss on interest rate swaps, designed to protect the Solvency II capital position in a falling interest
rate environment, of £227 million (2023: £4 million gain) and a loss on the value of surplus assets in the annuity portfolio of
£307 million (2023: £93 million loss). These losses are partly offset by a gain of £142 million (2023: £321 million loss) arising from a
rise in the present value of shareholder transfers less equity hedges, driven by the increase in interest rates, and gains on other
assets. Additionally, the reduction in Solvency Capital Requirements and risk margin net of TMTP attributable to market
movements is a benefit of £254 million compared to £146 million in 2023 driven by the increase in risk-free rates. Market
movements in 2023 included a negative impact of £264 million in respect of the UK Government’s consultation on ground rents,
which had £nil impact in 2024.
There are limits, prescribed by the regulator, on the amount of different types of own funds that can be used to demonstrate
solvency. While the capital remains available to the Group, where the sum of capital classed as Tier 2 and Tier 3 exceeds 50% of
the regulatory Group Solvency Capital Requirement (SCR), own funds must be restricted by this amount to determine eligible own
funds. As at 31 December 2023 the restriction was £216 million which was released in the year ended 31 December 2024 following
the subordinated debt deleveraging actions announced in June 2024.
Restructuring costs and other movements of £135 million (2023: £49 million) includes the impact on the capital position of restructuring
costs which are relatively stable year on year. These are partly offset by the net benefits from the implementation of the Solvency
UK reforms in the year which include the removal of the matching adjustment cap on sub-investment grade assets, applying the
fundamental spread by notched credit rating in the capital calculation and the introduction of fundamental spread additions in the
matching adjustment. These changes result in a £16 million capital benefit in 2024. In 2023, there was a £177 million benefit from
the impact of the Solvency UK reforms, comprising a reduction in the risk margin and the removal of a restriction that applied in
relation to transition from Solvency I to Solvency II.
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Capital position
£8.5bn
£8.9bn
£3.8bn
£4.4bn
¢ Own funds
¢ SCR
The Group’s shareholder Solvency II coverage ratio increased
to 223% (31 December 2023: 203%). Shareholder Solvency II
surplus increased to £4.7 billion as at 31 December 2024
(31 December 2023: £4.5 billion), with a reduction in the SCR
offsetting a decrease in eligible own funds. Eligible own funds
includes Present Value of future Shareholder Transfers (PVST)
of £4.3 billion (31 December 2023: £4.0 billion). The increase in
surplus reflects the total capital generation of £1,108 million,
partly offset by negative capital movements of £924 million.
These were mainly the payment of dividends to shareholders
and the impact of subordinated debt deleveraging actions. The
reduction in SCR is driven by model changes and rise in yields.
Our With-Profits Fund continues to have a substantial Solvency
II surplus and a coverage ratio of 284% (2023: 403%). The fall in
ratio reflects a distribution of excess surplus from the With-
Profits inherited estate and an increase in the SCR. A
component of the increase in SCR arises from a full rebuild of
the prospective with-profits modelling.
Reflecting the With-Profits Fund’s strong solvency position, a decision was made to rationalise and simplify the number of
protective management actions which may be taken in extreme stress scenarios to ensure that management are not unnecessarily
constrained as regards the actions that they may take in extreme stress and thereby have appropriate freedom to act to protect
the long-term interests of policyholders. This increases the capital requirements of the With-Profits Fund. The fund retains a
substantial solvency buffer and there are no changes to policyholder outcomes.
The regulatory Solvency II coverage ratio of the Group as at 31 December 2024 is 168% (31 December 2023: 167%). This view of
solvency combines the shareholder position and the With-Profits Fund, but excludes all surplus within the With-Profits Fund.
Capital Management
Framework
The primary focus of our capital
management framework is to
maintain financial strength and
reward shareholders with
attractive returns. This is achieved
through actively managing M&G’s
solvency position and the quality of
capital held.
When deploying additional capital,
we prioritise investments that can
generate long-term sustainable
earnings growth. Any investment is
always measured against the
financial attractiveness of capital
returns, as well as our Risk
Appetite Framework.
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Financial
strength and
flexibility
Considers shareholder
Solvency II coverage ratio,
Holding Company liquidity,
and leverage ratio
Capital
returns
When appropriate
Attractive
dividends
Progressive dividend policy
Investments
in the business
Investments in our
high returning
growth businesses
Shareholder Solvency II surplus and ratio
2024
2023
223%
203%
Leverage Ratio
2024
2023
As at 31 December
£m
£m
Nominal value of subordinated debt
2,788
3,242
Shareholder Solvency II own funds
8,525
9,143
Leverage ratio
33%
35%
The leverage ratio is defined as the nominal value of debt as a
percentage of the shareholder view of M&G plc’s Solvency II
available own funds, which excludes any eligible own funds
restriction noted in the capital position section above. Our
leverage ratio of 33% (31 December 2023: 35%) has decreased
as a result of the deleveraging actions announced in June 2024.
The deleveraging actions comprised a repurchase of £161 million of 5.56% Sterling fixed rate subordinated notes for a
consideration of £150 million on 19 June 2024 and, on 20 July 2024, the redemption of all £300m 3.875% Sterling fixed rate
subordinated loan notes in issue, as described in Note 26.
Liquidity
The following table shows the movement in cash and liquid assets held by the Group’s holding companies during the period:
2024
2023
For the year ended 31 December
£m
£m
Opening cash and liquid assets at the
beginning of the period
977
986
Cash remittances from subsidiaries
909
725
Corporate costs
(121)
(129)
Interest paid on core structural
borrowings
(188)
(189)
Debt repurchase and redemption
i
(450)
—
Cash dividends paid to equity holders
(468)
(462)
Shares purchased by employee benefits
trust
(4)
(5)
Acquisition of and capital injections into
subsidiaries
(22)
(66)
Interest income on intercompany loans
36
42
Other
61
75
Closing cash and liquid assets at the
end of the period
ii
730
977
Cash remittances from subsidiaries have increased to £909
million compared to £725 million in 2023, reflecting the strong
positions of both The Prudential Assurance Company Limited
and M&G Group Limited. The increased remittances facilitated,
in part, the payment of the repurchase and redemption of £450
million of subordinated notes as part of the deleveraging
actions announced in June 2024, reflected in the reduced total
cash and liquid assets balance of £730 million at the end of the
year. Following these actions, we now expect to operate at the
level of cash and liquid assets at 31 December 2024.
Other movements in cash and liquid assets held by the holding
companies represent the dividends and payments that arise in
the normal course of business, including the interest paid on
structural borrowings of £188 million.
i
On 19 June 2024 the Group completed a repurchase of £161 million of 5.56% sterling fixed rate subordinated notes for a consideration of £150 million. On
20 July 2024, the Group redeemed, at par, all £300m 3.875% sterling fixed rate subordinated loan notes. See note 26 for further information.
ii
Closing cash and liquid assets at 31 December 2024 included a £705 million (2023: £940 million) inter-company loan asset with Prudential Capital plc,
which acts as the Group’s treasury function.
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We have reviewed our sustainability strategy, focusing on areas that are
important to M&G and where we can have positive real-world impact
Since 1848, we’ve been supporting customers to navigate
uncertainties and harness opportunities through our insurance
products and wider investment capabilities.
As an asset manager and asset owner, our balanced and
integrated business model helps us manage risk and
opportunities on behalf of our customers and clients, investing for
the longer term, with an active approach. This means identifying
structural trends, conducting rigorous research, and staying
innovative in the development of new products and services.
This focus on delivering for our customers and clients has
never been more important than in 2024, a year defined by
significant global events such as major elections, geopolitical
conflicts, and the average global temperature reaching 1.5°C
above pre-industrial levels for the first time.
As we look at our business, and how to adapt to a fast-moving
external environment, we have four levers we use to manage
sustainability risks and to drive positive change:
– Our investments
– Our community impact
– Our own operations and workforce
– Our advocacy and engagement
Over the last 12 months, we have continued to focus on our
sustainability priorities of climate change and diversity and
inclusion, and have used these levers to support the needs of
our customers, clients, communities, colleagues and
shareholders.
Our investments
As stewards of our customers’ and clients’ capital, we need to
assess and manage a complex range of risks and opportunities.
Through our broad capabilities, we continue to provide our
customers and clients with access to a range of sustainable
investment options. These include products with defined
sustainability objectives across our public asset fund ranges,
as well as through our private asset business, including our
emerging markets impact manager responsAbility, whose
investment strategies fall under three key themes – climate
finance, financial inclusion and sustainable food. We also
support early-stage innovation through Catalyst, our purpose-
led private asset strategy, which invests in pioneering
responsible enterprises. In 2024, the Catalyst team identified
opportunities in a number of areas, including data centre
cooling, low-carbon homes, and electric grid stability.
Over the year, we have also backed sustainable office
developments and social housing. 40 Leadenhall, developed and
managed by M&G’s real estate business on behalf of our With-
Profits Fund was among the UK’s first buildings to target the
NABERS certification, a reliable sustainability rating for a
building’s efficiency across energy, water and waste. As one
of the largest alternative lenders to the social housing sector,
we have nearly £5 billion invested on behalf of our
customers and clients.
In 2024, we reviewed our approach to assessing and managing
climate risks and opportunities through the development of our
Group Climate Action Framework, which provides a consistent
approach to the climate transition for our investment and
stewardship activities, across our business. As part of this
work, we have expanded our set of interim targets to include
asset alignment and engagement indicators. For more
information on our approach to climate, see pages 64-81.
Our community impact
Our community investment programmes focus on providing
education and skills to increase financial confidence and
revitalise communities to deliver local, sustainable
development.
Through our work with The Talent Foundry, Age UK, and Junior
Achievement, we have supported projects that give people
essential skills to build their resilience and financial capability.
Our work with Habitat for Humanity to turn unused spaces into
homes and with the Tree Council, who create green spaces in
urban schools, supports the regeneration of communities.
In total we committed £4.4 million through our community
investment programmes in 2024 and look forward to
continuing our support in 2025. For further details on our
community investment, please see pages 60-63.
Our operations and workforce
Across our own operations we continued efforts to reduce
operational emissions against our 2030 targets. While we have
made significant progress on Scope 1 and 2 emissions and are
on track to deliver on our commitment to achieve 100%
renewable energy procurement, we have seen an increase in
emissions related to business travel. Further information on our
operational climate activities can be found on pages 74-76.
We remain committed to creating a diverse and inclusive
workplace where people feel valued and included, and in doing
so seek to inspire colleagues to do their best for our clients. We
have achieved 36% women in senior leadership roles, against
our target of 40% by the end of 2025. The percentage of
colleagues in senior leadership from minority ethnic
backgrounds remains broadly consistent at 6.9% and we
acknowledge that we have a way to go to reach our target of
20% by the end of 2025. More information on D&I can be found
on pages 41-43.
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Our approach to sustainability
M&G's commitment to sustainability
30
“
We aim to use our
strengths to manage our
environmental impacts and
contribute positively to the
societies we serve.”
Kathy Ryan
Chief Sustainability Officer
Our advocacy and engagement
We understand the impact we can have through proactive
engagement and advocating for sustainable business
practices. In 2024, our asset manager continued to make
progress on its climate, nature and social engagement
programmes, reflecting our efforts to support our customers’
financial goals, by considering how their investments affect –
and are affected by – what’s happening in our society and
environment.
However, no single organisation, government, or individual can
solve the challenges we face alone, and change is dependent
on supportive public policy and regulatory frameworks. We
recognise the complexity of these issues and the need to be
agile in the evolving landscape. We remain focused on our
partnerships and industry collaboration with our peers to
support ambitious public policy to deliver the change we need.
Our new Group sustainability framework
In 2024, we undertook a review of our sustainability strategy to
ensure we are focused on areas that are important to M&G and
where we can have the most impact, resulting in the development
of a new sustainability framework. We have grouped our activities
under two themes – ‘Resilient planet’ and ‘Resilient societies’ -
which include the work we do on climate, communities and
people, with the addition of nature given its growing importance
for our customers and clients and broader society.
Our approach to sustainability is aligned with our purpose – to
give everyone real confidence to put their money to work – and
supports our broader Group strategy, delivering profitable
growth where we can capture new opportunities to meet
evolving client needs.
The resilient planet theme is supported by two pillars –
‘Financing the climate transition’ and ’Developing our approach
to nature’. Our work on financing the climate transition seeks to
address the risks presented by climate change alongside
capturing new opportunities to meet client needs. In 2025, we
will use an updated Group Climate Action Framework and
focus on the alignment of our portfolios with the transition to a
low-carbon economy, including engagement where more
progress is required. More details can be found on pages 65-71.
We also recognise the importance of addressing nature loss
through the investments we own and manage, as well as
measuring and reducing our operational impact. We are
working to better understand our investment exposure to
nature-related impacts, dependencies, risks and opportunities,
and will share more detail on our approach in due course.
The resilient societies theme also comprises two pillars –
‘Promoting financial confidence’ and ‘Building communities’,
both of which build on the work we already do as part of our
investment and corporate activities. Improved financial
confidence supports people to access finance and make better
decisions – something we believe we can influence by helping
close the investment and advice gap, as well as investing in
financial inclusion initiatives. Building communities includes
targeted social infrastructure investments such as affordable
housing and our community investment programme.
We recognise we are in the early stages of tackling these
issues, but believe we have an important role to play.
During 2025 we will start to track and measure progress against
our new sustainability framework using an initial set of
performance indicators. As we monitor these indicators, we will
develop a set of internal and external targets for each of the pillars.
Group Sustainability Framework
Resilient planet
Resilient societies
Financing the
climate transition
Developing our
approach to nature
Promoting
financial confidence
Building
communities
Supporting real-economy
decarbonisation by investing in
solutions and managing risks
through the transition
Understanding how our business
interfaces with nature, to manage
risks and meet emerging customer
and client expectations
Enabling informed decision-
making, building trust and
narrowing the advice gap
Contributing to a more resilient
society through social and
community investments
Underpinned by
responsible business
practices
Sustainable
operations
Corporate
responsibility
Diversity
& inclusion
Human
Rights
Strengthening
operational goals
Supporting the
resilience and
regeneration of
communities
Continuing focus
on gender
and ethnicity
representation
Ongoing
commitment
to support
human rights
Developing our framework
When developing our sustainability framework, we first conducted a materiality assessment that involved evaluating the most
relevant issues in terms of impacts on M&G as well as on wider stakeholders. In this initial phase, we carried out a holistic
review of risks and opportunities, incorporating views from over 100 internal stakeholders, including our long-term
sustainability goals as a business. The material and emerging topics identified were used as the basis for our framework,
alongside comprehensive research, customer and client assessment, regulatory and policy development analysis and
consideration of our existing sustainability strengths.
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31
Financing the climate transition
As a long-term investor, we can enable our customers and
clients to transition their investments to a low-carbon
economy by investing in businesses that are driving and
innovating in sustainable products and services, and using
our influence as active investors to encourage companies
to align to net zero carbon business models. By developing
our climate research and investment strategies, we can
provide customers and clients with access to companies
and assets that are profitably navigating the transition to a
low-carbon economy, leveraging our diversified
investment capabilities across public and private markets.
Our target to achieve net zero across our operations and
investments by 2050 remains, but we have refocused our
investment approach to climate to strengthen its ability to
deliver real-world impact. Our updated Group Climate
Action framework is built around three levers - grow, align
and reallocate - which we will use to manage climate-
related risks and opportunities on behalf of our clients. It is
based on a more comprehensive assessment of transition
alignment, including new interim targets, recognising the
potential disconnect between portfolio decarbonisation
and real-economy change.
The framework is focused on the investments we manage
and administer, but we will continue to take action to
decarbonise our direct operations and engage our supply
chain. We will share more details when we publish our
updated Group Climate Transition Plan.
Developing our approach to nature
Nature is deteriorating globally, and biodiversity declining
faster than any time in human history. Changes to natural
systems, which are interconnected - including forests,
oceans and rivers, soil and nutrient cycles, climate and
weather patterns - will increase nature-related risks. If left
unmanaged, they could have disruptive consequences on
asset valuations, and potentially the stability of financial
markets.
While developing our approach to nature, we recognise the
importance of addressing nature loss through our
investments, where our main risks and opportunities reside,
as well as to measure and reduce our own impacts and
dependencies on nature through our operations.
Engagement is an important lever for us, with nature being
one of our key top-down stewardship programmes as an
asset manager. M&G Investments is a participant in Nature
Action 100 (NA100), a global investor-led engagement
initiative focused on supporting greater corporate ambition
and action to reverse nature loss. It takes part in working
groups for five companies, three of which are extending its
work on Climate Action 100 (CA100).
Together with our peers and industry network, we are looking
to continue to participate in the evolving dialogue on the
challenges for investors to effectively take action on nature
loss.
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Resilient planet
32
Find out more on climate, including details of
the Climate Action Framework on pages 65-73
Solar power deployment
Last year, Candi Solar, a clean energy company
specialising in distributed solar power solutions for
commercial and industrial (C&I) clients in India and
South Africa, secured additional debt funding from a
climate fund part managed by our emerging markets
impact manager responsAbility. Candi Solar has
pioneered end-to-end customised solar solutions, from
finance and engineering to performance management
for the C&I market. The funding will be used to scale its
renewable energy portfolio in these regions.
Regenerative agriculture
In 2024, our Catalyst strategy, backed by our With-Profits
Fund, committed €150 million to the Regenerate European
Sustainable Agriculture Fund managed by specialist
climate impact investment managers, Regenerate Asset
Management. The fund invests directly in agricultural
businesses growing and supplying regenerative and
climate-positive produce in Europe. Examples include a
diversified Portuguese blueberry enterprise - Regen Blue -
which Regenerate will help grow through a €40 million
investment.
Promoting financial confidence
Financial confidence refers to an individual’s ability to
understand, access and make informed decisions about
their finances, and directly links to our purpose. Our aim is
to promote financial confidence for all our clients and the
communities we interact with.
As well as our community investment programme, where
we partner with charities to provide people the skills and
opportunities to build resilience and become financially
secure, we are enabling existing and new clients to make
informed financial decisions through our advice business.
We are already working with our existing advisors through
the M&G Wealth Advice Academy, our in-house financial
advice qualification programme, as we seek to narrow the
investment and advice gap.
We are also supporting financial confidence through the
investing capabilities of our emerging market impact-
focused manager responsAbility, offering dedicated
investment products, such as the responsAbility Micro and
Small-Medium Enterprise (SME) Finance Fund. Financial
inclusion is one of responsAbility’s key investment themes,
with the ambition to deliver critical credit and savings
services to households and small-and-medium enterprises
traditionally without access to banking. For example, its
portfolio company BRAC Tanzania provides microcredit
programmes but also equips women with the essential
tools to establish their own micro-enterprises,
complemented by educational and skills training to aid
their economic independence.
Building communities
Supporting the resilience and regeneration of communities
can help growth and economic productivity and help
alleviate disadvantage. Regeneration programmes can
revitalise cities and communities, enhance connectivity,
ensure security of vital resources, and drive local
sustainable development.
We believe we can have a positive impact on communities
as well as society more broadly, supporting long-term
societal and economic well-being, through our investments
in social infrastructure, our community investment
programmes and by enhancing our business practices to
ensure the respect for human rights.
We are supporting community resilience and regeneration
through investment in social infrastructure to help unlock
economic productivity and growth, and we also are
supporting our local communities through our charity
partnerships.
Our community investment programmes focus on
providing education and skills to increase financial
confidence and revitalising communities to deliver local,
sustainable development. This is delivered with our charity
partners and support from our colleagues, who volunteer
their time to make a difference. Over the last twelve
months they provided 12,031 hours as part of our
commitment to give every colleague two volunteering days
per year.
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Resilient societies
33
Find out more about our Community
investment work on pages 60-63
Gender smart investing
In June last year, M&G’s Impact Financing Fund
committed an additional US$30 million to the Global
Gender Smart Fund (GGSF) – one of the world’s largest
gender-focused investment funds addressing the
US$1.7 trillion gender gap in access to finance for
women. The new investment brings our total
commitment to US$120 million. The GGSF is partly
managed by our impact manager responsAbility and
invests in projects that widen access to financial
services for underserved women in developing markets.
Supporting social housing
During 2024, M&G Investments provided £60 million to
The Jersey Homes Trust (JHT), the largest independent
housing association in Jersey. The funding will allow
JHT, a not-for-profit organisation, to refinance existing
debt on more favourable terms, including access to
long-term funding. M&G has been investing in social
housing since the 1980s, and is now one of the largest
alternative lenders to the sector, with an exposure of
nearly £5 billion on behalf of our pension fund and
insurance clients.
Understanding the needs of our stakeholders is essential to help us
fulfil our purpose and drive value creation over the longer term
The following pages provide more detail on how the Board has fulfilled its duties as set out in Section 172(1) (a) to (f)
of the Companies Act 2006 (Section 172) and how it has engaged with and taken account of our stakeholders’ interests over 2024.
We have also described how the Board considers our key stakeholders and their views when making key decisions.
How the Board fulfils its Section 172 duties
Section 172 requires a company director to act in the way he or she considers, in good faith, would most likely promote the
success of the company for the benefit of its members as a whole. The following aspects demonstrate how the Board
establishes a structure to help it fulfil the Section 172 duties.
Establishing our purpose, strategy, culture and values
The Board sets M&G's purpose, values, and strategy, and monitors our culture to ensure that these are aligned and this sets
the tone for how we want to do business. Our culture and values inform our purpose, and are an essential underpin for our
decision-making on strategy and what we want to achieve. Find out more on page 87.
Board skills and stewardship
Having a strong board is essential for successful stewardship at M&G. We seek to recruit and retain directors with diverse
skills and expertise to govern decision-making. We develop our directors through a comprehensive induction process and
engagement with management, training, and workshops. This process helps our directors to enhance their skills, so they can
contribute to sound decision-making and are better placed to help shape proposals and provide constructive challenge. Find
out more on page 96.
Board information
The Board has guidelines and training for colleagues to ensure that material prepared for the Board is of a high standard and
considers aspects relevant for Section 172, including long-term impact and how key stakeholder interests have been
considered. Directors are encouraged to provide feedback to paper preparers to further improve this process.
Board discussion and decision-making
As part of its discussions, the Board provides rigorous evaluation, assessment of risk and challenge to ensure decisions
promote our long-term sustainable success and balance the needs and interests of our stakeholders. Key themes and issues
relating to our stakeholders are considered when the Board has discussions, and they influence the Board’s decision-making.
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How the Board fulfils its duties
34
Key decision 1
Life/Wealth strategy
Our transformation programme to support better outcomes for our customers continued into 2024. As part of this programme,
the Board performed a strategic review of our Wealth business and determined that our competitive position in the wealth
market was not sufficiently strong to ensure profitable growth without committing significant further resources. As a result,
the Board agreed to focus and rationalise our Wealth strategy, combining the Life and Wealth businesses.
This approach will help us grow the distribution of our customer products and services through our restricted advice channel
and independent advisers, and make our propositions more accessible on third party platforms.
Stakeholders considered
Customers, clients, colleagues, investors and regulators.
Decision-making process
Management recommended the proposal to rationalise the Wealth strategy and refocus the Wealth distribution arm in the Life
business, focusing on restricted advice and distribution of life insurance products. This aims to increase sales of PruFund and
annuities, with the additional flows benefitting the Asset Management business, including in private assets. This also ensures
alignment to the strategy of accelerating growth in private assets.
The restructure makes it more convenient for our clients, and ensures that we continue to focus on customer outcomes,
service and experience.
The Board discussed the impact on certain colleagues and the steps being taken, which included alternative roles being
explored for individuals and outplacement support was offered. The Board stressed the importance of communication of this
change to all stakeholders, including customers, colleagues and investors. Regulators were kept informed of the restructure,
which included sharing a detailed plan and key messaging prior to announcing the strategy in the half year 2024 results in
September 2024. The Board took into account feedback received on reducing barriers to execution, simplifying the business,
and increasing speed of decision making, which our colleagues have said are important to them.
Key decision 2
Review of Group sustainability strategy
During the year, the Board reviewed the Group sustainability strategy and approved the new framework which groups our
activities under two themes - ‘Resilient planet’ and ‘Resilient societies’. Further information can be found on pages 30 to 33.
The approach to sustainability is aligned with the Group’s purpose and supports our broader corporate strategy, delivering
profitable growth where we can capture new opportunities to meet evolving client needs.
Stakeholders considered
Customers, clients, colleagues, investors and regulators.
Decision-making process
Sustainability has been considered by the Board throughout the year (see Our approach to sustainability section and the
Corporate governance report on page 87). The framework was approved in September 2024, having been challenged by the
Board at its strategy offsite in June and the Board meeting in July 2024.
The Board was actively involved in reviewing the strategy and framework, and challenged management on the priority themes
as well as the importance of clear communication to colleagues and external stakeholders. The Board also challenged
management to ensure that the overall sustainability strategy was sufficiently stretching and measurable. The Board
discussed that there should be clear alignment to remuneration incentives once the framework is embedded. Clear articulation
of the sustainability credentials to customers and clients was also considered by the Board, particularly with regard to those
customers in the With-Profits Fund.
The framework is underpinned by the Group’s responsible business practices, including diversity and inclusion, human rights,
corporate responsibility and sustainable operations.
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Key decision 3
Capital allocation
The Board is responsible for capital allocation across M&G, including its Asset Management and Life businesses. The role of
the Board includes balancing the needs of stakeholders when making decisions about the allocation of capital. This included
the following in 2024:
Deleveraging actions
In June 2024, we announced a number of deleveraging actions totalling £450 million. This included the redemption of £300
million subordinated notes which were callable in July 2024.
Mergers & Acquisitions (M&A)
The Board reviewed and debated potential M&A activity across the Group during the year. In October, we acquired a majority
stake in BauMont Real Estate Capital, a fund manager specialising in value-add investment strategies in Western Europe.
Having identified value-add as a key target addition to our existing capabilities we conducted an extensive scan of potential
opportunities which resulted in the selection of BauMont as the preferred target. BauMont's expertise is highly complementary
to our existing team and benefits customers by having access to broader investment strategies.
Value Share Bulk Purchase Annuity (BPA)
Since agreeing to re-enter the BPA market, the Board reviewed the business case for a BPA deal to share value with the
corporate sponsor, providing scheme members with the security of a buy-in while the Group shares the financial risk and
upside with the corporate sponsor. This deal announced in November is believed to be the first of its kind in the market.
Transformation & change spend
During the year, we continued to deliver good momentum on our transformation programme initiated in 2023, which is
focused on simplification and creates capacity to invest. This included migrating 80% of our heritage policies to a single,
modern platform solution.
Stakeholders considered
Customers, clients, colleagues, investors, regulators, communities, charities, credit rating agencies.
Decision-making process
The Board considered its stakeholders throughout the year when discussing and approving capital allocation matters.
The deleveraging activities were discussed in depth with the Prudential Regulation Authority. The Board ensured that the
activities would have minimal impact on our solvency position – remaining well above the target operating range – and
protecting our customers from harm. The Board discussed the impact on credit rating, debt capacity and the impact to
shareholders. The deleveraging activities that were undertaken in 2024 also demonstrate a continued focus on delivering
across our three strategic pillars: financial strength, simplification and growth.
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Colleagues
M&G has over 6,000 permanent colleagues in 39 offices globally.
Our colleagues are core to everything we do and fundamental to
the success of the Group. The Board believes that ongoing
engagement and two-way dialogue with colleagues is vital to
ensuring that their interests and concerns are understood, and
that we take appropriate action. An engaged workforce is the
foundation to delivering for our other stakeholder groups.
How we engage
Direct dialogue with colleagues
During 2024, there were a number of formal sessions between Non-Executive Directors and colleagues from across the
Group. The Non-Executive Directors attended sessions during the year, with colleagues across different geographies and
seniority, and included colleagues from Asset Management, Asia, European offices, the Mumbai office, the offices in Scotland,
the Corporate Functions, graduates, and colleague ambassadors. The purpose of these regular sessions is to give our Board
members the opportunity to engage directly with colleagues, gain insights into M&G's culture and understand colleague views
and interests.
Board site visit to Kildean
The Board visited the Kildean, Stirling office in September 2024 and held a variety of colleague events including a Town Hall
with colleagues and breakout groups with NEDs and colleagues on topics including diversity, equity and inclusion, and
customer listening.
Town Halls
There were Town Halls with Q&As held in both London and Kildean during the year which were attended by members of the
Board.
Key themes, issues and matters arising from Board engagement with colleagues
– Positive feedback on people centric culture and
workforce/people policies
– Need to remove barriers to execution including
technology (and pace of decision-making)
– Hybrid working and return to office in the context of
collaboration
– Balance of controlling costs and investing for growth
– Empowerment and desire for increased autonomy
– Importance of learning and development, career
progression, and pastoral care, including for
graduates
– Collaboration and prioritisation
– Entity Structures – Target Operating Model
– Communication
Actions and progress
The key themes and issues are taken into account when discussing as a Board and influence the Board’s decision-making. Feedback
on themes from Board conversations with colleagues are documented and shared for discussion with Non-Executive Directors and
the Chief People Officer and, where appropriate, senior management.
The Board discussed with the Group CEO the key themes from its direct engagement with colleagues and emphasised to
management the importance of growing internal talent, people culture, strengthening succession plans, and further improving the
employee proposition. Themes and issues from colleague engagement feeds into the business plan process and allocation of spend.
The Board discussed and approved the actions being taken to improve accountability, which included the approach to performance
and reward to ensure it improved objective setting for senior leaders and strengthened alignment with the purpose. The events for
senior leaders held during the year were also designed to enhance collaboration, accountability and understanding of the strategic
direction, as well removing barriers to execution.
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37
Find out more about our colleagues
on pages 40-43
Customers and clients
M&G distributes investments and savings products to a broad
range of pension funds, insurance companies, wealth
managers, financial advisers, and other distribution partners
across 6 continents. We also offer an end-to-end distribution
channel for savings products in the UK, through financial
advisers and directly to individual customers and clients. We
manage savings for approximately 4.5 million policyholders,
across all age and wealth brackets.
How we engage
The Board receives management information reporting on client metrics, which are discussed with management. The Board
considered clients and customers as part of the combination of the Life and Wealth operations.
The Group CEO regularly meets directly with customers and clients to understand their views, discuss ways to further
enhance our relationships and product offerings, and provides feedback to the Board.
The Board’s visit to the Kildean office in September 2024 included call listening sessions and briefings on other customer
enhancement initiatives.
Engagement meetings are held to enable management to understand what matters to our clients and customers and to build
strategic relationships with them. Management also engages regularly with our customers and clients on a day-to-day basis, in
meetings, at roundtable events and conferences.
Key themes, issues and matters
The key themes and issues arising from engagement and dialogue with clients and customers included:
– Product offering
– Product innovation
– Investment returns
– Digitisation and digital transformation
– Client and customer outcomes
– Client experience and customer service
Actions and progress
The Board provided oversight of the programme of activity regarding Consumer Duty and the focus on delivering good
customer outcomes.
The Board regularly reviews and discusses a range of management information to ensure we are delivering good customer
outcomes, and in 2024 questioned management on proposed actions in response to client feedback and other matters, such
as service and complaints.
The Board encourages management to improve how they measure feedback and client satisfaction, and it is incorporated into
scorecards for remuneration purposes.
The Board and management regularly discuss and actively advocate for a customer mindset and consideration of the client in
everything we do, together with the importance of ensuring that colleagues are spending time understanding their clients’ and
customers' priorities.
The Board and management discussed the ways M&G can execute on growth opportunities, including from a distribution
standpoint, and the investment spend required in data and technologies across strategically important areas, including client
experience.
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Find out more about our customers and clients
on pages 12-15.
Regulators
Maintaining an open and cooperative relationship with regulators and policymakers is critically important. We have a number
of regulated entities, which are supervised at entity level. We engage with regulators at a Group and subsidiary level.
How we engage
The Chair, Group CEO and other Board and Executive Committee members meet regularly with the supervisory and other
teams at the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).
Representatives from the PRA attended the July 2024 Board meeting and representatives from the FCA attended the Board
meeting in February 2025, to discuss business, customer and regulatory priorities.
Key themes and regulatory priorities
– Governance
– Consumer Duty
– Financial Crime
– Strategy
– Operational resilience
– Succession planning
– Risk and Control environment
– Sustainability Disclosure Requirements / Climate risks
– Outsourcing arrangements
– PAC’s Operating Model Enhancement
Actions and progress
The Board believes that open and regular dialogue promotes transparency between the Group and its regulators and ensures
that M&G is in a position to reflect the views of our regulators when setting strategy and the business plan. The outcomes of
our ongoing engagement with our regulators influence the Group’s priorities and focus for the year, including the key areas of
focus and activity for the Board and its Committees.
The quantum of industry-wide regulatory driven change continues to impact our businesses and we remain focused on
adapting to meet the expectations of our regulators. This includes establishing and delivering against our Group-wide
programmes on Consumer Duty and Financial Crime.
One of the Board’s main priorities is ensuring that the governance, leadership and culture at M&G is of requisite quality and
facilitates good decision-making, problem solving, and the delivery of good client outcomes.
During the year, the Board’s activities have included consideration of Sustainability risks and opportunities, the Group’s
compliance with the Consumer Duty regulation, and oversight of the ongoing Financial Crime programme, together with a
range of matters and decisions relating to strategy and execution. Our Financial Crime programme strengthens and enhances
processes and controls across all of our products and markets and the Board has engaged with our regulators on the progress
of this programme.
During the year, the Risk Committee’s activities have included reviewing a range of climate scenarios as part of the ORSA
process, and review and challenge of matters relating to risk management, internal controls, operational resilience, financial
crime and outsourcing. The Nomination and Governance Committee’s activities included Board leadership and succession
planning and Group Executive Committee succession planning.
The Board is also committed to engaging with its other stakeholders in order to ensure that we maintain positive relationships and
take account of their views and interests. These include communities, charity partnerships, and suppliers.
Communities
Social responsibility is firmly embedded in M&G’s operations around the world as an integral part of the way we do business. Our
social purpose is to build inclusive and resilient communities through urban regeneration, economic empowerment and community
building. We want to use our community investment to help break down the barriers that prevent people from living the life they
want. Our framework for community engagement provides support at a strategic and local level.
Charity partnerships and donations
We work closely with our charity partners to develop strong, sustainable projects that meet local needs. We nurture spaces and
places that help people and nature to thrive, giving people skills and opportunities to be financially secure, and building and
strengthening relationships within and between communities. Find out more about our community engagement on pages 60-63.
Business partners
Our suppliers are critical to our business and the long-term success of the Group. We are committed to the principles of the
Prompt Payment Code, and aim to treat suppliers fairly and consistently. The Chief Risk and Compliance Officer’s (CRCO) report to
the Risk Committee provides a regular assessment of key risks, including any issues regarding third party suppliers and
outsourcers. The Board oversees the performance of business partners and suppliers through reporting from management and
the Risk function. Day-to-day oversight is conducted by the operational teams and substantive issues are escalated to the Board
through the regular management reporting.
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We are focused on creating the right capabilities to empower our colleagues,
enable business change and drive our business performance
What our colleagues mean to us
Our colleagues are critical to our success. Our people approach
aligns with M&G’s strategic goals while ensuring a safe, inclusive
and productive workplace. We are focused on creating an
exceptional place to work: a positive culture that inspires and
supports our colleagues to do their best for our customers and
clients.
Our people policies and processes are always evolving to support
colleagues through their employment lifecycle to deliver our
business strategy. Our five global people workstreams cover
gender, ethnicity/nationality, life stages, disability/accessibility and
LGBTQ+, and support our ambition of building a diverse culture.
Our people priorities
Our six key people priorities are aligned to our business
strategy and help us to deliver growth:
1. Enable business change and simplification by ensuring
that the people implications of change are well thought
through and delivered with care and integrity.
2. Build an organisation that is fit for purpose and scalable,
which supports growth by ensuring we have highly
engaged people, in the right roles, aligned to deliver our
business strategy.
3. Attract and develop the capability required to deliver our
strategy, focusing on the development of our leaders
and people managers and having a robust approach to
talent management and succession planning.
4. Protect our licence to operate by continuing to deliver
our core people services safely and effectively.
5. Drive diversity, well-being and inclusion by building on
our strengths to drive further progress to help us meet
our 2025 targets.
6. Build a high-performing culture by aligning colleagues
behind our purpose, align goals and objectives to our
strategic pillars, drive engagement, regularly listen to
and act on colleague feedback.
Engaging with all employees to support growth
We conduct OneVoice surveys several times throughout the
year to ensure that M&G colleagues have an active voice. This
approach helps us understand how colleagues feel about
working at M&G, and how we can continue to improve the
experience we’re creating for our customers, clients,
stakeholders and each other.
In our November 2024 survey, we received just over 9,800
comments from more than 2,700 colleagues. Results
highlighted that our sustainable engagement scores remain
stable at 69.0 (2023: 70.7) and that our culture is a strength,
with colleagues treating one another with respect and dignity.
During 2024, we improved our survey approach to provide
people managers with deeper insights into our colleagues’
experience, as well as how our policies and initiatives are
working. We are making it simpler to understand feedback,
such as improving ‘action taking’ and ‘barriers to execution’ -
two of our biggest opportunities. Here, we are reducing
bureaucracy by cutting unnecessary meetings and
empowering colleagues to take decisions, which aligns with
our strategic priority of simplification.
Colleagues still have an overriding desire to work flexibly and
we recognise that a more prescriptive approach to when they
could come into the office could result in lower engagement.
We aim for colleagues and their managers to have an open and
honest dialogue about working from home. The challenges we
face are not unique to M&G and individual circumstances vary
significantly. We recognise that capacity at M&G is a challenge
and are continually looking at capacity and working patterns.
We currently operate a booking system for working in the
office.
For more on how we engage
with our colleagues see page 37
The importance of learning and development
In January 2024, we launched our new purpose, so everyone at
M&G can feel that they’re clear, excited and energised by our
sense of direction and understand the part they play in it. It’s
the common thread through everything we do so that we can
work together to give everyone real confidence to put their
money to work.
To meet our purpose, we need the right skills and capabilities.
We aim to create an integrated approach to attracting,
developing, accelerating and ultimately retaining talented
people for our future success. We do this through building core
behavioural, professional, leadership and management
capabilities to drive high performance and foster a more
inclusive culture.
Our behaviours
Our values of care and integrity underpin our behaviours,
which guide how all our colleagues should act and interact
with each other, customers, clients and stakeholders. Our
behaviours are aligned with our culture and values, and
help us to deliver our purpose and strategy:
Own it now: Putting your name on things with confidence
to drive progress and results quickly.
Move it forward together: Forming cross-functional teams
to seize the right opportunities and solve real problems.
Tell it like it is: Respectfully speaking up to create better
ways forward - both direct and empathetic.
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Creating a positive and diverse culture
40
45.1%
44.6%
7.2%
1.6%
1.5%
54%
46%
Winning behaviours
We’ve also introduced Winning Behaviours, a learning
experience for all colleagues to build belief and capability to
shift our behaviours: Own it now, Move it forward together and
Tell it like it is. Learner experiences have included live events
with keynote speakers, immersive workshops, team sessions
led by managers and on-demand digital resources.
Winning Behaviours demonstrates our commitment to
supporting and upskilling colleagues. It’s encouraging to see
colleagues gaining a deeper understanding of our behaviours,
their importance and how they contribute to growth at M&G,
together with their feedback that the learning is helping apply
these behaviours.
In 2024, we invested in our new simplified, personalised, one-
stop shop for digital learning – available to all colleagues. We
have started to create academies (communities of learners)
and pathways to develop prioritised capabilities including AI,
sustainability and data management - democratising access to
learning and empowering colleagues to own their
development.
A careful approach to how we work
Our Code of Conduct puts our values and behaviours into
action every day, and aims to ensure we act in accordance with
our policies and procedures, global laws and regulation. These
standards underpin our strong reputation, giving everyone real
confidence to put their money to work. Our values and
behaviours allow us to build lasting relationships, based on
trust, with our customers, clients, shareholders and regulators,
and to deliver our ambitions for growth.
Our Whistleblowing Policy details whistleblower protections in
place across M&G, so that anyone who speaks out feels safe and is
confident in doing so. All reports are taken seriously, with qualifying
reports independently and confidentiality investigated. All
investigations are governed by our Speak Out programme.
For more on how we manage
colleague related risk see page 51
Measuring D&I at M&G
Diversity in senior leadership: We are aiming to achieve
40% women and 20% ethnic diversity in senior leadership
by the end of 2025. In 2024, women in senior leadership
was 36% (2023: 37%) and ethnicity in senior leadership
was 6.9% (2023: 7.4%).
Colleague inclusion index: This continues to be measured
on a regular basis as part of the OneVoice survey, with an
average score of 65.3 (2023: 66.7) across three surveys in
2024. It is based on two questions - ‘Leaders at M&G value
different perspectives’ and ‘I feel free to speak my mind
without fear of negative consequences’. While we have
seen changes in leadership and organisational structure
across the year, we have broadly maintained our level of
inclusion, reflecting that care and integrity remain core
values at M&G.
Creating a balanced workplace
M&G has a duty to keep colleagues safe at work, and they also
need to feel valued for who they are, included in their teams
and feel that their contributions are welcomed and listened to.
It’s an important part of our culture.
We have a five-year Diversity and Inclusion (D&I) plan and
governance model, which was launched in 2020, with targets
to build a positive and balanced workplace. Our D&I initiatives
cover the talent management lifecycle, from sourcing
candidates through recruitment, development, career
progression and succession.
Our people policies and strategies are constantly evolving to
help colleagues balance work with personal life, responsibilities
and commitments, while making sure we still do what is best
for our clients. To help us narrow our gender and ethnicity pay
gaps, retain a diverse workforce and reach our diversity
targets, we are focused on creating an inclusive, flexible and
family-friendly culture, with employee-related policies that
support work-life balance and well-being for all colleagues.
Our five employee-led Diversity and Inclusion Networks are a
source of support for all colleagues. Examples include Embrace
(promoting racial, ethnic, social, faith and cultural diversity) and
Enable (for anyone impacted by physical or mental health,
caring responsibilities, neurodiversity and different abilities).
Reducing the gaps
We are committed to our target of 40% female representation
in senior leadership by the end of 2025. Over the past year, we
have made several leadership changes to best align M&G for
future delivery and growth. While these changes have resulted
in a 1% drop in the proportion of women to 36%, there is no
overall decrease in the number of women in this group. Our
diversity targets are part of our performance scorecard, and
are tied to leadership performance compensation. Our
scorecard includes both financial and non-financial metrics,
with our progress regularly reviewed by M&G’s Executive
Committee, Board of Directors and Remuneration Committee.
We are signatories and on-going supporters of the UK HM
Treasury Women in Finance Charter, as well as the Women in
Finance Charter in Ireland, and the diversity charters in France,
Italy, Sweden and Luxembourg, showing expanded support for
this ambition internationally.
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Diversity
throughout
M&G
White
Women
Men
Undisclosed
Asian
Minority Ethnic
Black
Our mean gender pay gap across the business for 2024
continued to improve to 23.4% from 28.5% in 2023: this 5.1%
movement is our single largest year-on-year improvement
since we began reporting at Group level in 2020. It is due to the
number of senior women that have been hired and the number
of long-serving senior men that have left or retired from the
business. Our average bonus gap improved to 64.7% from
66.6% in 2023.
The ethnicity pay gap shows the difference in the average pay
and bonus between Black, Asian and minority ethnic
colleagues and White colleagues across an organisation,
irrespective of role and seniority. Increasing Black, Asian and
minority ethnic representation in senior leadership is key to
continuing to address our ethnicity pay gap.
To find out more about how we are delivering on our
D&I targets see our gender and ethnicity pay gap report
on our website
Employee profile gender diversity
Number of people
6
4
6
4
40
22
Board
Group
Executive
Committee
(GEC)
GEC
direct
reports
261
145
1,283
836
1,727
1,817
Other senior
management
Professionals
All other
employees
¢ Men ¢ Women
Accreditations
– LGBT Great gold standard for LGBT+ equality to 2025
– Social Mobility Employer Index Top 100 Employer 2024
– Disability Confident Leader – reaccredited January 2024
– National Equality Standard accreditation (reaccreditation
2023-2026)
Increasing diversity at M&G
We recognise that women and people from Black, Asian and
minority ethnic backgrounds remain in the minority throughout
UK financial services and at senior levels in our business. We
are committed to developing female and minority ethnic talent
at all levels to redress this imbalance. One of the aims of the
Life Stages pillar of our diversity and inclusion (D&I) strategy is
to enable talented colleagues to advance into higher-paying
positions at M&G, and to build the skills and confidence
required. We do this by addressing mitigating factors, for
example increased carer responsibilities, which might
otherwise cause our colleagues to leave M&G or take lower-
paying roles.
We are proud to announce that M&G has successfully achieved
re-accreditation for being a Disability Confident Leader, the
highest level recognised under the Department for Work and
Pensions Disability Confident Scheme. The Scheme supports
employers to make the most of the talents disabled people
bring to the workplace. Since the last accreditation, three years
ago, we have remained committed to thinking differently about
disability, welcoming people of all abilities and ensuring that
everyone has the opportunity to fulfil their potential and realise
their aspirations.
Employees who declare as LGBTQ+ has remained at 1%, while
those at M&G who identify as a person with a disability is 2%.
In addition to our internal diversity-related targets, we use
external benchmarks to monitor our progress against industry-
wide goals. We are accredited with the National Equality
Standard (NES) re-accreditation and our score of 145/175 puts
us above comparable businesses in financial services and
businesses across all sectors that are a similar size.
We encourage diversity in our talent pipeline and welcome
applications regardless of age, gender/gender identity, sexual
orientation, ethnicity/ nationality, disability or military service,
as well as those who have taken career breaks.
By diversifying our candidate pool, we have better access to
the breadth of talent in the market, while helping us to create a
more balanced representation of genders and ethnicities at all
levels of our business, including graduates, interns and
apprentices.
Under the Companies Act 2006 (the Companies Act), we are required to report on the gender diversity of our employees, our ‘senior managers’ and our Board.
The gender diversity of our employees and our Board is shown above. ‘Senior managers’ is defined by the Companies Act, as anyone who has responsibility for
planning, directing or controlling the activities of the Company, or a strategically significant part of the Company, and must include the number of persons of each
sex who were the directors of the undertakings included in the consolidation. Where such persons hold multiple directorships across the Group they are only
counted once. For this purpose, ‘senior managers’ includes our GEC members (excluding those on the Board), our GEC direct reports and our ‘Other senior
management’ from the chart above. On this basis, we have 476 senior managers (306 men, 170 women).
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Employee profile ethnic diversity
%
90.0%
10.0%
81.9%
4.2%
0.0%
2.8%
11.1%
44.7%
7.2%
1.6%
1.5%
45.0%
¢ White ¢ Undisclosed ¢ Asian ¢ Black ¢ Minority ethnic
We are committed to gender diversity at M&G with our target
of 40% of women in senior leadership positions at M&G by the
end of 2025. Due to structural changes to better align the
business for growth, women now make up 36% of this group, a
reduction of 1% since last year. We have appointed a number
of senior women in 2024, including Shawn Gamble who has
joined our executive committee as Chief Risk and Compliance
Officer. Our target is part of our performance scorecard, and is
tied to leadership performance compensation for the Group
Executive Committee (GEC) and their direct reports. Our
progress is regularly reviewed by M&G’s GEC, Board of
Directors and Remuneration Committee.
Additionally, we are showing positive improvement in building
diversity in the broader talent pipeline with 56% of GEC direct
reports (GEC-1) leadership teams (5 of 9) already having
achieved or exceeded our 40% target and 61% of GEC-2 teams
(33 of 54) achieving or exceeding 40%. Through continued
commitment and focus, we aim to reach our goal of 40%
women in senior leadership positions at M&G by the end of
2025.
Our ethnic diversity reporting includes a separate category of
‘undisclosed’. To support our evolution to more granular
reporting, we have taken a number of measures over the past
two years to improve our data accuracy and enhance our
definition of diversity, reporting capabilities and
competitiveness in attracting a diverse talent pool.
Our ethnicity percentage for GEC and GEC direct reports has
decreased slightly to 6.9% at the end of 2024 from 7.4% at the
end of 2023. However this still represents an increase of almost
5% from our 2019 baseline of 2% (excluding undisclosed).
The Board remains fully committed to continuing to increase
diversity at M&G by attracting the broadest range of leaders.
We recognise that we need more time to achieve our ambitious
target of 20% minority ethnic diversity within senior leadership
by the end of 2025. We have several initiatives in place to
enhance the overall ethnic diversity of our talent pipeline,
including increasing our use of job boards targeting diverse
candidates, such as Black Women in Asset Management and
Black Professionals UK. We are also building our succession
pipeline with a greater focus on the broader diversity of
colleagues joining our early careers schemes, including interns,
graduates and apprentices.
Early career hires in 2024
17
20
Apprentices
41% women – 42% Black,
Asian or Minority ethnic
Graduates
55% women – 35%
i Black,
Asian or Minority ethnic
30
Interns
47% women – 50% Black,
Asian or Minority ethnic
i 40% did not declare ethnicity at onboarding
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Board
GEC and
GEC Direct
Reports
All other
employees
Our effective risk management approach protects our business as we deliver
on our strategy
The external environment, driven by geopolitical events and
continued economic uncertainty, underlines the importance of
effective risk management. The Risk and Compliance function
continues to support the business in the delivery of the
strategy through oversight of informed risk taking while
proactively managing the associated risks. We do so by
applying our Risk Management Framework and the ‘three lines
of defence’ model.
Risk management framework
As part of our business, we take on risk on behalf of our
customers, clients and shareholders. We selectively take risks
if they are adequately rewarded, and can be appropriately
quantified and managed. In this way, we safeguard our ability
to meet client commitments, comply with regulations and
protect our reputation.
Our Risk Management Framework is designed to manage risk
within agreed appetite levels, which are set by the Board,
aligned to delivering our strategy and creating long-term value
for customers, clients and shareholders.
Our comprehensive approach to risk management includes
identifying, measuring, managing, monitoring and reporting
current and emerging risks - the Risk Management Cycle – and
is supported by our risk culture and strong risk governance.
Risk culture
The Board is responsible for instilling an appropriate risk
culture and setting the tone from the top through establishing
our purpose, behaviours and values. Working together with
management, the Board oversees and promotes risk
management by emphasising and embedding the importance
of balancing risk with profitability and growth in decision-
making. It also oversees key internal control processes and
ensures compliance with regulatory requirements.
Our Risk Management Framework and internal control systems
are based on the ‘three lines of defence’ model. First line
business and support functions identify and manage risks and
are overseen by the second line Risk and Compliance function.
The second line is independent of the first line, defines the
overall risk framework by which we manage risk and provides
oversight, advice and challenge to the first line. The third line
Internal Audit function is empowered by the Audit Committee
to audit the design and operating effectiveness of our system
of internal controls, including governance, risk management
and control processes.
Our risk framework and ‘three lines of defence’ model
Board
Risk Committee
First line of defence
(Business and support functions)
Second line of defence
(Risk and compliance)
Third line of defence
(Internal Audit)
Risk identification and management:
– Identify, own, manage and report
risks
– Own specific risk and compliance
policies
– Execute Business Plan and strategy
– Establish and maintain controls
– Instil conduct requirements and
individual monitoring
– Stress and scenario modelling
– Operate within systems and controls
– Ongoing self-assessment of control
environment effectiveness
Oversight, advice and challenge:
– Own risk and compliance framework
– Stress and scenario setting,
responsible for oversight
– Give proactive and reactive advice and
guidance
– Monitor risk and compliance and
assurance activities
– Report on risk and compliance
– Strategy and approach for regulatory
engagement
Independent assurance:
– Independent assurance of first and
second lines of defence
– Independent thematic reviews
– Risk and controls assessment
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Our approach to risk culture requires colleagues to take
personal responsibility for identifying, assessing, managing and
reporting risk. In 2024 we launched our ‘colleague behaviours
for risk and compliance’, articulating what good behaviour
looks like from both the first and second lines, with the aim of
achieving better outcomes and a more collaborative approach
to risk management. Our colleagues are expected to work
together to do the right thing for our customers, clients, wider
stakeholders and our business. All colleagues have risk
management accountabilities as part of their core objectives.
Governance
The Risk Committee is responsible for assisting the Board in
overseeing risk.
The Audit Committee assists the Board in meeting its
responsibilities for the integrity of our financial reporting,
including the effectiveness of our Risk Management
Framework and internal control systems.
The Remuneration Committee ensures that our compensation
structures place appropriate weight on colleagues adopting
our behaviours and risk culture to align with our long-term
success.
Risk appetite and limits
The Board is responsible for the overall risk appetite of the
Group. Risk appetite is the level and type of risk we are willing
to accept in pursuing our business objectives. Our risk appetite
statements and limits, specify our risk appetite and tolerance to
take on risk. We have established aggregate risk appetite
statements and limits for capital, liquidity and dividend volatility.
Our capital risk appetite is supported by a solvency intervention
ladder, which sets out management actions to consider or
implement at different levels of regulatory solvency.
We assess our ability to stay within our risk appetite during the
annual business planning process, and monitor and manage
our actual position regularly throughout the year.
Prescribed indicators inform us whether a risk may move out of
appetite and, together with limit utilisation where relevant, this
is a core element of our risk reporting to our Board and
Executive Risk Committees with appropriate management
actions.
Risk and capital management
Our Group Own Risk and Solvency Assessment (ORSA) is built
around risk management, strategy and business planning and
capital management. It covers our processes and procedures
to identify, measure, manage, monitor and report short-term
and long-term risks and assess the adequacy of our solvency
position.
The Group ORSA process is supported by subsidiary ORSA
processes for our Solvency II entities and Internal Capital
Adequacy and Risk Assessment (ICARA) processes for our
investment firm entities.
Risk management for technology migrations
In 2024, the business has undertaken a series of
technology migrations to simplify and optimise our
technology estate as part of our previously announced
transformation programme. Risk & Compliance perform a
key role in the migrations through the provision of
oversight and advice during the programme lifecycle.
We work with the business during the planning and testing
phase and provide an independent assessment and
opinion to relevant governance bodies as part of ‘go/no-go’
decision making.
The key focus areas of our assessment are:
– Technical readiness
– Testing and defect resolution
– Operational readiness and associated risk assessment
– Capacity and service performance
– Contingency
We may identify actions that are required to be
implemented pre or post go-live. These actions will be
owned by the business and tracked to closure.
Risk management and internal control
effectiveness
The Risk and Audit Committees have considered the outcome
of the annual assessment of risk management and internal
control effectiveness for 2024. The assessment is performed
for each business area by the first line, with an independent
second line opinion. It is driven by Risk and Control Self
Assessments (RCSAs) conducted over the year, along with
consideration of issues; notifiable events; compliance with
policy requirements; risk appetite assessment; and regulatory
feedback.
The business area assessments are aggregated to provide a
material subsidiary and an overall M&G plc group-wide
assessment. Internal Audit also provide an independent
assessment of the overall control environment.
The 2024 assessment recognises positive progress made
across M&G plc in building on the risk and control foundations
previously put in place, but also acknowledges that
implementation work identified in prior years needs to continue
into 2025. Management attention and an additional reporting
cycle is therefore still required to further embed the framework,
including driving further consistency in group-wide Key Control
Assessments across the business. The nature of financial crime
threats are evolving and there are continuing rigorous
regulatory expectations. In 2024 a dedicated Financial Crime
programme has been set up to strengthen, mature and
optimise our financial crime framework, processes and
controls, as well as implement an enhanced target operating
model.
The Risk and Audit Committees at M&G plc Group and
subsidiary level collectively monitor the timeliness with which
outstanding actions and embedding plans are completed.
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45
1 Business environment and market forces
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
Changing customer and client
preferences, together with
economic and political
conditions, could adversely
impact our performance against
our strategy.
Economic factors may impact
product demand and our ability to
generate an appropriate return.
Increased geopolitical risks and
conflicts, and policy uncertainty,
may impact our products,
investments and operating model.
Our reliance on PruFund for our
inflows in our advice business and
our intermediated channel for
sales heighten our exposure to
changing economic conditions
and client preferences.
Our strategic planning is
overseen by the Risk and
Compliance function and the
Board, and considers the
potential impact of the wider
business environment and
economy.
In 2024 we announced further
operational simplification of the
business with the merger of the
Life and Wealth segments.
Through this change we will
better focus our efforts to serve
the UK retail market, complement
PruFund with life solutions,
reduce duplication and improve
efficiency.
We have re-entered the BPA
market with a number of
transactions to support Defined
Benefit Schemes with
differentiated solutions. This
strategy supports our growth and
diversification from PruFund.
Our risk exposure to business
environment and market forces is
expected to increase as we build
scale in selected markets, while
managing risks arising from the
ongoing geopolitical conflicts and
uncertainty for the global
economy and financial markets.
The lead EU countries are
experiencing political instability
and economic slowdown, while
US tariffs with respective
retaliatory actions may impact
global economic growth and
possibly inflation. Within the UK
market, there are ongoing fiscal
and legislative risks. Legislative
risks include potential changes in
legislation resulting from the
Government’s stated intent to
pursue leasehold reform, which
could adversely impact our senior
and junior notes backed by
residual ground rents.
The evolving asset management
market places competitive
pressure on fees, requiring
continued focus on delivering
good customer outcomes and
assessing target markets.
Increased
Key
Maintain our financial strength
Simplify our business
Deliver profitable growth
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46
2 Sustainability and ESG
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
A failure to address and embed
sustainability considerations
within our strategy, products,
operating model, and
communication approach could
adversely impact on our financial
performance, reputation and
future growth.
We consider and act upon a
broad range of issues including
those concerning greenwashing,
climate and nature impact,
diversity and inclusion, and
corporate governance.
We consider ESG Risk in terms of
sustainability, or by how our
business impacts on the planet
and society. We also consider the
impact of ESG factors on our
organisation, and our ability to
meet a range of key stakeholder
expectations.
Our Group sustainability
framework sets a clear group-
wide direction across M&G’s
businesses. This is supported by
M&G plc’s ESG Risk Policy which
sets out the key requirements for
the management of ESG Risk on
an ongoing basis, supporting the
delivery of M&G plc’s strategic
plans and objectives, in a manner
consistent with M&G plc’s Risk
Management Framework (RMF),
Non-Financial Risk Appetite and
Key Risk Indicators.
We consider ESG risks in our key
strategic decisions, regular risk
reporting and Board risk
assessment papers. We integrate
climate change risk into our
scenario analysis process, with
both top down and bottom up
considerations, over a range of
time horizons.
The importance of ESG factors to
the organisation is expected to
continue as the physical impacts
of climate change accelerate,
nature risks become more
prominent and new risks emerge.
Regular assessment of ESG risk
and review of the risk
management activities will be
required to identify any
enhancements necessary to allow
the business to manage these
risks appropriately.
Neutral
3 Investment
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
A failure to deliver against fund
mandate or client investment
objectives (including sustained
underperformance of funds), to
maintain risk profiles that are
consistent with our clients’
expectations, or to ensure that
fund liquidity profiles are
appropriate may all lead to poor
client outcomes and result in
fund outflows.
If these risks materialise for our
funds or a range of funds, it may
impact our profitability, reputation
and growth plans.
Our fund managers are
accountable for the performance
of the funds they manage, and
management of the risks within
the funds.
Independent Investment Risk and
Performance teams oversee fund
performance, fund liquidity and
investment risks. Such activities
feed into established oversight
and escalation forums to identify,
measure and oversee investment
performance, investment risk and
fund liquidity risks.
Our investment risk exposure is
expected to increase due to
ongoing geopolitical and
economic instability in many parts
of the world, including more
recent US tariff actions. Such
uncertainties increase investment
risk which is driven by market
targets, with investment
performance measured against
benchmarks and peers. Any
unforeseen economic downturns
or escalation in regional conflicts
could result in repricing of
markets. Exposures will be
managed within our existing
control environment.
Increased
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4 Credit
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
We are exposed to the risk that a
counterparty to a financial
instrument, banking transaction
or reinsurance contract fails to
discharge an obligation resulting
in a financial loss to us.
Our primary exposure to solvency
is from the change in the value of
invested assets and collateral
arising from credit spread
widening or credit rating
downgrades.
We also have exposure to credit
risk through trading, banking or
reinsurance activities related to
the risk that the counterparty fails
to meet their obligations.
Our Credit Risk Policy sets
standards for assessing,
measuring and managing credit
risk, with oversight from a
dedicated independent team in
our Risk and Compliance function.
We set and regularly review limits
for individual counterparties,
individual issuers, sectors and
aggregate credit quality, and
monitor exposures against these
limits.
Where appropriate, we seek to
collateralise transactions to
mitigate credit risk including
derivatives, securities lending,
reverse repurchase agreements
and reinsurance transactions. We
also manage and control
reinsurance treaties to enable
effective risk transfer in line with
our Reinsurance Policy.
Our credit risk is impacted by our
bulk purchase annuity growth as
well as ongoing economic and
geopolitical uncertainty that may
trigger volatile markets. Negative
market developments or industry
events could impact our credit
portfolio and counterparty
exposures. Exposures will be
managed within our existing
control environment in line with
our Credit Risk Policy.
Neutral
5 Market
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
We are exposed to the risk of
loss or adverse change in the
financial health of our business
resulting, directly or indirectly,
from fluctuations in the level or
volatility of market prices of
assets, currencies, liabilities and
financial instruments.
Significant market fluctuations
could have material adverse effects
on our revenues and returns.
Material falls in interest rates may
increase the amount we need to
set aside to meet our future
obligations.
Exchange rate movements could
impact valuations, fee and
investment income denominated
in foreign currencies.
Material increases in inflation may
increase our cost base and the
amount we need to set aside to
meet future obligations,
negatively impacting profitability.
Our market risk appetite is set
and monitored to limit our
exposure to key market risks, and
we have prescribed limits on the
seed capital provided for new
funds.
Where appropriate, and subject
to risk limits and procedures, we
use derivatives for risk reduction,
to hedge equities, interest rates
and currency risks, for example.
We review regularly our hedging
and investment strategies,
including asset-liability matching,
informed by stress testing.
We have procedures to respond
to significant market events and
disruptions, bringing together
colleagues from across M&G to
provide enhanced monitoring and
decision-making capability.
Our market risk exposure is
expected to remain broadly
unchanged over the near term as
the run-off of risk from existing
insurance business is offset by
expected volumes of new
business, particularly PruFund
new business. The outlook
however remains uncertain due to
ongoing geopolitical conflicts and
negative economic trends,
including uncertain interest rate
and inflation pathways. Our
solvency buffers offer significant
protection against market risks.
Neutral
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6 Corporate liquidity
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
We are exposed to the risk that
we do not have, or are unable to
generate, sufficient cash
resources to meet our
obligations, such as claims,
creditors, debt interest and
collateral calls, as they fall due.
Our liquidity risk appetite is set so
that we maintain adequate liquid
resources in the normal course of
events and under a range of
severe but plausible stress
scenarios. Our liquidity position is
regularly monitored and stress
tested. Our businesses have
detailed liquidity contingency
funding plans in place to manage
a liquidity crisis.
Liquidity, cash and collateral are
managed by the Group Treasury
function, which holds liquid, high
grade assets and has access to
external funding.
Our corporate liquidity risk
exposure is expected to remain
stable. Corporate liquidity is
driven by subsidiary dividend
payments and intercompany
settlement and is therefore
dependent on the successful
delivery of our Business Plan.
Neutral
7 Insurance
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
We are exposed to the risk of
loss or of adverse change in the
financial situation of our
business, or that of our
customers, resulting from
changes in the level, trend, or
volatility of mortality; longevity;
morbidity; persistency; expense
and margin pricing experience.
We make assumptions regarding
the life expectancy (longevity) of
our customers, the frequency at
which they lapse (persistency)
and the level of expenses that
may be incurred in running the
business. These assumptions
determine the amount we need to
set aside to pay policyholders and
cover our expenses. Unexpected
changes to these assumptions
could have a material adverse
impact on both our profitability
and solvency. Longevity risk is our
most material insurance risk and
mainly arises from our large
annuity book.
We conduct annual reviews of
longevity and other assumptions
such as persistency and
expenses, which are supported
by detailed assessments of actual
experience. We have a team of
specialists undertaking longevity
research.
We perform regular stress and
scenario testing to understand
the size of our insurance risk
exposures.
We have undertaken longevity
risk transfer transactions, where
attractive financial terms are
available from suitable market
participants.
Our insurance risk exposure is
expected to increase at a
managed level over the near term
due to our growth strategy.
Exposures will be managed within
our existing control environment,
including appropriate controls in
pricing and reserving processes.
The uncertain economic outlook
could also have implications for
our insurance risk exposures, in
particular expense and
persistency risk.
Increased
Key
Maintain our financial strength
Simplify our business
Deliver profitable growth
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8 Operational
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
A material failure or operational
disruption in the processes and
controls supporting our
activities, including that of our
third-party suppliers or our
technology, could result in poor
client outcomes, reputational
damage, increased costs and
regulatory censure.
Our dependence on technology
means the unavailability of key
hardware or software, inadequate
information security
arrangements and ineffective use
of digital solutions could impact
our ability to operate effectively.
Additionally, serious failings in the
delivery, or persistent under
performance by our third-party
suppliers, could impact our client
service delivery.
Our Risk Management
Framework defines our approach
to managing operational risks and
associated controls, including
information technology, data and
outsourcing arrangements.
We have a Data Policy that sets
out the principles and
requirements on the use of data
across the organisation.
We apply business continuity and
crisis management practices to
manage Important Business
Services and Critical Shared
Services. Strategies are then
designed, implemented, and
tested to manage the risk of
intolerable harm under ‘Severe,
but plausible’ scenarios.
We have an Information
Technology Risk Policy in place to
manage technology risks. We are
enhancing the existing third-party
risk management policy
framework which incorporates
the selection, on-boarding,
ongoing management and
termination of third parties.
We recognize the potential risks
of artificial intelligence (AI) and
adopt it in a considered manner,
supported by an AI framework,
established governance, and
mandatory training.
We have seen significant
improvement in our control
environment maturity over recent
years. This includes a shift
towards focusing more on the
quality of assessments and
reporting and how these are
connected to provide confidence
that we are in control of our risks
as well as what has gone wrong.
This gives us the strong
foundations needed to further
enhance our risk and control
environment and ensure that
operational risks introduced as a
result of our growth strategy are
appropriately managed.
Neutral
Key
Maintain our financial strength
Simplify our business
Deliver profitable growth
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9 Change
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
Failure to deliver on our
significant change programmes
within cost and capacity
constraints may impact our
business model and ability to
deliver against our Business Plan
and strategy.
Our Group Executive Committee
advises the Group CEO on
prioritisation decisions to ensure
focus is on activities that help to
achieve our Business Plan, that
they are delivered in a controlled
fashion and support compliance
with new regulatory
requirements.
The Change Delivery Board,
chaired by a Group Executive
Committee Member, monitors
and reports on a suite of metrics
measuring the delivery progress,
costs and benefits of our
transformation programmes. The
Project Standard, to which all
functions must follow and attest
compliance, includes reporting
and escalation of risks to
management and the Board.
We continue to manage our
change risk related to our
previously announced
transformation programme,
however this will be more limited
than in previous years reflecting
the progression of the
programme. Our change risk
profile will be driven by the
delivery against our strategic
pillars and by regulatory change
in 2025.
Neutral
10 People
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
The success of our operations is
highly dependent on our ability
to attract, retain and develop
highly qualified people with the
right mix of skills and
behaviours, to support our
positive culture and growth.
As we continue to implement our
strategy, our people risk is
heightened in areas including our
pay practices, workloads and
morale, the conduct of colleagues
or groups of colleagues, and
industrial relations.
Our people approach is designed
to align colleague objectives and
remuneration to our business
strategy and culture. It includes
policies and standards for
diversity and inclusion, employee
relations, remuneration, talent,
resourcing, performance and
learning.
Our management and Board
receive regular reporting on key
issues and developments,
including succession planning,
industrial relations, pay, culture
and diversity. Key people metrics
are measured and monitored and
have remained stable through the
period.
We conduct colleague surveys to
better understand their views and
use the survey findings to
improve their experience.
We expect the nature of our
people risk to remain stable in
2025. The impacts on colleagues
of our transformation
programmes and our changes to
hybrid working are being
monitored and managed.
Neutral
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11 Regulatory
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
We are exposed to the risk from
potential failure to meet
regulatory requirements or to
adequately consider regulatory
expectations, standards or
principles.
We operate in a highly regulated
environment, interact with
regulators globally, and are
subject to a number of regulatory
initiatives due to changing
regulatory norms. There are wide-
ranging consequences of
regulatory non-compliance,
including client detriment,
reputational damage, fines and
restrictions on operations or
products.
Accountability for compliance
with regulatory and legal
requirements sits with our
management. Our Risk and
Compliance function provides
guidance to, and oversight of, the
business in relation to regulatory
compliance matters, including
Financial Crime and carries out
assurance activities to assess the
adequacy of systems and controls
designed to comply with
regulations and legislation.
We monitor regulatory
developments and consultations
and engage with government
policy teams, industry bodies and
regulators.
Our regulatory footprint will
increase in complexity driven by
both internal growth focused on
new markets and products; and
externally driven regulatory
change. The evolving political and
regulatory agenda may lead to
further divergence of rules
between the UK and Europe as
the UK government pursues an
agenda of international
competitiveness.
We remain focused on adapting
to meet the evolving expectations
of our regulators, including on
consumer duty and operational
resilience.
We continue to invest in our
teams across the first and second
line to ensure that they continue
to evolve and enable effective risk
and internal control management
and oversight.
Neutral
12 Reputational
Principal risk
Management
and mitigation
Outlook
Strategic
pillars
Change
from last year
Our reputation is the sum of our
stakeholders’ perceptions,
which are shaped by the nature
of their expectations and our
ability to meet them. There is a
risk that through our activities,
behaviours or communications,
we fail to meet stakeholder
expectations and adversely
impact trust and reputation in
M&G or our brands.
Failure to effectively manage
reputational risk could result in
poor stakeholder outcomes and
impact our revenues and cost
base, our ability to attract and
retain the best staff and potential
regulatory intervention or action.
Our Reputational Risk
Management framework and
dedicated Reputational Risk team
monitor and report on
reputational risks, using a suite of
metrics to monitor stakeholder
groups.
Our Executive Reputational Risk
Forum enables senior
management to oversee
reputational risk management
across the company and manage
group-wide considerations.
We have embedded Reputational
Risk Champions throughout our
business. They perform an active
role in identifying and monitoring
key reputational risks and drivers.
Our reputational risks will
continue to be driven by
geopolitical uncertainty,
sustainability, meeting the
evolving needs of our customers,
clients and distributors and
ensuring we continue to meet the
expectations of our regulators.
Risks will be managed within our
existing control environment
including meeting the evolving
expectations of our stakeholders
on all material aspects of our
business.
Neutral
Key
Maintain our financial strength
Simplify our business
Deliver profitable growth
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13 Conduct
Principal risk
Management and mitigation
Outlook
Strategic
pillars
Change
from last year
There is a risk that through the
acts or omissions of individuals
within M&G, we deliver poor
outcomes for customers, clients,
colleagues, or other
stakeholders, or that we affect
market integrity.
Observing the proper standards
of conduct in all its forms is
essential at M&G. Due to the
broad nature of conduct risk,
management is pervasive and
reflected in policy and processes
including but not limited to: our
Code of Conduct and our Conflict
of Interest, Market Abuse and
Investment Communications
Recording policies.
Our Asset Management business
has a Conduct Management
Framework to provide a
consistent process for conduct
management and our Life and
Asset Management businesses
have a mature suite of customer
outcome management
information in place in support of
Consumer Duty.
The FCA is undertaking a cross-
sector review of Consumer Duty
board reports from FCA regulated
firms to identify, and share
publicly, good practices and areas
for improvement. This will afford
an opportunity to further refine
the now well-established
Consumer Duty programme
within M&G.
Neutral
Emerging risks
Emerging risks are potentially significant newly developing or evolving risks, generally characterised by a high degree of
uncertainty - making them difficult to quantify.
An annual assessment process identifies our emerging risks, and assesses those that will be subject to management and
monitoring. The assessment collates input from subject matter experts across our first and second lines of defence, as well as
external perspectives.
We review the development of emerging risks during the year to update our assessment. We also review our preparedness
should a risk emerge, incorporating any material developments since the annual assessment.
The emerging risks reviewed by the Executive Risk Committee and the Board Risk Committee during the year include the
following:
– Political: Geopolitical conflicts, protectionism
– Economic: Global recession, stagflation
– Societal: Failure of critical infrastructure
– Technological: Artificial intelligence, cyber risk
– Legal: Legislation changes
– Environmental: Climate change
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M&G's non-financial and sustainability information statement, produced
to comply with sections 414CA and 414CB of the Companies Act 2006
The table below sets out our approach towards the key matters from the legislation, with a guide to where further disclosures are
located to help our stakeholders understand the impact of our activities. Our climate-related financial disclosures can be found in
the ‘Climate-related disclosures’ section of the report, with a mapping of the section’s contents to the requirements of section
414CB (2A) and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) provided on page 64.
Our Group Governance Framework sets out the general principles by which we conduct our business and ourselves. It is
supported by a suite of policies which define our approach to governance and internal controls and also help us meet regulatory
requirements across the mandated non-financial reporting areas. These undergo an annual refresh and compliance exercise to
ensure they remain relevant and appropriate. Similarly our investment-related policies are subject to review periodically as
required.
Reporting
requirements
Approach
Supporting disclosures
in Annual Report
Environment
Scientific evidence indicates that climate change is one of the biggest
threats to our planet. Financing the climate transition is a pillar of our new
Group sustainability framework, alongside nature as an important but
developing priority theme for us, recognising the scale of the global
biodiversity crisis. Details of our approach can be found on page 32.
– Climate-related disclosures
(incl. SECR) Pages 64-81
Our employees
We understand that exceptional people need the right environment in
which to thrive. Our ambition is to create and sustain a safe, inclusive and
diverse culture where our colleagues enjoy each day and feel inspired to
do their best for our customers and clients, and the communities in which
we operate.
– Our colleagues Pages
40-43
Social matters
We seek to positively contribute to the societies we serve by promoting
financial confidence, enabling informed financial decision-making and
access to finance, as well as through social investments, such as
affordable housing, and our community investment programme. Our
ambition is reflected in the ‘Resilient societies’ theme of the Group
sustainability framework, with further information outlined on page 33.
– Our social commitment
Pages 60-63
Human rights
As an organisation, we do not tolerate any form of slavery, servitude,
forced or compulsory labour and human trafficking. Our influence also
extends to the companies and assets in which we invest. More details on
our approach can be found in our Modern Slavery Transparency
Statement available on our website.
– Human rights Page 83
Anti-bribery and
anti-corruption
matters
Addressing financial crime is integral to protecting and stimulating
economic growth as well as instilling confidence in consumers within the
financial services sector. We are committed to preventing, detecting and
where necessary, reporting instances of criminal conduct.
– Anti-bribery and anti-
corruption Page 82
– Risk Committee Report
Pages 110-111
For details on Business model
see pages 6-8
For Non-Financial KPIs see Inside
Front Cover
For details on Principal risks
see pages 46-53
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Sustainability at M&G
Non-financial and sustainability information statement
54
A selection of policies and documents that guide our approach to each of the key matters from the legislation and support delivery
of related activity are summarised below. These comprise both policies under the Group Governance Framework umbrella, which
regulate how our business operates, and policies and statements which frame our responsible business and investing approach.
Additionally, the table presents which elements of the value chain may be considered for each policy or framework
i. The value
chain labels reflect the scope of application for each policy or standard. The ‘Investments’ label covers assets managed and
administered through both our Asset Management and Life (primarily asset owner) segments, unless otherwise stated. Certain
policies are internal standards and guidelines which are not published externally.
Policies, frameworks and
statements guiding our approach
Reporting
requirements
Value chain
ESG Risk Policy
Environment Policy
People policies
Employee Relations Policy
Diversity and Inclusion Policy
Community Investment Policy
Whistleblowing Policy
Health and Safety Policy
Code of Conduct
Regulatory Compliance Risk Policy
Conflicts of Interest Policy
Financial Crime Policy
Modern Slavery Transparency Statement
M&G Investments Voting Policy
PAC Voting Standard
M&G Investments ESG Integration and Sustainable Investing Policy
ii
PAC ESG Investment Policy
Engagement policies (M&G Investments Engagement Policy and PAC
Shareholder Engagement Policy)
M&G plc’s position on thermal coal, supported by M&G Investments
Thermal Coal Investment Policy
ii and PAC's thermal coal approach
Key
Operations
Supply chain
Investments
M&G's direct business operations
M&G's procurement/supplier
activities
Assets managed and administered through
our Asset Management and Life (primarily
asset owner) segments
i
Application of policies and frameworks listed may vary for newly acquired businesses where integration with wider group frameworks is ongoing.
ii
Policy scope excludes M&G Investments Southern Africa and responsAbility Investments AG.
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Our governance framework establishes oversight of our
sustainability-related risks and opportunities
Our Chief Financial Officer (CFO) acts as executive sponsor for sustainability across the Group. Our Chief Sustainability Officer
(CSO) supports the CFO by leading on sustainability strategy, policy, commitments and governance. The CSO also chairs the
Executive Sustainability Committee, where updates on the strategy and other related topics are presented, as well as receiving
updates on sustainability activity from the business units.
During the year, the CSO has led efforts to strengthen our Group-wide sustainability governance, including:
– Establishing thematic working groups to implement and oversee aspects of the Group sustainability strategy, manage
associated risks, and enhance oversight of business unit activities.
– Updating our Sustainability Communications Framework, which covers oversight and governance requirements for
sustainability-related communications across the Group.
– Commencing work on reviewing our sustainability governance model to support effective delivery against our strategy.
Consideration of sustainability within our investment activity is managed at the executive management level in our Asset
Management and Life segments. This comprises oversight of investment strategy, adherence to responsible investment policies,
progress against sustainability-related investment objectives, and climate strategy. Regulated entity boards and committees have
accountability and oversight of sustainability for the investments and products within their remit (including the With-Profits
Committee).
The diagram below presents a summary of the Group governance structure as it relates to sustainability. All terms of reference for
our Board-level governance committees are available on our website.
Board oversight
M&G plc Board
Ultimate responsibility for Group's sustainability strategy lies with M&G’s Board of Directors. The Board has delegated certain duties
and responsibilities related to climate change and sustainability to some of its committees.
Risk Committee
Responsible for overseeing and
advising the Board on the risk
exposures and profile of the
Group, including sustainability
risks
Remuneration Committee
Responsible for establishing,
approving and maintaining the
remuneration policies of the
Group
Nomination and
Governance Committee
Supports the Group’s strategy
through monitoring of the
Board’s overall composition,
balance of skills and succession
planning
Audit Committee
Responsible for
overseeing Group’s corporate
reporting which includes
sustainability-related
disclosures
Group Executive Committee
Advisory committee to the Group Chief Executive, with remit covering development and implementation of strategy. It is composed of executive
leaders responsible for business units and corporate functions.
Management’s role
Executive Risk Committee
Responsible for the consideration
and oversight of risk matters, policies and
risk appetite including those pertaining to
sustainability risks
Executive Sustainability Committee
Responsible for supporting the Group
Executive Committee and Board in providing
direction and oversight of the Group’s
sustainability-related activities. The
committee, chaired by the CSO, meets on a
monthly basis and includes membership
from the Asset Management
and Life segments, allowing
for representation and interconnectivity
across the wider business
Management Disclosure Committee
Responsible for the review and challenge of
external reporting which are of significance
to the Group including sustainability-related
disclosures, before submission to the Audit
Committee and/or Board for approval
Sustainability-focused working groups support delivery of our sustainability ambitions
across functions and business areas
Various firm-wide teams support in assessing, managing and reporting on sustainability risks, including
our Central Sustainability Office, Workplace Solutions, Finance, Risk and Compliance, People and Investment teams
Further details on climate-related governance arrangements can be found on page 73
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Sustainability governance
56
Reporting
Delegation
The table below summarises a selection of sustainability-related topics presented to Board governance forums in 2024.
Board /
Committee
Frequency of
sustainability updates
Sustainability matters covered in
the reporting year, inclusive of climate
Board
Updated formally at
least annually
– Received a briefing regarding sustainability governance best practice
covering board responsibilities and accountabilities
– Reviewed and approved Group’s updated sustainability framework (see
more details on page 31)
– Had oversight of ESG risk through the M&G plc business plan
– Attended a workshop on the sustainability landscape across the industry,
covering aspects such as positioning against peers and industry trends
Audit
Committee
As required, in line
with frequency of
external reporting and
emerging regulations
Reviewed Group-level TCFD and other external sustainability disclosures. Areas
of focus included:
– Environmental metrics methodology and judgements
– Scope and progress of assurance work for non-financial metrics
– Updates on the sustainability reporting landscape and upcoming regulation
Risk Committee
At least bi-annually
– ESG risk updates provided through the Top Risks report which includes
status against risk appetite
– The Chief Sustainability Officer provided an update on sustainability risk
and related plans
– Risk and Compliance updates on ESG risks through the Chief Risk and
Compliance Officer reports at least bi-annually
Nomination and
Governance
Committee
Annually
– Continued consideration of sustainability as part of Board composition and
skills matrix
Remuneration
Committee
Annually
– Reviewed and approved performance assessment against the sustainability
targets included in the incentive scorecard
Executive remuneration
Our Executive Directors’ reward structure is linked to core
performance management scorecards, which include
sustainability-related metrics.
Our executive LTIP arrangements (the M&G Performance
Share Plan) for 2024-2026 has an overall weighting to
sustainability-related targets set at 25%, evenly divided
between our operational emissions reductions, our gender
diversity target, and ethnicity diversity target. This allocation
has been set to 15% for the LTIP covering the 2025-2027 target
period, reflecting the gender and ethnicity targets only. While
the emissions-based measure will remain a part of the long-
term executive remuneration plans until 2026, it has not been
included for 2025-2027 period on the basis that good progress
has been made on operational emissions, and that investment-
related measures for future awards will be carefully considered
during 2025 following the update to our sustainability strategy.
Objectives and remuneration structures are reviewed annually
by the Remuneration Committee, including any sustainability-
related targets.
Find out more in the Directors'
Remuneration Report on pages 112-119
Risk management
Sustainability and ESG has been identified as a principal risk to
our business. It has the potential to impact our business,
including from a financial, operational, strategic and
reputational perspective.
Our ESG Risk Policy sets out the key requirements for the
management of ESG Risk on an ongoing basis, supporting the
delivery of M&G plc’s strategic plans and objectives. In
particular, the key requirements of the policy relate to the
identification, measurement, management, monitoring and
reporting of ESG risk.
Our ESG risk governance is based on a Three Lines of Defence
model, consistent with the wider Group risk management
approach. The first line is responsible for the identification and
management of risk on a day-to-day basis. The second line Risk
and Compliance functions provide risk advice, oversight and
challenge. The third line provides independent assurance over
the design and effectiveness of internal controls, including
those over sustainability-related policies and processes.
Find out more on Risk management on pages 44-45
and Climate risks on pages 71-72
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As an asset manager and owner we continue to strengthen our integration
of sustainability, including stewardship and product development
Our Asset Management business manages a significant share
of the assets of our Life business (see diagram below). This
integrated business model supports alignment from a
sustainability perspective, including commitments, policies and
integration practices, and allows us to pursue opportunities
using our asset management expertise, with the long-term
capital of our asset owner. Both businesses continue to
strengthen the integration of ESG considerations into their
processes.
Asset Manager
During 2024, M&G Investments launched their updated ESG
Integration & Sustainable Investment Policy – providing greater
clarity and transparency on the approaches and resources in
place to embed sustainability considerations into the
investment process.
ESG integration
Given the breadth of asset classes we invest in, our investment
managers tailor their approach to ESG integration taking into
account the specific portfolio construction, research and
investment processes used by each team. We seek to integrate
ESG across all investments as far as we are able and where it is
financially material. We are also applying a sustainable
investing lens to portfolio construction in a number of our
funds, offering a range of strategies which can cater for clients’
financial objectives alongside their sustainability preferences.
Enhanced frameworks and tools
We have continued to develop and leverage sustainability
frameworks to facilitate ESG integration and enable
sustainable investment approaches across the suite of product
categories offered in listed markets. Through a combination of
qualitative and quantitative analysis, investment teams are
equipped with in-depth, stock-specific insights relating to
financially material ESG factors to enable better investment
decision-making, and support execution against both financial
and sustainability-related objectives.
Stewardship
The long-term success of a company is supported by effective
investor stewardship, which in our view includes encouraging
high standards of corporate governance as well as integration
of sustainability considerations into a company’s strategy. Our
preference is to engage issuers rather than divest in order to
support and, where possible, accelerate the transition on key
ESG risks and improve their approach to meet customer and
stakeholder expectations.
Climate change and nature remain key top-down engagement
areas for us, and over 2024 we have continued to develop our
approach to both (see more on page 32). We also have an
active social engagement programme. In 2022, we published
our expectations on board diversity, and communicated these
to over 1,000 companies.
Since then, there has been clear improvement in our focus list,
with more than two-thirds of these companies increasing
female representation and just over half now fully meeting our
minimum expectations. In 2025, we plan to broaden our social
engagements to include additional aspects of human capital
management. For detailed information on our asset manager
engagement and voting activities see the annual M&G
Investments Stewardship report, which is available on our
website.
Evolving product offering
We have continued to work closely with our clients – engaging
to understand their preferences and priorities and seeking to
offer tailored solutions to meet their requirements.
Over 2024, we broadened our range of sustainable investing
options. For example, we launched a sustainable bond strategy
with our emerging markets impact manager responsAbility, the
M&G (Lux) responsAbility Sustainable Solutions Bond Fund,
classified as Article 9 under SFDR. This fund aims to drive
positive change in six key areas: better health, better work &
education, social inclusion, circular economy, environmental
solutions and climate action. During the reporting period, we
also closed our M&G Climate Solutions fund due to its small
size. At the same time, we launched the M&G (Lux) Nature and
Biodiversity Solutions Fund (Article 9 under SFDR), which
focuses on delivering solutions to the challenges of biodiversity
loss, climate change, and the degradation of nature.
Additionally, we continued to build out our Fixed Maturity Bond
Fund range, with four funds launched in 2024. Classified as
Article 8 under SFDR, these strategies seek to capture
opportunities present in credit markets while being suitable for
investors with sustainability preferences.
Note: Diagram excludes corporate assets of £1.9bn (2023: £2.3bn),
of which £0.9bn (2023: £1.0bn) is in Asset Management.
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Sustainability and investments
58
£158.9bn
Third party assets managed
(2023: £153.2bn)
£156.1bn
Life assets managed by our Asset
Management business
(2023: £160.3bn)
£29.0bn
Life assets not managed by our
Asset Management business
(2023: £27.7bn)
Asset Owner
As an asset owner, we integrate sustainability considerations
into key stages of our investment process. We aim to identify
both sustainability risks and opportunities, in order to enhance
investment returns for our customers. We consider the impact
of sustainability considerations on risk and return in our
strategic asset allocations, appoint investment managers who
have the skill and expertise to manage and engage on
investment mandates with sustainability criteria, and construct
our mandates to reflect our view of risks and opportunities.
Strategic asset allocation
We integrate sustainability considerations into our strategic
asset allocations by taking into account their effects on our risk
and return assumptions. This is so that, when we allocate
capital by asset class and investment jurisdiction, we have
considered as many investment opportunities and risks as
possible. For example, we carry out scenario analysis to better
understand our exposure to physical climate risks via the real
estate investments in our multi-asset portfolios.
Asset manager selection
From a sustainability perspective, we consider the purpose of
manager selection to be to identify an investment manager that
has the people, processes and expertise in place to meet the
requirements specified in the investment mandate. To achieve
this, our selection process includes a comprehensive
assessment against sustainability-specific criteria, to enable an
appropriate review of the managers’ alignment with our
purpose, values and priorities.
We perform investment due diligence to assess managers’
ability to deliver the expected investment performance or
outcome for a fund over the long term. This is informed by our
bespoke Request for Proposal (RfP) process, which includes
detailed ESG investment-led questions. In turn, this is
supported by our ESG due diligence questionnaire, which aims
to assess a manager’s stance and approaches to key
sustainability issues and integration, and their alignment with
our ESG priorities and values.
Manager engagement
Once an investment manager has been selected and
onboarded, the Manager Oversight team conducts ongoing
due diligence reviews. This includes regular meetings and site
visits, with sustainability issues being a standing agenda item at
quarterly meetings.
At the issuer level, we have implemented a quarterly ESG
screening process to give appropriate review of broader ESG
issues and risks within our investment portfolios. This is
characterised by reviewing our holdings, where look-through is
available to us, and monitoring their exposures against ESG-
specific areas. Where appropriate, we will engage with
managers over any notable issues.
Although issuer engagements are executed by our asset
managers, we hold them accountable for the interactions they
have with investee companies, and engage with them to deliver
our desired results.
Overall, we expect engagement processes and actions to be
aligned with the PAC ESG Investment Policy, Shareholder
Engagement Policy and Voting Standard, as well as the agreed-
upon mandate. Should we feel that there is persistent
misalignment, we will escalate our engagement.
Engagement process
Among other things, our engagement approach includes
the following actions:
– Annual letter of priorities: we share an Annual Letter of
ESG Priorities with our asset managers, which
communicates our areas of ESG focus for the upcoming
year, and outlines the support we will require from the
asset managers in achieving our ESG ambitions and
goals.
– Effective monitoring and analysis: our asset managers
are expected to submit regular ESG due diligence,
engagement and voting templates, where applicable, to
provide an update on their stewardship activities and
approach to sustainability. These are reviewed and
assessed, with key takeaways escalated to appropriate
governance forums and action taken where necessary.
– Ad hoc engagement: where engagement activities
require further due diligence/escalation, changes have
occurred within the managers’ sustainability activities or
priorities that are a cause for concern or in response to
events, the ESG & Regulatory team will aim to discuss
with managers and assess whether further action should
be taken.
See more information in our annual PAC Stewardship
report, which is available on our website.
Propositional development
Since we launched PruFund Planet in 2021, clients have been
given the opportunity to access solutions that have
environmental and societal objectives combined with the same
smoothing mechanism and risk profiles as our other PruFund
propositions, such as PruFund Growth. The PruFund Planet
proposition is a family of five funds differentiated by risk level,
with an investment strategy and manager selection that
prioritises sustainability and positive impact.
We continue to use responsAbility’s impact investing
capabilities, expanding the number of strategies we invest in.
We believe these allocations are both diversifying to our
investment strategies and represent positive sustainability
outcomes. In addition, our Catalyst investment strategy,
backed by the With-Profits Fund, invests in early-stage assets
that contribute to a sustainable economy with three key
objectives: act to avoid harm, benefit stakeholders and
contribute to solutions.
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59
Creating inclusive, resilient and sustainable communities
We believe that being a socially-sustainable business isn’t just about responsible investing but demonstrating our commitment
to the communities in which we operate as well. Our work with communities aligns with our updated sustainability strategy and
underpins the Resilient societies theme of our new framework.
Through the pillars of our Resilient societies theme - ‘Promoting financial confidence’ and ‘Building communities’ - we are
committed to building better futures. We do this through giving people the skills and opportunities to become financially secure
and investing in essential needs for communities to have sustainable futures.
We support each of our offices to manage charitable activities using the framework in our Community Investment Policy to ensure
a consistent, business wide approach. We also work closely with charity partners to develop strong, sustainable programmes to
support their activities. Our community investment strategy and performance is reviewed by the Executive Committee annually.
M&G in the Community
Building better futures: creating inclusive and resilient communities
Financial confidence
Giving people skills and opportunities
to become financially secure
Building communities
Regenerating spaces and places that
help people and nature to thrive
Disaster and emergency response
Financial confidence
The Talent Foundry
M&G worked with the Talent Foundry to
co-create a series of programmes under
the Skills for Life banner. These provide
young people with practical guidance on
CV writing, interview techniques, and
money management, equipping them to
handle real-world financial
responsibilities like budgeting and
navigating student loans. For younger
students, the Enterprise Challenge links
maths to real-life scenarios,
encouraging financial capability and
teamwork.
In 2024, 6,559 young people took part
in a Skills for Life programme, all
attending schools with high levels of
deprivation.
M&G volunteers play a pivotal role, and
in 2024 colleagues donated 599 hours
of support. This involved offering
personalised CV reviews and
mentorship that boost students’
employability and provide valuable
career insights that many young people
from disadvantaged backgrounds do
not typically have access to.
Our programmes help to equip young
people in communities across the UK
with the confidence, skills, and
connections they need to pursue
ambitious futures.
In 2024,
6,559
young people took part in
a Skills for Life programme
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Building better futures
60
“
The experience for the students
to see a day in the life
of working in the square mile was
incredible. The professional
volunteers were such a big part
of this for the students.
They really looked up to
them, and the volunteers’ input
to projects and the students' ideas
were genuinely fantastic. Every
single student found it inspiring
and I cannot praise the day more.”
Teacher
The Reach Free School
Skills for Life
The Skills for Life programme is making a real difference for
young people in Middlesbrough and Rochdale by building their
confidence, skills, and awareness of career paths in a way that
fills a crucial gap for these underserved communities. Through
M&G’s commitment to fostering resilient communities, this
programme provides students with unique, practical experiences
that help them feel prepared for the future.
Over four interactive sessions, students in Middlesbrough and
Rochdale explore self-awareness, career options, and
professional skills. Volunteers from local industries guide
students in developing interview techniques, communication,
and financial skills through engaging activities and personal
stories. The impact of these experiences has been deeply
positive: 98% of students now feel more confident about their
futures and 97% see a clear pathway to an exciting career ahead.
Teachers in both regions have noticed significant
improvements in student behaviour, attendance, and
educational engagement. In Middlesbrough, several students
even secured placements with the Police and Fire Cadets, an
exciting step towards their career aspirations, and across
both areas teachers report reductions in suspensions, with
many citing the programme as being ‘life changing’.
Age UK
Now in its fifth year, M&G’s sole support
has enabled Age UK to help 7,810 older
people, respond to 31,820 enquiries to
Age UK’s Advice Line, as well as
distribute 7,000 'Looking after your
money' information guides to help older
people manage and protect their
finances.
Age UK's Building Resilience
programme aims to equip vulnerable,
older people with the tools, skills and
opportunities needed to build resilience
at difficult stages of their lives. The
holistic support offered includes in-
depth information and advice, support
and referrals to appropriate services
through Age UK’s Advice Line.
Jeanette, who is in her 70s, has several
health issues after suffering a stroke a
couple of years ago. She has been
struggling with the rising living and
energy costs which are a constant
source of worry to her, especially as the
cold weather can worsen her health.
Since Building
Resilience launched in 2020:
31,820
calls answered by Age UK’s Advice Line
Junior Achievement Europe
M&G’s support of the 10X Challenge has
enabled over 25,000 students to gain
first-hand entrepreneurial experience as
they created a business and entered
competitions along the way.
The 10X Challenge enterprise
programme and digital platform helps
young people develop financial
capability skills with a focus on
investment and longer-term saving, and
empowers teachers to be confident
about teaching financial capability. It is
run over four weeks and young people
use a £/€10 pledge to get their business
ideas off the ground. As a result of
M&G’s funding, 10X Challenge now
engages students in schools across
France, Germany, Italy, Poland, Spain
and the UK.
In 2024, 10X Challenge supported
25,061
students across Europe
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“
Without Age UK’s support
and advice I wouldn’t have
had a chance of getting Attendance
Allowance. I never thought in
a million years I'd get it. I’ve bought
myself a mobility scooter which
has changed everything.”
Jeanette
“
The best part of 10X is that
I learnt how to make a business,
made friends, gained confidence
and now I have something
to write on my future CV.”
Student
“
The best thing about taking part
in 10X was watching the students’
confidence grow, take more
ownership and responsibility.”
Teacher
Building communities
Habitat for Humanity GB
M&G’s partnership with Habitat for
Humanity GB focuses on providing safe
and decent housing globally by
repurposing empty spaces into homes
for vulnerable groups.
Through the Empty Spaces to Homes
initiative, vacant properties have been
transformed into homes that meet both
social and environmental needs. This
has been achieved by working with
cities, municipalities and stakeholders
across Europe. Since 2020, the
programme has used data to
understand the scale of the opportunity
presented by empty buildings; and
developed a coalition of experts to
design a toolkit to share this knowledge
more widely. Our partnership has
delivered 108 repurposed spaces
creating new homes across multiple
countries including Poland, Germany,
Ireland, and the UK.
108
spaces repurposed
in 10 countries over 4 years
The Tree Council
M&G’s partnership with The Tree
Council supports schools in urban areas
with high levels of deprivation and
nature-poor grounds. Over the last four
years, we have helped towards greening
1,030 school communities, and this has
enabled 380,000 students and teachers
to take part in the programme.
The Young Tree Champions Programme
is aligned with the National Curriculum
and our support aims to give young
people the skills and knowledge to help
tackle the climate and ecological crises.
Alongside pupil workshops and teacher
training, more than 56,000 trees have
been planted in schools across the UK.
Redwood Park Academy Special School
in Cosham, Portsmouth has been part of
the Young Tree Champions programme
since 2021.
Redwood Park transformed their
grounds for nature through planting
over 1000 trees, linking up a wildlife
corridor, helping to shield the school
from noise and air pollution, and
transforming the diversity of plant
species and invertebrates in the
grounds.
The school continues to grow their
ambitions and are looking to install a
community tree nursery to gift on
saplings to local schools and their
community.
380,000
students in 1,030 schools and
youth groups have taken part in
The Tree Council’s ‘Young Tree
Champions’ programme since 2020
Supporting communities in times of crisis
We feel it is our responsibility to respond to emergencies and make a meaningful contribution in the most appropriate and prompt
way and work with national and international charity partners to direct a targeted, humanitarian response.
In response to the flooding in Spain and Poland in 2024 we made emergency corporate donations to support the relief efforts.
M&G’s donation to the Spanish Red Cross helped to distribute basic aid including food, water, blankets, and hygiene kits, and
provided first aid and psychosocial support. An emergency childcare team was sent to shelters, to support affected families. In
Poland, our support of Habitat for Humanity helped to repair damaged homes, and provide essential items such as furniture and
the equipment to dry out buildings.
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“
Nationally, there’s a real crisis
within the social housing sector.
Habitat for Humanity’s
Empty Spaces to Home programme
has been a game changer for
Barking and Dagenham Council
and for our care leavers.
It's allowed us to develop spaces
which we have within the
community, which are otherwise
not being put to use at all…
It can’t be underestimated how
much this project is helping
to transform lives. It’s allowing
young people to have dignity,
security and safety
in their accommodation”
Andrew Borwick-Fox
Children’s Care and Support
Services Manager, London Borough
of Barking and Dagenham
“
We are super proud of what
we have achieved, this project
means a lot to me, the school,
the community, and the nature
with in it.”
Ed Bond
Lead Teacher at Redwood Park School
Colleague engagement
In 2024, 1,787 M&G colleagues dedicated 12,031 hours to
supporting charities with activities from skills-based
volunteering such as mentoring, to tree planting, beach
cleaning and refurbishment of housing for vulnerable groups.
Working together with community champions across our
offices, we direct funding and volunteering through our local
community grants, giving our colleagues ownership and the
ability to choose where to focus their support.
Through their support of The Talent Foundry’s Skills for Life
programme, M&G volunteers provide professional insights and
employability skills development. This helps schools to offer
quality careers provisions to their students.
“
It was so rewarding and an opportunity
to take a step back and realise how important
it is to ensure we’re preparing the younger
generations for work.”
Claire F
Volunteer
In our ongoing efforts to provide support to people transitioning
into our Empty Space transformations, M&G supports Habitat for
Humanity’s Upcycling Workshop. With a focus on circular
economy, by upcycling items destined for landfill we are diverting
them and giving them a new lease of life, transforming them into
high quality, repaired items. These items are used to furnish our
Empty Spaces to Homes properties, helping create welcoming
homes for those in need. M&G colleagues contributed 222 hours to
upcycle furniture and combat furniture poverty in 2024.
M&G in the Community Fund
Our M&G in the Community Fund is an annual grant
programme that supports local charities and projects. The
Committee includes colleagues across M&G locations and,
since its launch in September 2019, has awarded 489
charitable grants globally.
Charitable donations
We calculate our community investment spend using the Business
for Societal Impact standard (B4SI). This includes cash donations
to registered charitable organisations, as well as a cash equivalent
for in-kind contributions. Our total community investment spend in
2024 was £4.4 million, of which £3.2 million was cash. The balance
included in-kind donations prepared in accordance with B4SI
guidelines. Furthermore, £169,116 was donated by our employees
through our payroll giving scheme.
£4.4m
Total community investment spend in 2024
12,031
Total volunteering hours in 2024
Building better futures
Every year we run a series of roadshows to showcase how
our flagship Building Better Futures programme is making a
difference in our communities.
The Mumbai Community team adopt villages in remote rural
areas and work with several different charity partners to
provide holistic, wraparound support to maximise the impact
in a particular area. The 13 hamlets where the charities have
been working for the last three years to bring about real
change have impacted over 3,000 villagers and farmers in a
remote rural area.
As a result of our partnership with the charities Vyakti Vikas
Kendra India (VVKI), International Association for Human Values
(IAHV) and Habitat for Humanity India, 6 schools in the Raipur
area now have new classrooms and sanitation provided through
M&G’s commitment to building resilient communities. The
washrooms are the most critical as that deters many girls from
remaining at school. We have also helped build hygienic kitchen
facilities so that all the children are guaranteed one hot meal a
day. School attendance has doubled since the new classrooms,
kitchens and sanitation were installed.
One of the remote rural villages suffers with flooding each
year during the monsoon. This means that in the dry season
there is a severe water shortage which impacts the
agricultural irrigation, the water wells and prevents the
villagers from producing a second harvest. The funding from
M&G has enabled The TNS Foundation to dig out the plain to
create a deeper river basin and trees have been planted to
prevent soil erosion. The water pump (pictured) that was
broken for the last two years has been fixed and improved
so that it collects rainwater as well.
On top of this The TNS Foundation works with the farmers and
the women to teach them about organic farming, improving the
quality of the soil which has helped to ensure a second harvest
and good quality crops.
A
PwC has provided independent limited assurance over the total community investment spend in 2024 (as indicated by A) in accordance with International
Standard on Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’, issued
by the International Auditing and Assurance Standards Board. The assurance statement can be found on our website.
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A
“
The impact of the improved farming techniques
and water capture have been transformative to
the lives of all those living in the villages.”
Deepti Kommera
Lead, Agricultural projects, The TNS Foundation
The climate transition is a key pillar of our sustainability approach and we
have continued to improve our assessment of what good looks like
At M&G, we manage climate impacts from three key
perspectives: as an asset owner with long-term liabilities, an
asset manager looking after both internal and external capital,
and as an international business with operations across many
locations. We recognise that climate change is a collective
challenge and that progress is heavily dependent on ambitious
public policy. We are committed to engaging with policymakers
to support the development of effective policy, and at the same
time we will continue to improve our assessment of climate-
related risks and opportunities using our evolving frameworks
and tools.
Our climate-related disclosures are prepared to be consistent
with the four pillars and 11 recommended disclosures of the
Task Force on Climate-related Financial Disclosures (TCFD),
per the table below, and take into account both the all-sector
guidance and supplemental guidance for asset owners and
asset managers.
Disclosure of our Scope 3 emission metrics are presented
where availability of source data allows. We continue to gather
data and refine our methodology for supply chain emissions
with a view to being able to report on this category in the
future.
For emissions relating to our investment portfolio (financed
emissions), we have seen increased coverage in the year,
mostly driven by the reclassification of some of our public
assets. We expect further improvements as availability of data
improves, and industry guidance extends to a broader range of
asset classes such as private credit and asset-backed
securities.
As climate is a consideration across a number of areas of the
business, the table below provides details of where relevant
disclosures can be found for each of the TCFD
recommendations.
TCFD pillar and recommendations
Further information
CA 414CB (2A)
Governance
Board’s oversight of
climate-related risks and opportunities
Sustainability governance – pages 56-57
Climate governance – page 73
(a)
Management’s role in assessing and managing
risks and opportunities
Sustainability governance – pages 56-57
Climate governance – page 73
(a)
Strategy
Climate-related risks and opportunities the organisation
has identified
Climate risk management – pages 71-72
Financing the climate transition – pages 67-70
(d)
The impact on the organisation’s businesses, strategy
and financial planning
Our approach to climate change – page 65
Climate risk management – pages 71-72
Climate governance – page 73
Financing the climate transition – pages 67-70
(e)
Resilience of the organisation’s strategy, based
on different climate-related scenarios
Climate risk management – pages 71-72
Forward-looking metrics – pages 80-81
Financial statements – from page 185
(Notes 1, 13, 15, 17, 31, 37)
(f)
Risk management
Processes for identifying and assessing climate-related
risks
Climate risk management – pages 71-72
(b)
Processes for managing climate-related risks
Climate risk management – pages 71-72
Risk management – pages 44-53
(b)
Integration of climate-related risks into the organisation’s
overall risk management
Risk management – pages 44-53
Sustainability governance – pages 56-57
(c)
Metrics and targets
Metrics used by the organisation to assess climate-related
risks and opportunities in line with its strategy and risk
management process
Climate change and our operations – pages 74-76
Climate metrics - investments – pages 77-79
Forward-looking metrics – pages 80-81
(h)
Greenhouse Gas (GHG) emissions
Greenhouse Gas Emissions Statement – page 76
Climate metrics - investments – pages 77-79
(h)
Targets used by the organisation to manage
climate-related risks and opportunities and
performance against targets
Our climate targets – page 66
Climate change and our operations – pages 74-76
(g)
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64
We recognise the urgency of the climate transition and have developed our
action framework to strengthen issuer alignment with climate goals
At M&G, we recognise that the returns we provide to our
clients are dependent on a stable environment and economy.
Alongside many of our clients, we believe that climate change
presents material financial risks to the investments we manage.
We are committed to addressing these risks across our
business. As part of this, we are supporting and advocating for
an orderly transition to net zero, in line with the Paris
Agreement.
The challenge is stark. 2024 has been confirmed as the first
calendar year with the average global temperature 1.5°C above
pre-industrial levels, and physical impacts of a hotter and more
variable climate are intensifying across the world - underlining
the urgent need for adaptation. Meanwhile, greenhouse gas
emissions have continued to rise, making the Paris Agreement
harder to achieve.
Through our wide investment capabilities we will seek to
support our clients by helping them navigate such volatility and
uncertainty. The path to net zero is unlikely to be straight. It will
require unprecedented levels of innovation, as well as a more
supportive public policy environment.
We have updated our climate approach across our asset
manager and asset owner businesses, to focus on how we can
support companies that are driving action, while also managing
our exposure to transition risks. Often the companies needing
to transform the most are involved in the energy system or
industry and have higher emissions. To better capture actual
transition efforts, we have expanded our interim climate targets
to a more comprehensive set of indicators, strengthening the
link to real-world change.
We will work to increase the share of issuers we invest in that
are taking meaningful climate action in line with climate goals,
rather than focusing narrowly on portfolio decarbonisation.
We have built our approach around three levers – grow, align
and reallocate – focused on supporting companies across
sectors and regions to identify transition risks and develop
plans to manage them. This is the basis of the ‘financing the
climate transition’ pillar in our updated Group sustainability
framework.
Alongside our investment-related efforts, we remain
committed to taking steps towards decarbonising our business
operations, including engaging with our suppliers to encourage
them to set science-based targets and take action.
Priorities for 2025
– Implement our Transition Assessment Framework and track
progress against our asset alignment and engagement
targets.
– Expand the Transition Assessment Framework across asset
classes, covering sovereign bonds and infrastructure in the
first instance, and private equity and private credit thereafter.
– Develop our Climate Solutions Investment Framework to
enable us to better monitor our allocation to issuers
providing solutions to climate change.
– Engage at market level with policymakers, standard setters
and industries to promote the conditions for a successful
energy transition.
– Continue to focus on driving energy efficiency and
decarbonisation of our operational estate, as well as engage
our supply chain on their climate transition plans.
Our climate action framework
Grow
Align
Reallocate
Seeking to grow funds and assets
that support climate goals
by collaborating with our clients
and working to develop innovative
strategies and solutions across
asset classes
Engaging with high-emitting
companies and assets to seek
robust transition plans aligned
with climate goals, in turn supporting
the decarbonisation of the
investments we manage
Monitoring the climate risk
characteristics of assets, undertaking
scenario analysis and, where
engagement fails, considering
reallocating away from those assets
exposed to elevated risks
Decarbonise our operations and engage our supply chain
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Our approach to climate change
65
Find more information on pages 67-70
Find more information on pages 74-76
We have updated our existing climate targets with additional
metrics that reflect the actions we plan to take to support the
climate transition. In addition to targeting a reduction in
financed emissions by 2030 and 2050, we have developed a
new ‘asset alignment’ target to track the proportion of assets
that are supporting the climate transition and are articulating
this through robust transition plans. We have also
strengthened and aligned our engagement metrics and
approach between our asset owner and asset manager
businesses, to encourage companies to improve disclosures
and develop transition plans.
We believe our asset alignment target, supported by a
minimum engagement threshold, provides a comprehensive
way of incentivising and tracking the decarbonisation of the
assets we invest in. We will prioritise achieving asset alignment
over our portfolio decarbonisation targets, as we believe this is
more likely to support real-world climate action.
Our strengthened climate approach rests on our Transition
Assessment Framework (TAF), which we use to assess
corporate climate targets and transition plans. The framework
is based on the Net Zero Investment Framework guidance
developed by The Institutional Investors Group on Climate
Change (IIGCC). It involves assessing several components of a
company’s transition plan, including whether they have set
science-based targets, actions to deliver their targets and
supporting investment. Companies are then assigned an
overall level: net zero, aligned, aligning, committed, or not
aligned with the goals of the Paris agreement.
For our asset alignment target, we believe including issuers’
Scope 3 emissions in our transition assessment is important, to
fully capture transition risks across the corporate value chain.
However, methodologies and data for measuring Scope 3 are
still evolving, and this could influence movements in this data.
We will continue to develop our attribution analysis, and may
have to recalculate and restate figures, including baselines, due
to factors such as improved data coverage and quality.
Portfolio emissions targets remain important to establish the
overall ambition of our climate objectives, and provide an
indicator of progress. However, financed emissions can be
volatile and require detailed analysis of the multiple drivers of
change, as they may not relate to changes in absolute real-
world emissions (eg market movements and portfolio activity).
Importantly, there are a range of challenges that may constrain
our ability to deliver on our targets, notably uncertainty over
government policy support. This is why public policy
engagement and advocacy, to create the right incentive
structures for the climate transition, is a key priority for us.
Viewed together, our expanded set of targets promotes a more
balanced approach that aims to support companies innovating
and reducing emissions in the real economy, and allow us to
monitor both backward and forward-looking indicators of
transition risk. As we develop our transition tools and metrics
we may identify new approaches and targets that support our
climate ambition.
Climate targets
Net zero by 2050 across our operations and investment portfolios
Supported by the following interim targets:
Asset manager
Asset owner
Asset
alignment
(NEW)
– 50-70% of financed emissions (Scope 1, 2 and 3) are assessed to be ‘net zero’, ‘aligned’ or ‘aligning’ by 2030. The assets in
scope are listed equity and corporate bonds managed by our asset manager on behalf of PAC, where PAC has sufficient
investment control
i. See page 80 for our assessment of asset alignment as at 31 December 2024.
Engagement
(UPDATED)
– For all listed equity and corporate bond assets, we aim to
maintain at least 70% of financed emissions (Scope 1, 2 and
3) as either assessed to be ‘net zero’ or ‘aligned’, or subject
to climate-related engagement
ii.
– For PAC listed equity and corporate bond assets
i, we aim to
maintain at least 70% of financed emissions (Scope 1, 2 and
3) as either assessed to be ‘net zero’ or ‘aligned’, or subject
to climate-related engagement
ii.
Portfolio
decarbonisation
iv
For assets managed by the Group's asset manager on behalf of PAC :
– 50% reduction in emissions intensity (tCO2e/$m invested) for in-scope
i listed equity and corporate bonds by 2030
iii .
– 36% reduction in emissions intensity (kgCO2/m
2) for in-scope real estate assets by 2030
iii.
Operational
targets
– 46% reduction in Scope 1 and 2 (market-based) emissions from buildings by 2030
iii.
– 46% reduction in business travel emissions by 2030
iii.
– Engaging with suppliers to encourage them to set ambitious carbon reduction targets aligned with climate science, covering
at least 67% of our operational supply chain emissions by 2030
iii.
i Assets in scope at the end of 2024 covered £71bn. Investment control refers to where PAC is able to determine investment characteristics. In general,
PAC does not expect to have investment control over collective vehicles where its assets are invested alongside those of third parties.
ii
Includes direct climate-related engagements as well as engagements through collaborative initiatives where we are actively involved. For the asset
owner target, it includes engagement by external managers where this aligns with PAC's stewardship priorities.
iii Target measured against 2019 baseline. The portfolio decarbonisation targets cover Scope 1 and 2 financed emissions.
iv These targets relate to those set under the Net Zero Asset Managers initiative and Net Zero Asset Owner Alliance, respectively. PAC previously
disclosed an interim target on portfolio decarbonisation for defined sectors. Following the introduction of the new asset alignment target, PAC is
reviewing the appropriateness of its sectoral decarbonisation targets.
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Our climate targets
66
Grow
We are working to increase the proportion of assets we
manage that support the achievement of climate goals. By
increasing the share of funds and assets that are aligned to
a credible net zero pathway or providing climate solutions,
we can support companies and assets that are doing the
hard work of delivering decarbonisation in the real
economy. Over time, we will also aim to increase the scope
of our climate goals, for example, as data quality, technical
guidance and product variety improves, to include
investments managed in commingled funds, as well as
across more asset classes.
We're doing this by:
Developing our climate alignment toolbox
We are developing a range of metrics and methodologies to
assess the alignment of assets and companies with climate
goals. Our Transition Assessment Framework (TAF) is one of
these tools. The TAF is designed to assign portfolio companies
an ‘alignment level’ based on the robustness and ambition of
their GHG emissions targets and transition plans. The TAF can
be used to track the proportion of a fund’s assets that have a
transition plan consistent with climate goals.
In parallel, we have been developing our Climate Solutions
Investment Framework (CSIF), to strengthen our ability to
identify companies that are providing solutions to climate
change. We have also developed an emissions glide-path tool
to model different carbon pathway alignment methodologies.
These tools can be used in combination to design a range of
portfolio alignment strategies, to support the climate targets
we have set.
Strengthening data tools to support fund-level
assessment of climate alignment
We develop tools to enable investment teams and our asset
management clients to monitor and understand the climate
characteristics of their investments. A key example is our asset
manager's Portfolio Assessment Tool, which models the
historic and current climate characteristics of investment
portfolios and of issuers in different asset classes.
Working with our clients to increase the proportion
of assets managed in line with climate goals
As well as aligning our own investments, many of our asset
management clients are committed to aligning their portfolios
with net zero. We seek to engage with them to understand
their needs and provide options for how they can meet their
objectives using our climate alignment toolbox. Where our
institutional clients have opted to align investments with
climate goals, we can develop climate metrics and may work
with them to set an interim target, such as an asset alignment
target using our TAF tool or a decarbonisation goal.
Offering clients innovative strategies and products
with better climate outcomes
We also work with existing and prospective asset management
clients to develop new methodologies and investment
strategies that enable them to increase their allocation to
companies and assets that are profitably navigating the net
zero transition. We have developed a range of strategies that
support climate goals across asset classes (eg our ‘Sustain
Paris Aligned Funds’ and responsAbility’s ‘Transition to Net
Zero Fund’).
Many of our Life customers also want their investments to
address some of the world’s pressing environmental and social
issues, including climate change, while providing potential for
returns like any other investment product. We created the
PruFund Planet range of funds to help them do this. The
sustainability-focused goals of PruFund Planet mean that some
of the sub-funds invested in have an objective to support
climate mitigation and adaptation.
These strategies and products across the Asset Management
and Life business allow us to invest in opportunities that
support the climate transition, including private assets, where
there is greater scope for direct impact.
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Financing the climate transition – Grow
67
Align
Many issuers and assets need to improve their
preparedness for the transition and increasing physical
risks. We engage with high-emitting companies to
encourage them to set credible decarbonisation targets
and to adopt and implement robust transition plans. By
linking our transition assessments and engagement
programme, we can increase the alignment of the
investments we manage with climate goals and deliver on
our interim targets. We'll also work with stakeholders
across society to create the right enabling environment for
climate action.
We're doing this by:
Engaging with individual assets and companies
Across public markets, we have established an engagement
threshold target to ensure 70% of in-scope financed emissions
(see page 66 for more detail) are either the subject of direct or
collective engagement, or assessed to be ‘net zero’ or ‘aligned’
with a net zero pathway using our Transition Assessment
Framework. By engaging with companies that account for the
largest proportion of our financed carbon emissions – to set
science-based climate targets, develop robust transition plans
and reduce their emissions – we support delivery of our interim
asset alignment target.
Our engagement programme follows a six-stage process,
outlined in the diagram below. For our private assets business,
engagement is important too. Climate disclosures are generally
less mature among private companies. We are focused on
encouraging improved climate-related disclosures, to help us
track decarbonisation efforts and better understand risk
exposures. We are also exploring use of our public markets
assessment tools, like the Transition Assessment Framework,
to strengthen our approach.
Climate stewardship: Engagement and voting
To structure and support the development of our engagement
agendas with the most material portfolio companies and
assets, we leverage the Transition Assessment Framework. By
linking this framework, which we use to assess both issuer and
portfolio alignment, and our stewardship efforts we strengthen
the connection between engagement and the transition
alignment of the assets and companies we invest in.
Where companies fail to meet our expectations, or are slow to
show progress, we may seek to escalate engagement in line
with our Engagement Policy. Our Voting Policy sets out our
approach to using our vote when inadequate disclosures have
been made.
Investment manager engagement and monitoring
As an asset owner, we set clear expectations of investment
managers (both internal and external), communicating annual
priorities and meeting on a quarterly or bi-annual basis. We are
strengthening the link between Transition Assessment
Framework milestones set for companies with manager
engagement priorities and will more closely monitor voting and
shareholder resolution activities of our managers.
Our ESG scorecard informs our manager due diligence and
selection process. We review the scorecard as part of our
manager selection process to ensure it reflects updates to our
climate strategy as well as other ESG priorities. It aims to
capture the information needed to determine whether a
manager can contribute positively to meeting the asset owners’
climate goals and targets.
In addition to direct engagement with managers, we are active
participants in the asset manager engagement working group
of the NZAOA, recognising the value of a common set of
expectations for managers from their clients, and the power of
a unified and collective voice of asset owners that have shared
ambitions in relation to managing risks from the climate
transition.
Collaborative engagement
Collaboration is critical to accelerate the transition. M&G
Investments are active participants in the Climate Action 100+
(CA100+) initiative, which targets the world’s major corporate
GHG emitters, as well as the broader Net Zero Engagement
Initiative (NZEI) which includes companies that are heavy users
of fossil fuels.
We are co-leads on three CA100+ engagements, currently
covering investee companies in the mining, chemicals and
energy sectors. We also sit on the IIGCC Corporate Programme
Advisory Group, and are active members of a number of
additional company-specific working groups.
Engaging with policymakers
We recognise that individual companies cannot deliver net zero
alone. The right real-economy policy environment is needed to
create incentive structures to accelerate decarbonisation and
investment in climate solutions. Achieving this policy
environment will require collaboration between the public and
private sector, to remove barriers and develop shared solutions
as effectively as possible.
Engagement programme
Research
and objective
setting
Initiation
of requests
Recognition
of requests
Commitment
to act
Interim
progress
review
Resolution
or escalation
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68
We therefore seek to engage with policymakers and regulators
across a number of jurisdictions, to provide our view on how to
do this effectively. We work with our peers through groups
such as the NZAOA and the IIGCC’s European Policy Working
Group to raise our views with policymakers.
Strengthening assessment methodologies
and influencing industry
We work with industry peers, data providers and industry
forums to address gaps in transition metrics and sector-
specific methodologies, particularly in carbon-intensive
industries where decarbonisation pathways are complex to
assess.
For example, through CA100+ we have been working with
companies and investors to develop a Net Zero Standard for
evaluating mining company transition plans, while our work
with NZAOA aims to help develop positions on portfolio
transition metrics and climate solutions investments.
Hot 100 engagement programme
Although our climate stewardship approach is evolving we
have continued our asset manager ‘Hot 100’ engagement
programme, which was established in 2020 and covers listed
equity and corporate bond issuers. This focus list of high-
emitting companies is updated annually to reflect changing
holdings, and last year assets managed by M&G Investments
Southern Africa were included for the first time. As part of the
2024 refresh, 48 new issuers were added, 10 of which are from
South Africa. By the end of the year, we had either assessed as
Paris aligned, or started the engagement process with, 58 of
the Hot 100, representing 73% of the financed carbon
emissions of this group of issuers.
To date, the Hot 100 list has been based on Scope 1 and 2
emissions, but we are planning to incorporate Scope 3 data
into our assessments. This more comprehensive approach will
enable us to more accurately measure and manage a broader
spectrum of emissions associated with our investments and
therefore improve alignment with climate goals.
Public policy advocacy
M&G continues to engage constructively and responsibly
with UK and international policymakers on a wide range of
public policy topics. Throughout 2024, our climate
advocacy involved contributing to the Transition Finance
Market Review Call for Evidence, which is an independent
market-led review commissioned by the HM Treasury in
the UK and the Department for Energy Security and Net
Zero and hosted by the City of London Corporation.
We continue to call on policymakers to create a
comprehensive policy framework that provides long term
clarity for investors and market participants. Such a
framework would contain, among other things:
– Ambitious, and mandatory, high quality disclosure
requirements for both public and private companies,
creating long-term clarity for investors’ decision-making
– Proper incentivisation of climate solutions (ensuring
critical technologies reach competitive
commercialisation quicker)
– Support for credible transition activities
– Meaningful prudential regulation reform and
– Broader policy action to capture nature and
biodiversity loss
We also recognise that closing the climate financing gap
requires direct deployment of capital towards solutions,
and we have worked with UK policymakers on ways to
increase institutional investors’ allocation to private assets.
M&G was a co-founding signatory of the Mansion House
Compact, which is a voluntary industry-led initiative aiming
to secure better financial outcomes for Defined
Contribution (DC) savers by increasing pension investment
into unlisted equities.
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69
Reallocate
There are uncertainties in the transition to net zero that may
create risk to the investments we manage on behalf of
clients. While we seek to enhance the ways we monitor and
manage climate risks, we may consider using reallocation as
a measure of last resort. Where engagement fails to achieve
meaningful progress within a defined timeframe, we may
reallocate away from assets that present elevated climate
risks. By doing this we can manage our exposure to climate
risk and support delivery of our interim targets. We also
know that some investee products and services are
incompatible with the Paris Agreement goals. This is the
guiding principle behind our approach to thermal coal.
We’re doing this by:
Applying climate-sensitive sector screening and exclusions
We believe companies operating in, or dependent on, climate-
sensitive sectors such as coal, oil and natural gas should
develop transition plans that ensure they are resilient to
climate-related financial risks. We are seeking to enhance how
we monitor and assess the risk exposure of issuers in such
sectors. We believe some companies are inherently exposed to
elevated levels of climate risk. A notable example is thermal
coal, which the International Energy Agency (IEA) has stressed
must be phased out globally by 2040 at the latest to achieve
net zero by 2050. Accordingly, we have established a Group
position on thermal coal, including a time-bound approach to
phaseout as detailed in our asset manager Thermal Coal
Investment Policy (see more information on our website).
Given that our clients and customers’ expectations are varied
and dynamic, any decision to divest or allocate away from a
company or asset due to its climate risk profile will be informed
by and undertaken in the best interest of our customers, in line
with our fiduciary duties. For further information on how we
integrate ESG into our investment processes, relevant policies
for PAC and M&G Investments can be found in the responsible
investing sections on our website.
Planet+ fund range baseline exclusions
For certain fund ranges, including our Planet+ fund range, as
well as for some regulatory regimes, we apply additional sector
baseline exclusions that restrict investments in Arctic oil and oil
sands activities. Companies that derive business equal to or
more than 10% of total revenues from the unconventional
extraction of oil and gas (defined as oil sands and Arctic drilling)
are excluded.
Assessing physical and transition risks using scenario analysis
Scenario analysis is a forward-looking assessment tool we use
to evaluate the resilience of our equities, corporate and
sovereign debt, real estate, infrastructure, and private markets
portfolios under a range of climate scenarios. While subject to
assumptions and limitations – given the uncertainty and
complexity of transition and physical climate impacts – this
analysis helps us to assess portfolio and asset-level risks and
opportunities as well as the resilience of our balance sheet and
business planning.
For more information on our bottom-up climate
scenario analysis see page 81
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Climate-related risks can affect M&G through two key channels
The investments we manage
Our own operations
Transition and physical risks can impact the assets we invest in on
behalf of our clients, as well as those on our balance sheet. We are
improving our management of these risks through new
frameworks and indicators, while recognising that no single
approach or metric captures the complexities and uncertainties
brought by climate change.
We are exposed to transition and physical risks in our
operations and through our supply chain, both of which could
have an impact on our offices and business continuity. We
monitor and manage our operational emissions footprint,
including engagement with our suppliers.
More details can be found in Financing the climate transition
on pages 67-70
More details can be found in Climate change and our
operations on pages 74-76
Identification and assessment
Monitoring and management
Reporting
We combine a range of approaches to
help us identify climate-related risks,
informed by academic research, industry-
shared learning, and best practice guides.
Scenario analysis is one of the tools
employed to assess our forward-looking
exposure to climate-related risks across
our investments, solvency, business
planning and corporate estate.
Following a review of climate scenario
approaches across the Group, a working
group has been set up in 2024 to
support a more consistent approach
across functions, and to monitor
developments in the climate scenario
landscape.
Our investment desks have access to
quantitative data tools, such as our ESG
Scorecard, to enable measurement and
assessment of climate risk.
From an investment perspective, our
first-line risk management approach is
implemented by integrating ESG
considerations into our processes, for
example through our thermal coal
policies and Transition Assessment
Framework. Our frameworks and
quantitative tools provide the
investment teams with data to assess
climate risk factors.
We also manage risk through our
stewardship activities, engaging with
companies to push for progress on
transition plans. In cases where we do
not see sufficient progress, we may
consider divestment where necessary.
We also manage climate risk for our
operations, for example through active
engagement with our supply chain.
Internal reporting on risk exposure is
primarily coordinated via the Executive
Sustainability Committee, and the
Executive and Board Risk Committees,
with reporting and escalation to the
Group Executive Committee and Board
as required.
The Executive Sustainability Committee
receives regular updates on climate-
related work streams from each of the
business areas.
Updates on current ESG risk, including
climate considerations, and assessment
of key risks against appetite, are
periodically communicated to the
Executive and Board Risk Committees
by the business via Top Risks reports,
and by the Risk and Compliance
function via the Chief Risk and
Compliance Officer’s report.
Climate resilience and our balance sheet
Scenario analysis is an important tool when assessing the wide-ranging financial impacts that could emerge from the physical and
transition risks associated with climate change. We use our in-house climate modelling expertise in a number of forward-looking
processes, including our Own Risk and Solvency Assessment (ORSA), asset owner strategic asset allocation and in our business planning.
As part of our annual ORSA we have explored the potential financial impacts of physical and transition risks on our balance sheet
across a range of different climate scenarios. The scenarios use the most up to date Network for Greening the Financial System
(NGFS) scenarios as a basis (phase 4 at the time of our most recent analysis), with additional inputs taken from the 2015 Burke et al.
study on the effects of temperature on economic production, the Emergency Events Database, and the Notre Dame Global Adaptation
Index to support the modelling of physical risk.
Our latest ORSA explored the impact of three different transition pathways (based on the NGFS’s ‘Net Zero 2050’, ‘Fragmented
World’, ‘Sudden Wake-up Call’ pathways) and a ‘Current Policies’ pathway over both the short term, broadly consistent with our
business planning horizon, and longer term (30+ years). The newly-introduced ‘Sudden Wake-up Call’ scenario assumes a major
climate event triggers an abrupt policy change, and sets off shock waves through the economy and financial system. This scenario was
also added to the stress tests used for our business plan.
The results of our latest modelling indicate that a ‘Hot House’ (‘Current Policies’) scenario continues to have the most significant impact on our
balance sheet, while a disorderly transition is more adverse than an orderly scenario. With the likelihood of an orderly transition appearing to be
falling, due to the gap between global action and Paris-aligned pathways, we have continued to strengthen our focus on disorderly outcomes.
We recognise that the scenarios we have considered represent only four potential outcomes from an extremely wide and uncertain spectrum
and that actual impacts may be significantly different given the number of assumptions required. Overall, our business remains resilient under
the range of climate scenarios considered, particularly given the management actions available (such as those outlined on pages 67-70).
We also carry out bottom-up scenario analysis on public and private assets. This analysis is performed to help our investment teams
identify and manage specific transition and physical risk exposures.
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71
Find out more on our bottom-up scenario analysis on page 81
Transition and physical impacts
We take a holistic view of climate risks across a range of timeframes (short term: <3 years (consistent with our business planning
cycle); medium term: 3-10 years; long term: 10+ years).
Both transition and physical risks have the potential to impact the value of the assets we manage on our clients’ behalf (find out
more about our investment scenario analysis on page 81), which directly influences our revenue and the value of assets held on our
balance sheet. The main categories of these risks are illustrated in the table below and are applicable across our different legal
entities and business areas.
We understand that climate-related risks can overlap and interact, creating compound and cascading impacts, and that the precise
timing and sequence is hard to predict. Given this uncertainty, the transition and physical risks outlined below have potential to
arise over a range of timeframes. We believe that both transition and physical risks may start to materialise over the short term,
with the likelihood and potential impact of the risks rising, and continuing to increase over time.
Risk
name
Risk
description
Physical/
transitional
Time
horizon
Description
of impact
Policy and legal
Carbon pricing, climate
regulation and restrictions on
carbon intensive activities.
Increased climate litigation (eg due
to greenwashing, or failure to meet
targets).
Transitional
Asset repricing impacting
profitability
Ability to attract and retain
customers, clients and colleagues
Costs associated with adapting to
policy change or legal action
Technology
Renewable energy, cleaner
transport and other low-emission
products and services replacing
carbon-intensive technologies,
causing obsolescence and potential
stranding of assets.
Transitional
Asset repricing impacting
profitability
Ability to attract and retain
customers and clients
Market
Changes in consumer and investor
preferences (eg avoidance of
carbon intensive products and
assets) and related pressure on
input/raw material prices.
Transitional
Asset repricing impacting
profitability
Demand for M&G’s products and
services
Ability to attract and retain
customers and clients
Reputation
Damage to company’s standing
among customers, clients,
shareholders and other
stakeholders (eg from
greenwashing, or failure to meet
climate targets or regulatory
requirements).
Transitional
Financial impact of fines
Demand for M&G’s products and
services
Ability to attract and retain
customers, clients and colleagues
Acute physical
Increased frequency and severity of
extreme weather (eg storms,
wildfires and heatwaves).
Physical
Asset repricing impacting
profitability
Operational and supply chain
disruption
Chronic physical
Longer-term shifts in climate
patterns (eg sea level rise and
changes in precipitation patterns)
and associated impacts on food and
water security, human health,
damage to assets, increased
insurance premiums and
geopolitical risk.
Physical
Asset repricing impacting
profitability
Operational and supply chain
disruption
The climate transition presents major long-term investment opportunities across countries and asset classes, including private
markets where we have strong capabilities. Our business model and balance sheet allow us to allocate long-term capital to climate
solutions. Investing in these solutions allows us to offer innovative strategies and products to our customers and clients (see page
67). We have not defined such opportunities with specific time horizons or impacts for inclusion in the table above. We will share
more details when we publish our updated Group Climate Transition Plan.
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n Short (1 to 3 years)
n Medium (3 to 10 years)
n Long (10+ years)
n Short (1 to 3 years)
n Medium (3 to 10 years)
n Long (10+ years)
n Short (1 to 3 years)
n Medium (3 to 10 years)
n Long (10+ years)
n Short (1 to 3 years)
n Medium (3 to 10 years)
n Long (10+ years)
n Short (1 to 3 years)
n Medium (3 to 10 years)
n Long (10+ years)
n Medium (3 to 10 years)
n Long (10+ years)
Governance of climate risks and opportunities follows our overall sustainability governance model. Further details of how the
Board and subcommittees discharge their responsibilities in relation to sustainability (including climate) are set out in the
sustainability governance section of the strategic report (pages 56-57).
A key part of effective governance is having clear and decision-useful reporting of climate information, to enable us to assess
climate-related risks and opportunities, meet regulatory requirements, as well as monitor progress against our targets and
commitments. The Executive Sustainability Committee (ESC) oversees implementation of the Group’s sustainability strategy,
including climate-related matters and delivery and progress against related targets. The ESC receives monthly updates from
business units on ongoing sustainability activity.
Review of climate scenarios
We have seen increasing levels of attention being given to
the scenarios used by organisations to model climate risks.
In response, approaches to climate scenario modelling
were discussed by the ESC during the year, including:
– Analysis of the external environment on climate change,
covering themes such as the limitations of industry
climate change models and developing market trends.
This was aimed at informing our work on the climate
transition across the business.
– A deep dive assessment on climate scenario analysis
used by different parts of the business, focused on
evolving and harmonising our approach and
assumptions. The review led to the creation of a working
group with responsibility for further developing and
overseeing the Group’s climate change scenario
framework.
The Board is responsible for approving the Business Plan
annually. Where we have a reasonable estimate of the income
or expenditure related to our climate actions, and these are
expected to materialise over the plan period (three years), we
capture it in our business planning process. For example,
change programme spend and anticipated growth in
sustainability-focused fund propositions are captured in the
plan.
In addition, the business plan is subject to stress and scenario
testing, evaluating the estimated impact of climate and
economic impacts. In 2024, we introduced a new ‘Sudden
Wake-up Call’ scenario, where a major climate event leads to
large economic disruption over a short-term horizon, followed
by a move to an accelerated transition path. The results of this
stress test indicated that, although solvency and liquidity would
be negatively impacted across the Group, the business remains
resilient under this scenario.
Find out more on sustainability
governance on pages 56-57
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73
Operational targets
We continue to focus on reducing the carbon emissions related
to our own operations as a corporate and to improving our
energy efficiency. Our near-term operational carbon reduction
targets are:
– Reducing Scope 1 and 2 (market-based) carbon emissions
(tCO2e) from our buildings by 46% by 2030 from our
2019 baseline.
– Reduce business travel carbon emissions (tCO2e) by 46% by
2030 from our 2019 baseline.
– Engage with suppliers to encourage them to set carbon
reduction targets aligned with climate science, with an aim to
cover a minimum of 67% of our Scope 3 supply-chain
emissions by 2030 (excluding investments).
We have also committed to purchasing 100% renewable
electricity across our operational estate by the end of 2025.
Building environmental management
We continue to look for ways to improve the environmental
performance of our offices. Our newly formed Buildings
Decarbonisation Working Group is set up to look at
opportunities to improve office energy use and utilise tools
created to help us quantify the suitability of projects to take
forward.
Other actions taken in 2024 include:
– Undertaking operational environmental assessment for
selected offices internationally to assess opportunities for
improvement and knowledge sharing
– Switching to a fully electric kitchen in the restaurant of our
London office, by removing gas-fired cooking infrastructure
– Integrating environmental considerations into the office
acquisition and leasing process, including assessment of
physical climate scenario analysis findings for our corporate
estate
– Further rationalisation of our UK offices to reflect how our
colleagues are using the offices
We operate an environmental management system (EMS)
certified to the internationally recognised ISO 14001 standard
for five out of our nine UK offices, which covers 56% of our total
Group floor area at the end of 2024.
Our other international office locations – while not in the formal
scope of the certification – align with the principles of our EMS
through adherence to the requirements of our Environment
Policy.
Supply chain engagement
Our upstream supply chain carbon emissions form a large part
of the corporate operations footprint. Each year we engage
with suppliers in our value chain to share our sustainability
ambition and to better understand their carbon footprint, its
impact on our scope 3 emissions, and their ambition and
approach to managing carbon emissions. In 2024, we assessed
carbon emissions data and progress against carbon reduction
targets for more than 150 of our suppliers.
The gathering of this data allows us to segment suppliers
according to maturity in carbon management, so we can tailor
our engagement approach and gain a greater understanding of
our own risk. Approved and committed science based targets
cover 43% (2023: 58%) of our calculated supply chain
emissions
i. The reduction from 2023 relates to changes in
spend across our supply chain and changes in commitments
from some suppliers. We continue to review the supply chain
data and aim to provide more detail in future disclosures.
Renewable energy
As part of our ongoing global RE100 target to reduce Scope 2
emissions, we have purchased high-quality REGO-backed
(Renewable Energy Guarantees of Origin) renewable energy
across our UK estate, where we have ownership of utilities
contracts.
Across our remaining offices, we obtain energy from certified
renewable energy contracts and on-site renewables. Where
direct renewable energy is not available we purchase energy
attribute certificates (EACs). In 2024, 99% of our electricity use
was provided by renewable energy; 1% onsite generation, 88%
via procurement and 10% via EACs.
Enforcement actions
No fines or regulatory actions have occurred during the year for
environmental incidents.
Electrifying our office restaurants
In our continued efforts to reduce the amount of fossil fuels
used across our corporate operations, we have now removed
gas from our UK office restaurants.
Our Kildean colleague restaurant was designed to be fully
electric when we moved in, and in 2024 we replaced our
London head office restaurant kitchen equipment with electric
only devices, potentially saving 60 tCO2e per annum (based on
2023 consumption).
i
Our supply chain emissions are calculated on a cash paid basis and include our UK and Ireland operations.
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74
Progress against our interim targets
87%
2030 Target: 46%
21%
2030 Target: 46%
43%
2030 Target: 67%
Buildings Scope 1 and 2
reduction from baseline
Scope 1, 2, and 3 reported
business travel reduction
from baseline
Supply chain emissions
from suppliers with validated
or committed SBTs
Progress against targets
For our corporate operations carbon reduction targets we
measure progress against our Scope 1 and 2 building
emissions, and across our business travel emissions, using
2019 as the baseline year.
At the end of 2024:
– Scope 1 and 2 market-based emissions from our buildings of
428 tCO2e (2023: 446 tCO2e) have reduced by 87% from our
baseline.
– Scope 1, 2 and 3 emissions relating to business travel by air,
rail, car, transport fuels and other emissions of 8,503 tCO2e
represents a 21% reduction from our baseline as we have
continued to utilise virtual collaboration and encourage the
use of more sustainable modes of travel where possible.
However these emissions have increased by 15% from 2023
(7,397 tCO2e) primarily due to increased air travel to India as
we grow our operations in Mumbai. Consistent with our
ongoing business transformation activity and strategy to
grow our international presence, we will review our business
travel target during 2025.
– 43% of supply chain emissions are covered by suppliers with
either validated or committed science-based targets (SBTs).
This reduction from 2023 (58%) relates to changes in spend
across our supply chain and changes in commitments from
some suppliers.
Performance in the year
Our year-on-year performance compares 2024 with the 2023
results as detailed in our GHG Emissions Statement on page 76.
In 2024, our total Scope 1 and 2 market-based GHG emissions
were 622 tCO2e
A, which is a 12% reduction from 2023
(703 tCO2e). In 2024, we reduced our total energy consumption
by 12% compared to 2023. Savings have been achieved
through the continued rationalisation of occupied space, as
well as actions such as the removal of gas in the restaurant
kitchen of our London office.
Waste emissions were 20 tCO2e (316 tonnes
A of waste) in
2024. We have restated emissions from waste for 2023 from
53 tCO2e to 21 tCO2e due to the incorrect treatment in the
calculation of emissions associated with one of our waste
streams. Despite an increase in offices reporting waste from
16 to 19, covering 80% of our total floorspace (2023: 69%), our
emissions associated with waste have remained stable. In 2024
our UK operational recycling rate was 66% (2023: 67%).
Water emissions reduced in 2024 to 2 tCO2e (15,458m
3)
A from
7 tCO2e (37,592m
3) in 2023. The reported reduction in water
consumption is attributed to improved maintenance at our
Reading office that reduced water wastage, and improvement
in water data quality for our UK head office. In 2024, 28 offices
(80% of our total floorspace) provided water data.
Land and air travel emissions have increased in 2024, to
8,310 tCO2e from 7,139 tCO2e in 2023 for Scope 3. The increase
is primarily driven by an increase in air travel emissions
following the growth of our operations in Mumbai.
Car travel emissions have decreased from 309 tCO2e in 2023 to
235 tCO2e in 2024, with 194 tCO2e relating to Scope 1 and 2
and 41 tCO2e associated with Scope 3. In 2024 the proportion
of electric vehicles in our business fleet has increased to 33%,
(2023: 19%) with efforts ongoing to increase this to 100%,
alongside continuation of colleague engagement to increase
adoption.
Approach to carbon credits
We continue to focus our efforts on reducing the emissions
from our corporate operations, while recognising the
importance of the voluntary market to provide finance to
projects to avoid, reduce and store carbon from the
atmosphere.
In 2024, we took the opportunity to review and update our
Carbon Credit Principles for sourcing carbon credits.
Amendments to our internal guidance have focused on
strengthening the evidence requirements for assessing
additionality, permanence and leakage.
Over the year, we purchased Pending Issuance Units (PIUs)
supporting peatland (Scaliscro Peatland Restoration) and
woodland restoration (Trossachs Highland Afforestation)
projects in Scotland, which should sequester carbon for
years to come as new biomass grows. Additionally, we
purchased and retired credits from the Orb Solar project in
India. Our carbon credit purchases are not used to offset
emissions in our GHG calculations, and should be viewed
more as contributions to climate action.
Metrics indicated by
A have been subject to external independent
limited assurance by PricewaterhouseCoopers LLP (PwC).
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75
Greenhouse Gas Emissions Statement
We have compiled our global greenhouse gas (GHG) emissions statement in accordance with the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
GHG emissions are broken down into three scopes; we have included full reporting for Scope 1 & 2, and selected Scope 3
reporting as best practice. Scope 1 emissions are our direct emissions from the combustion of fuel, fugitive emissions and
company-owned vehicles. Scope 2 emissions cover our indirect emissions from the purchase of electricity (including use of
company electrical vehicles), heating and cooling. We have reported our Scope 2 emissions using both the location and
market-based methods in line with the GHG Protocol Scope 2 Guidance. Our Scope 3 footprint currently includes business
travel (category 6) booked through our travel providers, car travel in colleague-owned cars (category 6), water consumption
(category 1), waste generation (category 5) from occupied properties (where data is available) and emissions from sub-leased
property (category 13), where data is available. We do not currently report Investments (category 15) as part of this statement,
but have reported financed emissions separately on pages 77-79.
Please refer to our Environmental Metrics Basis of Reporting 2024 (Basis of Reporting) for further detail on our methodology.
Data is presented gross of any carbon credits. Selected metrics reported for 2024 (as indicated by
A) have been subject to
external independent limited assurance by PricewaterhouseCoopers LLP (PwC). For the results of that limited assurance,
see PwC's independent limited assurance report and our Basis of Reporting available on our website.
2024
2023
2019 baseline
UK
Total
UK
Total
UK
Total
Scope 1 (tCO2e)
Natural gas, oil (generators), vehicle fleet,
refrigerants
307
543
A
446
595
1,936
2,187
Scope 2 (tCO2e)
Location-based
Electricity, purchased heat and steam
1,407
2,944
A
1,592 3,023
4,213
5,948
Scope 2 (tCO2e)
Market-based
Electricity, purchased heat and steam
15
79
A
25
108
105
1,976
Scope 1&2 (tCO2e)
Total using market-based emissions
322
622
A
471
703
2,041
4,163
tCO2e per FTE
i (Scope 1 & 2)
0.09
A
0.10
0.74
Energy
EAC volumes (MWh)
44 1,084
— 1,073
—
—
Energy use (MWh)
8,460 11,515
A
9,850 13,017
25,745 29,490
2024
2023
(restated)
2019
Selected Scope 3
(tCO2e)
Air travel
8,191
7,018
9,764
Land travel
119
121
128
Water (global where available data)
2
7
11
Waste (global where available data)
20
21
19
Emissions from sub-leased property (market-based)
147
94
—
Total selected Scope 3
8,479
A
7,261
9,922
Global Scope 1, 2 and selected Scope 3 (tCO2e)
9,101
A
7,964
14,085
Reporting period:
1 January 2024 to 31 December 2024
Baseline year:
2019
Consolidation
boundary:
Operational control as defined by the Greenhouse Gas Protocol is where the Group has authority to
introduce and implement its operating policies at the operations.
Accounting
methodology:
Our GHG emissions and energy consumption are prepared in line with The Greenhouse Gas Protocol
Corporate Accounting and Reporting Standard. Further details on our calculation methodology, including
emission factors used can be found in our Basis of Reporting which is available on our website.
Data
restatements:
We have restated emissions from waste for 2023 from 53 tCO2e to 21 tCO2e due to the incorrect
treatment in the calculation of emissions associated with one of our waste streams.
i
FTE refers to full-time equivalent colleagues.
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76
Across our investment portfolios we produce a range of metrics to identify and assess climate-related risks and opportunities. This
includes absolute emissions metrics as well as intensity-based indicators that enable comparison across different issuers and
portfolios. In addition to backward-looking data, which indicate the current emissions profile of an asset or portfolio, we also use
forward-looking metrics to assess transition alignment and potential impacts on asset values over time.
The metrics used across our internal and external reporting are financed carbon emissions (FCE), carbon footprint, and weighted
average carbon intensity (WACI). For example, we assess FCE change at portfolio level to monitor our overall portfolio emissions
exposure, while we monitor carbon footprint (a measure of emissions intensity based on the ratio of company emissions to their
enterprise value including cash (EVIC)) to assess progress against our asset manager and asset owner interim targets. WACI is
used to understand our portfolio exposure to carbon-intensive issuers. We monitor Scope 3 emissions as a proxy for risk exposure
to inform targeted actions, such as engaging companies on transition plans, however we acknowledge that disclosure of this
category remains poor, which makes it less reliable for decision-making.
In preparing our financed emissions metrics we consider the Partnership for Carbon Accounting Financials (PCAF) principles. We
report data quality scores for our FCE metrics – covering listed equity and corporate bonds with both a known and unknown use of
proceeds and sovereign debt emissions. The score is based on PCAF methodology and ranges from one to five, where one
represents the highest data quality and five is the lowest. Details on definitions of metrics reported and limitations of data used can
be found on page 358, with more information provided in our Environmental Metrics Basis of Reporting 2024 (Basis of Reporting)
available on our website.
In our analysis, ‘coverage’ refers to the proportion of in-scope AUMA for which we have sufficient environmental, financial, or other
data required in the calculation of a given metric. Externally managed mandates in which we invest are not included. Metrics
reported in this section are calculated for M&G plc, subject to asset classes included and coverage within these groups.
Our Basis of Reporting, available on our website, sets out our policy on restatements. Details on any restatements and the impact
on the previously presented metrics are set out in the relevant section below. All figures presented reflect the annual emissions
calculated with reference to in-scope AUMA of each asset class as at 31 December for each year.
Selected metrics reported for 2024 (as indicated by
A) have been subject to external independent limited assurance by
PricewaterhouseCoopers LLP (PwC). PwC’s independent limited assurance report is available on our website.
Public assets (Listed equity and corporate bonds)
The table below presents emissions metrics relating to listed equity and corporate bonds managed by our asset management
business, including on behalf of our asset owner. Corporate bonds with a known use of proceeds are presented separately.
2024
2024
Coverage
2023
Restated
i
2023
Restated
Coverage
i
2023
(previously
presented)
2023
Coverage
(previously
presented)
AUMA in-scope for metrics presented (£bn)
152.6
A
N/A
153.4
N/A
178.7
N/A
FCE – Scope 1 & 2 (ktCO2e)
11,899
A
96%
14,765
95%
15,758
87%
Data quality score – Scope 1 & 2
2.1
A
N/A
2.2
N/A
2.2
N/A
FCE – Scope 3 (ktCO2e)
82,179
96%
78,628
91%
83,490
84%
Data quality score – Scope 3
2.4
N/A
2.2
N/A
2.2
N/A
Carbon footprint – Scope 1 & 2 (tCO2e/£m invested)
81
A
96%
101
95%
101
87%
Carbon footprint – Scope 3 (tCO2e/£m invested)
562
96%
562
91%
558
84%
WACI – Scope 1 & 2 (tCO2e/£m sales)
160
A
92%
188
93%
187
83%
WACI – Scope 3 (tCO2e/£m sales)
937
92%
1,097
92%
1,088
83%
i
A granular review of asset classification has resulted in a change of in-scope AUMA (see below for details).
Analysis of 2024 compared with restated 2023 metrics
For 2024, we have seen a reduction in Scope 1 & 2 emissions metrics in part due to the continued reduction of our holdings in a
high-emission intensity issuer in our M&G Investments Southern Africa (MGSA) portfolio. Other contributing factors to the
decrease include reductions in reported emissions for some high-emissions intensity issuers and improvements in underlying data.
The increase in Scope 3 FCE includes a combination of higher coverage and increased emissions for some large contributors to
this emissions category. We expect Scope 3 emissions to fluctuate in the near-term, reflecting volatility from evolving
methodologies and improvements in measurement data, as well as from companies reporting across more Scope 3 categories.
The portfolios managed by our MGSA business continue to make up a significant proportion of our FCE at 2,492 ktCO2e (2023:
3,073 ktCO2e ) for Scope 1 & 2 and 8,946 ktCO2e (2023: 10,310 ktCO2e) for Scope 3.
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Restatement of 2023 metrics previously presented
We have undertaken a review of our approach to asset classification in order to more closely align to PCAF guidance. This review led to
the removal of some assets from what had previously been included in the scope of our reporting for listed equity and corporate bonds.
As a result of this change, we have restated the 2023 metrics previously presented. The change in asset classification has resulted in a
reduction in the value of assets in-scope (14%), however the impact on our reported emissions is smaller (6%) as the majority of assets
removed did not have emissions data coverage. Of the assets removed from scope, we have presented green, social and sustainability
bonds (where there is a known use of proceeds) as a separate asset class this year – the emissions relating to these can be found
below. Further details are set out in our Basis of Reporting, available on our website.
Green, social and sustainability bonds
The table below presents emissions metrics relating to our listed corporate bonds where there is a known use of proceeds,
covering green, social and sustainability bonds.
2024
2024
Coverage
2023
2023
Coverage
AUMA in-scope for metrics presented (£bn)
9.1
N/A
7.8
N/A
FCE – Scope 1 & 2 (ktCO2e)
225
96%
318
89%
Data quality score – Scope 1 & 2
2.2
N/A
2.4
N/A
FCE – Scope 3 (ktCO2e)
1,792
95%
2,129
82%
Data quality score – Scope 3
2.4
N/A
2.3
N/A
Carbon footprint – Scope 1 & 2 (tCO2e/£m invested)
26
96%
46
89%
Carbon footprint – Scope 3 (tCO2e/£m invested)
207
95%
333
82%
Analysis of 2024 compared with 2023 metrics
This asset class has been separated from listed equity and corporate bonds and presented separately here for the first time as
explained above. For 2024, despite an increase in both AUMA and coverage, we have seen a reduction in Scope 1 & 2 and Scope 3
emissions driven by reduced exposures to some higher emitting holdings.
Sovereign debt
In the table below, we have included financed domestic production and consumption emissions, and their respective weighted
average intensities, showing both including and excluding Land Use, Land Use Change and Forestry (LULUCF).
2024
i
2023
incl.
LULUCF
excl.
LULUCF
Coverage
incl.
LULUCF
excl.
LULUCF
Coverage
AUMA in-scope for metrics presented (£bn)
41.3
A
41.3
A
N/A
40.1
40.1
N/A
Financed sovereign production emissions - Scope 1 (ktCO2e)
11,379
A 11,064
A
99.5%
11,123 10,705
99.6%
Data quality score – production emissions
1.9
A
1.9
A
N/A
1.9
1.9
N/A
Financed sovereign consumption emissions - Scope 1,2,3 (ktCO2e)
11,939
A 11,629
A
99.5%
10,601 10,390
95.2%
Data quality score – consumption emissions
4.0
A
4.0
A
N/A
4.0
4.0
N/A
Weighted average sovereign production intensity - Scope 1 (tCO2e/
PPP-adj. GDP (USDm))
0.2
A
0.2
A
99.5%
0.2
0.2
99.6%
Weighted average sovereign consumption intensity - Scope 1,2,3
(tCO2e/ Capita)
10.4
A
10.6
A
99.5%
9.8
10.1
95.2%
Analysis of 2024 compared with 2023 metrics
We have updated our process for collecting sovereign debt emissions data this year, sourcing data from a third-party data vendor
in place of manual sourcing across publicly available data undertaken previously. The impact of this change on production
emissions is negligible, however where the new data source is applied to consumption emissions for 2023, the recalculated output
increases by 10% to 11,667 ktCO2e (including LULUCF) driven primarily by the increased coverage provided by the new data
source. Other smaller impacts come from more recent data being available, and different estimation methodologies being used by
the data vendor compared to those sourced for 2023 outputs.
In 2024, once the change in process is considered, sovereign emissions increased largely in line with the increase of in-scope
AUMA. The increase in in-scope AUMA is largely driven by increased exposure to US sovereign debt.
Similar to listed equity and corporate bonds, our MGSA portfolios make up a significant proportion of our sovereign FCE at 2,065
ktCO2e (2023: 2,199 ktCO2e) for production emissions and 1,719 ktCO2e (2023: 1,656 ktCO2e) for consumption emissions (both
including LULUCF).
i
Selected metrics reported for 2024 (as indicated by
A) have been subject to external independent limited assurance by PricewaterhouseCoopers LLP (PwC).
PwC’s independent limited assurance report is available on our website.
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78
Private assets (M&G Real Estate and Infracapital)
For private assets, we currently present emissions metrics for our commercial real estate assets managed by M&G Real Estate, and
assets held within our private infrastructure investment business, Infracapital.
2024
2024
Coverage
2023
Restated
i
2023
Restated
Coverage
2023
(previously
presented)
2023
Coverage
(previously
presented)
Real Estate – AUMA in-scope for metrics presented (£bn)
32.5
N/A
31.7
N/A
31.7
N/A
Real Estate – FCE Scope 1 & 2 (ktCO2e)
106
80.4%
112
84.7%
93
84.7%
Real Estate – FCE Scope 3 (ktCO2e)
484
80.4%
487
84.7%
584
84.7%
Real Estate – Carbon footprint Scope 1 & 2 (tCO2e/£m)
4.1
80.4%
4.2
84.7%
3.5
84.7%
Real Estate – Carbon footprint Scope 3 (tCO2e/£m)
18.5
80.4%
18.2
84.7%
21.8
84.7%
Infracapital – AUMA in-scope for metrics presented (£bn)
4.4
N/A
4.4
N/A
Infracapital – FCE Scope 1 & 2 (ktCO2e)
466
99.9%
652
91.7%
Infracapital – FCE Scope 3 (ktCO2e)
71
79.7%
14
72.2%
Infracapital – Carbon footprint Scope 1 & 2 (tCO2e/£m)
105
99.9%
162
91.7%
Infracapital – Carbon footprint Scope 3 (tCO2e/£m)
20
79.7%
4.4
72.2%
Analysis of 2024 compared with 2023 metrics
Our real estate assets recorded a decrease in Scope 1 & 2 emissions of 5% compared to restated 2023 figures, primarily due to a
decrease in coverage, but supported by energy efficiencies implemented by M&G Real Estate’s property managers. Scope 3
emissions have remained stable compared to restated 2023 emissions.
Infracapital emissions data is based on numbers reported directly from the underlying investee companies
ii. The decrease in Scope
1 & 2 FCE is mainly reflective of the sale of some high emitting assets. Scope 3 emissions have increased as investee company
reporting becomes more mature.
i
We have restated 2023 outputs for real estate to reflect actual emissions data obtained after the reporting period where estimated data had been used in
the 2023 calculations.
ii
This emissions data has not been externally audited.
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79
Implied temperature rise
Outside
Paris goals
Inside
Paris goals
Portfolio alignment
Backward-looking data is important to assess decarbonisation
progress and investment exposures, but analysis of portfolio
alignment and future scenarios is necessary to gauge the
credibility of transition plans and how companies and assets
are likely to fare in a world of growing climate-related risks and
opportunities. In this section we present the following metrics:
– Asset alignment: this metric is based on our Transition
Assessment Framework and captures several components
of a company’s transition plan, including whether they have
set science-based targets, actions to deliver their targets
and supporting investment.
– Implied temperature rise (ITR): this metric is an attempt to
estimate the temperature trajectory an issuer or portfolio is
on, providing a simple measure of alignment with the Paris
Agreement goals.
Transition Assessment Framework (public assets)
This year, we have calculated a new ‘asset alignment’ metric,
which shows the percentage of public asset financed
emissions (all GHG scopes) that we have assessed to be ‘not
aligned’, ‘committed’, ‘aligning’ or ‘aligned’ with climate goals
based on our Transition Assessment Framework (TAF).
The proportion of financed emissions from issuers that are
‘aligning’, ‘aligned’ or ‘net zero’ under the TAF is a new interim
target for in-scope assets (see page 66 for further details). We
are targeting a range of 50-70% by 2030.
At the end of 2024, 39.8% of financed carbon emissions
associated with in-scope assets (£71 billion) were either aligning
or aligned. No issuer assessed has reached net zero emissions.
2024
Not aligned (%)
46.2
Committed (%)
14.0
Aligning and aligned (%)
39.8
Implied temperature rise (public assets)
As part of our forward-looking analysis, we also calculate the
implied temperature rise (ITR) for each public market issuer
where data is available (covering 95% of in-scope listed
equities and corporate debt as at 31 December 2024). ITR is an
intuitive way to assess transition alignment, within and
between investment portfolios, by translating each issuers
emissions trajectory into a temperature increase which can be
weighted and aggregated. In simple terms, it shows what the
global temperature rise could be if the whole economy
followed the same emissions pathway (carbon budget over or
undershoot) as the issuer or portfolio analysed.
ITRs are inherently limited and we recognise the following:
– There is no commonly accepted approach to temperature
alignment calculations, which makes comparisons across
different model outputs problematic.
– The methodology we have used allocates a carbon budget to
each company, and compares that company’s progress and
expected future emissions against that budget.
– The calculation is sensitive to sector emissions assumptions.
– It is based on carbon intensity (emissions per unit of revenue
for each investee), and on projections of future emissions
which are subject to significant uncertainties.
– The portfolio ITR is calculated as the weighted average of
individual company ITRs (based on market value).
– ITR by its nature is a point-in-time metric and therefore does
not account for likely changes to our portfolios.
We do not use ITR in isolation, due to the limitations mentioned,
but believe it provides a useful indication of alignment when
viewed in conjunction with other information.
The chart below shows the composition of our ITR exposure
(by market value), with issuers aligned to a broad range of
temperature outcomes. While the proportion aligned to below
1.5°C has increased to 43% (2023: 38%), 46% of modelled
assets still exceed 2°C based on the underlying issuers’
transition pathways. The weighted average warming potential
across modelled issuers (listed equities and corporate debt) is
2.6°C, which represents an increase from our average
temperature alignment in 2023 (2.5°C).
While the average across our modelled assets is higher than
the Paris Agreement goals, this is consistent with the broader
economy and therefore not surprising at this stage in the
climate transition.
43%
11%
13%
10%
6%
17%
Fossil fuel and EU Taxonomy-aligned assets
We monitor metrics that track fossil fuel and EU taxonomy-
aligned exposures to assess climate transition risks and
opportunities. The fossil fuel exposure data is relevant from an
engagement and voting perspective, as it captures many of the
target companies in our climate stewardship programme.
These metrics can be found in our Sustainability Annex
available on our website.
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Portfolio alignment
80
Paris
Agreement
* The weighted average warming potential across
investees modelled is 2.6
oC (2023: 2.5
oC)
2.6°C
M&G
Average
>4.0°C
3.0-4.0°C
2.5-3.0°C
2.0-2.5°C
1.5-2.0°C
=<1.5°C
Scenario analysis is a type of forward-looking assessment we
use to assess the resilience of our listed equity, listed
corporate debt (with known and unknown use of proceeds),
sovereign debt, real estate and infrastructure portfolios to
different future climate scenarios. We conduct the following
assessments, using models that have sufficient coverage
across key funds and our largest issuers:
– Climate-adjusted value (CaV): this metric is equivalent to
value at risk (VaR), but is calculated on a bottom-up basis, by
assessing the impact of different climate scenarios on a
company’s financial position and market valuation. The
adjusted value is calculated separately for physical and
transition risks as part of the scenario model we use across
our public portfolios (Aladdin Climate).
– Private asset climate hazard exposure: this data shows
potential physical climate risk impacts across private fixed
assets, covering real estate and infrastructure. Physical risk
exposures assessed include climate-related natural
disasters, such as storms, flooding and wildfires.
Methodology and limitations
The scenario modelling outputs we produce are based on a
bottom-up approach, starting at the company and asset level,
but we also carry out top-down scenario analysis as part of our
balance sheet stress tests (see page 71).
Asset-level analysis can help our investment teams identify and
monitor specific transition and physical risk exposures, to
inform investment decisions and improve the quality of
engagement with issuers. In this analysis, the scope of assets
included for public and private asset portfolios are the same as
those in our backward-looking metrics unless otherwise stated.
We rely on data modelling partners to provide us with portfolio,
sector, and asset-level output data, including projected future
GHG emission, emissions intensity, physical climate damages,
energy demand and technological capabilities. The data points
are then aggregated to calculate the climate-adjusted
valuation.
As with any model, the results are heavily influenced by the
assumptions made, which significantly influence the outputs.
We recognise that the climate models are based on simplified
scenarios, and can’t capture the full complexity and dynamics of
natural and economic systems. The results are not predictive,
but rather help us explore a range of potential outcomes.
It should also be noted that the data underpinning climate-
scenario modelling is reported by companies at a lag relative to
financial data. We have used up-to-date information where
available. However, for a subset of our analysis, the GHG
emissions used in the scenario modelling represents data from
prior years.
Our scenario modelling outputs should be considered in the
context of the limitations described above, as well as additional
detail on limitations described on pages 357-358.
Public assets
As part of our forward-looking analysis we use Aladdin Climate
to model our public asset portfolios (equities, corporate debt
and sovereign debt) against the financial impact of climate
change based on three Network for Greening the Financial
System (NGFS) scenarios:
– An orderly scenario, predicting a temperature rise below 2°C
by 2100 as a result of immediate climate action.
– A disorderly scenario, in which climate action is delayed until
2030, and the temperature rise is kept below 2°C.
– A hot house scenario, which predicts an average
temperature change of over 3°C by 2100, assuming only
current policies are implemented.
This analysis provides estimates of the financial impact on all
issuers modelled, including on asset valuations. Our analysis
shows that our exposure to energy and materials sectors
where valuation impacts are higher is relatively small, but we
have more sizeable exposure to industrials. We continue to
focus our climate-related stewardship on high-emitting issuers,
notably through our asset manager Hot 100 engagement
programme. Further details on the outputs from this analysis,
which are considered as part of our risk management
processes (see pages 71-72), can be found on page 356.
Private assets
For the real estate and infrastructure asset modelling, we
continue to use the global insurance broker and risk adviser
Marsh to assess our real estate and infrastructure exposure to
physical climate risk. Our output is limited to Representative
Concentration Pathway (RCP) 2.6 and 8.5 only, as produced by
the IPCC. These conceptually align to the public asset orderly
and hot house scenarios.
The output of this model is limited to the identification of risk
level, with the results for assets that have been classified as at
high risk from climate-related hazards being presented on
page 357. The analysis shows that this still represents a
relatively small share of assets across the period covered for
the two business areas.
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Scenario analysis
81
Orderly
Disorderly
Hot House
2020
2025
2030
2035
2040
2045
2050
0
10,000
20,000
30,000
40,000
50,000
Source: Network for Greening the Financial System (NGFS) - Phase 3
Scenario global emission trajectories
Million tons of CO₂e/year
We aim to operate with the highest levels of integrity in the way
we conduct business and have a no tolerance approach to
bribery and corruption given its adverse impact on society and
undermining of economic development. Risk management
and control failures could lead to criminal prosecution, fines
or reprimands and/or cause significant damage to
M&G’s reputation.
Annual mandatory training and contractual clauses help to
make employees (and associated persons) aware of their
obligations under relevant anti-financial crime laws and
regulations, including the UK Bribery Act 2010.
Adherence to policies
Our approach to management of financial crime risk is
articulated in our Financial Crime Policy and related standards.
Together, the policy and standards are designed to manage
M&G’s obligations under applicable laws and regulations.
We require all our employees across the globe, including
persons that conduct activity on our behalf (associated
persons), to adhere to our Financial Crime Policy and
standards, which include anti-bribery and anti-corruption
controls, and to carry out their duties with openness and
transparency.
Any wrongdoing by M&G, its employees or its other associated
persons will be reported as necessary to law enforcement and
our regulators, in accordance with applicable law and under
policy. In addition, our Gifts and Hospitality Standard and
associated controls that we operate helps to ensure dealings
with external parties are managed effectively, limiting the risks
of improper conduct.
Our Financial Crime Policy and standards are underpinned by
legislative and regulatory obligations as well as industry
guidance issued by bodies such as the UK’s Joint Money
Laundering Steering Group. They require us to apply Enhanced
Due Diligence to relationships involving Politically Exposed
Persons (PEPs) and other high-risk clients and for such
relationships to be approved by senior management.
Investments
As an investor, we manage financial crime risks for the
investments that we make. For example, known corrupt
practices by governments, entities or people, may mean an
investment target is also subject to economic sanctions by
applicable regimes. Such target investments are excluded from
our investment universe through our sanctions compliance.
Our investment teams consider governance factors in their
investment analysis and decision-making, as far as we are able
and where it is financially material, including factors such as
issuer exposure to bribery and corruption risk. For funds and
mandates applying an exclusion based on global norms (e.g.
the UN Global Compact Principles, which include anti-
corruption and anti-bribery considerations), our Global Norms
Committee decides whether we consider companies to be
responsible for severe, repeated and/or systemic breaches of
norms (as identified through data providers and/or internal
research). The Global Norms Committee, which consists of
representatives from across our business, including our asset
manager and asset owner, discusses cases to determine if
exclusion, engagement or monitoring is the most suitable
course of action.
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Responsible business practices
Anti-bribery and anti-corruption
82
We are committed to supporting human rights and we strive to
uphold the UN Guiding Principles on Business and Human
Rights, the global standard of conduct that both governments
and companies are expected to meet. M&G is a signatory to the
UN Global Compact, and both our asset manager and owner
are signatories to the Principles for Responsible Investment.
Both these initiatives set standards and guidance to manage
human rights issues.
In 2024, M&G improved our ranking in the Churches,
Charities and Local Authorities (CCLA) Modern Slavery
benchmark, going from fourth to second tier (one being the
highest tier out of five in total).
Employees
Our values of care and integrity underpin our approach to
human rights in the workplace. We believe that everyone
should be treated with respect and we seek to empower our
employees to do the right thing. With over 6,000 employees in
six continents, our policies, including our Code of Conduct,
reiterate our commitment to respect, non-discrimination,
health and safety and freedom of association.
In the UK, we have a recognition agreement with the trade
union, UNITE. The trade union negotiates with
management on a number of areas including annual salary
pots, principles around its fair distribution and other terms
and conditions of employment.
Our Code of Conduct mandates employees to uphold our
core values and behaviours. The ‘Speak Out’ whistleblowing
programme allows confidential reporting of misconduct and
wrongdoing. M&G’s mandatory e-learning training on modern
slavery requires all staff to take the session annually, and, in
doing so, underscores the importance of risk awareness
among our employees.
Supply chain
Supply chains have inherent human rights risks. According to
the Global Slavery Index, G20 countries together import
US$468 billion worth of goods at risk of forced labour
per annum.
We assess suppliers with potential exposure to modern slavery
based on whether they fall into a high-risk procurement
category such as cleaning suppliers, goods not for resale, office
equipment and facilities management. For suppliers identified
as high-risk, we then endeavour to understand their approach
to managing modern slavery risks through a questionnaire. This
looks at whether suppliers have appropriate systems in place,
for example policies, training and other relevant controls. We
then make recommendations to these suppliers to help
strengthen their management practices. In 2024, we have been
progressively closing off actions arising from the questionnaire,
to confirm suppliers are responsibly addressing exposure to
risk. We always first seek to work with suppliers to address any
identified gaps, prioritising issues based on their severity,
rather than simply exiting from a relationship, as we recognise
this is a more responsible approach.
Investments
With £345.9 billion of assets under management and
administration, our influence extends far beyond our direct
operations or those of our supply chains. We seek to integrate
ESG across all investments where possible and financially
material.
Human rights (including modern slavery) is considered within
our sustainability research, particularly in sectors where risk of
involvement is material. To support this, we also endeavour to
screen holdings to identify high-risk companies in relation to
modern slavery, using internal and external expertise and data
such as the Corporate Human Rights Benchmark. In 2024, PAC
engaged with underlying managers who held names flagged
under this screening and M&G Investments conducted 23
engagements with 21 companies to address modern slavery
and human rights concerns. If material human rights issues are
identified, including modern slavery, this could also be
considered under the global norms exclusion process, as
outlined on the previous page.
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Human rights
83
In accordance with Section 31 of the UK Corporate Governance
Code, the Board has undertaken a comprehensive and robust
assessment of the prospects and viability of the Group.
Process for assessing long-term prospects
The Group’s long-term prospects are primarily assessed through
the strategic and financial planning process. Due to the long
dated nature of our products, the Board considers the
sustainability and resilience of the strategy and business model,
as detailed on pages 10-11 and pages 6-7, over a longer time
horizon. This includes the consideration of longer term themes
such as technology, digitalisation, growing need for savings
products and climate change which are pertinent to the Group.
The Board have also considered the output of the financial
planning process reflected in the Business Plan which covers the
period to December 2027. The Business Plan was approved by the
Board in March 2025, following a rigorous review and challenge
process.
The Business Plan contains detailed financial forecasts, including
the related risks and mitigating actions over the planning period.
The forecasts have been prepared based on the business model
that management is deploying to deliver against our key strategic
pillars, as explained on pages 10-11. The Business Plan covers all
the key measures that underpin our Financial Management
Framework, which includes metrics on capital, liquidity, debt
and earnings.
The Business Plan considers the implications of current and
emerging risks and the resulting uncertainties that these present
to the achievement of the Business Plan, including the principal
risks and uncertainties to which the Group is exposed, as
discussed on pages 46-53. We assess these risks and
uncertainties through stress and scenario testing as discussed
below.
Progress against the Business Plan will be monitored regularly by
the Board.
The Board also considered and reviewed the results of the annual
Own Risk and Solvency Assessment (ORSA), which is an integral
part of our risk management process. The process assists the
Board to assess the resilience of the Group’s solvency position to
various risk and stress scenarios. The Board confirms that it has
carried out a robust assessment of the Group’s emerging and
principal risks.
Period for assessing viability
The Board considers that the three-year period to December 2027
is appropriate for assessing viability. This aligns with the business
planning horizon and as such, reflects the period over which key
strategic initiatives will be delivered, principal risks will be
managed and results will be monitored.
Assessment of viability
The Board assessed the financial and operational impact of the
Group’s principal risks on the ability to deliver the Business Plan.
The Board reviews the principal risks to ensure that they reflect
current market conditions and any changes to the Group
risk profile.
As part of the strategic and financial planning process, we
considered the resilience of our financial position to various
combined risk scenarios.
The combined scenarios are developed by the Risk and Resilience
team, with input from the Investment Office and Finance. The
process is overseen by the Group Risk Committee.
The Business Plan was subjected to the following combined risk
scenarios based on plausible pathways for the global economy in
the context of technological developments and geopolitical
uncertainty, and the resultant impact on investment performance
and consumer behaviour:
– Optimistic (Productivity Boom) – AI developments help to spark
a productivity boom, raising potential growth of the economy
without raising inflationary pressure.
– Severe Pessimistic (Geo-Political Escalation) – Further
escalations in one of the main regions of conflict leads to direct
escalation between major economic blocs, disrupting trade and
leading to a spike in prices of key commodities and heightened
risk aversion in capital markets.
– Stagflation (Trade War) – Major economies escalate
protectionist policies, driving a further supply shock high
inflation, forcing central banks to remain restrictive in policy
setting. The elevated nature of inflation and tight credit
conditions leads to demand destruction in the real economy
and a recession.
The stated scenarios were translated into impacts on various
macroeconomic indicators to determine how delivery of the
Business Plan is affected.
In addition, as part of its ORSA, the Group undertook reverse
stress testing to determine scenarios that would result in the
shareholder solvency coverage ratio falling below 100%.
The derived scenarios indicated that the Group had the ability to
withstand severe events while still meeting its capital
requirements and maintaining sufficient headroom to maintain
viability over the projection period.
Climate risk is considered by the Board as part of its strategic
oversight. It features in the assumptions and modelling performed
for our Business Plan and is also assessed as part of our ORSA.
We continue to refine our climate-related scenario testing
approach and to assess appropriate management actions that
could mitigate the impacts of climate-related risks.
For the purpose of the ORSA, the following scenarios
were assessed:
– Net zero 2050 – Global warming limited to 1.5ºC by the end of
the century through stringent climate policies and innovation,
reaching global net zero CO2 emissions around 2050.
– Fragmented World – Assumes a delayed and divergent climate
policy response among countries globally, leading to high
physical and transition risks. Countries with net zero targets
achieve them only partially (80% of the target), while other
countries follow current policies.
– Current Policies - Only currently implemented policies are
preserved, leading to high physical risks. Warming exceeds
2.9ºC by 2100.
– Sudden Wake-Up Call - A major climate event leads to large
economic disruption over a short-term horizon followed by a
move to an accelerated transition path.
The results of the stress and scenario testing demonstrated that
due to the comprehensive risk management process in place and
the broad range of mitigating actions available, such as access to
immediate liquidity funding and the ability to reduce dividends,
the Group is able to withstand the impact in each case with
regards to meeting all liabilities as they fall due.
Statement of viability
Based on the results of the procedures outlined above, the Board
has a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over
the three-year period ending 31 December 2027.
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84
The Strategic Report presented in our Annual Report and Accounts for the year ended 31 December 2024 has been prepared in
accordance with the Companies Act 2006 and the Disclosure and Transparency Rules (DTR) issued by the FCA. In accordance with
Section 414C of the Companies Act 2006, DTR 4.1.8 and DTR 4.1.9, the Group is required to provide a fair, balanced and understandable
review of the business, including key performance indicators to the extent necessary, and a description of the principal risks and
uncertainties facing the Group.
The risk management section of the Strategic Report describes the principal risks and uncertainties on pages 46-53.
In preparing this Strategic Report we have considered the Guidance on the Strategic Report as issued by the Financial Reporting Council
in June 2022.
In addition the Board has also considered the guidelines with respect to alternative performance measures (APMs) as issued by the
European Securities and Markets Authority (ESMA) in October 2015 and the guidance on APMs included in the thematic review published
by the Financial Reporting Council titled IFRS 17 ‘Insurance Contracts’ Disclosures in the First Year of Application in September 2024.
Our Board believes that the APMs identified within the Strategic Report are useful for management and investors in assessing the
performance of the business during the year, in conjunction with the relevant IFRS results included within the Group’s consolidated
financial statements.
Approved by the Board of Directors and signed on their behalf by
Andrea Rossi
Group Chief Executive Officer
18 March 2025
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Basis of preparation
85
Governance
87 Chair’s introduction to governance
89 Board of Directors
92 Board leadership and company purpose
94 Division of responsibilities
96 Composition, succession and evaluation
101 Audit, risk and internal controls
102 Nomination and Governance Committee Report
104 Audit Committee Report
110 Risk Committee Report
112 Directors’ Remuneration Report
120 Directors’ Remuneration Policy
129 Remuneration at a glance
138 Annual Report on Remuneration
157 Directors’ Report
160 Statement of Directors’ responsibilities
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86
The Board is responsible for our long-term sustainable success, generating
stakeholder value and achieving the Group’s objectives
As Chair of the Board I am pleased to present the key areas of
governance on which the Board has focused over 2024. We
have complied with the UK Corporate Governance Code
throughout the financial year. The table on the next page sets
out examples of how the Board has done this for each Principle
and signposts to where you can find more information.
Governance and strategy
The Board is responsible for M&G’s long-term sustainable
success, generating value for shareholders and contributing to
wider society.
During 2024 the Board oversaw a strategic review of the
Wealth segment and concluded that the competitive position in
the wealth market was not sufficiently strong enough to ensure
profitable growth without committing significant resources. As
a result, the Board resolved to refocus and rationalise our
Wealth strategy, combining the Life and Wealth operations to
continue to build on our financial strength while driving
simplification and efficiencies that benefit our clients, and
deliver growth. I believe that our revised approach will set M&G
up to achieve our strategic goals and deliver for our customers.
Culture
Having the right culture at M&G is fundamental to our strategy
and the Board is committed to ensuring that our colleagues are
engaged in creating the right work environment and a positive
culture. The Board continued to monitor and review the actions
taken to embed the new purpose approved in 2023, together
with the values and behaviours aligned to our strategy and
business plan.
The Board monitors culture in a number of ways and receives
regular updates on people and culture, as well as insights from
regular colleague surveys. We also draw on regular formal and
informal sessions with colleagues to gain deeper insights into
our culture. The purpose of the sessions is for Board members
to have the opportunity to directly engage with, and listen to,
colleagues from different cross sections of the business and to
ensure we are reflecting feedback into planning and decision-
making.
The Board and I strongly believe in the value of culture and
demonstrating the right tone from the top, and key to our
success is maintaining our positive culture.
Stakeholders
The Board takes active steps to understand the interests,
needs and concerns of other key stakeholders. Ongoing
engagement and active listening are vital to ensuring that
stakeholder views are properly understood and appropriately
represented. In particular, the Board regularly discusses and
advocates for a client-focused mindset and delivery of good
customer outcomes.
Board evaluation review
The Board reflects on its performance and effectiveness
annually. This year, our evaluation was internally facilitated by
the Senior Independent Director and the General Counsel and
Company Secretary. The review included a detailed
questionnaire and sought the views of Directors on a number of
topics including Board composition and dynamics,
stakeholders and culture, strategic and operational oversight,
Board support, management and focus of meetings, risk
management and internal controls, and the performance of the
Board and individual directors.
Key themes were used to develop an action plan, which was
reviewed and endorsed by the Board. The Board will continue
to track the actions through 2025 and progress will be
reviewed at Board meetings through the year.
More information about the Board evaluation and action plan is
on pages 99 and 100.
Board composition and succession planning
Board composition and succession planning was a key area of
focus for the Nomination and Governance Committee during
2024, helping us ensure we have the appropriate balance of the
desired skills, experience, independence and knowledge.
As Chair, I consider each Director’s individual contribution to
the Board, together with feedback and insights from the 2024
Board effectiveness review, to confirm that all Directors are
discharging their roles effectively. The Nomination and
Governance Committee keeps the skills required by the Board
under review as part of succession planning.
Appointments to the Board during the year included Elisabeth
Stheeman and Paul Evans as Non-Executive Directors. Clare
Thompson was formally appointed to the Senior Independent
Director (‘SID’) position having been acting SID since May 2023.
Sustainability
During the year the Board approved our refreshed Group
sustainability strategy, which seeks to support two themes -
Resilient planet and Resilient societies – as part of a new
sustainability framework. The refreshed strategy builds on our
current capabilities and progress made through existing
targets, business activities and partnerships. We believe that
the new framework is aligned to our purpose and will support
the businesses’ plans to drive growth while meeting evolving
sustainability regulations and client expectations.
Our climate targets have been described interchangeably as
‘commitments’, ‘targets’ and ‘aims’ in past reporting. To avoid
ambiguity in climate reporting from this year, we have adopted
a more consistent approach, labelling all targets in our climate
strategy as ‘targets’. This change in terminology does not
necessarily reflect a change in the underlying nature of the
target.
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Financial information
Other information
Chair’s introduction to governance
Governance that supports our business
87
Diversity
The Board is fully committed to
leveraging the benefits of diversity of
thought and life experience in our
discussions. We have committed to and
are currently achieving the gender and
ethnic diversity targets contained in FCA
Listing Rule 6.6.6 (9). I am pleased that
50% of the senior Board positions
(Chair, Group CEO, SID and CFO) are
held by a woman, the gender diversity on
the Board is 40%, an increase from the
prior year figure of 37.5% and, the Board
continues to meet the requirement of at
least one of its members to be from an
ethnic minority.
AGM
The Board would like to thank our
shareholders who participated in our
AGM in 2024. The Board continues to
view the AGM as a key point in our
governance calendar. It is an opportunity
to listen to views from our shareholders
and for shareholders to meet and ask
questions of our Board members,
including Committee Chairs. We look
forward to welcoming you again in 2025.
Finally, I would like to thank our
colleagues for all of their hard work
during 2024 and the commitment they
have shown to deliver for our
stakeholders.
Sir Edward Braham
Chair
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Chair's introduction to governance continued
88
Code Principle
Read More
Board leadership and company purpose
Long-term value and sustainability
Page 92
Culture
Page 92
Shareholder engagement
Page 92
Other stakeholder engagement
Pages 92-93
Conflicts of interest
Page 103
Role of the Chair
Page 94
Division of responsibilities
Non-Executive Directors
Page 94
Independence
Page 96
Composition, succession and evaluation
Appointments and succession planning
Page 96
Skills, experience and knowledge
Pages 89-91
Length of service
Pages 89-91
Evaluation
Pages 99-100
Diversity
Page 96
Audit, risk and internal control
Audit Committee
Pages 104-109
Integrity of Financial Statements
Pages 104-109
Fair, balanced and understandable
Page 105
Internal controls and risk management
Page 106
External auditor
Page 107
Principal and emerging risks
Pages 46-53
Remuneration
Policies and processes
Pages 120-128
Alignment with purpose, values and long-term strategy
Pages 112-119
Independent judgement and discretion
Pages 120-128
The UK Corporate Governance Code can be found on the FRC website
UK Corporate Governance Code
The Company has complied with the principles of the UK Corporate Governance Code
(the Code) throughout the financial year ended 31 December 2024 and to the date of
this report, and complied with all provisions of the Code.
The table below sets out examples of how the Board has done this for each principle,
enabling our shareholders to evaluate our Code compliance. We have also signposted
to different parts of the Annual Report where you can find more information.
We have a diverse Board, with a balance of skills, experience and specific
strengths, providing different perspectives in Board decision making
Sir Edward Braham
Chair
Relevant skills and experience
Sir Edward Braham joined as Chair in March
2022. Edward was previously the Senior Partner
of Freshfields, the global law firm, and before
that, Global Head of its Corporate practice. While
the Senior Partner, he headed the firm’s
strategic growth in the US, including establishing
a new office in Silicon Valley. Edward also led on
culture, diversity and ESG. Edward was a leading
international lawyer in mergers and acquisitions,
with experience in many industries, including
financial services.
Other appointments
– TheCityUK (Chair of International Trade and
Investment Group)
– HM Treasury (Non-Executive member of
the Board)
– Lord Mayor’s Appeal Advisory Board (Chair)
– Modern Slavery and Human Trafficking
Commission (Commissioner)
– Charities Aid Foundation (Trustee and
Chair-elect)
Appointment: 14 March 2022
Clare Thompson
Senior Independent Director
Relevant skills and experience
Clare Thompson is an experienced Non-
Executive Director with a deep understanding of
the insurance sector and extensive financial
services and audit experience.
Clare spent 23 years as lead audit partner in
major financial services groups at PwC,
predominantly in the insurance and investment
sectors. Since stepping down from her executive
career, Clare has held several non-executive
directorships. Her previous non-executive
director roles include Direct Line Group and The
British United Provident Association Limited
(Bupa).
Clare is Chair of Investment Funds Direct
Limited. Also Clare is a Fellow of the Institute of
Chartered Accountants in England and Wales.
Other appointments
– Financial Reporting Council (Non-Executive
Director/Senior Independent Director)
Appointment: 7 May 2019
Andrea Rossi
Group Chief Executive Officer
Relevant skills and experience
Andrea Rossi was appointed Group Chief
Executive Officer in October 2022. He has more
than 25 years of experience in financial services,
in particular in the global asset management and
insurance sectors. He was CEO of AXA
Investment Managers and a member of the AXA
Group Executive Committee for six years. Before
that Andrea spent five years as CEO of AXA's
Italian Insurance business. He also held a
number of senior roles across AXA’s insurance
businesses in France, the Mediterranean and
Middle East regions.
Before joining M&G, Andrea was a Senior
Adviser to the Boston Consulting Group on
Insurance and Asset Management within the
firm’s Financial Institutions practice.
Andrea graduated from INSEAD with an MBA in
1994, and holds an MsC in Economics and
Commerce from the University of Rome, 'La
Sapienza'.
Other appointments
– REsustain (Non-Executive Director)
– ARRM Capital Limited (Director)
Appointment: 10 October 2022
Kathryn McLeland
Chief Financial Officer
Relevant skills and experience
Kathryn McLeland was appointed as Chief
Financial Officer in May 2022. She is responsible
for managing the financial resources of the
Group, aligning Group-wide business and
transformation priorities, and ensuring robust
governance and compliance with regulatory
requirements. Kathryn joined M&G from Barclays
PLC, where she was Group Treasurer from 2018.
She held several senior roles at Barclays since
joining there in 2001, including Head of Equity
Investor Relations and Head of Investor
Relations. Previously, Kathryn held investment
banking roles at Merrill Lynch and Salomon
Brothers International. Kathryn served as a
member on the FCA Listing Authority
Advisory Panel.
Other appointments
– None
Appointment: 3 May 2022
Key
Risk Committee
Audit Committee
Remuneration Committee
Nomination and Governance Committee
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Experienced leadership
89
Clive Adamson
Independent Non-Executive Director
Relevant skills and experience
Clive Adamson has considerable experience of
UK and global economic, banking and regulatory
matters gained from an extensive career in
banking and financial services regulation,
including senior executive and advisory positions
with the FCA and its predecessor, the Financial
Services Authority. As well as his Board role, he is
Chair at Ashmore Group PLC and holds a number
of Board positions within the J.P. Morgan Chase
Group. Until January 2025, Clive was a Non-
Executive Director and Chair of the PAC Risk
Committee. He was previously a Non-Executive
Director and Chair of the Risk Committee at Virgin
Money and a Senior Adviser at McKinsey & Co.
Other appointments
– Ashmore Group plc (Chair)
– J.P. Morgan Europe Limited (Chair & Audit
Chair)
– J.P. Morgan Securities Plc (Non- Executive
Director & Audit Chair)
– Nutmeg Savings and Investment Limited
(Chair)
Appointment: 22 March 2019
Clare Chapman
Independent Non-Executive Director
Relevant skills and experience
Clare Chapman is Chair of ACAS, the Advisory,
Conciliation and Arbitration Service for Great
Britain, and co-Chair of The Purposeful
Company, which focuses on transforming UK
business with purposeful companies that create
long-term value by serving the needs of society.
Her executive career includes HR leadership
roles at BT Group, the UK Department of Health
and Social Care and Tesco, as well as
international roles at Pepsi-Cola International,
covering West and Central Europe, and Quaker
Oats in Chicago and London. She also has
experience in the Asian market.
Clare’s previous non-executive experience
includes chairing the remuneration committees
at Kingfisher, G4S and Heidrick & Struggles
International. She was also a Trustee at
Reconciliation Leaders Network.
Other appointments
– ACAS (Chair)
– The Purposeful Company (Co-Chair
and Steering Group Member)
Appointment: 15 March 2021
Paul Evans
Independent Non-Executive Director
Relevant skills and experience
Paul is an experienced senior business leader in
financial services, with deep experience in life
insurance. He brings international experience of
regulated risk management and governance
frameworks. He is currently Chair of Allianz
Holdings plc and Non-Executive Director and
Chair of the Audit Committee of Bupa. He spent
17 years at AXA in a variety of senior roles in life
insurance, wealth management and asset
management, including as Group CEO of AXA's
Global Life, Savings and Health businesses with
responsibility for global asset management. Prior
to joining AXA, Paul spent 13 years with PwC as
a Chartered Accountant.
Other appointments
– Allianz Holdings plc (Chair)
– Bupa (Non-Executive Director and Chair of
Audit)
Appointment: 1 October 2024
Dev Sanyal
Independent Non-Executive Director
Relevant skills and experience
Dev Sanyal is the CEO of VARO Energy Group, a
Swiss-based diversified energy company. He
has been in this position since 1 January 2022.
Until 2021, Dev was a member of bp’s Group
Executive committee for over a decade. His 32-
year career at bp included heading the Gas and
Low Carbon Energy business globally; Chief
Executive, Alternative Energy; as well as being
responsible for bp’s Europe and Asia regions.
Prior to that, he was Group Treasurer and
Chairman, bp Investment Management; Chief
Executive Air bp International and Chief
Executive, bp Eastern Mediterranean. Dev was
also an independent Non-Executive Director of
Man Group between 2013 and 2022.
Other appointments
– VARO Energy Group (Chief Executive Officer)
– Centre for European Reform (Member of
Advisory Board)
– Tufts University, The Fletcher School of Law
and Diplomacy (Member of Advisory Board)
Appointment: 16 May 2022
Elisabeth Stheeman
Independent Non-Executive Director
Relevant skills and experience
Elisabeth has over 30 years’ executive
experience in global blue chip organisations
across a range of different sectors, including
banking, real estate, private equity and
investment management. She served on the
Bank of England's Financial Policy Committee
until February 2024 and the Bank of England's
Financial Market Infrastructure Board until
December 2023. Prior to this, Elisabeth was the
Global Chief Operating Officer for LaSalle
Investment Management and prior to that
worked at Morgan Stanley for almost 25 years
across a variety of sectors including Real Estate
and the Financial Institutions Group.
Other appointments
– The Edinburgh Investment Trust plc (Chair)
– W. P. Carey Inc, (Non-Executive Director)
– Deloitte’s North & South Europe Board
(Member)
– Deloitte UK Oversight Board (Member)
– Deloitte’s Audit Governance Board
(Member)
– Asian Infrastructure Investment Bank
(External Member of the Audit and Risk
Committee)
Appointment: 1 August 2024
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Massimo Tosato
Independent Non-Executive Director
Relevant skills and experience
Massimo Tosato has 40 years’ experience as an
investment banking and international asset
management entrepreneur and senior manager.
Massimo’s career has included 21 years at
Schroders, where he was Chief Executive of
Schroder Investment Management Limited and
Executive Vice Chairman of Schroders plc. He
has also held non-executive Board positions at
Pictet Asset Management Holding (Geneva) until
March 2020, Nutmeg, Banca Nazionale del
Lavoro, and served as Vice President of the
European Fund and Asset Management
Association. He was on the Board of Overseers
of Columbia Business School in New York until
June 2022. Massimo served as an Advisory
Board member of Trilantic Europe Capital
Partners LLP until January 2022.
Other appointments
– Banca Investis SpA (Non-Executive Chair)
– Axyon AI (Member of Advisory Committee)
– TheCityUK (Co-Chair of the Anglo Italian
Financial Services Dialogue)
– Trinity investments (Advisor)
– Delbycrest Limited (Non-Executive
Director)
– Montpelier Investimenti srl (Sole Director)
– Tenuta Villa Pinciana società agricola
simplice (Co-Managing Partner)
Appointment: 1 April 2020
Charlotte Heiss
General Counsel and Company
Secretary
Relevant skills and experience
Charlotte Heiss has over 20 years' experience
advising a number of blue-chip companies
across a range of sectors on legal and
governance matters. She joined from The Very
Group, where she was Group General Counsel
and Company Secretary, responsible for the
oversight of corporate governance and ESG, as
well as legal, risk and compliance. Prior to that,
she spent 11 years at RSA Insurance Group,
including five years as Group General Counsel
and Company Secretary leading a global legal
and company secretarial team. She started her
career at Linklaters.
Other appointments
– Trustee, Family Action
Appointment: 5 June 2023
Key
Risk Committee
Audit Committee
Remuneration Committee
Nomination Committee
Board diversity
The FCA Listing Rule 6.6.6 (9) sets out a number of requirements for Board diversity based on the following targets:
– At least 40% of M&G’s Board are women (including those self-identifying as a woman).
– At least one of the senior board positions (Chair, Chief Executive Officer (CEO), Senior Independent Director (SID) or Chief
Financial Officer (CFO)) is a woman (including those self-identifying as a woman).
– At least one member of the Board is from a non-white ethnic minority background (as referenced in categories recommended
by the Office for National Statistics (ONS)).
The Board continues to meet the requirement for at least one of its members to be from an ethnic minority. Currently, 50% of the
senior Board positions (Chair, CEO, SID and CFO) are held by a woman and gender diversity on the Board is 40%. M&G therefore
met the 40% target as at 31 December 2024. See page 103 for further details.
Gender
Number of our
Board members
Percentage
of our Board
Number of senior
positions on
our Board
i
Number in
executive
management
Percentage of
executive
management
Men
6
60
2
6
60
Women
4
40
2
4
40
Ethnic Group
White British
6
60
2
6
60
Other white (including minority-white groups)
3
30
2
3
30
Mixed/multiple ethnic groups
—
—
—
—
—
Asian - Asian British
1
10
—
—
—
Not specified/prefer not to say
—
—
—
1
10
All data in graphs and tables are as at 31 December 2024. Data relating to the gender and ethnic diversity of the Board was collected by way of a
questionnaire. This questionnaire asked Board members individually to disclose their gender identity and ethnic background, on a voluntary self-
reporting basis, by selecting options aligned with those in the left-hand columns of the table above (and therefore included the option not to specify an
answer). M&G employees (including executive management) are encouraged to confirm their gender and ethnicity at the onboarding stage, on a
voluntary self-reporting basis, by selecting options (which include the option not to specify an answer). Data relating to the gender and ethnic diversity
of executive management was sourced from this existing data, which is held within M&G’s secure HR system.
i
Chair, CEO, SID and CFO.
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Board of Directors continued
91
Board responsibilities
The M&G Board is collectively responsible for our long-term,
sustainable success, the delivery of sustainable value to our
stakeholders, and contributing to wider society.
The responsibilities of the Board include:
– providing leadership, setting the strategy and maintaining
high standards of governance
– leading the development of our culture, values and
behaviours
– providing oversight of the execution of our strategy and
holding management to account for financial and business
performance
– ensuring the necessary resources are in place for the Group
to be able to meet its objectives and measure performance
against these
– being responsible for ensuring there is a framework of
prudent and effective controls, which enable risk to be
assessed and managed
– ensuring that its responsibilities to shareholders and
stakeholders are met, including through effective
engagement and dialogue with key stakeholders, particularly
shareholders, customers, colleagues and the regulators.
Culture, values and behaviours
The Board understands the importance of culture and setting
the tone of the organisation from the top and embedding it
throughout M&G. During the year, the Board received updates
from management on the progress being made to embed the
new purpose statement and behaviours. Our purpose is aligned
with our culture and strategy, and positions us to achieve
against our strategic pillars: profitable growth, simplification,
and financial strength targets.
The Board has approved the approach to culture
measurement, which includes consideration of a culture
insights report at least twice a year, and a culture dashboard as
a primary method for monitoring culture.
Additionally, the Board assesses culture when reviewing and
discussing the outputs and themes from regular colleague
surveys. The culture dashboard includes colleague and culture
insights on a range of matters including: safe; respectful;
inclusive; client-centric, accountable; and one team.
In 2024, the Board considered and endorsed the actions
proposed by management to further improve culture, which
included:
– additional actions to embed the strategic drivers and
priorities across M&G
– continued work to address barriers to execution to ensure
the delivery of good customer outcomes
– ensuring that support and clear communication are provided
during any transformation projects.
Stakeholder engagement
The Board seeks to understand the interests, needs and
concerns of shareholders and other key stakeholders
(including customers, colleagues, and regulators) to enable
M&G to pursue long-term sustainable success.
For more information on how we engage with our stakeholders
as well as how the Board has discharged its duties under
Section 172 of the Companies Act, see pages 34-39 of the
Strategic Report.
Shareholder engagement
We believe that regular, ongoing engagement with key
stakeholders and, in particular, our shareholders is central to
good corporate governance. Our Investor Relations (IR) team,
reporting to our Chief Financial Officer, is responsible for
managing institutional shareholder engagement and ensuring it
is effective and comprehensive.
Throughout 2024, management regularly met and engaged
with shareholders as part of results roadshows, at investor
conferences and at sell-side analyst events.
We held a mix of in-person and virtual meetings to maximise
investor engagement, encourage the participation of overseas
investors and manage time efficiently. Across 2024, we held
over 164 engagements with institutional equity and debt
investors, primarily from the UK. We achieved broad coverage
of our existing register, meeting with over 43% of our active
shareholder base.
The Chair, Senior Independent Director and Chairs of each
Board Committee are always available to engage with major
investors, typically to discuss corporate governance matters.
In 2024, the Chair engaged with shareholders on matters
including sustainability, remuneration and Board composition,
as well as performance against the Group’s strategy. The Chair
of the Remuneration Committee consulted with major
shareholders and proxy voting agencies to understand their
views on the proposed approach for our Remuneration Policy
and key executive remuneration decisions.
Further details and the outcome of this engagement are
included within the Directors’ Remuneration Report from page
112.
The Board receives a report on investor relations matters at
least quarterly, including feedback from investors, market
expectations of financial performance and updates on share
register composition. Our Corporate Brokers also provide the
Board with advice on market sentiment, input on market
communications and share register analysis.
In addition to information on strategic, financial, and
operational performance, the Group engages with
shareholders and relevant shareholder advisory agencies on
sustainability matters. The Group produces regular
sustainability reporting detailing our approach. This can be
found on our website.
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Board leadership and company purpose
92
Our AGM provides the opportunity for all shareholders to meet
and to put questions to the Board. We were delighted to host a
hybrid AGM in 2024. We encourage shareholders to use virtual
meeting technology to ask questions ‘live’ and to pre-register
questions in advance. The virtual meeting technology enables
shareholders to vote on AGM resolutions ‘live’ in the meeting.
Recognising that joining our full year and half year results
conference calls is not always possible, we ensure that
recordings of these presentations are accessible to all
shareholders via our website. We provide additional dedicated
services to our retail shareholders via the Group Secretariat
team and our registrar, Equiniti.
Workforce engagement
The Board believes that having a diverse team of colleagues
makes us more dynamic, fosters innovation and boosts
performance. The Board continues to support senior
leadership goals for ethnic and gender diversity. The Board
regularly tracks progress against these through diversity and
inclusion (D&I) reporting.
Information on D&I can be found in Our Colleagues section
on pages 40-43
To comply with the provision of the Code relating to workforce
engagement, the Board has determined it would have
collective responsibility for employee engagement. The Board
believes that Non-Executive Directors’ regular meetings with
colleagues across different geographies and seniority,
supplemented by colleague surveys and culture insight
reporting, are effective.
These methods facilitate meaningful, two-way dialogue
between the Board and colleagues to gain insights into culture,
and to understand colleague views and interests. It also inputs
into the Board’s decision-making process by ensuring
meaningful engagement on how feedback is considered and
acted upon.
Engagement during 2024 included seven sessions between
Non-Executive Directors and colleagues, together with various
sessions with colleagues as part of the Board’s site visit to
Kildean, Stirling in September 2024 and a Town Hall in London
in June 2024. The engagement sessions in Kildean between
the Board and colleagues included: a community roadshow; a
people manager session; a talent session; and a customer call
centre session where the Non-Executive Directors were able to
listen in to live customer calls. The Board also held a Townhall
with colleagues hosted by the Group CEO and General Counsel
and Company Secretary.
Feedback on themes from direct engagement sessions
between the Board and colleagues are documented and
shared with the Non-Executive Directors and the Chief People
Officer, to ensure appropriate follow-up and action as
applicable. Management regularly reports to the Board on a
range of people matters, topics and themes, which the Board
takes into account when making decisions.
Further information on colleague engagement
is in the stakeholder engagement section on page 37.
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Board leadership and company purpose continued
93
Our governance structure is designed to support delivery of
our strategy. The Board has responsibility for the oversight,
governance, direction, long-term sustainability and success of
the business and affairs of M&G, and is responsible to
shareholders for creating and delivering sustainable
shareholder value.
Board
The Board is specifically responsible for a range of matters,
which include:
– approving M&G’s strategic aims and objectives
– setting our purpose, standards, and culture
– approving the annual Group’s financial budgets and business
plan
– approval of effective risk management and internal control
processes
– taking strategic decisions
– the approval of specific matters.
The matters that require Board approval are contained in a
Schedule of Matters Reserved for the Board.
Chair, Group CEO and Non-Executive Directors
In discharging its responsibilities, the Board is supported by
management and ensures a clear division of responsibilities
between the Chair, the Group Chief Executive Officer, the
Senior Independent Director and the Non-Executive Directors.
Day-to-day management of M&G is delegated to the Group
Chief Executive Officer. The division of responsibilities between
the roles of the Chair, Chief Executive Officer and Senior
Independent Director are documented in accordance with the
principles and provisions of the Code.
The role of the Non-Executive Directors includes providing
constructive challenge, strategic guidance, offering specialist
advice, and holding management to account.
During the year, the Chair of the Board engaged with Directors
between Board meetings to discuss business and strategic
issues. The Chair and the Non-Executive Directors met
regularly during the year without the Executive Directors being
present.
The Board spent significant time getting to know the new
members of the Board and executive management team.
Comprehensive papers, comprising an agenda and formal
reports and briefing papers are sent to Directors in advance of
each Board and Committee meeting.
Board Committees
The Board delegates specific responsibilities to Board
Committees, which operate within clearly defined terms of
reference approved by the Board. In compliance with the Code,
the Board has established an Audit Committee, a Nomination
and Governance Committee and a Remuneration Committee.
We have also established a separate Risk Committee.
The Terms of Reference for each Board Committee are
reviewed and approved annually by the Board and are available
to view on our website.
The Committee Chairs are responsible for reporting to the
Board on the Committees’ activities and do so following each
Committee meeting.
Chairs’ Forum
The Chairs’ Forum is composed of the Chairs of M&G Group
Limited (MGG), The Prudential Assurance Company Limited
(PAC) and the Group Chair, with the Group CEO being invited
to meetings as needed. This provides an opportunity to engage
on common themes, matters of escalation, and other topics of
interest. During the year, this included: strategic matters; Board
effectiveness and succession planning; customer outcomes;
people and culture; regulatory matters; sustainability; and
financial performance and business plan.
Subsidiaries
Independent Non-Executive Directors are appointed to the
Boards of MGG and PAC relating to the Asset Management
and Life businesses respectively.
MGG and PAC both have a Board of Directors led by an
independent Chair, and Audit and Risk Committees, composed
entirely of independent Non-Executive Directors. During the
year, the Board of the Company and the Boards of these
material subsidiaries had a full day meeting discussing
strategic topics and priorities.
The Life business also has a With-Profits Committee, which is
composed of independent non-executives, and an Independent
Governance Committee, which is composed of a majority of
independent non-executives.
The Nomination and Governance Committee provides
oversight of the governance arrangements for the material
subsidiaries.
Executive governance
There is an executive governance framework, which includes
details of how the members of the Group Executive Committee
discharge their duties and regulatory responsibilities, make
decisions in adherence with the Delegated Authority
framework, and how the management committees, in their
business or function, support their decision-making and
governance processes.
The members of the Group Executive Committee are:
– Group Chief Executive Officer
– Chief Financial Officer
– M&G Asset Management Chief Executive Officer
– M&G Life Chief Executive Officer
– Corporate Affairs Director
– Chief Risk and Compliance Officer
– Chief Strategy and Transformation Officer
– General Counsel and Company Secretary
– Chief People Officer
– Chief Information Technology Officer
The Chief Auditor is an invitee to all Group Executive
Committee meetings.
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Division of responsibilities
94
M&G plc Board
The Board sets the purpose, strategic direction, and risk appetite for the Group and is the ultimate decision-making body for
matters of Group-wide strategic, financial, regulatory or reputational significance. The matters that are reserved for the Board’s
decision include business strategy and culture, financial reporting and controls, Board and Committee appointments, capital
expenditure and any major acquisitions, mergers or disposals, communications with shareholders and other stakeholders, risk
management and internal control matters, and the appointment and removal of the Company Secretary. The Matters Reserved
for the Board can be found on our website.
The Board has established the following committees to assist in fulfilling its oversight responsibilities:
Audit
Committee
Risk
Committee
Remuneration
Committee
Nomination and
Governance Committee
– Financial reporting:
monitoring the integrity
of the consolidated
financial statements,
related announcements
and other financial
information provided to
shareholders and other
stakeholders.
– Reviewing the
framework of internal
control and risk
management systems.
– Reviewing and
approving the internal
and external audit
plans.
– Approving the
whistleblowing
procedures and policy.
– Sustainability reporting
oversight and the
development of
assurance approach in
relation to this
reporting.
– Advising the Board on
M&G’s overall risk
appetite, risk
tolerances and risk
strategy.
– Reviewing the Risk
Management
framework and
advising the Board on
its overall effectiveness.
– Providing input to the
Audit Committee’s
review of effectiveness
of the internal control
framework.
– Reviewing the Group
Own Risk and Solvency
Assessment (ORSA)
and overseeing the
Internal Capital
Adequacy and Risk
Assessment (ICARA)
and ORSA processes in
our subsidiaries.
– In conjunction with the
Audit Committee,
ensuring compliance
with regulatory
requirements and
advising the
Remuneration
Committee on risk and
control issues that may
impact remuneration.
– Deciding the
framework of the
remuneration policies:
establishing, approving,
and maintaining the
principles and
framework of the
remuneration policies
and arrangements for
the Group.
– Determining the
design,
implementation, and
operation of
remuneration
arrangements for the
Chair of the Board, the
Executive Directors,
Group Executive
Committee and
identified staff for all
remuneration
regulations that apply
to the Group and
overseeing
remuneration for
individuals whose total
remuneration exceeds
an amount determined
by the Committee from
time to time.
– Monitoring the balance
of skills, knowledge,
experience, and
diversity of the Board.
– Making
recommendations of
new appointments to
the Board.
– Overseeing Board and
Executive succession
planning.
– When considering
Board composition and
succession planning,
reviewing the gender
and ethnic diversity on
the Board.
– Reviewing the
governance framework
for the Group including
approving any policies
on internal governance.
Delegated authorities
The Board has delegated the day-to-day running of the Group to the Group Chief Executive Officer. The Executive Directors
make and implement operational decisions to run the business on a day-to-day basis. To support the Group Chief Executive
Officer in discharging his responsibilities, he is supported by the Group Executive Committee.
Group Executive Committee
The Group Executive Committee leads on: the development and implementation of strategy; operational plans, policies,
procedures and budgets; prioritisation and allocation of resources; and promotion of our culture and values.
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We have a well-established corporate governance structure
to oversee how we run our business
Board composition and diversity
The Board has 10 Directors: a Non-Executive Chair, a Senior
Independent Non-Executive Director, six Non-Executive
Directors, and two Executive Directors (Group Chief Executive
Officer and Chief Financial Officer).
The Board considers all its Non-Executive Directors to be
independent and that it has complied with the requirements of
the Code in relation to the balance of Executive and
independent Non-Executive Directors on the Board, and the
composition of the Company’s Board Committees.
Four of the Directors are women, one of the Directors is from a
minority ethnic background; and two senior positions are held
by women (Senior Independent Director and Group Chief
Financial Officer).
The Nomination and Governance Committee regularly reviews
the Board’s composition to ensure there is a diverse mix of
skills, knowledge and experience. During the year, this
Committee also reviewed the Board composition, tenure, mix
of skills and diversity on a number of principal subsidiary
boards.
You can find further details on diversity and inclusion, including
statistical data on gender and ethnic diversity, in our
Colleagues section on pages 40-43.
Time commitment
The Nomination and Governance Committee at least annually
considers the time commitment required of the Non-Executive
Directors to ensure that they have sufficient time to meet their
board responsibilities, together with reviewing their external
appointments, potential or actual conflicts of interest, and
assessing their independence.
Board independence
The Board has evaluated the independence of all the Non-
Executive Directors.
In assessing each Director, the Board considers whether there
are relationships or circumstances which are likely to affect or
could appear to affect a Director’s judgement.
The Board has concluded that each of the Non-Executive
Directors are independent in character and judgement. The
Chair was independent on appointment. In line with the Code,
at least half the Board, excluding the Chair, are independent
Non-Executive Directors. All Directors are subject to annual re-
election at the Company’s AGM.
Succession planning
The Nomination and Governance Committee is responsible for
succession planning and for making recommendations to the
Board regarding Board composition. During the year, this
Committee reviewed and discussed Board composition and
succession planning, and executive succession planning. You
can find further details on succession planning in the
Nomination and Governance Committee report, which starts on
page 102.
Directors are appointed by the Board and then put forward for
election or re-election by shareholders at the AGM.
All Non-Executive Directors are appointed for initial terms of
three years and the appointment may be terminated by either
party upon six months’ written notice or by shareholder vote at
the AGM.
The Non-Executive Directors do not have any entitlement to
compensation if their office is terminated. Find out more about
the remuneration of the Non-Executive Directors on page 128.
Directors’ inductions, training,
and development
All new Board members have a structured induction
programme on appointment, which includes an overview of our
business areas and functions.
At each Board meeting, the Directors receive regular updates
on market and industry activities, and legal and regulatory
changes relevant to M&G. The Board holds an annual strategy
offsite.
During 2024, the Board received training and/or undertook
deep dives on the following areas: sustainability within asset
management; artificial intelligence; brand; crisis management;
talent and succession; and the client and adviser experience.
The Audit Committee undertook a deep dive on Solvency II, as
well as a joint deep-dive with the Risk Committee on
information technology risk and controls.
All Board members are invited to participate in all sessions,
regardless of Committee membership. Where appropriate, we
extend invitations to relevant training sessions to Non-
Executive Directors on our subsidiary boards.
Information to the Board
Board members receive formal papers in advance of each
Board or Committee meeting, which provides them with the
opportunity to review and challenge, and facilitates more
informed decisions on the issues under consideration. The
Chair and Company Secretary oversee an ongoing programme
to ensure Board and Committee papers are of high quality and
meet internal standards and requirements. In addition to formal
Board meetings, the Chair maintains regular contact
throughout the year with the Group Chief Executive Officer,
Chief Financial Officer, and members of the Group Executive
Committee to discuss specific issues. The Company Secretary
acts as an adviser to the Board on matters concerning
governance and ensures compliance with Board procedures.
All Directors had access to the Company Secretary’s advice
during the year. Directors may also take independent
professional advice at M&G’s expense, if required.
Committee terms of reference www.mandgplc.com/
investors/shareholder-information/corporate-governance
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Board and Committee attendance
The table below shows the number of scheduled Board and Board Committee meetings attended by each individual Director
compared to the total number of meetings each Director was eligible to attend.
Total scheduled meetings
Board
6
Audit
Committee
7
Risk
Committee
6
Remuneration
Committee
6
Nomination &
Governance
Committee
2
Clive Adamson
6/6
6/7
6/6
—
2/2
Sir Edward Braham
6/6
—
—
—
2/2
Clare Chapman
6/6
—
—
6/6
2/2
Paul Evans
2/2
1/2
2/2
1/1
—
Kathryn McLeland
6/6
—
—
—
—
Andrea Rossi
6/6
—
—
—
—
Dev Sanyal
6/6
7/7
6/6
—
—
Elisabeth Stheeman
3/3
2/2
2/2
—
—
Clare Thompson
6/6
7/7
6/6
6/6
2/2
Massimo Tosato
6/6
—
—
6/6
—
Board
There were six scheduled Board meetings held during the year, plus two joint meetings with the Audit Committee to consider our
full-year and half-year results, and four short ad hoc Board meetings.
Audit Committee
There were seven scheduled Audit Committee meetings held during the year. There were also two joint meetings with the Board,
and two joint meetings with the Risk Committee.
Risk Committee
There were six scheduled Risk Committee meetings held during the year. There were also two joint meetings held with the Audit
Committee.
Remuneration Committee
There were six scheduled Remuneration Committee meetings and three ad hoc meetings during the year.
Nomination and Governance Committee
There were two scheduled Nomination and Governance Committee meetings held during the year.
How the Board spends its time
The Chair and Company Secretary ensure that the Board balances its agenda to cover all statutory and regulatory duties, as
well as dedicating sufficient time to consider matters relating to strategy, execution, financial performance and planning,
people and culture, key stakeholders, risk management and governance matters. In 2024, the agenda was weighted between
regular items and specific focus areas. Our typical Board agenda allows time for:
Strategy and execution
Finance, investor
relations and capital
Business matters
and stakeholders
Risk, governance
and regulatory
Approval of the strategy and
business plan, and oversight of
progress against targets,
strategic objectives,
investment projects and
transactions, as well as
approvals needed from the
Board under M&G’s delegated
authority framework.
Review and challenge of
financial performance and
forecasts, together with
capital and operational
expenditure, capital matters,
capital allocation and
investment, and investor
relations.
Discussion and debate on
reports from Group CEO and
business CEOs on strategy
and execution, and key
projects and programmes.
Oversight of matters relating
to people and culture,
customers, shareholders and
regulators.
Approval of Risk Appetite
Statements, consideration of
matters relating to risk
management and internal
and control. Approval of
Group Governance
Framework and Delegated
Authority and Approval
Limits.
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The Board's year
At each Board meeting, there is a wide-ranging report from the Group Chief Executive Officer and from the Chief Financial Officer
on the Group’s financial performance, together with reports and/or updates from the Chairs of the material subsidiary boards and
from the Committee Chairs.
During the year, the key matters considered by the Board included the following:
Key Board activities and areas of focus throughout the year
Area of focus
Key discussions, considerations and activities
Customers and
clients
– Customer matters, including deep dives on client and adviser experience and as part of the Board
strategy offsite in Kildean.
– Consideration of customer outcomes when discussing papers on strategy and business proposals.
– Regular updates on customer metrics, client servicing, and key customer initiatives.
– Approved the Consumer Duty Annual Report.
Strategy, execution
and sustainability
– Regular updates on progress against the strategic objectives, capital expenditure and investment
projects, and key projects and programmes.
– Reviewed progress against our purpose, together with the behaviours and strategic drivers aligned to
the Group strategy and Business Plan.
– Approved strategic direction for the Asset Management and Life businesses, including the
rationalisation of the Wealth business.
– Approved the Business Plan, and the half-year and full-year results.
– Regular updates in relation to achieving the stated targets, customer matters, people and culture, and
transformation.
– Annual Board strategy day at which the Group’s strategy was considered and debated.
– Approved the Group sustainability strategy.
– Reviewed and approved the Modern Slavery statement.
People and culture
– Received regular updates on employee culture and discussed culture dashboard and insights.
– Regular updates on diversity and inclusion and gender balance against targets.
– Discussed the direct engagement with colleagues across the Group including during the Board site visit
to Kildean, the conversations between Non-Executive Directors and colleagues as well as Town Hall
meetings.
– Received and discussed reports on executive talent and succession planning.
– Discussed the results of the employee opinion survey ‘OneVoice’. The Board endorsed the actions
proposed by management in response to the feedback from the workforce.
Finance, investor
relations and capital
– Reviewed and approved a detailed assessment of the Group’s financial performance for the year.
– Approved the annual budget and three-year strategic plan, with particular focus on capital allocation
and strategic priorities.
– Received updates from the Investor Relations team on views from shareholders on all aspects of the
business.
– Approved the Annual Report and Accounts. Approved the dividends paid to shareholders during the
year.
– Approved the deleveraging actions totalling £450m, including the redemption of £300m subordinated
notes.
Risk management
and internal controls
– Regular updates from the Chief Risk & Compliance Officer on key risk management and internal control
matters, and discussion of key risks and, where applicable, risk reduction activities.
– Reviewed and approved of the Group’s Risk Appetite Statements and the Policy Governance
Framework, which sets the requirements for all policies within the Group.
– Updates on technology and operational resilience.
– Updates at each Board meeting from the Chairs of the Risk and Audit Committees on matters
considered by these Committees.
Governance and
regulatory
– The Company Secretary and Chief Risk & Compliance Officer provide regular regulatory trends, policy
guidelines and governance updates.
– Undertook direct engagement with representatives from the FCA and PRA; both regulators attended a
Board meeting during the year to discuss regulatory priorities.
– Board changes during the year, including the appointments of Elisabeth Stheeman and Paul Evans to
the Board in August and October 2024, respectively.
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2024 Board Performance Review
Background
In line with the UK Corporate Governance Code, a Board Performance Review is undertaken annually. An externally facilitated
review is carried out at least every three years. The 2023 Performance Review was facilitated externally by Dr Tracy Long of
Boardroom Review, the resulting actions can be found on page 100.
In 2024, the Board carried out an internally facilitated Performance Review, facilitated by the Senior Independent Director and the
General Counsel and Company Secretary.
Process
The 2024 Performance Review was undertaken internally and included a review of the Board, its Committees, the Chair and
individual directors. The Review included a detailed questionnaire and sought the views of Directors on a number of topics,
including Board composition and dynamics, stakeholders and culture, strategic and operational oversight, Board support,
management and focus of meetings, risk management and internal controls, and the performance of the Board and individual
Directors. The Senior Independent Director also undertook a review of the performance of the Chair, meeting each Director to
obtain their feedback. Separately, the Chair met each Director individually to discuss their performance.
Summary of 2024 review findings
The key findings and proposed actions were presented to the Board in December 2024, which prompted an open and constructive
debate on the insights and findings, and actions were agreed.
The Board continued to make good progress since the previous performance review. Directors were positive about the
improvements made to the composition of the Board and improved meeting management and a stronger focus on the key issues
affecting the Company. There was better engagement observed between the Board and management on strategy and key
decisions.
Key themes emerging from the Board discussion were used to develop a number of agreed action points, which are summarised
below.
The review found that the Board and its Committees are performing effectively and that the Board has the appropriate skills,
experience and knowledge to ensure that the Board and its Committees are able to discharge their duties effectively.
Themes
Overview of actions
1. Board and Committee decisions
Ensure past decisions are reviewed.
– Continue to embed the process for reviewing the effectiveness of past decisions
and capturing the lessons learned within the Schedule of Business.
2. Strategy and execution
Ensure that products and innovation are
being considered effectively and at the
appropriate organisational level.
– Continue to embed the division of responsibilities between key decision-making
boards and committees.
– Greater insights on competitors, products and innovation and improve the flow of
information from material subsidiaries.
3. Board and Committee information
Further improve the metrics and information
relating to key topics.
– Continue to focus on improving management information relating to matters
including data and digital, sustainability and greater insight on customer, clients
and external perspectives.
The Board is fully committed to making the improvements identified. The work will continue through 2025 and progress will be
updated in next year’s Annual Report.
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2023 review progress
In our last Annual Report, we set out feedback from our 2023 Performance Review and the actions we planned to take over to 2024
to enhance performance. A summary of the 2023 action points and progress made in 2024 is set out in the table below.
Themes and summary actions
Progress achieved in 2024
1. Board and Committee composition
and diversity
Ensure composition of the Boards and
Committees remain appropriate for the business.
– The Board has been strengthened in the year by the appointments of
Elisabeth Stheeman and Paul Evans. Key appointments have also been
made on subsidiary Boards.
2. Board, Committee and Management
responsibilities
Validate division of responsibilities to ensure the
optimum fora for key topics and potential to
reduce unnecessary duplication.
Continue to focus on Board paper quality and
improved planning and phasing of meetings.
– A revised delegation of authority for the Group CEO, updated matters
reserved for the Board and division of responsibilities were approved by the
Board.
– During 2024, the Boards reviewed the division of responsibility between the
Company and the material subsidiary companies in the Group to ensure
that matters were being considered by the right Board or Committee.
– Implemented a consistent approach for categorising Board and Committee
papers. Progress has been made on further improving the timeliness,
quality and length of papers.
3. People and culture
Further improve talent development and
performance management, which should
facilitate attracting a diverse range of people to
join M&G and improving internal succession.
– Winning Behaviours have been embedded throughout the year. Enhanced
Board reporting on people matters have been implemented, including deep
dives on talent and succession.
– People matters were considered as part of strategic topics, including the
rationalisation of our Wealth strategy, M&A activity, sustainability strategy,
and talent and succession planning held with business CEOs.
– Town Halls were held in London and Kildean during the year involving the
non-executive directors and colleagues.
– Chris Cochrane was appointed to the Group Executive Committee in
September 2024, having joined M&G in 2018.
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The Board is responsible for ensuring the Group’s risk
management framework and internal control system is
maintained and remains effective.
Our internal control systems ensure the quality and integrity of
our internal and external financial and sustainability reporting,
as well as operational, legal and regulatory compliance. It
prescribes the extent of the principal risks we are willing to
take as part of our strategy.
The internal control systems are designed to facilitate
management of the Group and its businesses within the
Board’s risk appetite, rather than eliminate the risk of failure to
achieve our objectives, and can only provide reasonable, but
not absolute, assurance against material misstatements.
M&G currently operates the ‘three lines of defence’ model to
govern its approach to risk management. In the three lines of
defence model, the first line is responsible for the ownership
and day-to-day management of risks and is overseen by the
second line Risk and Compliance function. The second line is
independent of the first line, and provides oversight, advice and
challenge. The third line Internal Audit function is empowered
by the Audit Committee to audit the design and operating
effectiveness of our system of internal controls, including
governance, risk management and control processes.
The Board remains committed to instilling an appropriate risk
culture and operating within a strong internal control system,
with a view to continuously maturing, embedding, and
enhancing risk management throughout the Group. The Board
delegates some of its responsibilities to the Audit Committee
and Risk Committee. The Chairs of these committees each sit
on both committees to ensure that issues relevant to both
committees are appropriately managed.
The Board is responsible for setting the Group’s risk appetite
and tolerance, following recommendation from the Risk
Committee. Details on our Risk Management Framework, risk
appetite and limits, principal risks and uncertainties, and
emerging risks are in the Risk Management section on pages
44-53.
The Audit Committee regularly works alongside the Risk
Committee to monitor the adequacy and effectiveness of our
internal control systems and risk management systems. The
Audit Committee reports regularly to the Board on its activities.
Details on the Audit Committee’s activities in 2024 are on
pages 104-109.
The Risk Committee assists the Board in fulfilling its
responsibilities by advising on risk strategy and overseeing the
development, implementation, and maintenance of the Group’s
Risk Management Framework and the Group Risk Appetite
statements. The Risk Committee reports regularly to the Board
on its activities. Further details on the activities of the Risk
Committee can be found on pages 110-111.
The Remuneration Committee ensures that our compensation
structures place appropriate weighting on colleagues adopting
our behaviours and risk culture to deliver the Group’s strategy
and achieve the objectives to deliver long-term, sustainable
success for the Group. Further details on the activities of the
Remuneration Committee can be found on pages 112-119.
Remuneration
The Board has established a Remuneration Committee
composed of independent Non-Executive Directors. Details of
its responsibilities, activities, and areas of focus are set out in
the Committee report on pages 112-119.
The Remuneration Committee has determined that our
Remuneration Policies and practices are designed to support
M&G’s strategy and promote the Group’s long-term
sustainable success.
Remuneration for executives is aligned to M&G’s purpose and
values, and is clearly linked to the successful delivery of M&G’s
strategy.
Details regarding remuneration policies and practices, together
with the procedure for developing policy on executive, senior
management, and workforce remuneration is in the Directors’
Remuneration Report, which starts on page 112.
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Nomination
and Governance
Committee
Report
Nomination and Governance Committee composition
Sir Edward Braham (Chair)
Clive Adamson
Clare Chapman
Clare Thompson
Priorities for 2025
– Continue to keep Executive Committee succession planning under review
– Ensure that the balance of skills, knowledge and experience on the Board is
appropriate to lead the Group
– Refresh Group Governance Framework and subsidiary governance policies
Dear Shareholder
As Committee Chair, I am pleased to report on the key activities
undertaken by the Committee in 2024. Key matters we
discussed throughout the year included Board and Committee
composition, Executive Committee succession planning,
Diversity & Inclusion goals, and oversight of the Board
composition of material subsidiaries.
Committee purpose and responsibilities
The Nomination and Governance Committee is responsible for
monitoring the balance of skills, knowledge and experience, as
well as the diversity of the Board. It is also responsible for
making recommendations of new appointments to the Board
and overseeing Board and senior management succession
planning.
Further details can be found in the Committee’s terms of
reference, which are reviewed annually and available on our
website.
Board composition, succession planning
and performance
The Committee’s primary responsibilities are to ensure that
Board composition is appropriate and to keep succession
planning of both Board and Senior Management roles under
ongoing review. The Committee refreshed its Skills Map for the
Board during 2024 and to incorporate the skills and experience
added to the Board through its appointments of Elisabeth
Stheeman and Paul Evans. Our Skills Map enables us to
objectively identify and track the skills required on the Board,
and to plan for emergency and longer-term succession.
The 2024 Skills Map review demonstrated the Board has a
strong blend of skills overall. The highest aggregated scores
were Strategy, M&A, Regulatory, UK Listed Company, Change &
Transformation, Risk Management, People and Finance. Areas
identified for potential further strengthening were Technology,
Digitisation and Data. The appointments of Ms Stheeman and
Mr Evans during the year further enhanced the Life and Asset
Management experience on the Board.
Executive Directors – skills mapping
and succession
The Committee reviews the skills of the Executive Directors and
succession plans for these positions on an ongoing basis. This
process helps to ensure that there are potential internal
candidates for succession, who are suitably qualified and
experienced and there is a diverse talent pipeline.
Executive succession planning was a key focus of the
Committee during the year. The Board recognises the
importance of ensuring that the business has the appropriate
people in senior roles to build a strong and diverse senior
management pipeline for the longer term. The Committee
received updates on the succession planning for the wider
senior executive group twice during the year, with deep dives of
Life and Wealth businesses and the Finance function in
February 2024 and a deep dive of the Asset Management
business during February 2025. There will be a continued focus
during 2025 on the internal succession pipeline by enhancing
the current talent programme to develop future leaders ready
for advancement.
Appointment process
The Committee has a duty to consider, and recommend to the
Board the appointment of any new member of the M&G plc
Board.
The appointment of a new Director begins with the
identification of a vacancy or skills gap, together with
consideration of the current gender and ethnic diversity on the
Board as a whole. The Committee assesses any skills required,
including the evolving needs of the Board. The Committee then
works with HR to produce a clear role specification to focus
recruitment activities.
Areas of focus in 2024
– Executive Committee succession planning.
– Ensuring that the balance of skills, knowledge and
experience on the Board is appropriate to lead the Group.
– Providing oversight of work to meet our diversity and
inclusion goals and the targets that we have set to
measure progress.
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Using the role specification, HR arranges external searches for
Non-Executive roles and internal and external searches for
Executive roles. The next stage is interviews, at which
Committee members (among others) test the candidates’ skills,
including fit with culture. These are both essential criteria for the
selection of Board members, since the Board aim to set the right
tone from the top in how we go about our work and how our
Directors represent and promote M&G’s culture.
During 2024, MWM was engaged to undertake an external
search to identify an additional independent Non-Executive
Director (iNED) candidate for the Board. MWM has no
connection with M&G or our individual directors. A short list of
candidates were considered by the Committee and candidates
were put forward for interview, with the preferred candidate,
Elisabeth Stheeman identified and recommended to the Board
for appointment.
MWM actively continued their search for an iNED with deep UK
Life Insurance experience to be appointed to the Board. As with
Ms Stheeman, a shortlist of candidates were considered by the
Committee and candidates were put forward for interview, with
the preferred candidate, Paul Evans, identified and
recommended to the Board for appointment.
The Committee had previously confirmed that additional Life,
Asset Management and diversity considerations should be
factored in for future appointments. The skills and experience in
all of these areas has been enhanced by the appointments of Ms
Stheeman and Mr Evans.
In April 2024, the Board also formally appointed Clare
Thompson to the Senior Independent Director (SID) position.
Ms Thompson had been the acting SID since May 2023.
Induction process
Structured and tailored induction programmes are prepared
and, amongst other matters, cover: meeting key members of the
executive management team and the external and internal
auditors; an overview of the financial and business plan;
stakeholder engagement; organisation structure and all relevant
policies, procedures and other governance material. Both Ms
Stheeman and Mr Evans had tailored induction plans, which
were undertaken on announcement of their appointment.
Board independence and conflicts
The Committee takes into account the independence criteria
set out in the UK Corporate Governance Code as part of the
selection process for Non-Executive Directors.
The Committee, at least annually, assesses the independence of
each Non-Executive Director to ensure that they can continue to
fulfil their roles on the Board and provide independent challenge
to the Executive Directors. In February 2025, the Committee
reviewed each Non-Executive, taking into account tenure,
external roles and potential conflicts of interest. The Committee
determined that all Non-Executive Directors were free from any
relationship or circumstances that could affect, or appear to
affect, their independent judgement and therefore all Non-
Executives could properly be recommended for election and re-
election at our 2025 AGM as independent Board members.
In line with the Code, over half of our Board members, excluding
the Chair, are independent Non-Executive Directors.
The Committee reviews potential conflicts for Non-Executive
Directors on their appointment, at least annually, and in advance
of taking on any additional external appointment. The Committee
is supported in this by the Risk and Compliance team.
Time commitment
The Committee maintains oversight of Non-Executive Directors’
time commitments, to ensure that each has sufficient time to
dedicate to their role in order to discharge their responsibilities
effectively. The Committee at least annually considers the
number and nature of the Non-Executive Directors’ external
commitments and how this impacts the time required for their
Board and Committee responsibilities. The Committee is
satisfied that each of the Non-Executive Directors has sufficient
time to undertake their role at M&G plc.
Board effectiveness
The process, results and agreed areas of focus of the 2024 Board
and Committee effectiveness review are described on page 99.
Diversity & inclusion and gender balance
When considering Board composition and succession the
Committee specifically reviewed the gender and ethnic diversity on
the Board. The Board has committed and is currently achieving all
gender and ethnic diversity targets contained in FCA Listing Rule
6.6.6 (9). At present, 50% of the senior Board positions (Chair,
Group CEO, SID and CFO) are held by a woman, the gender
diversity on the Board is 40%, an increase from the prior year figure
of 37.5% and the Board continues to meet the requirement of at
least one of its members to be from an ethnic minority. The Board
also considers gender diversity on the boards of its material
subsidiaries and reviewed the progress against the Group’s
diversity commitments for all colleagues at half year and full year.
Governance of material subsidiaries
The Committee provides oversight of the governance
arrangements of its material subsidiaries in the Asset
Management and Life businesses. During the year, the boards
of key subsidiaries took part in a skills assessment to identify
the current blend of skills, knowledge and experience and to
recognise potential areas where they might be enhanced. Both
material subsidiary boards appointed iNEDs throughout the
year and Committee members had input into the appointment
processes.
The Committee considers the current blend of skills, knowledge
and experience on the material subsidiary boards is appropriate in
relation to the current business priorities and prospective strategic
initiatives. The Committee will continue to evaluate the boards of
the key subsidiaries to ensure that the composition of the boards
and changes to them, continue to comply with regulatory
requirements and that appropriate succession plans are in place.
Sir Edward Braham
Committee Chair
Role and responsibilities of the Nomination
and Governance Committee
The Committee is responsible for the composition of the Board
and its Committees, together with succession planning.
This ensures that the right skills are in place to support our
strategic priorities, long-term success and future viability.
The Committee is also responsible for elements of diversity
and inclusion leadership.
The Nomination and Governance Committee’s terms
of reference www.mandg.com
Membership and meeting attendance
page 97
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Audit
Committee
Report
Audit Committee composition
Clare Thompson (Chair)
Clive Adamson
Paul Evans
Dev Sanyal
Elisabeth Stheeman
Priorities for 2025
– With the Risk Committee, monitor and oversee planned enhancements to the
control environment
– Preparation for the implementation of changes to the UK Corporate
Governance Code
– Ongoing development of sustainability reporting including preparations for
new requirements expected to be announced
Dear Shareholder
I am pleased to present the Audit Committee Report, which
outlines the key themes we focused on during the year.
Our 2024 agenda focused on financial reporting, with an
increasing spotlight on sustainability reporting as the
regulatory landscape continues to develop in this area. We also
continued to focus on our finance transformation plan, which
we monitor alongside our business as usual activities.
The Committee has continued to focus on the overall control
environment and this also encompassed the oversight controls
over financial reporting processes performed by third parties.
The Committee engaged with management throughout the
year on changes to the Financial Reporting Council’s Corporate
Governance Code, particularly with regard to material controls.
We held a number of ‘deep-dive’ sessions during the year,
including on Information Technology key controls and Solvency
II assumptions and judgements. We also received updates on
changes related to the Finance function, including offshoring,
tax strategy and updates on the tax environment.
We continued to spend time with PwC during their third year of
audit, and we ensured that we met with PwC privately without
management present. We also held private sessions with the
Chief Auditor without management present.
Finally, I would like to welcome Elisabeth Stheeman and Paul
Evans who joined the Committee in August and October 2024,
respectively. I would also like to extend my thanks to the
Committee members for their support and dedication over the
year.
Clare Thompson
Committee Chair
Areas of focus in 2024
– IFRS 17: Reviewing and recommending to the Board the
full-year 2023 results, the first full-year results produced
under IFRS 17, and embedding the associated new
financial reporting processes.
– External financial reporting: Reviewing and
recommending to the Board other external financial
reporting, including half-year results, Solvency II Pillar III
reporting, and approving the associated methodology
and assumptions for each.
– Regulatory reporting: Reviewing and approving the
2023 Annual Report and Accounts, which included our
TCFD reporting.
– Internal controls: Oversight of the control environment,
particularly in relation to financial reporting.
Composition and Schedule
The Board considers all Committee members are independent
and that the Chair has recent and relevant experience. The
Committee’s overall experience of financial reporting and
accounting matters has been further strengthened during the
year through updated membership. Details of Committee
members’ relevant skills and experience are on pages 89-91.
In 2024, there were seven scheduled Audit Committee
meetings held during the year. There were also two joint
meetings with the Risk Committee and two joint meetings with
the Board to consider our full-year and half-year results.
The Chief Auditor and PwC are standing attendees at all Audit
Committee meetings.
The Audit and Risk Committees continue to work closely
together, and the cross-membership principles that we follow
ensure that members of both committees receive information
in the most efficient way. We also receive regular updates from
The Prudential Assurance Company Limited (PAC) and M&G
Group Limited (M&GG) Audit Committees.
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Role and responsibilities
of the Audit Committee
The Committee’s responsibilities include, but are not
limited to, reviewing and monitoring:
– The integrity of the Group’s financial statements,
climate-related and non-financial disclosures, and
related announcements and other financial information
provided to shareholders.
– The assurance processes to verify the financial and non-
financial information included in the Group’s Annual
Report and Accounts (ARA) and half-year report.
– The effectiveness of the Group’s internal controls and
risk management systems.
– The effectiveness and objectivity of the internal and
external audit processes and auditors.
– The effectiveness of the Group’s whistleblowing
procedures.
– The effectiveness of processes for compliance with laws,
regulations and ethical codes of practice.
The Audit Committee’s terms of reference
www.mandg.com
Membership and meeting attendance
page 97
Annual evaluation of Audit Committee
performance
The process and results of the 2024 Board and Committee
effectiveness review are described on page 99 together with
this year’s results and agreed areas of focus. An update on
progress on the actions identified in last year’s review is
provided on page 100.
Financial Reporting 2024
The Audit Committee reviewed the full-year 2024 consolidated
and Company financial statements.
The review included:
Fair, balanced and understandable
In assessing whether the 2024 Annual Report and Accounts
are fair, balanced and understandable and provide the
information necessary for shareholders to assess M&G’s
position, we gave regard to whether:
– Information in the Strategic Report, in particular the Business
and Financial Review, represents a fair reflection of M&G’s
performance during the year.
– Significant issues identified in this report, including key areas
of judgement and estimation, as well as any other significant
issues disclosed within narrative reporting, are consistent
with the financial statements.
– Alternative Performance Measures (APMs) have been given
equal prominence to the statutory measures, there is a clear
description of their calculation and an explanation of their
use and relevance.
– The treatment and classification of items within the APMs,
particularly whether items are considered to be operating, is
in line with the defined methodology and is appropriately
disclosed. This includes the rationale for the classification of
insurance related balances following the implementation of
IFRS 17.
– The identified key performance measures reflect those used
by management to manage, monitor and assess the results
of the business, linking to the strategy.
– Key messages are clear, consistent and easily understood,
without the use of excessive jargon.
Going concern and viability statements
In early 2025, we reviewed the going concern assessment
undertaken by management for the purposes of the 2024
consolidated financial statements.
This included assessing M&G plc’s solvency, including its
sensitivity to various economic stresses across various
plausible scenarios including: a baseline scenario (current
market conditions), an optimistic scenario (productivity boom),
a severe pessimistic scenario (geo-political escalation), and a
stagflation scenario (economic stagnation combined with high
inflation resulting from a trade war). The liquidity projections
under these scenarios, including the impact of applying specific
liquidity stresses, and the ability to access funding sources was
assessed. Based on the review, we concluded that the going
concern assumption remains appropriate.
In addition, we considered the associated assessment of
longer-term viability to support the Viability Statement. This
involved consideration of the strategic and financial planning
process alongside an assessment of M&G plc’s key strategic
priorities, business model and forecasting undertaken as part
of the business planning process.
The Board challenged the assumptions underpinning the plan,
including the impact of various severe, but plausible stresses
and scenarios on the ability to deliver the business plan, and
concluded that the positions were both reasonable and
supportable. Based on this determination, the Committee
concluded that three years was the most appropriate period for
longer-term viability in line with the business plan.
Sustainability reporting
We have a responsibility to review, and challenge as
appropriate, any sustainability or climate-related reporting in
material public documents, including but not limited to, climate-
related financial disclosures required by the UK Listing Rules.
As in previous years we received regular updates during 2024
on our planned sustainability reporting, and have challenged,
reviewed and approved these accordingly, including the Task
Force on Climate-related Financial Disclosures (TCFD); within
the Annual Report and Accounts; and our Sustainability
Accounting Standards Board (SASB) disclosures.
We apply the same level of rigour to the review and challenge
of sustainability disclosures as we do to the review of external
financial reporting.
In relation to climate reporting in this Annual Report and
Accounts, the Committee also considered the
following matters and judgements in the year:
– The classification of assets, particularly in respect of Equities
and Corporate Debt, in the climate metrics disclosure tables
on pages 77-79 in line with Partnership for Carbon
Accounting Finance (PCAF) guidance and the subsequent
restatement of prior year metrics.
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– Scenario analysis disclosure – our scenario analysis for public
assets is based on Network for Greening the Financial
Systems scenarios, and for real estate and infrastructure
assets based on pathways produced by the
Intergovernmental Panel on Climate Change (IPCC). We
recognise the significant limitations of forward-looking
climate scenario analysis but judge them appropriate for
continued disclosure while thinking in this area develops
along with appropriate and transparent caveats. We have
moved the detailed output of this analysis to the
supplementary information section this year rather than
including in the Strategic Report.
In relation to the mandatory TCFD reporting included in this
Annual Report and Accounts, we have also reviewed and
approved the Environmental Metrics Basis of Reporting (Basis
of Reporting) published on our website, which has been
updated in the year for the methodology updates set out
above.
Our sustainability reporting continues to improve as our Group-
wide approach has developed and data becomes more
accurate and accessible. We recognise however that there is
work to do, and we continue to be reliant upon the accuracy
and availability of data received from third-party data providers.
We will continue to work with management as we look to
develop clear, transparent and accurate disclosures compliant
with International Sustainability Standards Board requirements
in the future.
Audit and Corporate Governance Reform
An updated version of the UK Corporate Governance Code (the
Code) was published in January 2024. Most of the changes
made to the Code apply to reporting for financial years starting
on or after 1 January 2025. However, the most significant
changes relate to internal controls and these will apply to
reporting years starting on or after 1 January 2026.
The Committee continues to engage with management on any
changes required to our processes and procedures in light of
the updates to the UK Corporate Governance Code and any
further reforms.
Internal controls
The Committee has a responsibility, in conjunction with the Risk
Committee, to review the adequacy and effectiveness of our
Risk Management Framework and internal control systems.
During the year the Committee carried out a ‘deep-dive’ on
information technology risk and controls and has continued to
support and provide oversight to management’s embedding of
the control environment.
We receive regular reports from Risk and Compliance, and
from Internal Audit, regarding the status of the control
environment, including reviews of the effectiveness of the Risk
Management Framework, the status and assessment of any
outstanding control deficiencies and results of Key Control
Assessments performed by the first Line of Defence and
independent second Line of Defence testing of Key Controls
including over Financial Close and Reporting Processes.
Read more about the annual assessment of risk management
and internal controls on page 45.
Whistleblowing policy and framework
We are committed to a safe workplace where all colleagues
can speak out and report concerns of wrongdoing in complete
confidence, without fear of retaliation.
The Whistleblowers’ Champion, who is also Chair of the
Committee, provides governance and oversight of our Speak
Out programme, which supports our Whistleblowing policy.
Reporting to the Committee on the effectiveness and
robustness of the Whistleblowing programme occurs twice a
year, with discussion on any programme enhancements
including planned communications and awareness. Individual
cases are not discussed with the Committee. Regular meetings
are also held between management, including the Group CEO,
and the Whistleblowers’ Champion.
We are satisfied that our whistleblowing policies and
procedures remain robust and adequate.
Internal Audit
The Committee has responsibility for overseeing the work of
Internal Audit, including the independence and effectiveness of
the function.
We approved the Internal Audit Charter, setting a clear
purpose for Internal Audit of helping the Board and Executive
Management protect the assets, reputation, and sustainability
of M&G plc by providing independent and objective assurance
on the effectiveness of M&G’s systems of internal control.
The Committee approved the Internal Audit risk-based plan,
developed in the context of M&G plc strategy and the Group-
wide coordinated assurance plan. We received regular
progress updates relating to the outcome of plan delivery, key
control weaknesses, emerging themes, management’s
progress in resolving issues identified, and an annual evaluation
of the overall control environment and risk and control culture.
The plan was updated accordingly during the period to
respond to the Group’s evolving risk profile and assurance
requirements.
Key areas of Internal Audit’s work reported to the Committee
during the year included:
– third-party oversight including material outsourcing
– major change/improvement programme
– IT and operational resilience
– financial crime risk management
– FCA’s Consumer Duty regulation
– IT and data security
– data privacy risk management
– Solvency II compliance
– enterprise risk management framework
– sustainability reporting
– international entity regulatory compliance.
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We conducted an annual review of the Internal Audit function
to assess its effectiveness, based on regular internal audit
reporting, private sessions with the Chief Audit Officer and the
outcome of the Internal Audit Quality Assurance Improvement
Programme. The Committee is satisfied with the effectiveness
of the Internal Audit function, its independence, and the
appropriateness of its resources.
External Audit
Oversight and engagement of external auditor
PwC has been M&G’s external auditor since 1 January 2022,
following a competitive tender process in 2020. The audit is
being led for the third year by audit partner Mark Pugh.
We provide clear guidance to PwC on our expectations and
hold meetings with PwC, without the presence of
management, to allow the audit team to raise any concerns and
remain independent and objective. The external audit plan was
reviewed and approved by the Committee before the start of
the 2024 year-end process.
M&G has complied with the Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 for the year ended
31 December 2024.
The Committee has considered the Audit Committees and the
External Audit: Minimum Standard published by the FRC in
May 2023, and confirm compliance with this Standard.
External auditor effectiveness
Each year, together with senior management, we assess the
external auditor’s performance, monitor their independence,
objectivity, and the effectiveness of the audit process.
In line with the latest FRC guidance, this year’s review
comprised:
– a survey of key internal stakeholders who interacted with
PwC across the Group functions and material subsidiaries,
seeking feedback on the effectiveness and efficiency of the
external auditor
– feedback from key external stakeholders who interacted
with PwC as part of the audit process
– consideration of the challenge provided by the auditors and
the management response.
Our assessment was carried out in April 2024 and considered
feedback from key internal and external stakeholders on:
– quality of resource
– overall plan and approach
– execution of the audit
– quality of communications received
– appropriate level of challenge on management’s
methodology and assumptions, key accounting policy
judgements and exercised professional scepticism.
Based on the feedback received, it was concluded that PwC
provided an effective, quality audit for M&G plc and its
subsidiaries, with an appropriate level of challenge.
PwC also provided regular updates to the Committee
throughout the year on their Audit Quality Indicators:
– senior team involvement – Partner to Manager
– team continuity
– management deliverables
– audit progress milestones.
A shareholder resolution was recommended to reappoint PwC
as external auditors at the Annual General Meeting in May
2024. A further review of effectiveness will be carried out in
April 2025, and on an annual basis thereafter.
Auditor independence policy
Our Auditor Independence Policy is reviewed at least annually
and was last reviewed in December 2024.
The main purpose of this policy is to ensure that M&G and the
external auditor comply with regulations and ethical standards,
for example, that they are not engaged in any non-audit
services that are not permitted, comply with all other relevant
regulation and ethical guidance relating to relationships with
the external auditor and that we maintain a sufficient choice of
appropriately qualified audit firms.
Certain services need to be approved by the Committee before
any engagement.
Fees paid to the auditor
Total fees paid to PwC during the year ended 31 December
2024 amounted to £19.7 million, of which £3.4 million related to
non-audit services. This compares to £22.3 million paid in 2023,
of which £3.0 million related to non-audit services.
The main reason for the year-on-year reduction is that the fees
for the year ended 31 December 2023 included an amount of
£4.3 million in relation to additional audit work as a result of first
time adoption of IFRS 17. A breakdown of fees paid to PwC is in
Note 9 of the consolidated financial statements.
In line with the Auditor Independence Policy, all non-audit
services were approved by the Committee. We were satisfied
that, considering the fees paid and services provided under the
policy, the objectivity and independence of PwC was
safeguarded.
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Critical estimates and areas of judgement and how they were addressed
We have assessed whether suitable accounting policies have been adopted in the preparation of the consolidated financial
statements. We have also considered all critical estimates and key judgements that are material to the preparation of the
consolidated financial statements. In this regard, we receive regular updates from management and review and challenge
estimates and judgements accordingly.
This section outlines the critical estimates and key judgements that have been applied in the preparation of the consolidated
financial statements and how each of them have been considered and addressed by the Committee.
Critical estimate/
Key judgement
How the Committee addressed the issue
Valuation of
insurance
contracts and
defined benefit
pension liabilities
We reviewed the key assumptions and judgements presented by management in the estimation and
valuation of the Group’s insurance contracts and defined benefit pension liabilities. The key assumptions
reviewed were:
– Policyholder mortality, maintenance expenses and valuation rate of interest (including selection of
reference portfolio and allowance for credit risk) used in the estimation of insurance contract liabilities for
annuities.
– Allowance for maintenance expenses, persistency, assumed future investment returns on the backing
assets, policyholders’ share of historic and future surpluses, and the illiquidity premium in setting the
discount rate used in the estimation of insurance contract liabilities for with-profits policies.
– The risk adjustment included when measuring insurance contract liabilities. The assessment of the risk
adjustment requires assumptions about the compensation that the Group requires for bearing uncertainty
about the amount and timing of the cash flows that arise from non-financial risk, the most significant of
which is the assumed rates of the policyholder mortality for annuity contracts.
– Mortality, inflation rates and discount rates used in the estimation of the Group's defined benefit pension
liabilities.
We considered the rationale provided by management for the assumptions used and reviewed any
benchmarking provided. We also challenged the appropriateness of management’s credit assumptions
given current market conditions.
We were satisfied that the assumptions adopted by management were appropriate. Further information
on key assumptions can be found in Notes 24 and 32 of the consolidated financial statements in respect
of the insurance contract liabilities and in Note 17 of the consolidated financial statements in respect
of the defined benefit pension liabilities.
Valuation of
complex and
illiquid financial
assets
We received information on the carrying value of investments held on the consolidated statement of financial
position, and particularly focused on those investments where the determination of their fair value required
more subjective estimation (classified as Level 3 under the fair value hierarchy).
These assets include investment properties, equity release mortgages, private credit (which includes
securitised notes backed by residential ground rents) and investments in private equity vehicles. Specifically,
in relation to the notes backed by residential ground rents, we considered the impact on assumptions of the
UK Government Draft Leasehold and Commonhold Reform Bill, from which potential future legislation may
potentially restrict future income.
In addition, we considered the governance arrangements put in place by management to review the
valuation of these assets (including those held by the defined benefit pension schemes) to ensure that it
remains appropriate. While reviewing the valuation, we also considered the potential impact of the current
macroeconomic environment and climate-related risk on relevant asset classes.
Further information on key assumptions can be found in Note 31 of the consolidated financial statements.
Recoverable
amount of
goodwill
We reviewed the results of annual impairment testing carried out in respect of goodwill associated with the
Group’s cash-generating units. This involved reviewing the key inputs used in the assessment, including the
discount rate and future cash flow projections used to determine value in use. Appropriate challenge was
provided to management, particularly around growth rates, discount rates and terminal profit margins.
We considered the results of the work performed and agreed with management’s assessment that the
responsAbility Investments AG cash-generating unit was impaired by £30m, the M&G Wealth platform
business was impaired by £25m, and other Wealth businesses were impaired by £51m.
Further information on key assumptions can be found in Note 13 of the consolidated financial statements.
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Critical estimate/
Key judgement
How the Committee addressed the issue
Valuation of
intangibles
acquired at
acquisition
We reviewed the value of the IFA relationship intangible recorded as a result of the acquisition of My Continuum
Financial Limited. We considered the key assumptions used to determine the value at initial recognition including
the discount rate and future attrition projection.
Based on the review, we were satisfied that the value of the intangible recorded at the acquisition date was
appropriate. Further information on intangible assets can be found in Note 13 of the consolidated financial
statements.
Specific
accounting
judgements
applied in
accounting for
insurance
contracts
Applying IFRS 17 requires the application of judgement in respect of the following areas:
– The judgement with respect to whether contracts issued by M&G plc contain significant insurance risk,
unless a specific exemption applies (eg equity release mortgages).
– Judgement in respect of certain investment contracts which provide an additional benefit in addition to
guaranteed benefits to determine whether they meet the criteria to be considered as discretionary
participation features.
– Judgement required at a contract level as to whether they meet the conditions for having direct
participation features and consequently require the use of the Variable Fee Approach to measure the
CSM.
– Judgement required to define underlying items for with-profits contracts that reflect the mutualisation
between contracts and how to split underlying items between current and future policyholders.
– Judgement required to determine the amount of surplus that should be divided between current and
future with-profits policyholders as well as with the Group and the amount of surplus attributable solely
to the Group.
– Judgement required in determining the relative weighting for the purposes of deriving coverage units where a
contract provides both insurance and investment services.
As part of the review of IFRS 17 methodology, we review and challenge the judgements made by management in
applying IFRS 17. Further information can be found on the accounting policies at Note 1.5.2 and on the
accounting treatment, at Note 24 of the consolidated financial statements.
Other
significant
judgements
We reviewed and considered the other significant judgements as disclosed within Note 1.3 of the consolidated
financial statements:
– Consideration over M&G plc’s interest in structured entities and whether control exists which would
require their consolidation.
– The judgement exercised to determine the extent to which future taxable profits are expected to emerge and
the corresponding period over which unused tax credits and unused tax losses will be utilised for recognition
of deferred tax asset.
Following review of the basis of the above judgements we were satisfied that these were appropriate.
We also considered the following critical estimates and key judgements in respect of the Company financial statements.
Critical estimate/
Key judgement
How the Committee addressed the issue
Recoverable
amount of M&G
Group Regulated
Entity Holding
Company
Limited (M&G
REH) and
Prudential
Financial
Services Limited
(PFSL) in the
financial
statements
Management performed an impairment assessment at the year end in relation to the Company’s investment in
M&G REH, which in turn is the holding company for M&G plc’s main regulated entities, including MGG and
PAC. As a result, the recoverable amount of M&G REH has been determined by reference to the recoverable
amount of these main operating subsidiaries.
We considered management’s assessment of the recoverable amounts based on a discounted cash flow
assessment, which was derived from management’s expectations of profits in respect of MGG and application
of a discounted dividend model in respect of PAC. Where possible, management also considered alternative
valuation techniques consistent with established valuation principles to determine the recoverable amount.
Based on the review, we concluded that no impairment should be recognised. Further information is disclosed
at Note A to the M&G plc Company financials.
Management performed an impairment assessment in relation to the Company's investment in Prudential
Financial Services Limited (PFSL), which in turn is the holding company for service and advice entities within
the Group. We considered the results of the work performed and agreed with management’s assessment that
an impairment of £115m be recognised in relation to the Company's investment in (PFSL) during the year
ended 31 December 2024 (2023: £nil). The impairment relates to a group restructuring transaction, with
related dividend income recognised in the Company’s income statement.
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Risk
Committee
Report
Risk Committee composition
Clive Adamson (Chair)
Paul Evans
Dev Sanyal
Elisabeth Stheeman
Clare Thompson
Priorities for 2025
– Continued oversight of the Financial Crime Programme to strengthen, mature
and optimise our framework, processes and controls
– With the Audit Committee monitor and oversee planned enhancements to the
control environment
– Monitoring of the embedding of the UK operational resilience regulation and
Digital Operational Resilience Act (DORA), including oversight of the risks
relating to our third party and outsource providers
Dear Shareholder
I am pleased to present the Risk Committee Report, which
outlines our activities and work during the year.
The economic and geopolitical uncertainty during the year
continued to require our close attention. As a result, we
increased our oversight of non-financial and financial risks,
through risk scenario assessments, deep dives and by
reviewing a range of stress and scenario testing results
through the Group ORSA. The output of these tests feed into
the Viability Statement on page 84.
Oversight of financial crime risks is a top priority for us, and we
received regular updates in respect of our Group-wide
programme to strengthen, mature and optimise our framework,
processes and controls as well as implement an enhanced
target operating model.
We received regular updates from our business units and
functions on the key risks that they face and emerging risks that
they are seeking to manage. We also received Group-wide risk
updates, including sessions on Consumer Duty compliance,
financial crime, concentration risk, and operational resilience.
We continue to monitor and oversee the M&G transformation
programme, including the execution and operating model
impact risks associated with this change. This continues to aid
our understanding of the impact on the overall risk profile, and
we have been closely monitoring how these are managed over
the remainder of the programme, with regular updates.
We continue to work closely with the Audit and Remuneration
Committees. Our cross-membership principles ensure we
manage conflicts and all Non-Executive Directors have the right
information provided in the most efficient way.
During 2024, I served as Chair of the Risk Committee of PAC
which allowed me a wider oversight of Group risk issues. I have
now stepped down from the PAC Board and welcome Alastair
Barbour as my successor as Chair of the PAC Risk Committee.
I would like to welcome Elisabeth Stheeman and Paul Evans
who joined the Committee in August and October 2024,
respectively. I would also like to welcome Shawn Gamble who
joins M&G as Group Chief Risk and Compliance Officer from
January 2025 and would like to thank Louise Gelling, who
served in this position on an interim basis over 2024.
Clive Adamson
Committee Chair
Areas of focus in 2024
– Oversight of risks related to the execution of M&G’s
business strategy
– Monitoring implementation of new UK operational
resilience regulation
– Oversight of the group-wide Financial Crime programme
to strengthen our processes and controls
– Monitoring our top risks, including third-party and
sustainability risks
Composition and Schedule
Details of Committee members’ relevant skills and experience are
on pages 89-91.
In 2024, there were six scheduled Risk Committee meetings. In
addition, we held two joint meetings with the Audit Committee.
Chief Risk & Compliance Officer
The Chief Risk & Compliance Officer (CRCO) has responsibility
for the risk function and all compliance matters, and is a
standing attendee at all our meetings. Our CRCO provides
written reports to us covering key risk matters and compliance
reporting, and is available to the Committee for consultation
regarding any agenda item.
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Review of current and emerging risks
We are responsible for reviewing the Risk Management
Framework, detailed on page 44, together with a list of M&G’s
principal risks and how those risks are identified, managed and
mitigated. We’re satisfied that our review, and subsequent
reporting to the Board, enabled the Board to carry out a robust
assessment of M&G’s emerging and principal risks.
Risk appetite, tolerance, profile and strategy
We reviewed regular reports from the CRCO, including updates
on the risk profile, key risks and issues facing M&G, emerging
risks, our capital and liquidity position against appetite and our
control environment. We also received regular reports from our
subsidiary Board Risk Committees.
We regularly reviewed and provided advice to the Board on
how the assessment and analysis of the top financial and non-
financial risks facing M&G were being managed. We were also
provided with ‘deep-dive’ reviews and presentations from
executives on key risks under their management, including
third-party risk, impact of the transformation programme,
financial crime and conflicts of interest. We also received
regular updates on business change activities and key
programmes.
Sustainability risk remained a key area of focus. We reviewed
the required scenarios, including climate change scenarios, on
a full balance sheet basis as part of the ORSA and
recommended to the Board a range of economic scenarios for
business planning purposes.
Risk Management Framework
and internal controls
We approved changes to the Risk Management Framework
and the risk policies as part of our annual review. We also
recommended updates to M&G’s risk appetite and individual
risk limits to the Board for approval.
Risk models and measures
We approved the overall methodology and key assumptions for
the Solvency II valuation in conjunction with the Audit
Committee, and reviewed the overall effectiveness of M&G’s
Internal Model by reviewing the results of the annual
programme of Solvency II Internal Model validation. We also
approved the Internal Model validation plan for the
forthcoming year.
Regulatory matters
We reviewed M&G’s ORSA and recommended its approval to
the Board. In conjunction with the Audit Committee, we also
reviewed regulatory and public Solvency II disclosures and
recommended them to the Board for approval. In addition, we
received updates on emerging regulations, regulatory risks and
other regulatory matters arising during the year.
Compliance and fraud
We reviewed and approved updates to a number of policies
including those relating to regulatory compliance risk, privacy and
data protection, and market abuse.
Annual evaluation of Risk Committee
performance
The process and results of the 2024 Board and Committee
effectiveness review are described on page 99, along with this
year’s results and agreed areas of focus.
Role and responsibilities of the Risk
Committee
The Committee is responsible for assisting the Board in its
oversight of risk, including but not limited to:
– Advising the Board on the Group’s overall risk appetite,
risk tolerances and risk strategy.
– Reviewing the Group’s Risk Management Framework
(RMF) and advising the Board on its overall
effectiveness.
– Approving the Group’s risk and compliance policies and/
or recommending to the Board approval of these
policies.
– Reviewing current and potential future risks and the
mitigation strategies for these.
– In conjunction with the Audit Committee reviewing the
effectiveness of financial and non-financial controls
across the Group’s internal control framework.
– Reviewing the effectiveness of internal models including
stress testing.
– Reviewing the ORSA and, in conjunction with the Audit
Committee as required, compliance with regulatory
requirements.
– Advising the Remuneration Committee on Risk and
control issues that may impact remuneration strategy in
any given year including adjustments to individual
incentives.
– Receiving information, via its regular risk, compliance,
regulatory and other reporting on entities that are
subsidiaries of the Company and form part of the Group.
The Committee is not the risk committee for those
entities but has responsibility for oversight of any issues
escalated to it by Group subsidiaries.
The Risk Committee’s terms of reference
www.mandg.com
Membership and meeting attendance
page 97
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In this section
Directors’ Remuneration Policy
Remuneration at a glance
Single figure remuneration
Directors’ share interests and other payments
Remuneration arrangements throughout the Company
Statement of implementation of the Remuneration Policy in 2025
Other related disclosures
Directors’
Remuneration
Report
Remuneration Committee
i
Clare Chapman (Chair)
Paul Evans
Clare Thompson
Massimo Tosato
Priorities for 2025
– Further incentive scorecard alignment to strategy for 2026 including
customer, risk and sustainability metrics
– Ensure incentives reinforce continuous improvement in the control
environment
– Design remuneration solutions to support strategic cost and simplification
initiatives
– Assess workforce engagement with reward schemes and the implications
of increasing transparency
Areas of focus in 2024
– Review of the Directors’ Remuneration Policy in relation to
executive packages and shareholding requirements
– Incentive scorecard review for alignment to strategy,
growth and long-term value creation
– Remuneration aspects of transformation and change to
support the achievement of strategic objectives
– Assessment of scheme outcomes for alignment with
performance and stakeholders and to ensure fairness
across the wider workforce
Dear Shareholder
On behalf of the Board and its Remuneration Committee, I am
pleased to present the Directors’ Remuneration Report (DRR) for
the year ended 31 December 2024. Included are our decisions in
respect of remuneration outcomes for the 2024 financial year, a
review of the Directors’ Remuneration Policy (DRP) and our
proposed implementation of the new DRP in 2025.
I would firstly like to thank shareholders for their valuable
engagement during a consultation on our proposed changes to
the DRP. The Committee engaged with 30 of our largest
shareholders, representing c. 70% of share ownership, and
also with proxy advisory bodies and regulators. We received
valuable feedback from the majority of our top shareholders,
which was broadly supportive of the proposals as well as
suggestions for further refinement and improvement. I have
summarised the feedback we received and our final proposals
for the new DRP and 2025 implementation below.
Directors’ Remuneration Policy Review
In 2024, the Committee has continued its ongoing assessment
of the effectiveness of remuneration arrangements and their
overall alignment to our purpose and strategy. Our objectives in
this review have been to ensure that our remuneration
structure and performance measures are fully aligned to our
strategic priorities and the delivery of longer-term future
performance and value creation, and that the Executive
Directors are properly incentivised to lead our growth
ambitions in the coming years.
Following the successful completion of the first phase of our
new strategy announced in 2023, the business is transforming
at pace in challenging market conditions. Our 2024 results and
strategy update demonstrate the continued progress we are
making across all strategic pillars. This is a strategic pivot and
critical point in our transformation journey, therefore a key
priority of the Committee is to ensure that we incentivise and
retain our executive team for the next phase of growth. The
focus of the Committee’s review has therefore been to ensure
that remuneration packages and performance measures are
designed to achieve M&G’s ambitions and drive the continued
delivery of longer-term shareholder value, recognising that any
additional remuneration opportunity should be dependent on
that future performance. It is in this context that the Committee
has determined two primary updates:
– Executive Director package review - an increase in Long-
Term Incentive Plan (LTIP) opportunity and shareholding
requirement, which require amendments to the DRP and are
presented for a binding shareholder vote at the 2025 AGM; and
i
Louise Fowler is a standing attendee as a representative of the Prudential Assurance Company (PAC) Board.
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– Incentive plan scorecard review - focus on the Short-Term
and Long-Term Incentive financial scorecard measures,
which are presented in Remuneration at a glance and the
statement of implementation of the remuneration policy in
2025, and are subject to an advisory shareholder vote at the
2025 AGM.
The proposed updates to the Executive Director packages for
2025 are as follows:
– an increase in LTIP opportunity from 250% to 375% of
salary for the Group CEO, and from 225% to 275% for the
CFO;
– an increase in shareholding requirement from 300% to
375% for the Group CEO and from 250% to 275% for the
CFO); and
– vesting of deferred awards changing from three-year cliff
vesting to three-year pro-rata vesting in 3 equal tranches
from 2025 Short Term Incentive awards granted in early
2026, to align with a policy change across our workforce
reflecting market practice across many of our peers.
Base salary and STI opportunity will remain unchanged.
The Committee was mindful that M&G operates within a
competitive sector and attracting and retaining executives with
the requisite knowledge and experience of asset management
and insurance is very challenging. Peer group market data has
been carefully considered to ensure that market positioning is
appropriate in light of the Executive Directors’ experience,
performance and strong contribution in role, and taking into
account M&G’s size, complexity and strategic ambition. The
Committee will be mindful of the impact on total remuneration
when considering future salary reviews as a result of the
package rebalancing and intended market positioning.
The proposals have been carefully structured to ensure that
any increase in overall remuneration will only be realised if
long-term performance objectives are delivered over time, with
higher shareholding requirements to further enhance long-
term shareholder alignment. Full details of our approach to
determining these proposals is provided from page 117.
2025 Incentive Scorecard Review
The proposed incentive scorecard changes for 2025 have been
focused on further alignment with our purpose and strategy.
Increased alignment to our growth ambitions and external
strategic targets was the primary objective for the Committee
with two principal changes:
– a Net Client Flows measure will be introduced to the financial
section of the Short-Term Incentive (STI) scorecard; and
– an Adjusted Operating Profit Growth measure will be
introduced to the financial section of the LTIP scorecard
alongside the Operating Capital Generation measure.
These changes will provide an improved balance between
value and growth measures in the financial element of the
scorecards (with the non-financial elements continuing to focus
on customer, colleagues, risk and sustainability) and embed
alignment of the Executive Directors’ remuneration outcomes
to our longer-term strategic targets through the LTIP
scorecard:
– 3-year Operating Capital Generation target of £2.7bn aligned
to our strategic target with significant outperformance
stretch in the performance range; and
– average growth in adjusted operating profit of 4-8% per
annum over 3 years, with a midpoint/target outcome
positioned in excess of our strategic objective to grow by 5%
or more over the period with further stretch in the
performance range.
We have also continued to refine the non-financial measures in
the LTIP scorecard reducing the weighting for sustainability in
2025, as it will only incorporate diversity measures. Given the
significant progress made in respect of own emissions, with the
2024-26 LTIP scorecard already aligned to achieving the
external reduction target three years early, the Committee
considered it more appropriate to remove this metric for 2025
and focus the scorecard on other measures. Refinement of our
sustainability strategy is due to be completed during 2025 and
the Committee will therefore review sustainability measures
again for 2026 once the wider strategic review is complete.
Full details of the 2025 incentive scorecard changes and new
measures are provided in Remuneration at a glance and the
implementation report for 2025.
Engagement with stakeholders
We were very pleased to be able to engage with the majority of
our largest shareholders, proxy advisory bodies and regulators
during the consultation.
Shareholder questions and feedback primarily focused on the
strategic rationale, timing and benchmark methodology/
positioning for the package review proposals. The proposed
increase to shareholding requirements was welcomed, with
very clear feedback from some shareholders and proxy
advisers that a minimum shareholding requirement must be at
least as high as the annual LTIP opportunity.
Our proposal to introduce Adjusted Operating Profit growth as
an additional financial measure to the LTIP scorecard, aligned
with our strategic growth objectives, was well received by
shareholders. We subsequently proposed to introduce Net
Client Flows from open business as a new STI financial
measure after the initial consultation, as an additional
growth metric.
Our rationale to revise our use of sustainability measures
aligned with shareholder feedback on their expectations for the
structure of non-financial measures. Feedback generally
reinforced shareholder expectations that measures should
provide genuine strategic alignment, with meaningful
weighting to impact behaviours and have stretching targets.
We received some further observations on the overlap of
measures between the scorecards. The Committee reviewed
the STI and LTIP metrics against our Key Performance
Indicators over both the short and long term, seeking to reduce
overlap where appropriate. The Committee will keep this under
review.
Further details of the consultation process, feedback and how
we have reflected this in our final proposals is provided on
pages 119 and 134.
Performance delivered in 2024
In 2024, we have continued to deliver progress on our strategy,
focused on financial strength, simplification, and profitable
growth. There have been significant achievements, including
the upgrade and achievement of our 3-year operating capital
generation target, a reduction in debt and leverage ratio,
further upgrades to our cost saving target with improvements
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in the Asset Management cost-income ratio and achievement
of 5% growth in Adjusted Operating Profit.
Our capital position remains strong with our shareholder
Solvency II ratio increasing 20 ppts to 223%, maintaining strong
momentum from the previous year to outperform our three-
year cumulative operating capital generation target for the
2022-24 LTIP award and our strategic external target to
achieve £2.7 billion by the end of 2024, which was upgraded
from the original target of £2.5 billion in September.
With the continuation of our dividend policy in 2024,
shareholders realised a total return of 33.5% for the 3-year
period from 1 January 2022, above the median of the 2022 LTIP
peer group of FTSE 100 financial services companies.
2024 Short-term Incentive Plan
The performance measures driving the outcome of the 2024
Short-Term Incentive (STI) scorecard are summarised below.
Financial performance in 2024
Since 2023, when we moved to a new basis of accounting for
insurance contracts (IFRS 17), we have adopted an STI profit
measure taking account of operating change in contractual
service margin (CSM). Operating change in contractual service
margin gives a view of economic value generated by including
the impact of new business written and management actions
taken in the period. By adding the two metrics together,
executive remuneration is better linked to strategic actions in
the performance period in which they have been made. To align
with our strategic decision to re-enter the de-risking market,
our operating capital generation measure was refined to
exclude capital strain on writing new business, which aligns
with our 3-year strategic target.
AOP plus operating change in CSM of £1,131 million was above
target in 2024 due to a higher AOP plus operating change in
CSM from the shareholder annuities in the Life business and
higher than expected AOP from Other Life, following actions
taken to reduce costs.
Operating Capital Generation (excluding new business strain)
of £1,090 million was above the maximum. Performance in
2024 was driven by higher than planned operating capital
generation from both the Asset Management and Life
businesses.
Non-financial performance in 2024
Non-financial measures focus on our customers and
colleagues, and ensuring we operate within an effective risk
and controls environment. The non-financial elements of our
scorecards ensure there is an appropriate balance between
performance and how it is delivered, which is critical for M&G’s
long-term success, sustainable shareholder value creation and
aligning with our purpose and the principles of the Consumer
Duty. Progress was made towards a number of our stretching
measures and an outcome just above target was achieved for
the non-financial section overall. The Committee was pleased
to observe stable or improving year-on-year trends across the
non-financial measures.
Our customer metrics include:
– Our Life Net Promoter Score (NPS), which was +22 for 2024,
a +5 improvement on prior year and above the maximum of
the performance range (the 2023 measure included
additional customer groups so is not directly comparable to
the 2024 outcome);
– With-Profits Fund investment performance, which
outperformed the benchmark demonstrating the benefit to
policyholders of the strength and diversification of the Fund’s
investment approach; and
– Asset Management investment performance, which is
measured on a rolling quarterly average basis over one and
three years. 77.3% of institutional funds outperformed their
investment benchmark/objective to deliver a maximum
outcome. 48.3% of wholesale funds outperformed their
investment benchmark/objective, which was broadly
consistent with the previous two years, just below the
threshold of the performance range.
Employee engagement is the degree to which employees
invest themselves to drive positive organisational outcomes.
Colleague inclusion continues to be measured on a regular
basis. We measure this in our OneVoice survey, asking
colleagues how happy they are at work and if they would
recommend M&G as a great place to work. The scorecard
target and performance is based on an average of the three
surveys conducted in 2024. Taking into account the level of
change across the Group in 2024, the relatively stable average
outcome of 69.0 (2023: 70.7), which is at the threshold of the
performance range, was a pleasing outcome and demonstrates
the stretching nature of the target.
As part of our annual assessment of risk management and
internal control effectiveness, the positive trend of minimising
the number of overdue high and very high assurance issues
continued in 2024, with the outcome of 2.2% being above
target, albeit a slightly higher percentage outcome than 2023
performance. At 82.1%, the proportion of self-identified issues
was at target (this measure incorporated new methodology for
the 2024 performance period).
A downward risk adjustment of 2.5% has been applied to the
STI outcome to reflect that, while positive progress has been
made building on the risk and control framework foundations
previously put in place, additional implementation work
continues to be needed to further embed the framework.
As a result of this performance and independent risk
assessment, the 2024 STI delivered an outcome of 68.10% of
maximum opportunity for the Executive Directors (compared to
an outcome of 79.9% in 2023).
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Category
Measure
Performance
Vesting (Max)
Financial
Measures
– Adjusted operating profit plus operating change in CSM
– Operating Capital Generation excluding new business strain
£1,131m – above target
£1,090m – above maximum
48.58% (60%)
Customer
Outcomes
– Life – Net Promoter Score
– With-Profits Fund (versus benchmark)
– Wholesale (% of funds above benchmark)
– Institutional (% of funds above benchmark)
22 – above maximum
4.3% – above maximum
48.3% – below threshold
77.3% – above maximum
15.00% (20%)
Colleague
Measures
– Sustainable engagement index score
69.0 – at threshold
0.00% (10%)
Risk &
Controls
– % high/very high assurance issues overdue
– Proportion self-identified high/very high issues of total
2.2% – above target
82.1% – at target
6.27% (10%)
Scorecard outcome
69.85%
Risk Adjustment (2.5% of the scorecard outcome)
(1.75)%
Final Outcome
68.10%
2022 Long-Term Incentive Plan
The 2022 LTIP award was granted in April 2022 with performance measures covering the period 2022 to 2024 and has an overall
outcome of 62% of maximum.
Category
Measure
Performance
Vesting (Max)
Financial
Measures
– Cumulative operating capital generation including new business
strain
£2,749m – above target
43.0% (50%)
– Relative total shareholder return ranking
53rd percentile –
above threshold
8.5% (25%)
Non-Financial
Measures
– Risk and Conduct
30% – see below
3.0% (10%)
– Diversity (Gender)
36% – at threshold
0.0% (7.5%)
– Climate – own emissions reduction
35% – above maximum
7.5% (7.5%)
Scorecard outcome
62.0%
The primary measure was cumulative operating capital generation including new business strain, which was above the target and
in excess of our upgraded 3-year strategic target of £2.7 billion by the end of 2024 primarily due to higher than expected yields at
the start of 2023 and higher contribution than planned from actions taken to manage capital.
25% of the scorecard was based on our total shareholder return relative to a peer group of FTSE 100 financial services companies
(excluding investment trusts), with threshold performance set at the median of the peer group and maximum performance at the
upper quartile. Performance was at the 53
rd percentile of the peer group with a return of 33.5% for the three-year period compared
to the peer group median of 23.8%. Our share price was broadly flat over the period, with an above median total shareholder return
achieved, driven by our dividend policy which continued to be at the high end of FTSE 100 levels.
Performance against the non-financial measures in the scorecard was as follows:
– For Risk and Conduct, the Committee, taking input from the Risk Committee, considered a range of factors in determining the
outcome of the qualitative Risk and Conduct measure. They observed that over the three-year period the business had generally
operated within risk appetite and policy limits, and in particular, policy compliance was maintained at a high level. It was
observed that there had been incremental improvements in the control environment in each of the three years of the
performance period and that, while implementation work identified in prior years needs to continue into 2025, the positive
progress was acknowledged. Taking consideration of all of these factors the Committee concluded that an outcome of 30% was
appropriate.
– We currently have 36% women in senior leadership, which is a slight decrease on our year-end 2023 position of 37%, at the
threshold of the performance range with zero vesting. The number of women in the leadership category remained steady, with
performance driven by business realignment and changes in the Group Executive Committee. We remain committed to
achieving our target of 40% female representation in senior leadership by the end of 2025, which is reflected in the target for the
2023-25 LTIP scorecard.
– Own emissions reduced by 35% from the 2019 baseline. An upward trend in business travel continued in 2024. Scope 3 business
travel accounts for 91% of reported emissions, resulting in a 14% increase in total reported emissions versus 2023. The outcome
still exceeds the progress required (on a straight-line basis) to achieve our near-term target of a 46% reduction by 2030,
resulting in a maximum outcome for the 2022 LTIP measure. We remain committed to taking steps towards achieving the near-
term target with the objective reflected in the target for the 2024-26 LTIP scorecard, three years ahead of schedule. This
measure has been removed from the 2025 LTIP in light of the significant progress made and target set in the 2024 LTIP award.
Climate-related measures will be subject to review in 2025 following the update to our sustainability strategy.
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Consideration of pay and conditions across
the wider workforce
The Committee takes great care to consider the pay and
conditions of the wider workforce with a focus on fairness of
remuneration outcomes. From 2023 a remuneration-based
question has been included in the all-colleague OneVoice
survey to give the Committee additional insight. Workforce
remuneration is also a key input when determining salary
reviews and incentive outcomes for the Executive Directors.
The key indicators considered by the Committee as part of its
2024 year-end decision making included:
– 2025 salary increases: The actual salary spend increase
across the UK workforce in 2025 has been 3%, with higher
increases towards more junior roles and a more limited
budget available for senior management and executives for
whom increases applied by exception only;
– 2024 STI outcomes: The average STI outcome for wider
workforce colleagues, which was 2% lower than it had been
in 2023; and
– 2024 Total Remuneration outcome: The Chief Executive
Total Remuneration Ratio, which was 24:1 at median in 2024
(compared to 28:1 in 2023 and 77:1 in 2022).
The decrease in the ratio between 2023 and 2024 is primarily a
consequence of the decrease in the Group CEO STI outcome
relative to the average change across the wider workforce. The
Committee was satisfied that the decisions taken in respect of
remuneration outcomes were fair and reasonable when compared
to the wider workforce experience over the period.
The Committee noted that outputs such as the Group Chief
Executive Officer pay ratio would continue to be subject to
some volatility over a period where there have been changes to
the Executive Directors and transformation activity impacts the
demographics of our wider workforce.
Diversity and inclusion is a responsible business practice which
underpins our new Group Sustainability Framework. We are
proud to have been one of the first companies in our industry to
publish an ethnicity in leadership target and voluntarily publish
ethnicity pay gap data.
We believe that transparency is key to driving real change,
which is why we report our ethnicity pay gap in the same way
that we report our gender pay gap data. See our Gender and
Ethnicity Pay Gap Report on our website for more detail.
Both gender and ethnicity are again included in the 2025 LTIP
scorecard with stretching targets underpinning our
commitment to increase representation in leadership roles. For
more information on diversity and inclusion please refer to the
Colleagues section of this report from pages 40-43.
Other areas of focus in 2024
Other areas of focus for the Committee during 2024 included
items related to transformation and change to support our
strategic objectives, and consideration of performance
outcomes for the incentive schemes to ensure that these were
fair across different colleague populations and were
appropriate taking consideration of all relevant aspects of
performance across the group.
Implementation in 2025
The Committee approved no salary increase for the Group
Chief Executive Officer and Chief Financial Officer in 2025. This
was consistent with the approach taken for the senior
leadership team and was below the wider workforce salary
spend of 3% .
There is no change to STI opportunity in 2025. As explained
earlier, we are proposing to increase the LTIP opportunity and
shareholding requirements for the Executive Directors from 2025,
subject to approval of the new DRP at the AGM. Further details on
these proposed changes are provided from page 117. Changes to
the incentive plan metrics for 2025 are covered in Remuneration
at a glance and the implementation report for 2025.
Looking forward
During 2025 we will undertake a further review of the incentive
scorecards for 2026 considering strategic alignment and the
balance of value and growth measures across the scorecards. As
our updated sustainability strategy is embedded, we will assess
whether any changes are required to the incentive plans to retain
appropriate alignment. We will also consider if further refinement
of customer and risk measures is required to improve alignment of
incentives to our purpose, values and behaviours.
As we look forward to 2025, the Committee will be focused on:
– Further incentive scorecard alignment to strategy for 2026
including customer, risk and sustainability metrics.
– Ensure incentives reinforce continuous improvement in the
control environment.
– Design remuneration solutions to support strategic cost and
simplification initiatives.
– Assess workforce engagement with reward schemes and
the implications of increasing transparency.
I would again like to thank shareholders for their engagement
during the consultation and look forward to your support for
our revised Directors’ Remuneration Policy and 2024 Directors’
Remuneration Report.
Clare Chapman
Remuneration Committee Chair
Role and responsibilities
of the Remuneration Committee
Deciding the framework of the remuneration policies:
establishing, approving and maintaining the principles and
framework of the remuneration policies and arrangements
for the Group.
Determining the design, implementation and operation of
remuneration arrangements for the Chair of the Board, the
Executive Directors, Group Executive Committee and
identified staff for all remuneration regulations that apply
to the Group, and overseeing remuneration for individuals
whose total remuneration exceeds an amount determined
by the Committee from time to time.
The Remuneration Committee’s terms of reference
www.mandg.com
Membership and meeting attendance
page 97
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Context for our Directors’ Remuneration Policy review
As outlined in the Chair’s opening statement, the Committee has undertaken a review of our remuneration structure and
performance measures to ensure they are fully aligned to our strategic priorities and the delivery of long-term future performance
and value creation. The proposed Policy changes are designed to ensure that the Executive Directors are properly incentivised to
lead our growth ambitions.
Following the successful completion of the first phase of our new strategy announced in 2023, the business is transforming at pace
in challenging market conditions with our insurance and asset management business segments both well positioned for
sustainable growth. This is a critical point in our transformation journey at which the Committee believes these off-cycle policy
changes are required to reinforce alignment to the delivery of growth in the next phase of the strategy.
The focus of the Committee’s review has therefore been to ensure that remuneration packages and performance measures are
designed to achieve M&G’s ambitions and drive the continued delivery of long-term shareholder value, recognising that any
additional remuneration opportunity should be dependent on that future performance over time. It is in this context that the
Committee has determined two primary proposals:
– Executive Director package review - an increase in LTIP opportunity and shareholding requirement, which require amendments
to the DRP and are presented for a binding shareholder vote at the 2025 AGM; and
– Incentive plan scorecard review - with focus on the STI and LTIP financial scorecard measures and further refinement of non-
financial measures. All changes are within the parameters defined in the DRP for incentive scorecard structures, so have not
required the Committee to propose any changes to the DRP. Full details are presented in Remuneration at a glance and the 2025
implementation sections of the DRR which is subject to an advisory shareholder vote at the 2025 AGM.
The Committee was mindful that M&G operates within a competitive sector and attracting and retaining executives with the
requisite knowledge and experience of asset management and insurance is very challenging. As part of the review, peer market
data has been carefully considered to ensure that market positioning is appropriate in light of the Executive Directors’ experience,
performance and strong contribution in role, taking into account M&G’s size, complexity, and strategic ambition. The proposals
have been carefully structured to ensure that any increase in overall remuneration will only be realised if long-term performance
objectives are delivered over time, with higher shareholding requirements to further enhance long-term shareholder alignment.
The focus on incentive opportunity rather than fixed pay also rebalances the package towards variable remuneration, which is more
commensurate with asset management peers and aligned to our long-term strategic objective to grow the proportion of Group profits
contributed by the Asset Management business. We would note that the proposed LTIP opportunity for the Group CEO remains below
the exceptional limit of 400% of salary that was removed from the DRP in 2023. No increase to base salary for 2025 is proposed.
The proposed package changes for the Executive Directors for 2025 are summarised in the following tables:
Directors’ Remuneration Policy – summary of changes for 2025
Fixed Remuneration
Andrea Rossi, Group CEO
Kathryn McLeland, CFO
Salary - no change
£910,000 (0% increase)
£603,000 (0% increase)
Base salaries will next be subject to the standard annual review process in 2026
Pension - no change
Aligned with wider workforce – 13% of salary
Benefits - no change
No change in provision
Variable Remuneration
Short-Term Incentive (STI) –
no change
Maximum:
250% of salary
(2024: 250% of salary)
Maximum:
225% of salary
(2024: 225% of salary)
50% of awards are deferred in shares over three years
i
Long-Term Incentive (LTIP) –
increased opportunity
Maximum:
375% of salary
(2024: 250% of salary)
Maximum:
275% of salary
(2024: 225% of salary)
LTIPs are awarded over M&G plc shares, subject to stretching performance targets over a
three-year performance period and additional two-year holding period
Shareholding Requirement
Shareholding Requirement –
increased requirement
375% of salary
(2024: 300% of salary)
275% of salary
(2024: 250% of salary)
The requirement must be achieved within five years of appointment and maintained
for two years post-employment with M&G
i
In line with a policy change for the wider workforce and in alignment with market practice across many of our peers, vesting of deferred awards is
changing from three-year cliff vesting to three-year pro-rata vesting in three equal tranches from the 2025 performance year (for deferred STI awards
granted in 2026).
The impact of these changes on the Executive Directors’ packages (excluding pension and benefits) is illustrated below at target
package level:
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Directors’ Remuneration Report continued
Our review of the Directors’ Remuneration Policy
117
Andrea Rossi
Group CEO (Current)
Andrea Rossi
Group CEO (New)
Kathryn McLeland
CFO (Current)
Kathryn McLeland
CFO (New)
£0k
£500k
£1,000k
£1,500k
£2,000k
£2,500k
£3,000k
£3,500k
£4,000k
¢ Base salary ¢ Target STI ¢ Target LTI
The overall impact on target and maximum package (excluding pension and benefits) and shareholding requirement on a %
change basis is further illustrated below:
UK £’000
Names
Total target compensation
Total maximum compensation
Shareholding requirement
Group CEO (New)
Andrea Rossi
3,860
6,598
375%
Group CEO (Current)
3,256
5,460
300%
% Change
18.6%
20.8%
25.0%
CFO (New)
Kathryn McLeland
2,163
3,619
275%
CFO (Current)
2,003
3,318
250%
% Change
8.0%
9.1%
10.0%
In considering the current packages and developing these proposals, the Committee has taken benchmarking data into account to
ensure the proposals are appropriate and proportionate from an external market perspective. We have updated our benchmarking
peer group to include the most aligned UK and European peer companies in terms of business scope, recruitment and retention
risk (e.g. excluding wealth managers and wider investment firms)*. At this point in the strategy some refinement of the peer group
was considered appropriate in the context of our priority to grow our European business, with the Committee acknowledging that
a broader international peer group for benchmarking purposes may become more relevant over time.
Remuneration benchmarking peer group
Asset Managers
Life Insurers
– Aberdeen
– Amundi
– DWS
– Jupiter
– Man Group
– Ninety One
– Schroders
– Aviva
– Just Group
– Legal & General
– Phoenix
*
Relevant wealth managers and wider investment firms are still represented in our TSR peer group for the purpose of the LTIP, for which a broader set of peers
is considered appropriate for performance measurement.
The quartile benchmark levels for the peer group are presented below with the market position of current and proposed total
target remuneration for the Executive Directors. On a market capitalisation basis, M&G is positioned around median within the peer
group. The proposed changes will position the total remuneration packages at or just above the median of the benchmark, below
the largest companies in the peer group, but generally above companies of commensurate or smaller market cap with simpler
asset management or life business structures. The Committee considered this market positioning to be appropriate given the size
and complexity of our business, particularly when coupled with the increased weighting and dependency on long-term future
performance and an increased shareholding requirement, which is above median compared to the market:
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118
Total target compensation against our peer group
Note: Peer group data is based on disclosure available as at the end of 2024, excluding pension and benefits..
In actual terms the proposals move the Group CEO from c. 40th percentile to c. 60th percentile and the CFO from c. 40th
percentile to c. 50
th percentile, with similar ranking within the peer groups.
The shareholding requirement is proposed to increase for both Executive Directors by a higher percentage than their respective
package increases, ensuring that the requirement remains at least as high as the LTIP award opportunity and further embeds long-
term alignment to shareholder value creation and shareholders’ interests. The requirement continues to extend for two years post-
employment and is expected to be achieved within five years of their respective appointment dates.
The final proposed change is in respect of the vesting profile of deferred STI awards, which are currently subject to three-year cliff
vesting. A shift in STI deferral policy from three-year cliff to three-year pro-rata vesting (in 3 equal instalments on the 1st, 2nd and
3rd anniversaries of the grant) is being implemented across our workforce to better align our package structures with peers in our
sector. The Committee proposes to align the Executive Directors with this Policy change from 2025. Given the requirement for
Executive Directors to build up and maintain their shareholding requirement within five years of appointment, the Committee is
comfortable that this change is broadly neutral for the current and any future Executive Directors.
Consideration of shareholder views on the Policy
The Committee engaged with 30 of our largest shareholders, representing c. 70% of share ownership, proxy advisory bodies and
regulators. We received valuable feedback from the majority of our top shareholders and all advisory bodies. Shareholder
questions and feedback primarily focused on the strategic rationale, timing and benchmark methodology/positioning for the
package review proposals. Our rationale and supporting evidence was generally considered robust and there was a request for
transparent disclosure explaining the strategic rationale for the changes, our approach to benchmarking and the implications of
the proposals on our market position, and why the Committee considers this to be appropriate at this time.
The proposed increase to shareholding requirements was welcomed, however we received very clear feedback from some
shareholders and proxy advisers that a minimum shareholding requirement must be at least as high as the annual LTIP opportunity
which the Committee has fully implemented.
The rationale for the rebalancing of the package was acknowledged and, while base salary should remain competitive, certain
shareholders highlighted that we should be mindful of the overall increased opportunity of the total package in future salary review
processes.
The Committee carefully reflected on all feedback received in finalising our proposals. In our disclosures we have sought to be as
transparent as possible on our rationale for the proposals, benchmarking methodology and the market positioning of the revised
packages. We acknowledge the feedback on monitoring base salary prudently in light of the rebalancing of the packages. No
salary increases have been applied in 2025 and this will be carefully considered in future annual reviews.
Shareholder views were also sought on the incentive scorecard review. The feedback on this topic is summarised in Remuneration
at a glance with full details of the changes to the 2025 scorecards on page 134.
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119
Remuneration Policy for Executive Directors
Key principles of the Remuneration Policy for Executive Directors
The Remuneration Policy, which will take effect from the April 2025 AGM subject to shareholder approval, has been designed to
align with and support our purpose and strategic priorities of financial strength, simplification and growth, resulting in the creation
of shareholder value and positive customer outcomes within an inclusive and engaging culture for our colleagues. The proposed
changes are summarised below, followed by the full Policy with updates highlighted.
In determining this Policy, the Committee has followed a fully informed and independent decision-making process, receiving input
from shareholders, proxy advisers and the Company’s independent remuneration consultants, with conflicts of interest managed
by ensuring that no individuals participated in the consideration of decisions impacting their own remuneration. The Committee
comprises independent Non-Executive Directors who do not participate in the Company’s incentive plans.
The proposed changes to the Directors’ Remuneration Policy, which are explained in detail in the previous section of the report, are
as follows:
– An increase to the Long-Term Incentive Plan limit from 250% to 375% of base salary;
– An increase to the shareholding requirement from 300% to 375% for Andrea Rossi, Group Chief Executive Officer and from
250% to 275% for Kathryn McLeland, Chief Financial Officer; and
– Vesting of deferred awards under the Short-Term Incentive Plan changing from three-year cliff vesting to three-year pro-rata
vesting in 3 equal tranches, to align with a policy change across our workforce to reflect market practice across many of our
peers (noting that the previous policy wording gave sufficient flexibility to implement this change and has therefore only been
subject to a minor amendment).
In addition, a minor change has been made to the Policy wording to remove the requirement for our Executive Directors to disclose
external fees. All external appointments and fees remain subject to approval of the Board.
All changes to the Policy have been highlighted in bold italics for ease of reference.
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Directors’ Remuneration Policy
120
Base salary Base salaries are appropriately positioned to attract
and retain executives with the required skills and
experience to deliver our strategic objectives.
Base salaries are paid in monthly instalments and
are normally reviewed annually with increases
normally effective from 1 April each year.
In reviewing base salaries, the Remuneration
Committee takes into account a number of factors,
including but not limited to:
– Company and individual performance;
– the scope/size of the roles and the skills and
experience of the Executive Directors;
– increases among the general workforce and
affordability; and
– benchmarking information for other firms of a
similar size and scope to M&G plc.
There are no prescribed
maximum salary levels, but
any increase will normally be
below or in line with increases
for the general workforce in
an ordinary year.
The Remuneration Committee
will retain the discretion to
award increases at a level
greater than that applied to
the general workforce if the
Remuneration Committee
deems it appropriate to do so.
The Remuneration Committee
will consider the impact of
increasing base salary on
other elements of
remuneration to ensure total
remuneration remains
appropriate.
Both individual and Company
performance will be taken into
consideration when
determining base salary
increases.
Benefits
Benefits are provided to ensure our remuneration
packages are appropriate to attract and retain
executives with the required skills and experience
to deliver our strategic objectives.
Benefits are provided to Executive Directors at a
market competitive level, taking into account
benefits offered to other employees within M&G.
Benefits currently provided to Executive Directors
include but are not limited to:
– Life assurance;
– Disability insurance and critical illness
insurance;
– Private health insurance (including eligibility for
his or her spouse or civil partner and
dependent children); and
– Annual health screening.
The Executive Directors are able to participate in
self-funded voluntary benefits and discounted M&G
products in line with other employees.
Executive Directors are eligible to participate in UK
all-employee share plans, which currently
comprises HMRC-approved Sharesave and SIP
plans, on the same terms as other employees.
The Company may cover reasonable legal costs and
certain relocation expenses in accordance with the
Company’s relocation policy.
Cover levels are defined
within the terms of each
benefit with maximum
opportunity dependent on the
terms of the insurer and
individual circumstances.
There are no performance
measures for benefits.
Pension
Pension contributions as a percentage of salary are
aligned with the general workforce at a level
sufficient to ensure our remuneration packages are
appropriate to attract and retain executives with the
required skills and experience to deliver our
strategic objectives.
Executive Directors are eligible for employer
contributions in respect of the Company’s defined
contribution pension scheme which may be
received in part or in full in cash.
The approach to pension arrangements for the
Executive Directors is in line with the wider
workforce.
13% of base salary
per annum.
There are no performance
measures for pension
contributions.
Remuneration
element
Strategic alignment and operation
Maximum opportunity
Performance measures
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121
Short-
Term
Incentives
(STI)
STI awards are designed to provide clear alignment
of objectives and performance with the delivery of
our financial and non-financial strategic objectives
annually. The deferred share component of STI
provides longer-term alignment with the interests of
the Company and shareholder value creation.
Executive Directors are eligible to participate in an
annual STI plan at the discretion of the Committee.
Performance measures, targets and weightings are
determined annually and may vary to ensure
alignment with the Business Plan and strategy.
A threshold, target and maximum performance level
is set for each measure, with an outcome of 0% for
threshold performance or below and 50% of
maximum for on-target performance.
Performance outcomes may be subject to a
discretionary downward risk adjustment taking
consideration of an annual report from the Risk
Committee, including factors such as an
assessment of risk and compliance events and the
effectiveness of risk management relative to M&G’s
risk appetite during the performance period. Any
adjustments applied will be explained in the relevant
annual remuneration report.
50% of any STI payable to an Executive Director
will normally be deferred over three years into an
award over M&G shares under the Deferred
Incentive Plan. The rate of deferral may be adjusted
upwards and a post-vesting holding period may be
applied to meet remuneration regulatory
requirements where required.
Dividend equivalents may accrue on deferred share
awards, based on dividends paid to shareholders
during the vesting period. In line with the plan rules,
dividend equivalents may also accrue during any
applicable post-vesting holding period. These may
accrue either in cash or shares on a reinvestment
basis and are subject to the same terms, including
vesting date, as the deferred share award.
Adjustments may be made to deferred share
awards in certain circumstances including rights
issues, corporate restructuring and special
dividends, if the Remuneration Committee deems it
appropriate to do so.
Malus and/or clawback provisions apply to both
cash and deferred STI awards - see ‘Malus and
clawback’ for further details.
STI awards are subject to an
annual limit of 250% of base
salary for the Executive
Directors.
The scorecard of performance
measures will comprise a
combination of financial and
non-financial measures, with
financial measures normally
comprising at least 50% of
the scorecard.
Performance measures and
weightings are determined
annually to ensure alignment
with the Business Plan and
strategy.
The Remuneration Committee
has discretion to adjust
formulaic outcomes if they are
not considered to be
representative of the overall
performance of the Company.
Any adjustments applied will
be explained in the relevant
annual remuneration report.
Performance targets and
ranges will be disclosed with
the performance outcomes of
STI awards in the annual
remuneration report
published at the end of the
performance period for the
STI awards.
Remuneration
element
Strategic alignment and operation
Maximum opportunity
Performance measures
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Long-Term
Incentive
Plan (LTIP)
LTIP awards are designed to provide long-term
alignment of executive remuneration to sustained
business performance relative to long-term
strategic objectives and shareholder value creation.
Executive Directors are eligible to participate in the
LTIP at the discretion of the Committee. Awards are
normally granted annually over M&G plc shares.
Awards are subject to performance conditions
which are measured over a three-year vesting
period from 1 January of the year of grant with
vesting occurring on the third anniversary of the
grant date. Vested awards are subject to an
additional holding period of two years.
A threshold and maximum performance level is set
for each measure, with straight-line interpolation for
performance between these levels. At threshold
performance, 0% will vest for all metrics with the
exception of TSR, for which 25% will vest. There is
zero vesting for performance below the threshold.
Maximum performance will result in 100% vesting.
Performance outcomes may be subject to a
discretionary downward risk adjustment taking
consideration of a report from the Risk Committee,
including factors such as an assessment of risk and
compliance events and the effectiveness of risk
management relative to M&G’s risk appetite during
the performance period. Any adjustments applied
will be explained in the relevant annual
remuneration report.
Dividend equivalents may accrue on LTIP awards,
based on dividends paid to shareholders during the
vesting period. In line with the plan rules, dividend
equivalents may also accrue during any applicable
post-vesting holding period. These may accrue
either in cash or shares on a reinvestment basis and
are subject to the same terms, including vesting
date, performance conditions and holding period, as
the LTIP share award.
Adjustments may be made to LTIP awards in certain
circumstances including rights issues, corporate
restructuring and special dividends, if the
Remuneration Committee deems it appropriate
to do so.
Malus and clawback provisions apply to LTIP
awards during the vesting and holding periods - see
'Malus and clawback' for further details.
LTIP awards are subject to a
limit of 375% of base salary in
respect of any financial year.
The performance conditions
may comprise a combination
of financial (including TSR)
and non-financial measures,
with financial measures
normally comprising at least
75% of the scorecard.
Performance measures and
weightings for the grant of
new awards are determined
annually to ensure alignment
with the Business Plan and
strategy.
The Remuneration Committee
has discretion to adjust
formulaic outcomes if they are
not considered to be
representative of the overall
performance of the Company.
Any adjustments applied will
be explained in the relevant
annual remuneration report.
The Remuneration Committee
has discretion to amend or
replace performance
measures and/or targets
where it reasonably considers
it appropriate to do so,
provided that the amended
conditions are not materially
less challenging.
Performance measures,
targets and ranges will be
disclosed in the
implementation section of the
annual remuneration report
for the year prior to the grant
of LTIP awards.
Remuneration
element
Strategic alignment and operation
Maximum opportunity
Performance measures
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Malus and clawback
All STI and LTIP awards operated by M&G are subject to malus and clawback provisions in the following circumstances:
Application to STI
– Cash STI
– Deferred STI (in shares)
– Clawback for 3 years from the payment date
– Malus for the 3-year vesting period
Application to LTIP
– 3-year vesting period
– 2-year holding period
– Malus for the 3-year vesting period
– Clawback for the 2-year holding period
The circumstances in which the Remuneration Committee may consider the application of malus and/or clawback are defined in
the plan rules and can be summarised as follows:
– a material misstatement of published accounts;
– an error in the calculation of performance outcomes or such calculation being based on inaccurate information;
– material risk management failures;
– reasonable evidence of individual misconduct or material error;
– breach of an applicable law, regulation or code of practice and/or failure by the individual to meet standards of fitness and
propriety;
– actions or responsibility for conduct leading to significant loss(es) and/or reputational harm to the company or any Group
Member;
– material downturn in financial performance; or
– corporate failure.
Malus can be applied to an alternative unvested award to satisfy a clawback event on a vested/released award. The periods that
malus and clawback apply may be extended if required to meet regulatory requirements.
Legacy arrangements
The Committee reserves the right to make any remuneration payments and/or payments for loss of office, including the exercise of
any discretions available to it in connection with such payments (notwithstanding that they are not in line with this policy), where
the terms of payment:
– came into effect before this policy was approved and implemented (including where such payments are in line with a previously
approved policy); and
– were agreed at a time when the individual was not a Director of the Company and, in the opinion of the Committee, the payment
is not in consideration for the individual becoming a Director.
Details of any such payments will be set out in the applicable Annual Report on remuneration as they arise.
Remuneration Committee discretion
The Remuneration Committee retains discretion in the operation and administration of the Directors’ Remuneration Policy, noting
that no material changes will be made to the advantage of the Executive Directors without obtaining shareholder approval. Any use
of discretion and how it was exercised will be disclosed, where relevant, in the Annual report on remuneration. This includes (but is
not limited to) the following:
– the Executives’ participation in the Company’s incentive plans;
– the timing of awards including grant, vesting and release dates;
– the size of awards and vesting levels within the limits set out in this policy;
– the performance measures and weighting for STI and LTIP awards within the terms set out in this policy;
– the adjustment of formulaic outcomes of incentive awards for risk management issues or where the outcomes are not reflective
of overall Company performance or aligned with shareholder and/or wider stakeholder experience;
– the settlement of any share awards in cash in exceptional circumstances;
– the determination of good leaver status and treatment of unvested awards in line with this policy and incentive plan rules;
– the extent to which malus and clawback should apply to any award;
– the adjustment of awards in certain circumstances including rights issue, corporate restructuring, change of control and special
dividends;
– the amendment or replacement of performance measures and targets where it reasonably considers it appropriate to do so,
provided that the amended conditions are not materially less challenging; and
– to amend the policy to ensure continued compliance with any applicable remuneration regulations.
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Performance measures
Performance measures and targets for the STI and LTIP will include a balance of financial and non-financial measures aligned with
the Company’s key short-and long-term strategic priorities:
– stretching financial targets to deliver growth and create financial flexibility for investment opportunities to build capabilities in
high value-added areas and expand our proposition in the UK and internationally. Financial targets are approved by the Board
through a rigorous process taking consideration of market conditions, competitor practices and forecasts;
– balancing the interest of policyholders and shareholders;
– creating and maintaining positive experience and outcomes for our clients;
– ensuring alignment with the Company’s strategy, purpose and values;
– creating an inclusive and engaging culture that supports the Company’s diversity and inclusion objectives to provide equality of
opportunity for all who apply for and perform work for the Company;
– adhering to a robust risk management policy and risk appetite limits;
– aligning with the long-term sustainable success of the Company and value creation for shareholders; and
– ensuring alignment with our objectives relating to environmental, social and governance factors.
Shareholding requirement
Executive Director
Shareholding requirement
Group Chief Executive Officer
375% of base salary
Chief Financial Officer
275% of base salary
The purpose of the shareholding requirement is to align executives with the long-term interests of the Company, clients and
shareholders through a requirement to hold shares both during and post-employment.
Executive Directors must normally attain the shareholding requirement and maintain this level of holding within five years of
becoming an Executive Director.
In addition to personally owned shares, unvested shares not subject to performance conditions (deferred STI awards and LTIP
share awards subject to a holding period) will count towards the requirement on a net-of-tax value basis. Executive Directors must
hold vested shares until the requirement is met except in exceptional circumstances with the approval of the Chair.
Shareholding levels will be tested annually following completion of the annual grant and vesting of awards, which will be disclosed
in the annual Remuneration Report.
A post-employment shareholding requirement will be operated for the Executive Directors requiring them to maintain their
shareholding requirement or actual shareholding, if lower, at the point of departure in full for two years post-employment
(following the same methodology as set out above).
External appointments
The Executive Directors may take up external directorships and retain the fees for such appointments with the approval of the
Board
i.
Remuneration regulations
This policy has been designed to ensure compliance with all remuneration regulations applicable to the Company. The
Remuneration Committee reserves discretion to amend the policy if it is required to do so in order to maintain compliance with any
new or amended regulations.
Scenario charts
This policy is designed to ensure that executive remuneration is directly aligned with the delivery of key financial and non-financial
performance objectives and the creation of shareholder value, achieved in accordance with the Company’s policies and values for
risk management, conduct, customer and culture. The majority of the remuneration packages are in the form of incentive awards
with the maximum values only achievable with significant outperformance of business plans and objectives. The LTIP and 50% of
the STI award are delivered in shares to maintain close alignment with shareholders. The table to the right illustrates the potential
earnings of each Executive Director in four performance scenarios:
i
Policy wording requiring our Executive Directors to disclose external fees has been removed. All external appointments and fees remain subject to
approval of the Board.
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Group Chief Executive Officer - Andrea Rossi
Below threshold
Target
Maximum
Maximum with 50%
share price growth
¢ Fixed
¢ STI
¢ LTIP
Chief Financial Officer - Kathryn McLeland
Below threshold
Target
Maximum
Maximum with 50%
share price growth
¢ Fixed
¢ STI
¢ LTIP
The performance scenarios incorporate the following assumptions:
Fixed remuneration
Comprising the 2025 base salary, benefits (based on the annualised 2024 single figure for the
Group Chief Executive Officer and Chief Financial Officer) and a 13% pension contribution.
Target remuneration
Fixed remuneration plus the value that would arise from the incentives for achieving on-target
performance:
STI with a 50% outcome for on-target performance.
LTIP with a 53% outcome for on-target performance (financial/non-financial measures with a
50% outcome and TSR with a performance scale mid-point of 62.5%).
Maximum remuneration
Fixed remuneration plus the value that would arise from the incentives for achieving maximum
performance.
Maximum remuneration with
50% share price growth
Maximum remuneration increased for the assumption that the shares granted under the LTIP
increase in value by 50% from the share price at grant.
Remuneration Policy for new appointments
Remuneration packages for new Executive Directors (including those promoted internally) will be in line with the requirements of
this policy, including maximum incentive levels, and will be determined on the principle of delivering remuneration that is
proportionate and not more than what is necessary to recruit and secure talented individuals with the requisite levels of skills and
experience, ensuring that the cost to secure the right candidate is appropriate. If required, awards may be granted to replace
awards or amounts forfeited by a previous employer (buyout awards). Any buyout awards would be limited to what is considered
to be a fair estimate of the value of remuneration forfeited and with equivalent terms (including vesting dates, performance
conditions and malus/clawback provisions) to ensure that the cost to secure the right candidate is appropriate. As buyout awards
may cover multiple years of awards from a previous employer, the grant value is not subject to the maximum limits described in this
policy.
The Company may cover reasonable legal costs and certain relocation expenses in accordance with the Company’s relocation
policy for new appointments.
The fees and benefits to be paid to a new Non-Executive Director will be determined in accordance with the terms described in the
Remuneration Policy for Non-Executive Directors.
Service agreements
All Executive Directors have service agreements of an indefinite duration that can be terminated by either party by serving 12
months’ notice. Under this policy this is the maximum notice period that may be applied to Executive Directors. The terms of the
service agreements are considered to be in line with current best practice for Executive Directors. The service contracts are
available for inspection on request from the Company’s offices.
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126
0
£2,000,000
£4,000,000
£6,000,000
£8,000,000
'000s
£1,047
£3,997
£6,735
£8,441
100%
26%
15%
12%
29%
45%
34%
51%
27%
61%
000s
£692
£2,251
£3,707
£4,536
100%
31%
19%
15%
30%
39%
36%
45%
30%
55%
0
£2,000,000
£4,000,000
£5,000,000
Loss of Office
In the event of the termination of an Executive Director, the terms of the termination will be determined by reference to the service
agreement, this policy, the rules of the relevant incentive plans, relevant regulatory requirements and the signing of a settlement
agreement, as detailed in the table below:
Element
Policy
Notice period
– 12 months from either party.
– The Company may require that all or an element of the notice period be taken as gardening leave.
– The Company may elect to pay in lieu of notice for all or a portion of the contractual notice period.
In this instance payment would be restricted to salary only and may be delivered monthly
to mitigate loss.
– Any holiday entitlement will be pro-rated to reflect the proportion of the year employed.
Any outstanding holiday entitlement must be used during the notice period.
– If an executive is dismissed for cause, there will be no notice period or payment made for loss
of office.
Termination payments
Consistent with other employees, Executive Directors may receive payments to compensate them for
the loss of employment rights on termination, subject to entering into a satisfactory settlement
agreement. Payments may include a nominal amount for agreeing to non-solicitation and
confidentiality clauses, insurance cover for a specified period following the termination date,
outplacement services, legal fees or repatriation assistance.
In the event of redundancy, a payment may be made in accordance with the Company redundancy
policy in effect at that time.
STI awards
A good leaver
i will be entitled to a pro-rated STI award for the period worked (excluding garden leave)
during the year, determined and paid through the normal process and subject to normal terms,
including deferral.
There is no entitlement to an STI award in the year of termination for a bad leaver.
Treatment of incentive
awards
Unvested deferred STI awards for good leavers continue to their normal vesting date. Unvested
awards for bad leavers will lapse.
Unvested LTIP awards for good leavers will continue to their normal vesting date, pro-rated for the
time worked during the performance period. The Remuneration Committee has discretion to waive the
pro-ration of LTIP awards, should they deem this to be appropriate. Unvested awards for bad leavers
will lapse.
Vested LTIP awards subject to a holding period will remain subject to the holding period until the
original release date.
All awards continue to be subject to their original terms, including malus, clawback and holding
periods.
The Remuneration Committee has discretion to accelerate the vesting and release of awards for good
leavers in exceptional circumstances.
Change of control
In the event of a change of control of the Company, the Remuneration Committee may determine that:
– STI awards for the year during which the change of control occurred may either continue to be
determined on the basis of the whole year or may be pro-rated to the date of the change of control.
– Unvested deferred STI awards are exchanged or replaced with equivalent awards over shares in
another company, continuing to their normal vesting date, or that the vesting of the awards is
accelerated to the date of the change of control.
– Unvested LTIP awards are exchanged or replaced with equivalent awards in another company,
continuing to their normal vesting date and subject to the same or equivalent performance
conditions, or that the vesting of awards is accelerated to the date of the change of control. If the
awards are accelerated, they will be subject to pro-ration and an assessment of the extent to which
the performance conditions have been achieved. The Remuneration Committee has discretion to
waive the pro-ration of LTIP awards if this is deemed appropriate.
i
Good leaver applies in the event of death, disability, redundancy and sale of the company/business in which an individual works. Other leavers may be
granted good leaver status at the discretion of the Remuneration Committee (which may include retirement).
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Remuneration Policy for Non-Executive Directors
Element
Policy
Fees
Fees take account of the time commitment and responsibilities of the roles and market reference points
for comparable FTSE organisations.
The Chair receives a base fee which is reviewed annually by the Remuneration Committee.
Non-Executive Directors receive a base fee and additional fees for other Board roles such as Chairship
or membership of a Committee, acting as the Senior Independent Director or subsidiary Board roles.
Fees are reviewed annually by non-conflicted members of the Board.
Benefits
The Chair is eligible to receive private medical insurance.
– The Chair and Non-Executive Directors are not eligible to participate in the Company’s pension or
incentive arrangements.
– Benefits may be provided in specific circumstances to the Non-Executive Directors that are
immaterial in nature and value, up to a maximum value of £1,000.
– Reasonable expenses may be reimbursed by the Company. The Company may pay any tax due on
reimbursed expenses.
Recruitment
Fees for a new Non-Executive Director will normally be aligned with the fee structure applicable to
other Non-Executive Directors at the time of appointment.
Notice period
– Chair: six months by either party without liability for compensation.
– Non-Executive Director: six months by either party without liability for compensation.
Key terms of
appointment
The Chair and Non-Executive Directors are subject to annual re-election at the AGM.
Remuneration arrangements throughout the Company
The Committee has taken careful consideration of remuneration arrangements for employees across the Company in determining
the Remuneration Policy and its implementation, and considers carefully the impact of Board or management decisions on pay on
the wider employee population. Formal consultation with employees has not taken place on the development of the Policy, but
insight into arrangements and conditions for the wider workforce is achieved through a combination of management and
employee feedback and an engagement plan of formal and informal activities.
A Remuneration Policy is in place for establishing standards for the design and operation of remuneration across the Company,
which has consistent principles to the Directors’ Remuneration Policy. Pension and benefit programmes are in place for all
employees. Pension entitlement is aligned with that for the Executive Directors. The majority of benefits are also aligned.
All employees are eligible for an STI award annually, determined through a combination of Company and personal performance
and subject to risk adjustment. LTI awards are used for senior management roles across the Company. Employees are eligible to
participate in all-employee share schemes and discounted products on the same terms as the Executive Directors. The
Remuneration Committee received information on remuneration across the Company, including average salary increases, the
design and outcomes of incentive plans and the Group Chief Executive Officer pay ratio, when determining the proposed changes
and implementation of the Remuneration Policy for Executive Directors.
Consideration of shareholder views on the Policy
The Committee engaged with 30 of our largest shareholders, representing c. 70% of share ownership, proxy advisory bodies and
regulators. We received valuable feedback from the majority of our top shareholders and all advisory bodies. The Committee
carefully reflected on all feedback received in finalising our proposals. Full details of the feedback received is provided on page 119.
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This section provides an overview of the Directors' Remuneration Policy, the remuneration outcomes for 2024 and implementation
decisions for 2025. Through our implementation and operation of the Policy we ensure alignment to the following principles:
Key principles underpinning our Directors’ Remuneration Policy
Sustainable, long term
success of the Group and
robust risk framework
– Clear alignment with the long-term interests of the Company through a significant proportion of
executive packages being delivered in shares for three to five years and through our shareholding
requirement policy, which includes a requirement to hold shares for two years post-employment.
– Remuneration appropriately balanced, recognising short and long-term performance.
– Financial and non-financial incentive measures that are focused on indicators of sustainable
performance that position the company strongly for continued success.
– A robust and rigorous risk review of remuneration outcomes to ensure that these properly reflect
overall Company performance from a financial, key stakeholder, conduct and reputational
perspective, and within an effective risk management framework and culture.
High performing talent
– Ensuring clarity of our remuneration packages which are appropriately positioned relative to the
scope and complexity of the roles and relevant market benchmarks, and designed to reflect and
recognise performance.
Positive, safe and
collaborative environment
aligned to our purpose,
values and culture
– Key focus on positive customer outcomes and quality of customer engagement.
– Strong alignment with our ambitious diversity targets and objectives to maintain a positive and
engaging culture that provides equality of opportunity for all current and prospective colleagues.
– Promoting a positive culture in which the ‘how’ as well as the ‘what’ is recognised and valued, with
a focus on colleagues and customers and demonstrable alignment between behaviours and
remuneration outcomes.
Predictability and
alignment with
stakeholders
– Strong alignment of our executives with the experience of shareholders through the delivery of a
significant proportion of remuneration in shares, with vesting and holding periods over five years
and a robust shareholding requirement policy.
– Incentive plan measures aligned to customer outcomes and long-term sustainability measures
that reflect and recognise the Company’s wider role and impact.
Simple and transparent
– Remuneration plans and programmes that are simple to understand and provide clear linkage to
performance set in line with business strategy.
Compliant and focused
on best practice
– Arrangements are fully compliant with all applicable regulatory and legal requirements and
reviewed on a continuous basis to align with best practice as this continues to evolve.
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Overview of the Directors’ Remuneration Policy
The following chart shows the operation of the key elements of our Directors’ Remuneration Policy. Summary details of the Policy
are provided in the next section (total amounts in £’000). The charts detail the remuneration arrangements proposed for our Group
Chief Executive Officer, Andrea Rossi, and our Chief Financial Officer, Kathryn McLeland. The target and maximum LTIP
opportunities are subject to approval at the April 2025 AGM.
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Summary of the Directors’ Remuneration Policy and 2025 implementation
References to the policy in this section and the detailed implementation section of the report align with the Remuneration Policy
being submitted for approval at the 2025 AGM.
Base Pay
Operation
Normally reviewed annually with any increases
usually taking effect from 1 April each year.
Opportunity
There are no prescribed maximum salary levels.
The Committee considers a range of internal and
external factors to ensure that base salaries are
appropriate.
Performance
Individual and Company performance will be taken
into consideration.
Benefits
Operation
Reviewed periodically against market practice
taking consideration of benefits offered to
colleagues across the Company.
Opportunity
Cover levels are defined within the terms of each
benefit with maximum opportunity dependent on
the terms of the insurer and individual
circumstances.
Performance
There are no performance measures that apply to
the provision of benefits.
Benefits provision includes but is not limited to:
– Life, disability and critical illness insurance
– Private health insurance (including partner and
dependants) and annual health assessment
– Eligibility to participate in the Company
Sharesave and Share Incentive Plan (SIP)
Pension
Operation
Defined contribution pension participation or cash
in lieu.
Opportunity
13% of base salary per annum, aligned with the
wider workforce.
Performance
There are no performance measures that apply to
the provision of pension participation or cash in lieu.
Remuneration element
and time horizon
Policy summary
2025 Implementation
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Effective
1 April
2025
£
Effective
1 April
2024
£
%
increase
Andrea Rossi
910,000
910,000
0%
Kathryn
McLeland
603,000
603,000
0%
Wider workforce 2025
(UK annual review
spend)
3%
‘25 ‘26
‘27
‘28 ‘29
‘25 ‘26
‘27
‘28 ‘29
Contribution
2025
Contribution
2024
Andrea Rossi
13%
13%
Kathryn McLeland
13%
13%
‘25 ‘26
‘27
‘28 ‘29
Short-term
incentives (STI)
Operation
An annual incentive award subject to performance
conditions assessed at the end of the calendar year.
Performance outcomes are subject to a
discretionary downward risk adjustment. 50%
of any STI payable will normally be deferred
into shares with equal pro-rata vesting over a three-
year period. Malus and/or clawback provisions
apply to cash and deferred STI.
Opportunity
Up to a maximum of 250% of base salary, subject to
performance. Threshold, target and maximum
performance levels are established for each award.
Performance
Performance scorecards comprise a combination of
financial and non-financial measures aligned to the
Company’s strategic objectives and financial goals.
Financial measures will normally comprise at least
50% of the scorecard.
Financial measures comprise 60% and non-
financial measures 40% of the 2025 STI scorecard,
which can be found on page 149. There are no
changes to target and maximum STI opportunity as
a percentage of base salary for 2025:
Long-term
incentives (LTIP)
Operation
LTIP awards over M&G plc shares are normally
granted annually subject to performance conditions
assessed at the end of a three-year performance
period. Vested shares are subject to an additional
holding period of two years. Performance outcomes
may be subject to a discretionary downward risk
adjustment. Malus and clawback provisions apply
to the award during the vesting and holding
periods.
Opportunity
Subject to approval at the 2025 AGM, up to a
maximum of 375% of base salary, subject to
performance. Threshold, target and maximum
performance levels are established for each award.
Performance
Performance scorecards may comprise a
combination of financial and non-financial
measures aligned to the Company’s strategic
objectives and financial goals. Financial measures
(including TSR) will normally comprise a minimum of
75% of the scorecard.
Financial measures (including TSR) for 2025 will
have an 85% financial weighting and 15% non-
financial weighting with sustainability measures
aligned to diversity. The scorecard can be found on
page 150.
The maximum LTIP awards for our Executive
Directors in 2025 are as set out in the table below,
subject to approval from shareholders at the 2025
AGM:
Remuneration element
and time horizon
Policy summary
2025 Implementation
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Target
STI %
2025
Maximum
STI %
2025
Andrea Rossi
125%
250%
Kathryn McLeland
112.5%
225%
Deferral period
‘25 ‘26
‘27
‘28 ‘29
Holding
period
‘25 ‘26
‘27
‘28 ‘29
Maximum
LTIP %
2025
Maximum
LTIP %
2024
Andrea Rossi
375%
250%
Kathryn McLeland
275%
225%
Shareholding requirements
The Group Chief Executive Officer and Chief Financial Officer must attain a shareholding requirement, currently set at 300% and
250% of base salary but due to increase subject to shareholder approval at the 2025 AGM to 375% and 275% respectively, within
five years of their appointment. Vested shares, after the sale of shares to fund tax liabilities, must be held until the requirement is
met (unless there are exceptional circumstances). Unvested shares not subject to performance conditions count towards the
requirement on a net-of-tax basis. In addition, shares subject to the shareholding requirement must be held in full for two years
post-employment.
The shareholdings for Andrea Rossi and Kathryn McLeland are shown in the table below as at 31 December 2024, set against the
current shareholding guideline. Having joined the Board in 2022, both are currently in compliance with the shareholding policy.
Name
Guidelines
Shares as a % of salary
Andrea Rossi
300% of base salary
100%
Kathryn McLeland
250% of base salary
125%
2024 Performance outcomes
The performance scorecard outcome for the 2024 STI was the same for both Executive Directors at 69.85%. A downward risk
adjustment of 2.5% has been applied to the STI outcome to reflect that, while positive progress has been made building on the risk
and control framework foundations previously put in place, further implementation work continues to be needed to further embed
the framework. The impact of this leads to an effective outcome of 68.1% of maximum opportunity.
Kathryn McLeland has awards vesting under the 2022 LTIP. Performance against the scorecard measures is set out below with a
vesting outcome of 62%. Further detail is provided on page 140. Andrea Rossi does not have awards vesting under the 2022 LTIP,
as the first award under the M&G plc LTIP was granted to him in 2023 and is due to vest in 2026.
The component and total outcomes of the scorecards were as follows, including comparison to prior year, where applicable.
2024 STI – % of maximum opportunity
Financial
Measures
Non-financial
Measures
STI scorecard
Outcome
Outcome post 2.5%
downward risk
adjustment
Andrea Rossi
2024
81.0%
53.2%
69.85%
68.10%
Andrea Rossi
2023
98.6%
51.9%
79.9%
N/A
Kathryn McLeland
2024
81.0%
53.2%
69.85%
68.10%
Kathryn McLeland
2023
98.6%
51.9%
79.9%
N/A
2022 LTI – % of maximum opportunity
Financial
Measure (excl. TSR)
TSR
Sustainability
(Diversity & Climate)
Risk & Conduct
Outcome
Kathryn McLeland
2024
86.0%
33.8%
50.0%
30.0%
62.0%
Neither Executive Director had LTIP awards vesting in 2024 and Andrea Rossi has no LTIP awards due to vest in 2025.
Remuneration outcomes
The Executive Directors’ 2024 single figure earnings are summarised below:
Fixed Remuneration
£’000
STI
£’000
LTIP
£’000
Total (incl. ‘Other’)
£’000
Andrea Rossi
2024
1,037
1,549
—
2,586
Andrea Rossi
2023
998
1,748
—
2,745
Kathryn McLeland
2024
685
924
999
2,608
Kathryn McLeland
2023
663
1,043
—
1,706
– Fixed remuneration includes salary, benefits and pension.
– The employer pension entitlement is delivered fully in the form of a cash in lieu allowance for both Executive Directors.
– STI includes both the cash and deferred elements of the STI awarded for the 2024 performance year.
– LTIP for Kathryn McLeland denotes the estimated vesting proceeds from the award granted in 2022 for the performance period
ending 31 December 2024.
– Additional details of the single figure methodology and incentive plan scorecards can be found in the Annual Report on
Remuneration section from page 138.
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Rationale for measures and link to strategy
The Committee has continued its review of the alignment of incentives to purpose and strategy during 2024. In 2023 we completed
the first stage as part of the triennial policy review, which had a key focus on incentive scorecard simplification and commencing
alignment to our refreshed strategy. We also refined the financial measures later in the year to ensure they properly reflected
management delivery and shareholder value creation under IFRS 17 accounting standards and our strategic decision to re-enter
the defined benefit pension de-risking market.
In 2024 the Committee has undertaken a further review of the scorecards for alignment to strategy and performance outcomes
that will deliver long-term growth and shareholder value. We will continue to keep the alignment of incentives under review and
shareholders should therefore expect further refinements in the performance measures that the Committee may determine for
future performance periods.
A consultation with our largest shareholders has been conducted seeking feedback on our provisional proposals for the
scorecards. A summary of the feedback is provided below and was duly considered in helping us to finalise the proposals.
What is changing in the 2025 STI
The Committee is satisfied that the updates made to the STI scorecard in 2023 have been effective and remain appropriate.
However, following our consultation exercise, we will introduce a third financial measure – Net client flows from open business – to
the scorecard which is directly aligned with our strategic growth ambitions.
The weighting and mix of non-financial measures is unchanged, however we have refined the customer and risk measures to
ensure they continue to drive the intended outcomes and behaviours. The summary table below illustrates the changes with
further details of the measures provided in the next section:
2024 STI Scorecard
2025 STI Scorecard
Financial
30% - Operating capital generation excluding new
business strain (OCG excluding NBS)
30% - AOP and Operating change in CSM
(AOP + CSM)
25% - OCG excluding NBS
25% - AOP + CSM
10% - Net client flows from open business
Non-financial 40% - Customer, Colleagues and Risk
40% - Customer, Colleagues and Risk
What is changing in the 2025 LTIP
The primary change is an increase in the financial weighting in the scorecard to accommodate the addition of one further financial
measure aligned to growth – a three-year Group Adjusted Operating Profit growth measure. Combined with the existing capital
generation measure, the addition of an AOP growth measure embeds alignment to the targets underpinning the next phase of the
strategic objectives for financial strength, simplification and growth:
– Three-year operating capital generation (excluding new business strain) target of £2.7bn, aligned to our strategic target with
significant outperformance stretch in the performance range; and
– Average growth in adjusted operating profit of 4-8% per annum over three years with a midpoint/target in excess of our
strategic objective to grow by 5% or more on average over the period, with further stretch in the performance range.
An update to our sustainability strategy is ongoing and scheduled to be completed and communicated in 2025. Given the
significant progress already made towards our mid-term own emissions reduction target, we have removed this measure from the
scorecard in 2025. Sustainability will therefore comprise diversity measures only in 2025 and, in light of this, we are applying a
lower sustainability weighting of 15%. The Committee will review sustainability measures for 2026 as the updated sustainability
strategy is embedded.
Finally, we have made small amendments to the TSR peer group, removing the two least aligned companies from the current FTSE
peers, and replacing them with more aligned European peers. The inclusion of these new peers is considered appropriate on the
basis that they provide materially better alignment to M&G’s business scope and our strategic objective to grow our Asset
Management business in Europe. We have included further detail on the updated TSR peer group on page 136.
The summary table below illustrates the changes with further details of the measures provided in the next section:
2024 LTIP Scorecard
2025 LTIP Scorecard
Financial
50% - Cumulative OCG excluding NBS
40% - Cumulative OCG excluding NBS
20% - Adjusted operating profit growth
TSR
25% - Relative TSR against bespoke peer group (TSR)
25% - Relative TSR against bespoke peer group (TSR)
Non-financial
25% - Sustainability (Gender, Ethnicity and Own
Emissions)
15% - Sustainability (Gender and Ethnicity)
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Our incentive scorecards continue to retain an appropriate balance between performance and how it is delivered, which is critical
for M&G’s long-term success and sustainable shareholder value creation. Key aspects of non-financial performance include risk
management effectiveness, customer experience and outcomes, conduct, culture and diversity, demonstrating alignment with our
stakeholders:
Customers
Customer outcome measures embedded in the STI scorecard
Colleagues
Colleague engagement is an established measure in the STI scorecard and Diversity is in our LTIP scorecard
Communities
Diversity measures embedded in the LTIP scorecard
Shareholders
Alignment to the shareholder experience via:
– The relative TSR component within the LTIP scorecard
– Focus on capital generation which underpins our ability to pay a dividend
– Deferral into shares of a significant proportion of annual STI awards with vesting over three years
– Share ownership and post-vesting holding requirements for our senior executives
Consideration of shareholder views
Our proposal to introduce an additional financial measure to the LTIP aligned with our strategic growth objectives was well
received by major shareholders. The proposal to down-weight sustainability in the scorecard for 2025, with a further review to be
undertaken during 2025 in light of the updated sustainability strategy, was also supported. We also received very clear feedback
that non-financial measures should only be included if relevant to strategy and the creation of shareholder value, with transparent
and stretching targets, which the Committee fully supports.
We also received additional feedback emphasising the importance of having measures that were dependent on delivering growth
across all segments of the Group and clearly lead to the creation of shareholder value; continued mixed views on the use of TSR;
requirement for all measures to have sufficient weighting to have a meaningful impact on behaviours and outcomes; the extent of
overlap in the financial measures across the STI and LTIP scorecards; the need for LTIP targets to be genuinely stretching; and
support for the Committee’s intention to incorporate a growth measure into the STI scorecard in 2026.
The feedback received has been taken into account in the final scorecards recommended for implementation in 2025. We have
adhered to the principles of ensuring that all measures are fully aligned to our strategy, growth ambitions and external targets with
stretching performance ranges.
The Committee acknowledges the feedback in respect of the overlap in certain financial measures across the scorecards. The
changes we are proposing will reduce the extent of this overlap, as the introduction of growth measures result in a lower weighting
for Operating capital generation in both scorecards. The new LTIP profit measure is also differentiated from the STI profit measure,
which includes operating change in contractual service margin. Operating capital generation remains a critical KPM for the
business and shareholders, for which it is important to set targets and measure performance both annually and over the longer
term. We believe that the scorecards retain an appropriate balance of value and growth measures. We are, however, committed to
reviewing this annually in order to ensure continued effectiveness.
Performance measures
The 2025 scorecards remain in accordance with the policy, which defines that the performance conditions may comprise a
combination of financial and non-financial measures, with financial measures comprising at least 50% for STI and at least 75%
(including TSR) for the LTIP. All measures have transparent, quantifiable targets and performance ranges.
The definitions of the financial measures are provided on page 152.
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The performance conditions and weightings for 2025 are illustrated in the following tables:
STI
¢ Financial
60%
Operating capital generation excluding NBS
25%
Adjusted operating profit before tax plus operating change in CSM
25%
Net client flows from open business
10%
¢ Non-financial
40%
Customers
20%
Colleagues
10%
Risk and controls
10%
LTIP
¢ Financial
85%
Cumulative operating capital generation excluding NBS
40%
Adjusted operating profit growth
20%
Relative total shareholder return
25%
¢ Non-financial
15%
Diversity (Gender)
7.5%
Diversity (Ethnicity)
7.5%
2025 Financial measures
The financial measures in our incentive scorecards are based on the Group’s Alternative Performance Measures, which are aligned
with M&G’s long-term performance, external financial targets and shareholder experience.
Operating Capital Generation excluding new business strain (STI and LTIP)
Operating capital generation (defined on page 152) is an alternative performance measure which demonstrates the longer-term view of
the movements in our capital surplus. Operating capital generation is aligned to our external targets and is reflective of performance that is
within management’s control to deliver. The Committee decided to adopt an adjusted metric that excludes new business strain in order to
ensure the measurement of current management’s performance is not impacted by the regulatory requirement to hold additional capital
against new business written. New business strain is a component of underlying capital generation in the Life segment.
Adjusted operating profit before tax (STI and LTIP)
Adjusted operating profit before tax (defined on page 152) is the Group’s non-GAAP alternative performance measure used to
demonstrate the longer-term performance of the Group as it is less affected by short-term market volatility and non-recurring
items than profit before tax.
For the short-term incentive this is combined with operating change in contractual service margin (see below) to create a measure
aligned to growth and management actions.
For the long-term incentive the measure is defined as the average growth achieved over the three-year performance period.
Operating change in contractual service margin (CSM) (STI)
The Committee previously decided to add the operating change in contractual service margin, our IFRS 17 related alternative
performance measure for the Life segment (defined on page 152) to adjusted operating profit before tax, to ensure that the
incentive recognises growth and management actions in the period in which they were taken.
Net client flows from open business (STI)
Net flows from open business is a key performance measure, which consists of net client flows from Asset Management, PruFund,
Shareholder annuities, and the elements of Other Life which are open to new business. It excludes net flows from our Traditional
with-profits business, platform and certain elements of Other Life closed to new business. See page 152 for the full definition.
Relative total shareholder return (LTIP)
A long-term measure, which ensures direct alignment of remuneration outcomes to shareholder experience relative to a peer group. Our
peer group comprises selected FTSE 350 and European peers based on comparable size, business scope and geography. This approach
ensures close alignment to M&G’s core business activities of asset management and life and geographic coverage. The peer group has
been updated, replacing Hargreaves Lansdown and 3i Group with Amundi and DWS. The peer group therefore now comprises:
– Amundi – Aberdeen – Ashmore – Aviva – DWS – ICG – Jupiter – Just Group – Legal & General – Man Group
– Ninety One – Phoenix Group – Quilter – Rathbone – Schroders – St James’s Place
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2025 Non-financial measures
Across our STI and LTIP we have non-financial measures aligned with our purpose, strategy and culture. These measures ensure
that there is an appropriate balance between our performance and how that performance has been delivered. The following
updates have been applied to non-financial measures in 2025:
– Life customer measures: an adviser satisfaction measure is being added alongside the customer Net Promoter Score (NPS)
measure to give broader coverage of customer outcomes. Adviser satisfaction is indicative of whether the business is providing
good service and outcomes for customers;
– Risk measures: the measure for self-identified issues is being replaced with a new measure monitoring the percentage of high/
very high issues reopened at high/very high by assurance providers. Self-identified issues will continue to be monitored as a
broader control environment indicator, but given sustained performance levels and strong management focus it was not
considered necessary to retain this measure within the STI scorecard. The new measure is another key indicator of the control
environment providing additional focus on the quality of closure of high/very high issues.
– Sustainability measures: given the significant progress already made towards our mid-term own emissions reduction target, we
have removed this measure from the scorecard in 2025. Sustainability will therefore comprise diversity measures only with a
lower weighting of 15%. The utilisation of climate measures for future awards will be reviewed during 2025 following the update
to the sustainability strategy.
Customer measures (STI)
Customer measures are key to the successful execution of our strategy, and to understanding and delivering good customer
outcomes. We include the following measures:
– Life customers: (a) two measures aligned to addressing and improving our customer net promoter and advisor satisfaction
scores; and (b) With-Profits Fund investment performance relative to benchmark.
– Investment management customers: (a) investment performance of wholesale funds; and (b) investment performance of
institutional funds, relative to benchmarks and objectives.
Colleague and risk measures (STI)
– Colleague measure: aligned to the sustainable engagement outcome from an average of the colleague OneVoice surveys,
aligned with embedding our culture and supporting a safe, respectful and inclusive environment for colleagues.
– Risk and control environment measures: aligned with our commitment to operate within an embedded risk culture and strong
risk governance framework.
Sustainability measures (LTIP)
Sustainability measures aligned to our strategy and external commitments for diversity.
– Diversity (gender) – aligned to our external commitment to achieve 40% gender representation from the end of 2025 onwards,
with additional stretch in the target; and
– Diversity (ethnicity) – target aligned to our external commitment to achieve and maintain 20% ethnicity representation from the
end of 2025 onwards.
Find out more about our scorecard measures on pages 149 and 150
Link to strategy and purpose
The financial measures used for remuneration are primary indicators of M&G’s long-term performance and how we are delivering
against our strategic pillars of financial strength, simplification and growth. Total shareholder return aligns with our performance in
delivering value to shareholders through improvements in our financial performance and outlook, driven by the execution across
our three strategic pillars and how we serve our customers. Non-financial measures ensure there is appropriate balance with how
we deliver performance and underpin our purpose to give everyone real confidence to put their money to work:
Our strategic pillars
Metric
Maintain our
financial strength
Simplify
our business
Deliver
profitable growth
Purpose
Operating capital generation excluding NBS
û
û
û
Adjusted operating profit before tax
û
û
û
Operating change in CSM
û
û
û
Net client flows from open business
û
û
û
Relative total shareholder return
û
û
û
û
Customer measures
û
û
Colleague and risk measures
û
û
Sustainability measures
û
Find out more about our strategy on pages 10-11
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137
Single figure remuneration
In this section
Single figure total remuneration table (Audited)
Single figure remuneration – Base salary
Single figure remuneration – Benefits (Audited)
Single figure remuneration – Pension (Audited)
Single figure remuneration – Short-Term Incentives (STI) (Audited)
Single figure remuneration – Long-Term Incentive Plan (LTIP) vesting in year (Audited)
Single figure remuneration – Other (Audited)
Total shareholder return performance graph and Group Chief Executive Officer pay
Non-Executive Director single figure total remuneration table (Audited)
Single figure total remuneration table (Audited)
The following table provides the 2024 single figure remuneration for the Executive Directors, with prior year for comparison where
applicable.
Year
Executive Director
Base Salary
£’000
Benefits
£’000
Pension
£’000
Total fixed
remuneration
£’000
STI £’000
LTIP £’000
Total variable
remuneration
£’000
Total £’000
2024
Andrea Rossi
901
19
117
1,037
1,549
—
1,549
2,586
2023
Andrea Rossi
875
9
114
998
1,748
—
1,748
2,745
2024
Kathryn McLeland
597
10
78
685
924
999
1,923
2,608
2023
Kathryn McLeland
580
8
76
663
1,043
—
1,043
1,706
Notes to the single figure table
– Fixed remuneration includes salary, benefits and pension.
– The employer pension entitlement is delivered fully in the form of a cash in lieu allowance for both Executive Directors.
– STI includes both the cash and deferred elements of the STI awarded.
– The LTIP for Kathryn McLeland denotes the estimated vesting proceeds from an award granted in 2022 for the performance
period ending 31 December 2024. This is subject to an additional two-year holding period.
– Andrea Rossi does not have awards vesting under the 2022 LTIP, as the first award under the M&G plc LTIP was granted to him
in 2023 and is due to vest in 2026.
– The price used to calculate the value of the vesting M&G plc shares for the 2022 LTIP in respect to Kathryn McLeland is £1.9976
using an average of the closing price for the final three months of 2024. The actual share price and vesting value will be
determined upon vesting and disclosed in the 2025 Annual Report on Remuneration.
Single figure remuneration – Base salary
A 4% salary increase was awarded to both Andrea Rossi and Kathryn McLeland, taking effect in April 2024. This was the first
increase to apply since their respective appointments in 2022, and was below the wider workforce increase for 2024 of 4.6%.
Single figure remuneration – Benefits (Audited)
Benefits include the total value of all benefits provided in respect of the year ended 31 December 2024. For both Executive
Directors these comprise life, disability and critical illness insurance, private medical cover, eligibility for health assessments, and
the gross taxable value of expenses relating to travel.
Andrea Rossi
Kathryn McLeland
2024
£’000
2023
£’000
2024
£’000
2023
£’000
Healthcare and insurances
12
9
9
8
Travel
7
—
1
—
Total
19
9
10
8
Single figure remuneration – Pension (Audited)
Executive Directors receive a 13% employer pension contribution which they may receive in part or in full in cash. The employer
pension entitlement is delivered fully in the form of a cash in lieu allowance for both Executive Directors. The contribution rate and
delivery options are in line with other colleagues who participate in the Company’s defined contribution pension plan. Executive
Directors do not accrue benefits under any legacy company defined benefit pension plans.
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138
Single figure remuneration – Short-Term Incentive (Audited)
For the purpose of determining the 2024 STI outcome, the Remuneration Committee assessed the performance of the Company
and the individuals by reference to the 2024 STI scorecard, which included a combination of financial and non-financial measures,
as follows:
2024 Executive Director STI scorecard outcome
2024 STI Scorecard
Weighting
Threshold
0%
Target
50%
Maximum
100%
Actual
Outcome
% of
maximum
Weighted
Outcome
% of
maximum
Financial
Adjusted operating profit before tax plus operating change
in contractual service margin (CSM)
30%
928
1,092
1,256
1,131
61.9%
18.58%
Operating capital generation, excluding new business
strain (£m)
30%
742
873
1,004 1,090
100%
30.0%
Non-financial
Customer: Life - Net Promoter Score
5%
17
18
21
22
100%
5.0%
Customer: With-Profits Fund investment performance over
benchmark (three-year)
5%
0%
1%
3% 4.3%
100%
5.0%
Customer: Investment performance of Wholesale Funds
relative to benchmark (one and three-year)
5%
50%
60%
70% 48.3%
0%
0 %
Customer: Investment performance of Institutional Funds
relative to benchmark (one and three-year)
5%
50%
60%
70% 77.3%
100%
5.0%
Colleague: sustainable engagement index
10%
69
72
75
69.0
0%
0%
Risk and Controls: % high/very high issues overdue
(average over the year)
5%
10%
5%
0%
2.2%
78.0%
3.9%
Risk and Controls: % self-identified of total issues raised
5%
75% 82.5%
90% 82.1%
47.3%
2.37%
Scorecard outcome
100%
69.85%
Risk adjustment (2.5% of the scorecard outcome)
(1.75%)
Final outcome
68.10%
Definitions
Definitions and further details of the above measures can be found on pages 152-153.
Consideration of risk
A downward risk adjustment of 2.5% has been applied to the STI outcome to reflect that, while positive progress has been made
building on the risk and control framework foundations previously put in place, further implementation work continues to be
needed to further embed the framework. The impact of this leads to an effective outcome of 68.1% of maximum opportunity.
Consideration of individual performance
The Committee considered individual performance of the Executive Directors and concluded that the formulaic outcome of the STI
scorecard, including the downward adjustment as described above, was appropriate in the context of their personal contribution
over the performance period.
Deferral policy
50% of any STI amount awarded is deferred for three years in M&G plc shares, subject to continued employment, good leaver and
malus provisions. Dividend equivalents accrue on a reinvestment basis during the vesting period.
STI opportunity and outcome
The maximum STI opportunity for the Group Chief Executive Officer and Chief Financial Officer roles remained unchanged at 250%
of base salary and 225% of base salary respectively. The STI amounts in the single figure table reflect awards to be delivered in
2025 in respect of 2024 performance, inclusive of both cash and deferred elements, as follows:
Executive Director
Maximum STI Opportunity
£’000
Total STI Outcome
£’000
Cash STI
£’000
Deferred STI
£’000
Andrea Rossi
2,275
1,549
774.5
774.5
Kathryn McLeland
1,357
924
462
462
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Single figure remuneration – LTIP vesting in year (Audited)
The LTIP award granted to Kathryn McLeland in 2022 under the M&G Performance Share Plan will vest on the basis of performance
measured at the end of 2024. Andrea Rossi has no LTIP awards vesting in respect to the 2024 performance year.
2022 LTIP Scorecard
Weighting
Measure
Period
Threshold
Target
Maximum
Actual
Outcome
% of
maximum
Weighted
outcome
% of
maximum
Vesting
0%
50%
100%
Capital
50% Cumulative operating capital
generation (£m)
1/1/22–
31/12/24
2,108
2,480
2,852
2,749
86%
43%
Diversity
7.5%
Gender - % of women at the
senior leadership level
36%
38%
40%
36%
0%
0%
Climate
7.5%
Own operations carbon
emissions reduction
18.4%
21%
23.6%
35%
100%
7.5%
Risk & Conduct
10%
Qualitative assessment
30%
30%
3%
Vesting
25%
100%
Relative TSR
25%
Percentile ranking relative
to peer group
1/1/22–
31/12/24
50th
p’cile
75th
p’cile
53rd
33.8%
8.5%
Performance outcome
62%
Notes to the 2022 LTIP scorecard
Cumulative operating capital generation
See the definitions table on page 152.
Sustainability measures of Diversity and Climate
Details of these measures are set out on page 153.
Risk and Conduct
The Committee considered a range of factors in determining the outcome of the qualitative Risk and Conduct measure. They
observed that over the three-year period the business had generally operated within risk appetite and policy limits, and in
particular, policy compliance was maintained at a high level. It was observed that there had been incremental improvements in the
control environment in each of the three years of the performance period and that, while implementation work identified in 2024
needs to continue into 2025, the positive progress was acknowledged. Taking consideration of all of these factors, the Committee
concluded that an outcome of 30% was appropriate.
Relative Total Shareholder Return (TSR) outcome
For the 2022 LTIP M&G plc TSR was measured against a peer group constituted of FTSE 100 Financial Services companies
excluding investment trusts. The starting point for TSR was based on a 30-calendar day average of M&G plc and peer group
companies preceding the performance period. The end point was based on an average of the last 30-calendar days of the
performance period.
Vesting of 2022 LTIP award
The table below shows the following information for the 2022 awards granted under the M&G Performance Share Plan that are due
to vest in 2025:
– the original grant value of the award and performance outcome;
– the number of shares under award at the vesting date including dividend equivalents that have accrued during the performance
period and the number of shares vesting based on the performance outcome;
– the estimated value of the vesting shares using the average closing price for the final three months of 2024, £1.9976; and
– the vesting value attributable to the accrual of share price growth and dividend equivalents over the performance period. This
has been calculated as the difference between the grant value, which was made at a share price of £2.027, adjusted for the
performance outcome and the estimated vesting value. As the grant price was higher than the estimated vesting price, the value
attributable to share price growth is negative.
Grant Value £
Performance
outcome
Shares under
award at vesting
Shares vesting
Estimated value
of shares
vesting £
Value attributable
to share price
movement £
Value attributable
to dividend
equivalents £
Kathryn McLeland
1,305,000
62%
806,549
500,060
998,921
(11,736)
201,557
Andrea Rossi has no LTIP awards due to vest in 2025.
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Consideration of risk
The Committee received an independent review of the control environment and key risk and compliance matters from the Chief
Risk and Compliance Officer, as well as input from the Risk Committee and the subsidiary Risk Committees for PAC and MGG. The
Committee noted positive progress has been made across M&G plc during 2024 in building on the risk and control framework
foundations previously put in place. They acknowledged that implementation work identified in 2024 needs to continue into 2025,
including consistency of Group-wide Key Control Assessments across the business. The review framework considers the
management of individual risks (for example conflicts of interest risk) and risk outcomes, such as customer outcomes, with specific
output received in respect of notifiable event impacts; compliance with Group policy requirements; risk appetite assessment; and
regulatory feedback. Taking into consideration all information from the report, the Committee considered it appropriate to make a
downward risk adjustment of 2.5% to the formulaic outcome of the 2024 STI, and no risk-related adjustment to the vesting of the
2022 LTIP.
Total shareholder return performance graph and Group Chief Executive Officer pay
The performance graph shows the Total Shareholder Return of M&G plc compared to the index constituents of the FTSE 100,
FTSE 100 financial services companies (excluding investment trusts), and a peer group of FTSE 350 sectoral firms aligned to the
Group’s core business activities (asset management and life) for the period beginning October 2019 and ending in December 2024.
The comparator performance data selected reflects M&G plc’s membership of the FTSE 100 index. The FTSE 100 financial services
sector (excluding investment trusts) is used to measure relative TSR performance in the 2022 LTIP scorecard, and a bespoke FTSE
350 sectoral peer group is selected for LTIP awards granted in 2023 and 2024, being more closely aligned to M&G’s core business
activities and geographic coverage.
Total shareholder return performance graph
M&G
FTSE 100
FTSE 100 FS (excluding investment trusts)
FTSE 350 sectoral peers
21/10/2019
31/12/2019
30/6/2020
31/12/2020
30/6/2021
31/12/2021
30/6/2022
31/12/2022
30/6/2023
31/12/2023
30/6/2024
31/12/2024
20
40
60
80
100
120
140
160
180
The following table sets out a breakdown of Chief Executive remuneration for the performance years 2019 to 2024 inclusive.
2019
John Foley
2020
John Foley
2021
John Foley
2022
John Foley/
Andrea Rossi
2023
Andrea Rossi
2024
Andrea Rossi
Total remuneration (£’000)
3,281
4,036
4,597
6,990
2,745
2,586
STI as % of maximum
64.3%
59.4%
70.15%
50.6%
79.9%
68.1%
LTIP as % of maximum
63.5%
59.6%
52.6%
85.5%
N/A
N/A
Andrea Rossi does not have an LTIP award vesting in respect to 2024 (the final vesting outcome of the 2022 LTIP is 62% of
maximum as set out on page 140 of this report).
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141
Non-Executive Director single figure total remuneration table (Audited)
The total remuneration for the full year ended 31 December 2024 for the Chair and each Non-Executive Director is detailed below:
Fees for 2024
£’000
Benefits for 2024
£’000
2024 Total
£’000
Fees for 2023
£’000
Benefits for 2023
£’000
2023 Total
£’000
Sir Edward Braham
525.0
0.3
525.3
525.0
—
525.0
Clive Adamson
254.8
7.2
262.0
252.5
1.3
253.8
Clare Chapman
117.3
16.4
133.7
115.0
2.6
117.6
Paul Evans
32.4
3.3
35.7
—
—
—
Dev Sanyal
112.3
21.5
133.8
110.0
28.4
138.4
Elisabeth Stheeman
46.3
0.4
46.7
—
—
—
Clare Thompson
217.3
0.7
218.0
203.2
—
203.2
Massimo Tosato
344.8
26.3
371.1
342.5
26.6
369.1
Notes to the table:
– Benefit values comprise the gross taxable value of expenses relating to travel, including international travel to and from the UK,
accommodation and other expenses incurred while undertaking duties as Non-Executive Directors of the Company.
– Sir Edward Braham is eligible for private medical insurance but has not taken up this benefit during his tenure.
– Clive Adamson’s fees include £110,000 for his role on the PAC Board during 2024 and 2023.
– Paul Evans joined the Board on 1 October 2024 and Elisabeth Stheeman on 1 August 2024. Fees and benefits reflect values from
these dates.
– Fees for Clare Thompson include £35,000 in respect of her position as Chair of the IFDL Board.
– Massimo Tosato’s 2024 and 2023 fees include £250,000 for his role of Chair of the MGG, MAGIM and MAGAIM Boards.
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Directors’ share interests and other payments (Audited)
In this section
Awards granted in 2024 (Audited)
Directors’ share interests (Audited)
Payments to past Directors (Audited)
Payments for loss of office (Audited)
Awards granted in 2024 (Audited)
The following table provides the details of scheme interests awarded to the Executive Directors during 2024:
Plan
Participant
Type of award
Basis of award
Grant date
End of
performance
period
Face value
at grant
£’000
Number
of shares
awarded
% payable
for threshold
performance
Deferred Incentive
Plan (STI)
Andrea
Rossi
Conditional
award
Deferred STI:
50%
28/03/24
31/12/26
873.9 369,986
N/A
Performance
Share Plan (LTIP)
Andrea
Rossi
Nil-cost options
% of salary:
250%
28/03/24
31/12/26
2,275.0 963,166
6.25%
Deferred Incentive
Plan (STI)
Kathryn
McLeland
Conditional
award
Deferred STI:
50%
28/03/24
31/12/26
521.3 220,723
N/A
Performance
Share Plan (LTIP)
Kathryn
McLeland
Nil-cost options
% of salary:
225%
28/03/24
31/12/26
1,356.8 574,407
6.25%
Notes on the scheme interests table:
Andrea Rossi and Kathryn McLeland were granted an LTIP award at 250% and 225% of salary respectively under the M&G
Performance Share Plan on 28 March 2024, subject to the performance conditions set out in the table below. The awards have a
vesting date of 28 March 2027 and are subject to a further two-year holding period.
Andrea Rossi and Kathryn McLeland also received deferred STI awards of M&G plc shares on 28 March 2024, representing the
50% deferred value of their 2023 STI.
The number of shares granted under deferred STI and LTIP awards was calculated using the average middle-market closing share
price for the three business days immediately preceding the award date of £2.362.
Performance conditions for LTIP awards granted in 2024
Weighting
Threshold
Target
Maximum
Vesting
0%
50%
100%
Cumulative operating capital generation excluding new business
strain (NBS) (£m)
50%
2,640
3,106
3,572
Diversity - Gender
8.33%
38%
40%
42%
Diversity - Ethnicity
8.33%
10%
20%
22%
Climate – own emissions reduction (from 2019 baseline)
8.33%
43%
46%
49%
Vesting
25%
100%
Relative TSR
25% 50th p’cile
75th p’cile
Definitions
Definitions for the above measures are provided on pages 152 and 153.
Measurement and vesting
All performance conditions have straight-line vesting between points and are measured over the three-year period 1 January 2024
to 31 December 2026.
For all performance conditions other than TSR there is 0% vesting for performance at or below threshold, 50% at target and 100%
at maximum with straight-line interpolation between these points.
The starting point for TSR is based on a 30-calendar day average of M&G plc and peer group companies preceding the
performance period. The end point will be based on an average of the last 30-calendar days of the performance period. For this
metric there is 0% vesting for performance below threshold, 25% for achieving the median (threshold performance) and 100%
vesting for achieving upper quartile or above, with straight-line interpolation between these points. The peer group consists of a
selection of FTSE 350 sectoral peers selected on objective criteria in terms of comparable size, business scope and geography and
aligned to M&G’s core business activities (asset management, life and wealth management), and for 2024 comprises:
3i Group – Aberdeen – Ashmore – Aviva – Hargreaves Lansdown – ICG – Jupiter – Just Group – Legal & General
– Man Group – Ninety One – Phoenix Group – Quilter – Rathbone – Schroders – St James’s Place
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Directors’ share interests (Audited)
The following table shows the interests that each Director and where applicable their connected persons had in M&G plc shares as
at 31 December 2024. This comprises personally/legally owned shares, shares purchased and held within the Company’s Share
Incentive Plan (SIP) and unvested shares under deferred STI and LTIP awards.
Upon vesting, shares awarded under the LTIP are subject to a two-year holding period. Neither Executive Director currently has
vested shares subject to the holding period. Fully owned shares are included in the ‘Shares owned outright’ column in the table
below. The value of the shares has been calculated using the average closing M&G plc share price for the final three months of
2024, which was £1.9976.
Name
Shares
owned
outright
Subject
to SIP
Deferred STI
shares
(Conditional
awards)
Unvested LTIP
awards subject
to performance
conditions
(Nil -cost
options)
Total
Value
Multiple
of salary
(all interests)
Andrea Rossi
200,456
— 484,756
2,398,727 3,083,939 £6,160,477
677%
Kathryn McLeland
176,620
— 376,700
2,237,350 2,790,670 £5,574,642
924%
Edward Braham
250,050
—
—
—
250,050
£499,500
—
Clive Adamson
9,100
—
—
—
9,100
£18,178
—
Clare Chapman
—
—
—
—
—
—
—
Paul Evans
—
—
—
—
—
—
—
Dev Sanyal
—
—
—
—
—
—
—
Elisabeth Stheeman
—
—
—
—
—
—
—
Clare Thompson
22,100
—
—
—
22,100
£44,147
—
Massimo Tosato
274,900
—
—
—
274,900
£549,140
—
There were no changes to the Directors’ interests in ordinary shares between 31 December 2024 and 12 March 2025.
Shareholding guidelines
The Executive Directors are required to build up and maintain a shareholding in the Company under the Directors’ Remuneration
Policy. The holding requirement must be achieved within five years of the introduction of the policy in 2020 (or recruitment date for
new Executive Directors). Having joined the Board in 2022 both Andrea Rossi and Kathryn McLeland are currently in compliance
with the shareholding policy. The guideline in the table below is that which applied as at 31 December 2024, and does not take into
account the increased shareholding guidelines of 375% for the Group CEO and 275% for the CFO within the revised Directors
Remuneration Policy being proposed for approval at the April 2025 AGM.
Name
Guidelines
Shares as a % of salary
Andrea Rossi
300% of base salary
100%
Kathryn McLeland
250% of base salary
125%
Holdings as a percentage of salary are shown for Andrea Rossi and Kathryn McLeland as at 31 December 2024. Shares counting
towards the holding requirement are shares owned outright, vested conditional awards subject to a holding period and unvested
deferred STI awards that do not have performance conditions on a net-of-tax basis.
Payments to past directors and for loss of office (Audited)
No fees or payments were made to past directors and there are no payments for loss of office to report.
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Remuneration arrangements throughout the Company
In this section
Workforce remuneration
Group Chief Executive Officer pay ratio
Directors vs average employee pay
Relative importance of spend on pay
Workforce remuneration
A Remuneration Policy is in place for establishing standards for the design and operation of remuneration across the Company,
and is based on principles consistent with the Directors’ Remuneration Policy. The core components of remuneration and how they
are operated for colleagues across the Company are explained in the table below.
The Board has an established approach to how it engages with colleagues, including both formal and informal meetings, and takes
careful consideration of conditions across the wider workforce in reaching its decisions. During 2024, there were a number of
formal sessions between Non-Executive Directors and colleagues from across the Group. The Non-Executive Directors attended
sessions during the year, with colleagues across different geographies and seniority. The purpose of these regular sessions is to
give our Board members the opportunity to engage directly with colleagues, gain insights into M&G’s culture and understand
colleague views and interests. The Board visited the Kildean, Stirling office in September 2024 and held a variety of colleague
events including a Town Hall and breakout groups with NEDs and colleagues. In addition other Town Halls with Q&A’s took place in
both London and Kildean during the year, which were attended by members of the Board.
Executive remuneration was not specifically discussed at these events but colleagues had the opportunity to raise questions and
issues of importance to them. In addition the Board held discussions on the all-colleague OneVoice survey that tracks engagement
and feedback and reviewed the key outputs and themes with management. A remuneration-based question is included in the
survey which provides the Committee with additional insight.
The Board and management have continued to pay careful attention to the external environment and to conditions across the
wider workforce, and have held regular discussions with UNITE union representatives and the Colleague Forum to obtain input on
matters relating to their members and the wider population. For 2024 the overall UK annual workforce salary review increase was
4.6%, with spend targeted towards junior and middle levels. The salary review budget increase for 2025 is 3.0% and this has been
focused towards the wider workforce with increases for senior management approved on an exceptional basis only.
Base salary
Base salaries are set at a competitive level taking into account a range of factors including:
– The individual’s skills, performance and experience;
– Internal relativities and wider workforce salary levels;
– External benchmark data; and
– The size, responsibility and geographical scope of the role.
The Company is an accredited Living Wage Employer in the UK.
Salaries are reviewed annually. The annual salary review increase for the UK workforce in 2024 was 4.6%.
For 2025 the overall UK workforce annual salary increase was 3%, with pay rises for senior management
and executives managed on an exception basis only. Budgets across our international locations are
determined on the basis of local market conditions but aligned to global principles and guidelines.
Pension
Across the Company all colleagues are eligible to participate in a pension scheme, or equivalent according
to local market practice, which is designed to be competitive, but not excessive, in each of the markets in
which we operate. Our standard defined contribution scheme in the UK offers a core contribution of 8% of
salary with additional matching to a maximum company contribution of 13%, aligned with arrangements for
the Executive Directors. Certain UK colleagues have retained the right to accrue benefits under defined
benefit schemes, which are closed to new entrants (neither of the Executive Directors are accruing benefits
under a defined benefit scheme).
Remuneration element
Details
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Benefits
Benefit packages are designed to be competitive, but not excessive, aligning with local market practice for
businesses with which we compete for talent, and with the culture and values of the Group. Benefits are
benchmarked periodically to ensure they remain consistent with these principles. A consistent core and
flexible benefit offering operates across our UK businesses. Standard benefits include life, ill-health and
critical illness insurances and private medical cover. Colleagues may supplement core benefits with
additional cover for both themselves and family members on a self-funded basis and have access to a range
of other voluntary programmes including cycle-to-work, a colleague discounts platform and payroll giving.
Certain colleagues have entitlement to higher levels of core benefits retained from their employment prior to
2020. Our health and well-being support is also regularly reviewed; colleagues in all countries have access
to an employee assistance programme, supplemented by additional initiatives as appropriate to the local
market as well as to the nature and size of our operations.
Short-Term
Incentive
Plans (STI)
All colleagues are eligible to participate in an STI plan with outcomes closely aligned with business
performance, customer outcomes and individual objectives, including the effectiveness of risk management,
conduct, culture and behaviours. Bespoke schemes are operated for Investment Management and
Distribution colleagues consistent with these principles. Colleagues working within a control function
participate in a separate STI plan assessed predominantly on own function performance and overseen by
the Risk and Audit Committee Chairs to ensure independence.
The Company operates a Group-wide deferral policy under which a proportion of STI over a threshold is
deferred over three years, typically in M&G plc shares, unless regulation requires a higher level of deferral or
an alternative deferral mechanism.
Long-Term
Incentive
Plans (LTIP)
Participation in an LTIP is reserved for senior management colleagues with the highest influence over the
determination and execution of strategic goals, delivery of business performance and creation of
shareholder value.
The Group Executive Committee and certain other senior management roles, not including individuals in
control functions, participate in the performance-based share plan, aligned with that disclosed for the
Executive Directors. Other senior management and control function roles are eligible to receive time vesting
awards with no performance conditions. Eligibility to participate is assessed annually.
All-colleague share
plans
Colleagues are eligible to participate in one or more of our all-employee share plans to drive alignment and
give the opportunity to share in the overall long-term success of the Company.
In the UK all colleagues have the option to participate in the Company Sharesave (SAYE) and Share
Incentive Plan (SIP) on the same terms as those applicable to the Executive Directors. Both schemes are
HMRC tax-advantaged. In addition an International Sharesave is offered in other locations.
Remuneration element
Details
Group Chief Executive Officer pay ratio
The table below sets out the M&G plc Group Chief Executive Officer pay ratio when compared to pay levels at the 25th, 50th and
75th percentile of M&G’s UK workforce for both base salary and total remuneration. We have used Option B as our method for
calculating the pay ratio for this report, as this is consistent with our approach and methodology for other publicly reported
information on the gender pay gap. Individuals are identified using the gender pay gap methodology, with 2024 full year
remuneration then calculated on a basis consistent with the single figure methodology.
Year
Method
25th percentile
Median
75th percentile
Single figure total remuneration
2024
B
40:1
24:1
18:1
Single figure total remuneration
2023
B
44:1
28:1
20:1
Single figure total remuneration
2022
B
125:1
77:1
50:1
Single figure total remuneration
2021
B
80:1
52:1
36:1
Single figure total remuneration
2020
B
67:1
45:1
31:1
Single figure total remuneration
2019
B
80:1
58:1
35:1
Salary
2024
B
18:1
12:1
9:1
Salary
2023
B
19:1
12.1
9:1
Salary
2022
B
23:1
15:1
10:1
Salary
2021
B
23:1
16:1
11:1
Salary
2020
B
22:1
15:1
11:1
Salary
2019
B
23:1
16:1
12:1
The Company finalised the identification and calculations for the applicable colleagues at the 25th, 50th and 75th percentiles,
effective 31 December 2024, following the close of the annual compensation review recommendation period on 25 February 2025.
The Remuneration Committee is satisfied that using this population and methodology delivers a representative pay ratio relative to
the Group Chief Executive Officer and that the median ratio is reflective of our pay and progression policies and practices.
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The changes in ratio from 2023 are a result of the following factors:
– The salary ratio has remained flat at median and upper quartile, and shows a slight decrease at the lower quartile. In 2024
Andrea Rossi received an increase in base salary of 4%, slightly below the overall wider workforce outcome of 4.6%. The
decrease in the pay ratio at the lower quartile is indicative of the focus on supporting colleagues through the challenging cost of
living environment that prevailed at the time, and changes in the employee population profile resulting from on-going
organisational change.
– The total remuneration pay gap at median is showing a moderate decrease compared to 2023. This is reflective of the decrease
in the Chief Executive STI award on a year-on-year basis. It is also influenced by changes in workforce demographics and
variation in individual employee experience (noting that Option B is the selected methodology and therefore is based on selected
employees at each of the 25th, 50th and 75th percentiles).
– Once LTIP vesting commences for Andrea Rossi with effect from the 2025 performance year onwards the ratio will be likely to
show a marked corresponding increase.
For the purpose of comparing annual changes in pay levels and determining the pay ratio at each percentile, the single figure
methodology was used for total remuneration, as disclosed earlier in this report for the Executive Directors. The salary and total
remuneration of the representative individuals at each quartile were as follows in the table below. Salary and total remuneration
figures for the individuals concerned are based on actual remuneration with no estimates or assumptions made and the Company
is satisfied that the quartile positions below are representative of the overall workforce position.
25th percentile
£
50th percentile
£
75th percentile
£
Total remuneration 2024
64,462
106,067
147,037
Total remuneration 2023
62,550
99,317
137,804
Total remuneration 2022
53,722
87,789
135,844
Total remuneration 2021
55,716
86,789
124,704
Total remuneration 2020
57,490
85,410
124,603
Total remuneration 2019
46,854
64,707
105,542
Salary 2024
49,440
72,622
104,194
Salary 2023
46,797
71,016
101,500
Salary 2022
42,500
66,818
97,580
Salary 2021
42,314
63,047
92,000
Salary 2020
44,187
64,500
90,245
Salary 2019
39,484
55,750
77,750
Directors vs average employee pay
2024
2023
2022
2021
2020
Change
to base
salary/
fee
Change
to
benefits
Change
to STI
outcome
Change
to base
salary/
fee
Change
to
benefits
Change
to STI
outcome
Change
to base
salary/
fee
Change
to
benefits
Change
to STI
outcome
Change
to base
salary/
fee
Change
to
benefits
Change
to STI
outcome
Change
to base
salary/
fee
Change
to
benefits
Change
to STI
outcome
Andrea Rossi
3%
114%
(11%)
335%
276%
586%
—
—
—
—
—
—
—
—
—
Kathryn McLeland
3%
34%
(11%)
51%
92%
138%
—
—
—
—
—
—
—
—
—
Edward Braham
—
—
—
24%
—
—
—
—
—
—
—
—
—
—
—
Clive Adamson
1%
477%
—
1%
(63%)
—
—
—
—
2%
—
—
39%
—
—
Clare Chapman
2%
529%
—
(5%)
(49%)
—
16%
—
—
—
—
—
—
—
—
Paul Evans
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Dev Sanyal
2%
(24%)
—
68% 1630%
—
—
—
—
—
—
—
—
—
—
Elisabeth Stheeman
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Clare Thompson
7%
—
—
9%
(100%)
—
(8%)
—
—
32%
—
—
13%
—
—
Massimo Tosato
1%
(1%)
—
18%
139%
—
7%
—
—
37%
—
—
—
—
—
UK workforce
6%
10%
(2%)
6%
9%
14%
8%
7%
9%
6%
3%
36%
3%
13%
70%
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Notes to the 2024 to 2023 figures
– The percentage changes for the Directors between 2024 and 2023 have been based on the single figure tables on page 138
and 142.
– The Board fee was increased by 3.3% with effect 1 January 2024 from £75,000 to £77,500.
– Benefits for the Non-Executive Directors comprise the gross taxable value of expenses relating to travel, including
international travel to and from the UK, accommodation and other expenses incurred while undertaking duties on behalf
of the Company. Year-on-year changes are a factor of the number and location of meetings attended.
– Paul Evans and Elisabeth Stheeman joined the Board over the course of 2024.
– Only the Executive Directors are employees of M&G plc. As remuneration is set by reference to the UK market and
regulatory practice the UK workforce is considered the most appropriate employee population for the basis of comparison,
consistent with that used for calculation of the Group Chief Executive Officer pay ratio.
– The 2024 salary review increase for the UK was 4.6% and was targeted primarily at lower levels of the organisation. The
increase in average salary of 6% across the UK workforce over the course of 2024 takes into account specific adjustments
and promotions managed outside the main pay review as well as the annual increases. Calculations have been run on a full
time equivalent salary basis over a consistent full year population to provide a like-for-like comparison.
– The increase in benefit costs reflects the impact of employee pay increases over the year, as well as increases in the
premium rates for critical illness and private medical insurance.
– The decrease in the average STI award of 2% is calculated on a consistent population basis and reflects the impact of
2024 STI funding levels relative to 2023 offset by salary increases and promotions over the year.
Relative importance of spend on pay
The following table shows the relative importance of spend on pay in 2024 compared to shareholder dividends, adjusted operating
profit before tax and operating capital generation. These measures have been chosen as they are key performance measures
for the business, which are linked to the financial measures in the Executive Directors’ STI performance scorecard as defined
on page 152.
£m
2024
2023 restated
i
2023 reported
% change
Spend on pay
i
1,026
962
1,003
6.6%
Shareholder dividends
468
462
462
1.3%
Adjusted operating profit before tax
837
797
797
5.0%
Operating capital generation
933
996
996
(6.3%)
i
Spend on pay is calculated as Staff and Employment costs excluding ‘other staff costs’ as presented in Note 8 to the consolidated financial statements on
page 229. The 2023 comparative has been restated following a change in presentation of these Staff and Employment costs.
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Statement of implementation of Remuneration Policy in 2025
In this section
2025 Salary review
Incentive measure changes in 2025
2025 Short-term incentive
2025 Long-term incentive
2025 Non-Executive Director remuneration
2025 Salary review
The Committee approved no salary increase for the Group Chief Executive Officer and Chief Financial Officer in 2025. In
determining this outcome the Committee considered external market benchmark data and the experience of the wider workforce,
for whom an overall salary increase budget of 3% applied in the UK with no increases other than by exception for senior
management.
Year
Salary £
Salary Increase
Andrea Rossi
910,000
0%
Kathryn McLeland
603,000
0%
2025 Incentive measures
The 2025 scorecards remain in accordance with the policy requirements for the performance conditions to comprise a
combination of financial and non-financial measures, with financial measures comprising at least 50% for STI and at least 75%
(including TSR) for the LTIP. All measures have transparent, quantifiable targets and appropriate performance ranges.
The 2025 STI scorecard will have:
– 60% financial weighting with measures aligned to profit, capital generation and net client flows from open business; and
– 40% non-financial weighting with measures aligned to customer outcomes, colleagues and risk and controls.
The 2025 LTIP scorecard will have:
– 85% financial weighting comprising capital generation, profit growth and relative TSR measures; and
– 15% non-financial weighting with sustainability measures aligned to diversity.
2025 Short-term incentive
The maximum STI opportunity for our Executive Directors in 2025 is unchanged:
– Group Chief Executive Officer – 250% of salary
– Chief Financial Officer – 225% of salary
Vesting of deferred awards is changing from 3-year cliff vesting to pro-rata vesting in 3 equal tranches.
The following table sets out the 2025 STI scorecard of performance measures and weightings that will apply to both Executive
Directors. As these measures and targets are reflective of the Company’s annual Business Plan for the year ahead, full details will
be disclosed retrospectively, along with the performance outcomes, in the 2025 Annual Report on Remuneration, reflecting the
associated commercial sensitivity.
Metrics
Weighting
Financial metrics
Adjusted operating profit before tax plus operating change in contractual
service margin (CSM)
25%
Operating capital generation excluding new business strain
25%
Net client flows from open business
10%
Non-financial metrics
Customer
20%
Colleague
10%
Risk and controls
10%
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Definitions
Measure
Additional information
Adjusted operating profit
before tax plus operating
change in CSM
CSM stands for Contractual Service Margin. See the definitions section on page 152 for more
information.
Operating capital generation,
excluding new business strain
See the definitions section on page 152.
Net client flows from open
business
See the definitions section on page 152.
Customers
Life customers (10%). Measures covering:
– Net Promoter and Advisor Satisfaction Scores; and
– With-Profits Fund investment performance relative to its benchmark.
Asset Management customers (10%). Two measures, equally weighted:
– Wholesale funds investment performance relative to benchmark/target; and
– Institutional funds investment performance relative to benchmark/target.
Colleagues
The sustainable engagement outcome from the average of the colleague opinion surveys
(OneVoice) run over the year, relative to a target and performance range.
Risk and Controls
Represents two measures, equally weighted, aligned to assessing the effectiveness of risk
management culture across the Company. Both measures have quantitative targets and
performance ranges. For 2025 these are:
– % of high/very high issues overdue; and
– % of high/very high issues reopened at high/very high by assurance providers.
2025 Long-term incentive
The maximum LTIP awards for our Executive Directors in 2025 will change subject to approval from shareholders at the 2025 AGM:
– Group Chief Executive Officer – 375% of salary (previously 250%)
– Chief Financial Officer – 275% of salary (previously 225%)
The table below shows the 2025 LTIP scorecard of performance measures, weightings, targets and performance ranges that will
apply to both Executive Directors.
Weighting
Threshold
Target
Maximum
Vesting
0%
50%
100%
Cumulative operating capital generation excluding new business
strain (£m)
40%
2,295
2,700
3,105
Adjusted operating profit before tax growth
20%
4%
8%
Diversity - Gender
7.5%
40%
42%
44%
Diversity - Ethnicity
7.5%
10%
20%
22%
Vesting
25%
100%
Relative TSR ranking
25%
50th p’cile
75th p’cile
Definitions for the above measures are provided on pages 152-153. Performance conditions have straight-line vesting between
points and are measured over the three-year period 1 January 2025 to 31 December 2027.
Relative TSR ranking
The peer group consists of a bespoke selection of FTSE 350 and European peers selected based on objective criteria in terms of
company size, business scope and geography. The full 2025 award peer group is set out below:
Amundi – Aberdeen – Ashmore – Aviva – DWS – ICG – Jupiter – Just Group – Legal & General – Man Group
– Ninety One – Phoenix Group – Quilter – Rathbone – Schroders – St James’s Place
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Non-Executive Director remuneration
The fee structure applicable to the Non-Executive Directors in 2025 is detailed in the table below.
£’000
2025 fees
2024 fees
Chair
525
525
Non-Executive Director basic annual fee
77.25
77.25
Senior Independent Director
30
30
Chair of the Risk Committee
40
40
Chairs of the Audit and Remuneration Committees
30
30
Members of the Audit, Remuneration and Risk Committees
17.5
17.5
Members of the Nomination and Governance Committee
10
10
No increases have been applied to Director fees for 2025.
Directors’ service contracts and letters of appointment
As detailed in the Directors’ Remuneration Policy all Executive Directors have service agreements of an indefinite duration that can
be terminated by either party by serving 12 months’ notice and each of the Non-Executive Directors has a letter of appointment
with a mutual notice period of six months.
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Definitions table
Financial
Profit
Adjusted operating profit
before tax
Adjusted operating profit before tax (defined on page 341) is the Group’s non-
GAAP alternative performance measure used to demonstrate the longer-term
performance of the Group as it is less affected by short-term market volatility
and non-recurring items than profit before tax.
For the short-term incentive this is combined with operating change in
contractual service margin (see below) to create a measure aligned to growth
and management actions.
For the long-term incentive the measure is defined as the average growth
achieved over the 3-year performance period.
Adjusted operating profit
before tax, plus operating
change in contractual
service margin (CSM)
Adjusted operating profit before tax (defined on page 341) plus operating
change in contractual service margin (CSM). CSM is a IFRS 17 related alternative
performance measure for the Life business to ensure recognition of growth and
management actions in the period.
Capital
Generation
Operating capital
generation
Operating capital generation is the total capital generation adjusted to exclude
tax and market movements relative to those expected under long-term
assumptions, and to remove other non-operating items, including shareholder,
restructuring and other costs.
Operating capital
generation excluding new
business strain
In order to ensure the measurement of current management’s performance is
not impacted by the regulatory requirement to hold additional capital against
new business written, this is an adapted operating capital generation metric that
excludes new business strain. New business strain is a component of underlying
capital generation in the Life segment.
Net Client Flows
Net Client Flows from
open business
Net client flows represent gross inflows less gross outflows and provides useful
insight into the growth of the business. Gross inflows are new funds from clients.
Gross outflows are money withdrawn by clients during the period.
Net flows from open business consists of net client flows from Asset
Management, PruFund, Shareholder annuities and the elements of Other Life
which are open to new business. It excludes net flows from our Traditional with-
profits business, platform and certain elements of Other Life closed to new
business.
Net client flows includes flows on assets held on the Group’s consolidated
statement of financial position for our clients, and external client flows on assets
belonging to wholesale and institutional clients outside of the Group which are
not included in the Group’s consolidated statement of financial position and as a
result, this measure is not directly reconcilable to the financial statements.
Shareholder
Return
Relative Total Shareholder
Return (TSR)
TSR represents the growth in the value of a share plus the value of dividends
paid, assuming that the dividends are reinvested in the Company’s shares on the
ex-dividend date. Relative TSR compares the performance of the Company with
the relevant peer group.
Category
Measure
Definition
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Definitions table (continued)
Category
Measure
Definition
Non-financial
Customer
With-Profits Fund
investment performance
Performance of the With-Profits Fund, relative to its benchmark, the ABI Mixed
Investment 20-60% Shares fund.
Investment performance
of Wholesale and
Institutional Funds
The investment performance of wholesale and institutional funds on an asset
weighted basis over one and three years, measured against relevant
benchmarks/targets, as appropriate.
Adviser Satisfaction score The percentage of advisors satisfied with the service they receive in respect of
illustrations and valuations for new business and service once new business has
been written.
Net Promoter Score
Applies to the Life business: six-month rolling average relative to a target and
performance range.
Colleague
Engagement
The sustainable engagement score outcome from colleague opinion surveys
(OneVoice) relative to a target and performance range.
Diversity
Gender and Ethnicity
Percentage of the senior leadership team, defined as the Executive Committee
and their direct reports, that is female/Black, Asian, or minority ethnic at the end
of the defined performance period compared to progress against publicly
disclosed targets.
Climate
Own emissions reduction
The percentage reduction in the Company’s Scope 1, 2 and 3 emissions from the
disclosed restated baseline position for 31 December 2019 in the 2019 Annual
Report. Targets are aligned to our objective to achieve a near-term carbon
emissions reduction of 46% by 2030, and are assessed against the 2019 base
year.
Risk, Controls and
Conduct
STI: Measures aligned to assessing the effectiveness of risk management culture across the Company.
All measures have quantitative targets and performance ranges.
2022 LTIP scorecard: Determined on a qualitative basis by reference to an independent report from the Chief
Risk and Compliance Officer, approved by the Risk Committee, taking consideration of adherence to risk
appetite policy and limits, and to conduct/culture/governance policies and standards.
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Other related disclosures
In this section
Remuneration Committee
External advisers to the Committee
Consideration of risk
Operation of the policy
Consideration of shareholder views
Voting outcomes, share dilution and statement on external directorships
Remuneration Committee
The Remuneration Committee’s terms of reference can be found on the Company’s website.
The Committee’s principal areas of focus are:
– Framework of the remuneration policies: establishing, approving and maintaining the principles and framework of the
remuneration policies of the Group.
– Remuneration: determining the design, implementation and operation of remuneration arrangements for the Chair of the Board,
Chairs and Non-Executive Directors of subsidiary boards, the Executive Directors, members of Senior Management, ‘identified
staff’ for all remuneration regulations that apply to the Group and overseeing remuneration for individuals whose total
remuneration exceeds an amount determined by the Committee from time to time.
The Remuneration Committee comprises Clare Chapman (Chair), Paul Evans, Clare Thompson and Massimo Tosato. The
Committee met 9 times during 2024 and full details of Committee member attendance can be found on page 97 of the Governance
Report. Other attendees during 2024 comprised: Sir Edward Braham - Chair, Clive Adamson - Board member, Louise Fowler -
Non-Executive Board member of PAC, Dev Sanyal - Board member and Elisabeth Stheeman - Board member. Where appropriate
the Group Chief Executive Officer, Chief Financial Officer, Chief People Officer, General Counsel, Chief Risk and Compliance
Officer, Reward Director and Deputy Reward Director and from time to time other members of senior management also attended
meetings. No individual was in attendance for decisions in respect of their own remuneration.
A summary of the activities undertaken by the Committee is presented below:
Q1 2024
Q2 2024
– Salary review and incentive outcomes for the executives and
broader workforce.
– Annual share grants for STI deferrals and LTIP awards.
– Performance outcomes of 2023 STI and 2021 LTIP awards.
– Performance measures and targets for 2024 incentive plans.
– Completion and disclosure of the 2023 Annual Remuneration
Report.
– 2024 individual performance objectives for the executives.
– AGM
– Review and approval of remuneration arrangements and
appointment and leaver terms for roles falling under the remit
of the Committee.
Q3 2024
Q4 2024
– Review of the Directors Remuneration Policy and incentive
plan design.
– Approval of remuneration arrangements and appointment
and leaver terms for roles falling under the remit of the
Committee.
– Review of the Directors Remuneration Policy and incentive
plan design.
– Engagement with shareholders and regulatory authorities on
changes under consideration to the Directors Remuneration
Policy and incentive design.
– Incentive plan forecasts and performance measures and
targets for 2025 incentive plans.
– Annual review of remuneration governance, including
regulatory compliance.
– Board Chair and Material Subsidiary Board fees.
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External advisers to the Committee
Deloitte were appointed as advisers to the Remuneration Committee in December 2020 following a formal tender process to
provide guidance and advice to the Committee. Deloitte are founding members of the Remuneration Consultants Group and
provide advice in line with its Code of Conduct. The Committee is satisfied that the advice received from Deloitte is objective and
independent. The Committee is comfortable that Deloitte do not have any current connections with any individual M&G plc
Directors that may impair their independence and objectivity. In addition to advice regarding remuneration, separate teams from
Deloitte also provided other unrelated professional services to the Group during the year including technology consulting, tax
advisory, finance and accounting and also cyber strategy services.
Key areas of advice provided to the Committee by Deloitte related to the 2024 Directors’ Remuneration Policy review, the 2023
Directors’ Remuneration Report, 2025 incentive structures and measures, remuneration arrangements for Executive Directors and
the Executive Committee and regulatory advice.
The total fees for 2024 charged by Deloitte on a time and expenses basis were £148,450.
Consideration of risk
The design and operation of all remuneration policies and incentive schemes must be aligned with the Company’s risk
management principles and policies through the appropriate use of performance measures and targets and the discretion to
adjust outcomes to reflect risk, compliance and conduct events.
The Risk Committee provides independent input to the Remuneration Committee to help with the assessment of scheme design
and outcomes to ensure that they are consistent with these principles and policies. A formal risk and compliance report, compiled
by the Chief Risk and Compliance Officer (CRCO) and approved by the Risk Committee, is submitted to the Committee annually to
provide an assessment of:
– The effectiveness of the risk and control environment, material events and specific conduct and compliance issues over the one
and three-year performance periods of awards to enable the Remuneration Committee to determine if the outcome of schemes
are appropriate or if any adjustments should be applied at scheme or individual level, and the appropriateness of scheme design
for the coming year.
Input from the report is also used to assess whether there have been any events that warrant the consideration of malus and/or
clawback on previously determined awards. Any adjustments applied to scheme outcomes for the Executive Directors will be
explained in the relevant Remuneration Report.
Sustainability risk
As a responsible investor we consider the sustainability risks of all our investments and advice by taking into consideration
sustainability factors that have the potential to have a material financial impact and seek to incorporate them into our general risk
management framework. The effectiveness of sustainability risk management in investment decisions and advice is a
consideration in the CRCO Risk and Compliance report and adherence to relevant principles and policies is monitored and
reported to the Remuneration Committee as part of this report. In accordance with the M&G Remuneration Policy, any failings to
meet the required standards of these principles and policies will be transparently reflected in the determination of remuneration
outcomes.
Operation of the policy
The Committee is satisfied that the policy has operated as intended in respect to alignment of remuneration outcomes and
quantum with company performance and key principles.
Consideration of shareholder views
As further detailed earlier in the report, the Committee engaged with 30 of our largest shareholders, representing c. 70% of share
ownership, proxy advisory bodies and regulators on the proposed changes to the Directors’ Remuneration Policy and incentive
scorecard review, receiving valuable feedback from the majority of our top shareholders and all advisory bodies. The Committee
carefully reflected on all feedback received in finalising proposals.
The Committee will continue to monitor trends and changes in best practice guidelines issued by institutional shareholder bodies,
shareholder governance teams and corporate governance requirements to ensure remuneration at M&G plc remains appropriate.
The Committee will also continue to engage with shareholders on the effectiveness of the Remuneration Policy, its implementation
and on matters of importance as and when they arise.
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Annual Report on Remuneration continued
155
Voting outcomes at the Annual General Meeting (AGM) 2024
The following table provides the voting outcomes for the Directors’ Remuneration Policy approved at the May 2023 AGM and for
the 2023 Annual Remuneration Report approved at the May 2024 AGM.
Voting Item
For
Against
Abstain
Remuneration Policy
96.5%
3.5%
1,368,489,460
50,232,635
223,066,558
2023 Remuneration Report
96.8%
3.2%
1,535,355,539
50,946,080
325,010
i
Votes withheld are not votes in law and therefore have not been counted in the calculation of the proportion of the votes for and against a resolution.
Share dilution
All share plans operated by M&G plc which permit awards to be satisfied by issuing new shares contain dilution limits that comply
with the guidelines produced by the Investment Association on 31 December 2018. As at 31 December 2024 M&G plc’s standing
against these dilution limits was:
– 4.95% (2023: 3.10%) where the guideline is no more than 5% in any 10 years under all discretionary share plans.
– 6.57% (2023: 4.22%) where the guideline is no more than 10% in any 10 years under all share plans.
Statement on external directorships
Details of external directorships held by the Executive Directors can be found on pages 89-91 of the Annual Report.
The Directors’ Remuneration report was approved by the Board on 18 March 2025.
Clare Chapman
Remuneration Committee Chair
18 March 2025
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Annual Report on Remuneration continued
156
The Directors present their Report for the financial year ended 31 December 2024. The information that fulfils the requirements of
the Corporate Governance Statement for the purposes of the FCA’s DTRs can be found in the governance section of the Annual
Report on pages 87-160 (all of which forms part of this Directors’ Report) and in this Directors’ Report.
Directors
The names and details of the current Directors, along with their
biographical details as at the date of this Report, are set out on
pages 89-91.
Details of the Directors’ and executives’ beneficial interests in
the share capital of the Company can be found in the Directors’
Remuneration Report on page 144.
Powers of the Board
The Board may exercise all powers conferred on it by the
Company’s Articles and the Companies Act 2006. This includes
the powers of the Company to borrow money and to mortgage
or charge any of its assets (subject to the limitations set out in
the Companies Act 2006 and the Company’s Articles which
can be found on our website) and to give a guarantee, security
or indemnity in respect of a debt or other obligation of the
Company. The Articles of Association also govern the
appointment and replacement of Directors (so long as the
number of Directors does not exceed the limit prescribed in the
Articles). The Board has the power to appoint additional
Directors or to fill a casual vacancy amongst Directors. Any
such Director only holds office until the next AGM and may
offer themselves for election.
Information included in the Strategic Report
The Company’s Strategic Report on pages 1-85 includes the
following information that would be otherwise be required to
be disclosed in this Directors’ Report:
Subject matter
Page
reference
Corporate responsibility governance
60
Employment practices and engagement
37
Greenhouse gas emissions
76
Charitable donations
63
Assessing and monitoring culture
92
Internal control and risk management objectives
and policies
44-45
Business review and future developments of the
business
10-29
Stakeholder engagement with suppliers,
customers and others
37-39
Events since the end of the financial year
322
In addition, the principal risks set out on pages 46-53, the
financial instruments set out on pages 250-251, the changes in
borrowings set out on pages 279-281 and the Shareholder
Information on page 360 are incorporated by reference into the
Directors’ Report.
Requirements of FCA Listing Rule 6.6.1R
Information to be included in the Annual Report and Accounts
under FCA Listing Rule 6.6.1R, where applicable, can be found
as follows:
Subject matter
Page
reference
Details of long-term incentive schemes
115
Shareholder waivers of dividends
158
Shareholder waivers of future dividends
158
Publication of unaudited financial information
341
Share capital
Issued share capital
The issued share capital as at 31 December 2024 consisted of
2,407,168,284 ordinary shares of 5 pence each, all fully paid up
and listed on the London Stock Exchange. At 31 December
2024, the Company held 3,414,030 ordinary shares in Treasury.
Accordingly, at 31 December 2024, the total number of voting
rights in the Company was 2,403,754,254.
Rights and obligations
The rights and obligations attaching to the Company’s shares
are set out in full in the Articles. There are currently no voting
restrictions on the ordinary shares, all of which are fully paid,
and each share carries one vote on a poll. If votes are cast on a
show of hands, each shareholder present in person or by proxy,
or in the case of a corporation, each of its duly authorised
corporate representatives, has one vote except that if a proxy is
appointed by more than one member, the proxy has one vote
for and one vote against if instructed by one or more members
to vote for the resolution and by one or more members to vote
against the resolution. Where, under an employee share
scheme, participants are the beneficial owners of the shares
but not the registered owners, the voting rights are normally
exercisable by Apex Group Fiduciary Services Limited and
Equiniti Share Plan Trustees Limited (The Trustees) in
accordance with the relevant plan rules. The Trustees would
not usually vote any unallocated shares held in trust, but they
may do so at their discretion provided it would be considered
to be in the best interests of the beneficiaries of the trust and
permitted under the relevant trust deed. As at 12 March 2025,
Trustees held 1.48% of the issued share capital under the
various plans in operation. Rights to dividends under the
various schemes are set out in the Directors’ Remuneration
Report.
Restrictions on transfer
In accordance with English company law, shares may be
transferred by an instrument of transfer or through an
electronic system (currently CREST) and any transfer is not
restricted except that the Directors may, in certain
circumstances, refuse to register transfers of shares but only if
such refusal does not prevent dealings in the shares from
taking place on an open and proper basis. If the Directors make
use of that power, they must send the transferee notice of the
refusal within two months. Certain restrictions may be imposed
from time to time by applicable laws and regulations (for
example, insider trading laws) and pursuant to the Listing Rules
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Directors’ Report
157
of both the Financial Conduct Authority as well as under the
rules of some of the Group’s employee share plans. All
Executive Directors are required to hold a minimum number of
shares under guidelines approved by the Board, described on
page 125 of the Directors’ Remuneration Report.
Authority to issue shares
The Directors require authority from shareholders in relation to
the issue of shares. Whenever shares are issued, these must be
offered to existing shareholders pro-rata to their holdings
unless the Directors have been given authority by shareholders
to issue shares without offering them first to existing
shareholders. M&G plc will seek authority from its shareholders
on an annual basis to issue shares up to a maximum amount, of
which a defined number may be issued without pre-emption.
Dis-application of statutory pre-emption procedures is also
sought for rights issues. Relevant resolutions to authorise share
capital issuances will be put to shareholders at the 2025 AGM.
Authority to purchase own shares
The authority for the Company to purchase in the market for up
to 238,338,500 of its ordinary shares (representing 10% of the
issued share capital of the Company as at the latest practicable
date before publication of the Notice of the Company’s last
AGM) granted at the Company’s last AGM, expires on the date
of the forthcoming AGM.
The Company has not utilised the authority obtained at the
2024 AGM. Shareholders will be asked to give a similar
authority to purchase shares at the forthcoming 2025 AGM.
Major shareholders
Information provided to the Company by substantial
shareholders pursuant to the Disclosure Guidance and
Transparency Rules (DTRs) are published via a Regulatory
Information Service and is available on the Company’s website.
As at 31 December 2024, the Company had been notified under
Rule 5 of the DTRs of the following holdings of voting rights in
its shares. Between 31 December 2024 and 12 March 2025 (the
latest practicable date for inclusion in this report), the Company
has not received any additional notification pursuant to Rule 5
of the DTRs.
The Company is not aware of any agreements between holders
of securities which may result in restrictions on the transfer of
securities or on voting rights.
Shareholder
% of total
voting rights
BlackRock, Inc.
6.79%
Kingdom Holding Company
6.37%
Norges Bank
5.05%
Schroders plc
4.98%
Silchester International Investors LLP
5.05%
Between 31 December 2024 and 12 March 2025 (the latest
practicable date for inclusion in this report) there have been no
changes to the table of major shareholders.
Dividend information
The Directors have declared a second interim dividend for the
financial year ended 31 December 2024 of 13.5 pence per
Ordinary Share which will be paid out of distributable reserves.
Below is a table of the key dates and further information
regarding the dividend can be found on our website.
2024 dividend
Shareholders registered on the
UK register
Ex-dividend date
27 March 2025
Record date
28 March 2025
Payment date
9 May 2025
A number of dividend waivers are in place and these relate to
shares issued but not allocated under the Group’s employee
share plans. These shares are held by the Trustees and will, in
due course, be used to satisfy requirements under the Group’s
employee share plans. As at 12 March 2025 (the latest
practicable date for inclusion in this report), the Company held
3,414,030 shares in Treasury. Treasury shares are not taken
into consideration in relation to the payment of dividends.
Cash dividend alternative
The Company operates a Dividend Reinvestment Plan (DRIP).
Shareholders who have elected for the DRIP will automatically
receive shares for all future dividends in respect of which a
DRIP alternative is offered. The election may be cancelled at
any time by the shareholder. Further details of the DRIP can be
found on our website. The ability to receive dividend payments
by cheque was withdrawn during 2021.
Dividends will be paid directly via bank mandate or
shareholders can join the DRIP to use their dividend to
purchase further M&G plc shares. Receiving dividends in this
way, rather than by cheque, means shareholders can receive
funds more quickly, more securely and in a more
environmentally friendly way.
Political donations
The Group does not make political donations or incur political
expenditure within the ordinary meaning of those words and
nor did it in 2024. However, the definitions of political
donations, political parties, political organisations, and political
expenditure used in the UK Companies Act 2006 are broad. As
a result, they may cover routine activities that form part of the
normal business activities of the Group and are an accepted
part of engaging with stakeholders, such as sponsoring events
or supporting policy reviews where M&G has a legitimate
business interest in policy development. While the Group
prohibits political donations, the Group believes it appropriate
to seek authority from shareholders in making political
donations at the AGM in order to avoid inadvertent breaches.
Change of control
There are a number of agreements that take effect, alter or
terminate upon a change of control of the Company, such as
commercial contracts, bank loan agreements, property lease
arrangements and employee share plans. In the context of the
Group as a whole, none of these are deemed to be significant in
terms of their potential impact except for those listed below.
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Directors’ Report continued
158
Credit facilities
Under a £1,286 million multi-currency revolving credit facility
between the Company and the banks and financial institutions
named therein as lenders (Lenders) dated 27 March 2019 (the
Facility), in the event that any person or group of persons acting
in concert directly or indirectly gains control of the Company and
its subsidiaries, then any Lender may elect within a prescribed
time frame to be replaced by a new lender, or to cancel its
commitment, under the Facility whereupon the Company shall
be required to repay each loan made to it on the last day of the
interest period for that loan, and any loan repaid may be re-
borrowed from a new lender, subject to the terms of the Facility.
Under a £107 million and two £53.6 million revolving loan
facilities between the Company and the bank named therein as
lender (Lender) dated 27 March 2019 (the Facility), in the event
that any person or group of persons acting in concert directly
or indirectly gains control of the Company and its subsidiaries,
then the Lender may elect within a prescribed time frame to be
replaced by a new lender, or to cancel its commitment, under
the Facility whereupon the Company shall be required to repay
each loan made to it, together with accrued interest and all
other amounts accrued under the Facility, which shall in each
case be immediately due and payable, on the last day of the
interest period for that loan.
Risk management objectives and policies
Details of the framework which allows M&G to manage risk
within agreed appetite levels are set out on page 44. In this
section is information on risk culture and governance, systems
of internal control, how risks are categorised and how risk
appetites and levels are set. Specific information around risk
management objectives, policies (eg hedging) and exposure
(eg price, credit, liquidity, cash flow risk) is contained in the
financial statements on pages 294-314.
Environmental, employee and social policies
Policies relating to environmental matters, the Company’s
employees and social, community and human rights issues can
be found on page 55 of this Report.
Equal opportunities and employment
of disabled persons
M&G plc’s Global Diversity and Inclusion Policy ensures that equal
opportunities are afforded to all colleagues, candidates and
suppliers in an environment in which each is treated with dignity
and respect. Defined processes are in place to ensure diversity
and inclusion is embedded in the culture of the workplace and
that we comply with statutory and regulatory requirements in the
local labour marker; provide equal opportunity for all who apply
for and perform work for M&G plc irrespective of sex, race, age,
ethnic origin, educational, social and cultural background, marital
or civil partnership status, religion or belief, sexual orientation or
disability; and allow for reasonable adjustments to support those
with special requirements. We also encourage the same
standards of our recruitment and consultant suppliers.
The Company’s targets around women in senior executive
positions can be found on page 41 and the proportion of women
on the Board and in senior executive positions can be found on
page 91. The Company’s ethnicity targets can be found on page
41. We make reasonable adjustments for colleagues with a
temporary or permanent disability to ensure that both their
individual role and M&G more broadly as a workplace remains
accessible to them. Where reasonable adjustments alone do not
enable a colleague to continue in their role we aim to provide
support to colleagues in identifying alternative roles.
Research and Development
In the ordinary course of business, the Group develops new
products and services in each of its businesses.
Conflicts of interest
The Company’s Articles of Association allow the Board to
authorise conflicts of interest that may arise and to impose
such limits or conditions as it thinks fit. The Group has
established procedures whereby actual and potential conflicts
of interest are regularly reviewed, appropriate authorisation is
sought prior to the appointment of any new Director, and new
conflicts are addressed appropriately. The decision to
authorise a conflict of interest can only be made by non-
conflicted Directors and, in making such decisions, the
Directors must act in a way they consider, in good faith, would
be most likely to promote the Company’s success.
Directors’ indemnities and insurance
The Company maintains Directors and Officers Liability
insurance cover in respect of legal actions brought against its
Directors and Officers. Pension Trustee Liability insurance is
also in place to cover legal actions brought against pension
trustees of the Group’s pension schemes managed for staff
pensions. The policies include coverage for M&G plc and its
subsidiaries. Qualifying third-party indemnity provisions are
also available for the benefit of the Directors of the Company
and certain other such persons, including certain Directors of
the other companies within the Group. Qualifying pension
scheme indemnity provisions are also in place for the benefit of
certain pension trustee Directors within the Group.
Branch registrations
The Group has registered branches in Belgium, France,
Germany, Italy, The Netherlands, Poland, South Korea, Spain,
Sweden and the UK.
Independent Auditors
The Directors are recommending the reappointment of
PricewaterhouseCoopers LLP as the Group’s statutory auditor at
the 2025 AGM.
Statement of disclosure of information
to the auditor
Each Director of the Company confirms that, as far as each is
aware, there is no relevant audit information of which the
Company’s auditor is unaware and that each of the Directors
has taken all reasonable steps to ascertain any relevant audit
information and to ensure the Company’s auditor is aware of
that information.
Signed on behalf of the Board of Directors
Charlotte Heiss
General Counsel and Company Secretary
18 March 2025
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Directors’ Report continued
159
The Directors are responsible for preparing the Annual Report
and Accounts and the financial statements in accordance with
applicable law and regulations.
The Board requested that the Audit Committee review the
Annual Report and provide its opinion on whether the report is
fair, balanced and understandable. The Audit Committee’s
opinion is on page 105.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in accordance
with UK-adopted international accounting standards and the
Company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 ‘Reduced
Disclosure Framework’, and applicable law).
Under company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company and
of the profit or loss of the Group for that period. In preparing
the financial statements, the Directors are required to:
– select suitable accounting policies and then apply them
consistently;
– state whether applicable UK-adopted international
accounting standards have been followed for the Group
financial statements and United Kingdom Accounting
Standards, comprising FRS 101 have been followed for the
Company financial statements, subject to any material
departures disclosed and explained in the financial
statements;
– make judgements and accounting estimates that are
reasonable and prudent; and
– prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
Group’s and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the
financial statements and the Directors’ Remuneration Report
comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s and Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and functions are listed in
Directors’ Report confirm that, to the best of their knowledge:
– the Group financial statements, which have been prepared in
accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Group;
– the Company financial statements, which have been
prepared in accordance with United Kingdom Accounting
Standards, comprising FRS 101, give a true and fair view of
the assets, liabilities and financial position of the Company;
and
– the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and Company, together with a
description of the principal risks and uncertainties
that it faces.
For further information on the comprehensive process followed
by the Board in order to reach these conclusions please refer to
the Audit Committee Report on pages 104-109.
Signed on behalf of the Board of Directors
Andrea Rossi
Group Chief Executive Officer
18 March 2025
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Statement of Directors' responsibilities
160
Financial
information
162 Independent auditors’ report
179 Consolidated financial statements
179 Consolidated income statement
181 Consolidated statement of financial position
180 Consolidated statement of comprehensive income
182 Consolidated statement of changes in equity
184 Consolidated statement of cash flows
331 Company financial statements
341 Supplementary information
185 Notes to the consolidated financial statements
185 Note 1: Basis of preparation and material
accounting policies
215
Note 2: Group structure and products
219 Note 3: Segmental analysis
224 Note 4: Insurance Revenue
225 Note 5: Investment income and insurance
finance expenses
228 Note 6: Fee income
228 Note 7: Administrative and other expenses
229 Note 8: Staff and employment costs
229 Note 9: Fees payable to the auditor
230 Note 10: Tax
235 Note 11: Earnings per share
236 Note 12: Dividends
236 Note 13: Goodwill and intangible assets
239 Note 14: Investments in joint ventures and associates
240 Note 15: Property, plant and equipment
241
Note 16: Investment property
242 Note 17: Defined benefit pension schemes
250 Note 18: Classification of financial instruments
252 Note 19: Accrued investment income and other debtors
252 Note 20: Cash and cash equivalents
253 Note 21: Issued share capital and share premium
253 Note 22: Shares held by employee benefit trusts
and other treasury shares
254 Note 23: Other reserves
255 Note 24: Insurance liabilities
279 Note 25: Investment contract liabilities without
discretionary participation features (DPF)
279 Note 26: Subordinated liabilities and other borrowings
281 Note 27: Leases
282 Note 28: Provisions
282 Note 29: Accruals, deferred income and other liabilities
283 Note 30: Structured entities
283 Note 31: Fair value methodology
294 Note 32: Risk management and sensitivity analysis
315 Note 33: Contingencies and related obligations
317
Note 34: Commitments
317
Note 35: Related party transactions
317
Note 36: Capital management
320 Note 37: Share-based payments
322 Note 38: Post balance sheet events
322 Note 39: Related undertakings
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161
Report on the audit of the financial statements
Opinion
In our opinion:
– M&G plc’s Group financial statements and Parent Company financial statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2024 and of the Group’s loss and the
Group’s cash flows for the year then ended;
– the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards
as applied in accordance with the provisions of the Companies Act 2006;
– the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and
applicable law); and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated and Company
statements of financial position as at 31 December 2024; the Consolidated income statement, Consolidated statement of
comprehensive income, the Consolidated and Parent Company statements of changes in equity and the Consolidated statement of
cash flows for the year then ended; and the notes to the financial statements, comprising material accounting policy information
and other explanatory information.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
During the period, a PwC network firm was engaged by a controlled undertaking of the Group to design and build reports to
support financial reporting. This is a prohibited non-audit service under paragraph 5.40 of the FRC Revised Ethical Standard 2019.
As soon as the service was identified, it was immediately stopped and no fees were charged.
The entity that the non-audit service was provided to is an immaterial subsidiary and is not a component for the purposes of our
audit of the Group’s consolidated financial statements. We confirm that, based on our assessment of this breach, the nature and
scope of the services and the subsequent actions taken, the provision of the services has not affected our professional judgement
in connection with our audit of the year ended 31 December 2024. Other than the matter referred to above, and to the best of our
knowledge and belief, we declare that no non-audit services prohibited by the FRC’s Ethical Standard, were provided to the Group.
Other than those disclosed in Note 9, we have provided no non-audit services to the Parent Company or its controlled
undertakings in the period under audit.
Context
The group is an international asset manager and insurer. Its operations primarily consist of the legal entity operations in the United
Kingdom, Europe and Asia. Given the activities of the Group, we have established teams with the relevant industry experience in all
significant locations in which the Group operates. In addition to forming this opinion, in this report we have also provided
information on key audit matters we discussed with the Audit Committee, setting out a description of the matter, how we
approached the audit in these areas, and our conclusion. In designing our audit approach, we have considered the impact that
climate change could have on the Group, including physical or transitional risks which could arise. In particular, we have assessed
the impacts on the financial statements of the commitments related to climate change which the Group has made.
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Independent auditors’ report
to the members of M&G plc
162
Overview
Audit scope
– Our audit scope has been determined to provide coverage of all material financial statement line items, and as part of designing
our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
– The Group has three operating segments, Asset Management, Life and Corporate Centre. Each operating segment includes a
number of reporting components across different locations and legal entities.
– We tailored our in-scope components based on our assessment of inherent risk and their financial significance to the
consolidated financial results. In particular, we considered where management made subjective judgements; for example, in
respect of significant accounting estimates that involved making assumptions and considering future events that are inherently
uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including consideration
of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
– Three components were subject to an audit of their complete financial information. Eighteen other components were subject to
an audit on certain balances and transactions.
– Our audit scope provided coverage over 83% of IFRS Profit before tax, 72% of Total assets, and 94% of Total liabilities.
Key audit matters
– Valuation of hard to value financial investments (level 3) (Group)
– Valuation of hard to value plan assets (level 3) and Valuation of defined benefit pension obligations (Group)
– Valuation of insurance contract liabilities: Annuitant mortality (Longevity) (Group)
– Valuation of insurance contract liabilities: Credit default allowance for annuity contracts (Group)
– Valuation of insurance contract liabilities: Expenses (Group)
– Valuation of insurance contract liabilities: Persistency for with-profit contracts (Group)
– Valuation of insurance contract liabilities: Division of with-profit assets between policyholders and shareholders (Group)
– Recoverability of the carrying value of investment in subsidiaries (Parent Company)
Materiality
– Overall Group materiality: £60 million (2023: £60 million) equivalent to 7.17% of Adjusted operating profit before tax.
– Overall Parent Company materiality: £104 million (2023: £105 million) based on 1% of Total assets.
– Performance materiality: £39 million (2023: £39 million) (Group) and £67 million (2023: £68 million) (Parent Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Valuation of insurance contract liabilities – division of with-profit assets between policyholders and shareholders is a new key audit
matter this year. Under IFRS 17, a portion of the with-profit assets are allocated to current and future policyholders and reflected in
the insurance contracts liabilities with the remainder allocated to shareholders (and reflected in equity). This division of assets
reflects a significant judgement due to the size of the surplus with-profit assets, and the complexity and subjectivity involved in the
assessment. In the prior year this was included within the key audit matter - Implementation of IFRS 17: Judgements on transition
and restatement of comparative information.
Valuation of insurance contract liabilities: Implementation of IFRS 17 - Judgements on transition and restatement of comparative
information, and Valuation of insurance contract liabilities: Implementation of IFRS 17 - New models and data flows, which were key
audit matters last year, are no longer included because this is the second year after the adoption of IFRS 17. The illiquidity premium
for with-profit contracts, which was also a key audit matter last year, is no longer included because the level of judgement in
setting the assumption is reduced following the implementation of IFRS 17.
Otherwise, the key audit matters below are consistent with last year.
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Valuation of hard to value financial investments (Level 3) (Group)
Refer to notes 1.5.5, 31.3.1 & 31.4 to the consolidated financial statements for disclosures of related accounting policies, valuation
methodologies and balances.
The Group’s financial investments are held to back the Group
insurance contract liabilities and investment contracts within its
Life business, and to meet regulatory capital requirements, as
well as providing returns on shareholder assets.
Most of the Group’s financial investments are valued by
reference to prices on active markets. However, some are
priced by reference to market data and/or valuation models.
Investments that require the use of significant judgement and
inputs that are not market observable have a higher level of
inherent estimation uncertainty. These investments are
classified as Level 3 under the fair value hierarchy and include:
– Equity release mortgages;
– Unlisted equity investments;
– Private credit and other illiquid debt securities; and
– Investment property.
The valuation of hard to value financial investments was a key
area of focus given the magnitude and the inherent uncertainty
involved in the estimation. Changes in estimates could result in
material changes in the valuation.
Equity release mortgages (ERMs)
The valuation of the Group’s ERM portfolio is inherently
subjective. There are significant unobservable inputs relating to
the No Negative Equity Guarantee. The valuation uses an
internal discounted cash flow model with assumptions based
on the current property value, net property growth rate and the
discount rate (including spread assumptions to estimate an
illiquidity premium above the risk free discount rate).
Unlisted equity investments
Unlisted equity investments are held through funds managed
by internal and external fund managers. The investments are
valued in line with the requirements of The International Private
Equity and Venture Capital Valuation (IPEV) Guidelines. Given
their magnitude, the external valuations are an area of focus.
Valuations are performed periodically by the fund managers.
The investments are included at the most recent Net Asset
Value (NAV) provided by the fund manager adjusted for cash
movements, where applicable.
We performed the following audit procedures to test the
valuation of the investments classified as Level 3:
– Understood and evaluated the design effectiveness of key
controls related to the valuation of investments; and
– Assessed both the methodology and assumptions used in
the calculation of the year end valuation, including
understanding the governance controls that are in place to
monitor these processes.
For Equity release mortgages, we:
– Applied our industry knowledge and experience (using our
actuarial specialists) to assess the appropriateness of the
methodology, models and assumptions used against
recognised actuarial practices;
– Tested data inputs used in the valuation models to underlying
documentation on a sample basis;
– Evaluated the appropriateness of significant economic
assumptions (including the spread applied above the risk free
rate) that are used within the valuation process, with
reference to market data and industry benchmarks where
available;
– Evaluated the appropriateness of the mortality and morbidity
assumptions used in the valuation, based on available
experience data and industry expectations of future mortality
improvements; and
– Performed testing over the model calculations relating to the
No Negative Equity Guarantee and future cash flows included
within the ERMs fair value calculation, and tested the analysis
of change in modelled results, to assess whether the model
continues to operate as expected.
For Unlisted equity investments, we:
– Assessed the methodology used for the valuation of these
investments and whether this is consistent with the
International Private Equity and Venture Capital Valuation
(‘IPEV’) guidelines;
– Where possible, independently obtained the most recent
NAV statements from fund managers and agreed the
valuation to underlying books and records;
– For a sample of positions, where the most recent NAV
statements are not conterminous with the balance sheet,
verified any adjustments made to the valuation for
subsequent capital movements;
– For sample positions, performed look back testing on the
NAV statements provided by fund managers against their
equivalent audited financial statements; and
– Where applicable, for sample positions, reviewed the fund
manager’s service organisation controls report to assess the
effectiveness of relevant controls.
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Private credit and other illiquid debt securities
Private credit and other illiquid debt are predominantly valued
using discounted cash flow models. A key assumption applied
in determining the discount rate used to calculate the fair value
of these securities is the credit rating and the associated credit
spread. The credit rating is determined by assessing the credit
quality of the counterparty and security structure and assigning
an internal credit rating, which is unobservable. The credit
spread is then determined by reference to a comparable
security or basket of securities. Determining the internal credit
rating and the associated comparables requires expert
judgement.
For assets backed by residential ground rents, the Leasehold
and Freehold Reform Act was passed in 2024. There remains
legislative risk and valuation uncertainty with the inclusion of
the ‘Draft Leasehold and Commonhold Reform Bill’ in the King’s
Speech in July 2024, noting there have been no explicit
proposals to date.
Investment property
The Group holds investment property (directly and indirectly)
within the UK, Europe and Asia. The valuation of the Group’s
portfolio is inherently subjective due to, among other factors,
the individual nature of each property, its location and the
expected future rentals for that particular property. There
continues to be uncertainty facing the real estate sector as a
result of the current economic environment and the impact of
climate change. Valuations of investment properties are carried
out by third party valuers engaged by the Group, who perform
their work in accordance with the Royal Institution of Chartered
Surveyors (‘RICS’) Valuation – Professional Standards or
equivalent local standards. The valuations take into account the
property-specific information including the current tenancy
agreements and rental income, condition and location of the
property, and future rental prospects, as well as prevailing
market yields and market transactions.
For Private credit and other illiquid debt securities, we:
– Tested inputs into the valuation model to external sources,
where possible, and contractual data;
– Engaged our valuation experts to assess the appropriateness
of the methodology used to determine internal credit ratings;
– For example positions, assessed the application of the
internal credit rating methodology, including challenging the
assumptions used in setting the internal credit rating;
– For example positions, reperformed the valuation using our
independently selected internal credit ratings and
comparable securities; and
– Where a management expert has been used to corroborate
management’s Level 3 valuations, we have assessed their
competence, capabilities and objectivity by discussing the
scope of their work and reviewing the terms of their
engagement for unusual terms or fee arrangements.
In response to the continued uncertainty associated with assets
backed by residential ground rents, and in conjunction with our
valuation experts, we have:
– Assessed the appropriateness of the judgements made in
determining the impact on the valuation of the assets backed
by residential ground rent assets;
– Assessed the consideration given to a range of likely
outcomes;
– Assessed and challenged management on the changes in
credit ratings and associated credit spread applied; and
– Assessed and challenged the associated disclosure given the
continued inherent uncertainty.
For Investment property, we:
– Engaged our own valuation experts (who are qualified
chartered surveyors with relevant market knowledge) to
support us in our audit of the property valuations;
– Assessed the competence, capabilities and objectivity of the
third party valuers and verified their qualifications. We
discussed the scope of their work and reviewed the terms of
their engagement for unusual terms or fee arrangements;
– Obtained and read the external valuation reports and held
separate meetings with the third party valuers to discuss the
key assumptions; and
– To verify that the valuation approach was suitable for use in
determining the carrying value for investment properties in
the financial statements, we:
– Confirmed that the valuation approach was in accordance
with RICS standards or equivalent local standards;
– Performed sample testing on the standing data in the
Group’s information systems used in the valuation process
to verify the accuracy of the property information supplied
to the third party valuers;
– Obtained valuation details of properties held by the Group
and set an expected range for yield and capital value
movement, determined by reference to published
benchmarks and using our experience and knowledge of
the market;
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– Compared the investment yields used by the third party
valuers with our expected range of yields and the year on
year capital movement to our expected range. Where key
assumptions were outside the expected range or otherwise
appeared unusual, and/or valuations showed unexpected
movements, we undertook further investigations;
– Challenged the third party valuers on the extent to which the
valuations have taken into account the impact of climate
change and related ESG considerations; and
– For properties under development valued using the residual
valuation method, obtained the development appraisal and
assessed the reasonableness of the third party valuers’ key
assumptions. This included comparing the yield to
comparable market benchmarks, comparing the estimated
costs to complete, to development plans and contracts, and
considering the reasonableness of other assumptions that
are not so readily comparable with published benchmarks,
such as estimated rental value and developers’ profit.
For all asset classes we assessed the adequacy of the
disclosures in the financial statements.
Based on the work performed and the evidence obtained, we
consider the valuations for hard to value financial investments
to be appropriate.
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Valuation of defined benefit pension obligations and Valuation of hard to value plan assets (Level 3) (Group)
Refer to notes 1.5.13 and 17 to the consolidated financial statements for disclosures of related accounting policies and balances.
The Group has three key defined benefit schemes which are all
closed to new entrants. The schemes are run by Trustees on
behalf of the beneficiaries. The defined benefit surplus or deficit
presented is the net of the defined benefit obligation and the
scheme plan assets, and a restriction on the surplus to the
Prudential Staff Pension Scheme (“PSPS”) scheme. The key
areas of focus are the valuation of the defined benefit
obligations and the valuation of the level 3 plan assets which
are complex and judgemental.
The valuation of the defined benefit obligations (“DBO”) for the
Group is performed by third party actuaries with key
assumptions initially set through the triennial valuation process
and reassessed annually by the Group.
The estimate of the DBO is dependent on a number of
assumptions, including the discount rate, inflation rate and
mortality rates. Small changes in these assumptions can have a
material impact on the valuation due to the size and the
duration of the pension obligations. Management performs a
review of the DBO valuation methodology and assumptions
each year with the assistance of external experts. Since last
year, new mortality studies were carried out as part of the
funding valuation process for two of the three schemes, and the
base tables have been updated accordingly. The longevity
improvements for all three schemes have been updated based
on annuity book data.
The valuation of complex plan assets includes a longevity swap
and illiquid private credit assets.
The valuation of the longevity swap has been performed by an
external expert. The swap has been valued under the
requirements of Fair Value, IFRS 13, which is consistent with
assuming the swap had nil value at outset. This effectively
means that there is an implicit loading for expenses within the
floating leg of the swap.
The underlying model used to value the longevity swap has
been updated from a collateral-based approach to a
replacement cost approach this year.
The financial assumptions, including discount rate and inflation
rate, are updated in line with market conditions at the reporting
date. Other assumptions, such as mortality and the fee
collateral have been set in line with the assumptions set out in
the longevity swap contract.
The surplus recognised in the Prudential Staff Pension Scheme
is limited to the amount which is recoverable through reduced
future contributions.
For the pension schemes, we have:
– Understood and, evaluated the design effectiveness of key
controls in place in respect of the DBO;
– Reviewed management expert’s IAS 19 report and
challenged the methods adopted to determine the valuation
of the obligations;
– Engaged our actuarial specialists to evaluate the judgements
made by management in determining the key financial and
mortality assumptions used in the calculation of the liability;
– Assessed the reasonableness of the methodologies and
assumptions adopted using our knowledge of market
practice and industry developments, including use of
benchmarks and external market data. We also used
sensitivity analysis to determine the impact of alternative
assumptions;
– Assessed the competence, capabilities and objectivity of
management’s actuarial experts by their qualifications and by
discussing the scope of their work; and
– Reperformed calculations of pension liabilities and compared
these with the expert’s calculations.
For the valuation of the level 3 plan assets, our work focused on:
– For the illiquid private credit assets, we assessed the
methods and assumptions used to value the assets (as set
out above), and
– For the longevity swap, we reviewed the assumptions used
to calculate the value of the longevity swap, assessed the
appropriateness of the change in valuation methodology in
the year and assessed the magnitude of the change in value
of the longevity swap since the previous year end.
For the surplus recognised in the schemes, we assessed the
availability of the pension surplus to the Group and recalculated
the available surplus in the PSPS scheme.
We read and assessed the disclosures made in the financial
statements, including disclosure of the assumptions.
Based on the evidence obtained, we found the valuation of the
Scheme’s defined benefit obligations and hard to value plan
assets to be appropriate.
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Valuation of insurance contract liabilities: Annuitant mortality (Longevity) (Group)
Refer to note 1.4, 1.5.2, 24 and 32.7 to the consolidated financial statements for disclosures of related accounting policies
and balances.
Annuitant mortality (longevity) assumptions are an area of
significant management judgement, due to the inherent
uncertainty involved. We consider these assumptions
underpinning the insurance contract liabilities to be a key audit
matter given the Group’s exposure to a large volume of annuity
business. The annuitant mortality assumption has two main
components as set out below.
Base mortality assumptions
This component of the assumption is mainly driven by internal
experience analyses. It requires expert judgement that includes
determining the most appropriate level at which to carry out the
analysis; the period used for historic experience (considering
COVID-19 in recent periods); the choice of base table / rates;
and adjustments made within the process of fitting rates to past
experience using management’s Prudential Retirement
Mortality (PRM) model.
Rate of future mortality improvements
This component of the assumption is more subjective given the
lack of data and the uncertainty over how life expectancy will
change in the future. The allowance for future mortality
improvements is inherently subjective, as improvements
develop over long timescales and cannot be captured by
analysis of internal experience data, with additional uncertainty
around the longer term impact of COVID-19 and other trends in
the UK on future mortality rates. The areas of judgement also
include the selection of the mortality projection model, its
calibration as well as re-expressing this in terms of the
Continuous Mortality Investigation (CMI) Bureau industry
standard model.
In addition, an allowance for risk in excess of the best estimate
is held and represents the view of compensation for non-
financial risk that management requires (known as the risk
adjustment). The primary component of the risk adjustment is
longevity risk and the selection of the distribution and
associated stresses is a matter of judgement.
We have performed the following procedures:
– Understood and evaluated the design effectiveness of key
controls over the determination of the longevity assumptions,
including the longevity stresses used for the risk adjustment
component of the insurance contract liabilities;
– Assessed the appropriateness of the methodology for
analysing experience and setting assumptions for longevity
with reference to relevant requirements, actuarial guidance
and by applying our industry knowledge and experience;
– Tested the design and operation of the controls in place to
validate the assumptions and data used in the experience
analysis and model calibration, including controls over the
accuracy of the PRM model used to calculate actual and
expected deaths;
– Examined the results of management’s experience analysis
and the resulting base mortality rates;
– Assessed the appropriateness of areas of expert judgement
used in the future mortality improvement rates and the
consistency of these with observed experience from the
Group’s own annuity portfolio and market data;
– Tested and challenged significant judgements made in the
determination of longevity assumptions, including assessing
the implications of COVID-19 and other mortality trends
in the UK;
– Tested the re-expression of the projection basis in terms of
CMI models and their parameterisation;
– Compared the longevity assumptions selected by
management against those adopted by peers using our
annual benchmarking survey of the market;
– Tested the appropriateness of the results of the longevity
contribution to the risk adjustment by comparing to Solvency
II stresses and using our expert knowledge;
– Examined management’s calculation of the financial impact
of changes to the longevity assumptions, to ensure that these
are in line with our expectations; and
– Assessed the disclosure of the longevity assumptions and
the commentary to support the profit (or CSM deferral)
arising from any changes for 2024 reporting in the financial
statements.
Based on the work performed and the evidence obtained,
we consider the assumptions used for annuitant mortality to
be appropriate.
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Valuation of insurance contract liabilities: Credit default allowance for annuity contracts (Group)
Refer to note 1.4, 1.5.2, 24, 32.7 to the consolidated financial statements for disclosures of related accounting policies
and balances.
The discount rate for calculating the annuity in payment and
deferment liabilities (future cash flows and risk adjustment) is
determined in IFRS using a ‘top-down’ approach. In this
approach the discount rate is set using the yield on a reference
portfolio of assets (based on the actual assets held) with explicit
deductions for both expected and unexpected credit
default risk.
The credit default assumptions are also used to determine the
locked-in discount rate based on the target asset mix for new
business written in the period (to calculate the contractual
service margin).
The allowance for expected and unexpected credit default risk
is based on the credit rating of the reference portfolio of assets
and consists of various components. The components include:
– A mechanical long-term allowance for expected defaults and
downgrades (based on historical data);
– A credit risk premium; and
– A short-term overlay reflecting a prospective outlook on
future potential experience.
Significant management judgement is required to set the
internal credit ratings, particularly for illiquid level 3 assets (such
as private credit assets and equity release mortgages). Once
the credit rating has been established there is further
judgement in selecting the short-term overlay to allow for risks
not captured in the long-term credit default allowance.
Changes to the valuation and internal credit rating of residential
ground rent assets (see ‘Valuation of hard to value assets’
above) that back annuity liabilities will impact the credit default
allowances.
The allowance for credit risk can have a significant impact on
the annuity liabilities, with small changes having a large financial
impact.
We have performed the following procedures:
– Understood and evaluated the design effectiveness of key
controls in place in respect of the credit default assumptions
used to value the insurance contract liabilities;
– Assessed the methodology used to derive the credit default
assumptions with reference to relevant requirements of IFRS,
actuarial guidance and by applying our industry knowledge
and experience;
– Obtained an understanding and challenged management
over the analysis performed to assess internal credit ratings
for illiquid assets such as equity release mortgages;
– Tested the approach, the ratings ascribed and the resulting
default allowances;
– Tested the internal credit ratings were based on the correct
inputs and that the calculations were in line with intended
methodology and are appropriate;
– Tested and challenged key management judgements
including the short-term overlay, referencing industry data,
market benchmarking where available and our industry
knowledge. In particular, consideration has been given to the
appropriateness of management’s proposals in the context of
the current economic climate;
– Assessed the legislative risk and valuation uncertainty
relating to residential ground rents and ensured this was
reflected in credit default risk assumptions;
– Examined management’s calculation of the financial impact
of changes to the credit default assumptions on the liability,
to ensure that these are in line with our expectations; and
– Assessed the disclosure of the credit default risk
assumptions and the commentary to support the impact of
any changes for 2024 reporting in the financial statements.
Based on the work performed and the evidence obtained,
we consider the assumptions used for credit default risk
to be appropriate.
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Valuation of insurance contract liabilities: Expenses assumptions (Group)
Refer to note 1.4, 1.5.2, 24 and 32.7 to the consolidated financial statements for disclosures of related accounting policies
and balances.
Future maintenance expenses, investment expenses and
expense inflation assumptions (or collectively the expenses
assumptions) are used in the measurement of the insurance
contract liabilities. The assumptions reflect the expected future
expenses that will be required to maintain the in-force policies
at the balance sheet date, including an allowance for
unavoidable project costs and investment costs.
For IFRS, only those expenses which are directly attributable to
each group of contracts are included in the valuation of
insurance contract liabilities.
Significant management judgement is required to determine
the expense assumptions, including the allocation of costs
between acquisition, maintenance, investment management
and other expenses; the treatment of project costs, the
allocation between with-profits and other policyholders and
down to individual products; and any short term allowances.
Judgement is also required over the long-term costs and
policies in-force to spread fixed costs over.
In addition, when calculating the liabilities, an assumption is also
needed to reflect how these costs will change in future as a
result of inflation rates or renewal of administration contracts.
This assumption is set with reference to industry and market
data; and management’s view of how their cost base will inflate
in future.
The projection of these costs forward over the duration of the
policies means that small changes in the expense assumptions
can lead to significant changes in the liabilities.
We have performed the following procedures:
– Understood and evaluated the design effectiveness of key
controls over the expense assumptions used in the valuation
of insurance contract liabilities;
– Examined and assessed the methodology applied in the cost
model, choice of approach and cost drivers to confirm that
these are reasonable and supportable;
– Tested the input data used in the cost allocation model,
including the completeness and accuracy of the total cost
base and allocation of expenses to the appropriate cost
centres;
– Compared the allocations in the cost allocation model to prior
year and understood the rationale for changes;
– Tested the allocation of investment-related expenses to
validate the completeness and accuracy of those included in
the insurance contract liabilities are appropriate;
– Assessed the methodology used by management to derive
the assumptions with reference to relevant requirements,
actuarial guidance and by applying our industry knowledge
and experience;
– Assessed and challenged the appropriateness of significant
judgements in the application of the methodology, including
excluded costs, allocations between acquisition,
maintenance, investment, and other costs and the treatment
on consolidation of look-through costs;
– Tested the calculation of any components of the expense
assumptions that are not based on the cost allocation model
(for example, short-term expense allowances), by performing
a combination of controls and substantive testing;
– Tested the assumption derived for expense inflation by
assessing the use of industry data, current economic
conditions and challenging the judgements used within the
calculations to ensure that they are reasonable;
– Examined management’s calculation of the financial impact
of changes to the expense assumptions, to ensure that these
are in line with our expectations; and
– Assessed the disclosure of the expense assumptions and
commentary to support the profit (or CSM deferral) arising
from any changes for 2024 reporting in the financial
statements.
Based on the work performed and the evidence obtained, we
consider the assumptions used for expenses, both renewal and
investment, to be appropriate.
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Valuation of insurance contract liabilities: Persistency for with-profit contracts (Group)
Refer to note 1.4, 1.5.2, 24 and 32.7 to the consolidated financial statements for disclosures of related accounting policies
and balances.
Persistency risk can cover a wide range of policyholder actions
including lapse, retirement (normal, early, late), rate of ceasing
regular contributions (paying up), level of premium increments,
and option take-up rates. However the main persistency risk
relates to lapse and retirement assumptions.
For these assumptions:
– Significant judgement is required to set the persistency
assumptions including: the choice of predictive parameters,
applicability of historic experience to the future, the impact of
one-off or short-term events on the data (for example COVID
19) and potential changes in the economic and regulatory
environment going forward;
– In some areas, there is limited historic experience on which to
base the assumptions, for example, retirement assumptions
for certain products beyond the initial selected retirement
age; and
– The current economic conditions, trends and volatility which
may increase the levels of uncertainty about future
persistency.
We have performed the following procedures:
– Understood and evaluated the design effectiveness of key
controls over the persistency assumptions used to value the
with-profit contract liabilities;
– Examined the methodology for analysing the historic
experience and then setting the assumptions for persistency
and assessed whether these are reasonable and in line with
our expectations and market practice;
– Tested the operation of controls to validate the assumptions
and the data used in the experience analysis calculations;
– Examined the results of management's experience analysis
and the resulting persistency assumption;
– Assessed the appropriateness and justification for significant
judgements applied, including:
– Whether the data used is an appropriate representation of
likely future experience or whether changes are needed;
– The potential impact on persistency of changes in
regulation and the current economic environment which
may change the perceived value of products, ability to
invest or retirement habits;
– Examined the judgments applied where there is a lack of
credible historical data to set the assumptions;
– Where available and applicable, compared the persistency
assumptions selected by management against those
adopted by peers using our annual benchmarking survey of
the market;
– Examined management’s calculation of the financial impact
of changes to the persistency assumptions, to ensure that
these are in line with our expectations; and
– Assessed the disclosure of the persistency assumptions and
the commentary to support the profit (or CSM deferral)
arising from any changes for 2024 reporting in the financial
statements.
Based on the work performed and the evidence obtained, we
consider the persistency assumptions used to be appropriate.
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Valuation of insurance contract liabilities: Division of with-profit assets between policyholders and shareholders (Group)
Refer to note 1.3, 1.4 1.5.2, 24 and 32.7.3 to the consolidated financial statements for disclosures of related accounting policies
and balances.
In order to prepare IFRS results a portion of the with-profits
assets are allocated between current and future policyholders
(reflected in the with-profit insurance contract liabilities) and
shareholders (reflected in equity). This division of assets
represents a significant judgement due to the size of the
surplus assets in the with-profit fund, and the complexity and
subjectivity involved in the assessment. Management assesses
the policyholders’ share of these assets on a prospective basis
and since the effective date of IFRS 17 (1 January 2022) this has
been assumed to be 90%.
The proportion of with-profit assets allocated to with-profits
policyholders is defined by the Articles of Association of the
with-profit fund as being at least 90%. There are a number of
considerations in assessing the appropriate allocation including
how the sharing relationship has changed in the past or is
expected to change in future, expectations for future estate
distribution and contribution to the tax payable on the future
shareholder transfers.
We have performed the following procedures:
– Obtained an understanding of, and challenged the
methodologies and judgements used, in determining the
division of assets relative to the requirements of IFRS and our
understanding of the operations of the with-profits fund as
determined by the Articles of Association, Principles and its
Practices of Financial Management and other past
precedents;
– Assessed the factors that will impact the division of assets,
including, the expected sharing relationship for recent and
future new with-profit contracts, shareholder tax on future
distributions, the expectations for estate distributions, and
looking-through internal service arrangements to underlying
cost within the Group;
– Examined and assessed any simplifications applied in
determining the division of assets between policyholders and
shareholders; and
– Assessed the disclosure of the division of assets and the
commentary to support the profit or loss (or CSM deferral)
arising from any changes for 2024 reporting in the financial
statements.
Based on the work performed and the evidence obtained, we
consider the division of the with-profits assets between
policyholders and shareholders to be appropriate.
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Recoverability/carrying value of investment in subsidiaries (Parent Company)
Refer to note A to the Parent Company financial statements for disclosures of related accounting policies and balances.
In the Parent Company’s financial statements, investments in
subsidiaries are reported at cost less impairment.
This balance is material to the Parent Company being the
largest asset on the Parent Company’s statement of financial
position.
During the year impairment indicators have been noted, due to
higher discount rates and the current economic environment,
for the investments in subsidiaries and a full impairment
assessment has been undertaken.
Management has compared the carrying value of investments
in subsidiaries to their recoverable value which is assessed as
the higher of value in use and fair value less costs of disposal.
This includes, but is not limited to, judgement regarding
discount rates, forecasted cash flows, comparable peer
companies and long-term growth rates.
Our procedures in relation to management’s assessment
of the carrying value of investments in subsidiaries as at
31 December 2024 included the following:
– Obtained and assessed the completeness of impairment
indicators noted by management;
– Assessed investment in subsidiaries for any indication of
impairment based on our understanding of the business and
current market environment; and
– Where an impairment assessment was necessary, we:
– engaged our valuation experts to assist us in the audit;
– obtained the value in use and fair value less costs of
disposal assessments completed by management;
– challenged the methodology and assumptions used,
including the discount rate, the cash flows, the long-term
growth rate, and selection of appropriate peer companies;
– tested the inputs back to source documents;
– recalculated the mathematical accuracy of the value in use
and fair value less cost of disposal calculations; and
– Assessed the disclosures in the financial statements.
Based on the work performed and evidence obtained, we
consider the carrying value of investments in subsidiaries to be
appropriate.
Key audit matter
How our audit addressed the key audit matter
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group and the Parent Company, the accounting processes and
controls, and the industry in which they operate.
The Group is a global asset manager and insurer, and its operations primarily consist of the legal entity operations in the United
Kingdom, Europe and Asia. We performed a full scope audit over the following three components:
i) the Parent Company, M&G plc; ii) Prudential Assurance Company (the key contributor to the Life operating segment); and iii)
M&G Group (the key contributor to the Asset Management operating segment).
For eighteen other components, we identified account balances which were considered to be significant in size or audit risk at the
financial statement line item level in relation to the consolidated financial statements, and performed financial statement line item
audit procedures over these specified balances. Analytical procedures over the remaining components that were not
inconsequential were performed by the Group engagement team. We also performed audit procedures over the consolidation
process.
As the Group audit team, we determined the level of involvement required at those components to be able to conclude whether
sufficient and appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as
a whole. In our role as Group auditors, we exercised oversight of the work performed by auditors of the components including
performing the following procedures:
– Issued Group instructions outlining areas requiring additional audit focus, including the key audit matters included above;
– Evaluated the competence and capabilities of component auditors;
– Maintained an active dialogue with reporting component audit teams throughout the year;
– Attended meetings with local management in person or via video conference;
– Attended Audit Committee meetings for certain in-scope components;
– Reviewed reporting requested from component teams, including those areas determined to be of heightened audit risk; and
– Reviewed selected working papers on component audit files, where considered relevant.
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The impact of climate risk on our audit
As part of our audit we have made enquiries of management (both within and outside of the Group’s finance functions) to
understand the governance and process adopted to assess the extent of the potential impact of climate risk on the Group’s
financial statements and support for the disclosures made within the Annual Report and Accounts.
In addition to enquiries with management, we also read the Group’s climate risk assessment documentation, reviewed Board
minutes and considered disclosures in the Annual Report and Accounts in relation to climate change (including those
recommended by the Task Force on Climate-related Financial Disclosures “TCFD”) in order to assess the completeness of
management’s climate risk assessment.
We have also made enquiries to understand the commitments made by the Group and how these may affect the financial
statements and the audit procedures that we perform.
Our procedures did not identify any material impact in the context of our audit of the financial statements as a whole, or our key
audit matters for the year ended 31 December 2024.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements,
both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - Group
Financial statements - Parent Company
Overall materiality
£60 million (2023: £60 million).
£104 million (2023: £105 million).
Materiality benchmark
The materiality amount was selected judgementally and is
equivalent to 7.17% (2023: 8% of 3-year average) of the
Adjusted operating profit before tax.
1% (2023: 1%) of Total assets.
How we determined it
In determining our materiality we have considered financial
metrics and benchmarks which we believe to be relevant to
the primary users of the consolidated financial statements.
Due to the disparate size of the Income Statement and
Statement of Financial Position, the materiality amount was
selected judgmentally by the Group audit team having
considered a range of relevant benchmarks including
Adjusted Operating Profit before tax, Profit before tax,
Operational Capital Generation before tax, Total assets,
Shareholder Solvency II coverage ratio, Net Assets plus
CSM and Total Assets.
Total assets has been used as the
benchmark given the Parent
Company's primary purpose is to act as
a holding company and not to generate
operating profits. Accordingly, a profit
based measure is not relevant.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was between £10 million and £55 million. Certain components were audited to a
local statutory audit materiality that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 65% (2023: 65%) of overall materiality, amounting to £39 million (2023:
£39 million) for the Group financial statements and £67 million (2023: £68 million) for the Parent Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that an amount in the middle of our normal range was
appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £3 million
(Group audit) (2023: £3 million) and £5.20 million (Parent Company audit) (2023: £5.25 million) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.
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Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the going
concern basis of accounting included:
– Obtained the Directors’ going concern assessment and challenged the rationale for the downside scenarios adopted and
material assumptions made using our knowledge of the Group’s business performance, review of regulatory correspondence
and obtaining further corroborating evidence;
– Considered management’s assessment of the regulatory solvency coverage and liquidity position in the forward looking
scenarios which have been driven from the Group’s Own Risk and Solvency Assessment (ORSA);
– Agreed the Group Solvency II information to the draft unaudited Group Solvency II schedules prepared by management;
– Considered information obtained during the course of the audit and publicly available market information to identify any
evidence that would contradict management’s assessment of going concern; and
– Reviewed the disclosures included in the financial statements in relation to going concern, including the Basis of Preparation.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the
Parent Company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’
Report for the year ended 31 December 2024 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
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Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the Parent Company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as
other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement, included within the Directors’ Report is materially consistent with the financial statements and our
knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
– The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
– The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks
and an explanation of how these are being managed or mitigated;
– The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of any material uncertainties to the Group’s and Parent company’s
ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
– The directors’ explanation as to their assessment of the Group’s and Parent Company’s prospects, the period this assessment
covers and why the period is appropriate; and
– The directors’ statement as to whether they have a reasonable expectation that the Parent Company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group and Parent Company was substantially less
in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the financial statements and our knowledge and understanding of the Group and Parent
Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained during
the audit:
– The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the Group’s and Parent Company’s position, performance,
business model and strategy;
– The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems;
and
– The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Parent Company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The
directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
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Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to UK and European regulatory principles, such as those governed by the Prudential Regulation Authority (PRA)
and the Financial Conduct Authority (FCA), and we considered the extent to which non-compliance might have a material effect on
the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such
as Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and determined that the principal risks were related to management bias in
accounting estimates and judgmental areas of the financial statements as shown in our ‘Key audit matters’. The Group
engagement team shared this risk assessment with the component auditors so that they could include appropriate audit
procedures in response to such risks in their work. Audit procedures performed by the Group engagement team and/or
component auditors included:
– Attendance at Audit Committee and Joint Audit and Risk Committee meetings;
– Discussions with the Board, management, Internal Audit, management involved in the Risk and Compliance functions and Group
and Parent Company’s legal function, including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
– Reviewing relevant meeting minutes including those of the Board of Directors, Audit, Risk, Remuneration and Disclosure
Committees;
– Meeting with the PRA periodically and reading key correspondence with the PRA and the FCA, including those in relation to
compliance with laws and regulations;
– Reviewing the Group’s register of litigation and claims, Internal Audit reports, and compliance reports in so far as they related to
non-compliance with laws and regulations and fraud;
– Assessment of matters reported on the Group and Parent Company’s whistleblowing helpline and fraud register and the results
of management’s investigation of such matters;
– Evaluation and testing of the operating effectiveness of management’s key controls designed to prevent and detect
irregularities;
– Identifying and testing journal entries based on risk criteria;
– Testing of judgements and assumptions in subjective areas as set out in the key audit matters; and
– Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Parent Company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
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Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not obtained all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 25 May 2022 to audit the financial
statements for the year ended 31 December 2022 and subsequent financial periods. The period of total uninterrupted engagement
is three years, covering the years ended 31 December 2022 to 31 December 2024.
Other matter
The company is required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules to include these
financial statements in an annual financial report prepared under the structured digital format required by DTR 4.1.15R - 4.1.18R
and filed on the National Storage Mechanism of the Financial Conduct Authority. This auditors’ report provides no assurance over
whether the structured digital format annual financial report has been prepared in accordance with those requirements.
Mark Pugh (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
18 March 2025
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178
2024
2023
For the year ended 31 December
Note
£m
£m
Insurance revenue
4
4,095
3,887
Insurance service expenses
24.3.1
(2,971)
(2,834)
Net expenses from reinsurance contracts held
24.3.1
(28)
(95)
Insurance service result
1,096
958
Interest revenue from financial assets not measured at fair value through profit or loss (FVTPL)
5
683
672
Interest revenue from financial assets measured at FVTPL
5
2,666
2,446
Net change in investment contract liabilities without discretionary participation features
5
(461)
(700)
Net credit impairment (losses)/reversal
5
(15)
2
Other investment return
5
5,813
6,214
Investment return
8,686
8,634
Finance expenses from insurance contracts issued
5
(8,426)
(7,318)
Finance (expenses)/income from reinsurance contracts held
5
(10)
39
Net insurance finance expenses
(8,436)
(7,279)
Net insurance and investment result
1,346
2,313
Fee income
6
1,029
1,003
Other income
70
37
Administrative and other expenses
7
(2,566)
(2,241)
Finance costs
7
(121)
(160)
Movements in third party interest in consolidated funds
363
(226)
Share of profit from joint ventures and associates
14
24
23
Profit before tax
i
145
749
Tax charge attributable to policyholders’ returns
10
(477)
(328)
(Loss)/profit before tax attributable to equity holders
(332)
421
Total tax charge
(492)
(440)
Less tax charge attributable to policyholders’ returns
10
477
328
Tax charge attributable to equity holders
10
(15)
(112)
(Loss)/profit for the year
(347)
309
(Loss)/profit for the year:
Attributable to equity holders of M&G plc
(360)
297
Attributable to non-controlling interests
13
12
Total (loss)/profit for the year
(347)
309
Earnings per share:
Basic (pence per share)
11
(15.1)
12.7
Diluted (pence per share)
11
(15.1)
12.4
i
The profit before tax comprises the pre-tax result attributable to equity holders and an amount equal and opposite to the tax charge attributable to
policyholders’ returns. This is the formal measure of profit or loss before tax under IFRS, but it is not the result attributable to equity holders. This is
principally because the corporate taxes of the Group include taxes borne by policyholders. These amounts are required to be included in the tax charge of
the Company under IFRS. The tax charge attributable to policyholders’ returns is removed from the Group’s total profit before tax in arriving at the Group’s
(loss)/profit before tax attributable to equity holders. As the net of tax profits attributable to policyholders is zero, the Group’s pre-tax profit attributable to
policyholders is an amount equal and opposite to the tax charge attributable to policyholders included in the total tax charge.
The Notes on pages 185 to 330 are an integral part of these consolidated financial statements.
M&G plc Annual Report and Accounts 2024
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Consolidated financial statements
Consolidated income statement
179
2024
2023
For the year ended 31 December
Note
£m
£m
(Loss)/profit for the year
(347)
309
Items that may be reclassified subsequently to profit or loss:
Exchange movements arising on foreign operations
i
(16)
(12)
Other comprehensive loss on items that may be reclassified subsequently to profit or loss
(16)
(12)
Items that will not be reclassified to profit or loss:
Gain/(loss) on remeasurement of defined benefit pension scheme
17
52
(124)
Tax on remeasurement of defined benefit pension scheme
10
(13)
28
Other comprehensive income/(loss) on items that will not be reclassified to profit or loss
39
(96)
Other comprehensive income/(loss) for the year, net of related tax
23
(108)
Total comprehensive (loss)/income for the year
(324)
201
Attributable to equity holders of M&G plc
(336)
193
Attributable to non-controlling interests
12
8
Total comprehensive (loss)/income for the year
(324)
201
i
Of the exchange movements arising on foreign operations, £15m loss is attributable to equity holders of M&G plc (2023: £8m loss) and £1m loss is
attributable to non-controlling interests (2023: £4m loss).
The Notes on pages 185 to 330 are an integral part of these consolidated financial statements.
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Consolidated financial statements continued
Consolidated statement of comprehensive income
180
Restated
i
31 December
2024
31 December
2023
Note
£m
£m
Assets
Goodwill and intangible assets
13
1,714
1,815
Deferred acquisition costs
19
23
Defined benefit pension asset
17
45
19
Investment in joint ventures and associates accounted for using the equity method
14
284
287
Property, plant and equipment
15
1,654
2,065
Investment property
16
14,385
15,422
Deferred tax assets
10
487
443
Insurance contract assets
24
39
44
Reinsurance contract assets
24
1,043
1,099
Equity securities and pooled investment funds
18
64,890
66,248
Loans
18
4,135
3,908
Debt securities
18
69,775
70,683
Derivative assets
18
1,085
1,693
Deposits
18
15,794
16,324
Current tax assets
10
65
67
Accrued investment income and other debtors
19
2,506
2,536
Assets held for sale
ii
1,466
1,356
Cash and cash equivalents
20
4,838
5,148
Total assets
184,224
189,180
Equity
Share capital
21
120
119
Share premium reserve
21
383
379
Shares held by employee benefit trust
22
(9)
(26)
Treasury shares
22
(6)
(21)
Retained earnings
14,435
15,223
Other reserves
23
(11,642)
(11,633)
Equity attributable to equity holders of M&G plc
3,281
4,041
Non-controlling interests
42
43
Total equity
3,323
4,084
Liabilities
Insurance contract liabilities
24
141,264
142,135
Reinsurance contract liabilities
24
280
357
Investment contract liabilities without discretionary participation features
25
12,144
12,535
Third party interest in consolidated funds
9,484
9,893
Subordinated liabilities and other borrowings
26
6,486
7,647
Defined benefit pension liability
17
258
294
Deferred tax liabilities
10
705
682
Lease liabilities
27
425
387
Current tax liabilities
10
81
97
Derivative liabilities
18
3,202
2,910
Other financial liabilities
18
1,018
1,186
Provisions
28
114
82
Accruals, deferred income and other liabilities
29
4,367
6,226
Liabilities held for sale
ii
1,073
665
Total liabilities
180,901
185,096
Total equity and liabilities
184,224
189,180
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, comparative amounts have been restated from
those previously reported. The restatement has had no impact on the consolidated income statement or net assets. See Note 1.1 for further information.
ii
Assets held for sale as at 31 December 2024 includes £92m (31 December 2023: £138m) of seed capital classified as held for sale as it is expected to be divested
within 12 months and £468m of investment property (31 December 2023: £211m). Additionally £906m (31 December 2023: £1,007m) of assets held for sale and
£1,073m (31 December 2023: £665m) of liabilities held for sale are in relation to the Group’s consolidated infrastructure capital private equity vehicles.
The Notes on pages 185 to 330 are an integral part of these consolidated financial statements.
The consolidated financial statements on pages 179 to 330 were approved by the Board and signed on its behalf by the following Directors
on 18 March 2025:
Andrea Rossi
Kathryn McLeland
Group Chief Executive Officer
Chief Financial Officer
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Consolidated financial statements continued
Consolidated statement of financial position
181
Share
capital
Share
premium
Shares
held by
employee
benefit
trust
Treasury
shares
Retained
earnings
Other
reserves
Total equity
attributable
to equity
holders of
M&G plc
Non-
controlling
interests
Total
equity
Note
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 1 January 2024
119
379
(26)
(21) 15,223 (11,633)
4,041
43 4,084
Loss for the year
—
—
—
—
(360)
—
(360)
13
(347)
Other comprehensive income
for the year
23
—
—
—
—
39
(15)
24
(1)
23
Total comprehensive loss
for the year
—
—
—
—
(321)
(15)
(336)
12
(324)
Dividends paid to equity holders
of M&G plc
12
—
—
—
—
(468)
—
(468)
—
(468)
Dividends paid to non-controlling
interests
—
—
—
—
—
—
—
(13)
(13)
Proceeds from shares issued to
settle employee share option
schemes
21
—
4
—
—
—
—
4
—
4
Shares distributed by employee
trusts or from treasury shares
22
—
—
37
—
(37)
—
—
—
—
Vested employee share-based
payments
23
—
—
—
—
33
(33)
—
—
—
Expense recognised in respect of
share-based payments
23
—
—
—
—
—
40
40
—
40
Shares issued to, acquired by or
transferred to employee trusts
22
1
—
(20)
15
—
—
(4)
—
(4)
Tax effect of items recognised
directly in equity
23
—
—
—
—
5
(1)
4
—
4
Net increase/(decrease) in equity
1
4
17
15
(788)
(9)
(760)
(1)
(761)
As at 31 December 2024
120
383
(9)
(6) 14,435 (11,642)
3,281
42
3,323
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Consolidated statement of changes in equity
182
Share
capital
Share
premium
Shares
held by
employee
benefit
trust
Treasury
shares
Retained
earnings
Other
reserves
Total equity
attributable
to equity
holders of
M&G plc
Non-
controlling
interests
Total
equity
Note
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 1 January 2023
119
370
(70)
(47) 15,504 (11,613)
4,263
48
4,311
Profit for the year
—
—
—
—
297
—
297
12
309
Other comprehensive loss for the
year
23
—
—
—
—
(96)
(8)
(104)
(4)
(108)
Total comprehensive income
for the year
—
—
—
—
201
(8)
193
8
201
Dividends paid to equity holders
of M&G plc
12
—
—
—
—
(462)
—
(462)
—
(462)
Dividends paid to non-controlling
interests
—
—
—
—
—
—
—
(13)
(13)
Proceeds from shares issued to
settle employee share option
schemes
21
—
9
—
—
—
—
9
—
9
Shares distributed by employee
trusts or from treasury shares
22
—
—
71
4
(71)
—
4
—
4
Vested employee share-based
payments
23
—
—
—
—
42
(42)
—
—
—
Expense recognised in respect
of share-based payments
23
—
—
—
—
—
32
32
—
32
Shares acquired by and
transferred to employee trusts
22
—
—
(27)
22
—
—
(5)
—
(5)
Tax effect of items recognised
directly in equity
23
—
—
—
—
9
(2)
7
—
7
Net increase/(decrease)
in equity
—
9
44
26
(281)
(20)
(222)
(5)
(227)
As at 31 December 2023
119
379
(26)
(21) 15,223 (11,633)
4,041
43 4,084
The Notes on pages 185 to 330 are an integral part of these consolidated financial statements.
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Consolidated statement of changes in equity (continued)
183
Restated
i
2024
2023
For the year ended 31 December
Note
£m
£m
Cash flows from operating activities:
Profit before tax
145
749
Non-cash and other movements in operating assets and liabilities included in profit before tax:
Investments
4,167
852
Other non-investment and non-cash assets
837
509
Insurance and reinsurance contract liabilities
(930)
167
Investment contract liabilities
(370)
671
Other liabilities (including operational borrowings)
(3,041)
(976)
Interest income and expense and dividend income included in profit before tax
(4,773)
(5,149)
Other non-cash items
286
(100)
Operating cash items:
Interest receipts
3,312
3,086
Interest payments
(359)
(204)
Dividend receipts
1,917
2,364
Tax paid
ii
(514)
(250)
Net cash flows from operating activities
iii
677
1,719
Cash flows from investing activities:
Purchases of property, plant and equipment
(289)
(496)
Proceeds from disposal of property, plant and equipment
21
1
Net cash paid on acquisition of subsidiaries, joint ventures and associates
iv
(31)
(103)
Divestment of subsidiaries by consolidated private equity vehicles
v
451
105
Investment in subsidiaries by consolidated private equity vehicles
v
—
(110)
Net cash flows from investing activities
152
(603)
Cash flows from financing activities:
Interest paid
(188)
(189)
Lease capital repayments
(28)
(25)
Repurchase of subordinated debt
(450)
—
Proceeds from shares issued
21
5
9
Dividends paid to equity holders of M&G plc
12
(468)
(462)
Dividends paid to non-controlling interests
(13)
(13)
Net cash flows from financing activities
(1,142)
(680)
Net (decrease)/increase in cash and cash equivalents
(313)
436
Cash and cash equivalents at 1 January
5,148
4,739
Effect of exchange rate changes on cash and cash equivalents
3
(27)
Cash and cash equivalents at end of period
20
4,838
5,148
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, comparative amounts have been
restated from those previously reported. The restatement has had no impact on the consolidated income statement or profit for the year ended 31
December 2023 or total equity attributable to shareholders as at 31 December 2023. See Note 1.1 for further information.
ii
Tax paid for the year ended 31 December 2024 includes £299m (2023: £99m) paid on profits taxable at policyholder rather than equity holder rates.
iii
Cash flows in respect of other borrowings of the With-Profits Fund, which principally relate to consolidated investment funds, are included within cash
flows from operating activities.
iv
Net cash paid on acquisition of subsidiaries, joint ventures and associates consists of £25m (2023: £22m) of cash paid, net of £4m (2023: £nil) cash
acquired. Refer to Note 2.2 for further information on shareholder acquisitions made in the period. An additional £14m (2023: £81m) of cash paid, net of
£4m (2023: £nil) relates to the acquisition of subsidiaries, joint ventures and associates held by the With-Profits Fund.
v
Divestment/(investment) in subsidiaries by consolidated private equity vehicles represents the amount paid or received in relation to the purchase or sale
of underlying investee companies held by the Group’s consolidated private equity vehicles. As at 31 December 2024, £nil (2023: £110m) relates to
investments in these vehicles and £451m (2023: £105m) relates to divestment in these vehicles.
The Notes on pages 185 to 330 are an integral part of these consolidated financial statements.
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Consolidated financial statements continued
Consolidated statement of cash flows
184
1 Basis of preparation and material accounting policies
1.1 Basis of preparation
The consolidated financial statements for the year ended 31 December 2024 comprise the financial statements of M&G plc (‘the
Company’) and its subsidiaries (together referred to as ‘the Group’). The consolidated financial statements have been prepared in
accordance with UK-adopted international accounting standards (IAS) and the legal requirements of the Companies Act 2006. The
consolidated financial statements have been prepared under the historical cost basis except for investment property measured at
fair value, certain financial assets and financial liabilities (including derivative instruments) that are measured at fair value through
profit and loss (FVTPL), insurance contract liabilities that are measured in accordance with the requirements of IFRS 17: Insurance
contracts, and defined benefit assets and liabilities, measured at the fair value of plan assets less the present value of the defined
benefit obligations. Assets and disposal groups held for sale are stated at the lower of the previous carrying amount and fair value
less costs to sell.
The consolidated financial statements are stated in million pounds sterling, the Group’s presentation currency.
Restatement of prior period information
The comparative consolidated statement of financial position as at 31 December 2023 has been restated following a presentational
change in cash and borrowings in certain consolidated investment funds which were disclosed incorrectly in the prior period.
Negative cash balances in these funds were disclosed as overdraft positions, however it has been determined that this was
notional in nature and should have been offset with positive cash balances in the same funds.
The restatement has had no impact on the consolidated income statement or profit for the year ended 31 December 2023 or total
equity attributable to shareholders as at 31 December 2023.
The impact of the restatement on the consolidated statement of financial position is set out in the table below:
As at 31
December
2023 as
previously
reported
Adjustments
As at 31
December
2023
restated
1 January
2023 as
previously
reported
Adjustments
1 January
2023
restated
Note
£m
£m
£m
£m
£m
£m
Consolidated statement of financial position:
Assets:
Cash and cash equivalents
20
5,590
(442)
5,148
4,884
(145)
4,739
Other
184,032
— 184,032 186,274
— 186,274
Total assets
189,622
(442) 189,180 191,158
(145) 191,013
Liabilities:
Subordinated liabilities and other borrowings
26
8,089
(442)
7,647
7,537
(145)
7,392
Other
177,449
— 177,449 179,310
— 179,310
Total liabilities
185,538
(442) 185,096 186,847
(145) 186,702
In the consolidated statement of cash flows, Cash and cash equivalents at 1 January 2023 has been reduced by £145m and at 31
December 2023 by £442m. The movement in other liabilities, net cash flows from operating activities and net (decrease)/increase
in cash and cash equivalents have been adjusted by £297m.
Comparatives in the impacted notes to the consolidated financial statements have also been restated.
Going concern
The Directors have a reasonable expectation that the Group as a whole has adequate resources to continue in operational
existence for the foreseeable future and for a period of at least 12 months from the date of approval of the consolidated financial
statements.
To satisfy themselves of the appropriateness of the use of the going concern assumption in relation to the consolidated financial
statements, the Directors have considered the liquidity projections of the Group, including the impact of applying specific liquidity
stresses. The Directors also considered the ability of the Group to access external funding sources and the management actions
that could be used to manage liquidity.
In addition, the Directors also gave particular attention to the solvency projections of the Group under a base scenario and its
sensitivity to various individual economic stresses and tested the resilience of the balance sheet to adverse scenarios using
reverse stress testing.
The impact of the following individual stresses on solvency were considered as part of the assessment:
– 20% fall in equity prices;
– 20% fall in property prices;
– (50bps) parallel shift in nominal yields;
– 20% of the credit portfolio downgrading by one full letter; and
– +100bps spread widening (A-rated assets).
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Notes to the consolidated financial statements
185
1 Basis of preparation and material accounting policies (continued)
1.1 Basis of preparation (continued)
The scenarios considered as part of the assessment included a range of different scenarios (base, optimistic and severe
pessimistic) taking into account the plausible pathways that the global economy would take, its impact on consumer demand and
actions that central banks could take. We have also assessed the resilience of our financial position and the economic implications
resulting from a high inflationary and low growth environment (stagflation scenario) and the aftermath of a major climate event
(climate scenario).
The results of the assessment demonstrated the ability of the Group to meet all obligations, including payments to shareholders
and debt holders, and future business requirements for the foreseeable future. In addition, the assessment demonstrated that the
Group was able to remain above its regulatory solvency requirements in a stressed scenario.
For this reason, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements.
Presentation of risk and capital management disclosures
We have provided additional disclosures relating to the nature and extent of certain financial risks and capital management in the
Supplementary Information section of this report.
1.2 New accounting pronouncements
1.2.1 New accounting pronouncements adopted by the Group
The Group has adopted the following amendments to standards which became effective from 1 January 2024:
– Classification of Liabilities as Current or Non-current (Amendments to IAS 1), issued in January 2020;
– Lease Liability in a Sale and Leaseback (Amendments to IFRS 16), issued in September 2022;
– Non-current Liabilities with Covenants (Amendments to IAS 1), issued in October 2022; and
– Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7), issued in May 2023.
The above amendments to standards do not have a material effect on these consolidated financial statements.
1.2.2 New accounting pronouncements not yet effective
The following new accounting pronouncements have also been issued but are not yet effective or have not yet been adopted for
use in the UK:
IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18) – Issued in April 2024 and effective from 1 January 2027
IFRS 18 will replace IAS 1 Presentation of Financial Statements and introduces new requirements around:
– categories and subtotals to be used in the statement of profit or loss;
– specific disclosures for management-defined performance measures (MPMs); and
– location, aggregation and disaggregation of financial information.
IFRS 18 will require an entity to classify all income and expenses within its statement of profit or loss into one of five categories:
operating; investing; financing; income taxes; and discontinued operations. Entities will also be required to present subtotals and
totals for ‘operating profit or loss’, ‘profit or loss before financing and income taxes’ and ‘profit or loss’.
IFRS 18 introduces the concept of MPMs which are metrics defined from the statement of profit or loss and are used to
communicate management’s views on financial performance externally. In the context of the Group, this would apply to our
adjusted operating profit metric. IFRS 18 requires disclosure of information about all of an entity’s MPMs within a single note to the
financial statements and requires further disclosures on how the measure is calculated and a reconciliation to the most
comparable subtotal specified by IFRS 18.
IFRS 18 also provides guidance on the location of information in the primary financial statements and the notes. It also requires
aggregation and disaggregation of information to be performed with reference to similar and dissimilar characteristics.
The adoption of IFRS 18 will have a significant impact on how the Group’s income statement is presented and may potentially
impact disclosures on our alternative performance measures. The Group is currently assessing the impact of adopting this
standard.
IFRS 19 Subsidiaries without Public Accountability: Disclosures (IFRS 19) – Issued in May 2024 and effective from 1 January 2027
IFRS 19 allows eligible entities to elect to apply reduced disclosure requirements while still applying the recognition, measurement
and presentation requirements in other IFRS accounting standards. This standard does not have any impact on the Group's
consolidated financial statements.
Other amendments
Furthermore, the following amendments have been issued and are not yet effective:
– Amendments to the classification and measurement of financial instruments (Amendments to IFRS 9 and IFRS 7), issued in May
2024 and effective from 1 January 2026; and
– Lack of exchangeability (Amendments to IAS 21), issued in August 2023 and effective from 1 January 2025.
These amendments are not expected to have a material impact on the Group.
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186
1 Basis of preparation and material accounting policies (continued)
1.3 Judgements in applying accounting policies and sources of estimation uncertainty
A full list of the Group’s material accounting policies is provided in Note 1.5. The accounting policies adopted by the Group have not
changed materially from those applied in the Group’s Annual Report and Accounts for the year ended 31 December 2023. In
applying these accounting policies, the Group has made a number of key judgements which have a significant effect on the
amounts recognised in the consolidated financial statements. The impact of climate change has been considered when preparing
these consolidated financial statements, particularly in the context of our climate-related disclosures included on pages 64 to 81.
While climate change is a source of uncertainty, management has considered the potential impacts on these financial statements,
concluding that there is no significant risk of material adjustment to the carrying amounts of assets and liabilities within the next
financial year.
The following table sets out the basis of the accounting policy judgements, and references the associated accounting policy and
related note which both give further detail on the specific application.
Financial statement area
Key judgement
Accounting
policy
Note
Consolidation of
structured entities
IFRS 10 requires entities that the Group controls to be consolidated in the
consolidated financial statements. Structured entities are entities that have been
designed so that voting or similar rights are not the dominant factor in deciding
who controls the entity. Due to the nature of structured entities, judgement is
required to determine whether the Group controls and therefore consolidates
structured entities. Judgement is also required where certain seed capital
investments in structured entities are classified as held for sale investments, and
therefore not consolidated on a line-by-line basis.
1.5.1
30
Classification of
insurance and
investment contracts
IFRS 17 requires that contracts that transfer significant insurance risk are
accounted for as insurance contracts. Judgement is required to determine
whether contracts written by the Group transfer significant insurance risk, unless a
specific scope exception applies (eg equity release mortgages).
Judgement is also required in the case of certain investment contracts which
provide an additional benefit in addition to guaranteed benefits to determine
whether they meet the criteria to be considered as discretionary participation
features, and therefore accounted for under IFRS 17.
1.5.2
24
Contractual Service
Margin (CSM)
measurement model
IFRS 17 requires an assessment of whether contracts meet the conditions for
having direct participation features and when this is the case such contracts must
use the Variable Fee Approach to measure the CSM. For with-profit and unit-linked
contracts, judgement is required to assess whether the Group expects to pay to
the policyholder an amount equal to a substantial share of the fair value returns on
the underlying items; and whether the entity expects a substantial proportion of
any change in the amounts to be paid to the policyholder to vary with the change in
fair value of the underlying items. The assessment is carried out at the contract
level and judgement is also applied to determine the extent to which mutualisation
between contracts is allowed for.
1.5.2
24
Underlying items
Underlying items are items that determine some of the amounts payable to a
policyholder as part of their with-profit or unit-linked contract and therefore are a
component of the insurance contract or investment contracts with discretionary
participation features (DPF) liabilities. Judgement is required to define underlying
items for with-profits contracts that reflect the mutualisation between contracts
and how to split underlying items between current and future policyholders.
1.5.2
24
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Notes to the consolidated financial statements continued
187
1 Basis of preparation and material accounting policies (continued)
1.3 Judgements in applying accounting policies and sources of estimation uncertainty (continued)
Financial statement area
Key judgement
Accounting
policy
Note
Division of surplus
relating to the
With-Profits Fund
Judgement is required to determine the amount of surplus that should be divided
between current and future with-profits policyholders as well as with the Group
and the amount of surplus attributable solely to the Group.
1.5.2
24
Provision of insurance
contract services
The amount of CSM recognised in profit or loss in each reporting period is
determined by reference to coverage units, which represent the insurance
contract services provided in that period. Judgement is required to define the
services provided, and the relative weighting if these include both insurance and
investment services.
1.5.2
24
1.4 Sources of estimation uncertainty
The preparation of these consolidated financial statements requires the Group to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities.
The following table sets out the estimates and assumptions which have a significant risk of resulting in a material adjustment to
carrying value within the next financial year. Details of the nature of the estimate is provided in the related accounting policy and
details of the assumptions applied at the statement of financial position date are provided in the related note.
Financial statement asset
or liability
Key estimate and assumptions
Accounting
policy
Note
Insurance contract
liabilities
When measuring the insurance contract liabilities, a number of assumptions are
applied to estimate future amounts due to the policyholder. The areas where the
assumptions could have a material impact are:
– for with-profits contracts, the assumed future investment returns on the
backing assets, the assumptions used in determining the allowance for
persistency and maintenance expenses, the policyholders’ share of historic
and future surpluses, and the illiquidity premium in setting the discount rate;
and
– for annuity contracts, the assumed rates of policyholder mortality,
maintenance expenses, and the selection of the reference portfolio and
allowance for credit risk in setting the discount rate.
In addition, when measuring the insurance contract liabilities, a risk adjustment is
included. The assessment of the risk adjustment requires assumptions about the
compensation that the Group requires for bearing uncertainty about the amount
and timing of the cash flows that arises from non-financial risk, the most significant
of which is the assumed rates of the policyholder mortality for annuity contracts.
1.5.2
24, 32
Assets classified as
level 3 under the fair
value hierarchy
Determination of the fair value of financial assets classified as level 3 in the fair
value hierarchy involves the use of inputs which are not observable in the market
and hence require a high degree of estimation which could result in a significant
change in the valuation. This includes the determination of the internal credit rating
and the spread above risk free rate applied to value residential ground rent notes
that are impacted by the ongoing legislative uncertainty which may potentially
restricts future income on these assets.
1.5.5, 1.5.12
18, 31
Determination of
recoverable amount of
goodwill
Goodwill is assessed for impairment at least on an annual basis by comparing the
recoverable amount of each cash-generating unit or group of cash-generating
units to which goodwill has been allocated with its carrying value. Recoverable
amount is defined as the higher of fair value less costs to sell and the value in use
where the value in use is based on the present value of future cash flows. The
determination of the value in use requires the use of various assumptions around
future cash flows, future growth rates and appropriate discount rates based on the
risks associated with the cash-generating-unit or group of cash-generating units
which can have a material impact on the calculation.
1.5.15
13
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188
1 Basis of preparation and material accounting policies (continued)
1.4 Sources of estimation uncertainty (continued)
Financial statement asset
or liability
Key estimate and assumptions
Accounting
policy
Note
Defined benefit
pension liability
The defined benefit pension scheme liability is calculated using actuarial valuations
which incorporate a number of assumptions including discount rates, inflation
rates, and expected future mortality. Due to the long-term nature of the schemes,
the value of the pension scheme obligation is sensitive to these assumptions.
1.5.13
17
Valuation of intangibles
acquired at acquisition
Valuation of intangibles acquired as part of a business combination are based on
various assumptions around acquired business value and appropriate discount
rates which can have a material impact on the valuation.
1.5.16
13
Recognition of deferred
tax asset
IAS 12 requires deferred tax assets to be recognised to the extent that it is
probable that sufficient taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax credits and unused tax
losses can be utilised. Judgement is required to determine the extent to which
future taxable profits emerge and the corresponding period over which unused tax
credits and unused tax losses will be utilised.
1.5.14
10.2
1.5 Accounting policies
1.5.1 Basis of consolidation
The Group has control over an investee if all three of the following conditions are met:
– it has power over an investee;
– it is exposed to, or has rights to, variable returns from its involvement with the investee; and
– it has the ability to use its power over the investee to affect its own returns.
(i) Subsidiaries
Subsidiaries are those investees that the Group controls. Where the Group is deemed to control an entity, the entity is treated as a
subsidiary and its results, assets and liabilities are consolidated. Where the Group holds a minority share in an entity but does not
have control, joint control or significant influence over the entity, the investments are carried at FVTPL within financial investments
on the consolidated statement of financial position.
The Group performs a reassessment of consolidation whenever there is a change in the substance of the relationship between the
Group and an investee.
(ii) Joint ventures and associates
Joint ventures are joint arrangements arising from a contractual agreement whereby the Group and other investors have joint
control of the net assets of the arrangement. In these arrangements, the Group’s share of the underlying net assets may be lower
or higher than 50% but the terms of the relevant agreement make it clear that control is jointly exercised between the Group and
the third party, for example, where significant decisions required unanimous approval of all parties, or where all parties have equal
voting rights.
Associates are entities over which the Group has significant influence, but which it does not control. Generally, it is presumed that
the Group has significant influence if it holds between 20% and 50% of the voting rights of the entity.
Investments in associates and joint ventures held by the With-Profits Fund through investments, including venture capital
business, mutual funds and unit trusts, and certain directly held investments are accounted for at FVTPL. All other investments in
joint ventures and associates are accounted for using the equity method of accounting. Under the equity method, the Group’s
share of profit or loss of its joint ventures and associates is recognised in the income statement and its share of movements in
other comprehensive income is recognised in other comprehensive income.
(iii) Structured entities
Structured entities are those that have been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity. Voting rights relate to administrative tasks. Relevant activities are directed by means of contractual
arrangements. The Group invests in structured entities such as:
– Collective investment vehicles including Open-Ended Investment Companies (OEICs), Authorised Contractual Schemes (ACSs),
Luxembourg-domiciled Sociétés d’Investissement à Capital Variable (SICAVs) and unit trusts;
– Limited partnerships;
– Collateralised debt obligations;
– Mortgage-backed securities; and
– Similar asset-backed securities.
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189
1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.1 Basis of consolidation (continued)
Collective investment vehicles
The Group invests in OEICs, ACSs, SICAVs and unit trusts, which invest mainly in equities, bonds, cash and cash equivalents, and
properties.
The assessment of control over OEICs, ACSs, SICAVs and unit trusts requires judgement. In assessing control, the Group
determines whether it is acting as principal or agent. This includes an assessment of the scope of its decision-making authority,
including rights held by third parties, which may provide these parties substantive removal rights that may affect the Group’s ability
to direct the relevant activities and indicate that the Group does not have power.
In addition, the assessment considers the aggregate economic interest of the Group, which includes both direct holding and
expected management fees if the fund manager is a Group company, however, management fees in most cases forms an
immaterial part of the aggregate economic interest of the Group.
Holdings in such investments can fluctuate on a daily basis according to the participation of the Group and other investors in them.
As a result, in determining control, the Group looks at the trend of ownership over a longer period (rather than at a point in time) to
mitigate the impact of daily fluctuations which do not reflect the wider facts and circumstances of the Group’s involvement.
Consolidation assessment is performed in line with the following principles having taken into account substantial removal rights:
– where the Group manages the assets of the entity, and the aggregate of the Group’s ownership holding in the entity exceeds
50%, the Group is judged to have control over the entity;
– where the Group manages the assets of the entity, and the aggregate of the Group’s ownership holding in the entity is between
20% and 50%, the facts and circumstances of the Group’s involvement in the entity are considered, including the rights to any
fees earned by the asset manager from the entity, in forming a judgement as to whether the Group has control over the entity;
– where the Group manages the assets of the entity, and the aggregate of the Group’s ownership holding in the entity is less than
20%, the Group is judged to not have control over the entity; or
– where the assets of the entity are managed externally, an assessment is made of whether the Group has existing rights that give
it the ability to direct the current activities of the entity and therefore control the entity. In assessing the Group’s ability to direct
an entity, the Group considers its ability relative to other investors. The Group has a limited number of investments in externally
managed OEICs and unit trusts where it considers it has such ability.
Where the Group is deemed to control these entities, they are treated as subsidiaries and are consolidated, with the interests of
investors other than entities within the Group being classified as liabilities, presented as third party interest in consolidated funds.
Where the Group does not control these entities (as it is deemed to be acting as an agent), and they do not meet the definition of
associates, they are carried at FVTPL within equity securities and pooled investment funds on the consolidated statement of
financial position.
Where the Group initially sets up OEICs, ACSs, SICAVs and unit trusts as part of its operations through its investment management
business, and invests the initial seed capital which results in a significant holding resulting in control of the fund, the Group
assesses whether there is a formal plan in place to divest its holding to below the threshold triggering control within 12 months.
In this situation, the vehicle is not consolidated, but classified as held for sale and carried at FVTPL.
Limited partnerships
The Group invests in a number of limited partnerships, either directly or through unit trusts, through a mix of capital and loans.
These limited partnerships are managed by general partners, in which the Group holds equity.
Such interests in general partners and limited partnerships provide the Group with voting and similar rights to participate in the
governance framework of the relevant activities which the limited partnerships are engaged in. Accounting for the limited
partnerships (including underlying investees) as subsidiaries, joint ventures, associates or other financial investments depends on
the terms of each partnership agreement and the level of shareholdings in the general partners.
Other structured entities
The Group holds investments in mortgage-backed securities, collateralised debt obligations and similar asset-backed securities.
The Group consolidates the vehicles that hold the investments where the Group is deemed to control the vehicles. When assessing
control over the vehicles, the factors considered include the purpose and design of the vehicle, the Group’s exposure to the
variability of returns and the scope of the Group’s ability to direct the relevant activities of the vehicle, including any kick-out or
removal rights that are held by third parties. The outcome of the control assessment is dependent on the terms and conditions of
the respective individual arrangements, taking into account aggregate economic interest where relevant.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.1 Basis of consolidation (continued)
(iv) Qualifying partnerships
Entities consolidated by the Group include Qualifying Partnerships as defined under the UK Partnerships (Accounts) Regulations
2008 (the ‘Partnership Act’). Some of these limited partnerships have taken advantage of the exemption under regulation 7 of the
Partnerships Act from the financial statements requirements. This is under regulations 4 to 6, on the basis that these limited
partnerships are dealt with on a consolidated basis in these financial statements.
(v) Third party interests
Interests of parties other than the Group in entities which the Group controls are assessed to determine whether they should be
classified as financial liabilities or as non-controlling interests in equity on the consolidated statement of financial position. Puttable
third party interests such as units held by external investors in unit trusts are classified as financial liabilities. Third party interests in
private equity vehicles set up with finite lives are also classified as financial liabilities.
1.5.2 Insurance contracts
(i) Contracts within the scope of IFRS 17
An entity must apply IFRS 17 to determine the requirements for recognition, measurement, presentation and disclosure of:
– Insurance contracts (including reinsurance contracts issued);
– Reinsurance contracts held; and
– Investment contracts with discretionary participation features (DPF) issued, provided the entity also issues insurance contracts.
IFRS 17 defines insurance contracts as contracts under which one party (the issuer) accepts significant insurance risk from another
party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event)
adversely affects the policyholder.
Reinsurance contracts are insurance contracts issued by one entity (the reinsurer) to compensate another entity for claims arising
from one or more insurance contracts issued by that other entity (underlying contracts).
The Group judges that a contract transfers significant insurance risk if there is at least one scenario where the amounts that could
be payable under the contract represent 10% or more than the amounts payable if the insured event does not occur.
In addition to accepting insurance risk from the insurance contracts issued, the Group is exposed to financial risk from the
insurance and investment contracts it issues and reinsurance contracts it holds.
The Group’s reinsurance contracts are predominantly contracts held under which risks are transferred to an external third party.
The Group has one reinsurance contract under which it accepts risks from with-profits contracts issued by another insurer.
Insurance contracts can be issued and reinsurance contracts can be initiated by the Group, or they can be acquired in a business
combination or in a transfer of contracts that do not form a business. All references in these accounting policies to ‘insurance
contracts’ and ‘reinsurance contracts’ include contracts issued, initiated or acquired by the Group, unless otherwise stated.
Investment contracts with DPF have the legal form of insurance contracts, but do not transfer significant insurance risk and so are
classified as financial instruments. Nevertheless such contracts fall within the scope of IFRS 17.
An investment contract with DPF is a financial instrument that provides a particular investor with the contractual right to receive, as
a supplement to an amount not subject to the discretion of the issuer, additional amounts:
– that are expected to be a significant portion of the total contractual benefits;
– the timing or amount of which are contractually at the discretion of the issuer; and
– that are contractually based on:
– the returns on a specified pool of contracts or a specified type of contract;
– realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or
– the profit or loss of the entity or fund that issues the contract.
The Group judges that the additional discretionary benefits are significant when they are expected to be at least 5% of the total
contractual benefits.
The Group’s investment contracts with DPF comprise the with-profits business that do not transfer significant insurance risk. This
includes investments in the PruFund range of funds available to individual investors.
Investment contracts without DPF are not accounted for under IFRS 17 but instead fall within the scope of IFRS 9. For the Group
these primarily comprise unit-linked contracts that do not transfer significant insurance risk. Also within the scope of IFRS 9 are
contracts issued to corporate bodies to facilitate investment in PruFund, which as a result of cancellation rights included in those
contracts, are judged by the Group to not provide significant discretionary benefits.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(i) Contracts within the scope of IFRS 17 (continued)
If several insurance contracts are transacted with the same or a related counterparty and the Group assesses that the contracts
are designed to achieve an overall commercial effect, the contracts are combined in order to report the substance of the
transactions. This includes instances where certain non-standard benefits covered by a bulk purchase annuity may be executed
through a separate legal contract for regulatory purposes but are accounted for as a single contract under IFRS 17.
Some investment contracts issued by the Group provide policyholders with the option to invest their premiums in both unit-linked
funds and with-profits funds (including access to PruFund). The Group accounts for such contracts as two separate in substance
contracts enabling the investment in with-profits and PruFund to be accounted for under IFRS 17 and the investment in unit-linked
funds to be accounted for under IFRS 9.
The Group has previously issued and still holds a book of equity release mortgages. These contracts contain a no negative equity
guarantee which ensures that, should the policyholder pass away or move into residential care during the term of the instrument
and the accrued loan value is in excess of the sale proceeds of the mortgaged property, then the policyholder’s beneficiaries would
not have to repay any excess. This feature has been assessed to consider whether it gives rise to insurance risk. The Group judges
that the equity release mortgages meet the definition of an insurance contract, but the compensation for insured events is limited
to the amount otherwise required to settle the policyholder’s obligation created by the contract. In this circumstance IFRS 17
permits the issuer of contracts to choose whether to account for these contracts under IFRS 17 or IFRS 9. The Group has opted to
account for these contracts under IFRS 9.
(ii) Separating components
At inception, the Group must identify and separate the following components from contracts within the scope of IFRS 17 and
account for the components as if they were stand-alone financial instruments:
– derivatives embedded in the contract whose economic characteristics and risks are not closely related to those of the host
contract, and where the component issued as a standalone contract is not itself a contract that falls within the scope of IFRS 17;
and
– distinct investment components other than investment components with DPF: ie investment components that are not highly
inter-related with the insurance components and for which contracts with equivalent terms are sold, or could be sold, separately
in the same market or the same jurisdiction.
After separating any financial instrument components, the Group must separate any promises to transfer to policyholders distinct
goods or services other than insurance coverage and investment services and account for them as separate contracts with
customers (ie these are accounted for under IFRS 15). A good or service is distinct if the policyholder can benefit from it either on
its own or with other resources that are readily available to the policyholder. A good or service is not distinct and is accounted for
together with the insurance component if the cash flows and risks associated with the good or service are highly inter-related with
the cash flows and risks associated with the insurance component, and the Group provides a significant level of service by
integrating the good or service with the insurance component.
The Group has assessed the contracts it has issued and no contracts were identified as containing embedded derivatives, distinct
investment components or distinct goods and non-insurance services that must be separated and accounted for under other IFRS
standards.
Certain contracts have been determined to contain non-distinct investment components, rights to a refund of premiums, and other
non-insurance components (ie amounts payable to a policyholder that are not contingent on the occurrence of an insured event)
which are not required to be separated from the host insurance contract but do require specific treatment under IFRS 17. These
payments are excluded from the value of insurance revenue and insurance service expenses presented in profit and loss.
Non-distinct investment components, rights to a refund of premiums, and other non-insurance components typically arise in
contracts where there is some form of surrender benefit payable at any time of the policyholder’s choosing. The Group has opted
as an accounting policy choice to consistently define the surrender value to be net of surrender charges or penalties when
determining the amounts to exclude from insurance revenue and insurance service expenses.
(iii) Level of aggregation
Insurance contracts
Insurance contracts issued are aggregated into groups for measurement purposes. Groups of insurance contracts are first
determined by identifying portfolios of insurance contracts, each comprising contracts subject to similar risks and managed
together.
The Group interprets that, when aggregating contracts by similar risk, all risks must be considered but ‘similar risks’ is not
interpreted to mean ‘identical risks’. The Group judges that an appropriate method is to aggregate contracts according to which of
the three risk categories of protection, longevity and investment is the dominant risk which the Group is exposed to from writing
the contract. These three categories have been chosen as they best represent the risks that the Group is exposed to without
unnecessary granularity and subdivision.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(iii) Level of aggregation (continued)
Insurance contracts (continued)
In aggregating contracts that are managed together, the Group considers the following factors:
– the existence of a common pool of assets backing the contracts;
– the approach to risk management, for example hedging strategies or the existence of reinsurance arrangements;
– for business in a with-profits fund, the approach to risk-bearing, profit-sharing and the application of discretion;
– the source of the business, eg UK or overseas; and
– the categorisation of contracts for the segmental reporting reported in the accounts or for internal management information.
Each portfolio is divided into a minimum of:
– a group of contracts that are onerous on initial recognition, if any;
– a group of contracts that at initial recognition have no significant possibility of becoming onerous subsequently, if any; and
– a group of the remaining contracts in the portfolio, if any.
The Group does not currently have any groups of contracts that fall into the category that on initial recognition have no significant
possibility of becoming onerous subsequently.
Each of these groups must then be further subdivided, if necessary to ensure that each group does not contain contracts that have
been issued more than one year apart.
For annuities, unisex pricing may be required under gender neutral pricing regulations, and may, for example, result in policies sold
to females being onerous and policies sold to males being non-onerous. As the other elements of the pricing basis are identical, the
difference in onerousness is solely due to the legal constraint. IFRS 17 permits such contracts to be included in the same group.
Reinsurance contracts held
Reinsurance contracts held are similarly aggregated into groups for measurement purposes by first identifying portfolios.
However, rather than dividing the portfolios into three groups based on profitability, the contracts are grouped according to
whether or not there is a net gain at initial recognition for a group, that is into a minimum of:
– a group of contracts for which there is a net gain on initial recognition, if any;
– a group of contracts for which, on initial recognition, there is no significant possibility of there being a net gain subsequently, if
any; and
– a group of the remaining contracts in the portfolio, if any.
As for groups of contracts issued, no group may contain contracts that have been issued more than one year apart and so the
groups must be further subdivided to meet this requirement as necessary.
The Group does not currently have any groups of contracts that fall into the category of, on initial recognition, having no significant
possibility of there being a net gain subsequently.
Some reinsurance contracts provide cover for underlying contracts that are included in different groups. However, the Group
concludes that the reinsurance contract’s legal form of a single contract reflects the substance of the Group’s contractual rights
and obligations, considering that the different covers lapse together and are not sold separately. As a result, the reinsurance
contract is not separated into multiple insurance components that relate to different underlying groups.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(iv) Recognition
A group of contracts issued by the Group is recognised from the earliest of:
– the beginning of the coverage period of the group (ie the period during which the Group provides services in respect of any
premiums within the boundaries of the contracts);
– when the first payment from a policyholder in the group becomes due or, if there is no contractual due date, when it is received
from a policyholder; and
– for a group of onerous contracts, when the group becomes onerous.
The Group is required to determine whether any contracts form a group of onerous contracts before the earlier of the first two
dates above if facts and circumstances indicate there is such a group.
An insurance contract acquired in a transfer of contracts or a business combination is recognised on the date of acquisition.
When the contract is recognised, it is added to an existing group of contracts or, if the contract does not qualify for inclusion in an
existing group, it forms a new group to which future contracts are added. Groups of contracts are established on initial recognition
and their composition is not revised once all contracts have been added to the group.
The recognition date of an investment contract with DPF is the date that the entity becomes party to the contract.
A group of reinsurance contracts held is recognised from the earlier of the following:
– the beginning of the coverage period of the group of reinsurance contracts held; and
– the date the Group recognises an onerous group of underlying insurance contracts, if the Group entered into the related
reinsurance contract held in the group of reinsurance contracts held at or before that date.
For groups of reinsurance contracts held that provide proportionate coverage, which for the Group consists of quota share
reinsurance contracts, recognition is delayed until the date that any underlying insurance contract is initially recognised, if that date
is later than the beginning of the coverage period of the group of reinsurance contracts held.
Reinsurance contracts that are acquired are recognised from the date of acquisition.
(v) Onerous groups of contracts
The Group considers the following factors to identify if a group of contracts is onerous:
– the Group’s pricing frameworks;
– profit testing results; and
– calculations for individual contracts.
(vi) Contract boundary
The measurement of a group of contracts includes all of the future cash flows within the boundary of each contract in the group,
determined as follows:
Insurance contracts
Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting
period in which the Group can compel the policyholder to pay premiums or has a substantive obligation to provide services
(including insurance coverage and any investment services).
A substantive obligation to provide services ends when:
– the Group has the practical ability to reassess the risks of the particular policyholder and can set a price or level of benefits that
fully reflects those reassessed risks; or
– the Group has the practical ability to reassess the risks of the portfolio that contains the contract and can set a price or level of
benefits that fully reflects the risks of that portfolio, and the pricing of the premiums up to the reassessment date does not take
into account risks that relate to periods after the reassessment date.
The reassessment of risks considers only risks transferred from policyholders to the Group, which may include both insurance and
financial risks, but exclude lapse and expense risks.
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194
1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vi) Contract boundary (continued)
Investment contracts with DPF
Cash flows are within the contract boundary of an investment contract with DPF if they result from a substantive obligation of the
entity to deliver cash at a present or future date. The entity has no substantive obligation to deliver cash if it has the practical ability
to reassess the risk and, as a result, can set a price for the promise to deliver the cash that fully reflects the related risks.
Reinsurance contracts
Cash flows are within the contract boundary of a reinsurance contract if they arise from substantive rights and obligations that
exist during the reporting period in which the Group is compelled to pay amounts to the reinsurer or has a substantive right to
receive services from the reinsurer. A substantive right to receive services from the reinsurer ends when the reinsurer:
– has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects those
reassessed risks; or
– has a substantive right to terminate the coverage.
In assessing contract boundaries for insurance, investment with DPF and reinsurance contracts the Group makes the following
judgements:
Granularity of contract boundary assessment
The contract boundary is assessed at an individual contract level.
Practical ability to set a price or level of benefits that fully reflect the risks
Only policyholder risks (the insurance and financial risks that the insurance contract transfers from the policyholder to the Group)
are considered when assessing the Group’s ability to set a price or level of benefits that fully reflects the risks. Individual
components of a single insurance contract are assessed separately, and the full insurance contract is subject to the same single
boundary which is the longest of the individual components.
The Group considers the practical ability to set a price or level of benefits that fully reflects the risks only exists where the Group is
not prevented from setting the same price it would for a new contract with the same characteristics. In addition to the constraints
that apply in relation to new business, constraints on the Group’s ability to set a price or level of benefits that fully reflects the risks
also include wider market competitiveness and commercial considerations and contractual, legal or regulatory restrictions.
The constraints must have commercial substance to bind the Group, where commercial substance is defined as having a
‘discernible effect on the economics of the transaction’.
Right to terminate the contract
Policyholder behaviour is not relevant in assessing whether a contract binds the Group. The Group includes, within the fulfilment
cash flows, the probability-weighted expectation of contract terminations, including allowance for policyholder behaviour.
Adding insurance coverage
Where there is an option to add insurance coverage to the same contract at a future date, then the cash flows arising from the
option will only fall outside the contract boundary if the Group has the practical ability to fully reassess the risks for the entire
contract (including the option) at the point the option is exercised.
Frequency of assessment
The assessment of the contract boundary is performed and reassessed to include the effect of changes in circumstances on the
entity’s substantive rights and obligations.
Treatment of non-contractual premium top-ups for accumulating with-profits and PruFund range of funds
The Group judges that, on initial recognition of an accumulating with-profits contract or PruFund range of funds contract, it has no
substantive right to any profits associated with future non-contractual premiums and no substantive obligations. Therefore future
non-contractual premiums are considered to be outside the contract boundary of the original contract. Non-contractual top-up
premiums for these contracts are recognised from the date of payment and are reported as new business in the year of payment.
(vii) Measurement - insurance contracts (initial measurement)
On initial recognition, the Group measures a group of insurance contracts as the total of:
– the fulfilment cash flows, which comprise estimates of future cash flows, adjusted to reflect the time value of money and the
associated financial risks, and a risk adjustment for non-financial risk; and
– the Contractual Service Margin (CSM).
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement - insurance contracts (initial measurement) (continued)
Estimates of future cash flows
The estimated future cash flows are an explicit, unbiased and probability-weighted estimate (ie expected value) of the present
value of the future cash outflows minus the present value of the future cash inflows that will arise as the entity fulfils insurance
contracts. For most contracts the cash inflows and outflows primarily consist of premiums, claims and costs relating to the
fulfilment of the contracts.
The With-Profits Fund contains surplus assets that have accumulated from a number of sources over a long period. Surpluses may
continue to arise, for example if the amounts charged to policies exceed the costs they are intended to cover. These surpluses
accrue to the With-Profits Fund and can be utilised to meet deficits arising on other with-profits contracts or to enhance the
benefits payable to current or future policyholders. The expression ‘mutualisation’ is used to refer to the feature whereby the cash
flows of some contracts may affect or be affected by the cash flows of other contracts.
This feature of the With-Profits Fund is recognised under IFRS 17 through:
– Adjustments to the estimated future cash flows of each with-profits group of insurance contracts to reflect the policyholders’
share of the future surpluses/deficits that are expected to emerge from that group of insurance contracts.
– A liability that is separate to the liabilities for the groups of insurance contracts that reflects the additional amounts expected to
be paid to current or future policyholders (in accordance with paragraph B71 of IFRS 17).
Estimating the policyholders’ share of the surplus assets is an area requiring significant judgement.
IFRS 17 requires that only costs that are directly attributable to fulfilling the insurance contracts are included in the cash flows.
Management considers that the majority of the expenses incurred in relation to contracts within the scope of IFRS 17 meet this
requirement. Examples of costs that would typically be excluded are those relating to corporate restructuring, brand marketing,
and regulatory failings.
IFRS 17 requires that cash flows within the contract boundary include costs that the entity will incur in providing an investment
activity to enhance benefits for the policyholder. The Group’s interpretation is that the Investment Management Expenses (IMEs)
incurred on assets backing the fulfilment cash flows are included in the fulfilment cash flows for the majority of business, with the
exception of non-profit protection contracts. This is on the basis of the effect of the Group’s investment activities and expected
investment returns on the benefits payable, even if the benefits are contractually fixed at inception (as for annuity contracts). If the
Group were to invest the premiums received for annuity contracts in less risky asset classes, a lower level of benefits would then
be offered for the same premiums. Therefore, the benefits to the policyholder if an insured event occurs are enhanced by the
investment activities performed, and so the associated expenses are included within the fulfilment cash flows.
Where there are cash flows between different components of the reporting entity (such as policyholder funds and shareholder
funds) IFRS 17 requires that these are not included when estimating the cash flows that will arise as the entity fulfils an existing
insurance contract, provided these cash flows do not change the amount that will be paid to the policyholders.
The Group’s interpretation is that expenses will reflect the costs incurred by the Group, which may differ from the internal charges
to companies within the Group.
The cash flows of a group of insurance contracts do not reflect the Group’s non-performance risk.
Discount rates
Cash flows are discounted using risk-free yield curves adjusted to reflect the liquidity characteristics of the contracts.
The Group determines the adjustment for illiquidity using either a top-down or a bottom-up approach.
Under the top-down approach a yield curve that reflects the current market rates of return implicit in a fair value measurement of a
reference portfolio of assets is adjusted to eliminate any factors that are not relevant to the insurance contracts, such as cash flow
mismatching and credit risk. There is no requirement to adjust the yield curve for differences in the liquidity characteristics of the
insurance contracts and the reference portfolio. Judgement is required to choose an appropriate reference portfolio and to
determine the element of the yield on the portfolio that is attributable to factors not relevant to the insurance contracts.
Under the bottom-up approach a liquid risk-free yield curve is increased to reflect the differences between the liquidity
characteristics of the financial instruments that underlie the risk-free rates observed in the market and the liquidity characteristics
of the insurance contracts. Judgement is required to determine the illiquidity premium.
The Group applies the top-down approach for non-profit annuity contracts and the bottom-up approach for all other contracts,
including with-profits.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement - insurance contracts (initial measurement) (continued)
Discount rates (continued)
The reference portfolios chosen for non-profit annuities are the Assigned Portfolios used for the Solvency II Matching Adjustment.
These are considered to be suitable as reference portfolios for IFRS 17 reporting because their objective is to closely match the
liability cash flows and there is strong governance around their management.
The largest adjustment made to reference portfolio yield is in relation to credit risk. IFRS 17 is not prescriptive as to how the
adjustment for credit risk is determined other than that it should reflect market risk premiums for credit risk. The Group continues
to calculate the credit risk adjustment using the same approach previously used for IFRS 4 reporting. This methodology is
considered appropriate for IFRS 17 reporting as it incorporates allowances for expected and unexpected credit events, including
internal and external views on the outlook for credit risk, and considers the relationship between credit risk and yield spreads.
For with-profits contracts the illiquidity premium is derived from a portfolio of fixed interest assets, comprising highly liquid
government bonds and less liquid corporate bonds, that have similar characteristics and duration to the liabilities. The illiquidity
premium for this portfolio is determined as the spread over risk-free rates less an allowance for credit risk. A weighting is then
applied to this premium to reflect the relative liquidity characteristics of the with-profits contracts.
Risk adjustment for non-financial risk
The risk adjustment for non-financial risk for a group of insurance contracts, determined separately from the other estimates, is the
compensation that the Group requires for bearing uncertainty about the amount and timing of the cash flows that arises from non-
financial risk, such as insurance risk, expense risk and lapse risk.
For all lines of business, the Group uses a confidence level technique under which the target confidence level is determined by
consideration of the Group’s pricing framework for insurance contracts issued and the prices at which the Group has previously
transacted reinsurance contracts held. The target confidence level is translated into product-specific non-financial assumptions by
reference to the Group’s view of the likely risk distributions of non-financial risk events, which have a time horizon of one year. The
risk adjustment for non-financial risk is determined as the increase in the discounted value of the future cash flows from using
these assumptions instead of unbiased non-financial assumptions.
There is significant overlap in the risks considered between IFRS 17 and Solvency II reporting. The IFRS 17 risk adjustment does not
include financial risks or non-financial risks that do not arise from insurance contracts. The majority of the risk adjustment relates to
the assumed rates of policyholder mortality for annuity contracts. Lapse risk is also a significant risk factor.
The risk adjustment reflects the impact of diversification of non-financial risks within each entity in the Group but not diversification
of risks between entities. The risk adjustment is calculated separately gross of reinsurance and for reinsurance contracts held.
For reinsurance contracts held, the risk adjustment represents the amount of risk being transferred by the Group to the reinsurer.
The same approach is used to determine the risk adjustment, ie as the difference in the discounted value of future cash flows
between using best estimate assumptions and assumptions calibrated to the required confidence level.
CSM
The CSM of a group of insurance contracts represents the unearned profit that the Group will recognise as it provides services
under those contracts. On initial recognition of a group of insurance contracts, if the total of (a) the fulfilment cash flows, (b) any
cash flows arising at that date and (c) any amount arising from the derecognition of any assets or liabilities previously recognised
for cash flows related to the group is a net inflow, then the group is not onerous. In this case, the CSM is measured as the value of
the net inflow, which results in no income or expenses arising on initial recognition.
For groups of contracts acquired in a transfer of contracts or a business combination, the consideration received for the contracts
is included in the fulfilment cash flows as a proxy for the premiums received at the date of acquisition. In a business combination,
the consideration received is the fair value of the contracts at that date.
If the total is a net outflow, then the group is onerous. In this case, the net outflow is recognised as a loss in profit or loss, or as an
adjustment to goodwill or a gain on a bargain purchase if the contracts are acquired in a business combination. A loss component
is created to depict the amount of the net outflow, which determines the amounts that are subsequently presented in profit or loss
as reversals of losses on onerous contracts and are excluded from insurance revenue.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement - insurance contracts (subsequent measurement)
The carrying amount of a group of insurance contracts at each reporting date is the sum of the liability for remaining coverage and
the liability for incurred claims. The liability for remaining coverage comprises (a) the fulfilment cash flows that relate to services
that will be provided under the contracts in future periods and (b) any remaining CSM at that date. The liability for incurred claims
includes the fulfilment cash flows for incurred claims and expenses that have not yet been paid, including claims that have been
incurred but not yet reported.
The fulfilment cash flows of groups of insurance contracts are measured at the reporting date using current estimates of future
cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk.
The method for calculating the CSM for a group of contracts subsequent to initial recognition of the group depends on whether the
group consists of contracts that are with or without direct participation features.
A contract within the scope of IFRS 17 is considered to have direct participation features if at inception:
a. the contractual terms specify that the policyholder participates in a share of a clearly identified pool of underlying items;
b. the entity expects to pay to the policyholder an amount equal to a substantial share of the fair value returns on the underlying
items; and
c. the entity expects a substantial proportion of any change in the amounts to be paid to the policyholder to vary with the change in
fair value of the underlying items.
Conversely all contracts that do not meet the definition of being with direct participation features at inception are contracts
without direct participation features.
Contracts must be individually assessed to determine whether they are with direct participation features and once classified they
are not reassessed unless the contract is modified.
Where contracts are subject to mutualisation, criteria (b) and (c) are assessed allowing for the impact of mutualisation.
The Group’s contracts with direct participation features comprise all of the with-profits business and unit-linked contracts
accounted for under IFRS 17.
All of the Group’s other business that is within the scope of IFRS 17 are contracts without direct participation features. In particular
IFRS 17 prescribes that reinsurance contracts, held or issued, can only be contracts without direct participation features.
Underlying items
The underlying items are items that determine some of the amounts payable to a policyholder. Underlying items can comprise any
items, for example, a reference portfolio of assets, the net assets of the entity, or a specified subset of the net assets of the entity.
For in-force with-profits contracts the Group defines the underlying items to be the assets backing asset shares (which are the
accumulated value of all items of income and charges for various costs) and, where applicable, the assets backing the amounts
expected to be added to asset shares in the future, for example to reflect miscellaneous surplus that has arisen (such as from some
non-profit business written in the With-Profits Fund).
A liability, that is separate to the liabilities for the in-force with-profits contracts (in accordance with paragraph B71 of IFRS 17), is
held in the With-Profits Fund that reflects the additional amounts expected to be paid to current or future policyholders. The Group
defines the underlying items for these benefits to be:
– the entirety of the assets in the With-Profits Fund;
– less: the underlying items of the in-force with-profits contracts;
– less: the assets held to meet other liabilities of the With-Profits Fund, for example for non-profit contracts.
For unit-linked contracts the Group defines the underlying items to be the assets backing the units allocated to all contracts in the
unit of account (the ‘unit fund’). For contracts where actuarial funding is used the underlying items are defined as the funded value
of units, that is the face value of units multiplied by the actuarial funding factor.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement - insurance contracts (subsequent measurement) (continued)
Insurance contracts without direct participation features
For insurance contracts without direct participation features, the carrying amount of the CSM subsequent to initial recognition is
calculated using the General Measurement Model (GMM). Applying GMM, the carrying amount of the CSM at each reporting date
is the carrying amount at the start of the reporting period, adjusted for:
– the effect of any new contracts that are added to the group in the reporting period;
– interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates determined on
initial recognition;
– changes in fulfilment cash flows that relate to future service, except to the extent that:
– any increases in the fulfilment cash flows exceed the carrying amount of the CSM, in which case the excess is recognised as a
loss in profit or loss and creates a loss component; or
– any decreases in the fulfilment cash flows are allocated to the loss component;
– the effect of any currency exchange differences on the CSM; and
– the amount recognised as insurance revenue because of the services provided in the reporting period.
Changes in fulfilment cash flows that relate to future service comprise:
– experience adjustments arising from premiums received in the reporting period that relate to future services and related cash
flows, measured at the discount rates determined on initial recognition;
– changes in estimates of the present value of future cash flows in the liability for remaining coverage, measured at the discount
rates determined on initial recognition, except for changes that arise from the effects of the time value of money, financial risk
and changes therein;
– differences between (a) any investment component expected to become payable in the reporting period, determined as the
payment expected at the start of the reporting period plus any insurance finance income or expenses related to that expected
payment before it becomes payable; and (b) the actual amount that becomes payable in the reporting period; and
– changes in the risk adjustment for non-financial risk that relate to future services.
A key aspect of GMM is that adjustments to the CSM resulting from changes to the present value of future cash flows must be
measured using the discount rate that applied at inception of the group of contracts. However, the standard does not explicitly
state whether this is intended to extend to all financial assumptions. The Group’s interpretation is that all financial assumptions
must be set at inception but are only ‘locked-in’ for future years, therefore the estimates of cash flows up to the measurement date
reflect the effect of actual historical financial risk experience. For example, for index-linked annuities the estimated future cash
flows reflect the actual inflationary increases that have been added to benefits since inception rather than the locked-in assumed
inflationary increases.
After recognising a loss on an onerous group of insurance contracts, specified fulfilment cash flows must be allocated on a
systematic basis between the loss component of the liability for remaining coverage and the liability for remaining coverage
excluding the loss component. For this purpose, the proportion allocated to the loss component is determined as the ratio of the
amount of the loss component to the discounted value of the future cash outflows plus the risk adjustment for non-financial risk.
Insurance contracts with direct participation features
Direct participating contracts are contracts under which the Group’s obligation to the policyholder is the net of:
– the obligation to pay the policyholder an amount equal to the fair value of the underlying items; and
– a variable fee in exchange for future services provided by the contracts, being the amount of the Group’s share of the fair value of
the underlying items less fulfilment cash flows that do not vary based on the returns on underlying items. The Group provides
investment services under these contracts by promising an investment return based on underlying items, in addition to
insurance coverage.
In respect of the variable fee for the Group’s in-force with-profits contracts, the Group’s share of the fair value of the underlying
items consists of:
– shareholder transfers, gross of tax; and
– the Group’s share of the excess of charges and deductions taken from the asset share (such as annual management charges or
surrender penalties) over shareholder transfers, gross of tax, and costs that vary directly with the underlying items.
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199
1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement - insurance contracts (subsequent measurement) (continued)
Insurance contracts with direct participation features (continued)
The fulfilment cash flows that do not vary based on the returns of the underlying items are:
– the Group’s share of amounts that are expressed as a monetary amount, such as administration expenses, policy fees and the
risk adjustment for non-financial risk. For certain types of cost, such as investment management expenses and additional death
benefits in excess of the asset share, some costs vary directly with the underlying items and others do not. Despite this
difference, the whole amount of these types of cost is included in the fulfilment cash flows that do not vary based on the returns
of the underlying items.
– less the fee margin charged by the Group’s asset managers for managing the investments backing the with-profits contracts.
There is no variable fee or CSM in relation to the additional amounts expected to be paid to current or future policyholders (that are
recognised in accordance with paragraph B71 of IFRS 17).
In respect of the variable fee for the Group’s unit-linked contracts, the Group’s share of the fair value of the underlying items
consists of charges and deductions taken from the unit fund (such as annual management charges or surrender penalties), less
costs that vary directly with the underlying items. The fulfilment cash flows that do not vary based on the returns of the underlying
items are amounts that are expressed as a monetary amount, such as administration expenses, policy fees and the risk adjustment
for non-financial risk. For certain types of cost, such as investment management expenses and additional death benefits in excess
of the unit fund, some costs vary directly with the underlying items and others do not. The whole amount of these types of cost is
included in the fulfilment cash flows that do not vary based on the returns of the underlying items.
For insurance contracts with direct participation features, the carrying amount of the CSM subsequent to initial recognition is
calculated using the Variable Fee Approach (VFA). When measuring a group of direct participating contracts, the Group adjusts
the fulfilment cash flows by the whole of the change in the obligation to pay policyholders an amount equal to the fair value of the
underlying items. These changes do not relate to future services and are recognised in profit or loss. The Group then adjusts any
CSM for changes in the amount of the Group’s share of the fair value of the underlying items, which relate to future services, as
explained below.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted for:
– the CSM of any new contracts that are added to the group in the reporting period;
– the change in the amount of the Group’s share of the fair value of the underlying items and changes in fulfilment cash flows that
relate to future services, except to the extent that:
– a decrease in the amount of the Group's share of the fair value of the underlying items, or an increase in the fulfilment cash
flows that relate to future services, exceeds the carrying amount of the CSM, giving rise to a loss in profit or loss (included in
insurance service expenses) and creating a loss component; or
– an increase in the amount of the Group’s share of the fair value of the underlying items, or a decrease in the fulfilment cash
flows that relate to future services, is allocated to the loss component;
– the effect of any currency exchange differences on the CSM; and
– the amount recognised as insurance revenue because of the services provided in the reporting period.
Changes in fulfilment cash flows that relate to future services include the changes relating to future services specified above for
contracts without direct participation features (measured at current discount rates) and changes in the effect of the time value of
money and financial risks that do not arise from underlying items eg the effect of financial guarantees.
In determining the change in CSM attributable to the effect of the time value of money and financial risk on the Group’s share of the
fair value of the underlying items and the fulfilment cash flows, the Group has chosen not to use the risk mitigation option whereby
the changes would be adjusted to reflect the use of derivatives, non-derivative financial instruments or reinsurance contracts held
to mitigate the effect of financial risk.
After recognising a loss on an onerous group of insurance contracts, specified fulfilment cash flows must be allocated on a
systematic basis between the loss component of the liability for remaining coverage and the liability for remaining coverage
excluding the loss component. For this purpose, the proportion allocated to the loss component is determined as the ratio of the
amount of the loss component to the discounted value of the future cash outflows plus the risk adjustment for non-financial risk.
(vii) Measurement - reinsurance contracts
To measure a group of reinsurance contracts, the Group applies the same accounting policies as are applied to insurance contracts
without direct participation features, with the following modifications.
The carrying amount of a group of reinsurance contracts at each reporting date is the sum of the asset or liability for remaining
coverage and the asset or liability for incurred claims. The asset or liability for remaining coverage comprises: (a) the fulfilment cash
flows that relate to services that will be received under the contracts in future periods; and (b) any remaining CSM at that date.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(vii) Measurement - reinsurance contracts (continued)
The Group measures the estimates of the present value of future cash flows using assumptions that are consistent with those used
to measure the estimates of the present value of future cash flows for the underlying insurance contracts. The present value of the
future cash flows for reinsurance contracts held is also adjusted for any risk of non-performance by the reinsurer. The effect of the
non-performance risk of the reinsurer is assessed at each reporting date and the effect of changes in the non-performance risk is
recognised in profit or loss.
The risk adjustment for non-financial risk is the amount of risk being transferred by the Group to the reinsurer.
On initial recognition, the CSM of a group of reinsurance contracts represents a net cost or net gain on purchasing reinsurance. It is
measured as the amount of the total of: (a) the fulfilment cash flows; (b) any amount arising from the derecognition of any assets or
liabilities previously recognised for cash flows related to the group; (c) any cash flows arising at that date; and (d) any income
recognised in profit or loss because of onerous underlying contracts recognised at that date.
However, if any net cost on purchasing reinsurance coverage relates to insured events that occurred before the purchase of the
reinsurance, then the Group recognises the cost immediately in profit or loss as an expense.
The carrying amount of the CSM at each reporting date is the carrying amount at the start of the reporting period, adjusted for:
– the effect of any new contracts that are added to the group in the reporting period;
– interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates determined on
initial recognition;
– income recognised in profit or loss in the reporting period on initial recognition of an onerous group of underlying contracts;
– reversals of a loss-recovery component to the extent that they are not changes in the fulfilment cash flows of the group of
reinsurance contracts;
– changes in fulfilment cash flows that relate to future services, measured at the discount rates determined on initial recognition,
unless they result from changes in fulfilment cash flows allocated to a group of underlying contracts that do not adjust the CSM
for the group of underlying insurance contracts;
– the effect of any currency exchange differences on the CSM; and
– the amount recognised in profit or loss because of the services received in the reporting period.
Reinsurance of onerous underlying insurance contracts
The Group adjusts the CSM of the group to which a reinsurance contract belongs and as a result recognises income when it
recognises a loss on initial recognition of an onerous group of underlying contracts, if the reinsurance contract is entered into
before or at the same time as the onerous underlying contracts are recognised. The adjustment to the CSM is determined by
multiplying:
– the amount of the loss that relates to the underlying contracts; and
– the percentage of claims on the underlying contracts that the Group expects to recover from the reinsurance contracts.
If the reinsurance contract covers only some of the insurance contracts included in an onerous group of contracts, then the Group
determines the portion of losses recognised on the onerous group of contracts that relates to underlying contracts covered by the
reinsurance contract.
A loss-recovery component is created or adjusted for the group of reinsurance contracts to depict the adjustment to the CSM,
which determines the amounts that are subsequently presented in profit or loss as reversals of recoveries of losses from the
reinsurance contracts and are excluded from the allocation of reinsurance premiums paid.
(viii) Derecognition and contract modification
The Group derecognises a contract when it is extinguished – ie when the specified obligations in the contract expire or are
discharged or cancelled.
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201
1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(viii) Derecognition and contract modification (continued)
The Group also derecognises a contract if its terms are modified in a way that would have significantly changed the accounting for
the contract had the new terms always existed, in which case a new contract based on the modified terms is recognised. If a
contract modification does not result in derecognition, then the Group treats the changes in cash flows caused by the modification
as changes in estimates of fulfilment cash flows.
On derecognition of a contract from within a group of contracts:
– the fulfilment cash flows allocated to the group are adjusted to eliminate those that relate to the rights and obligations
derecognised;
– the CSM of the group is adjusted for the change in the fulfilment cash flows, except where such changes are allocated to a loss
component; and
– the number of coverage units for the expected remaining services is adjusted to reflect the coverage units derecognised from
the group (see ‘Release of the CSM’ below).
If a contract is derecognised because it is transferred to a third party, then the CSM is also adjusted for the premium charged by
the third party, unless the group is onerous.
If a contract is derecognised because its terms are modified, then the CSM is also adjusted for the premium that would have been
charged had the Group entered into a contract with the new contract’s terms at the date of modification, less any additional
premium charged for the modification. The new contract recognised is measured assuming that, at the date of modification, the
Group received the premium that it would have charged less any additional premium charged for the modification.
(ix) Value Share
During 2024, the Group completed its first Value Share transaction which comprises a traditional bulk purchase annuity (BPA) buy-
in arrangement and a separate reinsurance contract with a captive reinsurer that transfers some of the insurance and investment
risk back to the sponsor of the originating pension scheme. The reinsurance arrangement is collateralised to reduce the risk of
default. The Value Share arrangement is described further in Note 2.3.3.
The accounting policies for the BPA arrangement are the same as for other BPAs transacted by the Group and are set out in the
earlier sections in Note 1.5.2.
Application of the Group’s accounting policies to the reinsurance arrangement results in the following outcomes:
– the reinsurance contract contains significant insurance risk and so is classified as an insurance contract within the scope of IFRS
17. An insured event occurs when the value of the liabilities determined in accordance with a specified basis exceeds the value of
the assets backing the BPA liabilities. Such an event would trigger a claim payment from the reinsurer to the Group;
– the reinsurance contract is measured separately from the BPA contract; and
– the reinsurance contract is subject to different risks and is managed separately from other insurance and reinsurance contracts
and so is in a different portfolio of insurance contracts.
(x) Presentation
Portfolios of insurance contracts that are assets and those that are liabilities, and portfolios of reinsurance contracts that are assets
and those that are liabilities, are presented separately in the consolidated statement of financial position. Any assets or liabilities
recognised for cash flows arising before the recognition of the related group of contracts are included in the carrying amount of the
related portfolios of contracts.
The Group disaggregates amounts recognised in the statement of profit or loss into: (a) an insurance service result, comprising
insurance revenue and insurance service expenses; and (b) insurance finance income or expenses. The Group has elected to
disaggregate the change in the risk adjustment for non-financial risk between the insurance service result and insurance finance
income or expenses.
Income and expenses from reinsurance contracts are presented separately from income and expenses from insurance contracts.
Income and expenses from reinsurance contracts, other than insurance finance income or expenses, are presented on a net basis
as ‘net expenses from reinsurance contracts’ in the insurance service result.
The Group excludes from both insurance revenue and insurance service expenses any non-distinct investment components,
refunds of premiums and other non-insurance components. The Group has made the accounting policy choice that accounting
estimates made in interim financial statements are changed when applying IFRS 17 in the subsequent annual reporting period.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(x) Presentation (continued)
Insurance revenue
The Group recognises insurance revenue as it satisfies its performance obligations (ie as it provides services to groups of
insurance contracts). The insurance revenue relating to the services provided for each reporting period represents the total of the
changes in the liability for remaining coverage that relate to services for which the Group expects to receive consideration, and
comprises the following items:
– A release of the CSM, measured based on coverage units provided (see ‘Release of the CSM’ below);
– Changes in the risk adjustment for non-financial risk relating to current services;
– Policyholder tax; and
– Claims and other insurance service expenses incurred in the reporting period, measured as the amounts expected at the
beginning of the reporting period.
In addition, the Group allocates a portion of premiums that relate to recovering any insurance acquisition cash flows to each period
in a systematic way based on the passage of time. The Group recognises the allocated amount, adjusted for interest accretion at
the discount rates determined on initial recognition in relation to GMM business and current discount rate in relation to VFA
business, as insurance revenue and an equal amount as insurance service expenses.
Release of the CSM
The amount of the CSM of a group of insurance contracts that is recognised as insurance revenue in the reporting period is
determined by identifying the coverage units in the group, allocating the CSM remaining at the end of the reporting period (before
any allocation) equally to each coverage unit provided in the current reporting period and expected to be provided in future
reporting periods, and recognising in profit or loss the amount of the CSM allocated to coverage units provided in the current
reporting period. The number of coverage units is the quantity of services provided by the contracts in the group, determined by
considering for each contract the quantity of benefits provided and its expected coverage period. The coverage units are reviewed
and updated at each reporting date.
Services provided to insurance contracts include insurance coverage and, for all direct participating contracts, investment services
for managing underlying items on behalf of policyholders (investment-related services). In addition, insurance contracts without
direct participation features may also provide investment services for generating an investment return for the policyholder
(investment-return service), but only if:
– an investment component exists or the policyholder has a right to withdraw an amount (eg the policyholder’s right to receive a
surrender value on cancellation of a contract);
– the investment component or withdrawal amount is expected to include an investment return; and
– the Group expects to perform investment activities to generate that investment return.
The Group defines the coverage units for its contracts as follows:
– Insurance coverage (where the benefit is a single lump sum payment, eg term assurances): the sum assured.
– Insurance coverage (where the benefit is a regular income, eg annuities and income protection): the annualised amount of
income, as confirmed by the IFRS Interpretation Committee (IFRIC) in 2022.
– Investment-related service (with-profits and unit-linked): the asset share or unit fund value.
– Investment-return service (eg annuities): the transfer amount (for deferred annuities in the accumulation phase) or the payment
of annuity benefits within a guaranteed payment period.
The expected coverage period reflects expectations of lapses and cancellations of contracts, as well as the likelihood of insured
events occurring to the extent that they would affect the expected coverage period. The period of investment services ends no
later than the date on which all amounts due to current policyholders relating to those services have been paid.
Where a contract provides both insurance coverage and investment services, the Group must apply judgement to determine
appropriate weightings to assign to the two types of service in order to calculate the coverage units for each reporting period. The
weights are not locked-in at inception of the group of contracts and instead are reviewed and updated at each reporting date,
consistent with the treatment of the coverage units.
With-profits and unit-linked contracts are predominantly investment contracts but may additionally provide insurance coverage if
the contract provides a death benefit in excess of the underlying items. For these contracts weighted coverage units are
determined as the maximum of the asset share or unit fund and the amount payable on death.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.2 Insurance contracts (continued)
(x) Presentation (continued)
Release of the CSM (continued)
IFRS 17 does not provide explicit guidance as to whether the assumptions used to project the expected coverage units for future
reporting periods should be current or locked-in (ie those that applied at inception of the group of contracts). In addition, the
standard does not provide guidance as to whether the future coverage units should be discounted when determining the amount
of CSM to be released in the current reporting period.
The Group judges that in regards to the assumptions used for both GMM and VFA CSM it is appropriate to use current
assumptions to calculate the coverage units expected to be provided in the future. This is on the basis that it results in the most
accurate estimate of the service that will be provided in future.
In respect of discounting, the Group judges that it is appropriate to discount the future coverage units as that is consistent with the
CSM calculation allowing for the time value of money. The discounting approach follows the method applied in the CSM
calculation, namely coverage units for GMM CSM are discounted using the rates that applied at inception and coverage units for
VFA CSM are discounted using current rates.
Insurance service expenses
Insurance service expenses arising from insurance contracts are recognised in profit or loss as they are incurred. They exclude
repayments of non-distinct investment components, rights to a refund of premiums, and other non-insurance components, and
comprise the following items:
– Incurred claims and other insurance service expenses;
– Amortisation of insurance acquisition cash flows: This is equal to the amount of insurance revenue recognised in the reporting
period that relates to recovering insurance acquisition cash flows;
– Losses on onerous contracts and reversals of such losses;
– Adjustments to the liabilities for incurred claims that do not arise from the effects of the time value of money, financial risk and
changes therein; and
– Impairment losses on assets for insurance acquisition cash flows and reversals of such impairment losses.
Net expenses from reinsurance contracts
Net expenses from reinsurance contracts comprise an allocation of reinsurance premiums paid less amounts recovered from reinsurers.
The Group recognises an allocation of reinsurance premiums paid in profit or loss as it receives services under groups of
reinsurance contracts. The allocation of reinsurance premiums paid relating to services received for each period represents the
total of the changes in the asset for remaining coverage.
Coverage units for reinsurance contracts held are typically consistent with the underlying insurance contracts, adjusted for
differences in the services received from the reinsurer. For reinsurance contracts held that provide reinsurance of mortality or
morbidity risk, the coverage units are typically defined as the sum at risk reinsured. For longevity swap reinsurance arrangements
in relation to non-profit annuity business, the coverage units are based on the proportion of the actual annuity payments made on
the underlying contracts that the Group recovers from the reinsurer.
For a group of reinsurance contracts covering onerous underlying contracts, the Group establishes a loss-recovery component of
the asset for remaining coverage to depict the recovery of losses recognised:
– on recognition of onerous underlying contracts, if the reinsurance contract covering those contracts is entered into before or at
the same time as those contracts are recognised; and
– for changes in fulfilment cash flows of the group of reinsurance contracts relating to future services that result from changes in
fulfilment cash flows of the onerous underlying contracts.
The loss-recovery component determines the amounts that are subsequently presented in profit or loss as reversals of recoveries
of losses from the reinsurance contracts and are excluded from the allocation of reinsurance premiums paid. It is adjusted to reflect
changes in the loss component of the onerous group of underlying contracts, but it cannot exceed the portion of the loss
component of the onerous group of underlying contracts that the Group expects to recover from the reinsurance contracts.
Insurance finance income and expenses
Insurance finance income and expenses comprise changes in the carrying amounts of groups of insurance and reinsurance
contracts arising from the effects of the time value of money, financial risk and changes therein, unless any such changes for
groups of direct participating contracts are allocated to a loss component and included in insurance service expenses. They
include changes in the measurement of groups of contracts caused by changes in the value of underlying items (excluding
additions and withdrawals).
The Group has opted as an accounting policy choice to recognise all insurance finance income or expenses for the reporting period
in profit or loss and to not recognise any part of that income or expenses in other comprehensive income (OCI).
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.3 Investment contracts without discretionary participation features (DPF)
(i) Investment contracts without DPF
Investment contracts without DPF, such as unit-linked savings and similar contracts, are accounted for as financial instruments.
This treatment reflects the deposit nature of the arrangement, with premiums and claims reflected as deposits and withdrawals
and recognised directly on the consolidated statement of financial position as movements in the financial liability. These investment
contracts are classified as financial instruments and designated as FVTPL because the resulting liabilities are managed, and their
performance is evaluated on a fair value basis. For unit-linked contracts, the fair value of the liability is equal to the unit value
obligation.
(ii) Reinsurance
The Group enters into various reinsurance arrangements in relation to unit-linked savings contracts where there is no transfer of
significant insurance risk to the reinsurer (fund reinsurance). Such contracts are classified as a financial instruments and measured
at FVTPL and included with Equity securities and pooled investment funds in the consolidated statement of financial position.
(iii) Deferred acquisition costs
The Group incurs various costs in acquiring new investment contracts without DPF. The incremental, directly attributable
acquisition costs relating to these contracts are capitalised and amortised in line with the related revenue. If the contracts involve
upfront charges, this income is also deferred and amortised through the consolidated income statement, as the service is provided
in accordance with IFRS 15.
The recoverability of any deferred acquisition costs is reviewed at each reporting date, and to the extent that these are no longer
deemed recoverable from future revenue, the carrying value is written down to the recoverable amount and the related impairment
charge recorded in the consolidated income statement.
1.5.4 Business acquisitions
Business acquisitions are accounted for by applying the acquisition method of accounting, where the identifiable assets and
liabilities of the acquired business are recorded at fair value on the date of acquisition. The excess of the fair value of acquisition
consideration over the recorded value of the assets and liabilities of the acquired entity is recorded on the consolidated statement
of financial position as goodwill. Expenses related to acquiring new business are charged to the consolidated income statement in
the year in which they are incurred. Income and expenses of acquired entities are included in the consolidated income statement
from the date of acquisition.
Acquisitions of entities under common control are accounted for under merger accounting principles. Under merger accounting,
the results and statement of financial position for entities acquired are presented as if they had always been combined. Assets and
liabilities of the entities acquired are recorded at their carrying values and a fair value measurement is not undertaken. No new
goodwill is recognised and the differences between the cost of investment, which is its fair value, and the carrying value of assets
and liabilities acquired is recorded within equity.
1.5.5 Financial instruments
(i) Initial recognition
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for
managing the instruments. Financial instruments are initially recognised on the trade date measured at their fair value.
(ii) Measurement categories
The Group classifies all of its financial assets based on the business model for managing the assets and the asset’s contractual
terms. The categories include the following:
– Amortised cost
– FVTPL
(iii) Financial instruments measured at amortised cost
Financial instruments are held at amortised cost if both of the following conditions are met:
– The instruments are held within a business model with the objective of holding the instrument to collect the contractual cash
flows; and
– The contractual terms of the debt instrument give rise on specified dates to cash flows that are Solely Payments of Principal and
Interest (SPPI) on the principal amount outstanding.
The details of these conditions are outlined below.
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Notes to the consolidated financial statements continued
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(iv) Business model assessment
The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its
business objective.
The Group holds financial assets to generate returns and provide a capital base to provide for settlement of claims as they arise.
The Group considers the timing, amount and volatility of cash flow requirements to support insurance liability portfolios in
determining the business model for the assets as well as the potential to maximise return for shareholders and future business
development.
The Group’s business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios
that is based on observable factors such as:
– How the performance of the business model and the financial assets held within that business model are evaluated and reported
to the Group’s key management personnel;
– The risks that affect the performance of the business model (and the financial assets held within that business model) and, in
particular, the way those risks are managed; and
– How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets
managed or on the contractual cash flows collected).
The expected frequency, value and timing of asset sales are also important aspects of the Group’s assessment.
The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios
into account. If cash flows after initial recognition are realised in a way that is different from the Group’s original expectations, the
Group does not change the classification of the remaining financial assets held in that business.
(v) The SPPI test
As a second step of its classification process the Group assesses the contractual terms to identify whether they meet the SPPI test.
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the
life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).
The most significant elements of interest within a debt arrangement are typically the consideration for the time value of money and
credit risk. To make the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in
which the financial asset is denominated, and the period for which the interest rate is set.
(vi) Financial assets measured at FVTPL
Financial assets in this category are those that are managed in a fair value business model, or that have been designated by
management upon initial recognition, or are mandatorily required to be measured at fair value under IFRS 9. This category includes
debt instruments whose cash flow characteristics fail the SPPI criterion or are not held within a business model whose objective is
to collect contractual cash flows.
(vii) Subsequent measurement
After initial measurement, deposits, cash and accrued investment income and other debtors are measured at amortised cost, using
the Effective Interest Rate (EIR) method, less allowance for impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR. An allowance for Expected Credit Loss
(ECL) is recognised in investment return in the consolidated income statement when the investments are impaired.
Financial assets at FVTPL are recorded in the consolidated statement of financial position at fair value. Changes in fair value are
recorded in investment return in the consolidated income statement. Interest earned on assets mandatorily required to be
measured at FVTPL is recorded using contractual interest rates. Dividend income from equity instruments measured at FVTPL is
recorded in investment return in the consolidated income statement when the right to receive the payment has been established.
(viii) Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances
in which there has been a change in business model.
(ix) Derecognition other than for substantial modification
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
– The rights to receive cash flows from the asset have expired; or
– The Group has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either: (a) the Group has transferred
substantially all the risks and rewards of the asset; or (b) the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(ix) Derecognition other than for substantial modification (continued)
The Group considers control to be transferred if, and only if, the transferee has the practical ability to sell the asset in its entirety to
an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Group has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset,
the asset continues to be recognised only to the extent of the Group’s continuing involvement, in which case, the Group also
recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights
and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration the Group could be required to pay.
(x) Derecognition due to substantial modification of terms and conditions
The Group derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it
becomes a new instrument, with the difference recognised as a derecognition gain or loss.
When assessing whether or not to derecognise an instrument, among others, the Group considers the following factors:
– Change in currency of the debt instrument;
– Introduction of an equity feature;
– Change in counterparty; and
– If the modification is such that the instrument would no longer meet the SPPI criterion.
If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition.
Based on the change in cash flows discounted at the original EIR, the Group records a modification gain or loss.
(xi) Impairment of financial assets
The Group recognises an allowance for ECLs for all debt instruments not held at FVTPL. ECLs are based on the difference between
the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at the appropriate EIR.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months
(12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a
loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For certain instruments with an investment grade rating, the Group uses the low credit simplification and consequently, a
determination of significant increase in credit risk will not be required and the impairment loss would always be calculated based
on a 12-month ECL.
The Group also makes use of a simplified impairment approach for trade receivables and contract assets as allowed under IFRS 9.
Under this approach, impairment is calculated using a provisioning matrix that is based on days past due.
(xii) Write-offs
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.
(xiii) Recognition of interest income
Under IFRS 9, interest income is recorded using the EIR method for all financial assets measured at amortised cost. The EIR is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial asset or, when appropriate, a
shorter period, to the gross carrying amount of the financial asset.
The EIR (and therefore, the amortised cost of the financial asset) is calculated by taking into account transaction costs and any
discount or premium on acquisition of the financial asset as well as fees and costs that are an integral part of the EIR. The Group
recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected
life of the debt instrument.
If expectations of fixed rate financial assets’ cash flows are revised for reasons other than credit risk, the changes to future
contractual cash flows are discounted at the original EIR with a consequential adjustment to the carrying amount. The difference to
the previous carrying amount is booked as a positive or negative adjustment to the carrying amount of the financial asset in the
balance sheet with a corresponding increase or decrease in interest income.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.5 Financial instruments (continued)
(xiv) Interest and similar income
Interest income comprises amounts calculated using the EIR method for assets measured at amortised cost.
Other interest income includes interest on all financial assets measured at FVTPL, using the contractual interest rate.
The Group calculates interest income on financial assets, other than those considered credit-impaired, by applying the EIR to the
gross carrying amount of the financial asset.
(xv) Determination of fair value
The Group uses current bid prices to value its investments with quoted prices. Actively traded investments without quoted prices
are valued using prices provided by third parties. Financial assets measured at fair value are classified into a three-level hierarchy
as described in Note 31.
If the market for a financial investment of the Group is not active, the fair value is determined using valuation techniques. The Group
establishes fair value for these financial investments by using quotations from independent third parties, such as brokers or pricing
services, or by using internally developed pricing models. Priority is given to publicly available prices from independent sources
when available, but overall the source of pricing and/or the valuation technique is chosen with the objective of arriving at a fair
value measurement, which reflects the price at which an orderly transaction would take place between market participants on the
measurement date.
The valuation techniques include the use of recent arm’s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, option-adjusted spread models and, if applicable, enterprise valuation and may include a
number of assumptions relating to variables such as credit risk and interest rates. Changes in assumptions relating to these
variables could positively or negatively impact the reported fair value of these financial investments. Details of the financial
investments classified as ‘level 3’ to which valuation techniques are applied, and the sensitivity of profit before tax to a change in
these items’ valuation, are presented in Note 31.
1.5.6 Fee Income
Revenue arising from contracts with customers consists of investment management and performance fee income from the Group's
asset management business, investment management fee income from investment contracts without DPF, platform fee and other
fees and commissions.
Management fee income is based on investment assets under management and is only recognised when the Group satisfies its
performance obligation to provide the asset management services. It is recognised in the year in which the services are rendered
and is recognised net of rebates. Since the asset management service the Group provides is a continuous service, it satisfies its
performance obligation over time. Therefore, the Group meets the criteria for its revenue to be recognised over time as the client
benefits from the asset management services received from the Group.
Performance fee income is based on the achievement of prescribed performance hurdles. It is only recognised when the
performance obligations are satisfied or upon the crystallisation event occurring and when it is highly probable that a significant
reversal will not occur.
Fees from investment contracts without DPF are recognised over time as the services are provided, which is the point at which the
cash is received. Other fees and commissions such as from the provision of financial advice to customers are recognised when
performance obligations are satisfied or upon the crystallisation of an event. The price is determined based on the agreed initial or
ongoing adviser charge.
Platform fees are recognised as the related services are provided to the customer.
No significant judgements are applied on the timing or transaction price or the determination of the costs incurred to obtain or fulfil
a contract.
1.5.7 Investment return
Investment return included in the consolidated income statement comprises interest income, rental income, dividends, foreign
exchange gains and losses, realised and unrealised gains and losses on investments designated as FVTPL, and realised gains and
losses (including impairment) on items held at amortised cost. Interest income is recognised as it accrues on an effective interest
basis. Dividends on equity securities are recognised on the ex-dividend date and rental income is recognised on an accruals basis.
1.5.8 Derivatives and hedge accounting
The primary areas of the Group’s operations where derivative instruments are held are in the With-Profits Fund and annuity
business. Management designates derivatives on inception and those that are not designated as hedging instruments are carried
at fair value, with movements in fair value being recorded within investment return in the consolidated income statement.
The Group does not regularly seek to apply fair value or cash flow hedging treatment under IFRS 9 and has had no fair value or
cash flow hedges for the years ended 31 December 2024 and 31 December 2023.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.9 Derecognition of financial assets and liabilities
The Group’s policy is to derecognise financial assets when it is deemed that substantially all the risks and rewards of ownership
have been transferred. Gains and losses on disposal are determined as the difference between the net disposal proceeds and the
carrying amount of the asset, and are recognised in the consolidated income statement.
The Group derecognises financial liabilities only when the obligation specified in the contract is discharged, cancelled or has
expired.
1.5.10 Securities lending and reverse repurchase agreements
The Group is party to various securities lending agreements and repurchase agreements under which securities are transferred to
third parties on a short-term basis. The transferred securities are not derecognised; rather, they continue to be recognised within
the appropriate investment classification. The Group’s policy is that collateral in excess of 100% of the fair value of securities
loaned is required from all securities’ borrowers and typically consists of cash, debt securities, equity securities or letters of credit.
In cases where the Group takes possession of the collateral under its securities lending programme, including cash collateral which
is not legally separated from the Group, the collateral and corresponding obligation to return such collateral is recognised as a
financial liability on the consolidated statement of financial position.
The Group is also party to various reverse repurchase agreements under which securities are purchased from third parties with an
obligation to resell the securities. The securities are not recognised as investments on the consolidated statement of financial
position. The right to receive the return of any cash paid as purchase consideration plus interest is recognised as a financial asset
on the consolidated statement of financial position.
1.5.11 Subordinated liabilities and other borrowings
Subordinated liabilities include loan notes issued by the Group which are classified as financial liabilities as they have a fixed
repayment date and do not represent a residual interest in the net assets of the Company on liquidation. The notes rank junior to all
other liabilities of the Group in the event of liquidation, but above share capital.
Borrowings include operational borrowings attributable to shareholder-financed operations and other borrowings attributable to
the With-Profits Fund.
Subordinated liabilities and other borrowings are initially recognised at fair value, net of transaction costs. Borrowings, excluding
those backing buy-to-let mortgages, which are managed on a fair value basis and designated at FVTPL in line with the underlying
loan assets, are subsequently accounted for on an amortised cost basis using the EIR method. Under the EIR method, the
difference between the redemption value of the borrowing and the initial proceeds (net of related issue costs) is amortised through
the consolidated income statement to the date of maturity, or for hybrid debt, over the expected life of the instrument.
1.5.12 Investment property
Investments in leasehold and freehold properties not for occupation by the Group, including properties under development for
future use as investment property, are carried at fair value, with changes in fair value included in the consolidated income
statement. Properties are valued annually either by the Group’s qualified surveyors or by taking into consideration the advice of
professional external valuers using the Royal Institution of Chartered Surveyors (RICS) valuation standards. Each property is
externally valued at least once every three years.
1.5.13 Defined benefit pension schemes
For the Group’s defined benefit schemes, if the present value of the defined benefit obligation for the relevant scheme exceeds the
fair value of the scheme assets, then a liability is recorded on the Group’s consolidated statement of financial position in respect of
that scheme. By contrast, if the fair value of the assets of the relevant scheme exceeds the present value of the defined benefit
obligation then the surplus in respect of that scheme will only be recognised if the nature of the arrangements under the trust
deed, and funding arrangements between the Trustee and the employing entity, support the availability of refunds or recoverability
through agreed reductions in future contributions. In addition, if there is a constructive obligation for the employing entity to pay
deficit funding in respect of schemes where there is no unconditional right to a refund to any surplus, this is also recognised such
that the financial position recorded for the scheme reflects the higher of any underlying IAS 19 Employee Benefits deficit and the
obligation for deficit funding.
The Group utilises the projected unit credit method to calculate the defined benefit obligation. This method sees each year of
service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.
Estimated future cash flows are then discounted at a high-quality corporate bond rate, adjusted to allow for the difference in
duration between the bond index and the pension liabilities where appropriate, to determine its present value. These calculations
are performed by independent actuaries.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.13 Defined benefit pension schemes (continued)
The plan assets of the Group’s pension schemes may include insurance contracts that have been issued by other entities in the
Group. These assets are excluded from plan assets in determining the pension surplus or deficit recognised on the consolidated
statement of financial position. The plan assets also exclude any reimbursement right assets resulting from buy-in of the scheme
liabilities from other entities in the Group. The aggregate of the actuarially determined service costs of the currently employed
personnel, and the net interest on the net defined benefit obligation at the start of the year, is charged to the consolidated income
statement. Actuarial and other gains and losses as a result of changes in assumptions or experience variances are recognised as
other comprehensive income.
Contributions to the Group’s defined contribution pension schemes are expensed when due.
1.5.14 Tax
The Group applies IAS 12 Income Taxes in accounting for taxes on income. Income tax comprises current tax and deferred tax.
Income tax is recognised in the consolidated income statement except to the extent that it relates to items recognised in other
comprehensive income or directly in equity, in which case the tax is recognised in the same statement as the related item appears.
Current tax expense is charged or credited based upon amounts estimated to be payable or recoverable as a result of taxable
amounts for the current year and adjustments made in relation to prior years. Income tax recoverable on tax allowable losses is
recognised as a current tax asset only to the extent that it is regarded as recoverable by offsetting against taxable profits arising in
the current or prior periods. Current tax is measured using tax rates and tax laws that have been enacted or substantively enacted
at the balance sheet date.
Deferred taxes are provided under the liability method for all relevant temporary differences. IAS 12 Income Taxes does not require
all temporary differences to be provided for, in particular, the Group does not provide for deferred tax on undistributed earnings of
subsidiaries where the Group is able to control the timing of the distribution and the temporary difference created is not expected
to reverse in the foreseeable future. Deferred tax is also not recognised on temporary differences that arise from initial recognition
of an asset or a liability in a transaction (other than a business combination) that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable
profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused
tax losses can be utilised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled,
based on tax rates (and laws) that have been enacted or are substantively enacted at the end of the reporting period. Deferred tax
assets and liabilities are only offset when there is both a legal right to set-off and an intention to settle on a net basis.
The total tax recorded in the consolidated income statement includes tax attributable to both policyholders and shareholders. The
tax attributable to policyholders comprises the tax on the income of the consolidated with-profits and unit-linked funds. In certain
jurisdictions, such as the UK, life insurance companies are taxed on both their shareholders’ profits and on their policyholders’
investment returns on certain insurance and investment products. Although both types of tax are included in the total tax charge in
the Group’s consolidated income statement, they are presented separately in the consolidated income statement to provide the
most relevant information about tax that the Group pays on its profits.
The Group is subject to tax in numerous jurisdictions and the calculation of the total tax charge inherently involves a degree of
estimation and judgement. The positions taken in tax returns, where applicable tax regulation is subject to interpretation, are
recognised in full in the determination of the tax charge in the financial statements if the Group considers that it is probable that the
taxation authority will accept those positions. Otherwise, the Group considers an uncertain tax position to exist and a provision is
recognised to reflect that a taxation authority, upon review of the positions, could alter the tax returns. From recognition, the
provision is measured based on management’s judgement and estimate of the likely amount of the liability, or recovery by
providing for the single best estimate of the most likely outcome or the weighted average expected value where there are multiple
possible outcomes, taking into account external advice where appropriate. Each uncertain tax treatment is considered separately
or together as a group, depending on management’s judgement as to which approach better predicts the resolution of the
uncertainty. It is assumed that tax authorities will examine the uncertain tax treatments and they have full knowledge of all related
information.
The judgements and estimates made to recognise and measure the effect of uncertain tax positions are reassessed whenever
circumstances change or when there is new information that affects those judgements.
1.5.15 Goodwill
Goodwill arises when the Group acquires a business and the fair value consideration paid exceeds the fair value of the net assets
acquired. Goodwill arising on acquisitions of subsidiaries and businesses is capitalised and carried on the consolidated statement
of financial position at initial value less any accumulated impairment losses. Goodwill impairment testing is conducted annually
and/or when there is an indication of impairment. For the purposes of impairment testing, goodwill is allocated to a group of cash-
generating units. Goodwill impairment charges are recognised immediately in the consolidated income statement.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.16 Intangible assets
Intangible assets acquired through business combinations are measured at fair value on acquisition. Separately acquired intangible
assets such as licences and software, are recognised at the price paid to acquire them. Intangible assets arising from development
costs are capitalised when it has been established that the project is technically and financially feasible and the Group has both the
intention and ability to use the completed asset.
Intangible assets are subsequently carried at cost less amortisation and any accumulated impairment losses.
Intangible assets are amortised on a basis to reflect the pattern in which the future economic benefits are expected to be
consumed by reference to new business production levels unless the pattern cannot be determined reliably, in which case a
straight-line method is applied. Impairment testing is conducted when there is an indication of impairment. If an impairment has
occurred, an impairment charge is recognised for the difference between the carrying value and recoverable amount of the asset.
The recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is calculated as the present value
of future expected cash flows from the asset, cash-generating unit or group of cash-generating units to which it is allocated.
Amortisation and impairment of intangible assets is charged to the consolidated income statement.
1.5.17 Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand, deposits held at call with banks, debt securities and money market
funds with less than 90 days’ maturity from the date of acquisition as these instruments are considered to be readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
1.5.18 Dividends
Dividends are recognised when the obligation becomes certain, ie when the dividend is no longer at the discretion of the Company.
In the case of interim dividends, this occurs when the dividends are paid. For final dividends, this occurs when they are
recommended by the Board and approved by shareholders.
1.5.19 Share capital and share premium
An equity instrument is any contract that evidences a residual interest in the assets of the Group, after deducting all of its liabilities.
Shares are classified as equity when their terms do not create an obligation to transfer assets. The nominal value of shares issued
is recorded in share capital.
Where the consideration received from the issue or sale of existing shares exceeds the nominal value recorded in share capital, the
difference is recorded in share premium. Share premium is recorded net of share issue costs.
1.5.20 Treasury shares
Where any of the Group entities purchase the Company’s share capital, the consideration paid, including any attributable
transaction costs, is shown as a deduction from total shareholders’ equity. Any gains and losses arising on treasury shares are
included within equity.
1.5.21 Merger reserve
The merger reserve arises from the application of merger accounting principles to acquisitions of entities under common control. It
represents the difference between the aggregate capital reserves and value of the entities acquired, which is recognised directly in
equity. On disposal of the relevant entity, the related merger reserve is released directly to retained earnings.
1.5.22 Share-based payments
All share-based payments made to employees for services rendered are measured based on the fair value of the equity instrument
granted. The fair value takes into account the impact of market-based vesting conditions and non-vesting conditions, but excludes
any impact of non-market-based vesting conditions. The related share-based payment expense is recognised over the vesting
period. The fair value is determined using an option pricing model such as Black-Scholes or a Monte Carlo simulation where
appropriate, taking into account the terms and conditions of the award.
For equity-settled share-based payments, the fair value of service rendered is based on the fair value of the equity instrument at
grant date, which is not remeasured subsequently. The share-based payment expense is recognised over the vesting period and is
based on the number of equity instruments expected to vest, with the corresponding entry to equity.
For cash-settled share-based payments, the fair value of service rendered is based on the fair value of the liability related to the
equity instrument granted. The fair value of the equity instrument granted is remeasured at each reporting date with any changes
recognised in the share-based payment expense in the consolidated income statement for the period.
A cancellation of an award without the grant of a replacement equity instrument is accounted for as an acceleration of vesting.
Accordingly, any share-based expense that would have been recognised over the remaining vesting period is recognised immediately.
On vesting or exercise, the difference between the expense charged to the consolidated income statement and the actual cost to
the Group is transferred to retained earnings.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.23 Earnings per share (EPS)
Basic EPS is calculated by dividing the profit or loss for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding, excluding treasury shares and shares held by the employee benefit trust.
Diluted EPS is calculated by dividing the profit or loss for the year attributable to ordinary shareholders by the weighted average
number of ordinary shares, excluding treasury shares and shares held by the employee benefit trust, adjusted to take into account
the effect of any dilutive potential ordinary shares. The Group’s only class of potentially dilutive ordinary shares are share options
and awards granted to employees. Potential ordinary shares are treated as dilutive when their conversion to ordinary shares
results in a decrease in EPS.
1.5.24 Foreign exchange
The Group’s consolidated financial statements are presented in million pounds sterling, the Group’s presentation currency.
Accordingly, the results and financial position of foreign subsidiaries are translated into the presentation currency of the Group
from their functional currencies. All assets and liabilities of foreign subsidiaries are converted at year-end exchange rates while all
income and expenses are converted at average exchange rates where this is a reasonable approximation of the rates prevailing on
transaction dates.
Foreign currency monetary assets and liabilities are translated at the spot exchange rate for the functional currency at the
reporting date. Changes resulting from exchange rates are recognised in the consolidated income statement.
Foreign currency transactions are translated into functional currencies at the spot rate prevailing on the date of transactions.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency
at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on
historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.
Exchange differences arising on the translation of foreign subsidiaries are recognised in other comprehensive income and taken to
other reserves within equity. On disposal of the foreign subsidiary, the related exchange differences are transferred out of this
reserve and are recognised in the consolidated income statement as part of the gain or loss on disposal.
The income statements and cash flows, and statements of financial position of Group entities that have a different functional
currency from the Group’s presentation currency, have been translated using the following principal exchange rates.
2024
2023
Income statement and cash
flows (average rate)
Statement of financial
position (closing rate)
Income statement and cash
flows (average rate)
Statement of financial
position (closing rate)
Euro (EUR)
1.18
1.21
1.15
1.15
Indian Rupee (INR)
106.95
107.22
102.70
106.08
Polish Złoty (PLN)
5.09
5.17
5.22
5.01
South African Rand (ZAR)
23.42
23.63
21.02
23.31
Swiss Franc (CHF)
1.13
1.14
1.12
1.07
US Dollar (USD)
1.28
1.25
1.24
1.27
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.25 Leases
The Group leases office property to conduct its business. At the inception of a contract, the Group assesses whether a contract is,
or contains, a lease. In simple terms this applies if the contract conveys the right to control the use of an identified asset for a period
of time in exchange for consideration. At inception, the Group allocates the consideration in a contract to each lease component.
However, for the leases of land and buildings, in which the Group acts as lessee, the Group has elected to account for the lease and
non-lease components as a single lease component.
Where the Group acts as a lessee, it recognises a ‘right of use’ asset and a corresponding lease liability, representing the obligation
to make lease payments at the lease commencement date. The Group applies the cost model to the right of use assets, except for
those that meet the definition of an investment property, to which the fair value model is applied.
The asset is initially measured at cost which comprises the amount of the lease liability, and lease payments made at or before the
commencement date, any initial direct costs incurred and an estimate of the costs related to the dilapidation of the asset that
would be incurred, less any lease incentives received. Subsequently, the asset is depreciated using the straight-line method from
the commencement date to the earlier of: (i) the end of the right of use asset’s useful life; and (ii) the end of the lease term.
The lease liability is initially measured at the present value of lease payments that are not yet paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s own incremental
borrowing rate. Subsequently, the lease liability is measured at amortised cost, using the EIR method. From time to time, the lease
liability is remeasured where there is a change in future lease payments for example, where the Group reassesses whether it will
exercise a purchase, extension or termination option. Where this happens, a corresponding adjustment is made to the carrying
amount of the right of use asset or an amount is recognised in the consolidated income statement if the carrying amount of the
right of use asset has been reduced to zero.
The Group presents the right of use assets that do not meet the definition of investment property in ‘Property, plant and
equipment’ on the consolidated statement of financial position. The corresponding lease liabilities are presented in ‘Lease
liabilities’.
Where the Group acts as lessor, it classifies and accounts for its leases as operating or finance leases. Where the Group acts as an
intermediate lessor, as it does with some of its property leases, it accounts for its interests in the head lease and the sub-lease
separately. The Group assesses the lease classification of a sub-lease with reference to the right of use asset arising from the head
lease, not with reference to the underlying asset. Where substantially all the risks and rewards of ownership are transferred to the
lessee, the Group recognises a receivable asset on the consolidated statement of financial position, equal to the present value of
the lease payments, within ‘Accrued investment income and other debtors’. The Group recognises finance income over the lease
term to reflect the rate of return on the net investment in the lease, within ‘Other income’. The Group recognises lease payments
received under operating leases as income on a straight-line basis over the lease term as part of ‘Investment return’.
1.5.26 Property, plant and equipment (PPE)
PPE includes Group occupied properties and other tangible assets, such as computer equipment, motor vehicles, leasehold
improvements and fixtures and fittings. PPE including owner-occupied property is measured at cost, which represents the original
purchase price less any expenses incurred in bringing it to its working conditions, and subsequently measured using the cost
model.
Depreciation is charged to the consolidated income statement on a straight-line basis over the assets estimated useful lives* as
follows:
Type of asset
Estimated useful life
Group occupied property
20–50 years
Right of use asset
2–50 years
Other tangible assets
2–40 years
*
Note that the useful lives stated are inclusive of PPE held by consolidated infrastructure private equity vehicles which typically have longer useful lives than
other assets of the Group.
Management determines useful lives and residual values for assets when they are acquired. The Group assesses the useful life,
residual value and depreciation method for PPE on an annual basis and any adjustments are made where required.
An impairment review of PPE is carried out whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. Management assesses impairment at the lowest level for which there are separately identifiable cash flows.
Where the carrying amount of an asset is greater than its estimated recoverable amount, which is the higher of the assets fair value
less costs of disposal and value in use, it is written down immediately to its recoverable amount and an impairment loss is
recognised in the consolidated income statement.
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1 Basis of preparation and material accounting policies (continued)
1.5 Accounting policies (continued)
1.5.27 Assets and liabilities held for sale
The Group classifies assets and liabilities as held for sale when the carrying amount is expected to be recovered through a sale
transaction, usually within one year, and management is committed to the sale.
Assets and liabilities held for sale are shown separately on the consolidated statement of financial position and are measured at the
lower of their carrying amount and their fair value less costs to sell. No depreciation or amortisation is charged on an asset which is
classified as held for sale.
When the Group is committed to a sale of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale
when the criteria described above are met, regardless of whether the Group retains a non-controlling interest in its former
subsidiary after the sale.
Income and expenses of subsidiaries sold during the year are included in the consolidated income statement up to the date of
disposal. The gain or loss on disposal is calculated as the difference between sale proceeds net of selling costs, less the net assets
of the entity at the date of disposal, adjusted for foreign exchange movements attaching to the sold entity that are required to be
recycled to the consolidated income statement under IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’.
1.5.28 Provisions and contingent assets and liabilities
Provisions are recognised in the consolidated statement of financial position when the Group has a present legal or constructive
obligation resulting from a past event, it is more probable than not that a loss will be made in settling the obligation and the
amounts can be estimated reliably.
Provisions are measured based on management’s best estimate of the expenditure required to settle the obligation at the
reporting date. Provisions are discounted and represent the present value of the expected expenditure where the effect of the
time value of money is material.
Contingent liabilities are possible obligations of the Group where the timing and amount are subject to significant uncertainty.
Contingent liabilities are not recognised in the consolidated statement of financial position, unless they are assumed by the Group
as part of a business combination. Contingent liabilities are however disclosed, unless they are considered to be remote. If a
contingent liability becomes probable and the amount can be reliably measured, it is no longer treated as contingent and
recognised as a liability.
Contingent assets which are possible benefits to the Group are only disclosed if it is probable that the Group will receive the
benefit. If such a benefit becomes virtually certain, it is no longer considered contingent and is recognised on the consolidated
statement of financial position as an asset.
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2 Group structure and products
2.1 Group composition
The following diagram is an extract of the Group structure as at 31 December 2024 and gives an overview of the composition of the
Group. M&G plc is the holding company of the Group.
A list of the Group’s related undertakings comprising subsidiaries, joint ventures, associates and other significant holdings is
contained within Note 39.
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2 Group structure and products (continued)
2.2 Corporate transactions
My Continuum Financial Limited acquisition
On 8 March 2023, M&G Wealth Advice Limited (MGWAL), a wholly owned subsidiary of the Group, acquired a 49.9% holding in My
Continuum Financial Limited (MCFL), the holding company of Continuum (Financial Services) LLP (CFSL), My Continuum Wealth
(MCW), and My Continuum Financial Nominee Limited (MCFNL), collectively referred to as ‘Continuum’, for a purchase
consideration of £22m, including an adjustment for capital. The Group acquired a further 25% stake on 19 March 2024, for a
purchase consideration of £12m, including an adjustment for capital. Subsequently, as part of a group reorganisation, Continuum
has been sold from MGWAL to M&G Wealth Holding Company Limited (MGWHCL), another subsidiary of the Group, in the year.
Continuum is now part of our Life segment, allowing us to further grow and build our advisory capability across the UK, providing a
wider range of investment solutions to more clients, including through its central investment offering, and a fast growing in-house
discretionary Model Portfolio Service. Continuum is based in Plymouth and has more than 70 self-employed advisers operating
nationally.
The Group retained call options and the seller retained put options over the final holding where the exercise price was fixed based
on historical financial performance. For accounting purposes, the Group has accounted for the transaction on the basis it controls
100% of Continuum from the date of acquisition of the additional 25% stake on 19 March 2024. A liability of £14m has been
recognised in respect of the Group’s obligation under the call option arrangement as at the balance sheet date. The Group
acquired the remaining shares on the 10 March 2025 extinguishing the liability.
The total consideration includes the fair value of the 49.9% equity interest held immediately before the acquisition date of 19 March
2024. A gain of £3m recognised as a result of remeasuring the 49.9% equity interest to fair value, is presented in the Other
investment return line of the consolidated income statement. As at the acquisition date, the consideration and net assets acquired
and resulting Goodwill and intangible assets were as follows:
£m
Total consideration
51
Net assets acquired:
Accrued investment income and other debtors
1
Cash and cash equivalents
3
Total assets
4
Accruals, deferred income and other liabilities
(1)
Total liabilities
(1)
Intangible assets and related deferred tax liability arising on acquisition:
Independent financial adviser (IFA) relationships
4
Brand name
3
Deferred tax liability
(2)
Goodwill
43
The goodwill of £43m represents the synergies to be achieved through the growth of our advisory capabilities, alongside
Sandringham Financial Partners Limited and The Advice Partnership. The acquisition was also expected to result in revenue
synergies from the M&G Wealth platform business and model portfolio services business, as referred to at Note 13.1. Goodwill and
intangible assets - impairment assessment.
An independent financial adviser (IFA) relationship asset was also recognised at a fair value of £4m. The valuation was based on
the multi-period excess earnings method and the key assumptions used in measuring the fair value were the discount rate and
advisor attrition rates.
The Continuum brand name was recognised on acquisition at a fair value of £3m. The valuation was based on the relief from royalty
rate method, with the key assumptions used in measuring the fair value being the discount rate and royalty rates.
The revenue and profit before tax included in the consolidated income statement in respect of Continuum were £13m and £1m
respectively. The revenue and profit before tax for the year ended 31 December 2024 for Continuum were £17m and £1m
respectively.
BauMont Real Estate Capital Limited acquisition
On 29 October 2024, M&G Real Estate Limited (MGRE), a wholly owned subsidiary of the Group, acquired 65% of the entire issued
share capital of BauMont Real Estate Capital Limited (BauMont), for a purchase consideration of £13m.
BauMont is now part of the Group’s Asset Management segment, bolstering M&G’s value-add capability, enabling us to drive
growth through the expansion of our real estate client proposition, beyond core, residential and debt strategies. BauMont is based
in Paris and London, and manages €1.5 billion of assets in European value-add real estate.
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2 Group structure and products (continued)
2.2 Corporate transactions (continued)
BauMont Real Estate Capital Limited acquisition (continued)
The Group retains call options over the remaining 35% holding where the exercise price has a fixed and variable element based on
fair value at the exercise date. The Group has accounted for the transaction on the basis it controls 100% of BauMont from the date
of acquisition of the initial 65% stake on 29 October 2024. A liability of £7m has been recognised in respect of the Group’s
obligation under the call option arrangement.
The full purchase price allocation has yet to be finalised and will be disclosed in the consolidated financial statements for the year
ended 31 December 2025. An amount of £20m is presented as goodwill within Goodwill and intangible assets on the consolidated
statement of financial position, in relation to the acquisition of BauMont.
As at the acquisition date, the consideration and net assets acquired and resulting Goodwill and intangible assets were as follows:
£m
Total consideration
20
Net assets acquired:
Accrued investment income and other debtors
3
Cash and cash equivalents
1
Total assets
4
Accruals, deferred income and other liabilities
(4)
Total liabilities
(4)
Goodwill and intangible assets
20
The revenue and profit before tax included in the consolidated income statement in respect of BauMont were £1m and £nil
respectively. The revenue and profit before tax for the year ended 31 December 2024 for BauMont were £7m and £nil respectively.
2.3 Insurance and investment contracts written by the Group’s insurance entities
A description of the main contract types written by the Group’s insurance entities is provided below.
The Group’s with-profits contracts are written in the With-Profits Fund in which policyholders share in the profit of the fund; there
are two with-profits sub-funds: the With-Profits Sub-Fund (WPSF), the Defined Charge Participating Sub-Fund (DCPSF).
Shareholder-backed business represents all insurance and investment contracts in the Group other than contracts written in the
With-Profits Fund. The profit on these contracts accrues directly to the Group’s shareholders.
2.3.1 With-profits contracts
With-profits contracts provide returns to policyholders through bonuses that are smoothed to reduce the impact of volatility of the
investment performance of the assets in the fund.
2.3.1.1 Conventional and accumulating with-profits contracts written in WPSF and DCPSF
Conventional and accumulating with-profits policyholders receive their share of profit by way of regular and final bonuses.
Regular bonus rates are determined for each type of policy primarily by targeting the bonus level at a prudent proportion of the
long-term expected future investment return on underlying assets, reduced as appropriate for each type of policy to allow for items
such as expenses, charges, tax and shareholder transfers.
In normal investment conditions, the Group expects changes in regular bonus rates to be gradual over time. However, the Group
retains the discretion whether or not to declare a regular bonus each year, and there is no limit on the amount by which regular
bonus rates can change.
A final bonus, which is normally declared annually, may be added when a claim is paid. The rates of final bonus usually vary by type
of policy and by reference to the period, usually a year, in which the policy commences or each premium is paid. These rates are
determined by reference to the asset shares of representative sample policies and are subject to smoothing.
Regular bonuses are typically declared once a year, and once credited are guaranteed in accordance with the terms of the
particular product. Final bonus rates are guaranteed only until the next bonus declaration.
Contracts are predominantly written in the WPSF, where the shareholders are entitled to an amount up to one-ninth of the bonus
declared, which is payable as a cash transfer from the With-Profits Fund. For the business written in the DCPSF, the charges
accrue to shareholders who also meet the corresponding expenses. Profits arising in the DCPSF are attributed wholly to DCPSF
policyholders. The shareholders’ profit arises as the difference between charges and expenses.
2.3.1.2 With-profits contracts with a PruFund investment option (‘PruFund contracts’)
These are a range of with-profits contracts offering policyholders a choice of investment profiles (PruFund funds). Unlike the with-
profits contracts described above, no regular or final bonuses are declared. Instead, policyholders participate in profits by means of
an increase in their investment, which grows in line with an Expected Growth Rate (EGR). The EGR is adjusted for significant
market movements.
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2 Group structure and products (continued)
2.3 Insurance and investment contracts written by the Group’s insurance entities (continued)
2.3.1 With-profits contracts (continued)
2.3.1.2 With-profits contracts with a PruFund investment option (‘PruFund contracts’) (continued)
The EGR may be applied for each of the different PruFund funds within the range, varying depending on the individual asset mix of
that fund. The applicable EGR, net of the relevant charges, is applied to calculate the ‘smoothed unit value’ of policyholder funds.
The EGRs are reviewed and updated quarterly, with the smoothed unit value calculated daily. In normal investment conditions, the
EGR is expected to reflect our view of how the funds will perform over the longer term.
Policyholders are protected from some of the extreme short-term ups and downs of direct investments by using an established
smoothing process. Prescribed adjustments are made to the smoothed unit value if it moves outside a specified range relative to
the value of the underlying assets.
PruFund contracts are predominantly written in the WPSF, where the shareholder is entitled to an amount up to one-ninth of the
difference between the smoothed unit value on withdrawal and the initial investment. The DCPSF also contains PruFund contracts,
and for these contracts the shareholders receive profits or losses arising from the difference between the charges and expenses
on this business.
2.3.2 Unit-linked contracts
Unit-linked contracts are contracts where the value of the policy is linked to the value of underlying investments (such as collective
investment schemes, internal investment pools or other property) or fluctuations in the value of underlying investments or indices.
Investment risk associated with the product is primarily borne by the policyholder. Some unit-linked contracts provide an element
of insurance coverage, such as a benefit payable on death in excess of the value of the units, and these contracts are classified as
insurance contracts and accounted for under IFRS 17 (see Note 24.2.5).
Charges are deducted from the unit-linked funds for investment and administration services and, for certain contracts, insurance
coverage. Benefits payable will depend on the price of the units prevailing at the time of surrender, death or the maturity of the
product.
2.3.3 Annuities
Annuities are contracts which offer policyholders a regular income over the policyholder’s life, in exchange for an upfront premium,
and may be immediate or deferred. For immediate annuities, the regular income starts immediately after the premium payment
but, for deferred annuities, the regular income is delayed until a specified date in the future. There are various types of annuity
contracts written across the Group: level, fixed increase, inflation-linked (all referred to as ‘non-profit annuities’) and with-profits
annuities.
– Level annuities: provide a regular (for example, monthly) fixed annuity payment over the policyholder’s life.
– Fixed increase annuities: provide a regular annuity payment which incorporates automatic increases in annuity payments by
either fixed percentages or fixed amounts over the policyholder’s life.
– Inflation-linked annuities: provide a regular annuity payment to which an additional amount is added periodically based on the
increase in an inflation index.
– With-profits annuities: are written in the With-Profits Fund. These combine the income features of annuity contracts with the
investment smoothing features of with-profits products and enable policyholders to obtain exposure to investment returns on
the With-Profits Fund. In addition, some non-profit annuities are written in the With-Profits Fund, and profits relating to this
business accrue to the With-Profits Fund.
During 2023, the Group re-entered the bulk purchase annuity (BPA) market where it transacted with certain pension schemes to
secure the annuitant benefits of the immediate and deferred members.
During 2024, the Group completed its first Value Share transaction which comprises a traditional BPA buy-in arrangement, while
also allowing corporate sponsors to participate in the risk and reward generated from the transaction through a separate
reinsurance contract with a captive reinsurer that transfers some of the insurance and investment risk back to the sponsor of the
originating pension scheme.
The benefits payable under the BPA arrangement are similar to those under other BPAs transacted by M&G.
Under the reinsurance arrangement, the Group manages the assets backing the BPA liabilities and deducts from these assets
amounts in relation to the BPA annuity payments and other benefits and specified expenses. In return for an annual intermediary
fee, the Group pays to the reinsurer assets in excess of the value of the liabilities determined in accordance with a specified basis.
Conversely, the reinsurer would top-up any shortfall in the assets relative to the value of the liabilities.
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3 Segmental analysis
The Group’s operating segments are defined and presented in accordance with IFRS 8: Operating Segments on the basis of the
Group’s management reporting structure and its financial management information. The Group’s primary reporting format is by
product type. The Chief Operating Decision Maker for the Group is the Group Executive Committee.
The Group’s operating segments have been revised during the year to reflect a change in management structure. Our previous
operating segments, ‘Life’ and ‘Wealth’ have been replaced with one new operating segment: ‘Life’. Comparatives for 2023 are re-
presented on the new segment basis.
3.1 Operating segments
The Group’s operating segments are:
Asset Management
The Group’s investment management capability is offered to both wholesale and institutional clients. The Group’s wholesale clients
invest through either UK domiciled OEICs or Luxembourg domiciled SICAVs and have access to a broad range of actively managed
investment products, including Equities, Fixed Income and Multi-Asset. The Group serves these clients through its many business-
to-business relationships both in the UK and overseas, which include independent financial advisers, high-street banks and wealth
managers. The Group’s institutional investors, include pension funds, insurance companies and banks from around the world, who
invest through segregated mandates and pooled funds into a diverse range of Equities, Fixed Income and Real Estate investment
products and services.
The Asset Management segment generates revenues by charging fees which are typically based on the level of assets under
management. The Asset Management segment also earns investment management revenues from the management of a
significant proportion of Life assets it manages.
Life
The Life business operates in the savings and pensions market and includes corporate risk solutions, individual life and pensions,
international solutions and advice.
During 2023, the Life business re-entered the bulk purchase annuity (BPA) market and transacted with certain schemes to secure
the annuity benefits of immediate and deferred annuity members. This activity continued in 2024 and included the completion of
our first Value Share BPA deal in November. The BPAs, along with workplace pensions, make up our corporate risk solutions.
Individual products include annuity contracts: level annuities, which provide a fixed annuity payment; fixed increase annuities,
which incorporate a periodic automatic fixed increase in annuity payments; and inflation-linked annuities, which incorporate a
periodic increase based on a defined inflation index. Some inflation-linked annuities have minimum and/or maximum increases
relative to the corresponding inflation index. The life products are primarily whole of life assurance, endowment assurances, term
assurance contracts, equity release mortgages, income protection, and critical illness products. Investment products include unit-
linked contracts and the Prudential bond offering, which mainly consists of single-premium-invested whole of life policies, where
the client has the option of taking ad hoc withdrawals, regular income or the option of fully surrendering their bond.
All of the Group’s products that give access to the PruFund investment proposition are included in Life. The PruFund investment
proposition gives customers access to savings contracts with smoothed investment returns and a wide choice of investment
profiles. Unlike the conventional and accumulating with-profits contracts, no regular or final bonuses are declared. Instead,
policyholders participate in profits by means of an increase in their investment, which grows in line with an expected growth rate.
International solutions include our savings businesses based in Ireland and Poland (Prudential International Assurance plc). The
Group’s products which give non-UK clients access to the PruFund investment proposition are also included.
Advice provides access to a range of retirement, savings and investment management solutions to its clients. These products are
distributed to clients through intermediaries and advisers, and include the Retirement Account (a combined individual pension and
income drawdown product), individual pensions, ISAs, collective investments and a range of on-shore and off-shore bonds.
Some of the Group’s products written through conventional and accumulating with-profits contracts, in the PAC with-profits sub-
funds, provide returns to policyholders through ‘regular’ and ‘final’ bonuses that reflect a smoothed investment return.
Corporate Centre
Corporate Centre includes central corporate costs and debt costs.
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3 Segmental analysis (continued)
3.2 Adjusted operating profit before tax methodology
Adjusted operating profit before tax is one of the Group’s non-GAAP alternative performance measures, which complements IFRS
GAAP measures and is key to decision-making and the internal performance management of operating segments.
Details of the methodology are presented below:
Fee based business
For the Group’s fee based business written by Asset Management and Life segments, adjusted operating profit before tax includes
fees received from clients and operating costs for the business including overheads, expenses required to meet regulatory
requirements and regular business development/restructuring and other costs. Costs associated with fundamental Group-wide
restructuring and transformation are not included in adjusted operating profit before tax.
Business written in the With-Profits Fund
For the Group’s business written in the With-Profits Fund in the Life segment, adjusted operating profit before tax includes the
release of the risk adjustment and the expected release of the CSM for the period. The expected CSM release for the period is
calculated as the CSM at the start of the period updated to reflect long-term expected investment returns multiplied by the
expected amortisation factor for the period.
– The long-term expected investment returns are calculated on the assumption of real-world investment returns, which are
determined by reference to the risk-free rate plus a risk premium based on the mix of assets held to back the asset shares. In the
calculation of the expected CSM release for with-profits business, the long-term expected investment returns for the year ended
31 December 2024 were 8.2% pa (8.5% pa for the year ended 31 December 2023).
– The expected amortisation factor for the period reflects the expected pattern of release of the CSM for the with-profits business
over the life of the contracts. The expected amortisation factor used for the year ended 31 December 2024 was 11.7% pa (12.7%
pa for the year ended 31 December 2023).
Adjusted operating profit before tax for the Group’s business written in the With-Profits Fund also includes the expected
investment return for the shareholder’s share of the IFRS value of the excess assets in the Fund. For the year ended 31 December
2024, the return was 6.8% pa (6.0% pa for the year ended 31 December 2023).
Adjusted operating profit for the Life segment does not include the impact of any margins on investment management fee earned
by other Group entities. These are recognised in the Asset Management segment as they emerge.
The application of IFRS 17 to non-profit contracts in the With-Profits Fund results in a mismatch due to the difference between
their value under the IFRS 17 General Measurement Model (GMM) accounting for these contracts (primarily annuities) and how
these contracts are treated in determining their fair value when assessing current and future with-profits contracts under the
Variable Fee Approach (VFA). Although the impact of this mismatch balances over the life of the current and future with-profit
contracts as the CSM under the VFA is set up and released, results for the period do not reflect the long-term economics of the
transaction. Therefore, the impact of the mismatch has been excluded from adjusted operating profit before tax.
Shareholder annuity business
For the Group’s shareholder annuity products written by the Life segment, adjusted operating profit before tax includes the release
of the CSM and the risk adjustment for the period. Adjusted operating profit before tax also includes the returns on surplus assets
in excess of IFRS 17 liabilities based on long-term expected investment returns, which are determined by reference to the risk-free
rate plus a risk premium based on the mix of assets. For the year ended 31 December 2024 the long-term expected investment
returns for shareholder annuities were 5.6% pa (6.6% pa for the year ended 31 December 2023). The net effect of changes to the
valuation rate of interest due to asset trading and portfolio rebalancing, and experience variances are also included in adjusted
operating profit before tax.
The results of the intercompany buy-in transaction executed between the trustees of M&G Group Pension Scheme (M&GGPS) and
PAC in 2023 are included in adjusted operating profit before tax as this generates economic value for the Group.
Adjusted operating profit before tax for shareholder annuities excludes the impact of the mismatch resulting from the
measurement of fulfilment cash flows using current interest rates and any changes to CSM being measured using locked-in rates.
For Value Share BPAs, the adjusted operating profit before tax reflects the net results of the underlying BPA and the reinsurance
arrangement after removing the impact of any mismatches that arise on the accounting for these transactions as stated below. The
resulting impact mainly represents the contribution of the intermediary fee earned on this arrangement.
Corporate Centre
For the Corporate Centre adjusted operating profit before tax is the expense incurred to run the head office and the actual
investment return on treasury activities and debt costs.
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3 Segmental analysis (continued)
3.2 Adjusted operating profit before tax methodology (continued)
Key adjusting items between IFRS profit before tax and adjusted operating profit before tax
Certain adjustments that are considered to be non-recurring or strategic, or due to short-term movements not reflective of longer-
term performance are made to IFRS profit or loss before tax to determine adjusted operating profit before tax. Adjustments are in
respect of short-term fluctuations in investment returns, mismatches arising on the application of IFRS 17, impairment and
amortisation in respect of acquired intangibles, costs associated with fundamental Group-wide restructuring and transformation,
profit or loss arising on business and corporate transactions and profit or loss before tax from any discontinued operations.
Short-term fluctuations in investment returns
The adjustment for short-term fluctuations in investment returns represents:
– Difference between actual CSM release for the period and expected CSM release for the period for with-profit contracts and
CSM release for non-profit business in the With-Profits Fund;
– Movements in the fair value of instruments held to manage equity risk in the future with-profits shareholder transfer and to
mitigate interest rate risk for the optimisation of the Group’s capital position on a Solvency II basis;
– Difference between actual and long-term expected investment return on surplus assets backing the shareholder annuity capital
and shareholders’ share of excess assets in the With-Profits Fund measured on an IFRS basis;
– Foreign exchange movements on the US dollar subordinated debt held in the Corporate Centre;
– Fair value movements on strategic investments;
– Impact of short-term credit risk provisioning and experience variances on the measurement of best estimate liabilities,
specifically:
– The impact of credit risk provisioning for short-term adverse credit risk experience;
– The impact of credit risk provisioning for actual upgrade and downgrade experience during the year. This is calculated by
reference to current interest rates;
– Credit experience variance relative to long-term assumptions, reflecting the impact of defaults and other similar experience,
such as asset exchanges arising from debt restructuring; and
– The impact of market movements on bond portfolio weightings and the subsequent impact on credit provisions.
Mismatches arising on the application of IFRS 17
The application of IFRS 17 results in the following mismatches in valuation basis being recognised in total profit/loss before tax. For
the purposes of calculating adjusted operating profit before tax the impact of these mismatches has been excluded.
– Difference between the value under IFRS 17 GMM for non-profit contracts (primarily annuities) written in the With-Profits Fund
and how these contracts are treated in determining their fair value when assessing current and future with-profits contracts
under the VFA;
– Mismatch resulting from measurement of fulfilment cash flows for shareholder non-profit business (primarily annuities) using
current interest rates while related changes to the CSM are measured using locked-in rates; and
– Mismatches resulting from measurement differences arising on the accounting for Value Share BPAs related to the definition of
the insurance service for the annuity contracts compared to the reinsurance contract and the discount rate used for each type of
contract.
Amortisation and impairment of intangible assets acquired in business combinations
Amortisation and impairment of intangible assets (including goodwill) acquired in business combinations are excluded from
adjusted operating profit before tax.
Profit/(loss) on disposal of businesses and corporate transactions
Certain additional items are excluded from adjusted operating profit before tax where those items are considered to be non-
recurring or strategic, or considered to be one-off, due to their size or nature, and therefore not indicative of the long-term
operating performance of the Group, including profits or losses arising on corporate transactions (including any liabilities that arise
from matters that arose prior to any acquisition by the Group) and profits or losses on discontinued operations.
Restructuring costs and other
Restructuring costs and other primarily reflect the shareholder allocation of costs associated with the transformation of our
business. These costs represent fundamental Group-wide restructuring and transformation and are therefore excluded from
adjusted operating profit before tax.
This also includes the elimination on consolidation of the results of the intercompany buy-in transaction executed between the
trustees of M&GGPS and PAC in 2023.
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3 Segmental analysis (continued)
3.3 Analysis of Group adjusted operating profit before tax by segment
Analysis of Group adjusted operating profit/(loss) before tax by segment:
2024
2023
i
For the year ended 31 December
£m
£m
Asset Management
289
242
Life
746
755
Corporate Centre
(198)
(200)
Total segmented adjusted operating profit before tax
837
797
Short-term fluctuations in investment returns
ii
(643)
(171)
Mismatches arising on application of IFRS 17
iii
(333)
(41)
Amortisation and impairment of intangible assets acquired in business combinations
(115)
(39)
Profit on disposal of business and corporate transactions
iv
11
—
Restructuring costs and other
v
(106)
(141)
IFRS (loss)/profit before tax and non-controlling interests attributable to equity holders
(349)
405
IFRS profit before tax attributable to non-controlling interests
vi
17
16
IFRS (loss)/profit before tax attributable to equity holders
vii
(332)
421
i
The comparatives for Life and Corporate Centre have been restated to reflect the revised segments and the adjustment of some advice-related costs.
ii
Losses from short-term fluctuations in investment returns continued in year ended 31 December 2024. These losses primarily comprise a £247m loss
(2023: £121m loss) from the difference in actual and expected long-term investment return on surplus assets backing the annuity portfolio. A £227m loss
(2023: £4m gain) on interest rate swaps purchased to protect PAC’s Solvency II capital position against falls in interest rates driven by rises in risk-free
rates in the year ended 31 December 2024. There were also losses of £98m (2023: £123m loss) on the hedging instruments held to protect the Solvency II
capital position from falling equity markets, due to rises in equity values during the year.
iii
Mismatches arising on application of IFRS 17 loss of £333m (2023: £41m) relate mainly to loss from mismatch in relation to non-profit business in the With-
Profits Fund of £239m (2023: £18m loss) and £89m loss (2023: £24m loss) from mismatch for annuities due to divergence between locked-in rate used to
value the CSM and valuation discount rate.
iv
Profit on disposal of business and corporate transactions for the year ended 31 December 2024 includes gains resulting from the repurchase of
subordinated notes in June 2024 (see Note 26) of £29m, partly offset by the increase in a provision for redress to customers in Life, which occurred prior to
the Group’s acquisition of the relevant business.
v
Restructuring costs and other excluded from adjusted operating profit includes costs that relate to the transformation of our business which are allocated
to the shareholder. These differ to Restructuring costs presented in the analysis of administrative and other expenses in Note 7 which include costs
allocated to the Policyholder. In the year ended 31 December 2024, restructuring costs and other of £106m (2023: £141m) mainly relate to £44m (2023:
£73m) in relation to actions taken to reduce our cost base, £21m (2023: £30m) of investment spend in building out capability in our Asset Management
business and £17m (2023: £8m) on transformation within the finance function.
vi
Excludes non-controlling interests in relation to amortisation of intangible assets acquired in business combinations which is presented net within
amortisation and impairment of intangible assets acquired in business combinations.
vii
The tax charge attributable to equity holders of £15m (2023: £112m) results in an IFRS loss for the year of £347m (2023: £309m profit) as presented in
consolidated income statement.
3.4 Analysis of Group revenue by segment
The following table shows revenue by segment for the Group:
2024
2023
i
For the year ended 31 December
£m
£m
Life
4,095
3,887
Total segmented insurance revenue
4,095
3,887
Asset Management
12
11
Life
3,292
3,054
Corporate Centre
45
53
Total segmented interest revenue
3,349
3,118
Asset Management
ii
1,043
1,025
Life
165
143
Total segmented fee income
1,208
1,168
i
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. Comparatives for 2023 presented on new
segment basis.
ii
The Asset Management segmented fee income differs from the fee income in Note 6 due to the netting of certain items that have no profit impact in
adjusted operating profit. Asset management fee income includes net inter-segment fee income of £179m (2023: £165m).
The Group has a widely diversified client base. There are no clients whose revenue represents greater than 10% of fee income.
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3 Segmental analysis (continued)
3.5 Total external revenue by geography
The following table provides a geographical segmentation of insurance revenue and other income (includes fee income and other
income), as presented in the consolidated income statement:
2024
2023
For the year ended 31 December
£m
£m
United Kingdom:
Insurance revenue
3,965
3,765
Fee and other income
493
450
Total United Kingdom
4,458
4,215
Rest of the World:
Insurance revenue
130
122
Fee and other income
606
590
Total Rest of the World
736
712
Total:
Insurance revenue
4,095
3,887
Fee and other income
1,099
1,040
Total
5,194
4,927
The geographical analyses of revenue from long-term business are based on the territory of the operating unit assuming the risk.
Other income from external asset management clients reflect the domicile of where revenues are generated. The following table
provides a segmentation of non-current, non-financial assets as presented in the consolidated statement of financial position:
Total non-current, non-financial assets by geographical location
2024
2023
As at 31 December
£m
£m
UK
12,503
13,356
Rest of the World
5,553
6,256
Total
18,056
19,612
Non-current, non-financial assets for this purpose consist of goodwill and intangible assets, deferred acquisition costs, property,
plant and equipment, investment property, and investment in joint ventures and associates accounted for using the equity method.
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4 Insurance revenue
The Group’s exposure to risks arising from insurance assets and liabilities is different for each component of the Group’s business.
The Group’s Insurance revenue is presented below for the different components of business:
2024
With-profits
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
For the year ended 31 December
£m
£m
£m
£m
Amounts relating to the changes in the liability for remaining coverage:
Expected incurred claims and other expenses
1,623
34
1,196
2,853
Change in the risk adjustment for non-financial risk for the risk expired
25
1
36
62
CSM recognised in profit or loss for the services provided
568
8
169
745
Revenue recognised for incurred policyholder tax
356
4
—
360
Amounts relating to the recovery of insurance acquisition cash flows:
Allocation of premium
43
—
32
75
Total insurance revenue
2,615
47
1,433
4,095
2023
With-profits
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
For the year ended 31 December
£m
£m
£m
£m
Amounts relating to the changes in the liability for remaining coverage:
Expected incurred claims and other expenses
1,609
36
1,226
2,871
Change in the risk adjustment for non-financial risk for the risk expired
24
1
32
57
CSM recognised in profit or loss for the services provided
499
9
141
649
Revenue recognised for incurred policyholder tax
249
6
—
255
Amounts relating to the recovery of insurance acquisition cash flows:
Allocation of premium
26
—
29
55
Total insurance revenue
2,407
52
1,428
3,887
Insurance revenue is recognised as services under the group of insurance contracts are provided to policyholders. This is at an
amount that reflects the consideration to which the Group expects to be entitled in exchange for those services but excludes
investment components.
The amount of CSM recognised in the profit or loss in the period is based on coverage units provided during the current period.
The number of coverage units is the quantity of services provided by the contracts in the group, determined by considering for
each contract the quantity of benefits provided and its expected coverage period.
Services provided to insurance contracts include insurance coverage and, for all direct participating contracts, investment services
for managing underlying items on behalf of policyholders (investment-related services). In addition, insurance contracts without
direct participation features may also provide investment services for generating an investment return for the policyholder
(investment-return service). The number of coverage units is a quantification of services provided under the contracts in the group.
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5 Investment income and insurance finance expenses
An analysis of net investment income and net insurance finance expenses by each component of the Group’s business is
presented below:
2024
With-profits
Unit-linked
liabilities
Annuity and
other long-
term
business
Other
Total
For the year ended 31 December
£m
£m
£m
£m
£m
Interest revenue from financial assets not measured at FVTPL
471
82
96
34
683
Interest revenue from financial assets measured at FVTPL
1,892
168
577
29
2,666
Net change in investments contract liabilities without DPF
(73)
(315)
(73)
—
(461)
Net credit impairment losses
(15)
—
—
—
(15)
Other investment return:
Dividend income
1,572
350
1
—
1,923
Net gains/(losses) on financial assets measured at FVTPL
4,095
262
(1,055)
34
3,336
Rental income from investment properties
862
20
65
—
947
Net losses on investment properties
(273)
(36)
(31)
—
(340)
Foreign exchange losses
(41)
—
(1)
(11)
(53)
Total other investment return
6,215
596
(1,021)
23
5,813
Total investment return
8,490
531
(421)
86
8,686
Insurance finance income/(expenses) from insurance
contracts issued:
Due to changes in the value of underlying assets of contracts
measured under the VFA
(7,893)
(255)
(22)
—
(8,170)
Interest accreted to insurance contracts measured under GMM
(361)
—
(654)
—
(1,015)
Due to changes in interest rates and other financial assumptions
226
—
526
—
752
Net foreign exchange income/(losses)
9
—
(2)
—
7
Total insurance finance income/(expenses) from insurance
contracts issued
(8,019)
(255)
(152)
—
(8,426)
Reinsurance finance income/(expenses) from reinsurance
contracts held:
Interest accreted to reinsurance contracts measured under GMM
—
(2)
(42)
—
(44)
Due to changes in interest rates and other financial assumptions
—
2
32
—
34
Total reinsurance finance income/(expenses) from reinsurance
contracts held
—
—
(10)
—
(10)
Total net investment return and insurance finance income/
(expenses)
471
276
(583)
86
250
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5 Investment income and insurance finance expenses (continued)
2023
With-
profits
Unit-linked
liabilities
Annuity and
other long-
term
business
Other
Total
For the year ended 31 December
£m
£m
£m
£m
£m
Interest revenue from financial assets not measured at FVTPL
488
69
77
38
672
Interest revenue from financial assets measured at FVTPL
1,675
167
570
34
2,446
Net change in investments contract liabilities without DPF
(122)
(521)
(57)
—
(700)
Net credit impairment (losses)/reversal
2
1
—
(1)
2
Other investment return:
Dividend income
2,041
333
1
—
2,375
Net gains on financial assets measured at FVTPL
3,222
449
336
55
4,062
Rental income from investment properties
849
35
72
—
956
Net losses on investment properties
(951)
(33)
(69)
—
(1,053)
Foreign exchange (losses)/gains
(137)
(1)
1
11
(126)
Total other investment return
5,024
783
341
66
6,214
Total investment return
7,067
499
931
137
8,634
Insurance finance income/(expenses) from insurance contracts issued:
Due to changes in the value of underlying assets of contracts measured
under the VFA
(5,761)
(239)
(22)
—
(6,022)
Interest accreted to insurance contracts measured under GMM
(395)
—
(780)
—
(1,175)
Due to changes in interest rates and other financial assumptions
24
—
(145)
—
(121)
Total insurance finance income/(expenses) from insurance
contracts issued
(6,132)
(239)
(947)
—
(7,318)
Reinsurance finance income/(expenses) from reinsurance
contracts held:
Interest accreted to reinsurance contracts measured under GMM
—
(2)
40
—
38
Due to changes in interest rates and other financial assumptions
(1)
(1)
3
—
1
Total reinsurance finance income/(expenses) from reinsurance
contracts held
(1)
(3)
43
—
39
Total net investment return and insurance finance income/(expenses)
934
257
27
137
1,355
In relation to the business in scope of IFRS 17, the table above provides detail of the total investment income and detail of the
resulting or corresponding changes in liabilities included in insurance and reinsurance finance income/(expenses). The key
offsetting movements in liabilities are:
– the offsetting change in liabilities due to changes in the value of the underlying items of contracts measured under the VFA;
– the offsetting changes in liabilities due to changes in interest rates and other financial assumptions; and
– the interest accreted to contracts measured under the GMM.
There are also certain items that contribute to investment income but do not have a corresponding off set within insurance and
reinsurance finance income/(expenses). These include:
– Investment returns on surplus assets that back the annuity portfolio;
– Investment returns on excess assets in the with-profits fund that do not form part of the asset share for policyholders;
– Gains and losses on financial instruments that are used to hedge the capital position of the Group; and
– Investment returns on other assets not relating to the Life business.
As a result, although there is some offset between investment income and insurance and reinsurance finance income/(expenses),
these items do not offset perfectly.
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5 Investment income and insurance finance expenses (continued)
The interest revenue, dividend income, net gains or losses at FVTPL and other investment income for each class of financial asset
are as follows:
2024
Fair value through
profit or loss
Amortised
cost
Total
Designated
Mandatory
For the year ended 31 December
£m
£m
£m
£m
Total interest revenue from financial assets not measured at FVTPL:
Cash and cash equivalents
—
—
105
105
Deposits with credit institutions
—
—
578
578
—
—
683
683
Total interest revenue from financial assets measured at FVTPL:
Loans
—
288
—
288
Debt securities
—
2,378
—
2,378
—
2,666
—
2,666
Net change in investment contract liabilities without DPF
(461)
—
—
(461)
Net credit impairment losses
—
—
(15)
(15)
Dividend income
—
1,923
—
1,923
Total net gains/(losses) from financial assets measured at FVTPL:
Equity securities and pooled investment funds
—
4,942
—
4,942
Loans
—
(57)
—
(57)
Debt securities
—
(1,495)
—
(1,495)
Derivatives
—
(54)
—
(54)
—
3,336
—
3,336
Foreign exchange losses
—
—
(53)
(53)
Total interest revenue and investment income from financial assets and liabilities
(461)
7,925
615
8,079
2023
Fair value through
profit or loss
Amortised
cost
Total
Designated
Mandatory
For the year ended 31 December
£m
£m
£m
£m
Total interest revenue from financial assets not measured at FVTPL:
Cash and cash equivalents
—
—
76
76
Deposits with credit institutions
—
—
596
596
—
—
672
672
Total interest revenue from financial assets measured at FVTPL:
Loans
—
272
—
272
Debt securities
—
2,174
—
2,174
—
2,446
—
2,446
Net change in investment contract liabilities without DPF
(700)
—
—
(700)
Reversal of net credit impairment losses
—
—
2
2
Dividend income
—
2,375
—
2,375
Total net gains from financial assets measured at FVTPL:
Equity securities and pooled investment funds
—
1,779
—
1,779
Loans
—
64
—
64
Debt securities
—
955
—
955
Derivatives
—
1,264
—
1,264
—
4,062
—
4,062
Foreign exchange losses
—
—
(126)
(126)
Total interest revenue and investment income from financial assets and liabilities
(700)
8,883
548
8,731
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6 Fee income
The following table disaggregates management fee revenue by segment:
2024
2023
i
For the year ended 31 December
£m
£m
Management fees
876
870
Rebates
(18)
(19)
Performance fees and carried interest
6
9
Total Asset Management fee income
864
860
Investment contracts without DPF
37
37
Platform fees
32
30
Advice fees
96
76
Total Life fee income
165
143
Total fee income
1,029
1,003
i
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. Comparatives for 2023 presented on new
segment basis.
7 Administrative and other expenses
2024
2023
For the year ended 31 December
Note
£m
£m
Staff and employment costs
i
8
939
887
Acquisition costs incurred:
Investment contracts without DPF
16
14
Other contracts
151
144
Acquisition costs deferred:
Other contracts
(7)
(2)
Amortisation of deferred acquisition costs:
Investment contracts without DPF
4
5
Other contracts
7
5
Depreciation of property, plant and equipment
15
164
143
Impairment of property, plant and equipment
ii
15
76
65
Amortisation of intangible assets
13
26
33
Impairment of goodwill and intangible assets
iii
13
149
17
Restructuring costs
180
226
Interest expense
298
206
Commission expense
149
159
Investment management fees
141
128
Property related costs
222
201
Other expenses
i
852
789
3,367
3,020
Less amounts directly attributable to insurance results:
Expenses attributed to insurance acquisition cash flows incurred during the year
(140)
(142)
Other directly attributable expenses
(661)
(637)
Total administrative and other expenses
2,566
2,241
i
Following a review of presentation an amount of £13m for the year ended 31 December 2023 included in other expenses is now presented in staff and
employment costs. See Note 8 Staff and employment costs.
ii
Net amount includes impairment of certain property, plant and equipment held by the Group’s infrastructure capital private equity vehicles of £76m (2023:
£75m). These assets are classified as held for sale at 31 December 2024 and so the values differ to amounts in Note 15 Property, plant and equipment. Also
includes impairment recognised in respect of our future ways of working of £nil (2023: £11m impairment) included in ‘restructuring costs and other’ in the
Segmental analysis in Note 3.
iii
Includes impairment of certain intangible assets held by the Group’s infrastructure capital private equity vehicles of £38m. These assets are classified as
held for sale at 31 December 2024 and so the value differs to the amounts in Notes 13 Goodwill and intangible assets.
In addition to the interest expense shown above of £298m (2023: £206m), the interest expense incurred in respect of subordinated
liabilities for the year ended 31 December 2024 was £150m (2023: £160m). For the year ended 31 December 2024 there was a
£29m gain attributable to the cancellation of the 5.56% subordinated notes in June 2024. This is shown as finance costs in the
consolidated income statement.
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8 Staff and employment costs
The average number of staff employed by the Group during the year was:
For the year ended 31 December
2024
2023
Average staff headcount
i
8,454
8,145
i
The headcount includes employees of the operating entities held in the Group’s consolidated infrastructure and private equity funds.
The following table shows the staff costs and specific other employee-related costs:
2024
2023
For the year ended 31 December
Note
£m
£m
Wages and salaries
i
792
766
Social security costs
i
90
87
Share-based payments
37
40
32
Pension costs:
Defined benefit schemes
17
31
13
Defined contribution schemes
73
64
Other staff costs
i
57
54
Total staff and employment costs
i
1,083
1,016
The table below provides a breakdown of staff and employment costs charged within administrative and other expenses:
2024
2023
For the year ended 31 December
£m
£m
Staff and employment costs
i
939
887
Acquisition costs
68
57
Restructuring costs
66
61
Other expenses
10
11
Total staff and employment costs
i
1,083
1,016
i
Following a review of presentation, total staff and employment costs for the year ended 31 December 2023 have been revised and now include other staff
costs, including an amount of £13m previously included in other expenses in Note 7, resulting in a revised total of £1,016m rather than the previously
reported £1,003m. The review also resulted in a reclassification of some amounts previously included in wages and salaries and social security costs.
Information in respect of Directors’ remuneration is provided in the Directors’ remuneration report on pages 112 to 119.
9 Fees payable to the auditor
The following table shows the auditor remuneration, excluding VAT:
2024
2023
For the year ended 31 December
£m
£m
Fees payable to the Company’s auditor and its associates for audit and assurance services:
Fees payable to the Company’s auditor for the audit of the Company’s individual and consolidated financial
statements
4.1
8.7
Audit of subsidiaries pursuant to legislation
12.2
10.6
Audit-related assurance services
2.4
2.1
Other assurance services
1.0
0.9
Total fees payable to the auditor
19.7
22.3
Fees payable to the auditor disclosed above exclude audit and non-audit fees payable to the Group’s principal auditor by funds
managed by the Group, but which are not controlled by the Group, and therefore are not consolidated in the Group financial
statements.
For the year ended 31 December 2023 fees payable to the Company’s auditor for the audit of the Company’s individual and
consolidated financial statement included an amount of £4.3m in relation to additional audit work as a result of first time adoption
of IFRS 17.
For more information on non-audit services, refer to the Audit Committee Report on page 107.
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229
10 Tax
10.1 Tax charged/(credited) to the consolidated income statement
2024
2023
For the year ended 31 December
£m
£m
The total tax charge comprises:
Current tax:
Current year
458
491
Adjustments in respect of prior years
46
7
Total current tax charge
504
498
Deferred tax:
Origination and reversal of temporary differences in the year
12
(44)
Adjustments in respect of prior years
(24)
(14)
Total deferred tax credit
(12)
(58)
Total tax charge
492
440
The tax charge above, comprising current and deferred tax, can be analysed as follows:
2024
Restated
i
2023
For the year ended 31 December
£m
£m
UK tax
336
276
Overseas tax
156
164
Total tax charge
492
440
i
Following a review of the Group’s presentation of UK and overseas tax charges, comparatives have been restated from those previously reported. For
2023 the UK tax charge has been reduced by £222 million, and the overseas tax charge has been increased by £222 million. There was no impact on total
tax charge for 2023.
10.1.1 Allocation of (loss)/profit before tax and tax charge between equity holders and policyholders
The profit before tax reflected in the consolidated income statement for the year ended 31 December 2024 of £145m (2023: £749m
profit before tax) comprises the pre-tax result attributable to equity holders and an amount equal and opposite to the tax charge
attributable to policyholder returns. This is the formal measure of (loss)/profit before tax under IFRS but it is not the result
attributable to equity holders.
This is principally because the corporate taxes of the Group include those on the income of consolidated with-profits and unit-
linked funds that, through adjustments to benefits, are borne by policyholders. These amounts are required to be included in the
tax charge of the Company under IAS 12. Consequently, this measure of profit before all taxes is not representative of pre-tax
profits attributable to equity holders.
The tax charge attributable to policyholder returns is removed from the Group’s total profit before tax in arriving at the Group’s
profit before tax attributable to equity holders. As the net of tax profits attributable to policyholders is zero, the Group’s pre-tax
profit attributable to policyholders is an amount equal and opposite to the tax charge attributable to policyholders included in the
total tax charge/(credit).
2024
2023
Equity
holders
Policyholders
Total
Equity
holders
Policyholders
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
(Loss)/profit before tax
(332)
477
145
421
328
749
Tax charge
(15)
(477)
(492)
(112)
(328)
(440)
(Loss)/profit for the year
(347)
—
(347)
309
—
309
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230
10 Tax (continued)
10.1 Tax charged/(credited) to the consolidated income statement (continued)
10.1.2 Tax reconciliation
2024
2023
Equity
holders
Policyholders
Total
Equity
holders
Policyholders
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
(Loss)/profit before tax
(332)
477
145
421
328
749
Tax (credit)/charge based on the standard UK corporation
tax rate of 25.0% (2023: 23.5%)
(83)
119
36
99
77
176
Impact of losses earned in jurisdictions with different
statutory rates to the UK
(2)
—
(2)
(2)
—
(2)
Recurring items:
Different basis of taxation - policyholders
—
365
365
—
243
243
Deductions not allowable for tax purposes
i
22
—
22
39
—
39
Differences arising on rate of deferred tax compared to
standard UK corporation tax rate
ii
32
—
32
(16)
—
(16)
Income and gains not taxable or taxable at concessionary
rates
iii
(5)
—
(5)
(1)
—
(1)
Items related to taxation of life insurance business
iv
10
—
10
—
—
—
Changes in recognition of deferred tax and effect of
unrecognised tax losses
v
(11)
—
(11)
(3)
—
(3)
Other
(3)
—
(3)
5
—
5
Non-recurring items:
Adjustments in relation to prior periods
vi
29
(7)
22
(15)
8
(7)
Impairment of goodwill
26
—
26
6
—
6
Tax charge
15
477
492
112
328
440
i
Deductions not allowable for tax purposes of £22m (2023: £39m), include £16m (2023: £33m) relating to non-taxable adjustments in relation to the Life
business. The remaining amount relates to expenses that are not deductible for tax purposes, primarily in the UK.
ii
This represents deferred tax recognised during the period at a rate that differs to the standard UK Corporation tax rate. It primarily represents deferred tax
recognised on accounting differences between IFRS and local GAAP which is used for the purposes of preparing statutory corporation tax returns.
iii
Predominantly relates to non-taxable dividend income in the UK.
iv
This represents profits/losses within the life insurance business taxable at different rates.
v
Other recurring items of £(11)m (2023: £(3)m), include £(6)m (2023: £(10)m) related to the utilisation of capital losses on which no deferred tax asset was
recognised and £(4)m (2023: £7m) in relation to the remeasurement of deferred tax assets on capital losses carried forward.
vi
The equity holders impact of £29m (2023: £(15)m) and policyholder impact of £(7)m (2023: £8m) relate to changes in estimates of prior year positions.
The Group’s profits are taxed at different rates depending on the country or territory in which the profits arise. The key applicable
tax rate for 2024 is the UK Corporation tax rate of 25.0% (effective from 1 April 2023) (2023: 23.5%) as the majority of the Group’s
profits are earned and taxed in the UK.
10.1.3 Factors that may impact the future tax rate
The majority of the Group’s profits are generated in the UK. Taking into account recurring tax adjusting items, the underlying effective
tax rate for equity holders’ portion of profits is expected to be marginally higher than the statutory rate in the UK of 25% (effective
from 1 April 2023).
The Group has unused tax losses carried forward in relation to UK capital losses £646m (2023: £548m), on which no deferred tax is
recognised. Should appropriate taxable profits arise in future periods it will result in tax benefits thereby reducing the future effective
tax rate in the relevant periods.
The Group is subject to the global minimum top-up tax under Pillar Two legislation enacted in the UK and effective for the year
ended 31 December 2024. The Group has completed an assessment to estimate the top-up tax that would be due for 2024,
resulting in top-up tax of £1m (2023: £nil) being provided for. The Group has applied a temporary mandatory exclusion from
deferred tax accounting for the impacts of top-up tax.
As the compliance, reporting and/or notification obligations become clear in the UK or other relevant countries where M&G plc is the
relevant taxpayer, M&G plc shall take appropriate steps to ensure compliance with any consequent relevant obligations under Pillar
Two as enacted in the UK.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
231
10 Tax (continued)
10.1 Tax charged/(credited) to the consolidated income statement (continued)
10.1.4 Use of accounting estimates and judgements
The calculation of the Group’s tax charge involves a degree of estimation and judgement. The two principal areas of judgement that
could impact the reported tax position are the recognition and measurement of deferred tax assets and the level of provisioning for
uncertain tax positions.
The recognition of a deferred tax asset relies on an assessment of the probability of future taxable profits, future reversals of existing
taxable temporary differences and ongoing tax planning strategies.
Deferred tax assets are reviewed at each reporting date. In considering their recoverability, the Group assesses the likelihood of their
being recovered within the expiry of losses and/or while operating as a going concern. This takes into account the future expected
profit profile and business model of each relevant company or country, and any potential legislative restrictions on use. Short-term
timing differences are generally recognised ahead of losses and other tax attributes as being likely to reverse more quickly.
The provisions for uncertain tax positions cover a wide range of issues, only a fraction of these are expected to be subject to challenge
by a tax authority at any point in time. The Group engages constructively and transparently with tax authorities with a view to early
resolution of uncertain tax matters. Estimated positions are based on the probability of potential challenge within certain jurisdictions
and the possible outcome based on relevant facts and circumstances. The judgements and estimates made to recognise and
measure the effect of uncertain tax positions are reassessed whenever circumstances change or when there is new information that
affects those judgements.
10.1.5 Tax charged/(credited) to other comprehensive income
2024
2023
For the year ended 31 December
£m
£m
The tax charge/(credit) booked to other comprehensive income, current and deferred tax, comprises:
Actuarial gains/(losses) on defined benefit pension schemes
13
(28)
Total tax charge/(credit) to other comprehensive income
13
(28)
10.1.6 Tax credited to equity
2024
2023
For the year ended 31 December
£m
£m
The tax credit booked to shareholders’ equity, current and deferred tax, comprises:
Share-based payments
(4)
(7)
Total tax credit to equity
(4)
(7)
10.2 Deferred tax
10.2.1 Deferred tax assets and liabilities
Under IAS 12, deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the
liability settled, based on tax rates (and laws) that have been enacted or are substantively enacted at the end of the reporting
period. Deferred tax assets are recognised as recoverable to the extent that, on the basis of all available evidence, it is regarded as
probable there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be
deducted or tax losses utilised. Deferred tax assets and liabilities are only offset when there is both a legal right to set-off and an
intention to settle on a net basis.
10.2.2 Deferred tax in the statement of financial position
The following table shows movements on deferred tax assets and liabilities during the year. The amounts are different from those
disclosed in the consolidated statement of financial position as the below amounts are presented before offsetting asset and
liability balances where there is a legal right to set-off and an intention to settle on a net basis.
Changes in tax laws and rates may affect recorded deferred tax assets and liabilities as the carrying values of our deferred tax
assets and liabilities will be revalued based on current tax rates. The majority of the UK deferred tax balances are measured at a
policyholder rate of tax and remaining UK balances are held at the UK corporation tax rate of 25%.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
232
10 Tax (continued)
10.2 Deferred tax (continued)
10.2.2 Deferred tax in the statement of financial position (continued)
2024
For the year ended 31 December
Unrealised
gains
/(losses) on
investments
i
Other short-
term timing
differences
ii
Deferred
acquisition
costs
iii
Defined
benefit
pensions
Capital
allowances
Tax
losses
carried
forward
iv
Share-based
payments and
deferred
compensation
Balances
relating to
insurance
and
investment
contracts
v
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
2
158
27
—
21
505
23
263
999
Liabilities
(675)
(35)
(1)
(21)
—
—
—
(506) (1,238)
As at 1 January 2024
(673)
123
26
(21)
21
505
23
(243) (239)
Income statement
(39)
(53)
(8)
6
(3)
11
2
96
12
Equity and other comprehensive
income
—
—
—
(13)
—
—
(1)
—
(14)
Other movements/foreign exchange
15
9
—
—
—
—
(1)
—
23
As at 31 December 2024
(697)
79
18
(28)
18
516
23
(147)
(218)
Assets
2
108
18
—
18
516
23
313
998
Liabilities
(699)
(29)
—
(28)
—
—
—
(460) (1,216)
As at 31 December 2024
(697)
79
18
(28)
18
516
23
(147)
(218)
2023
For the year ended 31 December
Unrealised
gains
/(losses) on
investments
i
Other short-
term timing
differences
ii
Deferred
acquisition
costs
iii
Defined
benefit
pensions
Capital
allowances
Tax
losses
carried
forward
iv
Share-based
payments and
deferred
compensation
Balances
relating to
insurance
and
investment
contracts
v
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
5
163
38
—
28
528
26
351 1,139
Liabilities
(825)
(37)
(1)
(39)
(15)
—
—
(572) (1,489)
As at 1 January 2023
(820)
126
37
(39)
13
528
26
(221) (350)
Income statement
138
(8)
(11)
(10)
(5)
(23)
(1)
(22)
58
Equity and other comprehensive
income
—
—
—
28
—
—
(2)
—
26
Other movements/foreign exchange
9
5
—
—
13
—
—
—
27
As at 31 December 2023
(673)
123
26
(21)
21
505
23
(243) (239)
Assets
2
158
27
—
21
505
23
263
999
Liabilities
(675)
(35)
(1)
(21)
—
—
—
(506) (1,238)
As at 31 December 2023
(673)
123
26
(21)
21
505
23
(243) (239)
i
Deferred tax on unrealised gains/(losses) on investments primarily arise on two key components. The largest component relates to gains/(losses) on
certain investments which are only taxed when realised, ie when an asset is sold. The second component relates to gains/(losses) on certain investments
held by life insurance companies, which for UK corporation tax purposes are deemed to have been disposed of and immediately reacquired at market
value at the end of each accounting period. Any gain/(loss) arising on the deemed disposal is required to be spread over a seven year period.
ii
The closing balance at 31 December 2024 primarily comprises £69m (2023: £77m) of deferred tax assets on subordinated debt together with a £19m
(2023: £27m) of deferred tax liability in relation to intangible assets arising on acquisitions. The remaining balance primarily relates to deferred tax assets
on employee related compensation.
iii
The Group incurs various incremental, directly attributable acquisition costs in obtaining new contracts. For UK corporation tax purposes, acquisition
expenses incurred until 31 December 2022 in respect of certain life insurance business were required to be spread over a seven year period. A deferred
tax asset was recognised for the expected future tax deductions.
iv
The tax losses carried forward at 31 December 2024 relate to £1,998m of UK tax losses (2023: £1,970m) and £66m (2023: £52m) of UK capital losses.
v
Deferred tax recognised in relation to differences arising on accounting for insurance contracts between IFRS 17 and FRS 103 - Insurance Contracts (used
for the preparation of the statutory accounts of one of the Group’s subsidiaries, The Prudential Assurance Company Limited).
The Group’s net deferred tax liability at 31 December 2024 of £218m reduced from the net deferred tax liability at 31 December
2023 of £239m representing an overall net movement of £21m. The movement is predominantly due to a decrease of deferred
tax liability (DTL) arising on balances relating to insurance and investment contracts partially offset by an increase in the DTL on
unrealised gains/losses on investments and a decrease in the deferred tax asset (DTA) on short-term timing differences.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
233
10 Tax (continued)
10.2 Deferred tax (continued)
10.2.2 Deferred tax in the statement of financial position (continued)
The recognition of a DTA relies on an assessment of the probability of future taxable profits. The Group’s expectations of future UK
taxable profits require management judgement, and take into account the Group’s long-term financial and strategic plans and
projected future shareholder transfers.
The DTA on tax losses carried forward at 31 December 2024 of £516m (2023: £505m) comprises of £499m in relation to UK income
tax losses (2023: £492m) and £17m (2023: £13m) in respect of UK capital losses. The DTA on UK income tax losses has been
recognised in full based upon sufficient future taxable profits arising from shareholder transfers. These transfers are considered a
reliable source of profit and are a consistent measure used in the Group’s Business Plans and Solvency II calculations. The DTA on
UK capital losses has been partially recognised and is based upon expected reversal of the taxable temporary differences
recognised on unrealised gains on investments, only a proportion of which are expected to be available for offset against the UK
capital losses.
Modelling was undertaken to review the recovery period of the DTA on both the income and capital losses. Under current UK tax
legislation, there is no time limit on utilisation of both the income and capital losses, however, these tax losses can only be used
against 50% of taxable income profits and capital gains in future periods. These restrictions in utilisation mean that the value of the
DTA in respect of income tax losses is only expected to be fully recovered by 2035 in the base case forecast. An impaired scenario
was also modelled which reflected a 10% reduction of forecast shareholder transfer in each period, this extended the recovery to
2038. The income tax losses arising in 2024 are not expected to be recurring in future periods and given the forecast of future
profitability and the Group’s commitment to the UK market, in management’s judgement it is probable that the value of the DTA on
losses will be recovered by the Group while still operating as a going concern. The modelling of future capital gains arising on
investments show that the recognised DTA on capital losses is expected to be recovered by 2030.
It is possible that future tax law changes could materially affect the timing of recovery and the value of these losses ultimately
realised by the Group.
The deferred tax balances arise in the following parts of the Group:
Deferred tax assets
Deferred tax liabilities
2024
2023
2024
2023
For the year ended 31 December
£m
£m
£m
£m
UK
477
430
(413)
(362)
Overseas
10
13
(292)
(320)
As at 31 December
487
443
(705)
(682)
10.2.3 Unrecognised deferred tax
Tax losses and temporary differences
At the end of the reporting period, the Group has unused tax losses of £644m (2023: £548m) for which no deferred tax asset is
being recognised. The Group’s unused tax losses primarily relate to capital losses in the UK of £636m (2023: £540m). No deferred
tax asset is recognised on these losses as it is considered not probable that future taxable UK capital gains or other appropriate
profits will be available against which they can be utilised. Under UK law, capital losses and trade losses can be carried forward
indefinitely.
Group investments in subsidiaries, branches and investments
Retained earnings of overseas subsidiaries are expected to be re-invested indefinitely or remitted to the UK free from further
taxation by virtue of Parent Company exemptions on dividends from subsidiaries and on capital gains on disposal. Consequentially,
the Group does not consider there to be any significant taxable temporary differences associated with investments in subsidiaries,
branches, associates and joint arrangements.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
234
10 Tax (continued)
10.3 Current tax assets and liabilities
Movements on corporation tax current tax assets and liabilities were as follows:
2024
2023
For the year ended 31 December
£m
£m
Net corporation tax (liability)/asset as at 1 January
(30)
197
Income statement
(504)
(498)
Reserves movement for the period
5
9
Corporation tax paid
514
250
Other movements
(1)
12
Net corporation tax liability as at 31 December
(16)
(30)
Corporation tax assets:
UK
6
16
Overseas
59
51
Corporation tax liabilities:
UK
(34)
(57)
Overseas
(47)
(40)
Net corporation tax liability as at 31 December
(16)
(30)
The net corporation tax liability consists of £65m current tax assets (2023: £67m) and £81m current tax liabilities (2023: £97m). All
corporation tax assets and liabilities are expected to be settled within 12 months.
One of the Group’s subsidiaries, The Prudential Assurance Company Limited (PAC), is the lead litigant in a combined group action
against HM Revenue and Customs (HMRC) concerning the correct historical tax treatment applying to dividends received from
overseas portfolio investments of its With-Profits Fund.
In February 2018, the Supreme Court heard HMRC’s appeal against the earlier Court of Appeal decision in PAC’s favour. The
decision of the Supreme Court, released in July 2018, upheld the main point of dispute in PAC’s favour but reversed the decisions
of the lower courts on some practical points of how to apply that principle. The Supreme Court issued its order giving effect to its
decision in October 2019, stating any remaining issues of computation be remitted back to the High Court. PAC and HMRC are
working through the mechanics of implementing the Supreme Court decisions. To date, this work has led to a reduction in the
estimate for policyholder tax credit recoverable, and the associated estimate of interest receivable.
As at 31 December 2024, PAC has recognised a total policyholder tax credit of £114m (2023: £114m) in respect of its claim against
HMRC. Of this amount, £40m (2023: £40m) has been paid by HMRC leaving a tax recoverable balance of £74m (2023: £74m)
recorded as an amount of tax due from HMRC. PAC will be entitled to interest on the tax repaid. Discussions with HMRC are
continuing to determine a mechanism for repayment and this is expected to be finalised during 2025 at which point PAC should
receive full and final payment.
11 Earnings per share
Basic earnings per share (EPS) for the year ended 31 December 2024 was (15.1)p (2023: 12.7p) and diluted EPS was (15.1)p (2023:
12.4p). Basic EPS is based on the weighted average ordinary shares outstanding after deducting treasury shares and shares held
by the employee benefit trust. Diluted EPS is based on the potential future shares outstanding resulting from exercise of options
under the various share-based payment schemes in addition to the weighted average ordinary shares outstanding. The following
tables shows details of basic and diluted earnings per share:
2024
2023
For the year ended 31 December
£m
£m
(Loss)/profit attributable to equity holders of M&G plc
(360)
297
2024
2023
For the year ended 31 December
Millions
Millions
Weighted average number of ordinary shares outstanding
2,388
2,350
Dilutive effect of share options and awards
—
46
Weighted average number of diluted ordinary shares outstanding
2,388
2,396
2024
2023
For the year ended 31 December
Pence
per share
Pence
per share
Basic (loss)/earnings per share
(15.1)
12.7
Diluted (loss)/earnings per share
(15.1)
12.4
As the Group has made a loss attributable to equity holders of the Company for the year ended 31 December 2024, the diluted
earnings per share is the same as the basic earnings per share as it is not permissible for the diluted earnings per share to be
greater than the basic earnings per share.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
235
12 Dividends
2024
2023
For the year ended 31 December
Pence
per share
£m
Pence
per share
£m
Dividends relating to reporting period:
First interim dividend - Ordinary
6.6
157
6.5
152
Second interim dividend - Ordinary
13.5
321
13.2
311
Total
20.1
478
19.7
463
Dividends paid in reporting period:
Prior year’s interim dividend - Ordinary
13.2
311
13.4
310
First interim dividend - Ordinary
6.6
157
6.5
152
Total
19.8
468
19.9
462
Subsequent to 31 December 2024, the Board has declared a second interim dividend for 2024 of 13.5 pence per ordinary share
and, an estimated £321m in total. The dividend is expected to be paid on 9 May 2025 and will be recorded as an appropriation of
retained earnings in the Parent Company’s financial statements at the time that it is paid.
13 Goodwill and intangible assets
2024
2023
Goodwill
Other
Intangibles
Total
Goodwill
Other
Intangibles
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
Cost
At 1 January
1,589
397
1,986
1,580
490
2,070
Transfer to held for sale
(51)
(77)
(128)
(1)
(111)
(112)
Reclassification from/(to) other item in statement of
financial position
22
(34)
(12)
—
—
—
Additions:
Arising on acquisitions
62
8
70
—
—
—
Other purchases
16
94
110
11
36
47
Disposals and transfers
—
(2)
(2)
—
(1)
(1)
Foreign exchange differences
(6)
—
(6)
(1)
(17)
(18)
At 31 December
1,632
386
2,018
1,589
397
1,986
Accumulated amortisation and impairment
At 1 January
(70)
(101)
(171)
(45)
(148)
(193)
Transfer (from)/to held for sale
—
(1)
(1)
—
68
68
Reclassification from other item in statement of financial
position
—
(1)
(1)
—
—
—
Amortisation
—
(26)
(26)
—
(33)
(33)
(Impairment)/reversal of impairment
(106)
(5)
(111)
(24)
8
(16)
Disposals and transfers
—
2
2
—
1
1
Foreign exchange differences
2
2
4
(1)
3
2
At 31 December
(174)
(130)
(304)
(70)
(101)
(171)
Net book amount
1,458
256
1,714
1,519
296
1,815
2024
2023
For the year ended 31 December
£m
£m
Goodwill comprises:
Asset Management
1,269
1,262
M&G Wealth Platform
—
13
Other
21
42
Subsidiaries held by the With-Profits Fund
168
202
1,458
1,519
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
236
13 Goodwill and intangible assets (continued)
13.1 Impairment assessment
Goodwill does not generate cash flows independently of other groups of assets and thus is assigned to a group of cash-generating
units (CGUs) for the purposes of impairment testing.
The group of CGUs are based upon how management monitors the business and represent the lowest level to which goodwill can
be allocated on a reasonable basis.
Goodwill is tested annually for impairment, and where there is an indication of impairment, by comparing the carrying amount of
the group of CGUs, including any goodwill, with its recoverable amount.
None of the goodwill recognised is expected to be deductible for income tax purposes.
Asset Management cash-generating units
The carrying value of Asset Management goodwill predominantly relates to that arising on the acquisition of M&G Group Limited,
split between the Wholesale Asset Management CGU (excluding MandG Investments Southern Africa (Pty) Limited), the
Institutional Asset Management CGU (excluding responsAbility Investments AG and BauMont Real Estate Capital Limited), and the
Internal Asset Management CGU. Goodwill arising on the acquisition of the MandG Investments Southern Africa (Pty) Limited CGU,
the responsAbility Investments AG CGU and the BauMont Real Estate Capital Limited CGU is also recognised.
M&G Group Limited
An impairment assessment has been undertaken, which resulted in no impairment charge being recognised.
The recoverable amount of the group of CGUs was determined by calculating the value in use. The value in use represents the
present value of future cash flows based on the business plan to 2027 approved by management, and relevant assumptions for
cash flows for later years.
The future cash flows used in the value in use calculation are based on a set of economic, market and business assumptions.
These include the direct and secondary effects of recent developments, such as changes in global equity markets and trends in
fund flows, which are considered by management in arriving at the expectations for the final projections for the business plan.
The business plan considers anticipated growth in sustainability-focused fund propositions, including those aimed at managing
and addressing climate risk, and its impact on projected AUMA flows based on our strategy. M&G Group Limited being an asset
manager does not hold material investments on its balance sheet which would directly be impacted by climate risk. Given this is an
emerging area, and given the current available data and the sophistication of the models, forecast cash flows may not fully reflect
the potential impact of climate risk.
Based on the assessment, the value in use of the group of CGUs was higher than the carrying value and no impairment has been
recognised as at 31 December 2024 in respect of goodwill arising on the acquisition of M&G Group Limited.
The value in use is particularly sensitive to a number of key assumptions as follows:
– The cash flow forecast has been extrapolated beyond the business plan period to incorporate a five-year value in use
assessment, estimating growth rates for 2028 and 2029, tapering the growth expected in 2027 down over the two-year period,
to the long-term growth rate (based on long-term inflation and nominal gross domestic product rates for the UK).
– The pre-tax discount rate as at 31 December 2024 was 11% (2023: 11%) and is based on the weighted average cost of capital for
M&G Group Limited derived using an estimated cost of equity, under the capital asset pricing model and cost of debt. A 50bps
increase in the discount rate would result in the value in use decreasing by £145m (2023: £175m). This would not result in any
impairment charge being recorded for goodwill.
– The terminal value was calculated using a standard growth model, using a discount rate of 11% (2023: 11%) as stated above, and
a long-term growth rate of 2% (2023: 2%). A 50bps decrease in the long-term growth rate would result in the value in use
decreasing by £100m (2023: £127m). This would not result in any impairment charge being recorded for goodwill.
– That asset management contracts continue on similar terms.
No reasonable change in assumptions stated above would result in any impairment being recorded. Furthermore, there would be
no impairment recorded even if the individual stresses to assumptions stated above were to apply concurrently which
demonstrates the significant headroom available on the carrying value.
responsAbility Investments AG
During the year to 31 December 2024 an impairment of £30m (2023: £25m) has been recognised in respect of the responsAbility
Investments AG CGU to bring the carrying value down to its recoverable amount which is its value in use of £94m (2023: £132m).
The change primarily reflects a revised view of the delivery of the revenue synergies expected through use of the Group’s
distribution capabilities as anticipated at the date of acquisition. The responsAbility Investments AG CGU consists of the net assets
and goodwill and other intangibles arising from the acquisition of responsAbility Investments AG in May 2022. All of the impairment
has been allocated against goodwill with the expense recorded in administrative expenses in the consolidated income statement.
The key assumptions in determining the value in use were a discount rate of 9.8% (2023: 10.5%), a long-term growth rate of 1.4%
(2023: 1.6%) and a terminal value earnings before interest, taxation, depreciation and amortisation (EBITDA) margin of 23.9%
(2023: 31.6%).
M&G plc Annual Report and Accounts 2024
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Notes to the consolidated financial statements continued
237
13 Goodwill and intangible assets (continued)
13.1 Impairment assessment (continued)
Wealth platform and advice businesses
During the year, the Group announced a refresh of the strategy for the Wealth business which included the decision to review the
future of the platform business, M&G Wealth Platform, and the merger of the Life and Wealth segments under joint leadership.
The refresh to strategy has had a material impact on the recoverable amount of M&G Wealth Platform and accordingly, an
impairment of £28m (2023: £nil) was recorded against the goodwill and intangible recognised in respect of the business. Goodwill
allocated to the business also included the portion related to the revenue synergies that were expected to be realised from the
acquisition of Continuum, the independent advice entity acquired during the year that will now not crystallise. The recoverable
amount was derived using the fair value less cost to sell approach.
The ongoing macro-economic volatility, including the sustained higher interest rate environment, along with the enhanced
regulatory scrutiny in the sector have led to a reassessment of the growth forecasts relating to our model portfolio services and
independent financial advice businesses. Furthermore, the restriction within IAS 36: Impairment of assets in recording expected
cost synergies over the projection period in full has resulted in a fall in the recoverable amount of these businesses using the value
in use approach. These factors have led to an impairment of £51m recorded in respect of these businesses during the year. The key
assumptions in determining the value in use was a discount rate of 11.5% (2023: 10.5% - 11.5%) and a long-term growth rate of
2.0% (2023: 2.0%).
Acquisition of subsidiaries held by the With-Profits Fund
This balance relates to goodwill arising on acquisition of subsidiaries held within consolidated infrastructure private equity vehicles
which are held by the With-Profits Fund. Management have undertaken an impairment assessment by comparing the fair value of
the subsidiaries with their carrying value. During the year £38m (2023: £nil) of impairments, were recognised in respect of goodwill
and other intangibles held by the Group’s infrastructure capital private equity vehicles that are related to assets classified as held
for sale. These impairments are therefore not shown in the impairment movement line in the above movement table.
13.2 Intangible assets
Intangible assets comprise customer relationships acquired through business combinations, software, service concessions,
royalties and licences. All intangibles are amortised on a straight-line basis.
Independent financial adviser relationships and trade name arising on acquisitions in the year
During the year, independent financial adviser relationships and a trade name have been recognised by the Group as part of the
acquisition of My Continuum Financial Limited in March 2024. Further details are set out in Note 2.2.
The description of the separate intangible assets acquired, including their estimated useful life, is as follows:
Intangible asset type
Average useful life at
acquisition date
Acquisition date
Fair value on
acquisition date
£m
Carrying value
£m
Independent financial adviser relationships
9 years
19 March 2024
4
4
Brand name
9 years
19 March 2024
3
3
All intangibles will be amortised on a straight-line basis.
In arriving at the fair value of intangible assets acquired in business combinations, a number of assumptions and judgements are
applied. Any reasonable change in the assumptions and judgements made would have a minimal impact on the valuation.
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Notes to the consolidated financial statements continued
238
14 Investments in joint ventures and associates
14.1 Investments in joint ventures and associates accounted for using the equity method
2024
2023
As at 31 December
£m
£m
Interests in joint ventures
284
265
Interests in associates
—
22
Investments in joint ventures and associates accounted for using the equity method
284
287
2024
2023
For the year ended 31 December
£m
£m
Share of profit from joint ventures
24
23
Share of profit from joint ventures and associates accounted for using the equity method
24
23
There is no share of other comprehensive income from joint ventures or associates.
14.1.1 Investment in joint ventures accounted for using the equity method
All of the Group’s investments in joint ventures which are accounted for using the equity method are property vehicles held in the
With-Profits Fund.
No joint ventures are considered to be material individually or in aggregate to the Group for the years ended 31 December 2024
and 31 December 2023. None of the Group’s joint ventures are listed and financial information of these investments covering
the same reporting period as that of the Group has been used for accounting for these investments using the equity method.
14.1.2 Investment in associates accounted for using the equity method
The Group acquired two further 25% stakes in Continuum on 19 March 2024 and 10 March 2025. The Group has accounted for the
transaction on the basis it controls 100% of Continuum from the date of acquisition of the additional 25% stake on 19 March 2024.
As at 31 December 2023 this investment was classified as an associate accounted for using the equity method, further details are
set out in Note 2.2.
14.2 Interests in joint ventures and associates accounted for at fair value through profit or loss (FVTPL)
The Group has investments in OEICs, unit trusts, property unit trusts and venture capital investments of the With-Profits Fund
where the Group has significant influence or joint control. These investments are accounted for on a FVTPL basis and are included
within equity securities and pooled investment funds in the consolidated statement of financial position.
14.2.1 Associates accounted for at FVTPL
As at 31 December 2024, the Group held 29.2% of M&G European Property Fund (MEP) (2023: 29.4%) with a fair value of £958m
(2023: £1,008m). No other associates accounted for at FVTPL are considered individually material to the Group for the years ended
31 December 2024 and 31 December 2023.
The aggregate fair value of associates accounted for at FVTPL, including MEP, at 31 December 2024 was £2,611m (2023: £2,004m).
14.2.2 Joint ventures accounted for at FVTPL
The aggregate fair value of joint ventures accounted for at FVTPL at 31 December 2024 was £465m (2023: £209m). None of the
joint ventures accounted for at FVTPL are considered individually material to the Group for the years ended 31 December 2024
and 31 December 2023.
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Notes to the consolidated financial statements continued
239
15 Property, plant and equipment
Property, plant and equipment (PPE) comprises right of use assets, properties and land occupied by the Group and other tangible
assets. A reconciliation of the carrying amount of these items from the beginning to the end of the year is as follows:
2024
2023
Right of use
assets
Group
occupied
property
Other
tangible
assets
Total
Right of use
assets
Group
occupied
property
Other
tangible
assets
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Cost
At 1 January
294
12
2,545
2,851
346
106
2,140
2,592
Transfer from/(to) held for sale
82
40
(219)
(97)
(11)
(102)
(73)
(186)
Additions
16
—
289
305
13
8
488
509
Disposals and transfers
(73)
(7)
(59)
(139)
(53)
—
(13)
(66)
Foreign exchange differences
(5)
(2)
(57)
(64)
(1)
—
3
2
At 31 December
314
43
2,499
2,856
294
12
2,545
2,851
Accumulated depreciation and
impairment
At 1 January
(124)
—
(662)
(786)
(105)
(23)
(511)
(639)
Transfer (from)/to held for sale
(16)
(33)
(353)
(402)
2
25
17
44
Depreciation charge for the year
(25)
(1)
(138)
(164)
(24)
(2)
(117)
(143)
Impairment
—
—
—
—
(4)
—
(61)
(65)
Disposals and transfers
73
1
46
120
6
—
11
17
Foreign exchange differences
3
1
26
30
1
—
(1)
—
At 31 December
(89)
(32)
(1,081)
(1,202)
(124)
—
(662)
(786)
Net book amount
225
11
1,418
1,654
170
12
1,883
2,065
15.1 Right of use assets
The Group recognises right of use assets for leases of land and buildings which are used as office space across various locations.
Some leases include lease break options that are exercisable at the option of the Group.
As at 31 December 2024, £88m (2023: £23m) of right of use assets were held by the With-Profits Fund.
15.2 Other tangible assets
As at 31 December 2024, other tangible assets with a net book value of £1,327m (2023: £1,784m) were held by the With-Profits
Fund, of which £63m (2023: £174m) are assets under construction. The other tangible assets within the With-Profits Fund are held
by the Group’s infrastructure capital and private equity vehicles which are consolidated by the Group.
During the year £76m (2023: £54m) of impairments, net of reversals, were recognised in respect of other tangible assets held by
the Group’s infrastructure capital private equity vehicles. In the current year, the impairments related to assets classified as held for
sale and therefore are not shown in the above property, plant and equipment disclosure.
Within the context of scenario analysis disclosed in our climate-related disclosures on page 81, consideration was given to the
potential impact of climate risk on certain infrastructure assets which are consolidated in the Group statement of financial position.
The assessment of assets identified as being located in high-risk areas, concluded that no impairment indicator is present due to
adaptation and mitigation measures in place for each asset.
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Notes to the consolidated financial statements continued
240
16 Investment property
Investment property is primarily held by the With-Profits Fund and is carried at fair value. A reconciliation of the carrying amount of
investment property from the beginning of the year to the end of the year is set out below:
2024
2023
For the year ended 31 December
£m
£m
At 1 January
15,422
16,505
Transfer to held for sale
(482)
(172)
Additions:
Resulting from property acquisitions
705
746
Resulting from expenditure capitalised
272
215
Arising on acquisition of subsidiaries
106
76
Disposals and other
(1,320)
(530)
Net fair value losses
(340)
(1,053)
Foreign exchange differences
22
(365)
At 31 December
14,385
15,422
For the year ended 31 December 2024 rental income from investment property was £947m (2023: £956m). Direct operating
expenses, including repairs and maintenance arising from these properties for the year ended 31 December 2024 were
£220m (2023: £191m). Direct operating expenses on investment property not generating rental income for the year ended
31 December 2024 was £5m (2023: £9m).
The Group’s policy is to let investment property to tenants through operating leases. The leases typically include clauses to enable
periodic rent reviews according to prevailing market conditions. In some agreements, the rents might be variable and linked
to an index. Certain leases contain options to break before the end of the lease term by either party.
Minimum future rental income to be received on non-cancellable leases of the Group’s freehold and leasehold investment property
are receivable in the following periods:
2024
2023
As at 31 December
£m
£m
Less than 1 year
496
461
After 1 year to 2 years
416
407
After 2 years to 3 years
363
375
After 3 years to 4 years
330
332
After 4 years to 5 years
299
298
Over 5 years
2,461
2,100
Total minimum future rental income
4,365
3,973
M&G plc Annual Report and Accounts 2024
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Notes to the consolidated financial statements continued
241
17 Defined benefit pension schemes
17.1 Background and summary economic and IAS 19 financial positions
The Group operates three defined benefit pension schemes, which historically have been funded by the Group. The largest defined
benefit scheme as at 31 December 2024 is the Prudential Staff Pension Scheme (PSPS), which accounts for 83% (2023: 83%) of
the present value of the defined benefit pension obligation.
The Group also operates two smaller defined benefit pension schemes that were originally established by the M&G Group Limited
(M&GGPS) and Scottish Amicable (SASPS) businesses.
On 18 September 2023, M&GGPS Trustees executed a buy-in transaction with PAC covering all deferred and pensioner member
liabilities. A premium of £329m was transferred to PAC as part of the transaction. The assets transferred to PAC as premium are
recognised in the relevant line within financial assets in the consolidated statement of financial position. As a result of the buy-in
the relevant plan assets transferred were replaced with a single line insurance policy reimbursement right asset which is
eliminated on consolidation. This reimbursement right asset, although available to the Scheme does not constitute a plan asset
under IAS 19. The value of this insurance policy at 31 December 2024 was £261m (2023: £298m).
In addition, on 30 September 2023, M&GGPS agreed to transfer the liability related to all active members to the PSPS scheme.
This resulted in a premium of £50m and related liability £29m being transferred to PSPS. This is accounted for as a settlement and
accordingly, M&GGPS recorded a loss of £21m on derecognition and PSPS recorded a corresponding gain which was eliminated in
the consolidated financial statements for the year 31 December 2023.
Subsequent to the transfer of active members from M&GGPS to PSPS, transacted at the same time as the buy-in, a portion (13%
and 23% as at 31 December 2024 and 31 December 2023 respectively) of the net economic pension surplus of PSPS is attributable
to M&G FA Limited, a subsidiary of the Group, and is attributable to the shareholders. The remainder is then attributed 70% to the
With-Profits Fund and 30% to the Group’s shareholders.
Under IAS 19: Employee Benefits and IFRIC 14: IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements
and their Interaction, the Group can only recognise a surplus to the extent that it is able to access the surplus either through an
unconditional right of refund or through reduced future contributions relating to ongoing service of active members. The Group has
no unconditional right of refund to any surplus in PSPS. Accordingly, PSPS’s net economic pension surplus is restricted up to the
present value of the Group’s economic benefit, which is calculated as the difference between the estimated future cost of service
for active members and the estimated future ongoing contributions. The level of the restriction is set out in the tables that follow.
In contrast, the Group is able to access the surplus of SASPS and M&GGPS through an unconditional right of refund. Therefore, the
surplus resulting from the schemes (if any) would be recognised in full. As at 31 December 2024 and 31 December 2023 the SASPS
scheme is in surplus and the M&GGPS schemes is in deficit based on the IAS 19 valuation.
M&GGPS is in a net economic surplus position but in deficit on an IAS 19 basis as a result of the elimination of the reimbursement
right asset recognised in respect of the buy-in of the Scheme by PAC as explained above. The Scheme also has investments in
insurance policies issued by Prudential Pensions Limited (PPL), a subsidiary of the Group, through which it invests in certain pooled
funds. Under IAS 19, non-transferable insurance policies issued by a related party do not qualify as plan assets and these are
eliminated.
The gross economic position of M&GGPS which includes the PPL policies and reimbursement is reflected in the financial
statements of M&G FA Limited.
The SASPS net economic pension surplus is attributed 40% to the With-Profits Fund and 60% to the Group’s shareholders. Both
the policyholder and shareholder allocation of SASPS is reflected in the financial statements of PAC.
In June 2023, the UK High Court passed a judgment in the Virgin Media Limited v NTL Pension Trustees II Limited case which
stated that certain historical amendments in respect of contracted-out defined benefit schemes in the period from 6 April 1997 to
5 April 2016 would be invalid if not accompanied at the time by a relevant actuarial confirmation. The judgment was subject to an
appeal in July 2024 where the Court of Appeal upheld the decision of the High Court and concluded that the initial judgment
applied to amendments to both future and past service.
The Group has undertaken an impact assessment which includes the review of available historical records and relevant enquiries.
Based on the Group’s assessment, no adjustments are expected to be required to the defined benefit obligations of the Group’s
pension schemes in respect of the case as at the reporting date. The Group will continue to monitor developments in relation to the
matter.
We recognise climate change has potential to affect the value of investments within the Schemes. Both PSPS and M&GGPS
incorporate climate-related factors when executing their strategic objectives.
M&G plc Annual Report and Accounts 2024
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Notes to the consolidated financial statements continued
242
17 Defined benefit pension schemes (continued)
17.1 Background and summary economic and IAS 19 financial positions (continued)
The pension assets and liabilities for the defined benefit pension schemes are as follows:
2024
PSPS
SASPS
M&GGPS
Total
As at 31 December
£m
£m
£m
£m
Fair value of plan assets
4,034
524
274
4,832
Present value of defined benefit obligation
(3,725)
(486)
(261)
(4,472)
Effect of restriction on surplus
(302)
—
—
(302)
Net economic pension surplus
i
7
38
13
58
Non-qualifying insurance policies
—
—
(10)
(10)
Elimination of reimbursement right asset on consolidation
—
—
(261)
(261)
Net total pension surplus/(deficit)
7
38
(258)
(213)
2024
PSPS
SASPS
M&GGPS
Total
As at 31 December
£m
£m
£m
£m
Attributable to:
Shareholder‑backed business
3
23
(258)
(232)
With-Profits Fund
4
15
—
19
Net total pension surplus/(deficit)
7
38
(258)
(213)
2023
PSPS
SASPS
M&GGPS
Total
As at 31 December
£m
£m
£m
£m
Fair value of plan assets
4,611
583
314
5,508
Present value of defined benefit obligation
(4,260)
(576)
(298)
(5,134)
Effect of restriction on surplus
(339)
—
—
(339)
Net economic pension surplus
i
12
7
16
35
Non-qualifying insurance policies
—
—
(12)
(12)
Elimination of reimbursement right asset on consolidation
—
—
(298)
(298)
Net total pension surplus/(deficit)
12
7
(294)
(275)
2023
PSPS
SASPS
M&GGPS
Total
As at 31 December
£m
£m
£m
£m
Attributable to:
Shareholder‑backed business
6
4
(294)
(284)
With‑Profits Fund
6
3
—
9
Net total pension surplus/(deficit)
12
7
(294)
(275)
i
The economic basis reflects the position of the defined benefit schemes from the perspective of the pension schemes, adjusted for the effect of IFRIC 14
for the derecognition of PSPS’s unrecognisable surplus and before adjusting for any non-qualifying assets.
17.1.1 Triennial actuarial valuations
A full actuarial valuation is required for defined benefit pension schemes every three years in order to assess the appropriate level
of funding for schemes in relation to their commitments. These valuations include assessments of the likely rate of return on the
assets held within the separate trustee administered funds. The actuarial valuation differs from the IAS 19 accounting basis
valuation in a number of respects, including the discount rate assumption where IAS 19 prescribes a rate based on high-quality
corporate bonds while a more prudent assumption is typically used for the actuarial valuation.
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Notes to the consolidated financial statements continued
243
17 Defined benefit pension schemes (continued)
17.1 Background and summary economic and IAS 19 financial positions (continued)
17.1.1 Triennial actuarial valuations (continued)
Summary information on the latest completed actuarial valuation for each of the schemes, as at 31 December 2024, is shown
in the table below.
PSPS
SASPS
M&GGPS
Last completed actuarial
valuation date
05 April 2023
31 March 2023
31 December 2023
Funding level at the last
valuation
108%
101%
100%
Deficit funding arrangement
agreed with the Trustees
based on the last completed
valuation
No deficit funding required
No deficit funding required
No deficit funding required
Current level of employer
contributions for active
members
Are at the minimum level
required under the scheme
rules (approximately £2m per
annum)
i
Approximately £3m per annum
Zero contribution:
no active members remaining
post-buy-in
Contributions to cover
ongoing administration
and other expenses
Approximately £7.6m per
annum
Approximately £1.8m per annum
Approximately £1.5m
per annum
i
Note that this includes the estimate amount in respect of PSPS members at the last triennial valuation plus the expected contribution at the minimum level
in respect of members transferred from M&GGPS.
The contributions detailed above broadly represent the Group’s current expectation of amounts that will be paid to each respective
plan in the next annual reporting period.
17.1.2 Risks to which the defined benefit schemes expose the Group
The plans are subject to the statutory funding objective requirements of the Pensions Act 2004, which require that plans be funded
to at least the level of their technical provisions (an actuarial estimate of the assets needed to provide for the benefits already built
up under the plan). Where there is a deficit, the employers of the schemes would agree a deficit recovery plan. Accordingly, the
pension schemes expose the Group to a number of risks, the most significant of which are interest rate risk, equity risk, inflation
risk, credit risk and mortality risk.
17.1.3 Corporate governance
The Group’s pension schemes are established under trust and are subject to UK legal requirements; this includes being subject to
regulation by the Pensions Regulator in accordance with the Pensions Act 2021. Each scheme has a corporate trustee to which
some Directors are appointed by Group employers with the remaining Directors nominated by members in accordance with UK
legal requirements. The Trustees have the ultimate responsibility to ensure that each scheme is managed in accordance with its
Trust Deed and Rules. The Trustees act in the best interests of the schemes’ beneficiaries; this includes taking appropriate account
of each employer’s legal obligation and financial ability to support the schemes when setting investment strategy and when
agreeing funding with the employers. The employers’ contribution commitments are formally updated at each triennial valuation;
between valuations funding levels and employer strength continue to be monitored, with the Trustees being able to bring forward
the next triennial valuation if they consider it appropriate to do so.
All of the Group’s defined benefit pension schemes are final salary schemes, which are closed to new entrants. The pensionable
salaries for most members are capped at the levels as at 30 September 2019. The Trustee of each scheme sets the general
investment policy and specifies any restrictions on types of investment and the degrees of divergence permitted from the
benchmark, but delegates the responsibility for selection and realisation of specific investments to the investment managers.
The Trustees consult with the principal employer for each scheme on the investment principles, but the ultimate responsibility for
the investment of the assets of the schemes lies with the Trustees.
M&G plc Annual Report and Accounts 2024
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Notes to the consolidated financial statements continued
244
17 Defined benefit pension schemes (continued)
17.1 Background and summary economic and IAS 19 financial positions (continued)
17.1.3 Corporate governance (continued)
The Trustees of each of the schemes manage the investment strategy of the scheme to achieve an acceptable balance between
investing in the assets that most closely match the expected benefit payments and assets that are expected to achieve a greater
return in the expectation of reducing the contributions required or providing additional benefits to members. For PSPS and SASPS,
a significant portion of the scheme assets are invested in liability matching assets such as bonds and gilts, including index-linked
gilts, to partially hedge against inflation. In addition, the schemes maintain portfolios of interest rate and inflation swaps to match
more closely the duration and inflation profiles of their assets to their liabilities.
As noted above, the Trustees of M&GGPS executed a buy-in transaction with PAC in 2023, whereby the longevity and investment
risk in respect of all deferred and pensioner members was transferred to PAC. Furthermore, liabilities relating to all active members
of the scheme were transferred to PSPS during 2023 which further de-risks the scheme.
PSPS and SASPS have invested in a mix of both return-seeking assets, such as equities and property, and matching assets,
including leveraged liability-driven investment portfolios to reflect the liability profile of the scheme. They manage the risks of the
return-seeking exposure by investing in a diversified mix of investments.
During 2020 PSPS entered into a longevity swap transaction with Pacific Life Re Limited. This arrangement provides long-term
protection for PSPS against costs that could result from unexpected increases in life expectancy relating to the pensions that were
in payment on 6 April 2019, excluding any future discretionary increases. As at 31 December 2024, the longevity swap covered
£1.8bn (2023: £2.0bn) of current pensioner scheme liabilities, on an IAS 19 basis.
17.2 Assumptions
17.2.1 Demographic assumptions
Post-retirement mortality
The calculation of the defined benefit obligation for the Group’s schemes requires assumptions to be set for both current mortality
and the allowance for future mortality improvements. The table below sets out the mortality tables and mortality improvement
model used for the Group’s schemes, along with the associated life expectancies.
As at
Scheme
Mortality tables (with scaling factors applied
to reflect experience)
Mortality
improvements
model
i
Expectation of life from retirement at aged 60
Male
currently
aged 60
Male
currently
aged 40
Female
currently
aged 60
Female
currently
aged 40
31 December 2024 PSPS
S3PMA/S3PFA Middle for males/
females
CMI 2022
26.3
28.6
27.9
30.2
SASPS
S3PMA/S3PFA for males/females
CMI 2022
27.2
28.9
28.9
30.7
M&GGPS
S3PMA/S3PFA Light for males/
females
CMI 2022
28.1
30.2
29.9
31.9
31 December 2023
PSPS
S2PMA/S2PFA for males/females
CMI 2021
26.5
28.6
28.3
30.3
SASPS
S1PMA/S1PFA for males/females
CMI 2021
27.4
29.4
29.9
31.8
M&GGPS
SAPS2 Light
CMI 2021
28.5
30.6
30.4
32.4
i
The mortality assumptions are adjusted to make allowance for future improvements in longevity. As at 31 December 2024, this allowance was based on
the CMI 2022 mortality improvements model, with a long-term improvement rate of 1.60% per annum for males (smoothing parameter (Sk) = 7.25 and A
parameter varies by age) and 1.60% per annum for females (Sk = 7.25 and A parameter varies by age) (2023: this allowance was based on the CMI 2021
mortality improvements model, with a long-term improvement rate of 1.60% per annum for males (Sk = 7.25 and A parameter varies by age) and 1.60% per
annum for females (Sk = 7.75)). The weighting parameter has been set at 15% at 31 December 2024. This parameter does not apply to the CMI 2021 model
used at 31 December 2023.
M&G plc Annual Report and Accounts 2024
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Notes to the consolidated financial statements continued
245
17 Defined benefit pension schemes (continued)
17.2 Assumptions (continued)
17.2.2 Economic assumptions
The actuarial assumptions used in determining defined benefit obligations and the net periodic benefit costs for each of the
Group’s defined benefit pension schemes are as follows:
2024
2023
For the year ended 31 December
PSPS
SASPS
M&GGPS
PSPS
SASPS
M&GGPS
Discount rate
i
5.4%
5.5%
5.5%
4.6%
4.6%
4.6%
Salary inflation
ii
3.5%
3.2%
N/A
3.4%
3.2%
N/A
Retail prices index (RPI)
3.1%
3.0%
2.9%
3.0%
2.9%
2.9%
Consumer prices index (CPI)
2.8%
2.7%
2.7%
2.7%
2.7%
2.7%
Rate of increase of pensions in payment for inflation
iii
CPI (maximum 5%)
2.8%
N/A
N/A
2.8%
N/A
N/A
CPI (maximum 2.5%)
2.5%
N/A
N/A
2.5%
N/A
N/A
Discretionary
2.8%
N/A
N/A
2.9%
N/A
N/A
RPI (maximum 5%)
N/A
3.0%
2.9%
N/A
2.9%
2.9%
RPI (maximum 2.5%)
N/A
2.5%
2.5%
N/A
2.5%
2.5%
i
The discount rate has been determined using a cash flow matching approach based on an ‘AA’ corporate bond index. The single equivalent rates in the
table above are illustrative as the full yield curve is used in the calculation of the liability.
ii
Due to the scheme changes during 2019, a cap to future pensionable salary increase came into effect and, as a result, salary growth inflation is only applied
for certain levels of pensionable salary which represent a very small proportion of the total liability.
iii
The long-term margin between RPI and CPI reflects expected changes in RPI from 2030 as a result of the UK Statistics Authority stated intention to align
RPI with CPI including owner occupiers’ housing costs (CPIH). The rate of inflation used reflects the long-term assumption for UK RPI or CPI, depending on
the particular tranche of scheme benefits, with caps and floors applied in accordance with the scheme rules. Certain tranches of scheme benefits within
PSPS have statutory pension increases in line with the higher of CPI up to a maximum level, or a discretionary level determined by the employer. Other
tranches are not guaranteed and determined by the employer on a discretionary basis. The single equivalent rates in the table above are illustrative as the
full yield curve is used in the calculation of the liability.
17.2.3 Other assumptions
In October 2018, the High Court ruled that pension schemes are required to equalise benefits for the effect of guaranteed minimum
pensions (GMPs). GMPs are a minimum benefit that schemes that were contracted-out on a salary-related basis between 1978 and
1997 are required to provide. There was a further Court ruling in November 2020 which required benefits in respect of past
transfers out of the schemes to also be equalised. In light of these Court rulings, at 31 December 2024 and 31 December 2023, the
Group has recognised an estimated allowance for GMP equalisation within the IAS 19 valuation for all the UK schemes - comprising
£29m for PSPS, £10m for SASPS, and £3m for M&GGPS as at 31 December 2024 (2023: £32m for PSPS, £11m for SASPS and £3m
for M&GGPS).
17.2.4 Sensitivity of the pension scheme liabilities to key variables
The sensitivity information below is based on the core scheme liabilities and assumptions at the balance sheet date.
The sensitivities are calculated based on a change in one assumption with all other assumptions being held constant. As such,
interdependencies between the assumptions are excluded. The impact of the rate of inflation assumption sensitivity includes the
impact of inflation on the rate of increase in salaries, where applicable, and on the rate of increase of pensions in payment.
The sensitivities of the underlying pension scheme liabilities as shown below do not directly equate to the impact on the Group’s
comprehensive income due to the effect of restriction on surplus for PSPS and the allocation of a share of the interest in the
financial position of PSPS and SASPS to the With-Profits Fund as described above. In addition, the sensitivities shown do not
include the impact on assets, which for PSPS and SASPS would significantly offset the impact of the discount rate and inflation
sensitivities on the IAS 19 surplus or deficit. For M&GGPS the reimbursement asset would fully offset the impacts on the defined
benefit obligation. For the PSPS scheme, the mortality rate sensitivity impact would also be partially mitigated by the longevity
swap asset held.
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Notes to the consolidated financial statements continued
246
17 Defined benefit pension schemes (continued)
17.2 Assumptions (continued)
17.2.4 Sensitivity of the pension scheme liabilities to key variables (continued)
2024
Increase/(decrease) in the present value
of the scheme’s defined benefit obligation
PSPS
SASPS
M&GGPS
Total
As at 31 December
Sensitivity of the change in assumptions
£m
£m
£m
£m
Base position
N/A
3,725
486
261
4,472
Discount rate
i
Decrease by 0.5%
203
36
21
260
Increase by 0.5%
(188)
(32)
(19)
(239)
Rate of inflation with consequent reduction
in salary increases (where applicable)
Decrease by 0.2% (with consequent
reduction in salary increases)
(50)
(7)
(6)
(63)
Mortality rate
Increase in life expectancy by 1 year
120
13
6
139
2023
Increase/(decrease) in the present value
of the scheme’s defined benefit obligation
PSPS
SASPS
M&GGPS
Total
As at 31 December
Sensitivity of the change in assumptions
£m
£m
£m
£m
Base position
N/A
4,260
576
298
5,134
Discount rate
i
Decrease by 0.5%
259
51
26
336
Increase by 0.5%
(234)
(45)
(24)
(303)
Rate of inflation with consequent reduction
in salary increases (where applicable)
Decrease by 0.2% (with consequent
reduction in salary increases)
(55)
(9)
(7)
(71)
Mortality rate
Increase in life expectancy by 1 year
146
15
7
168
i
The discount rate sensitivity has been revised to 0.5% from 0.2% for consistency with the discount rate sensitivities on insurance contracts.
17.3 Plan assets and other assets of the scheme
As at 31 December 2024 80% of the total value of the scheme assets, excluding the reimbursement asset, were derived from
quoted prices in an active market (2023: 81%), while the value of the remaining assets is derived from the use of various observable
and unobservable inputs. None of the scheme assets included property occupied by the Group. The IAS 19 basis plan assets as at
31 December 2024 of £4,822m (2023: £5,496m) is different from the economic basis plan assets of £4,832m (2023: £5,508m) as
shown below due to the exclusion of investment in Group insurance policies by M&GGPS as described in 17.1.
2024
2023
PSPS
Other
schemes
Total
PSPS
Other
schemes
Total
As at 31 December
£m
£m
£m
%
£m
£m
£m
%
Equities:
UK
26
—
26
1%
29
—
29
1%
Overseas
13
38
51
1%
10
37
47
1%
Bonds
i:
Government
2,824
423
3,247
67%
3,124
559
3,683
67%
Corporate
1,037
2
1,039
22%
1,145
3
1,148
21%
Asset-backed securities
332
81
413
9%
344
81
425
8%
Derivatives
ii
(689)
(128)
(817)
(17)%
(526)
(202)
(728)
(13)%
Properties
233
119
352
7%
238
118
356
6%
Other assets
258
2
260
5%
247
3
250
4%
Reimbursement right asset
iii
—
261
261
5%
—
298
298
5%
Total value of assets
4,034
798
4,832
100%
4,611
897
5,508
100%
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Notes to the consolidated financial statements continued
247
17 Defined benefit pension schemes (continued)
17.3 Plan assets and other assets of the scheme (continued)
2024
2023
Quoted in an
active market
Other
Total
Quoted in an
active market
Other
Total
As at 31 December
£m
£m
£m
%
£m
£m
£m
%
Equities:
UK
—
26
26
1%
—
29
29
1%
Overseas
—
51
51
1%
—
47
47
1%
Bonds
i:
Government
3,242
5
3,247
67%
3,678
5
3,683
67%
Corporate
799
240
1,039
22%
889
259
1,148
21%
Asset-backed securities
316
97
413
9%
315
110
425
8%
Derivatives
ii
(755)
(62)
(817)
(17)%
(720)
(8)
(728)
(13)%
Properties
—
352
352
7%
—
356
356
6%
Other assets
66
194
260
5%
60
190
250
4%
Reimbursement right asset
iii
—
261
261
5%
—
298
298
5%
Total value of assets
3,668
1,164
4,832
100%
4,222
1,286
5,508
100%
i
As at 31 December 2024 90% of the bonds were investment grade (2023: 90%).
ii
Included within derivatives is a £64m liability in respect of the longevity swap transaction with Pacific Life Re Limited (2023: £3m), valued at fair value as
per IAS 19 and based on the principles of IFRS 13.
iii
Although available to the scheme, under IAS 19 the reimbursement right asset does not constitute part of the plan assets.
17.4 Reconciliation in movement of schemes’ surplus/deficit
Economic basis
Fair value
of plan
and other
assets
Present
value of
benefit
obligation
Restriction
on surplus
Net
economic
pension
surplus/
(deficit)
Other
adjustments
Net pension
surplus/
(deficit)
£m
£m
£m
£m
£m
£m
Net defined benefit pension asset/(liability) at 1 January 2024
5,508 (5,134)
(339)
35
(310)
(275)
Total income/(expense) recognised in the income statement
i
Current service cost
—
(7)
—
(7)
—
(7)
Net interest income/(expense)
245
(228)
(15)
2
(17)
(15)
Administration expenses
(9)
—
—
(9)
—
(9)
236
(235)
(15)
(14)
(17)
(31)
Remeasurement (losses)/gains
ii
Return on the scheme assets less amount included in interest
income
(658)
—
—
(658)
43
(615)
Gains on changes in demographic assumptions
—
126
—
126
—
126
Gains on changes in financial assumptions
—
501
—
501
—
501
Losses on scheme liabilities
—
(12)
—
(12)
—
(12)
Unrecognisable surplus
—
—
52
52
—
52
(658)
615
52
9
43
52
Benefit payments
(282)
282
—
—
11
11
Employers’ contributions
28
—
—
28
—
28
Disinvestment from non-qualifying insurance policies
—
—
—
—
2
2
Net defined benefit pension asset/(liability) at 31 December 2024
4,832 (4,472)
(302)
58
(271)
(213)
M&G plc Annual Report and Accounts 2024
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Other information
Notes to the consolidated financial statements continued
248
17 Defined benefit pension schemes (continued)
17.4 Reconciliation in movement of schemes’ surplus/deficit (continued)
Economic basis
Fair value
of plan
and other
assets
Present
value of
benefit
obligation
Restriction
on surplus
Net
economic
pension
surplus/
(deficit)
Other
adjustments
Net
pension
surplus/
(deficit)
£m
£m
£m
£m
£m
£m
Net defined benefit pension asset/(liability) at 1 January 2023
5,665 (4,929)
(581)
155
—
155
Total income/(expense) recognised in the income statement
i
Current service cost
—
(8)
—
(8)
—
(8)
Net interest
267
(233)
(28)
6
—
6
Administration expenses
(11)
—
—
(11)
—
(11)
256
(241)
(28)
(13)
—
(13)
Remeasurement (losses)/gains
ii
Return on the scheme assets less amount included in interest
income
(185)
—
—
(185)
26
(159)
Gains on changes in demographic assumptions
—
27
—
27
—
27
Losses on changes in financial assumptions
—
(233)
—
(233)
—
(233)
Experience losses on scheme liabilities
—
(29)
—
(29)
—
(29)
Unrecognisable surplus
—
270
270
—
270
(185)
(235)
270
(150)
26
(124)
Benefit payments
(271)
271
—
—
—
—
Employers’ contributions
43
—
—
43
—
43
Disinvestment from the Group’s insurance policies
—
—
—
—
(11)
(11)
Reimbursement right asset
iii
—
—
—
—
(325)
(325)
Net defined benefit pension asset/(liability) at 31 December 2023 5,508
(5,134)
(339)
35
(310)
(275)
i
An expense of £6m is included in the total amount recognised in the consolidated income statement attributable to the Group for the year ended
31 December 2024 relating to the With-Profits Fund (2023: expense of £11m).
ii
Included in the share of remeasurement gains and losses recognised in other comprehensive income for the year ended 31 December 2024, are gains
attributable to the Group totalling £49m (2023: losses of £109m) and gains attributable to the With-Profits Fund of £3m (2023: losses of £15m).
iii
As noted above, M&GGPS executed a buy-in transaction with PAC (a Group entity) in 2023. The reimbursement right asset resulting from the transaction
is eliminated on consolidation. However, due to different measurement bases applied for determining the value of this asset and the related liability by
PAC for accounting purposes, the premium paid by the scheme exceeded the valuation of the scheme asset recognised by £79m. In the comparative table
above, this has been recognised as a loss in the actual return on assets.
17.5 Maturity analysis of benefit obligations
The following table provides an expected maturity analysis of the undiscounted defined benefit obligations:
All schemes
1 year or less
After 1 year
to 5 years
After 5 years
to 10 years
After 10
years to 15
years
After 15
years to 20
years
Over 20
years
Total
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2024
275
1,168
1,506
1,473
1,350
4,125
9,897
As at 31 December 2023
281
1,163
1,538
1,519
1,412
4,531
10,444
The weighted average duration of each scheme’s defined benefit obligations (in years) are as follows:
PSPS
SASPS
M&GGPS
As at 31 December 2024
11
14
15
As at 31 December 2023
12
17
17
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Notes to the consolidated financial statements continued
249
18 Classification of financial instruments
18.1 Financial assets
2024
Fair value through
profit or loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
£m
£m
£m
£m
Equity securities and pooled investment funds
31
— 64,890
— 64,890
Loans
ii
—
4,135
—
4,135
Debt securities
31
— 69,775
— 69,775
Derivative assets
31
—
1,085
—
1,085
Deposits
32
—
— 15,794 15,794
Accrued investment income and other debtors
19
—
—
2,428
2,428
Cash and cash equivalents
20
—
—
4,838
4,838
Total financial assets
— 139,885 23,060 162,945
Restated
i
2023
Fair value through
profit or loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
£m
£m
£m
£m
Equity securities and pooled investment funds
31
— 66,248
— 66,248
Loans
ii
—
3,908
—
3,908
Debt securities
31
— 70,683
— 70,683
Derivative assets
31
—
1,693
—
1,693
Deposits
32
—
—
16,324
16,324
Accrued investment income and other debtors
19
—
—
2,536
2,536
Cash and cash equivalents
20
—
—
5,148
5,148
Total financial assets
— 142,532 24,008 166,540
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, the comparative amount for cash and
cash equivalents has been restated from those previously reported. The restatement has had no impact on the consolidated income statement or net
assets. See Note 1.1 for further information.
ii
Loans primarily consist of mortgage loans of £1,891m (2023: £1,861m) and other loans of £2,243m (2023: £2,046m).
As at 31 December 2024, total mortgage loans were £1,891m (2023: £1,861m) of which £1,222m (2023: £1,258m) were held by the
shareholder-backed business. Of the mortgage loans held by the shareholder backed business 78% (2023: 74%) related to equity
release mortgage business which had an average loan to property value of 41% (2023: 39%). The equity release mortgages are
carried at fair value through profit or loss. Sensitivities in relation to the valuation of the equity release mortgages are provided in
Note 31.8.
Other loans mainly comprise collateralised loan obligations and other private debt instruments held by funds that are consolidated
by the Group.
Accrued investment income and other debtors exclude items which do not meet the definition of a financial asset.
Financial assets expected to be recovered after one year as at 31 December 2024 are £70,383m (2023: £72,033m).
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Notes to the consolidated financial statements continued
250
18 Classification of financial instruments (continued)
18.2 Financial liabilities
2024
Fair value through
profit or loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
£m
£m
£m
£m
Investment contract liabilities without DPF
25
12,144
—
—
12,144
Third party interest in consolidated funds
31
9,484
—
—
9,484
Subordinated liabilities and other borrowings
26
—
—
6,486
6,486
Derivative liabilities
31
—
3,202
—
3,202
Other financial liabilities
—
—
1,018
1,018
Accruals, deferred income and other liabilities
221
—
4,002
4,223
Total financial liabilities
21,849
3,202 11,506 36,557
Restated
i
2023
Fair value through
profit or loss
Amortised
cost
Designated
Mandatory
Total
As at 31 December
Note
£m
£m
£m
£m
Investment contract liabilities without DPF
25
12,535
—
—
12,535
Third party interest in consolidated funds
31
9,893
—
—
9,893
Subordinated liabilities and other borrowings
26
—
—
7,647
7,647
Derivative liabilities
31
—
2,910
—
2,910
Other financial liabilities
—
—
1,186
1,186
Accruals, deferred income and other liabilities
239
—
5,844
6,083
Total financial liabilities
22,667
2,910
14,677 40,254
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, the comparative amount for
subordinated liabilities and other borrowings have been restated from those previously reported.
Other financial liabilities relate to obligations under funding, securities lending and sale and repurchase agreements.
Accruals, deferred income and other liabilities exclude items which do not meet the definition of a financial liability.
Financial liabilities expected to be settled in more than one year as at 31 December 2024 were £10,326m (2023: £11,689m).
For financial liabilities designated at FVTPL there was no material impact from movement in credit risk in 2024 and 2023.
18.3 Fair value of underlying items for contracts measured under the Variable Fee Approach (VFA)
The fair value of the assets held by the With-Profits Fund for contracts measured under the Variable Fee Approach (VFA) are as
follows:
2024
2023
With-Profits Fund
With-Profits Fund
As at 31 December
£m
£m
Investment properties
4,979
5,664
Equity securities and pooled investment funds
81,194
80,996
Loans
456
568
Debt securities
41,437
42,322
Derivative assets
603
1,169
Derivative liabilities
(1,272)
(1,058)
Cash and cash equivalents
1,488
1,309
Total assets
128,885
130,970
Non-profit business in the With-Profits Fund
(6,223)
(6,856)
Other liabilities
(5,610)
(7,032)
Total fair value of VFA underlying items
117,052
117,082
In addition to the participating business underlying items detailed above, there are £3,848m of underlying items (unit-linked fund
assets) for unit-linked insurance contracts measured under the VFA (2023: £4,081m).
M&G plc Annual Report and Accounts 2024
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Notes to the consolidated financial statements continued
251
19 Accrued investment income and other debtors
2024
2023
As at 31 December
£m
£m
Interest receivable
907
893
Other accrued investment income and prepayments
314
376
Total interest receivable, accrued investment income and prepayments
1,221
1,269
Other debtors:
Outstanding sales of investment securities
117
170
Investment management fee debtors
124
127
Property related debtors
283
272
Cancellation of units awaiting settlement
18
19
Finance leases
183
176
Other
560
503
Total accrued investment income and other debtors
2,506
2,536
Analysed as:
Expected to be settled within one year
1,973
2,303
Expected to be settled after one year
533
233
Total accrued investment income and other debtors
2,506
2,536
Finance income from the net investment in all finance leases amounted to £14m (2023: £8m). Income from subleasing right-of-use
assets amounted to £4m (2023: £3m).
The table below presents a maturity analysis of undiscounted lease receipts due on these leases:
2024
2023
As at 31 December
£m
£m
Less than 1 year
8
9
After 1 year to 2 years
15
12
After 2 years to 3 years
14
17
After 3 years to 4 years
15
17
After 4 years to 5 years
15
18
Over 5 years
475
502
542
575
Unearned finance income
(359)
(399)
Net investment in finance leases
183
176
20 Cash and cash equivalents
Restated
i
2024
2023
As at 31 December
£m
£m
Cash
3,220
3,642
Cash equivalents
1,618
1,506
Total cash and cash equivalents
4,838
5,148
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, comparative amount for cash has been
restated from those previously reported. The restatement has had no impact on the consolidated income statement or net assets. See Note 1.1 for further
information.
Cash equivalents consist of short-term, highly liquid investments that are readily convertible into known amounts of cash subject to
insignificant risk of changes in value.
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Notes to the consolidated financial statements continued
252
21 Issued share capital and share premium
2024
2023
Issued shares of 5p fully paid
Number of
ordinary shares
Share capital
Share premium
Number of
ordinary shares
Share capital
Share premium
£m
£m
£m
£m
At 1 January
2,382,058,117
119
379
2,374,712,121
119
370
Shares issued to settle employee
share option schemes
3,110,167
—
4
7,345,996
—
9
Shares issued to employee
benefit trusts
22,000,000
1
—
—
—
—
At 31 December
2,407,168,284
120
383
2,382,058,117
119
379
Amounts recorded in share capital represent the nominal value of shares issued with any difference between proceeds received
on issue of shares, net of issue costs, and the nominal value of shares issued being credited to the share premium account.
In 2024, 3,110,167 (2023: 7,345,996) newly issued shares and no (2023: 2,253,878) treasury shares were used to satisfy obligations
under the SAYE scheme. Further details are outlined in Note 37.2. The newly issued shares resulted in an increase in share capital
of £0.2m (2023: £0.4m) and share premium of £4.4m (2023: £9.1m).
An additional 22,000,000 (2023: none) newly issued shares were acquired by the employee benefit trust. The newly issued shares
resulted in an increase in share capital of £1.1m (2023: £nil). Further details are outlined in Note 22.1.
22 Shares held by employee benefit trusts and other treasury shares
The Group buys and sells its own shares in relation to its employee share schemes or via transactions that may be undertaken by
authorised investment funds that the Group is deemed to control. These authorised investment funds undertake transactions in
the Group’s shares as part of their investment decisions.
22.1 Shares held by employee benefit trust
The M&G Employee Share Trust (the Trust) was created on 20 September 2019 to facilitate the procurement, holding and
distribution of M&G plc shares under the various employee incentive schemes in operation. The Trust is funded by M&G plc. In
addition, there is a separate trust that holds shares in respect of Share Incentive Plan (SIP) schemes.
The movement in the M&G plc shares held in employee benefit trusts are detailed below:
2024
2023
For the year ended 31 December
Number of shares
Number of shares
At 1 January
21,496,591
46,767,653
Shares acquired and transferred from treasury shares during the period
15,281,422
16,635,485
Newly issued shares acquired
22,000,000
—
Shares awarded during the period
(22,180,066)
(41,906,547)
At 31 December
36,597,947
21,496,591
The Trust holds 26,072,739 shares at 31 December 2024 (2023: 12,016,528) while a further 10,525,208 shares are held by the
trustee of the SIP scheme at 31 December 2024 (2023: 9,480,063).
During 2024, the Trust acquired 22,000,000 (2023: nil) newly issued shares. This resulted in an increase in share capital of £1m and
a corresponding increase in the value of shares held by employee benefit trust of £1.1m.
The cost of shares held in the employee benefit trusts of £9m as at 31 December 2024 (2023: £26m) is deducted from equity.
22.2 Other treasury shares
During 2024, no shares (2023: 2,253,878 shares with a carrying value of £4m) have been distributed in relation to employee share
schemes. An additional 10,000,000 shares (2023: 11,200,000) with a carrying value of £15m (2023: £22m) were transferred to the
employee benefit trust. As at 31 December 2024, the remaining 3,414,030 treasury shares (2023: 13,414,030 treasury shares) with
a carrying value of £6m (2023: £21m) are disclosed as a deduction to Shareholders equity within the Treasury shares reserve.
All share transactions were made on an exchange.
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Notes to the consolidated financial statements continued
253
23 Other reserves
Equity-settled
share-based
payment reserve
Merger reserve
Foreign currency
translation
reserve
Capital
redemption
reserve
Total Other
reserves
£m
£m
£m
£m
£m
As at 1 January 2024
89
(11,732)
(1)
11
(11,633)
Exchange movements arising on foreign
operations
—
—
(15)
—
(15)
Total items recognised in comprehensive income
—
—
(15)
—
(15)
Vested employee share-based payments
(33)
—
—
—
(33)
Expense recognised in respect of share-based
payments
40
—
—
—
40
Tax effect of items recognised directly in equity
(1)
—
—
—
(1)
Net increase/(decrease) in equity
6
—
(15)
—
(9)
As at 31 December 2024
95
(11,732)
(16)
11
(11,642)
Equity-settled
share-based
payment reserve
Merger reserve
Foreign currency
translation
reserve
Capital
redemption
reserve
Total other
reserves
£m
£m
£m
£m
£m
As at 1 January 2023
101
(11,732)
7
11
(11,613)
Exchange movements arising on foreign
operations
—
—
(8)
—
(8)
Total items recognised in comprehensive income
—
—
(8)
—
(8)
Vested employee share-based payments
(42)
—
—
—
(42)
Expense recognised in respect of share-based
payments
32
—
—
—
32
Tax effect of items recognised directly in equity
(2)
—
—
—
(2)
Net decrease in equity
(12)
—
(8)
—
(20)
As at 31 December 2023
89
(11,732)
(1)
11
(11,633)
The merger reserve arises from the application of merger accounting principles to the acquisition of entities under common
control. It represents the difference between the aggregate capital reserves and the value of the entities acquired. On disposal of
the relevant entity, the related merger reserve is released directly to retained earnings.
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Notes to the consolidated financial statements continued
254
24 Insurance liabilities
24.1 Insurance, investment with discretionary participation features and reinsurance contracts
The breakdown of groups of insurance, investment with DPF and reinsurance contracts issued, and reinsurance contracts held,
that are in an asset position and those in a liability position is set out in the table below:
2024
Shareholder-backed funds
With-profits
sub-funds
i
Unit-linked liabilities
Annuity and other
long-term business
Total
As at 31 December
£m
£m
£m
£m
Insurance contract liabilities
Insurance contract liabilities
28,777
4,108
13,686
46,571
Investment contracts with DPF liabilities
94,467
—
226
94,693
123,244
4,108
13,912
141,264
Insurance contract assets
Insurance contract assets
—
—
39
39
—
—
39
39
Reinsurance contracts
Reinsurance contract assets
15
4
1,024
1,043
Reinsurance contract liabilities
1
22
257
280
2023
Shareholder-backed funds
With-profits
sub-funds
i, ii
Unit-linked liabilities
Annuity and other
long-term business
Total
As at 31 December
£m
£m
£m
£m
Insurance contract liabilities
Insurance contract liabilities
30,461
4,404
13,892
48,757
Investment contracts with DPF liabilities
93,135
—
243
93,378
123,596
4,404
14,135
142,135
Insurance contract assets
Insurance contract assets
—
—
44
44
—
—
44
44
Reinsurance contracts
Reinsurance contract assets
11
7
1,081
1,099
Reinsurance contract liabilities
1
21
335
357
i
Includes the With-Profits Sub-Fund (WPSF) and the Defined Charge Participating Sub-Fund (DCPSF), including the non-profit business written within
these funds.
ii
With-profits sub-funds insurance contract liabilities and investment contract with DPF liabilities balances at 31 December 2023 have been restated from
those previously reported following a review of presentation. The restatement results in an increase of £556m in Investment contract with DPF liabilities
and corresponding decrease in Insurance contract liabilities and no impact on total Insurance contract liabilities or the consolidated primary statements or
any impact on other reporting periods.
The IFRS 17 disclosures have been disaggregated based on the following lines of business:
– With-profits business
– Unit linked business
– Annuities and other business
This reflects the level of granularity at which the assumptions are set and the insurance contract liabilities calculated.
All lines of business mentioned below form part of the Life segment and further information on the nature of the products written in
each line of business is presented in Note 2.3.
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Notes to the consolidated financial statements continued
255
24 Insurance liabilities (continued)
24.2 Determination of insurance, investment with DPF and reinsurance contract balances for different components of
business
Note 2.3 describes the different types of insurance and investment contracts across the business. The contracts are disclosed
according to management’s view of the business. A description relating to the determination of the policyholder and reinsurance
contract balances with the key assumptions for each component of business is set out in the notes below. The sensitivity of IFRS
profit/(loss) after tax to the key economic and non-economic assumptions is shown in Note 32.7.
24.2.1 Discount rates
Cash flows relating to insurance and reinsurance contracts issued and reinsurance contracts held are discounted using risk-free
yield curves adjusted to reflect the liquidity characteristics of the contracts. As described in Note 1.5, the Group determines the
adjustment for illiquidity using either a top-down approach (for non-profit annuity contracts) or a bottom-up approach (for all other
contracts, including with-profits).
For with-profits contracts, the illiquidity premium is determined at each reporting date by applying a weighting of 75% to the
illiquidity premium for the reference portfolio of fixed interest assets. The illiquidity premium included in the discount rate as at
31 December 2024 was 39bps (2023: 47bps). The assumed investment returns are consistent with the discount rates applied to
the cash flows. The volatility of investment returns is set with reference to implied volatility data on traded market instruments,
where available, or on a best estimate basis where not.
The unit-linked contracts are considered to be highly liquid as they can be surrendered at any time by the policyholder for a
surrender value which is the value of the units less any surrender charge. Therefore the cash flows are discounted using rates
derived from the risk-free yield curve without addition of an illiquidity premium. The assumed unit fund growth rates are consistent
with the discount rates applied to the cash flows.
For non-profit annuity contracts, the illiquidity premium is derived from the yield of a reference portfolio of assets which is adjusted
to eliminate any factors that are not relevant to the annuity contracts. The implied illiquidity premium at 31 December 2024 was
149bps (2023: 168bps) for shareholder-backed annuities and 143bps (2023: 161bps) for annuities in the With-Profits Fund. There is
no requirement to adjust the yield curve for any differences in the liquidity characteristics of the insurance contracts and the
reference portfolio. The reference portfolios chosen for in-force annuities are the assigned portfolios used to determine the
Solvency II matching adjustment. These are considered to be suitable as reference portfolios for IFRS 17 reporting because their
objective is to closely match the liability cash flows and there is strong governance around their management. The discount rates at
the inception of each contract are based on the yields within a reference portfolio of assets which the Group expects to acquire to
back the portfolio of new insurance contracts (the ‘target portfolio’). A weighted average of these discount rate curves is
determined for the purpose of locking-in and calculating movements in the CSM relating to each group of contracts. The point of
sale discount rate curves are weighted by the premiums in each group. On subsequent measurement of the fulfilment cash flows
the yield at the valuation date on the reference portfolio is adjusted, where necessary, in respect of new contracts incepting in the
period to allow for a period of transition from the actual asset holdings to the target portfolio. Typically, this period of transition can
be up to 12 months but may be dependent on the volume of new business. For the Value Share transaction written in 2024 the
period of transition can be up to 24 months.
The largest adjustment made to reference portfolio yield is in relation to credit risk. IFRS 17 is not prescriptive as to how the
adjustment for credit risk should be determined other than that it should reflect market risk premiums for credit risk. The credit risk
allowance comprises an amount for long-term best estimate defaults and downgrades, a provision for credit risk premium and,
where appropriate, an additional short-term overlay to reflect the prospective outlook for experience over the coming period,
including uncertainty in the outlook. It incorporates allowances for expected and unexpected credit events, including internal and
external views on the outlook for credit risk, and considers the relationship between credit risk and yield spreads. The allowance
for credit risk within the discount rate for shareholder-backed annuities as at 31 December 2024 was 53bps (2023: 56bps). The
allowance for credit risk within the discount rate for annuities in the With-Profits Fund as at 31 December 2024 was 56bps (2023:
57bps).
The derivation of the discount rates include consideration of any potential future legislative change in respect of residential ground
rents (further explained in Note 31.8.1) and the resulting impact on the portfolio yield.
The derivation of the discount rates for the Value Share BPA insurance contract is as described above. The derivation of the
discount rates for the Value Share reinsurance arrangement is as described above except that the reference portfolio of assets is
the pool of assets that backs the Value Share BPA liabilities.
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Notes to the consolidated financial statements continued
256
24 Insurance liabilities (continued)
24.2 Determination of insurance, investment with DPF and reinsurance contract balances for different components of
business (continued)
24.2.1 Discount rates (continued)
The tables below show the discount rates used as at 31 December 2024 and 31 December 2023.
Discount rates as at 31 December 2024
1 year
5 years
10 years
15 years
20 years
25 years
30 years
With-profits contracts
4.85%
4.43%
4.46%
4.62%
4.70%
4.69%
4.62%
Unit-linked contracts
4.46%
4.04%
4.07%
4.23%
4.30%
4.30%
4.23%
Non-profit annuities – shareholder-backed
5.95%
5.53%
5.56%
5.72%
5.79%
5.79%
5.72%
Non-profit annuities – in the With-Profits Fund
5.89%
5.47%
5.50%
5.66%
5.73%
5.72%
5.66%
Discount rates as at 31 December 2023
1 year
5 years
10 years
15 years
20 years
25 years
30 years
With-profits contracts
5.20%
3.82%
3.75%
3.86%
3.90%
3.88%
3.82%
Unit-linked contracts
4.74%
3.35%
3.28%
3.40%
3.43%
3.41%
3.35%
Non-profit annuities – shareholder-backed
6.41%
5.03%
4.96%
5.08%
5.11%
5.09%
5.03%
Non-profit annuities – in the With-Profits Fund
6.34%
4.96%
4.89%
5.00%
5.04%
5.02%
4.96%
The tables below show the credit risk allowances for annuity business as at 31 December 2024 and 31 December 2023.
Credit risk allowances as at 31 December 2024
Shareholder-backed annuities
Annuities in the With-Profits Fund
Credit risk allowance
53 bps
56 bps
Credit risk allowance as proportion of spread over swaps
25.67%
25.56%
Net of reinsurance credit reserve (£m)
454
157
Credit risk allowances as at 31 December 2023
Shareholder-backed annuities
Annuities in the With-Profits Fund
Credit risk allowance
56 bps
57 bps
Credit risk allowance as proportion of spread over swaps
24.57%
24.73%
Net of reinsurance credit reserve (£m)
516
199
24.2.2 Persistency and expense assumptions
The table below summarises the range of lapse rate assumptions used as at 31 December 2024 and 31 December 2023.
These exclude assumptions related to retirement rates for pension contracts, which may be as high as 100% at certain ages.
Lapse rate assumptions
31 December 2024
31 December 2023
With-profits contracts
0% - 30%
0% - 30%
Unit-linked contracts
0% - 16%
0% - 16%
Non-profit annuities – shareholder-backed
N/A
N/A
Non-profit annuities – in the With-Profits Fund
N/A
N/A
The table below summarises the range of maintenance expense assumptions used as at 31 December 2024 and
31 December 2023, before allowance for future inflationary increases.
Maintenance expense assumptions (per policy)
31 December 2024
31 December 2023
£ pa
£ pa
With-profits contracts
8 - 199
7 - 239
Unit-linked contracts
i
44 - 186
43 - 239
Non-profit annuities – shareholder-backed
36 - 68
35 - 57
Non-profit annuities – in the With-Profits Fund
37
36
i
For Prudential International Assurance plc, maintenance expenses assumptions are modelled as a percentage of assets under management and not
included in the range for 31 December 2024. For 31 December 2024, the range was 0.12% - 0.13% of assets under management.
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Notes to the consolidated financial statements continued
257
24 Insurance liabilities (continued)
24.2 Determination of insurance, investment with DPF and reinsurance contract balances for different components of
business (continued)
24.2.3 Risk adjustment
Risk adjustment for non-financial risk
The risk adjustment for non-financial risk is determined as the increase in the discounted value of the future cash flows derived
from non-financial assumptions set at the target confidence level instead of unbiased non-financial assumptions. The table below
shows the confidence level used to determine the risk adjustment for with-profits contracts, unit-linked contracts, annuities and
other long-term business:
As at 31 December
2024
2023
Confidence level (percentile of the Group’s one year risk distributions)
75th
75th
Confidence level (percentile of the risk distributions over the remaining lifetime)
60th
60th
24.2.4 With-profits business
The With-Profits Fund mainly contains with-profits contracts but also contains some non-profit business (annuities, unit-linked,
and term assurances).
The with-profits contracts are a combination of insurance contracts, investment contracts with discretionary participation features
(DPF) and investment contracts without DPF. The investment contracts without DPF are within the scope of IFRS 9 and are
presented in Note 25.
For the with-profits contracts the insurance contract liability is the sum of the liability for incurred claims and the liability for
remaining coverage, which comprises:
– the fair value of the underlying items for in-force contracts, ie the value of the asset shares and the expected future additions to
asset shares, plus the present value of future costs less charges;
– the allowance for ‘mutualisation’ on in-force business;
– the risk adjustment for non-financial risk;
– the CSM; and
– the historical allowance for ‘mutualisation’ (based on the underlying items for the additional amounts expected to be paid to
current or future policyholders).
These items are described further below.
Future costs less charges
The future costs include a market-consistent valuation of the costs of guarantees, options and smoothing and this amount is
determined using stochastic modelling techniques. The main assumptions used to value the future costs less charges are listed
below:
– assumptions relating to persistency (see Note 24.2.2) and the take-up of options offered on certain with-profits contracts are set
based on the results of the most recent experience analysis looking at the experience over recent years of the relevant business,
and supplemented by expert judgement within the business. In line with legislative changes, including pension freedoms, the
Group expects all policyholders of pension contracts to choose alternative post-vesting options;
– management actions under which the With-Profits Fund is managed in different scenarios. During 2024 the modelling of the
fund has been fully reviewed and updated. As part of the rebuild, changes have been made to the modelling of policyholder
taxation within prospective investment returns with other less significant changes in relation to Insurance contract liabilities. The
impact is a reduction in CSM of £106m offset by an increase in present value of future cashflows, with no overall impact on
Insurance contract liabilities;
– maintenance and, for some classes of business, termination expense assumptions are expressed as per policy amounts (see
Note 24.2.2). They are set based on forecast expense levels, including an allowance for ongoing investment management
expenses, and are allocated between entities and product groups in accordance with the Group’s internal cost allocation model.
They reflect the costs incurred by the Group which may differ from the internal charges to companies within the Group;
– expense inflation assumptions are set consistent with the economic basis and based on the inflation swap spot curve;
– the contract liabilities for with-profits business also require assumptions for mortality. These are set based on the results of
recent experience analysis. Mortality experience over 2020 and 2021 was significantly higher than previous years as a result of
the COVID-19 pandemic. In line with broader industry approach, no weight has been given to pandemic experience; and
– future investment return assumptions and discount rates are set at a risk-free yield curve plus an illiquidity premium (as set out in
Notes 1.5 and 24.2.1).
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Notes to the consolidated financial statements continued
258
24 Insurance liabilities (continued)
24.2 Determination of insurance, investment with DPF and reinsurance contract balances for different components of
business (continued)
24.2.4 With-profits business (continued)
Allowances for mutualisation
The allowance for mutualisation on in-force business is the policyholders’ share, which is assumed to be 90% (consistent with the
division of profits permitted by the Articles of Association), of the expected future surpluses arising from with-profits contracts,
which are determined as:
– the discounted value of the amounts that will be charged to policies;
– less: the discounted value of future shareholder transfers, gross of tax;
– less: the discounted value of other costs directly attributable to the group of insurance contracts; and
– less: the amount of any additional tax attributable to the above items.
The allowance for mutualisation on in-force business is included in the liabilities of the groups of insurance contracts.
The historical allowance for mutualisation is the policyholders’ share of the surpluses that have arisen in the past, which are
determined as the policyholders’ share of the fair value of the underlying items for the additional amounts expected to be paid to
current or future policyholders less, if required, an allowance for any further tax balances that should be apportioned between
policyholders and shareholders. The policyholders’ share is assessed on a prospective basis and is assumed to be 90%, consistent
with the division of profits permitted by the Articles of Association. The fair value of the underlying items reflects, among other
things, the fair value of the non-profit contracts in the With-Profits Fund. The fair value is measured as the sum of the best estimate
of the liability, determined using a discounted cash flow technique and assumptions used for Solvency II reporting; and the
compensation a market participant would require for taking on the obligation, over and above the best estimate liability,
determined using a cost of capital approach.
The historical allowance for mutualisation is separate from the liabilities of the groups of insurance contracts (in accordance with
IFRS 17 paragraph B71) and the Group has chosen to present this as part of the liability for remaining coverage.
With-profits options and guarantees
Certain policies written in the Group’s With-Profits Fund give potentially valuable guarantees to policyholders, or options to change
policy benefits which can be exercised at the policyholders’ discretion.
Most with-profits contracts give a guaranteed minimum payment on a specified date or range of dates or on death if before that
date or dates. For pensions products, the specified date is the policyholder’s chosen retirement date or a range of dates around
that date. For endowment contracts, guarantees apply at the maturity date of the contract. For with-profits bonds it is often a
specified anniversary of commencement, in some cases with further dates thereafter.
The main types of options and guarantees offered for with-profits contracts are as follows:
– for conventional with-profits contracts, including endowment assurance contracts and whole of-life assurance contracts,
payouts are guaranteed at the sum assured together with any declared regular bonus;
– conventional with-profits deferred annuity contracts have a basic annuity per annum to which bonuses are added. At maturity,
the cash claim value will reflect the current cost of providing the deferred annuity. Regular bonuses when added to with-profits
contracts usually increase the guaranteed amount;
– for unitised with-profits contracts and cash accumulation contracts the guaranteed payout is the initial investment (adjusted for
any withdrawals, where appropriate), less charges, plus any regular bonuses declared. If benefits are taken at a date other than
when the guarantee applies, a market value reduction may be applied to reflect the difference between the accumulated value of
the units and the market value of the underlying assets;
– for certain unitised with-profits contracts and cash accumulation contracts, policyholders have the option to defer their
retirement date when they reach maturity, and the terminal bonus granted at that point is guaranteed;
– for with-profits annuity contracts, there is a guaranteed minimum annuity payment below which benefit payments cannot fall
over the lifetime of the policies; and
– certain pensions products have guaranteed annuity options at retirement, where the policyholder has the option to take the
benefit in the form of an annuity at a guaranteed conversion rate.
CSM
The Variable Fee Approach (VFA) is used to measure the CSM for with-profits business.
For contracts that provide both insurance coverage and investment-related services the amount of the services provided in any
given period is measured as the greater of the asset shares and the amounts payable on death during that period.
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Notes to the consolidated financial statements continued
259
24 Insurance liabilities (continued)
24.2 Determination of insurance, investment with DPF and reinsurance contract balances for different components of
business (continued)
24.2.5 Unit-linked business
Only unit-linked contracts that transfer significant insurance risk are within the scope of IFRS 17. For these contracts the insurance
contract liability is the sum of the liability for incurred claims and the liability for remaining coverage, which comprises:
– the fair value of the underlying items, ie the value of the unit funds, plus the present value of future costs less charges;
– the risk adjustment for non-financial risk; and
– the CSM.
Future cash flows
The present value of future costs less charges is determined using best estimate assumptions for the non-financial risks of
mortality, on a basis that is appropriate for the policyholder profile, expenses and persistency (see Note 24.2.2). The assumed unit
fund growth rates are consistent with the discount rates applied to the cash flows (see Note 24.2.1).
Certain parts of the unit-linked business are reinsured externally by way of fund reinsurance. Where this is the case, the fair value
of the underlying asset and liability is equal to the unit value obligation.
CSM
The VFA is used to measure the CSM for unit-linked business.
The amount of the services provided in any given period is measured as the greater of the unit funds and the amounts payable on
death during that period.
24.2.6 Annuities and other long-term business
The majority of the policyholder liabilities in the ‘annuities and other long-term business’ component relate to annuity contracts, for
which some of the risk has been reinsured to external third parties. The annuity insurance contract liabilities are calculated as the
sum of the liability for incurred claims and the liability for remaining coverage, which comprises:
– the expected value of future annuity payments and expenses;
– the risk adjustment for non-financial risk; and
– the CSM.
Future cash flows
The key assumptions used to value the future cash flows for annuity contracts, both insurance contracts issued and reinsurance
contracts held, are described below.
Mortality
Mortality assumptions for annuity business are set in light of recent population and internal experience, with an allowance for
expected future mortality improvements. Given the long-term nature of annuity business, annuitant mortality remains a significant
assumption in determining insurance liabilities. The assumptions used reference recent England & Wales population mortality data,
consistent with the CMI mortality projections model with specific risk factors applied on a per policy basis to reflect the features of
the Group’s portfolio.
An increase in mortality rates was observed over 2020 and 2021 due to the COVID-19 pandemic, however over 2022 and 2023
rates were observed to be more consistent with pre-pandemic levels. There remains significant uncertainty following the
pandemic and the longer-term implications for mortality rates among the annuitant population will continue to be monitored by the
Group.
For current mortality, the longevity model has been recalibrated to account for updated population data following the 2021 Census
and to include mortality experience data from 2022 and 2023, while continuing to place zero weight on 2020 and 2021 data. This
has resulted in a slight weakening of assumptions and a reduction in future cash outflows.
The mortality improvements assumption was fully reviewed in 2022 following the COVID-19 pandemic and drivers which could
impact future mortality have been continually monitored. Best-estimate assumptions have been updated for 2024 to reflect new
data and information on the key drivers of changes in future mortality. This update results in lower levels of future improvements
than the previous year and a reduction in future cash outflows.
The 2024 mortality improvements assumption is expressed in terms of the CMI 2022 model, updated from the CMI 2021 used in
2023. Zero weight has been given to 2020 and 2021 experience, in line with the broader industry approach, however some
allowance has been made for 2022 data (15% in line with the CMI model calibration) as 2022 mortality is likely to be partially
reflective of future mortality.
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Notes to the consolidated financial statements continued
260
24 Insurance liabilities (continued)
24.2 Determination of insurance, investment with DPF and reinsurance contract balances for different components of
business (continued)
24.2.6 Annuities and other long-term business (continued)
The mortality improvement assumptions used are summarised in the table below, with all other assumptions reflecting the core
CMI projection:
Period ended
Model version
i, ii
Long-term improvement rate
iii
Smoothing parameter (Sk)
iv
31 December 2024
CMI 2022
For males: 1.60% pa
For females: 1.60% pa
For males: 7.25
For females: 7.25
31 December 2023
CMI 2021
For males: 1.60% pa
For females: 1.60% pa
For males: 7.25
For females: 7.75
i
A parameter in the model to reflect socio-economic differences between the portfolio and population experience is also utilised. This adjusts initial
mortality improvement rates, varying by age and gender. This is unchanged at all ages relative to 31 December 2024.
ii
The weighting parameter has been set at 15% at 31 December 2024. This parameter does not apply to the CMI 2021 model used at 31 December 2023.
iii
The tapering of improvements to zero is set to occur between ages 90-110 at 31 December 2024 which is unchanged from 31 December 2023.
iv
The smoothing parameter controls the amount of smoothing by calendar year when determining the level of initial mortality improvements.
The mortality assumptions for in-force vested annuities also cover annuities in deferment.
Discount rates
See Note 24.2.1. The same approach is also used to derive the discount rates applied to reinsurance cash flows.
Expenses
Maintenance expense assumptions are expressed as per policy amounts (see Note 24.2.2). They are set based on forecast
expense levels, including an allowance for ongoing investment management expenses and are allocated between entities and
product groups in accordance with the Group’s internal cost allocation model. They reflect the costs incurred by the Group which
may differ from the internal charges to companies within the Group. Expense inflation assumptions are set consistent with the
economic basis and based on the inflation swap spot curve. These assumptions therefore take recent increases in inflation into
account, and allow for the market-driven long-term view of future inflation. Increases in costs that are expected to follow an
inflation index are considered by the Group to relate to financial risk.
Value Share reinsurance cash flows
Payments made to or received from the reinsurer are dependent on the relationship between the value of the assets backing the
BPA liabilities and the value of the liabilities determined in accordance with a specified basis. These cash flows are estimated by
projecting the assets and liabilities and comparing their values on the calculation dates prescribed in the reinsurance contract. The
assumed investment returns on the assets are the same as the discount rates used for the Value Share reinsurance arrangement
(see Note 24.2.1).
CSM
The General Measurement Model (GMM) is used to measure the CSM for annuities and other long-term business. For annuities in
payment the amount of the services provided in any given period is the annualised amount of income.
24.3 Insurance, investment with DPF and reinsurance contract balances
The following reconciliations show how the net carrying amounts of insurance, investment with DPF and reinsurance contracts in
each group of insurance contracts issued, and reinsurance contracts held, changed during the year as a result of cash flows and
amounts recognised in the statement of profit or loss.
For insurance contracts issued and reinsurance contracts held, tables are presented that analyse changes in the estimates of
the present value of future cash flows, the risk adjustment for non-financial risk and the CSM and separate tables that analyse
movements in the liabilities for remaining coverage and liabilities for incurred claims, reconciling these movements to the line items
in the statement of profit or loss.
For insurance contracts issued, these analysis tables are then presented for each line of business. For reinsurance contracts held
98% (2023: 98%) relates to annuity and other long-term business contracts and so separate tables for each line of business are not
presented.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
261
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.1 Total insurance contract liabilities
Insurance contracts
Analysis by remaining coverage and incurred claims
2024
2023
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
141,007
80
1,048 142,135
140,841
106
1,029 141,976
Opening insurance contract assets
(50)
—
6
(44)
(43)
—
4
(39)
Net opening balance
140,957
80
1,054 142,091
140,798
106
1,033 141,937
Insurance revenue
Contracts under the modified
retrospective transition approach
(692)
—
—
(692)
(337)
—
—
(337)
Contracts under the fair value transition
approach
(3,216)
—
—
(3,216)
(3,239)
—
—
(3,239)
New contracts and contracts under the
fully retrospective transition approach
(187)
—
—
(187)
(311)
—
—
(311)
(4,095)
—
— (4,095)
(3,887)
—
—
(3,887)
Insurance service expenses
Incurred claims and other insurance
service expenses
—
(5)
2,862
2,857
—
(7)
2,859
2,852
Amortisation of insurance acquisition
cash flows
73
—
—
73
56
—
—
56
Adjustments to liability for incurred
claims
—
—
3
3
—
—
(54)
(54)
Losses and reversals of losses on
onerous contracts
—
38
—
38
—
(20)
—
(20)
73
33
2,865
2,971
56
(27)
2,805
2,834
Insurance service result
(4,022)
33
2,865
(1,124)
(3,831)
(27)
2,805
(1,053)
Finance expense/(income) from
insurance contracts issued
8,432
(6)
—
8,426
7,329
1
(12)
7,318
Total changes in income statement
4,410
27
2,865
7,302
3,498
(26)
2,793
6,265
Investment components and premium
refunds
(12,023)
— 12,023
—
(10,924)
— 10,924
—
Cash flows
Premiums received
6,988
—
—
6,988
7,748
—
—
7,748
Incurred claims paid and other
insurance service expenses paid
including investment component
—
— (14,991) (14,991)
—
— (13,696) (13,696)
Insurance acquisition cash flows
(165)
—
—
(165)
(163)
—
—
(163)
Total cash flows
6,823
— (14,991)
(8,168)
7,585
— (13,696)
(6,111)
Net closing balance
140,167
107
951 141,225
140,957
80
1,054 142,091
Closing insurance contract liabilities
140,213
107
944 141,264
141,007
80
1,048 142,135
Closing insurance contract assets
(46)
—
7
(39)
(50)
—
6
(44)
Net closing balance
140,167
107
951 141,225
140,957
80
1,054 142,091
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
262
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.1 Total insurance contract liabilities (continued)
Insurance contracts
Analysis by measurement component
2024
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total
CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
135,738
632
1,747
3,609
409 5,765 142,135
Opening insurance contract assets
(93)
4
—
12
33
45
(44)
Net opening balance
135,645
636
1,747
3,621
442 5,810 142,091
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
—
—
(241)
(441)
(63)
(745)
(745)
Change in the risk adjustment for non-financial risk for
the risk expired
—
(62)
—
—
—
—
(62)
Revenue recognised for incurred policyholder tax
(360)
—
—
—
—
—
(360)
Experience adjustments
3
—
—
—
—
—
3
(357)
(62)
(241)
(441)
(63)
(745) (1,164)
Changes that relate to future services
Contracts initially recognised in the period
(186)
31
—
—
155
155
—
Changes in estimates reflected in the CSM
(897)
(19)
289
582
45
916
—
Changes in estimates that result in onerous contract
losses or reversal of those losses
39
(2)
—
—
—
—
37
(1,044)
10
289
582
200 1,071
37
Changes that relate to past services
Adjustments to liabilities for incurred claims
3
—
—
—
—
—
3
3
—
—
—
—
—
3
Insurance service result
(1,398)
(52)
48
141
137
326
(1,124)
Finance expense/(income) from insurance contracts
issued
8,043
33
113
195
42
350
8,426
Total changes in income statement
6,645
(19)
161
336
179
676
7,302
Cash flows
Premiums received
6,988
—
—
—
—
—
6,988
Incurred claims paid and other insurance service
expenses paid including investment component
(14,991)
—
—
—
—
— (14,991)
Insurance acquisition cash flows
(165)
—
—
—
—
—
(165)
Total cash flows
(8,168)
—
—
—
—
— (8,168)
Net closing balance
134,122
617
1,908
3,957
621 6,486 141,225
Closing insurance contract liabilities
134,216
613
1,908
3,943
584 6,435 141,264
Closing insurance contract assets
(94)
4
—
14
37
51
(39)
Net closing balance
134,122
617
1,908
3,957
621 6,486 141,225
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
263
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.1 Total insurance contract liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
135,373
624
2,041 3,694
244
5,979 141,976
Opening insurance contract assets
(76)
3
—
11
23
34
(39)
Net opening balance
135,297
627
2,041 3,705
267
6,013 141,937
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
—
—
(221)
(383)
(45)
(649)
(649)
Change in the risk adjustment for non-financial risk
for the risk expired
—
(57)
—
—
—
—
(57)
Revenue recognised for incurred policyholder tax
(255)
—
—
—
—
—
(255)
Experience adjustments
(18)
—
—
—
—
—
(18)
(273)
(57)
(221)
(383)
(45)
(649)
(979)
Changes that relate to future services
Contracts initially recognised in the period
(181)
16
—
—
165
165
—
Changes in estimates reflected in the CSM
46
31
(194)
93
24
(77)
—
Changes in estimates that result in onerous contract
losses or reversal of those losses
(20)
—
—
—
—
—
(20)
(155)
47
(194)
93
189
88
(20)
Changes that relate to past services
Adjustments to liabilities for incurred claims
(54)
—
—
—
—
—
(54)
(54)
—
—
—
—
—
(54)
Insurance service result
(482)
(10)
(415)
(290)
144
(561)
(1,053)
Finance expense/(income) from insurance contracts
issued
i
6,941
19
121
206
31
358
7,318
Total changes in income statement
6,459
9
(294)
(84)
175
(203)
6,265
Cash flows
Premiums received
7,748
—
—
—
—
—
7,748
Incurred claims paid and other insurance service
expenses paid including investment component
(13,696)
—
—
—
—
— (13,696)
Insurance acquisition cash flows
(163)
—
—
—
—
—
(163)
Total cash flows
(6,111)
—
—
—
—
—
(6,111)
Net closing balance
135,645
636
1,747 3,621
442
5,810 142,091
Closing insurance contract liabilities
135,738
632
1,747 3,609
409
5,765 142,135
Closing insurance contract assets
(93)
4
—
12
33
45
(44)
Net closing balance
135,645
636
1,747 3,621
442
5,810 142,091
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
264
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.1 Total insurance contract liabilities (continued)
Reinsurance contracts
Analysis by remaining coverage and incurred claims
2024
2023
Assets for remaining
coverage
Assets for remaining
coverage
Excluding
loss recovery
component
Loss
recovery
component
Recoverable
for incurred
claims
Total
Excluding
loss recovery
component
Loss
recovery
component
Recoverable
for incurred
claims
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Opening reinsurance contract liabilities
369
—
(12)
357
363
—
(15)
348
Opening reinsurance contract assets
(999)
(41)
(59) (1,099)
(931)
(52)
(99) (1,082)
Net opening balance
(630)
(41)
(71)
(742)
(568)
(52)
(114)
(734)
Net expenses from reinsurance
contracts held
Allocation of reinsurance premiums
paid
516
—
—
516
493
—
—
493
Amounts recoverable from
reinsurers:
Recoveries of incurred claims and
other insurance service expenses
—
—
(466)
(466)
—
—
(463)
(463)
Recoveries and reversals of recoveries
of losses on onerous underlying
contracts
—
(19)
—
(19)
—
11
—
11
Adjustments to assets for incurred
claims
—
—
(3)
(3)
—
—
54
54
—
(19)
(469)
(488)
—
11
(409)
(398)
Effect of changes in the risk of
reinsurers non-performance
—
—
—
—
—
—
—
—
516
(19)
(469)
28
493
11
(409)
95
Finance expenses/(income) from
reinsurance contracts held
10
—
—
10
(39)
—
—
(39)
Total changes in income statement
526
(19)
(469)
38
454
11
(409)
56
Cash flows
Premiums and similar expenses paid
(528)
—
—
(528)
(516)
—
—
(516)
Amounts recovered
—
—
469
469
—
—
452
452
Total cash flows
(528)
—
469
(59)
(516)
—
452
(64)
Net closing balance
(632)
(60)
(71)
(763)
(630)
(41)
(71)
(742)
Closing reinsurance contract liabilities
290
—
(10)
280
369
—
(12)
357
Closing reinsurance contract assets
(922)
(60)
(61) (1,043)
(999)
(41)
(59) (1,099)
Net closing balance
(632)
(60)
(71)
(763)
(630)
(41)
(71)
(742)
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
265
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.1 Total insurance contract liabilities (continued)
Reinsurance contracts (continued)
Analysis by measurement component
2024
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening reinsurance contract liabilities
581
(94)
—
(129)
(1)
(130)
357
Opening reinsurance contract assets
(847)
(55)
(5)
(8)
(184)
(197) (1,099)
Net opening balance
(266)
(149)
(5)
(137)
(185)
(327)
(742)
Changes that relate to current services
CSM recognised in profit or loss for the services
received
—
—
—
22
6
28
28
Change in the risk adjustment for non-financial risk
for the risk expired
—
14
—
—
—
—
14
Experience adjustments
14
—
—
—
—
—
14
14
14
—
22
6
28
56
Changes that relate to future services
Contracts initially recognised in the period
26
(11)
—
—
(15)
(15)
—
Changes in estimates reflected in the CSM
125
4
—
(125)
(4)
(129)
—
Changes in the fulfilment cash flows that do not
adjust the CSM for the group of underlying contracts
(25)
—
—
—
—
—
(25)
126
(7)
—
(125)
(19)
(144)
(25)
Changes that relate to past services
Asset for incurred claims
(3)
—
—
—
—
—
(3)
(3)
—
—
—
—
—
(3)
Insurance service result
137
7
—
(103)
(13)
(116)
28
Net finance income from reinsurance contracts
16
4
—
(6)
(4)
(10)
10
Total changes in the income statement
153
11
—
(109)
(17)
(126)
38
Cash flows
Premiums and similar expenses paid
(528)
—
—
—
—
—
(528)
Amounts recovered
469
—
—
—
—
—
469
Total cash flows
(59)
—
—
—
—
—
(59)
Net closing balance
(172)
(138)
(5)
(246)
(202)
(453)
(763)
Closing reinsurance contract liabilities
621
(94)
—
(232)
(15)
(247)
280
Closing reinsurance contract assets
(793)
(44)
(5)
(14)
(187)
(206)
(1,043)
Net closing balance
(172)
(138)
(5)
(246)
(202)
(453)
(763)
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
266
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.1 Total insurance contract liabilities (continued)
Reinsurance contracts (continued)
Analysis by measurement component (continued)
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening reinsurance contract liabilities
567
(95)
—
(123)
(1)
(124)
348
Opening reinsurance contract assets
(855)
(54)
(6)
(5)
(162)
(173)
(1,082)
Net opening balance
(288)
(149)
(6)
(128)
(163)
(297)
(734)
Changes that relate to current services
CSM recognised in profit or loss for the services
received
—
—
1
11
4
16
16
Change in the risk adjustment for non-financial risk
for the risk expired
—
10
—
—
—
—
10
Experience adjustments
4
—
—
—
—
—
4
4
10
1
11
4
16
30
Changes that relate to future services
Changes in estimates reflected in the CSM
44
(4)
—
(17)
(22)
(39)
1
Changes in the fulfilment cash flows that do not
adjust the CSM for the group of underlying contracts
10
—
—
—
—
—
10
54
(4)
—
(17)
(22)
(39)
11
Changes that relate to past services
Asset for incurred claims
54
—
—
—
—
—
54
54
—
—
—
—
—
54
Insurance service result
112
6
1
(6)
(18)
(23)
95
Net finance income from reinsurance contracts
(26)
(6)
—
(3)
(4)
(7)
(39)
Total changes in the income statement
86
—
1
(9)
(22)
(30)
56
Cash flows
Premiums and similar expenses paid
(516)
—
—
—
—
—
(516)
Amounts recovered
452
—
—
—
—
—
452
Total cash flows
(64)
—
—
—
—
—
(64)
Net closing balance
(266)
(149)
(5)
(137)
(185)
(327)
(742)
Closing reinsurance contract liabilities
581
(94)
—
(129)
(1)
(130)
357
Closing reinsurance contract assets
(847)
(55)
(5)
(8)
(184)
(197)
(1,099)
Net closing balance
(266)
(149)
(5)
(137)
(185)
(327)
(742)
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
267
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.2 With-profits sub-funds
Insurance contracts
Analysis by remaining coverage and incurred claims
2024
2023
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
and liability
for incurred
claims
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
and liability
for incurred
claims
Loss
component
Liabilities
for incurred
claims
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
123,197
11
388 123,596
122,807
7
363 123,177
Opening insurance contract assets
—
—
—
—
—
—
—
—
Net opening balance
123,197
11
388 123,596
122,807
7
363 123,177
Insurance revenue
Contracts under the modified
retrospective transition approach
(686)
—
—
(686)
(331)
—
—
(331)
Contracts under the fair value transition
approach
(1,866)
—
— (1,866)
(1,863)
—
—
(1,863)
New contracts and contracts under the
fully retrospective transition approach
(63)
—
—
(63)
(213)
—
—
(213)
(2,615)
—
— (2,615)
(2,407)
—
— (2,407)
Insurance service expenses
Incurred claims and other insurance
service expenses
—
(1)
1,630
1,629
—
—
1,597
1,597
Amortisation of insurance acquisition
cash flows
43
—
—
43
26
—
—
26
Adjustments to liability for incurred
claims
—
—
—
—
—
—
—
—
Losses and reversals of losses on
onerous contracts
—
(1)
—
(1)
—
4
—
4
43
(2)
1,630
1,671
26
4
1,597
1,627
Insurance service result
(2,572)
(2)
1,630
(944)
(2,381)
4
1,597
(780)
Finance expense/(income) from
insurance contracts issued
8,019
—
—
8,019
6,144
—
(12)
6,132
Total changes in income statement
5,447
(2)
1,630
7,075
3,763
4
1,585
5,352
Investment components and premium
refunds
(11,459)
—
11,459
—
(10,391)
—
10,391
—
Cash flows
Premiums received
5,803
—
—
5,803
7,157
—
—
7,157
Incurred claims paid and other
insurance service expenses paid
including investment component
—
— (13,101) (13,101)
—
—
(11,951) (11,951)
Insurance acquisition cash flows
(129)
—
—
(129)
(139)
—
—
(139)
Total cash flows
5,674
— (13,101) (7,427)
7,018
—
(11,951) (4,933)
Net closing balance
122,859
9
376 123,244
123,197
11
388 123,596
Closing insurance contract liabilities
122,859
9
376 123,244
123,197
11
388 123,596
Closing insurance contract assets
—
—
—
—
—
—
—
—
Net closing balance
122,859
9
376 123,244
123,197
11
388 123,596
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
268
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.2 With-profits sub-funds (continued)
Insurance contracts (continued)
Analysis by measurement component
2024
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
119,435
222
1,747
1,877
315
3,939 123,596
Opening insurance contract assets
—
—
—
—
—
—
—
Net opening balance
119,435
222
1,747
1,877
315
3,939 123,596
Changes that relate to current services
CSM recognised in profit or loss for the
services provided
—
—
(241)
(277)
(50)
(568)
(568)
Change in the risk adjustment for non-
financial risk for the risk expired
—
(25)
—
—
—
—
(25)
Revenue recognised for incurred
policyholder tax
(356)
—
—
—
—
—
(356)
Experience adjustments
6
—
—
—
—
—
6
(350)
(25)
(241)
(277)
(50)
(568)
(943)
Changes that relate to future services
Contracts initially recognised in the period
(96)
4
—
—
92
92
—
Changes in estimates reflected in the CSM
(583)
(12)
289
252
54
595
—
Changes in estimates that result in
onerous contract losses or reversal of
those losses
(1)
—
—
—
—
—
(1)
(680)
(8)
289
252
146
687
(1)
Changes that relate to past services
Adjustments to liabilities for incurred
claims
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Insurance service result
(1,030)
(33)
48
(25)
96
119
(944)
Finance expense/(income) from insurance
contracts issued
7,708
29
113
138
31
282
8,019
Total changes in income statement
6,678
(4)
161
113
127
401
7,075
Cash flows
Premiums received
5,803
—
—
—
—
—
5,803
Incurred claims paid and other insurance
service expenses paid including
investment component
(13,101)
—
—
—
—
— (13,101)
Insurance acquisition cash flows
(129)
—
—
—
—
—
(129)
Total cash flows
(7,427)
—
—
—
—
—
(7,427)
Net closing balance
118,686
218
1,908
1,990
442
4,340 123,244
Closing insurance contract liabilities
118,686
218
1,908
1,990
442
4,340 123,244
Closing insurance contract assets
—
—
—
—
—
—
—
Net closing balance
118,686
218
1,908
1,990
442
4,340 123,244
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
269
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.2 With-profits sub-funds (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2023
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contracts
under modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
118,740
221
2,041
1,986
189
4,216 123,177
Opening insurance contract assets
—
—
—
—
—
—
—
Net opening balance
118,740
221
2,041
1,986
189
4,216 123,177
Changes that relate to current services
CSM recognised in profit or loss for the
services provided
—
—
(221)
(244)
(34)
(499)
(499)
Change in the risk adjustment for non-
financial risk for the risk expired
—
(24)
—
—
—
—
(24)
Revenue recognised for incurred
policyholder tax
(249)
—
—
—
—
—
(249)
Experience adjustments
(12)
—
—
—
—
—
(12)
(261)
(24)
(221)
(244)
(34)
(499)
(784)
Changes that relate to future services
Contracts initially recognised in the period
(124)
5
—
—
119
119
—
Changes in estimates reflected in the CSM
177
19
(194)
(19)
17
(196)
—
Changes in estimates that result in onerous
contract losses or reversal of those losses
4
—
—
—
—
—
4
57
24
(194)
(19)
136
(77)
4
Changes that relate to past services
Adjustments to liabilities for incurred
claims
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Insurance service result
(204)
—
(415)
(263)
102
(576)
(780)
Finance expense/(income) from insurance
contracts issued
5,832
1
121
154
24
299
6,132
Total changes in income statement
5,628
1
(294)
(109)
126
(277)
5,352
Cash flows
Premiums received
7,157
—
—
—
—
—
7,157
Incurred claims paid and other
insurance service expenses paid
including investment component
(11,951)
—
—
—
—
—
(11,951)
Insurance acquisition cash flows
(139)
—
—
—
—
—
(139)
Total cash flows
(4,933)
—
—
—
—
—
(4,933)
Net closing balance
119,435
222
1,747
1,877
315
3,939 123,596
Closing insurance contract liabilities
119,435
222
1,747
1,877
315
3,939 123,596
Closing insurance contract assets
—
—
—
—
—
—
—
Net closing balance
119,435
222
1,747
1,877
315
3,939 123,596
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
270
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.3 Unit-linked liabilities
Insurance contracts
Analysis by remaining coverage and incurred claims
2024
2023
Liabilities for remaining
coverage
Liabilities for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities
for incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
3,909
—
495
4,404
4,139
13
446
4,598
Opening insurance contract assets
—
—
—
—
—
—
—
—
Net opening balance
3,909
—
495
4,404
4,139
13
446
4,598
Insurance revenue
Contracts under the modified
retrospective transition approach
—
—
—
—
—
—
—
—
Contracts under the fair value
transition approach
(49)
—
—
(49)
(52)
—
—
(52)
New contracts and contracts
under the fully retrospective
transition approach
1
—
—
1
—
—
—
—
(48)
—
—
(48)
(52)
—
—
(52)
Insurance service expenses
Incurred claims and other
insurance service expenses
—
—
52
52
—
(2)
66
64
Amortisation of insurance
acquisition cash flows
(1)
—
—
(1)
1
—
—
1
Adjustments to liability for
incurred claims
—
—
—
—
—
—
—
—
Losses and reversals of losses on
onerous contracts
—
(1)
—
(1)
—
(11)
—
(11)
(1)
(1)
52
50
1
(13)
66
54
Insurance service result
(49)
(1)
52
2
(51)
(13)
66
2
Finance expense/(income) from
insurance contracts issued
255
—
—
255
239
—
—
239
Total changes in income
statement
206
(1)
52
257
188
(13)
66
241
Investment components and
premium refunds
(489)
—
489
—
(456)
—
456
—
Cash flows
Premiums received
68
—
—
68
38
—
—
38
Incurred claims paid and other
insurance service expenses paid
including investment component
—
—
(621)
(621)
—
—
(473)
(473)
Insurance acquisition cash flows
—
—
—
—
—
—
—
—
Total cash flows
68
—
(621)
(553)
38
—
(473)
(435)
Net closing balance
3,694
(1)
415
4,108
3,909
—
495
4,404
Closing insurance contract liabilities
3,694
(1)
415
4,108
3,909
—
495
4,404
Closing insurance contract assets
—
—
—
—
—
—
—
—
Net closing balance
3,694
(1)
415
4,108
3,909
—
495
4,404
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
271
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.3 Unit-linked liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component
2024
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment
for non-
financial risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
4,349
6
—
49
—
49
4,404
Opening insurance contract assets
—
—
—
—
—
—
—
Net opening balance
4,349
6
—
49
—
49
4,404
Changes that relate to current
services
CSM recognised in profit or loss for
the services provided
—
—
—
(8)
—
(8)
(8)
Change in the risk adjustment for non-
financial risk for the risk expired
—
(1)
—
—
—
—
(1)
Revenue recognised for incurred
policyholder tax
(4)
—
—
—
—
—
(4)
Experience adjustments
17
—
—
—
—
—
17
13
(1)
—
(8)
—
(8)
4
Changes that relate to future
services
Contracts initially recognised in the
period
—
—
—
—
—
—
—
Changes in estimates reflected in the
CSM
(9)
5
—
4
—
4
—
Changes in estimates that result in
onerous contract losses or reversal of
those losses
(2)
—
—
—
—
—
(2)
(11)
5
—
4
—
4
(2)
Changes that relate to past services
Adjustments to liabilities for incurred
claims
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Insurance service result
2
4
—
(4)
—
(4)
2
Finance expense/(income) from
insurance contracts issued
251
2
—
2
—
2
255
Total changes in income statement
253
6
—
(2)
—
(2)
257
Cash flows
Premiums received
68
—
—
—
—
—
68
Incurred claims paid and other
insurance service expenses paid
including investment component
(621)
—
—
—
—
—
(621)
Insurance acquisition cash flows
—
—
—
—
—
—
—
Total cash flows
(553)
—
—
—
—
—
(553)
Net closing balance
4,049
12
—
47
—
47
4,108
Closing insurance contract liabilities
4,049
12
—
47
—
47
4,108
Closing insurance contract assets
—
—
—
—
—
—
—
Net closing balance
4,049
12
—
47
—
47
4,108
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
272
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.3 Unit-linked liabilities (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2023
Contractual service margin
Estimates of
present value
of future cash
flows
Risk
adjustment
for non-
financial risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the fair
value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
4,557
6
—
35
—
35
4,598
Opening insurance contract assets
—
—
—
—
—
—
—
Net opening balance
4,557
6
—
35
—
35
4,598
Changes that relate to current
services
CSM recognised in profit or loss for
the services provided
—
—
—
(9)
—
(9)
(9)
Change in the risk adjustment for non-
financial risk for the risk expired
—
(1)
—
—
—
—
(1)
Revenue recognised for incurred
policyholder tax
(6)
—
—
—
—
—
(6)
Experience adjustments
29
—
—
—
—
—
29
23
(1)
—
(9)
—
(9)
13
Changes that relate to future
services
Contracts initially recognised in the
period
—
—
—
—
—
—
—
Changes in estimates reflected in the
CSM
(19)
1
—
18
—
18
—
Changes in estimates that result in
onerous contract losses or reversal of
those losses
(11)
—
—
—
—
—
(11)
(30)
1
—
18
—
18
(11)
Changes that relate to past services
Adjustments to liabilities for incurred
claims
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Insurance service result
(7)
—
—
9
—
9
2
Finance expense/(income) from
insurance contracts issued
234
—
—
5
—
5
239
Total changes in income statement
227
—
—
14
—
14
241
Cash flows
Premiums received
38
—
—
—
—
—
38
Incurred claims paid and other
insurance service expenses paid
including investment component
(473)
—
—
—
—
—
(473)
Insurance acquisition cash flows
—
—
—
—
—
—
—
Total cash flows
(435)
—
—
—
—
—
(435)
Net closing balance
4,349
6
—
49
—
49
4,404
Closing insurance contract liabilities
4,349
6
—
49
—
49
4,404
Closing insurance contract assets
—
—
—
—
—
—
—
Net closing balance
4,349
6
—
49
—
49
4,404
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
273
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.4 Annuity and other long-term business
Insurance contracts
Analysis by remaining coverage and incurred claims
2024
2023
Liabilities for remaining
coverage
Liability for remaining
coverage
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
Excluding
loss
component
Loss
component
Liabilities for
incurred
claims
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
13,901
69
165 14,135
13,895
86
220
14,201
Opening insurance contract assets
(50)
—
6
(44)
(43)
—
4
(39)
Net opening balance
13,851
69
171 14,091
13,852
86
224
14,162
Insurance revenue
Contracts under the modified
retrospective transition approach
(6)
—
—
(6)
(6)
—
—
(6)
Contracts under the fair value
transition approach
(1,301)
—
—
(1,301)
(1,324)
—
—
(1,324)
New contracts and contracts
under the fully retrospective
transition approach
(125)
—
—
(125)
(98)
—
—
(98)
(1,432)
—
—
(1,432)
(1,428)
—
—
(1,428)
Insurance service expenses
Incurred claims and other
insurance service expenses
—
(4)
1,180
1,176
—
(5)
1,196
1,191
Amortisation of insurance
acquisition cash flows
31
—
—
31
29
—
—
29
Adjustments to liability for incurred
claims
—
—
3
3
—
—
(54)
(54)
Losses and reversals of losses on
onerous contracts
—
40
—
40
—
(13)
—
(13)
31
36
1,183
1,250
29
(18)
1,142
1,153
Insurance service result
(1,401)
36
1,183
(182)
(1,399)
(18)
1,142
(275)
Finance expense/(income) from
insurance contracts issued
158
(6)
—
152
946
1
—
947
Total changes in income
statement
(1,243)
30
1,183
(30)
(453)
(17)
1,142
672
Investment components and
premium refunds
(75)
—
75
—
(77)
—
77
—
Cash flows
Premiums received
1,117
—
—
1,117
553
—
—
553
Incurred claims paid and other
insurance service expenses paid
including investment component
—
—
(1,269)
(1,269)
—
—
(1,272)
(1,272)
Insurance acquisition cash flows
(36)
—
—
(36)
(24)
—
—
(24)
Total cash flows
1,081
—
(1,269)
(188)
529
—
(1,272)
(743)
Net closing balance
13,614
99
160 13,873
13,851
69
171
14,091
Closing insurance contract liabilities
13,660
99
153 13,912
13,901
69
165
14,135
Closing insurance contract assets
(46)
—
7
(39)
(50)
—
6
(44)
Net closing balance
13,614
99
160 13,873
13,851
69
171
14,091
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
274
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.4 Annuity and other long-term business (continued)
Insurance contracts (continued)
Analysis by measurement component
2024
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
11,954
404
—
1,683
94
1,777 14,135
Opening insurance contract assets
(93)
4
—
12
33
45
(44)
Net opening balance
11,861
408
—
1,695
127
1,822 14,091
Changes that relate to current services
CSM recognised in profit or loss for the services
provided
—
—
—
(156)
(13)
(169)
(169)
Change in the risk adjustment for non-financial risk
for the risk expired
—
(36)
—
—
—
—
(36)
Experience adjustments
(20)
—
—
—
—
—
(20)
(20)
(36)
—
(156)
(13)
(169)
(225)
Changes that relate to future services
Contracts initially recognised in the period
(90)
27
—
—
63
63
—
Changes in estimates reflected in the CSM
(305)
(12)
—
326
(9)
317
—
Changes in estimates that result in onerous
contract losses or reversal of those losses
42
(2)
—
—
—
—
40
(353)
13
—
326
54
380
40
Changes that relate to past services
Adjustments to liabilities for incurred claims
3
—
—
—
—
—
3
3
—
—
—
—
—
3
Insurance service result
(370)
(23)
—
170
41
211
(182)
Finance expense/(income) from insurance
contracts issued
84
2
—
55
11
66
152
Total changes in income statement
(286)
(21)
—
225
52
277
(30)
Cash flows
Premiums received
1,117
—
—
—
—
—
1,117
Incurred claims paid and other insurance service
expenses paid including investment component
(1,269)
—
—
—
—
— (1,269)
Insurance acquisition cash flows
(36)
—
—
—
—
—
(36)
Total cash flows
(188)
—
—
—
—
—
(188)
Net closing balance
11,387
387
—
1,920
179
2,099 13,873
Closing insurance contract liabilities
11,481
383
—
1,906
142
2,048 13,912
Closing insurance contract assets
(94)
4
—
14
37
51
(39)
Net closing balance
11,387
387
—
1,920
179
2,099 13,873
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
275
24 Insurance liabilities (continued)
24.3 Insurance, investment with DPF and reinsurance contract balances (continued)
24.3.4 Annuity and other long-term business (continued)
Insurance contracts (continued)
Analysis by measurement component (continued)
2023
Contractual service margin
Estimates
of present
value of
future cash
flows
Risk
adjustment
for non-
financial
risk
Contracts
under
modified
retrospective
transition
approach
Contracts
under the
fair value
transition
approach
Other
contracts
Total
CSM
Total
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening insurance contract liabilities
12,076
397
—
1,673
55 1,728 14,201
Opening insurance contract assets
(76)
3
—
11
23
34
(39)
Net opening balance
12,000
400
—
1,684
78 1,762 14,162
Changes that relate to current services
CSM recognised in profit or loss for the services provided
—
—
—
(130)
(11)
(141)
(141)
Change in the risk adjustment for non-financial risk for
the risk expired
—
(32)
—
—
—
—
(32)
Experience adjustments
(35)
—
—
—
—
—
(35)
(35)
(32)
—
(130)
(11)
(141)
(208)
Changes that relate to future services
Contracts initially recognised in the period
(57)
11
—
—
46
46
—
Changes in estimates reflected in the CSM
(112)
11
—
94
7
101
—
Changes in estimates that result in onerous contract
losses or reversal of those losses
(13)
—
—
—
—
—
(13)
(182)
22
—
94
53
147
(13)
Changes that relate to past services
Adjustments to liabilities for incurred claims
(54)
—
—
—
—
—
(54)
(54)
—
—
—
—
—
(54)
Insurance service result
(271)
(10)
—
(36)
42
6
(275)
Finance expense/(income) from insurance contracts
issued
875
18
—
47
7
54
947
Total changes in income statement
604
8
—
11
49
60
672
Cash flows
Premiums received
553
—
—
—
—
—
553
Incurred claims paid and other insurance service
expenses paid including investment component
(1,272)
—
—
—
—
— (1,272)
Insurance acquisition cash flows
(24)
—
—
—
—
—
(24)
Total cash flows
(743)
—
—
—
—
—
(743)
Net closing balance
11,861
408
—
1,695
127 1,822 14,091
Closing insurance contract liabilities
11,954
404
—
1,683
94 1,777 14,135
Closing insurance contract assets
(93)
4
—
12
33
45
(44)
Net closing balance
11,861
408
—
1,695
127 1,822 14,091
24.3.5 Maturity analysis
The following table sets out the carrying amounts of insurance, investment with DPF and reinsurance contracts expected to be
recovered or settled more than 12 months after the reporting date.
2024
2023
i
As at 31 December
£m
£m
Insurance contract assets
46
50
Insurance contract liabilities
(40,986) (43,575)
Investment contracts with DPF liabilities
(85,132) (83,969)
Reinsurance contract assets
1,008
1,053
Reinsurance contract liabilities
(312)
(371)
i
Insurance contract liabilities and investment contracts with DPF liability balances at 31 December 2023 have been restated from those previously reported
following a review of presentation. See Note 24.1.
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24 Insurance liabilities (continued)
24.4 Effect of contracts initially recognised in the year
The following tables summarise the effect on the measurement components arising from the initial recognition of insurance
contracts in the year.
2024
2023
Profitable
contracts
Profitable
contracts
Issued
Issued
For the year ended 31 December
£m
£m
With-profits sub-funds:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
4,896
6,223
Insurance acquisition cash flows
129
137
Estimates of the present value of future cash outflows
5,025
6,360
Estimates of the present value of future cash inflows
(5,121)
(6,484)
Risk adjustment for non-financial risk
4
5
CSM
92
119
Losses recognised on initial recognition
—
—
Unit-linked liabilities:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
—
—
Insurance acquisition cash flows
—
—
Estimates of the present value of future cash outflows
—
—
Estimates of the present value of future cash inflows
—
—
Risk adjustment for non-financial risk
—
—
CSM
—
—
Losses recognised on initial recognition
—
—
Annuity and other long-term business:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
888
303
Insurance acquisition cash flows
14
25
Estimates of the present value of future cash outflows
902
328
Estimates of the present value of future cash inflows
(992)
(385)
Risk adjustment for non-financial risk
27
11
CSM
63
46
Losses recognised on initial recognition
—
—
Total:
Contracts initially recognised in current year
Claims and other insurance service expenses payable
5,784
6,526
Insurance acquisition cash flows
143
162
Estimates of the present value of future cash outflows
5,927
6,688
Estimates of the present value of future cash inflows
(6,113)
(6,869)
Risk adjustment for non-financial risk
31
16
CSM
155
165
Losses recognised on initial recognition
—
—
In the year ended 31 December 2024 in relation to reinsurance contracts there was £37m of new claims and other reinsurance
service expenses payable offset by £11m of estimates of the present value of future cash inflows, £11m risk adjustment for non-
financial risk and £15m of CSM. In the year ended 31 December 2023 there were no new reinsurance contracts recognised.
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24 Insurance liabilities (continued)
24.5 Expected recognition of the Contractual Service Margin
2024
2023
Insurance contracts issued
Insurance contracts issued
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
With-profits
sub-funds
Unit-linked
liabilities
Annuity and
other long-
term
business
Total
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Number of years until expected to be recognised:
0 to 1 year
502
7
133
642
428
8
114
550
1 to 2 years
441
6
129
576
379
6
110
495
2 to 3 years
398
5
125
528
343
5
106
454
3 to 4 years
357
5
120
482
309
5
103
417
4 to 5 years
319
4
116
439
279
4
99
382
5 to 10 years
1,135
12
505
1,652
1,019
13
435
1,467
10 to 15 years
602
5
377
984
570
5
331
906
15 to 20 years
300
2
252
554
301
2
227
530
20 to 25 years
146
1
152
299
155
1
138
294
Over 25 years
140
—
190
330
156
—
159
315
Total
4,340
47
2,099
6,486
3,939
49
1,822
5,810
The insurance contracts issued represents the run off of the net of insurance assets and insurance liabilities CSM. The amounts
presented in the table represent the current discounted value of the CSM amortisation expected to be recognised in the insurance
service result in future periods. The actual CSM amortisation in future periods will differ from that presented due to the impacts of
future new business, recalibrations of the CSM, changes in estimates reflected in the CSMs and changes in the future coverage
units.
2024
2023
Reinsurance
contracts
held
Reinsurance
contracts
held
As at 31 December
£m
£m
Number of years until expected to be recognised:
0 to 1 year
(25)
(9)
1 to 2 years
(24)
(9)
2 to 3 years
(23)
(9)
3 to 4 years
(23)
(10)
4 to 5 years
(22)
(10)
5 to 10 years
(100)
(55)
10 to 15 years
(79)
(56)
15 to 20 years
(57)
(50)
20 to 25 years
(38)
(40)
Over 25 years
(62)
(79)
Total
(453)
(327)
For reinsurance contracts held 96% (2023: 98%) relates to annuity and other long-term business contracts. The reinsurance
contracts held represents the run off of the net of reinsurance assets and reinsurance liabilities CSM.
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278
25 Investment contract liabilities without discretionary participation features (DPF)
Investment contract liabilities without DPF comprise unit-linked contracts that contain little or no insurance risk and certain
contracts invested in PruFund with a low level of discretion (detailed below). For the former, the assets and liabilities arising
under the contracts are distinguished between those that relate to the financial instrument liability, and the deferred
acquisition costs and deferred income that relate to the component of the contract that relates to investment management.
Deferred acquisition costs and deferred income are recognised in line with the level of service provision.
Certain contracts invested in PruFund which are sold via wholesale distribution agreements with certain European financial
institutions and that are not considered to have DPF are also included in investment contract liabilities without DPF. Accordingly,
the contracts are measured at FVTPL under IFRS 9. The carrying value of these liabilities as at 31 December 2024 is £316m
(31 December 2023: £294m).
The table below presents the analysis of change in investment contract liabilities without DPF:
2024
2023
£m
£m
As at 1 January
12,535
11,937
Premiums
382
695
Surrenders
(1,144)
(770)
Maturities/deaths
(138)
(133)
Total net flows
(900)
(208)
Switches
11
19
Investment-related items and other movements
i
519
859
Foreign exchange differences
(21)
(72)
As at 31 December
12,144
12,535
i
Investment-related items and other movements and foreign exchange differences closely align to the net change in investment contract liabilities without
DPF income statement amount. The difference between the values relates to policyholder tax, reclassifications and annual management charges.
Certain parts of the unit-linked business are reinsured externally by way of fund reinsurance. Where this is the case, the fair value
of the underlying asset and liability is equal to the unit value obligation.
26 Subordinated liabilities and other borrowings
Restated
i
2024
2023
As at 31 December
£m
£m
Subordinated liabilities
3,176
3,676
Operational borrowings
2
1
Borrowings attributable to the With-Profits Fund
3,308
3,970
Total subordinated liabilities and other borrowings
6,486
7,647
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, comparative amount for operational
borrowings and borrowings attributable to the With-Profits Fund have been restated from those previously reported. The restatement has had no impact
on the consolidated income statement or net assets. See Note 1.1 for further information.
26.1 Subordinated liabilities
The Group’s subordinated liabilities consist of subordinated notes which were transferred from Prudential plc on 18 October 2019
and were recorded at fair value on initial recognition. The transfer of the subordinated liabilities was achieved by substituting the
Company in place of Prudential plc as issuer of the debt, as permitted under the terms and conditions of each applicable
instrument. All costs related to the transaction were borne by Prudential plc.
2024
2023
Principal
amount
Carrying
value
Principal
amount
Carrying
value
As at 31 December
£m
£m
5.625% sterling fixed rate due 20 October 2051
£750m
823
£750m
831
6.25% sterling fixed rate due 20 October 2068
£500m
600
£500m
602
6.50% US dollar fixed rate due 20 October 2048
$500m
433
$500m
434
6.34% sterling fixed rate due 19 December 2063
£700m
836
£700m
841
5.56% sterling fixed rate due 20 July 2055
£439m
484
£600m
667
3.875% sterling fixed rate due 20 July 2049
—
—
£300m
301
Total subordinated liabilities
3,176
3,676
Subordinated notes issued by the Company rank below its senior obligations and ahead of its preference shares and ordinary
share capital.
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279
26 Subordinated liabilities and other borrowings (continued)
26.1 Subordinated liabilities (continued)
A description of the key features of each of the Group’s subordinated notes as at 31 December 2024 is as follows:
5.625% sterling
fixed rate
6.25% sterling
fixed rate
6.50% US dollar
fixed rate
6.34% sterling
fixed rate
5.56% sterling
fixed rate
Principal amount
£750m
£500m
$500m
£700m
£439m
i
Issue date
ii
3 October 2018
3 October 2018
3 October 2018 16 December 2013
(amended 10 June
2019)
9 June 2015
(amended 10
June 2019)
Maturity date
20 October 2051
20 October 2068
20 October 2048 19 December 2063
20 July 2055
Callable at par at the option of
the Company from
20 October 2031
(and each semi-
annual interest
payment date
thereafter)
20 October 2048
(and each semi-
annual interest
payment date
thereafter)
20 October 2028
(and each semi-
annual interest
payment date
thereafter)
19 December 2043
(and each semi-
annual interest
payment date
thereafter)
20 July 2035
(and each semi-
annual interest
payment date
thereafter)
Solvency II own funds
treatment
Tier 2
Tier 2
Tier 2
Tier 2
Tier 2
i
On 19 June 2024 the Group completed a repurchase of £161m of 5.56% sterling fixed rate subordinated notes for a consideration of £150m.
ii
The subordinated notes were originally issued by Prudential plc rather than by the Company.
As at 31 December 2024, the principal amount of all subordinated liabilities has a contractual maturity of more than 12 months and
accrued interest of £33m (2023: £42m) is expected to be settled within 12 months.
26.1.1 Movement in subordinated liabilities
The following table reconciles the movement in subordinated liabilities in the year:
2024
2023
For the year ended 31 December
£m
£m
At 1 January
3,676
3,729
Amortisation
i
(58)
(29)
Foreign exchange movements
8
(24)
Repurchases and redemptions
(450)
—
At 31 December
3,176
3,676
i
Included within amortisation is £29m (2023: £nil) attributable to the cancellation of the £161m of 5.56% sterling fixed rate subordinated notes repurchased
on 19 June 2024 for a consideration of £150m.
On 19 June 2024 the Group completed a repurchase of £161m of 5.56% sterling fixed rate subordinated notes for a consideration
of £150m. On 20 July 2024, the Group redeemed, at par, all £300m 3.875% sterling fixed rate subordinated loan notes. These notes
were issued 10 July 2019 with a maturity date of 20 July 2049.
The amortisation of premium on the subordinated notes based on an EIR and the foreign exchange movement on the translation of
the subordinated liabilities denominated in US dollar are both non-cash items.
26.2 Other borrowings
26.2.1 Operational borrowings attributable to shareholder-financed operations
In March 2019, the Group entered into revolving credit facilities of £1.5bn with several banks and financial institutions, and these
are due to mature in 2026. As at 31 December 2024, these remain undrawn.
26.2.2 Borrowings attributable to the With-Profits Fund
Restated
i
2024
2023
As at 31 December
£m
£m
Non-recourse borrowings of consolidated investment funds
ii
3,300
3,950
Bank loans and overdrafts
8
20
Total
3,308
3,970
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, the comparative amount for bank loans
and overdrafts has been restated from those previously reported. The restatement has had no impact on the consolidated income statement or net assets.
ii
In all instances, the holders of the debt instruments issued by these subsidiaries and funds do not have recourse beyond the assets of these subsidiaries
and funds.
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280
26 Subordinated liabilities and other borrowings (continued)
26.3 Maturity analysis
The following table sets out the remaining contractual maturity analysis of the Group’s other borrowings as recognised in the
consolidated statement of financial position:
Borrowings attributable to the With-Profits Fund
Less than
1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5
years
No stated
maturity
Total
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2024
617
312
463
354
388
1,173
1
3,308
As at 31 December 2023
i
532
601
267
1,219
531
820
—
3,970
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, the comparative amount for less than
one year has been restated from that previously reported. The restatement has had no impact on the consolidated income statement or net assets.
Operational borrowings of £2m (2023: £1m restated) have no stated maturity.
27 Lease liabilities
The Group leases various land and buildings which it utilises as office space and also sublets to other organisations. Information
about leases for which the Group is a lessee is presented below.
2024
2023
For the year ended 31 December
£m
£m
At 1 January
387
420
Transfers
i
64
(8)
Additions
14
8
Disposals
(5)
(8)
Interest expense
15
13
Foreign exchange differences
(5)
—
Lease repayments
(45)
(38)
At 31 December
425
387
i
For the year ended 31 December 2024, transfers in of £64m relate to lease liabilities held for sale in relation to the Group’s consolidated infrastructure
capital private equity vehicles (2023: transfers out of £8m).
As at 31 December 2024, £126m (2023: £73m) of the lease liabilities are attributable to the With-Profits Fund.
The table below presents a maturity analysis of lease liabilities:
2024
2023
As at 31 December
£m
£m
Expected to be settled within one year
50
29
Expected to be settled after one year
375
358
Total lease liabilities
425
387
The table below presents a maturity analysis of lease payments showing the undiscounted lease payments to be paid on an annual
basis on these leases:
2024
2023
As at 31 December
£m
£m
Future minimum lease payments falling due in:
Less than 1 year
51
46
1 to 5 years
178
139
Over 5 years
705
939
For the year ended 31 December 2024 there are no lease break options exercisable by the Group (2023: none).
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281
28 Provisions
2024
2023
£m
£m
Regulatory
10
1
Staff benefits
53
52
Restructuring
—
4
Other
51
25
Total provisions
114
82
2024
2023
For the year ended 31 December
£m
£m
At 1 January
82
90
Charged to consolidated income statement:
Additional provisions
29
13
Unused amounts released
(1)
(7)
Used during the year
(6)
(13)
Foreign exchange difference
—
(1)
Transfer from held for sale
10
—
At 31 December
114
82
Regulatory
The regulatory provision primarily relates to a regulatory provision held within one of the Group’s consolidated private equity
infrastructure vehicles.
Staff benefits
Staff benefits primarily relates to performance-related bonuses expected to be paid to staff over the next three years.
Restructuring
The restructuring provisions as at 31 December 2023 were in relation to transformation costs.
Other
Other provisions includes amounts related to redress to customers in the platform business which occurred prior to the Group’s
acquisition of the relevant business.
29 Accruals, deferred income and other liabilities
2024
2023
As at 31 December
£m
£m
Outstanding purchases of investment securities
2,409
3,943
Accruals and deferred income
929
1,230
Deferred consideration
221
239
Interest payable
50
97
Creation of units awaiting settlement
35
40
Property related creditors
26
20
Other
697
657
Total accruals, deferred income and other liabilities
4,367
6,226
Analysed as:
Expected to be settled within one year
4,153
5,993
Expected to be settled after one year
214
233
Total accruals, deferred income and other liabilities
4,367
6,226
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282
30 Structured entities
Structured entities are those that have been designed so that voting or similar rights are not the dominant factor in deciding
who controls the entity. The Group invests in structured entities such as:
– Pooled investment vehicles, including OEICs, unit trusts, SICAVs and limited partnerships.
– Debt securitisation vehicles, including collateralised debt obligations, mortgage-backed securities and other similar
asset-backed securities.
Structured entities which the Group is deemed to control are consolidated in the consolidated financial statements.
As at 31 December 2024 and 31 December 2023, the Group has not provided, and has no intention to provide, non-contractual
financial or other support to consolidated or unconsolidated structured entities that could expose the Group to a loss.
30.1 Investments in unconsolidated structured entities
The table below shows aggregate carrying amounts of the investments in unconsolidated structured entities reported in the
consolidated statement of financial position:
2024
2023
As at 31 December
£m
£m
Statement of financial position line item:
Equity securities and pooled investment funds
10,284
12,146
Debt securities
2,132
2,174
Total
12,416
14,320
The Group generates returns and retains the ownership risks in these investments commensurate to its participation and does not
have any further exposure to the residual risks or losses of the investments or the vehicles in which it holds investments. Further
details on risks associated with financial assets and how they are managed are provided in Note 32.
Included in equity securities and pooled investment funds as at 31 December 2024 were £3,703m (2023: £4,170m) of investments
in structured entities managed by the Group. Investment management fees for the year end 31 December 2024 of £431m (2023:
£414m) were recognised from managing these entities.
The maximum exposure to loss for unconsolidated structured entities in which the Group holds an investment is the carrying value
of the Group’s investment and the loss of future fees.
The Group also has interests in structured entities managed by the Group in which it holds no investment, through the collection of
investment management fees. The maximum exposure to loss for these interests is loss of future fees.
Investment management fees recognised for the year end 31 December 2024 from managing these entities were £232m
(2023: £151m).
31 Fair value methodology
31.1 Determination of fair value hierarchy
The fair values of assets and liabilities for which fair valuation is required under IFRS are determined by the use of current market
bid prices for exchange-quoted investments, by using quotations from independent third parties such as brokers and pricing
services, or by using appropriate valuation techniques. Fair value is the amount for which an asset could be exchanged or a liability
settled in an arm’s length transaction.
To provide further information on the approach used to determine and measure the fair value of certain assets and liabilities, the
following fair value hierarchy categorisation has been used. This hierarchy is based on the inputs to the fair value measurement and
reflects the lowest level input that is significant to that measurement.
Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 1 principally includes exchange-listed equities, mutual funds with quoted prices, exchange-traded derivatives such as futures
and options, and national government bonds, unless there is evidence that trading in a given instrument is so infrequent that the
market could not be considered active. It also includes other financial instruments where there is clear evidence that the year-end
valuation is based on a traded price in an active market.
Level 2 - inputs other than quoted prices included within level 1 that are observable either directly (ie as prices) or indirectly (ie
derived from prices)
Level 2 principally includes corporate bonds and other national and non-national government debt securities which are valued
using observable inputs, together with over-the-counter derivatives such as forward exchange contracts and non-quoted
investment funds valued with observable inputs. It also includes investment contract liabilities without DPF valued with observable
inputs.
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31 Fair value methodology (continued)
31.1 Determination of fair value hierarchy (continued)
Level 3 - significant inputs for the asset or liability are not based on observable market data (unobservable inputs)
Level 3 principally includes investments in private equity funds, directly held investment properties and investments in property
funds which are exposed to bespoke properties or risks and investments which are internally valued or subject to a significant
number of unobservable assumptions. It also includes debt securities which are rarely traded or traded only in privately negotiated
transactions and hence where it is difficult to assert that their valuations have been based on observable market data.
Restatement of prior period information
Comparative figures within Note 31 have been restated following a presentational change in the levelling of equity securities and
pooled investment funds and third party interest in consolidated funds. Equity securities and pooled investment funds of £941m
have been restated as at 31 December 2023 (1 January 2023: £1,308m) from level 2 to level 3. Third party interest in consolidated
funds of £2,110m have been restated as at 31 December 2023 (1 January 2023: £2,085m) from level 1 to level 3.
31.2 Valuation approach for level 2 assets and liabilities
A significant proportion of the Group’s level 2 assets are corporate bonds, structured securities and other national and non-
national government debt securities. These assets, in line with market practice, are generally valued using independent pricing
services or quotes from third party brokers. These valuations are subject to a number of monitoring controls, such as monthly price
variances, stale price reviews and variance analysis on prices achieved on subsequent trades.
Pricing services, where available, are used to obtain third party broker quotes. When prices are not available from pricing services,
quotes are sourced directly from brokers. The Group seeks to obtain a number of quotes from different brokers so as to obtain the
most comprehensive information available on their executability.
Where quotes are sourced directly from brokers, the price used in the valuation is normally selected from one of the quotes based
on a number of factors, including the timeliness and regularity of the quotes and the accuracy of the quotes considering the
spreads provided. The selected quote is the one which best represents an executable quote for the security at the measurement
date.
31.3 Level 3 assets and liabilities
31.3.1 Valuation approach for level 3
Investments valued using valuation techniques include financial investments which by nature do not have an externally quoted
price based on regular trades, and financial investments for which markets are no longer active as a result of market conditions
eg market illiquidity. The valuation techniques used include comparison to recent arm’s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analysis, option-adjusted spread models and, if applicable,
enterprise valuation. These techniques may include a number of assumptions relating to variables such as credit risk and interest
rates. Changes in assumptions relating to these variables could positively or negatively impact the reported fair value of these
instruments. When determining the inputs into the valuation techniques used, priority is given to publicly available prices from
independent sources when available, but overall the source of pricing is chosen with the objective of arriving at a fair value
measurement that reflects the price at which an orderly transaction would take place between market participants on the
measurement date.
Where certain debt securities are valued using broker quotes, adjustments may be required in limited circumstances. This is
generally where it is determined that the third-party valuations obtained do not reflect fair value (eg either because the value is
stale and/or the values are extremely diverse in range). These are usually securities which are distressed or that could be subject
to a debt restructure, or where reliable market prices are no longer available due to an inactive market or market dislocation. In
these instances, prices are derived using internal valuation techniques including those described below with the objective of
arriving at a fair value measurement that reflects the price at which an orderly transaction would take place between market
participants on the measurement date. The techniques used require a number of assumptions relating to variables such as credit
risk and interest rates. Examples of such variables include credit spreads taken from appropriate public comparables. The input
assumptions are determined based on the best available information at the measurement dates. Securities valued in such manner
are classified as level 3 where these significant inputs are not based on observable market data.
Certain debt securities and commercial loans were valued based on the credit quality of the underlying borrower and allocating an
internal credit rating which is unobservable. These debt securities are priced by taking the credit spreads on comparable quoted
public debt securities and applying these to the equivalent debt securities, factoring in a specified liquidity premium. The selection
of comparable quoted public debt securities used to determine the credit spread takes into account the internal credit rating,
maturity, sector and currency of the debt security.
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Notes to the consolidated financial statements continued
284
31 Fair value methodology (continued)
31.3 Level 3 assets and liabilities (continued)
31.3.1 Valuation approach for level 3 (continued)
The fair value estimates are made at a specific point in time, based upon any available market information and judgements about
the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of
counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time a
significant volume of a particular financial instrument, nor do they consider the tax impact of the realisation of unrealised gains or
losses from selling the financial instrument being fair valued. In some cases, the disclosed value cannot be realised in immediate
settlement of the financial instrument. In accordance with the Group Risk Framework, the estimated fair value of derivative financial
instruments valued internally using standard market practices are subject to assessment against external counterparties’
valuations.
The Group’s investment properties are valued by professionally qualified external valuers, in accordance with RICS valuation
standards, which also reflect considerations within the RICS Guidance Note “Sustainability and ESG in commercial property
valuation and strategic advice”. An income capitalisation technique is predominantly applied, which calculates the value through
the yield and rental value depending on factors such as the lease length, building quality, covenants and location. Typically, the
variables used by the external valuers in the valuation are compared to recent transactions with similar features to those being
valued, and effectively represent proxies for a range of factors which includes climate risk. For example, the trend is towards
greener buildings achieving better rents and yields than comparable buildings, all other factors being equal.
31.3.2 Analysis of internally valued level 3 financial instruments
Level 3 financial assets, net of financial liabilities, which were internally valued as at 31 December 2024 were £6,510m
(2023: £6,709m restated), representing 5.0% of the total fair-valued financial assets net of financial liabilities (2023: 5.1% restated).
Internal valuations are inherently more subjective than external valuations. These internally valued assets and liabilities primarily
consist of the following items:
– Debt securities of £7,085m as at 31 December 2024 (2023: £7,278m), of which £5,205m (2023: £5,746m) were valued using
discounted cash flow models with an internally developed discount rate. These include senior and junior notes backed by
residential ground rents with a carrying value of £1,077m (2023: £1,241m). Please see Notes 31.8.1 and 31.8.2 for more
information on these assets. The remaining debt securities were valued using other valuation methodologies such as enterprise
valuation and estimated recovery.
– Private equity investments in both debt and equity securities of £275m as at 31 December 2024 (2023: £325m) were valued
internally using a discounted cash flow model. The most significant inputs to the valuation are the forecast cash flows of the
underlying business, internally derived discount rate, and terminal value assumption, all of which involve significant judgement.
The valuation is performed in accordance with International Private Equity and Venture Capital Association valuation guidelines.
These investments are held by the Group’s consolidated private equity infrastructure funds.
– Equity release mortgage loans of £952m as at 31 December 2024 (2023: £928m) and a corresponding liability of £221m
(2023: £239m), which were valued internally using discounted cash flow models. The inputs that are most significant to the
valuation of these loans are the internally derived discount rate, the current property value, the assumed future property growth
and the assumed future annual property rental yields.
– Other commercial loans of £1,644m as at 31 December 2024 (2023: £1,417m) were valued using discounted cash flow models
with an internally developed discount rate.
– Liabilities of £4,707m as at 31 December 2024 (2023: £4,855m restated), for the third party interest in consolidated funds in
respect of the consolidated investment funds, which are non-recourse to the Group. These liabilities were valued by reference to
the underlying assets.
31.3.3 Governance of level 3
The Group’s valuation policies, procedures and analyses for instruments categorised as level 3 are overseen by management
committees as part of the Group’s wider financial reporting governance processes. The procedures undertaken include approval of
valuation methodologies, verification processes, and resolution of significant or complex valuation issues. In undertaking these
activities, the Group makes use of the extensive expertise of its asset management function. In addition, the Group has minimum
standards for independent price verification to ensure valuation accuracy is regularly independently verified.
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Notes to the consolidated financial statements continued
285
31 Fair value methodology (continued)
31.4 Fair value hierarchy for assets measured at fair value in the consolidated statement of financial position
The tables below present the Group’s assets measured at fair value by level of the fair value hierarchy for each component of
business as set out in Note 32.
2024
Level 1
Level 2
Level 3
Total
As at 31 December
Note
£m
£m
£m
£m
With-profits:
Investment property
—
— 13,738 13,738
Equity securities and pooled investment funds
35,666
1,373 16,343 53,382
Loans
—
713
2,160
2,873
Debt securities
22,606 25,057
4,484
52,147
Derivative assets
47
707
—
754
Total with-profits
58,319 27,850 36,725 122,894
Unit-linked:
Investment property
—
—
—
—
Equity securities and pooled investment funds
10,552
430
61 11,043
Debt securities
1,915
2,685
9
4,609
Derivative assets
—
—
—
—
Total unit-linked
12,467
3,115
70 15,652
Annuity and other long-term business:
Investment property
—
—
647
647
Equity securities and pooled investment funds
180
91
3
274
Loans
—
—
1,262
1,262
Debt securities
3,723
4,629
3,827
12,179
Derivative assets
—
172
26
198
Total annuity and other long-term business
3,903
4,892
5,765 14,560
Other:
Equity securities and pooled investment funds
128
—
63
191
Debt securities
587
253
—
840
Derivative assets
—
133
—
133
Total other
715
386
63
1,164
Group:
Investment property
32
—
— 14,385 14,385
Equity securities and pooled investment funds
32 46,526
1,894 16,470 64,890
Loans
32
—
713
3,422
4,135
Debt securities
32 28,831 32,624
8,320 69,775
Derivative assets
32
47
1,012
26
1,085
Total assets at fair value
75,404 36,243 42,623 154,270
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Notes to the consolidated financial statements continued
286
31 Fair value methodology (continued)
31.4 Fair value hierarchy for assets measured at fair value in the consolidated statement of financial position (continued)
Restated
i
2023
Level 1
Level 2
Level 3
Total
As at 31 December
Note
£m
£m
£m
£m
With-profits:
Investment property
—
—
14,423
14,423
Equity securities and pooled investment funds
38,863
719
15,021 54,603
Loans
—
747
1,860
2,607
Debt securities
17,966
29,837
4,436
52,239
Derivative assets
222
1,082
—
1,304
Total with-profits
57,051 32,385 35,740 125,176
Unit-linked:
Investment property
—
—
310
310
Equity securities and pooled investment funds
10,642
473
43
11,158
Debt securities
1,796
2,841
14
4,651
Derivative assets
18
12
—
30
Total unit-linked
12,456
3,326
367
16,149
Annuity and other long-term business:
Investment property
—
—
689
689
Equity securities and pooled investment funds
177
88
4
269
Loans
—
—
1,301
1,301
Debt securities
2,631
5,851
4,275
12,757
Derivative assets
—
195
32
227
Total annuity and other long-term business
2,808
6,134
6,301
15,243
Other:
Equity securities and pooled investment funds
151
—
67
218
Debt securities
678
358
—
1,036
Derivative assets
—
132
—
132
Total other
829
490
67
1,386
Group:
Investment property
32
—
—
15,422
15,422
Equity securities and pooled investment funds
32 49,833
1,280
15,135 66,248
Loans
32
—
747
3,161
3,908
Debt securities
32
23,071 38,887
8,725 70,683
Derivative assets
32
240
1,421
32
1,693
Total assets at fair value
73,144 42,335
42,475 157,954
i
Following a review of the Group’s presentation of the levelling of equity securities and pooled investment funds and third party interest in consolidated
funds, comparative amounts have been restated from those previously reported. See Note 31.1 for further information.
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Notes to the consolidated financial statements continued
287
31 Fair value methodology (continued)
31.5 Fair value hierarchy for liabilities measured at fair value in the consolidated statement of financial position
The tables below present the Group’s liabilities measured at fair value by level of the fair value hierarchy:
2024
Level 1
Level 2
Level 3
Total
As at 31 December
£m
£m
£m
£m
Investment contract liabilities without DPF
—
12,144
—
12,144
Third party interest in consolidated funds
4,272
199
5,013
9,484
Derivative liabilities
151
3,039
12
3,202
Accruals, deferred income and other liabilities
—
—
221
221
Total liabilities at fair value
4,423 15,382
5,246 25,051
Restated
i
2023
Level 1
Level 2
Level 3
Total
As at 31 December
£m
£m
£m
£m
Investment contract liabilities without DPF
—
12,535
—
12,535
Third party interest in consolidated funds
4,474
342
5,077
9,893
Derivative liabilities
76
2,821
13
2,910
Accruals, deferred income and other liabilities
—
—
239
239
Total liabilities at fair value
4,550
15,698
5,329
25,577
i
Following a review of the Group’s presentation of the levelling of equity securities and pooled investment funds and third party interest in consolidated
funds, comparative amounts have been restated from those previously reported. See Note 31.1 for further information.
31.6 Transfers between levels
The Group’s policy is to recognise transfers into and transfers out of levels as at the end of each half-year reporting period, except
for material transfers, which are recognised as of the date of the event or change in circumstances that caused the transfer.
Transfers are deemed to have occurred when there is a material change in the observed valuation inputs or a change in the level of
trading activities of the securities.
2024
Transfers between levels
Equity securities and
pooled investment
funds
Loans
Debt
securities
Derivatives
Total
For the year ended 31 December
£m
£m
£m
£m
£m
From level 1 to level 2
i, iii
70
—
3,652
—
3,722
From level 1 to level 3
i
15
—
90
—
105
From level 2 to level 1
i, iii
148
— 10,136
— 10,284
From level 2 to level 3
i
85
5
606
—
696
From level 3 to level 1
—
—
—
—
—
From level 3 to level 2
i
2
26
768
—
796
2023
Transfers between levels
Equity securities and
pooled investment
funds
Loans
Debt
securities
Derivatives
Total
For the year ended 31 December
£m
£m
£m
£m
£m
From level 1 to level 2
i, iii
—
—
3,127
—
3,127
From level 1 to level 3
i
39
—
45
—
84
From level 2 to level 1
i, iii
—
—
3,301
—
3,301
From level 2 to level 3
i, ii
632
50
310
3
995
From level 3 to level 1
i
—
—
5
—
5
From level 3 to level 2
i
—
1
171
—
172
i
The transfers in debt securities are in line with the Group’s levelling policy during the year ended 31 December 2024 and 31 December 2023.
ii
During the year ended 31 December 2023, additional information was identified in relation to a number of collective investment holdings (within equity
securities and pooled investment funds) with a value of £658m now reflected within level 3.
iii
The transfers in debt securities from level 2 to 1 and level 1 to 2 are primarily driven by movements in liquidity in the bond markets towards the end of the
financial year.
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Notes to the consolidated financial statements continued
288
31 Fair value methodology (continued)
31.7 Reconciliation of movements in level 3 assets and liabilities
The movements during the year of level 3 assets and liabilities held at fair value (excluding those held for sale) are analysed in the
tables below:
2024
At 1 Jan
Total
gains/
(losses)
recorded
in income
statement
Foreign
exchange
Purchases
/other
Sales
/other
Transfer
to held
for sale
Settled
Issued
Transfers
into
level 3
Transfers
out of
level 3
At 31 Dec
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Level 3 assets:
Investment property
15,422
(340)
22
1,083 (1,320) (482)
—
—
—
— 14,385
Equity securities and
pooled investment funds 15,135
(25)
67
1,567 (372)
—
—
—
100
(2) 16,470
Loans
3,161
(71)
12
826 (485)
—
—
—
5
(26) 3,422
Debt securities
8,725
(445)
10
1,630 (1,528)
—
—
—
696
(768) 8,320
Derivative assets
32
(3)
—
—
—
—
(3)
—
—
—
26
Total level 3 assets
42,475
(884)
111
5,106 (3,705) (482)
(3)
—
801
(796) 42,623
Level 3 liabilities:
Third party interest in
consolidated funds
5,077
(375)
(145)
—
(6)
— (522)
691
293
— 5,013
Derivative liabilities
13
(1)
—
—
—
—
—
—
—
—
12
Other financial liabilities
239
(5)
—
—
—
—
(13)
—
—
—
221
Total level 3 liabilities
5,329
(381)
(145)
—
(6)
— (535)
691
293
— 5,246
Restated
i
2023
At 1 Jan
Total
gains/
(losses)
recorded
in income
statement
Foreign
exchange
Purchases
/other
Sales
/other
Transfer
to held
for sale
Settled
Issued
Transfers
into
level 3
Transfers
out of
level 3
At 31 Dec
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Level 3 assets:
Investment property
16,505 (1,053)
(365)
1,037 (530)
(172)
—
—
—
— 15,422
Equity securities and
pooled investment funds 14,488
(841)
(240)
2,671 (1,463)
(151)
—
—
671
— 15,135
Loans
2,727
21
(19)
968 (585)
—
—
—
50
(1)
3,161
Debt securities
8,950
107
(20)
853 (1,280)
(64)
—
—
355
(176) 8,725
Derivative assets
26
8
—
—
—
—
(5)
—
3
—
32
Total level 3 assets
42,696 (1,758)
(644)
5,529 (3,858)
(387)
(5)
— 1,079
(177) 42,475
Level 3 liabilities:
Third party interest in
consolidated funds
3,773
(210)
(127)
—
—
—
(110)
839
949
(37) 5,077
Derivative liabilities
9
4
—
—
—
—
—
—
—
—
13
Other financial liabilities
246
—
—
—
—
—
(7)
—
—
—
239
Total level 3 liabilities
4,028
(206)
(127)
—
—
—
(117)
839
949
(37) 5,329
i
Following a review of the Group’s presentation of the levelling of equity securities and pooled investment funds and third party interest in consolidated
funds, comparative amounts have been restated from those previously reported. See Note 31.1 for further information.
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Notes to the consolidated financial statements continued
289
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs
31.8.1 Level 3 assets inputs
Where possible, the Group assesses the sensitivity of the fair value of level 3 assets to reasonably possible changes in the most
significant unobservable inputs.
The most significant unobservable inputs in determining the fair value of level 3 assets are presented within the tables below.
Real estate:
Geographical
location
Estimated rental value range
i
Equivalent yield range
As at 31 December
Property type
2024
2023
ii
2024
2023
ii
Investment
property
Industrial
UK
£4 to £29
£3 to £29
4.67% to 10.64%
4.70% to 9.70%
Asia/Pacific
$68 to $284
$93 to $292
3.08% to 7.50%
3.00% to 7.50%
Office
UK
£10 to £64
£12 to £64
4.73% to 10.52%
4.72% to 11.19%
Asia/Pacific
$396 to $1,096 $400 to $1,144
2.87% to 7.50%
3.70% to 6.75%
North America
$48
$50
8.00%
7.75%
Residential
UK
£8 to £97
£12 to £91
4.25% to 8.00%
4.15% to 6.98%
Europe
€209 to €329
€186 to €279
3.65% to 4.90%
3.61% to 8.42%
Asia/Pacific
$197 to $266
$220 to $297
3.46% to 4.55%
4.18% to 4.79%
Retail
UK
£10 to £55
£15 to £47
4.73% to 10.52% 4.00% to 10.61%
Asia/Pacific
$328 to $1,808 $398 to $1,782
6.75% to 8.5%
6.75% to 8.00%
Other
iii
UK
£8 to £168
£14 to £168
5.49% to 6.50%
5.63% to 6.70%
Asia/Pacific
$180 to $194
$194 to $200
8.00%
8.50%
i
The average estimated rental value for the UK and North America is quoted per square foot, while the average estimated rental value for Europe
and Asia/Pacific is quoted per square metre in line with local practice.
ii
The estimated rental value and equivalent yield are now shown as ranges instead of an average as previously reported following a review of presentation.
This provides a better representation due to the limited populations of properties in each type.
iii
Property type other represents hotels and student accommodation.
Other assets:
As at 31 December
Unobservable input
2024
2023
Retail income strips
Discount rate
2.11% to 6.41%
1.10% to 5.94%
Equity release mortgages
Discount rate
2.76%
2.76%
Total portfolio property value
£2.8bn
£3.0bn
Assumed property growth rate
Risk free + 1.10%
Risk free + 0.70%
Private placement loans
i
Credit risk premium:
AAA to A
0.32% to 3.07%
0.58% to 5.87%
BBB to BB
0.45% to 6.11%
1.09% to 6.65%
Infrastructure fund investments
Discount rate
9.3% to 12.00%
8.5% to 12.00%
i
Note on residential ground rent assets.
Included within private placement loans are senior and junior notes backed by residential ground rents with a carrying value of £1,077m (2023:
£1,241m), of which £743m are held in the shareholder-backed fund (2023: £859m).
As noted in the Draft Leasehold and Commonhold Reform Bill included in the King’s Speech on 17 July 2024, potential future legislative change may
result in a significant reduction in the cash flows that can be generated from these assets, although the eventual outcome is still uncertain.
Furthermore, there is ongoing legislative and legal uncertainty around the abolition of marriage values (the linking of ground rents to increase in
property values).
These uncertainties have been captured in the valuation through the application of probability weightings to plausible scenarios relevant to the matter
and during the period credit ratings of certain senior notes have been downgraded. The range of the credit ratings of the portfolio ranges between A+
and BBB (2023: A+ and A). In addition, an incremental illiquidity spread of 0.30% (2023: 0.60%) above the comparable spread implied by the rating has
been applied to reflect the compensation that a market participant would require at reporting date due to the uncertainty in future values. The
reduction on the illiquidity premium reflects the impact of the uncertainty partly captured already through the probability weighting and the ratings
downgrade.
The sensitivities of the valuation of the private placement loan portfolio to a change in discount rate is presented in the tables below.
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Notes to the consolidated financial statements continued
290
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities
The table below provides a breakdown of assets within the level 3 fair value hierarchy by investment type, the sensitivity of the fair
value to the possible changes in the most significant unobservable inputs, and the impact on IFRS profit/(loss) after tax and
shareholders’ equity for those held within the shareholder-backed funds.
2024
Fair
value
Held in
shareholder-
backed fund
Valuation
technique
Most significant
unobservable input
Sensitivity
Change in
fair value
Impact on
IFRS profit
after tax and
shareholders’
equity
viii
As at 31 December
£m
£m
£m
£m
Investment property
Property in use
13,859
647
Income
capitalisation
Equivalent yield
Increase by 50bps
(1,227)
(43)
Decrease by 50bps
1,489
52
Estimated rental
value
Increase by 10%
1,141
40
Decrease by 10%
(1,107)
(39)
Property under
development
526
—
Development cost
Increase by 10%
53
—
Decrease by 10%
(53)
—
Loans
Equity release
mortgages
ii
952
952 Discounted cash
flow
iii
Illiquidity premium
Increase by 50bps
(49)
(36)
Decrease by 50bps
52
39
Current property
value
Increase by 10%
31
24
Decrease by 10%
(41)
(30)
Assumed annual
property growth rate
Increase by 100bps
65
49
Decrease by 100bps
(95)
(71)
Assumed annual
property rental yield
Increase by 100bps
(53)
(39)
Decrease by 100bps
46
35
Other mortgages and
retail loans
826
— Broker quotes
iv
Broker quotes
Increase by 10%
83
—
Decrease by 10%
(83)
—
Other commercial loans
1,644
311 Broker quotes
iv
Broker quotes
Increase by 10%
164
23
Decrease by 10%
(164)
(23)
Equity securities and
pooled investment fund
i
16,359
127 Net asset
statements
Net asset value
Increase by 10%
1,636
10
Decrease by 10%
(1,636)
(10)
Infrastructure fund
investments
v
275
— Discounted cash
flow
vi
Discount rate
Increase by 10%
(26)
—
Decrease by 10%
31
—
Debt securities
Private placement loans
ix
4,942
2,912 Discounted cash
flow
vii
Discount rate
Increase by 50bps
(242)
(107)
Decrease by 50bps
302
133
Retail income strips
263
227 Discounted cash
flow
vii
Discount rate
Increase by 50bps
(12)
(8)
Decrease by 50bps
14
9
Unquoted corporate
bonds
2,951
696
Broker quotes
iv,
enterprise
valuation,
estimated
recovery
Broker quotes
Increase by 10%
295
52
Decrease by 10%
(295)
(52)
Derivative assets
26
26 Discounted cash
flow
Discount rate
Increase by 50bps
—
—
Decrease by 50bps
—
—
Total level 3
42,623
5,898
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Notes to the consolidated financial statements continued
291
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities (continued)
Restated
i
2023
Fair
value
Held in
shareholder-
backed fund
Valuation
technique
Most significant
unobservable input
Sensitivity
Change in
fair value
Impact on
IFRS profit
after tax and
shareholders’
equity
viii
As at 31 December
£m
£m
£m
£m
Investment property:
Property in use
14,414
994 Income
capitalisation
Equivalent yield
Increase by 50bps
(1,277)
(67)
Decrease by 50bps
1,535
81
Estimated rental
value
Increase by 10%
1,286
68
Decrease by 10%
(1,240)
(65)
Property under
development
1,008
5
Development cost Increase by 10%
101
—
Decrease by 10%
(101)
—
Loans
Equity release
mortgages
ii
928
928 Discounted cash
flow
iii
Illiquidity premium Increase by 50bps
(61)
(47)
Decrease by 50bps
66
51
Current property
value
Increase by 10%
44
33
Decrease by 10%
(54)
(41)
Assumed annual
property growth
rate
Increase by 100bps
109
84
Decrease by 100bps
(154)
(118)
Assumed annual
property rental yield
Increase by 100bps
(77)
(59)
Decrease by 100bps
72
55
Other mortgages and
retail loans
816
— Broker quotes
iv
Broker quotes
Increase by 10%
82
—
Decrease by 10%
(82)
—
Other Commercial loans
1,417
373 Broker quotes
iv
Broker quotes
Increase by 10%
142
29
Decrease by 10%
(142)
(29)
Equity securities and
pooled investment funds
i
15,031
104 Net asset
statements
Net asset value
Increase by 10%
1,503
8
Decrease by 10%
(1,503)
(8)
Infrastructure fund
investments
v
325
— Discounted cash
flow
vi
Discount rate
Increase by 10%
(62)
—
Decrease by 10%
72
—
Debt securities
Private placement loans
ix
5,523
3,242 Discounted cash
flow
vii
Discount rate
Increase by 50bps
(293)
(129)
Decrease by 50bps
325
143
Retail income strips
224
188 Discounted cash
flow
vii
Discount rate
Increase by 50bps
(12)
(7)
Decrease by 50bps
13
9
Unquoted corporate
bonds
2,757
859
Broker quotes
iv,
enterprise
valuation,
estimated
recovery
Broker quotes
Increase by 10%
276
66
Decrease by 10%
(276)
(66)
Derivative assets
32
32 Discounted cash
flow
Discount rate
Increase by 50bps
—
—
Decrease by 50bps
—
—
Total level 3
42,475
6,725
i
Following a review of the Group’s presentation of the levelling of equity securities and pooled investment funds and third party interest in consolidated
funds, comparative amounts have been restated from those previously reported. See Note 31.1 for further information.
ii
The equity release mortgages have a no-negative equity guarantee (NNEG) that caps the loan repayment in the event of death, or entry into long-term
care, to be no greater than the proceeds from the sale of the property that the loans are secured against. The value of the NNEG, which is recognised as a
deduction from the value of the loans, is based on a Black-Scholes option pricing valuation utilising a real-world approach and is estimated using
assumptions, including future property growth rate and property price volatility.
iii
The equity release mortgage loans of £952m as at 31 December 2024 (2023: £928m) and a corresponding liability of £221m (2023: £239m) were valued
internally using discounted cash flow models. Future cash flows are estimated based on assumptions, including prepayment, death and entry into long-
term care, and discounted using an appropriate discount rate, which references market rates for equity release mortgage loans.
iv
Quotes received from an external pricing service.
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Notes to the consolidated financial statements continued
292
31 Fair value methodology (continued)
31.8 Sensitivity of the fair value of level 3 instruments to changes in significant inputs (continued)
31.8.2 Level 3 asset sensitivities (continued)
v
Infrastructure fund investments comprises £111m (2023: £104m) of equity securities and pooled investment funds and £164m (2023: £221m) of debt
securities. These investments are valued in accordance with the International Private Equity and Venture Association valuation guidelines (latest edition
December 2022). Valuations are also benchmarked against comparable infrastructure fund transactions. The discount rate is made up of cash flows from
dividends due in respect of the equity investments and principal and interest from loan notes in respect of debt investments.
vi
These investments are valued in accordance with the International Private Equity and Venture Association valuation guidelines (latest edition December
2022). Valuations are also benchmarked against comparable infrastructure transactions. The discount rate is made up of cash flows from dividends due in
respect of the equity investments and principal and interest from loan notes in respect of debt investments.
vii
The discount rate is made up of a risk-free rate and a credit spread. The risk-free rate is taken from an appropriate gilt of comparable duration and the
spread is taken from a basket of comparable securities.
viii
Of the £5,898m (31 December 2023: £6,725m) of level 3 assets held in shareholder-backed funds, £70m (2023: £367m) is held by unit-linked business.
These assets are included in the analysis presented however, as the investment risk is borne by the unit-linked policyholders, there is no impact on IFRS
profit/(loss) after tax and shareholder’s equity.
ix
Included within private placement loans is senior and junior notes backed by residential ground rent assets with a carrying value of £1,077m of which
£743m were held in the shareholder-backed fund (2023: £1,241m of which £859m in the shareholder-backed fund) which may be impacted by potential
future legislative change as mentioned in Note 31.8.1.
31.9 Unrealised gains and losses in respect of level 3 assets and liabilities
Unrealised gains and losses recognised in the consolidated income statement in respect of assets and liabilities classified as level 3
that are held at the end of the year are analysed as follows:
Restated
i
2024
2023
As at 31 December
£m
£m
Investment property
(317)
(1,124)
Equity securities and pooled investment funds
219
(662)
Loans
(70)
11
Debt securities
(581)
(106)
Third party interest in consolidated funds
371
236
Derivatives
(5)
—
Other financial liabilities
5
—
Total
(378)
(1,645)
i
Following a review of the Group’s presentation of the levelling of equity securities and pooled investment funds and third party interest in consolidated
funds, comparative amounts have been restated from those previously reported. See Note 31.1 for further information.
31.10 Fair value of assets and liabilities at amortised cost
The tables below show the fair value of assets and liabilities carried at amortised cost on the consolidated statement of financial
position where the fair value does not approximate the carrying value:
2024
Level 1
Level 2
Level 3
Total fair
value
Total carrying
value
As at 31 December
£m
£m
£m
£m
£m
Liabilities:
Subordinated liabilities and other borrowings
—
5,608
339
5,947
6,486
Restated
i
2023
Level 1
Level 2
Level 3
Total fair
value
Total carrying
value
As at 31 December
£m
£m
£m
£m
£m
Liabilities:
Subordinated liabilities and other borrowings
—
6,822
260
7,082
7,647
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, comparative amounts have been
restated from those previously reported. The restatement has had no impact on the consolidated income statement or net assets. See Note 1.1 for further
information.
The estimated fair value of subordinated liabilities are based on the quoted market offer price. The fair value of the other liabilities
in the tables above have been estimated from the discounted cash flows expected to be received or paid. Where appropriate, an
observable market interest rate has been used and the assets and liabilities are classified within level 2. Otherwise, they are
included as level 3.
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Notes to the consolidated financial statements continued
293
32 Risk management and sensitivity analysis
32.1 Risk overview
The Group’s business involves the acceptance and management of risk. The Group’s risk management process is governed by the
Risk Management Framework (RMF). The RMF is designed to manage risk within agreed appropriate levels, aligned to delivering its
strategy and creating long-term value for clients and shareholders. Risk management is the process of identifying, assessing,
managing and reporting current and emerging risks, supported by embedded risk culture and strong governance. Effective risk
management enables better decision-making and safeguards the Group’s ability to meet commitments to its shareholders,
customers and clients, comply with regulation, manage disruption and protects its reputation. For more information on the RMF,
please refer to page 44.
Risk appetite is the amount and type of risk that the Group is willing to accept in pursuit of its business objectives, and is approved
by the Board. The risk appetite statements and limits specify the risk appetite and tolerance to take on risk. The statements and
limits are aligned to the business model and strategy and cover significant financial and non-financial risks. For more information
on risk appetite and limits please refer to page 45.
A number of risk factors affect the Group’s results and financial position. The financial risk categories affecting the Group’s
financial instruments, insurance assets and liabilities are set out below:
Risk type
Definition
Market risk
The risk of loss or adverse change in the financial health of the business resulting, directly or indirectly, from
fluctuations in the level or volatility of market prices of assets, currencies liabilities and financial instruments.
Credit risk
The risk of loss or adverse change in the financial situation of the business, or that of the Group’s customers
and clients, resulting from fluctuations in the credit standing of issuers of securities, counterparties and any
debtors in the form of default or other significant credit event (eg downgrade or spread widening).
Insurance risk
The risk of loss or adverse change in the financial situation of the business, or that of the Group’s customers
and clients, resulting from changes in the level, trend or volatility of the following:
– Morbidity/mortality/longevity risk: the risk of loss, the inability to meet contractual or other liabilities,
and/or profit volatility resulting from adverse mortality and/or morbidity and/or longevity experience
than estimated within pricing, underwriting and valuation.
– Persistency risk: the risk of loss, the inability to meet contractual or other liabilities, and/or profit
volatility resulting from adverse persistency experience than estimated within pricing and valuation.
– Expenses and margin pricing: the risk of loss, the inability to meet contractual or other liabilities,
and/or profit volatility resulting from adverse experience in expenses from those estimated in pricing
and valuation when considering insurance contracts.
Liquidity risk
The risk that the Group and/or its business are unable to meet financial obligations (eg claims, creditors debt
interest and collateral calls) as they fall due because they do not have or are unable to generate sufficient
liquid assets. Fund liquidity risk is the risk of being unable to meet financial obligations as they fall due
because of a mismatch in liquidity of the underlying assets and the frequency of liability requirements of the
fund.
These risks are described in more detail in the following sections.
The Group’s exposure to risks arising from financial instruments, insurance assets and liabilities is different for each component of
the Group’s business. The Group’s consolidated statement of financial position is presented below for the different components of
business.
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Notes to the consolidated financial statements continued
294
32 Risk management and sensitivity analysis (continued)
32.1 Risk overview (continued)
Analysis of consolidated statement of financial position by component of business
2024
Shareholder-backed funds
With-
profits
Unit-linked
Annuity and
other long-
term
business
Other
Total
As at 31 December
£m
£m
£m
£m
£m
Assets:
Goodwill and intangible assets
326
—
4
1,384
1,714
Deferred acquisition costs
—
1
3
15
19
Defined benefit pension asset
19
—
23
3
45
Investment in joint ventures and associates accounted for using
the equity method
284
—
—
—
284
Property, plant and equipment
1,432
—
11
211
1,654
Investment property
13,738
—
647
— 14,385
Deferred tax assets
29
2
289
167
487
Insurance contract assets
—
—
39
—
39
Reinsurance contract assets
15
4
1,024
—
1,043
Equity securities and pooled investment funds
53,382 11,043
274
191 64,890
Loans
2,873
—
1,262
—
4,135
Debt securities
52,147
4,609
12,179
840 69,775
Derivative assets
754
—
198
133
1,085
Deposits
11,918
1,827
2,044
5 15,794
Current tax assets
31
5
16
13
65
Accrued investment income and other debtors
1,563
195
274
474
2,506
Assets held for sale
1,117
256
1
92
1,466
Cash and cash equivalents
3,176
365
488
809
4,838
Total assets
142,804 18,307
18,776
4,337 184,224
Liabilities:
Insurance contract liabilities
123,244
4,108
13,912
— 141,264
Reinsurance contract liabilities
1
22
257
—
280
Investment contract liabilities without DPF
1,886 10,252
6
—
12,144
Third party interest in consolidated funds
7,032
2,449
3
—
9,484
Subordinated liabilities and other borrowings
3,308
1
1
3,176
6,486
Defined benefit pension liability
—
—
—
258
258
Deferred tax liabilities
629
27
41
8
705
Lease liabilities
126
—
10
289
425
Current tax liabilities
33
2
43
3
81
Derivative liabilities
1,352
14
1,619
217
3,202
Other financial liabilities
822
—
86
110
1,018
Provisions
10
4
11
89
114
Accruals, deferred income and other liabilities
2,308
359
1,149
551
4,367
Liabilities held for sale
1,058
15
—
—
1,073
Total liabilities
141,809
17,253
17,138
4,701 180,901
Total equity
3,323
Total equity and liabilities
184,224
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Notes to the consolidated financial statements continued
295
32 Risk management and sensitivity analysis (continued)
32.1 Risk overview (continued)
Analysis of consolidated statement of financial position by component of business (continued)
Restated
i
2023
Shareholder-backed funds
With-
profits
Unit-linked
Annuity and
other long-
term
business
Other
Total
As at 31 December
£m
£m
£m
£m
£m
Assets:
Goodwill and intangible assets
360
—
11
1,444
1,815
Deferred acquisition costs
—
5
4
14
23
Defined benefit pension asset
9
—
4
6
19
Investment in joint ventures and associates accounted for using
the equity method
265
—
—
22
287
Property, plant and equipment
1,826
—
13
226
2,065
Investment property
14,423
310
689
—
15,422
Deferred tax assets
79
3
193
168
443
Insurance contract assets
—
—
44
—
44
Reinsurance contract assets
11
7
1,081
—
1,099
Equity securities and pooled investment funds
54,603
11,158
269
218 66,248
Loans
2,607
—
1,301
—
3,908
Debt securities
52,239
4,651
12,757
1,036 70,683
Derivative assets
1,304
30
227
132
1,693
Deposits
12,253
1,808
2,255
8
16,324
Current tax assets
9
15
41
2
67
Accrued investment income and other debtors
1,620
206
290
420
2,536
Assets held for sale
1,112
105
1
138
1,356
Cash and cash equivalents
3,043
501
555
1,049
5,148
Total assets
145,763
18,799
19,735
4,883 189,180
Liabilities:
Insurance contract liabilities
123,596
4,404
14,135
— 142,135
Reinsurance contract liabilities
1
21
335
—
357
Investment contract liabilities without DPF
1,805
10,723
7
—
12,535
Third party interest in consolidated funds
7,617
2,271
5
—
9,893
Subordinated liabilities and other borrowings
3,970
—
1
3,676
7,647
Defined benefit pension liability
—
—
—
294
294
Deferred tax liabilities
619
11
38
14
682
Lease liabilities
73
—
11
303
387
Current tax liabilities
51
7
37
2
97
Derivative liabilities
1,129
4
1,514
263
2,910
Other financial liabilities
961
—
30
195
1,186
Provisions
—
—
12
70
82
Accruals, deferred income and other liabilities
4,371
495
792
568
6,226
Liabilities held for sale
665
—
—
—
665
Total liabilities
144,858
17,936
16,917
5,385 185,096
Total equity
4,084
Total equity and liabilities
189,180
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, comparative amounts for cash and cash
equivalents and subordinated liabilities and other borrowings have been restated from those previously reported. The restatement has had no impact on
the consolidated income statement or net assets. See Note 1.1 for further information.
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Notes to the consolidated financial statements continued
296
32 Risk management and sensitivity analysis (continued)
32.2 Market risk
Market risk is risk of loss or adverse change in the financial health of the business resulting, directly or indirectly, from fluctuations
in the level or volatility of market prices of assets, currencies liabilities and financial instruments.
Market risk comprises six types of risk, namely:
– Interest rate risk: fluctuations in the level and volatility of interest rates or the shape or curvature of the yield curve or spread
relationship.
– Inflation risk: fluctuations in actual or implied inflation rates.
– Equity risk: fluctuations in the level or volatility of equity investments.
– Property risk: fluctuations in the level or volatility of property investments.
– Currency risk: fluctuations, including translation risk, in the level or volatility of currency exposures.
– Alternative investments risk: fluctuations in the level or volatility of alternative investment exposures.
The primary market risks that the Group faces are equity risk, property risk and interest rate risk. Most assets the Group holds are
investments that are either equity or property-type investments and subject to equity or property price risk, or bonds, mortgages
and cash deposits, the values of which are subject to interest rate risk. Additionally, the Group holds alternative investments which
may exhibit some or all of these risks depending on the type of investment. The amount of risk borne by the Group’s shareholders
depends on the extent to which its customers share the investment risk through the structure of the Group’s products.
The split of the Group’s investments between equity investments and interest-sensitive instruments depends principally on the
type of liabilities supported by those investments and the amount of capital the Group has available. This mix of liabilities allows the
Group to invest a substantial portion of its investment funds in equity and property investments that the Group believes produce
greater returns over the long term.
Market risk is managed through a robust market risk framework which includes: policies, risk appetite statements and risk limits
and triggers covering key market risk exposures; asset and liability management programmes; a quality of capital framework;
strategic asset allocations; investment and hedging strategies; and the use of investment constraints and the limits for asset
portfolios.
Procedures are in place to respond to significant market events and disruptions, bringing together colleagues from across the
business to provide enhanced monitoring and decision-making capability.
32.2.1 Interest rate risk and inflation risk
The majority of the Group’s interest rate exposure arises from shareholder-backed annuities. The value of the liabilities are
exposed to interest rate movements, but these are closely matched with assets of an appropriate duration to manage interest rate
risk in accordance with regulatory capital reporting requirements. The assets held in excess of the liabilities, which back the capital
requirements of the annuity business, result in an exposure to interest rate risk.
Exposure to interest rate risk also arises on the shareholders' share of the excess assets in the With-Profits Fund.
The assets and liabilities for the with-profits and unit-linked components of business are sensitive to interest rates, but the
shareholder is not directly exposed to changes in the value of these assets and liabilities. The shareholder is indirectly exposed to
interest rate risk through the value of future shareholder transfers from with-profits business and charges levied on unit-linked and
asset management business.
The Group manages its exposure to interest rate risk within defined constraints via hedging strategies.
Material increases in inflation may increase the Group’s cost base and the amount that it needs to set aside to meet future
obligations, negatively impacting profitability. Inflation risk primarily arises from certain annuity contracts that have benefit
escalation linked to a price index. The Group manages this exposure by matching inflation-linked annuity liabilities with
corresponding inflation-linked assets.
32.2.2 Equity and property risk
While the Group holds significant amounts of equity and property assets on its consolidated statement of financial position, the
shareholders’ exposure to equity and property risk for the with-profits and unit-linked business is limited as the risk is
predominantly borne by the policyholder. For with-profits business, the impact of equity and property risk on shareholder transfers
is reduced over the short-term due to the PruFund smoothing process and the prudent approach taken to regular bonuses
declarations on traditional with-profits business. However, the impact of equity and property risk on long-term investment
performance may affect future shareholder transfers. The Group has entered into a partial equity hedge of the shareholder
transfers expected to emerge from the WPSF in order to mitigate this risk.
The Group’s direct exposure to this risk arises from the ‘annuities and other long-term business’ component’s holdings in equity
securities and property, which are not hedged or matched by corresponding liabilities.
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Notes to the consolidated financial statements continued
297
32 Risk management and sensitivity analysis (continued)
32.2 Market risk (continued)
32.2.3 Currency risk
The Group invests significant amounts of policyholder funds in overseas assets as part of its investment strategy. The direct
currency risk exposure to the shareholder from the with-profits and unit-linked components of business is minimal, although the
shareholder is indirectly exposed to currency risk in relation to the future value of shareholder transfers from with-profits business
and charges levied on unit-linked and asset management business. Currency risk exposure arising from overseas assets held by
the shareholder-backed annuity and other long-term business is mitigated through the use of derivatives. The currency risk
exposure arising from unit-linked business is low.
As at 31 December 2024, the Group held 53% (2023: 50%) and 44% (2023: 38%) of its financial assets and financial liabilities
respectively, in currencies other than pounds sterling, the presentation currency of the Group. The non-sterling currencies are
primarily US dollar and euro.
Of these financial assets, as at 31 December 2024, 93% (2023: 92%) are held by the With-Profits Fund, allowing the fund to obtain
exposure to foreign equity markets. Of these financial liabilities, as at 31 December 2024, 74% (2023: 74%) are held by the With-
Profits Fund, mainly relating to foreign currency borrowings. The exchange risks inherent in these exposures are mitigated through
the use of derivatives, mainly forward currency contracts.
For the year ended 31 December 2024, exchange losses of £53m (2023: losses of £126m) were recognised within the total net
insurance and investment result in the consolidated income statement; mainly arising on assets held by the With-Profits Fund, the
majority of which are offset by changes in with-profits and unit-linked liabilities. This excludes exchange gains and losses arising on
foreign currency investments measured at FVTPL, which are included as part of gains and losses included in investment return,
which is shown in Note 5.
The Group is also exposed to structural currency translation risk as a result of overseas operations which contribute to equity. The
assets and liabilities of foreign operations are translated into the Group’s presentational currency, pounds sterling. Foreign
exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive income
and accumulated in the translation reserve.
32.3 Credit risk
The Group’s exposure to credit risk primarily arises from the annuity funds, which hold substantial volumes of public and private
fixed income investments on which a certain level of defaults and downgrades are expected.
Exposure to credit risk also arises on the shareholders’ share of the excess assets in the With-Profits Fund.
While the with-profits and unit-linked funds have large holdings of assets subject to credit risk, the shareholder results of the
Group are not directly exposed to credit defaults on assets held in these components of business. However, the shareholder is
indirectly exposed to credit risk from these components of business in relation to the future value of shareholder transfers from
with-profits business and charges levied on unit-linked and asset management business. The direct exposure of the Group’s
shareholders’ equity to credit default risk in the ‘other’ component is small in the context of the Group.
Credit risk is managed through a robust credit and counterparty framework which includes: policies, standards, appetite
statements, limits and triggers (including relevant governance and controls); investment constraints and limits on the asset
portfolios (in particular, in relation to credit rating, seniority, sector and issuer), and counterparties in particular for derivatives,
reinsurance and cash; and a robust credit rating process.
32.3.1 Financial assets
The following tables provide an analysis of the quality of financial assets which are exposed to credit risk. The financial assets
below are analysed according to external credit ratings issued, with equivalent ratings issued by different ratings agencies
grouped together. Standard & Poor’s ratings have been used where available. For securities where Standard & Poor’s ratings are
not immediately available, those produced by Moody’s and then Fitch have been used as an alternative.
2024
AAA
AA+ to AA-
A+ to A-
BBB+
to BBB-
Below BBB-
Other
Total
As at 31 December
£m
£m
£m
£m
£m
£m
£m
Reinsurance contract assets
—
70
874
—
—
99
1,043
Loans
—
—
159
6
1,416
2,554
4,135
Debt securities
5,461 18,786 13,770
15,618
6,276
9,864 69,775
Deposits
53
3,006 10,520
373
65
1,777 15,794
Accrued investment income and other debtors
44
145
170
176
84
1,887
2,506
Cash and cash equivalents
576
761
3,345
25
31
100
4,838
Total financial assets
6,134 22,768 28,838
16,198
7,872
16,281 98,091
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Financial information
Other information
Notes to the consolidated financial statements continued
298
32 Risk management and sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.1 Financial assets (continued)
Restated
i
2023
AAA
AA+ to AA-
A+ to A-
BBB+
to BBB-
Below BBB-
Other
Total
As at 31 December
£m
£m
£m
£m
£m
£m
£m
Reinsurance contract assets
—
74
923
—
—
102
1,099
Loans
—
—
783
4
370
2,751
3,908
Debt securities
6,604
17,340
16,919
14,213
4,930
10,677 70,683
Deposits
9
4,667
8,526
1,427
—
1,695
16,324
Accrued investment income and other debtors
38
117
297
126
49
1,909
2,536
Cash and cash equivalents
826
1,058
3,202
18
17
27
5,148
Total financial assets
7,477
23,256 30,650
15,788
5,366
17,161 99,698
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, comparative amounts for cash and cash
equivalents have been restated from those previously reported. The restatement has had no impact on the consolidated income statement or net assets.
See Note 1.1 for further information.
The credit ratings, information or data contained in this report which are attributed and specifically provided by Standard & Poor’s,
Moody’s and Fitch Solutions and their respective affiliates and suppliers (‘Content Providers’) is referred to here as the ‘Content’.
Reproduction of any content in any form is prohibited except with the prior written permission of the relevant party. The Content
Providers do not guarantee the accuracy, adequacy, completeness, timeliness or availability of any Content and are not responsible
for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such
Content. The Content Providers expressly disclaim liability for any damages, costs, expenses, legal fees, or losses (including lost
income or lost profit and opportunity costs) in connection with any use of the Content. A reference to a particular investment or
security, a rating or any observation concerning an investment that is part of the Content is not a recommendation to buy, sell or
hold any such investment or security, nor does it address the suitability of an investment or security and should not be relied on as
investment advice.
In the table above, AAA is the highest possible rating. Investment grade financial assets are classified within the range of AAA to
BBB- ratings. Financial assets which fall outside this range are classified as below BBB- and are non-investment grade.
The Group is exposed to the risk of counterparty default on its reinsurance assets. The Group evaluates the financial condition of
its reinsurers and monitors concentration of credit risk to minimise its exposure from reinsurer insolvencies. The split of the
reinsurance asset by credit rating is shown above.
Loans that were impaired are not significant to the Group. Further information on the loans portfolio is provided in Note 18.
Debt securities with no external credit rating are classified as ‘other’. The following table shows the majority of debt securities
shown as ‘other’ are allocated an internal rating and are considered to be of investment grade quality:
2024
2023
As at 31 December
£m
£m
AAA
100
188
AA+ to AA-
900
841
A+ to A-
3,626
4,721
BBB+ to BBB-
2,391
1,944
Below BBB-
1,096
1,138
Unrated
1,751
1,845
Total
9,864
10,677
M&G plc Annual Report and Accounts 2024
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Governance
Financial information
Other information
Notes to the consolidated financial statements continued
299
32 Risk management and sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.2 Debt securities
The table below presents the Group’s debt securities by asset category and external credit rating issued for each component of
business as set out in Note 32.1.
2024
AAA
AA+ to AA-
A+ to A-
BBB+
to BBB-
Below BBB-
Other
Total
As at 31 December
£m
£m
£m
£m
£m
£m
£m
Government Sovereign debt
3,971
13,747
1,924
2,794
1,727
102
24,265
With-profits
2,729
10,479
1,853
2,680
1,706
3
19,450
Unit-linked
115
1,353
54
88
21
99
1,730
Annuity and other long-term business
604
1,866
17
26
—
—
2,513
Other
523
49
—
—
—
—
572
Quasi-sovereign and Public sector debt
196
1,568
240
381
873
288
3,546
With-profits
152
780
183
373
866
206
2,560
Unit-linked
8
116
12
8
7
2
153
Annuity and other long-term business
36
672
45
—
—
80
833
Corporate debt
1,093
3,277
11,220
12,149
3,541
7,835
39,115
With-profits
631
2,101
8,543
9,278
3,216
4,113
27,882
Unit-linked
80
213
877
1,212
254
38
2,674
Annuity and other long-term business
239
920
1,782
1,635
68
3,673
8,317
Other
143
43
18
24
3
11
242
Asset-backed securities
201
194
386
294
135
1,639
2,849
With-profits
86
122
186
208
135
1,518
2,255
Unit-linked
10
16
9
14
—
3
52
Annuity and other long-term business
79
56
191
72
—
118
516
Other
26
—
—
—
—
—
26
Total debt securities
5,461
18,786
13,770
15,618
6,276
9,864
69,775
With-profits
3,598
13,482
10,765
12,539
5,923
5,840
52,147
Unit-linked
213
1,698
952
1,322
282
142
4,609
Annuity and other long-term business
958
3,514
2,035
1,733
68
3,871
12,179
Other
692
92
18
24
3
11
840
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Other information
Notes to the consolidated financial statements continued
300
32 Risk management and sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.2 Debt securities (continued)
2023
AAA
AA+ to AA-
A+ to A-
BBB+
to BBB-
Below BBB-
Other
Total
As at 31 December
£m
£m
£m
£m
£m
£m
£m
Government Sovereign debt
4,790
12,650
1,699
2,295
1,213
187
22,834
With-profits
3,365
9,297
1,670
2,220
1,213
80
17,845
Unit-linked
109
1,354
15
47
—
107
1,632
Annuity and other long-term business
715
1,934
14
27
—
—
2,690
Other
601
65
—
1
—
—
667
Quasi-sovereign and Public sector debt
202
1,572
204
397
873
300
3,548
With-profits
157
821
145
377
873
238
2,611
Unit-linked
1
58
13
2
—
1
75
Annuity and other long-term business
44
693
46
18
—
61
862
Corporate debt
1,242
2,875
14,587
11,268
2,755
8,544
41,271
With-profits
745
1,789
11,670
8,332
2,423
4,462
29,421
Unit-linked
27
110
1,239
1,209
257
23
2,865
Annuity and other long-term business
283
904
1,644
1,707
72
4,057
8,667
Other
187
72
34
20
3
2
318
Asset-backed securities
370
243
429
253
89
1,646
3,030
With-profits
217
161
203
153
89
1,539
2,362
Unit-linked
17
22
17
23
—
—
79
Annuity and other long-term business
85
60
209
77
—
107
538
Other
51
—
—
—
—
—
51
Total Debt Securities
6,604
17,340
16,919
14,213
4,930
10,677
70,683
With-profits
4,484
12,068
13,688
11,082
4,598
6,319
52,239
Unit-linked
154
1,544
1,284
1,281
257
131
4,651
Annuity and other long-term business
1,127
3,591
1,913
1,829
72
4,225
12,757
Other
839
137
34
21
3
2
1,036
As at 31 December 2024 corporate debt exposure to banks amounted to £7,051m (2023: £8,884m).
The Group has holdings in asset-backed securities (ABS) which are presented within debt securities on the consolidated
statement of financial position. The Group’s holdings in ABS, which comprise residential mortgage-backed securities (RMBS),
commercial mortgage-backed securities (CMBS), collateralised debt obligations (CDO) funds and other asset-backed securities
are shown within the table above.
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Notes to the consolidated financial statements continued
301
32 Risk management and sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.2 Debt securities (continued)
The Group’s exposure to sovereign debt is analysed by issuer as follows:
2024
With-profits
Unit-linked
Annuity
and other
long-term
business
Other
Total
As at 31 December
£m
£m
£m
£m
£m
Government Sovereign debt securities by country:
UK
5,966
1,300
1,834
519
9,619
Germany
556
22
128
—
706
Other European countries
1,146
22
499
—
1,667
Total Europe
7,668
1,344
2,461
519
11,992
United States
3,552
65
—
2
3,619
Latin America countries
673
25
26
—
724
South Africa
961
101
—
—
1,062
South Korea
905
27
—
—
932
Indonesia
840
24
—
—
864
Malaysia
894
25
—
—
919
Singapore
364
10
—
—
374
Philippines
575
17
—
—
592
Thailand
512
15
—
—
527
India
711
22
—
—
733
Other
1,795
55
26
51
1,927
Total
19,450
1,730
2,513
572 24,265
2023
With-profits
Unit-linked
Annuity
and other
long-term
business
Other
Total
As at 31 December
£m
£m
£m
£m
£m
Government Sovereign debt securities by country:
UK
5,195
1,338
1,910
606
9,049
Germany
601
16
140
—
757
Other European countries
1,235
1
436
—
1,672
Total Europe
7,031
1,355
2,486
606
11,478
United States
3,328
5
—
10
3,343
Latin America countries
425
19
27
—
471
South Africa
922
105
—
—
1,027
South Korea
1,047
12
—
—
1,059
Indonesia
858
9
—
—
867
Malaysia
810
8
—
—
818
Singapore
491
5
—
—
496
Philippines
522
6
—
—
528
Thailand
499
6
—
—
505
India
450
5
—
—
455
Other
1,462
97
177
51
1,787
Total
17,845
1,632
2,690
667
22,834
As at 31 December 2024 other European countries included £1,248m (2023: £1,232m) and other included £1,144m (2023: £1,342m)
of Supranational Government bonds.
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Other information
Notes to the consolidated financial statements continued
302
32 Risk management and sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.3 Derecognition, collateral and offsetting
Securities lending and repurchase agreements
The Group has entered into securities lending and repurchase agreements whereby blocks of securities are transferred to third
parties, primarily major brokerage firms, in exchange for collateral. Typically, the value of collateral assets pledged to the Group in
these transactions is in excess of the value of securities transferred, with the excess determined by the quality of the collateral
assets granted. Collateral requirements are calculated on a daily basis. The securities lent and securities subject to repurchase
agreements are not derecognised from the Group’s consolidated statement of financial position. Collateral typically consists of
cash, debt securities, equity securities and letters of credit. Cash collateral received is recognised on the consolidated statement of
financial position and a financial liability for the obligation for the Group to repay the cash is also recognised. Non-cash collateral
received is not recognised on the consolidated statement of financial position. Collateral pledged by the Group under reverse
repurchase arrangements, aside from cash, is not derecognised from the consolidated statement of financial position as the risks
and rewards are still retained by the Group. Cash collateral pledged is derecognised as it is pledged under right to use by the
counterparty and a financial asset is recognised for the obligation for the counterparty to repay the cash to the Group.
As at 31 December 2024, the Group had £5,847m (2023: £7,308m) of collateral pledged under securities lending and repurchase
agreements, primarily relating to the With-Profits Fund. The cash and securities collateral accepted under securities lending
agreements was £5,627m (2023: £6,961m). As at 31 December 2024, the Group had entered into reverse repurchase transactions
under which it purchased securities and had taken on the obligation to resell the securities. The fair value of the collateral held in
respect of these transactions was £10,355m (2023: £10,165m).
Collateral and pledges under derivative transactions
At 31 December 2024, the Group had pledged £2,712m (2023: £2,116m) for liabilities and held collateral of £403m (2023: £468m) in
respect of over-the-counter derivative transactions.
These transactions are conducted under terms that are usual and customary to collateralised transactions including, where
relevant, standard securities lending and repurchase agreements.
Other collateral
At 31 December 2024, the Group had pledged collateral of £570m (2023: £635m) in respect of other transactions. This primarily
arises from collateral pledged in relation to deferred purchase consideration on equity release mortgages and reinsurance
exposures.
Offsetting assets and liabilities
The Group’s derivative instruments, repurchase agreements and securities lending agreements are subject to master netting
arrangements and collateral arrangements. A master netting arrangement with a counterparty creates a right of offset for amounts
due to and due from that same counterparty that is enforceable in the event of a default or bankruptcy. The Group recognises
amounts subject to master netting arrangements on a gross basis on the consolidated statement of financial position.
The following tables present the gross and net information about the Group’s financial instruments subject to master netting
arrangements:
2024
Related amounts not offset on the consolidated
statement of financial position
Gross amount
included on the
consolidated
statement of
financial position
Financial
instruments
Cash collateral
Securities
collateral
Net amount
As at 31 December
£m
£m
£m
£m
£m
Financial assets:
Derivative assets
840
(754)
(77)
(4)
5
Reverse repurchase agreements
11,973
—
—
(10,333)
1,640
Total financial assets
12,813
(754)
(77)
(10,337)
1,645
Financial liabilities:
Derivative liabilities
2,737
(754)
(13)
(1,898)
72
Securities lending and repurchase
agreements
617
—
—
(617)
—
Total financial liabilities
3,354
(754)
(13)
(2,515)
72
M&G plc Annual Report and Accounts 2024
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Governance
Financial information
Other information
Notes to the consolidated financial statements continued
303
32 Risk management and sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.3 Derecognition, collateral and offsetting (continued)
2023
Related amounts not offset on the consolidated
statement of financial position
Gross amount
included on the
consolidated
statement of
financial position
Financial
instruments
Cash collateral
Securities
collateral
Net amount
As at 31 December
£m
£m
£m
£m
£m
Financial assets:
Derivative assets
1,280
(884)
(387)
(6)
3
Reverse repurchase agreements
13,615
—
—
(10,141)
3,474
Total financial assets
14,895
(884)
(387)
(10,147)
3,477
Financial liabilities:
Derivative liabilities
2,520
(884)
(29)
(1,548)
59
Securities lending and repurchase
agreements
726
—
—
(730)
(4)
Total financial liabilities
3,246
(884)
(29)
(2,278)
55
In the tables above, the amounts of assets or liabilities included on the consolidated statement of financial position would be offset
first by financial instruments that have the right of offset under master netting or similar arrangements, with any remaining amount
reduced by the amount of cash and securities collateral. The actual amount of collateral may be greater than the amounts
presented in the tables. Reverse repurchase agreements shown in the tables above are included within deposits on the
consolidated statement of financial position.
32.3.4 Impairment of financial assets
Significant increase in credit risk
When determining whether the credit risk (ie risk of default) on a financial instrument has increased significantly since initial
recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or
effort. This includes both qualitative and quantitative information and analysis based on the Group’s experience, expert credit
assessment and forward-looking information.
The Group primarily identifies whether a significant increase in credit risk has occurred for an exposure by comparing:
– the remaining lifetime probability of default (PD) as at the reporting date; with
– the remaining lifetime PD for this point in time that was estimated on initial recognition of the exposure.
The Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due.
Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment
has not been received. Due dates are determined without considering any grace period that might be available to the debtor.
Some qualitative indicators of an increase in credit risk, such as delinquency or forbearance, may be indicative of an increased risk
of default that persists after the indicator itself has ceased to exist. In these cases, the Group determines a probation period during
which the financial asset is required to show a period of good payment behaviour.
If there is evidence that there is no longer a significant increase in credit risk relative to initial recognition, then the loss allowance
on an instrument returns to being measured as 12-month Expected Credit Losses (ECL).
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Notes to the consolidated financial statements continued
304
32 Risk management and sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.4 Impairment of financial assets (continued)
Low credit risk debt instruments
The Group has used the low credit risk exemption for financial instruments when they meet the following conditions:
– the financial instrument has a low risk of default;
– the borrower is considered to have a strong capacity to meet its obligations in the near term; and
– the Group expects, in the longer term, that adverse changes in economic and business conditions might, but will not necessarily,
reduce the ability of the borrower to fulfil its obligations.
The Group considers a financial asset to have low credit risk when its credit risk rating is equivalent to the globally understood
definition of ‘investment grade’. The Group considers this to be BBB- or higher based on Moody’s (or equivalent) ratings. The
Group defines low credit risk financial assets as financial assets that are BBB- investment grade at the reporting date, based on the
Group’s credit grading policies. For such instruments, the significant increase in credit risk is not assessed, and the impairment
allowance is calculated and the financial asset is measured using the 12-month ECL, as long as the financial asset meets the criteria
above.
Definition of default
The Group considers any exposure to financial assets in default to be credit impaired.
The impact of any collateral received will not be considered for the assessment of whether an asset is credit impaired. The
collateral is considered for the estimate of the related ECLs.
Write-off
Financial assets are written off either partially or in their entirety only when the Group has stopped pursuing the recovery. If the
amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the
allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit loss expense.
Modified financial assets
The contractual terms of a financial asset may be modified for a number of reasons, including changing market conditions and
other factors not related to a current or potential credit deterioration of the debtor. An existing financial asset whose terms have
been modified may be derecognised and the renegotiated asset recognised as a new financial asset at fair value plus eligible
transaction costs. The new asset is allocated to Stage 1 under IFRS 9 (assuming that it is not credit-impaired at the date of
modification).
When the terms of a financial asset are modified and the modification does not result in derecognition, the determination of
whether the asset’s credit risk has increased significantly reflects a comparison of:
– its remaining lifetime PD as at the reporting date based on the modified terms; with
– the remaining lifetime PD estimated based on data on initial recognition and the original contractual terms.
Measurement of ECL
Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped on the basis of shared
risk characteristics, which include:
– instrument type;
– credit risk grade;
– collateral type;
– date of initial recognition;
– remaining term to maturity;
– industry; and
– geographic location of the borrower.
The groupings are subject to regular review to ensure that exposures within a particular group remain appropriately homogeneous.
M&G plc Annual Report and Accounts 2024
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Other information
Notes to the consolidated financial statements continued
305
32 Risk management and sensitivity analysis (continued)
32.3 Credit risk (continued)
32.3.4 Impairment of financial assets (continued)
Loss allowance
The Group has used the low credit risk exemption for deposits and accrued investment income and other debtors and calculates
the loss allowance based on 12-month ECL. The carrying amounts and ECL allowances are shown in the following table:
2024
2023
12-month ECL
12-month ECL
Carrying amount
Related ECL
allowance
Carrying amount
Related ECL
allowance
Balance as at 31 December
£m
£m
£m
£m
Deposits
15,794
2
16,324
8
Accrued investment income and other debtors
2,506
31
2,536
2
There were no financial assets that were still subject to enforcement activity as at 31 December 2024 and 31 December 2023.
The table presenting an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised is
included in Note 32.3.1. The carrying amount of financial assets above also represents the Group’s maximum exposure to credit risk
on these assets.
32.4 Demographic and expense risk
The Group is exposed to significant levels of demographic risk. This arises mainly from the annuity business in the form of longevity
risk, which is the risk of unexpected changes in the life expectancy (longevity) of policyholders. If mortality improvement rates
significantly exceed the level assumed, the Group’s results are particularly sensitive to the assumptions made in relation to future
longevity experience. For example, a major medical breakthrough impacting the treatment of cancer or other life-threatening
diseases would require the Group to strengthen its longevity assumptions, increasing the value of liabilities and requiring additional
assets to be set aside to meet these liabilities. The Group’s annuity business results are also sensitive to changes in the level of
expenses incurred on the business.
Longevity risk for both shareholder-backed business and policyholder-backed business has been predominantly managed
through:
– Annual reviews of best estimate assumptions, supported by detailed assessments of actual mortality experience versus best
estimate assumptions;
– Regular monitoring of longevity exposure;
– Longevity research; and
– Longevity risk transfer transactions, assessed against principles and guidance provided in internal standards.
The Group is also exposed to expense risk in relation to maintenance expense levels from the shareholder-backed annuity
business.
For with-profits business, mortality and other demographic risks are relatively minor factors in the determination of the
policyholder bonus rates. Adverse persistency experience can affect the level of profitability from with-profits contracts, but in any
given year the shareholders’ share of cost of bonus may only be marginally affected. However, altered persistency trends may
affect future expected shareholder transfers.
For unit-linked business, by virtue of the design features of most of the contracts which provide low levels of mortality cover, profit
is relatively insensitive to changes in mortality experience. Persistency experience variances can affect the level of profit in the
year. The shareholder is also exposed to variances in expenses relative to the charges levied on these products.
The risk arising from the other long-term business is not significant in the context of the Group’s overall liabilities.
M&G plc Annual Report and Accounts 2024
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Other information
Notes to the consolidated financial statements continued
306
32 Risk management and sensitivity analysis (continued)
32.4 Demographic and expense risk (continued)
32.4.1 Concentration of insurance risk
The geographical concentration of the insurance contract assets and liabilities (both gross and net of reinsurance) is shown below.
The disclosure is based on the carrying amounts of insurance contract assets and liabilities and reinsurance contract assets and
liabilities disaggregated to countries where the business is written.
2024
2023
United
Kingdom
Europe
Total
United
Kingdom
Europe
Total
As at 31 December
£m
£m
£m
£m
£m
£m
With-profits:
Insurance contract assets and liabilities
(115,559)
(7,685) (123,244)
(116,135)
(7,461) (123,596)
Reinsurance
14
—
14
10
—
10
Net
(115,545)
(7,685) (123,230)
(116,125)
(7,461) (123,586)
Unit-linked:
Insurance contract assets and liabilities
(3,664)
(444)
(4,108)
(3,964)
(440)
(4,404)
Reinsurance
4
(22)
(18)
7
(21)
(14)
Net
(3,660)
(466)
(4,126)
(3,957)
(461)
(4,418)
Annuity and other long-term business:
Insurance contract assets and liabilities
(13,689)
(184) (13,873)
(13,892)
(199) (14,091)
Reinsurance
766
1
767
746
—
746
Net
(12,923)
(183) (13,106)
(13,146)
(199) (13,345)
Total:
Insurance contract assets and liabilities
(132,912)
(8,313) (141,225)
(133,991)
(8,100) (142,091)
Reinsurance
784
(21)
763
763
(21)
742
Net
(132,128)
(8,334) (140,462) (133,228)
(8,121) (141,349)
32.5 Liquidity risk
Liquidity risk is the risk that the Group and/or its business are unable to meet financial obligations (eg claims, creditors debt
interest and collateral calls) as they fall due because they do not have or are unable to generate sufficient liquid assets.
Fund liquidity risk is the risk of being unable to meet financial obligations as they fall due because of a mismatch in liquidity of the
underlying assets and the frequency of liability requirements of the fund.
The Group’s IFRS results are indirectly exposed to fund liquidity risk, for example, through reputational damage leading to lower
funds under management and lower revenue through charges collected. However, as the effect on the Group’s IFRS results is
indirect, this risk is not discussed further and the remainder of this section refers to liquidity risk.
Liquidity management in the Group seeks to ensure that, even under adverse conditions, the Group has access to the funds
necessary to cover surrenders, withdrawals and maturing liabilities.
Liquidity risk is carefully managed, in particular in relation to: bank balances, cash flow forecasting, appropriate fund management
(to ensure that assets are not unduly concentrated in less liquid investments) and detailed cash flow matching for the annuity
business. Specific arrangements are also in place to manage liquidity in the unit-linked funds, particularly property funds where the
underlying assets are relatively illiquid.
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32 Risk management and sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.1 Contractual maturities of financial liabilities on an undiscounted cash flow basis
The following table sets out the contractual maturities for applicable classes of financial liabilities, excluding derivative liabilities
that are separately presented in section 32.5.2. The financial liabilities are included in the column relating to the contractual
maturities at the undiscounted cash flows (including contractual interest payments and expected benefit payments) due to be
paid, assuming conditions are consistent with those at the year end.
2024
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total
undiscounted
value
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
£m
Financial liabilities:
Investment contracts
without DPF
12,144
12,144
—
—
—
—
—
—
12,144
Third party interest in
consolidated funds
9,484
95
368
176
22
—
2
8,821
9,484
Subordinated liabilities and
other borrowings
6,486
835
2,240
2,014
841
841
5,049
—
11,820
Other financial liabilities
1,018
870
—
—
—
—
—
148
1,018
Accruals, deferred income
and other liabilities
4,223
4,253
61
95
117
104
151
—
4,781
Total
33,355
18,197
2,669
2,285
980
945
5,202
8,969
39,247
Restated
i
2023
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total
undiscounted
value
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
£m
Financial liabilities:
Investment contracts
without DPF
12,535
12,535
—
—
—
—
—
—
12,535
Third party interest in
consolidated funds
9,893
521
463
190
—
—
13
8,706
9,893
Subordinated liabilities and
other borrowings
7,647
868
3,427
1,321
941
1,345
5,846
—
13,748
Other financial liabilities
1,186
1,092
—
—
—
—
—
94
1,186
Accruals, deferred income
and other liabilities
6,083
6,563
43
90
116
107
170
—
7,089
Total
37,344
21,579
3,933
1,601
1,057
1,452
6,029
8,800
44,451
i
Following a review of the Group’s presentation of cash and borrowings in certain consolidated investment funds, comparative amounts for subordinated
liabilities and other borrowings have been restated from those previously reported. The restatement has had no impact on the consolidated income
statement or net assets. See Note 1.1 for further information.
Most investment contracts have options to surrender early, often subject to surrender or other penalties. Therefore, most
contracts can be said to have a contractual maturity of less than one year, but the additional charges and term of the contracts
mean surrenders are unlikely to be exercised in practice.
The vast majority of the Group’s financial assets are held to back the Group’s policyholder liabilities. Although asset/liability
matching is an important component of managing policyholder liabilities (both those classified as insurance and those classified as
investments), this profile is mainly relevant for managing market risk rather than liquidity risk. Within each business unit this asset/
liability matching is performed on a portfolio-by-portfolio basis.
In terms of liquidity risk, a large proportion of the policyholder liabilities contain discretionary surrender values or surrender
charges, meaning that many of the Group’s liabilities are expected to be held for the long term. Many of the Group’s investment
portfolios are in marketable securities, which can therefore be converted quickly to liquid assets. As a result, an analysis of the
Group’s assets by contractual maturity is not considered appropriate to evaluate the nature and extent of the Group’s liquidity risk.
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308
32 Risk management and sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.2 Maturity analysis of derivatives
The following table shows the gross and net derivative positions together with the maturity profile of the contractual undiscounted
cash flows:
2024
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total
undiscounted
value
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
£m
Derivative assets
1,085
300
485
271
145
169
320
—
1,690
Derivative liabilities
3,202
852
911
1,042
990
709
1,195
—
5,699
Net derivative position
(2,117)
(552)
(426)
(771)
(845)
(540)
(875)
—
(4,009)
2023
Total
carrying
value
1 year or
less
After
1 year to
5 years
After
5 years
to 10 years
After
10 years
to 15 years
After
15 years to
20 years
Over
20 years
No stated
maturity
Total
undiscounted
value
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
£m
Derivative assets
1,693
740
534
284
76
115
461
—
2,210
Derivative liabilities
2,910
561
841
1,052
187
757
2,160
—
5,558
Net derivative position
(1,217)
179
(307)
(768)
(111)
(642)
(1,699)
—
(3,348)
32.5.3 Maturity analysis of insurance contracts
The following tables provide a maturity analysis of the Group’s insurance and reinsurance contract liabilities, which reflects the
dates on which the cash flows are expected to occur. The Group has elected to analyse the estimates of the present value of the
future cash flows by estimated timing. It excludes the release of the CSM which is in Note 24.5.
For reinsurance contracts held 95% (2023: 98%) relates to annuity and other long-term business contracts and so analysis by each
line of business are not presented.
Insurance contracts
i
2024
As at 31 December
With-profits
Unit-linked
insurance
Annuity and
other long-
term business
Total
0 to 1 year
11%
14%
10%
11%
1 to 2 years
9%
12%
9%
9%
2 to 3 years
8%
10%
8%
8%
3 to 4 years
8%
9%
8%
8%
4 to 5 years
7%
8%
7%
7%
5 to 10 years
26%
27%
26%
26%
10 to 15 years
15%
12%
16%
15%
15 to 20 years
8%
5%
8%
8%
20 to 25 years
4%
2%
4%
4%
Over 25 years
4%
1%
4%
4%
Total
100%
100%
100%
100%
Insurance contracts
i
2023
As at 31 December
With-profits
Unit-linked
insurance
Annuity and
other long-
term business
Total
0 to 1 year
11%
15%
9%
11%
1 to 2 years
9%
12%
9%
9%
2 to 3 years
8%
10%
8%
8%
3 to 4 years
7%
9%
7%
7%
4 to 5 years
7%
8%
7%
7%
5 to 10 years
24%
26%
27%
25%
10 to 15 years
15%
12%
17%
15%
15 to 20 years
9%
5%
9%
9%
20 to 25 years
5%
2%
4%
5%
Over 25 years
5%
1%
3%
4%
Total
100%
100%
100%
100%
i
There is no current plan for distribution of the policyholders’ share of excess assets in the With-Profits Fund and so this is not included in the analysis.
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32 Risk management and sensitivity analysis (continued)
32.5 Liquidity risk (continued)
32.5.3 Maturity analysis of insurance contracts (continued)
Reinsurance contracts
2024
2023
As at 31 December
Total
Total
0 to 1 year
11%
10%
1 to 2 years
10%
9%
2 to 3 years
9%
9%
3 to 4 years
8%
8%
4 to 5 years
7%
7%
5 to 10 years
28%
29%
10 to 15 years
15%
16%
15 to 20 years
7%
8%
20 to 25 years
3%
3%
Over 25 years
2%
1%
Total
100%
100%
32.6 Derivatives and hedging
The Group uses derivatives for the purpose of efficient portfolio management or the reduction in investment risk. In doing so, the
Group obtains cost-effective and efficient exposure to various markets and manages exposure to equity, interest rate, currency,
credit and other business risks. The Group has opted not to apply hedge accounting to derivatives.
The Group uses various interest rate derivative instruments such as interest rate swaps and swap options to reduce exposure to
interest rate volatility. The Group also uses various currency derivatives in order to limit volatility due to foreign currency exchange
rate fluctuations arising on securities denominated in currencies other than pounds sterling.
All over-the-counter (OTC) derivative transactions are conducted under standardised International Swaps and Derivatives
Association Inc (ISDA) master agreements and Credit Support Annexes (CSA). The Group has collateral agreements between the
individual entities in the Group, of which the Parent Company is one, and relevant counterparties in place under each of these
market master agreements. The Group also has the ability to enter into cleared derivative positions under UK European Market
Infrastructure Regulation (UK EMIR).
The total fair value balances of derivative assets and liabilities are shown in Note 18.
There are hedging arrangements in place for the with-profits liabilities, including some product-specific arrangements. The actual
and required hedging positions are monitored at least monthly and rebalanced if required.
Under Article 11 of the UK European Market Infrastructure Regulation (EU) no 648/2012, OTC derivatives, central counterparties
and trade repositories (UK EMIR and Commission Delegated Regulation (EU) 2016/2251 supplementing UK EMIR), market
participants transacting in non-cleared OTC derivatives are required to exchange collateral to cover variation and initial margin.
However, trades between counterparties belonging to the same group are exempt from these margin requirements subject to
certain criteria.
Prudential Capital Plc (Legal Entity Identifier reference CHW8NHK268SFPTV63Z64) has entered into such derivative agreements
with the following group entities. This counterparty pairing meets the criteria to be eligible for intra-group exemptions to the
margin requirements:
As at 31 December
2024
2023
Counterparty
Legal Entity Identifier
Relationship between parties
Type of
exemption
Aggregate notional
of OTC derivatives
contract
Aggregate notional
of OTC derivatives
contract
£m
£m
M&G FA Limited
213800TFNC2ZYHSGTN11
M&G plc is the ultimate Parent
Company for both parties
Full
315
392
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32 Risk management and sensitivity analysis (continued)
32.6 Derivatives and hedging (continued)
32.6.1 Hedges in respect of shareholder transfers arising from the with-profits business
The shareholders’ exposure to market risk from with-profits business arises from the shareholder transfers which depend on
investment return of the funds. These shareholder transfers, while smoothed, are particularly exposed to equity risk.
The Group has entered into a partial equity hedge of the shareholder transfers expected to emerge from the WPSF in order to
mitigate this risk. The effect for the year ended 31 December 2024 was an unrealised loss of £27m (2023: £8m) and a realised loss
of £82m (2023: £109m).
PAC’s shareholder fund had also previously entered into a risk management arrangement with the WPSF in relation to the
shareholder transfers expected to emerge from the WPSF, specifically with regard to the PruFund new business written during
2018 to 2020. This arrangement was designed to protect the shareholders against extremely weak market returns. This
arrangement was terminated in 2023 and resulted in a £9m realised loss for the year ended 31 December 2023.
In 2023, PAC’s shareholder fund entered into a further arrangement with the WPSF in relation to the shareholder transfers
expected to emerge from PruFund business written to 31 December 2022. The shareholder fund accepted a one-off cash
payment in lieu of 20% of future shareholder transfers. This arrangement is mutually beneficial since it generates certainty and
cash for the shareholder while reducing the WPSF exposure to a potential mismatch between the value of the shareholder
transfers and the fixed charges taken to cover those transfers. In addition, under the arrangement the shareholder paid the WPSF
for a higher share of future surplus from certain cohorts of business. For the year ended 31 December 2024 this arrangement
resulted in a net loss of £46m (2023: loss of £36m).
32.6.2 Other shareholder hedging arrangements
The Group’s shareholder fund has purchased interest rate swap instruments to protect the capital position against interest rate
movements. For the year ended 31 December 2024, these instruments resulted in an unrealised loss of £117m (2023: unrealised
gain of £116m) and a £nil realised gain/loss (2023: realised loss of £36m).
32.7 IFRS profit and liability sensitivity analysis
The Group uses a wide ranging stress and scenario testing approach to, among other things, understand the potential volatility of
earnings, and capital requirements and for the purposes of efficient capital management. Results of the IFRS profit and liability
sensitivity analysis for the long-term business to reasonable possible movements in key economic and non-economic risk factors
are summarised below (sensitivity of the capital position is detailed separately in the supplementary notes). For sensitivities arising
from financial assets refer to Note 31.8.
The risks are described in further detail throughout this note. For each sensitivity test the impact of a reasonably possible change in
a single factor is shown, with other assumptions left unchanged. The sensitivities applied are described below. The sensitivities
capture the immediate effects of an event occurring, as opposed to the longer-term or second-order effects which may impact
future years’ profits, and do not reflect management actions which could be taken to mitigate the impacts of these events
occurring. The results shown include the impacts on both the with-profits business and the non-profit annuity business.
Sensitivity factor
Sensitivity applied
Economic scenario:
+/- 50bps interest rates
The impact of a parallel increase/(decrease) in the market interest rates. The scenario allows
for the impact on both the changes to future yields and investment returns and the market
values of the fixed interest securities.
+/- 10% change in equity &
property market values
The impact of an increase/(decrease) in equity and property market values.
+ 5 bps increase in the with-profits
illiquidity premium
The impact of an increase in the illiquidity premium on with-profits business of 5 bps.
+ 5 bps increase in annuity credit
default/downgrade assumption
The impact on non-profit annuity liabilities from a 5 bps strengthening of the credit default/
downgrade assumptions.
Non-economic scenario:
+/- 5% renewal expenses
The impact of a permanent increase/(decrease) in future maintenance expense
assumptions across all lines of business.
+/- 10% persistency assumptions
The impact of a permanent increase/(decrease) in the lapse rates for the business.
+/- 1% base mortality rates
The impact of a permanent increase/(decrease) in the base mortality rates at all ages.
+ 0.25% increase in mortality
improvements
The impact of an increase in the annual rate of mortality improvements at all ages.
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32 Risk management and sensitivity analysis (continued)
32.7 IFRS profit and liability sensitivity analysis (continued)
32.7.1 Sensitivity - Profit/loss after tax/equity
The sensitivity of IFRS profit/(loss) after tax to the key economic and non-economic risks is summarised below. The impact on
equity is expected to be consistent with the impact on IFRS profit/(loss) after tax. The change in net of reinsurance CSM is also
shown.
2024
2023
Profit
CSM
Profit
CSM
£m
£m
£m
£m
Economic sensitivities
50bps increase in interest rates
(154)
83
(152)
129
50bps decrease in interest rates
164
(89)
160
(138)
10% fall in equity and property markets
(5)
(587)
(26)
(595)
10% rise in equity and property markets
(3)
584
15
592
5bps increase in with-profits illiquidity premium
1
16
2
20
5bps increase in annuity credit default/downgrade assumptions
(34)
—
(39)
—
Non-economic sensitivities
5% increase in renewal expense assumptions
9
(41)
9
(42)
5% decrease in renewal expense assumptions
(9)
41
(9)
42
10% increase in persistency assumptions
(5)
(76)
(4)
(69)
10% decrease in persistency assumptions
6
83
5
76
1% increase in base mortality assumptions
(39)
73
(40)
75
1% decrease in base mortality assumptions
39
(74)
40
(79)
0.25% increase in mortality improvements
102
(197)
107
(208)
The interest rate stresses reflect a parallel shift in the nominal rate of interest at all durations. As described in Note 32.2.1, the
impact on IFRS profit/(loss) after tax predominantly arises from assets held in excess of the IFRS liabilities. These assets are held to
back the regulatory capital requirements.
The main impact to the Group of changes in equity and property asset values is through the entity’s share of the returns in the with-
profits fund through future shareholder transfers. Under IFRS reporting, the change in expected future profits adjusts the CSM and
is released over the remaining lifetime of the business. The key impact to post-tax profit arises from the change in the level of CSM
amortised in the current reporting period.
The impact of the non-economic sensitivities to expenses, mortality and mortality improvements are the opposite of the result that
may be expected, and which may be seen in other financial metrics (eg in general we would expect an increase in mortality rates
would result in an increase in IFRS profits, whereas a reduction is observed in the stress scenario). As detailed in Note 3.2, the
application of IFRS 17 results in mismatches due to the use of locked-in rates for the CSM for annuities under GMM and in relation
to the measurement of the non-profit business in the With-Profits Fund. This results in the sensitivity analysis reflecting an increase
in IFRS profit when there is a strengthening of mortality assumptions, whereas the opposite effect might have been expected. The
primary reasons for this are:
– interest rates at the time of recognising most of the in-force annuity business were substantially lower than current rates,
resulting in a larger reduction in the CSM (from discounting the change in future cash flows at locked-in rates) than the increase
in the fulfilment cash flows (from discounting the change in future cash flows at current rates); and
– the fair value of non-profit business written in the With-Profits Fund is reflected in the liabilities for with-profits policyholders,
resulting in a mismatch in the timing of when the change in mortality assumptions impacts the with-profits liabilities and when
the IFRS 17 CSM for non-profit business is recognised as insurance revenue.
As described above, the main impacts of the sensitivities on profit arise through either short-term fluctuations in investment
returns or through mismatches arising on the application of IFRS 17. As a result there is limited impact on adjusted operating profit
(in line with the methodology detailed in Note 3.2).
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32 Risk management and sensitivity analysis (continued)
32.7 IFRS profit and liability sensitivity analysis (continued)
32.7.2 Sensitivity – Insurance and investment contract liabilities
The sensitivity of insurance and investment contract liabilities (detailed in Note 24) to the same key economic and non-economic
sensitivities are summarised below:
Insurance contracts
Reinsurance contracts
Estimates of
present value
of future cash
flows and risk
adjustment
Contractual
Service
Margin
Total
Estimates of
present value
of future cash
flows and risk
adjustment
Contractual
Service
Margin
Total
As at 31 December 2024
£m
£m
£m
£m
£m
£m
Economic sensitivities
50 bps increase in interest rates
(1,627)
83
(1,544)
(10)
—
(10)
50 bps decrease in interest rates
1,751
(89)
1,662
12
—
12
10% fall in equity and property markets
(6,460)
(587)
(7,047)
—
—
—
10% rise in equity and property markets
6,461
584
7,045
—
—
—
5 bps increase in with-profits illiquidity premium
(18)
16
(2)
—
—
—
5 bps increase in annuity credit default/downgrade
assumptions
46
—
46
1
—
1
Non-economic sensitivities
5% increase in renewal expense assumptions
29
(41)
(12)
—
—
—
5% decrease in renewal expense assumptions
(29)
41
12
—
—
—
10% increase in persistency assumptions
83
(76)
7
—
—
—
10% decrease in persistency assumptions
(90)
83
(7)
—
—
—
1% increase in base mortality assumptions
(39)
96
57
(14)
23
9
1% decrease in base mortality assumptions
39
(97)
(58)
14
(23)
(9)
0.25% increase in mortality improvements
99
(260)
(161)
31
(63)
(32)
Insurance contracts
Reinsurance contracts
Estimates of
present value
of future cash
flows and risk
adjustment
Contractual
Service
Margin
Total
Estimates of
present value
of future cash
flows and risk
adjustment
Contractual
Service
Margin
Total
As at 31 December 2023
£m
£m
£m
£m
£m
£m
Economic sensitivities
50 bps increase in interest rates
(1,831)
129
(1,702)
(19)
—
(19)
50 bps decrease in interest rates
1,973
(138)
1,835
22
—
22
10% fall in equity and property markets
(6,369)
(595)
(6,964)
—
—
—
10% rise in equity and property markets
6,370
592
6,962
—
—
—
5 bps increase in with-profits illiquidity premium
(22)
20
(2)
—
—
—
5 bps increase in annuity credit default/downgrade
assumptions
54
—
54
2
—
2
Non-economic sensitivities
5% increase in renewal expense assumptions
31
(42)
(11)
—
—
—
5% decrease in renewal expense assumptions
(31)
42
11
—
—
—
10% increase in persistency assumptions
75
(69)
6
—
—
—
10% decrease in persistency assumptions
(82)
76
(6)
—
—
—
1% increase in base mortality assumptions
(42)
99
57
(16)
24
8
1% decrease in base mortality assumptions
46
(103)
(57)
16
(24)
(8)
0.25% increase in mortality improvements
112
(277)
(165)
38
(69)
(31)
The presentation above reflects a change in insurance contracts or reinsurance contracts where insurance contracts are
expressed as a positive liability amount and reinsurance contracts are a positive asset amount.
Insurance contracts are insurance contract liabilities net of insurance contract assets.
Reinsurance contracts are reinsurance contract assets net of reinsurance contract liabilities.
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32 Risk management and sensitivity analysis (continued)
32.7 IFRS profit and liability sensitivity analysis (continued)
32.7.2 Sensitivity – Insurance and investment contract liabilities (continued)
The vast majority of the Group’s financial assets are held to back the Group’s policyholder liabilities. Consistent with this, the
changes in the insurance and investment contract liabilities in the economic sensitivities are offset by corresponding changes in
the value of the assets, with only the changes in the surplus assets contributing to changes in profit/(loss) after tax (as detailed in
Note 32.7.1).
32.7.3 Other estimates in measurement of insurance contract liabilities
As a consequence of applying the mutualisation requirements of IFRS 17, a portion of the with-profits surplus assets are allocated
to policyholders and a portion to shareholders. The portion of the with-profits surplus assets allocated to policyholders and
shareholders under IFRS 17 reflects a judgement on the division of surplus in the With-Profits Fund. The policyholders’ share is
assessed on a prospective basis and is assumed to be 90%, consistent with the division of profits permitted by the Articles of
Association. The portion of the surplus assets allocated to shareholders, £944m (after tax) at 31 December 2024 (2023: £1,037m) is
not easily or practicably fungible to shareholders in the short-term.
IFRS 17 liabilities include an explicit risk adjustment, covering the Group’s assessment of the margin required to cover non-financial
risks. The assessment of the risk adjustment requires assumptions about the compensation that the Group requires for bearing
uncertainty about the amount and timing of the cash flows that arise from non-financial risk, the most significant of which is the
assumed rates of policyholder mortality for annuity contracts. The Group has calibrated the risk adjustment at the 75th percentile
of its internal calibrations of the risk distributions (which have a time horizon of one year) and amounts to £479m (2023: £488m) net
of reinsurance. Increasing the calibration to the 80th percentile (over a one year time horizon) would increase the risk adjustment
(net of reinsurance) at 31 December 2024 by around £96m (2023: £90m). The increase would be offset by a corresponding
reduction in CSM, but with the CSM impact being assessed at locked-in rates as described above.
Potential future legislative action in relation to residential ground rents (as disclosed in Note 31.8.1) may result in an impact on the
valuation of the notes backing these assets and the insurance contract liabilities. An increase of 50bps to the illiquidity premium
would result in the fair value of the notes backing residential ground rents to decrease by £80m of which £56m would relate to the
shareholder-backed fund (2023: £100m of which £70m relates to the shareholder-backed fund). Application of this sensitivity
would result in the carrying value of the insurance contract liabilities to decrease by £37m, of which £15m would relate to the
annuities which are shareholder-backed (2023: £50m of which £23m relates to the shareholder-backed fund).
The net asset and liability impact of an increase in illiquidity premium of 50bps would be to reduce the profit/(loss) after tax by
£32m (2023: £38m).
In the event that the Government implements the ‘peppercorn cap’, the value of the insurance contract liabilities would be
impacted due to a change in the overall portfolio yield on the writing down of the underlying residential ground rent assets. The
impact would be dependent on replacement assets that are used to rebalance the portfolio.
32.7.4 Limitations
The sensitivity results demonstrate the effect of an instantaneous change in a key assumption while other assumptions remain
unchanged. In reality, changes may occur over a period of time and there may be a correlation between the risks. The sensitivity
analysis does not take into consideration active management of the Group’s assets and liabilities, and that this may change the
impact of an emerging risk scenario. It should also be noted that these sensitivities are non-linear, and larger or smaller impacts
should not be interpolated or extrapolated from these results.
The sensitivity analysis includes the use of ‘hypothetical’ market movements to demonstrate potential risk exposures, for example:
– The sensitivity analysis assumes a parallel shift in interest rates at all terms. These results cannot be used to calculate the impact
of non-parallel yield movements.
– The sensitivity analysis assumes equivalent assumption changes across all markets, eg all equity and property assets rise (fall) by
10%. The actual impact on the Group’s assets may not be identical to the observed changes in market indices and so actual
impacts on the Group cannot be inferred by applying the sensitivities to observed changes in key indices.
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Notes to the consolidated financial statements continued
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33 Contingencies and related obligations
33.1 Litigation, tax and regulatory matters
In addition to the matters set out in Note 10.3 regarding the portfolio dividend tax litigation, the Group is involved in various
litigation and regulatory issues. While the outcome of such litigation and regulatory issues cannot be predicted with certainty, the
Directors believe that their ultimate outcome will not have a material adverse effect on the Group’s financial condition, results of
operations, or cash flows.
33.2 Guarantees
Guarantee funds provide for payments to be made to policyholders on behalf of insolvent life insurance companies and are
financed by payments levied on solvent insurance companies based on location, volume and types of business. The estimated
reserve for future guarantee fund assessments is not significant, and adequate reserves are available for all anticipated payments
for known insolvencies.
M&G plc acts as guarantor for certain property leases where a Group company is a lessee. The most material of these is the
guarantee provided in respect of the 10 Fenchurch Avenue lease between Saxon Land B.V. and M&G Corporate Services Limited.
The Group has also received guarantees in respect of subleasing arrangements, entered into in the normal course of business.
On acquisition of a controlling interest in MandG Investments Southern Africa (Pty) Limited (MGSA), M&G Group Limited provided
a guarantee in respect of an existing loan facility between Thesele, the seller of MGSA, and Nedbank, a third party bank amounting
to ZAR 220m. The guarantee is secured on 7% of the shares that Thesele retains in MGSA.
M&G Group Regulated Entity Holding Company Limited is guarantor for the obligations of M&G Corporate Services Limited to
make payments under the Scottish Amicable Staff Pension Scheme.
The Group has also provided other guarantees and commitments to third parties entered into in the normal course of business, but
the Group does not consider that these would result in a significant unprovisioned loss.
33.3 Support for the With-Profits Fund by shareholders
PAC is liable to meet its obligations to with-profits policyholders even if the assets of the with-profits sub-funds are insufficient to
do so. The assets in excess of amounts expected to be paid for future terminal bonuses and related shareholder transfers (‘the
excess assets’) in the with-profits sub-funds could be materially depleted over time by, for example, a significant or sustained
equity market downturn. In the unlikely circumstance that the depletion of the excess assets within the with-profits sub-funds was
such that the Group’s ability to satisfy policyholders’ reasonable expectations was adversely affected, it might become necessary
to restrict the annual distribution to shareholders or to contribute shareholders’ funds to the with-profits sub-funds to provide
financial support.
There are a number of additional arrangements between the shareholder and the With-Profits Fund as follows:
– The With-Profits Fund contributed to the costs of establishing the Polish branch of PAC, and receives repayment through
income from charges levied on the business. There is an obligation on the shareholders to ensure that the With-Profits Fund will
be repaid in full with interest, and an amount is recognised for the estimated cost to the shareholder of any shortfall at the end of
the term of the agreement. The policyholders’ share of the impact is included in the insurance contract liabilities for the With-
Profits Fund, with changes in value recognised in finance expenses from insurance contracts issued in the consolidated income
statement. The amount held within insurance contract liabilities is £55m as at 31 December 2024 (2023: £56m).
– Part of the acquisition costs incurred in the early years of M&G Wealth Advice Limited were funded by the With-Profits Fund. In
return, M&G Wealth Advice Limited is required to deliver cost savings to the With-Profits Fund. In the event of closure of M&G
Wealth Advice Limited or, the cost savings not being delivered and M&G Wealth Advice Limited stops writing new business, the
shareholder will reimburse the With-Profits Fund for any remaining shortfall. The time period for repayment is not defined.
– Transformation costs associated with with-profits new business will be recovered in the pricing of future new business (subject
to a shareholder underpin whereby the shareholder will compensate the With-Profits Fund if any of these costs are not fully
recovered at the end of the term of the agreement). The policyholders’ share of the impact is included in the insurance contract
liabilities for the With-Profits Fund, with changes in value recognised in finance income or expenses from insurance contracts
issued in the consolidated income statement. The amount held within insurance contract liabilities is £15m as at 31 December
2024 (2023: £6m).
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33 Contingencies and related obligations (continued)
33.3 Support for the With-Profits Fund by shareholders (continued)
– PAC undertook a project to rationalise fund structures (The Target Investment Model programme) by combining existing, smaller
funds with the main With-Profits Asset Share Fund in a fund umbrella structure. This initiative was expected to yield withholding
tax benefits for the business over time. If the expected benefits did not materialise to the With-Profits Fund, the shareholder was
committed to compensating the fund for any implementation costs borne that were not fully recouped. The assessment period
for the underpin arrangement was five years, running to the end of 2025. As at 31 December 2024, the underpin ceased as the
benefits have now materialised, however a review will be required until the end of 2028 to determine if the recognised tax
benefits have been reversed, potentially necessitating the reactivation of the underpin.
– PAC has priced new with-profits business on a basis that is expected to be financially self-supporting or, where this has not been
the case, the shareholder is required to cover the cost (known as the New Business Supportability Test (NBST)). The
policyholders’ share of the impact is included in the insurance contract liabilities, with changes in value recognised in finance
expenses from insurance contracts issued in the consolidated income statement. The amount held within insurance contract
liabilities is £13m as at 31 December 2024 (2023: £15m).
The following matters are of relevance with respect to the With-Profits Fund:
33.3.1 Pension mis-selling review
The Pensions mis-selling review covers customers who were sold personal pensions between 29 April 1988 and 30 June 1994, and
who were advised to transfer out, not join, or opt out of their employer’s Defined Benefit Pension Scheme. During the initial review
some customers were issued with guarantees that redress will be calculated on retirement or transfer of their policies. The
provision continues to cover these clients. The expense to cover these customers continues to be recognised within insurance
contract liabilities.
While PAC believed it met the requirements of the FSA (the UK insurance regulator at that time) to issue offers of redress to all
impacted customers by 30 June 2002, there is a population of customers who, while an attempt was made at the time to invite
them to participate in the review, may not have received their invitation. These customers have been re-engaged, to ensure they
have the opportunity to take part in the review. The liability also covers this population. Currently, an expense amounting to £122m
as at 31 December 2024 (2023: £140m) is being held in relation to this within insurance contract liabilities.
The key assumptions underlying the liability are:
– average cost of redress per customer; and
– proportion of liability (reserve rate) held for soft close cases (where all reasonable steps have been taken to contact the
customer but the customer has not engaged with the review).
Sensitivities of the value of the liability to a change in assumptions are as follows:
Change in assumption
2024
2023
Assumption
£m
£m
Average cost of redress
increase/decrease by 10%
+/-5
+/-5
Reserve rate for soft closed cases
increase/decrease by 10%
+/-31
+/-31
Changes in the value of the pension mis-selling liability would not immediately impact profit or loss as the changes would be offset
by changes in the allowance for mutualisation and the CSM.
Costs arising from this review are met by the excess assets of the WPSF and hence have not been charged to the asset shares
used in the determination of policyholder bonus rates. An assurance was given that these deductions from excess assets would
not impact PAC's bonus or investment policy for policies within the WPSF that were in force at 31 December 2003. This assurance
does not apply to new business since 1 January 2004. In the unlikely event that such deductions would affect the bonus or
investment policy for the relevant policies, the assurance provides that support would be made available to the sub-fund from
PAC’s shareholder resources for as long as the situation continued, so as to ensure that PAC’s policyholders were not
disadvantaged. PAC’s comfort in its ability to make such support available was supported by related intra-group arrangements
between Prudential plc and PAC, which formalised the circumstances in which capital support would be made available to PAC by
Prudential plc. These intra-group arrangements terminated on 21 October 2019, following the demerger of M&G plc from
Prudential plc, at which time intra-group arrangements formalising the circumstances in which M&G plc would make capital
support available to PAC became effective.
33.3.2 With-profits options and guarantees
Certain policies within the With-Profits Fund give potentially valuable guarantees to policyholders, or options to change policy
benefits which can be exercised at the policyholders’ discretion. These options and guarantees are valued as part of the
policyholder liabilities. Please refer to Note 24 for further details on these options and guarantees.
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34 Commitments
The Group leases various offices to conduct its business. In line with the requirements of IFRS 16, the Group has recognised a lease
liability in respect of these leases representing the obligation to make future lease payments. For further information on the lease
liability see Note 27.
In addition, the Group has provided, from time to time, certain guarantees and commitments to third parties including funding the
purchase or development of land and buildings and other related matters. The contractual obligations to purchase or develop
investment property as at 31 December 2024 were £451m (2023: £711m). Commitments also arise in relation to the refurbishment
of investment properties, however these would not be material to the financial statements, either individually or in aggregate.
As at 31 December 2024, the Group had undrawn commitments of £4,079m to third parties (2023: £3,773m) of which £3,268m
(2023: £2,618m) was committed by its private equity infrastructure vehicles. These commitments were entered into in the normal
course of business and no material adverse impact on the operations is expected to arise.
35 Related party transactions
The Group and its related parties comprise members of the M&G plc Group, as well as the Group’s joint ventures and associates,
and any entity controlled by those parties.
35.1 Transactions with the Group’s joint ventures and associates
The Group received dividends of £7m for the year ended 31 December 2024 (2023: £89m) from joint ventures or associates
accounted for using the equity method. In addition, the Group had balances due from joint ventures or associates accounted for
using the equity method of £46m as at 31 December 2024 (2023: £43m). There were no balances due to joint ventures or
associates accounted for using the equity method at 31 December 2024 or 31 December 2023.
Furthermore, in the normal course of business a number of investments into and divestment from investment vehicles managed by
the Group were made. This includes investment vehicles which are classified as investments in associates and joint ventures
measured at FVTPL. The Group entities paid amounts for the issue of shares or units and received amounts for the cancellation of
shares or units. These transactions are not considered to be material to the Group.
During the year to 31 December 2024, the Group acquired a further 25% stake in My Continuum Financial Limited. This resulted in
the Group holding a controlling interest in the entity and so it is considered a subsidiary at 31 December 2024. It was previously
classified as an associate at 31 December 2023. See Note 2.2 for further information.
35.2 Compensation of key management personnel
The members of the Board and the Group Executive Committee are deemed to have power to influence the direction, planning and
control the activities of the Group, and hence are also considered to be key management personnel.
Key management personnel of the Company may from time to time purchase insurance, asset management or annuity products
marketed by the Group companies in the ordinary course of business on substantially the same terms as those prevailing at the
time for comparable transactions with other persons.
Other transactions with key management personnel are not deemed to be significant either by virtue of their size or in the context
of the key management personnel’s respective financial positions. All of these transactions are on terms broadly equivalent to
those that prevail in arm’s length transactions.
The summary of compensation of key management personnel is as follows:
2024
2023
For the year ended 31 December
£m
£m
Salaries and short-term benefits
11.8
13.2
Post-employment benefits
0.5
0.5
Share-based payments
1.5
3.2
Total
13.8
16.9
Information concerning individual Directors’ emoluments, interests and transactions are provided in the single figure tables in the
Remuneration Report on pages 138 to 142.
36 Capital management
36.1 Capital regulations of entities within the Group
The Group is regulated under Solvency II and supervised as an insurance group by the Prudential Regulation Authority (PRA). The
Group manages Solvency II own funds as its measure of capital. As at 31 December 2024 estimated and unaudited Group Solvency
II own funds are £11.6bn (2023: £11.3bn).
The Solvency II surplus represents the aggregated capital (own funds) held by the Group less the solvency capital requirement
(SCR). Own funds is the Solvency II measure of capital available to meet losses, and is based on the assets less liabilities of the
Group, subject to certain restrictions and adjustments. The SCR is calculated using the Group’s Internal Model, which calculates
the SCR as the 99.5th percentile (or 1-in-200) worst outcome over the coming year, out of 100,000 equally likely scenarios,
allowing for the dependency between the risks the business is exposed to.
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Notes to the consolidated financial statements continued
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36 Capital management (continued)
36.1 Capital regulations of entities within the Group (continued)
The regulated entities within the Group are also subject to local capital regulations. Capital is actively managed to ensure that local
regulatory requirements are met. The main regulated entities in the Group and the regulatory frameworks to which they must
adhere are listed below:
Entity
Main activity
Regulatory framework
M&G plc
Insurance
Solvency II
The Prudential Assurance Company Limited
Insurance
Solvency II
Prudential International Assurance plc
Insurance
Solvency II
i
Prudential Pensions Limited
Insurance
Solvency II
M&G Group Limited (including subsidiaries)
Investment management
IFPR
ii
Investment Funds Direct Limited
Investment services
IFPR
ii
i
Prudential International Assurance plc is included in the Group’s result on the basis of the Group’s internal model under Solvency II modified by UK, but is
subject to local Solvency II in the EU.
ii
Investment Firms Prudential Regime under MIFIDPRU – Prudential Sourcebook for MiFID Investment Firms.
All Group entities that were subject to externally imposed regulatory capital requirements complied with them throughout the year.
36.2 Group capital position
In 2020, the Government announced that it would undertake a review of the Solvency II regime. Following a consultation process,
His Majesty’s Treasury (HMT) has published the final proposed Solvency II reform package and plans for implementing the changes
to the UK’s prudential regime. The final changes were implemented during 2024. The reforms have impacted a number of areas
including the calculation of the risk margin and transitional measures; reporting requirements and the matching adjustment.
The matching adjustment reforms include enhanced investment flexibility, wider liability eligibility, and require enhanced reporting
and senior manager attestations going forward. The impact in the current period from the matching adjustment reforms included
changes to the granularity of the credit risk (fundamental spread) allowances and the inclusion of additions to the basic credit risk
allowance where the company believes these are appropriate to ensure full coverage of retained risks. Overall the changes had a
£16m (unaudited) impact on the regulatory surplus capital.
As a result of these reforms the transitional measures on technical provisions (TMTP) has been recalculated as at 31 December
2024 in line with the approach taken at 31 December 2023, with no Financial Resources Requirement (FRR) restriction. From 1
January 2025 the new TMTP calculation methodology will be introduced. The new TMTP calculation methodology is simpler,
removing the need to recalculate liabilities under the previous Solvency I regime to calculate the TMTP. Other changes include the
removal of recalculation triggers in relation to the TMTP; with permission to recalculate at any date.
During the year, a full rebuild of the prospective with-profits modelling took place. Reflecting the With-Profits Fund's strong
solvency position, a decision was made to rationalise and simplify the number of protective management actions which may be
taken in extreme stress scenarios to ensure that management are not unnecessarily constrained as regards the actions that they
may take in extreme stress and thereby have appropriate freedom to act to protect the long-term interests of policyholders. In
isolation, this increases the capital requirements of the With-Profits Fund and reduces the regulatory coverage ratio by
8% (unaudited). Shareholder and regulatory solvency improve by £86m (unaudited) after allowing for the ring-fenced fund
restriction. The With-Profits Fund retains a substantial solvency buffer and there are no changes to policyholder outcomes.
The impact of uncertainties associated with the potential future value of notes backed by residential ground rents (further
explained in Note 31.8.1) has been reflected in the capital position. The overall impact is a decrease in own funds due to the fall in
the valuation of the underlying assets which is offset partly by a fall in the value of the technical provisions. In addition, incremental
capital has been held in the SCR which reflects the possible outcomes resulting from future legislative action, the most extreme of
which effectively results in total loss of future ground rent income (‘peppercorn cap’). This has resulted in a reduction in surplus of
£230m (2023: £264m) (unaudited).
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Notes to the consolidated financial statements continued
318
36 Capital management (continued)
36.2 Group capital position (continued)
36.2.1 Regulatory capital position
The regulatory capital position of the Group takes into account all Group exposures, including that of the With-Profits Fund. This
view of capital recognises the ring-fenced nature of the With-Profits Fund, and on consolidation, surplus in the fund can only be
recognised to the level of associated SCR with any excess surplus being eliminated as a ring-fenced fund restriction, effectively
restricting the solvency coverage ratio of the With-Profits Fund to 100%. As such, the combined ‘regulatory’ solvency coverage
ratio is highly resilient to movements in the With-Profits Fund’s own funds.
The estimated and unaudited Solvency II capital position for the Group as at 31 December 2024 and 31 December 2023 is shown below:
2024
2023
As at 31 December
£bn
£bn
Solvency II eligible own funds
11.6
11.3
Solvency II SCR
(6.9)
(6.8)
Solvency II surplus
4.7
4.5
Solvency II coverage ratio
i
168%
167%
i
Solvency II coverage ratio has been calculated using unrounded figures.
The results include transitional measures, which are presented assuming a recalculation as at the valuation date, using
management’s estimate of the impact of operating and market conditions. As at 31 December 2024, the recalculation has been
performed and the positions are aligned, reflecting changes to the UK’s prudential regime allowing recalculation of the transitional
measures at each reporting date. As at 31 December 2023, the recalculation has been approved for the reporting date and the
positions were aligned.
36.2.2 Shareholder capital position
The Group focuses on a shareholder view of the Solvency II capital position, which is considered to provide a more relevant
reflection of the capital strength of the Group. The Group’s shareholder Solvency II capital position excludes the contribution to
own funds and SCR from the ring-fenced With-Profits Fund. Further information on the ring-fenced With-Profits Fund’s capital
position is provided in Section 1.5 of Supplementary Information. Shareholder Solvency II own funds also assume TMTP which have
been recalculated using management’s estimate of the impact of operating and market conditions at the reporting date
(regardless as to whether the recalculation was approved for the reporting date).
The estimated and unaudited shareholder Solvency II capital position for the Group is shown below.
2024
2023
As at 31 December
£bn
£bn
Shareholder Solvency II eligible own funds
8.5
8.9
Shareholder Solvency II SCR
(3.8)
(4.4)
Solvency II surplus
4.7
4.5
Shareholder Solvency II coverage ratio
i
223%
203%
i
Shareholder Solvency II coverage ratio has been calculated using unrounded figures.
36.3 Meeting of capital management objectives
The Group manages its capital on a Solvency II basis to ensure that sufficient own funds are available on an ongoing basis to meet
regulatory capital requirements. This is achieved by targeting a capital buffer significantly in excess of regulatory capital
requirements. This buffer is intended to absorb the impact of stressed market conditions and thus make the Solvency II balance
sheet under the regulatory view resilient to stresses that affect the Group’s business.
A range of stress and scenario testing is carried out across the business, including certain scenarios mandated by the regulator.
The sensitivity of liabilities and other components of total capital vary, depending upon the type of business concerned, and this
influences the approach to asset/liability management.
In addition, projections are performed to understand how the own funds and capital position is expected to develop and how this
might be affected by adverse events taking place. Informed by the results of these projections there are a number of actions
available to management to strengthen the own funds position.
As well as holding sufficient capital to meet regulatory requirements, the Group also closely manages the cash it holds so that it can:
– maintain flexibility, fund new opportunities and absorb shock events;
– meet liabilities to policyholders and other obligations;
– fund dividends; and
– cover central costs and debt payments.
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Notes to the consolidated financial statements continued
319
37 Share-based payments
The Group operates various share-based payment schemes that award M&G plc shares to participants upon meeting the required
vesting conditions. Details of those schemes are stated below:
37.1 Description of the plans
Discretionary schemes:
Scheme
Description
Performance
Share Plan (PSP)
The PSP is a conditional share plan: the shares awarded will ordinarily be released to participants after a
predetermined period, usually three years, to the extent that performance conditions have been met.
If performance conditions are not achieved in full, the unvested portion of any award lapses. The
performance conditions attached to PSP awards include market performance conditions; Relative Total
Shareholder Return (TSR); and other non-market conditions, including measures linked to profit as well as
sustainability related measures. The performance conditions attached to each award are dependent on the
role of the participants. Threshold and maximum achievement levels will be set at the beginning of the
performance periods in line with the business plan.
Deferred Incentive
Plan (DIP)
Under these plans, part of the participant’s Annual Bonus is paid in the form of a share award that vests
after three or four years. Other than the service condition, there are no other performance conditions
associated with this plan.
Approved schemes:
Share scheme
Description
Save As You Earn
(SAYE) plans
The Group operates SAYE plans, which allow eligible employees the opportunity to save a monthly amount
from their salaries, over either a three or five-year period, which can be used to purchase shares in M&G plc
at a predetermined price subject to the employee remaining in employment for three years after the grant
date of the options and satisfying the monthly savings requirement.
Share Incentive
Plan (SIP)
The Group operates SIPs, which allow eligible employees to invest a monthly or annual amount from their
salaries in M&G plc shares; M&G plc will then contribute a share for every two the employee purchases.
All approved and discretionary schemes are accounted for as equity-settled as the awards would be settled in M&G plc shares.
37.2 Outstanding options and awards
Movements in outstanding options and awards under the Group’s share-based compensation are as follows:
2024
Outstanding options under
SAYE schemes
Awards outstanding under
discretionary schemes
Awards outstanding under
share incentive plans
Outstanding as at 1 January
19,575,949
72,295,345
9,496,234
Granted
4,498,505
28,881,073
2,819,879
Exercised
(3,926,385)
(19,565,104)
(1,722,460)
Forfeited/Expired
(1,461,578)
(3,796,787)
(68,445)
Outstanding at 31 December
18,686,491
77,814,527
10,525,208
Awards immediately exercisable
at 31 December
933,937
335,712
7,051,162
2023
Outstanding options under
SAYE schemes
Awards outstanding under
discretionary schemes
(restated)
i, ii
Awards outstanding under
share incentive plans
(restated)
ii
Outstanding as at 1 January
23,265,327
85,242,726
8,287,223
Granted
7,266,101
34,246,494
2,404,701
Exercised
(9,599,874)
(40,767,440)
(1,126,136)
Forfeited/Expired
(1,355,605)
(6,426,435)
(69,554)
Outstanding at 31 December
19,575,949
72,295,345
9,496,234
Awards immediately exercisable
at 31 December
2,181,057
403,251
6,415,871
i
Immediately exercisable awards under discretionary schemes have been restated to remove options which have vested but are in a holding period.
ii
Restated to include, and present separately, all SIP shares.
Options are exercised throughout the year; the weighted average share price over 2024 was £2.09 (2023: £2.00).
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Notes to the consolidated financial statements continued
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37 Share-based payments (continued)
37.2 Outstanding options and awards (continued)
The following tables provide a summary of the range of exercise prices and average remaining contractual life for the SAYE options
and discretionary option awards.
2024
i
As at 31 December
Exercise price
Number outstanding
Weighted average
remaining contractual life
(years)
Weighted average
exercise price (£)
Number exercisable
SAYE options
Between £1 and £2
18,686,491
1.86
1.58
933,937
Discretionary option
awards
£nil
77,814,527
1.04
£nil
335,712
2023
i
As at 31 December
Exercise Price
Number outstanding
ii
Weighted average
remaining contractual life
(years)
Weighted average
exercise price (£)
Number exercisable
iii
SAYE options
Between £1 and £2
19,575,949
2.02
1.52
2,181,057
Discretionary option
awards
£nil
72,295,345
1.15
£nil
403,251
i
SIP awards have been excluded as it is not possible to calculate the contractual life of the partnership awards.
ii
Outstanding discretionary option awards have been restated to include Deferred Incentive Plan (DIP).
iii
Exercisable discretionary option awards have been restated to remove vested options which are in a holding period.
37.3 Fair value of options and awards
The fair value of all discretionary awards is equal to the share price of M&G plc (as the exercise price and dividend yield are nil)
except for PSP awards with performance conditions based on the Total Shareholder Returns (PSP TSR awards). The weighted
average M&G plc share price at the date of grant was £2.21 for 2024 (2023: £1.98).
The Group uses the Black-Scholes model to value the SAYE options. The implied volatility of the M&G plc share price was used in
determining the fair value of options granted, with no reliance on historical volatility.
The determination of the fair value of PSP TSR and SAYE awards requires the use of various assumptions which are disclosed
below:
Awards granted in
2024
2023
As at 31 December
PSP TSR
award
SAYE
options
PSP TSR
award
SAYE
options
Dividend yield (%)
N/A
9.67
N/A
9.88
Expected pay-off (%)
41.67
N/A
41.67
N/A
Expected volatility (%)
N/A
19.33
N/A
20.97
Risk-free interest rate (%)
N/A
3.92
N/A
4.40
Expected option life (years)
N/A
3.53
N/A
3.25
Weighted average exercise price (£)
N/A
1.67
N/A
1.63
Weighted average share price at grant date (£)
2.35
2.05
1.88
2.01
Weighted average fair value at grant date (£)
1.89
0.22
1.69
0.25
37.4 Share-based payment expense charged to the consolidated income statement
Total expenses recognised in the year in the consolidated financial statements relating to equity-settled share-based
compensation as at 31 December 2024 was £40m (2023: £32m). The Group has no outstanding liabilities at the year end relating to
awards which are settled in cash.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
321
38 Post-balance sheet events
On 4 February 2025, the Group, agreed to acquire a 70% controlling stake in P Capital Partners AB, a Sweden based alternative
investment fund manager which provides private credit solutions to European entrepreneur and family-owned companies, and
developers of sustainable infrastructure. The transaction is expected to complete later in the year, subject to all conditions
necessary for execution to be met and the receipt of the necessary regulatory approvals. The Group will consolidate the results of
the acquiree from the date of completion.
On 28 February 2025, the With-Profits Fund declared a bonus distribution of £2.3bn to the with-profits policyholders.
On 10 March 2025, the Group, via M&G Wealth Holding Company Limited, a wholly-owned subsidiary of the Group, acquired the
final 25.05% stake in Continuum. Full details of this can be found in Note 2.2.
39 Related undertakings
In accordance with Section 409 of the Companies Act 2006, a list of the Group’s subsidiaries, joint ventures, associates and
significant holdings (being holdings of more than 20%), along with the classes of shares held, the registered office address, the
country of incorporation and the effective percentage of equity owned at 31 December 2024 is disclosed below.
The definitions of a subsidiary undertaking, joint venture and associate in accordance with the Companies Act 2006 are different
from the definition under IFRS. As a result, the related undertakings included within the list below may not be the same as the
undertakings consolidated in the Group IFRS statements. The Group’s consolidation policy is described in Note 1.5.
Direct subsidiary undertakings of the Parent Company, M&G plc (shares held directly or via nominees)
Key to classes of shares held: Limited by guarantee (LBG), Limited partnership interest (LPI), Ordinary shares (OS), Preference
shares (PS), Units (U).
Name of entity
Share
class
% held
10 Fenchurch Avenue, London, EC3M 5AG, UK
M&G Group Regulated Entity Holding
Company Limited
OS
100%
M&G Corporate Holdings Limited
OS
100%
Prudential Capital Holding Company
Limited (In liquidation)
OS
100%
Name of entity
Share
class
% held
Prudential Capital Public Limited
Company
OS
100%
Prudential Financial Services Limited
OS
100%
Other subsidiaries, joint ventures, associates and significant holdings of the Group (no shares held directly by the Parent
Company, M&G plc, or its nominees)
Name of entity
Share
class
% held
Australia
Level 6, 60 Martin Place, Sydney NSW 2000
M&G Investments (Australia) Pty Limited
OS
100%
Suite 201, Level 2, 5 Berry Street, North Sydney NSW 2060
PAP Trusty Pty Limited
OS
100%
Canada
22 Adelaide Street West, Suite 2600, Toronto, Ontario, M5H 4E3
GTA W21 GP Inc.
OS
50%
GTA W21 Inc.
OS
50%
GTA W21 LP
LPI
90%
180 Dundas Street West, Toronto, M5G 1Z8
Canada Property (Trustee) No 1 Limited
OS
100%
CJPT Real Estate Inc.
OS
100%
CJPT Real Estate No. 1 Trust
U
100%
CJPT Real Estate No. 2 Trust
U
100%
Name of entity
Share
class
% held
Cayman Islands
190 Elgin Avenue, George Town, Grand Cayman, KYI-9005
M&G General Partner Inc.
OS
100%
NB Gemini Fund LP
LPI
99%
StepStone Scorpio Infrastructure
Opportunities Fund LP
LPI
100%
France
8 Avenue Hoche, 75008, Paris
M&G Real Estate France SAS
OS
100%
West Station 1 SCI
OS
100%
West Station 2 SCI
OS
100%
West Station SAS
OS
100%
8 Rue Lamennais, Paris, Département de Paris, IDF, 75008
responsAbility France SAS
OS
100%
11 Av. Myron Herrick 75008, Paris
BauMont Real Estate France SAS
OS
100%
Georgia
4 Tamar Chovelidze Street, Tbilisi, 0108
responsAbility Georgia LLC
OS
100%
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
322
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group
(no shares held directly by the Parent Company, M&G plc or its nominees) (continued)
Guernsey
1 Royal Plaza, Royal Avenue, St Peter Port, GY1 2HT
M&G RED II GP Limited (In liquidation)
OS
100%
M&G RED II SLP GP Limited (In liquidation)
OS
100%
M&G RED III Employee Feeder GP Limited
(In liquidation)
OS
100%
M&G RED III GP Limited (In liquidation)
OS
100%
Silverfleet Capital 2004 LP
LPI
100%
Silverfleet Capital 2009 LP
LPI
100%
Silverfleet Capital 2011/12 LP
LPI
100%
Dorey Court, Admiral Park, St Peter Port, GY1 2HT
M&G (Guernsey) Limited
OS
100%
The Car Auction Unit Trust
U
50%
PO Box 155, Mill Court, La, Charroterie, St Peter Port, GY1 4ET
M&G Group PCC Limited
OS
100%
Hong Kong
6th Floor, Alexander House, 18 Chater Road, Central
M&G Investments (Hong Kong) Limited
OS
100%
13/F, One International Finance Centre, 1 Harbour View
Street, Central
PPM Ventures (Asia) Limited (In liquidation)
OS
100%
India
First floor Prudential House, Central Avenue, Hiranandani
Business Park, Mumbai-400076
M&G Global Services Private Limited
OS
100%
31 Green Acre, Union Park Road Number 5, Mumbai, Mumbai
Suburban, MH, 400052
responsAbility India Business Advisors Pvt
Limited
OS
100%
Ireland
Fitzwilliam Court, Leeson CI, Dublin 2, Dublin, D02 TC95
Prudential International Assurance plc
OS
100%
Prudential International Management
Services Limited
OS
100%
Fourth floor, 35 Shelbourne Road, Ballsbridge, Dublin D04 A4EO
Lion Credit Opportunity Fund plc - Credit
Opportunity Fund XV
U
100%
Lion Credit Opportunity Fund Public Limited
Company - M&G SRT Fund II
U
37%
M&G Sustainable Loan Fund
OS
62%
M&G (South Africa) Global Funds ICAV -
M&G Worldwide Managed Fund
U
22%
Specialist Investment Funds (2) ICAV - M&G
Real Impact Fund
U
100%
Name of entity
Share
class
% held
IPC House, 35 Shelbourne Road, Dublin, D04 A4E0
M&G SIF Management Company (Ireland)
Limited
OS
100%
Second Floor, Block 5 Irish Life Centre, Abbey Street Lower,
Dublin 1, D01 P767
Folios III Designated Activity Company
U
49%
Folios IV Designated Activity Company
U
65%
Fourth Floor, 76 Baggot Street Lower, Dublin, D02 EK81
Debt Investments Opportunities IV
U
25%
Italy
Via Alessandro Manzoni 38, Milan, 20121
Elle 14 S.à r.l. Company
OS
50%
MCF S.r.l.
OS
50%
Japan
Tokyo Toranomon Global Square 13F, 1-3-1 Toranomon,
Minatoku, Tokyo 105-0001
M&G Investments Japan Co Limited
OS
100%
M&G Real Estate Japan Co Limited
OS
67%
Jersey
Level 1 LFC1, Esplanade, St Helier, JE2 3BX
Two Rivers One Limited
OS
100%
Two Rivers Two Limited
OS
100%
28 Esplanade, St Helier, JE2 3QA
The Strand Property Unit Trust
U
50%
IFC 5, St Helier, JE1 1ST
Belside Limited
OS
100%
Carraway Guildford (Nominee A) Limited
OS
100%
Carraway Guildford (Nominee B) Limited
OS
100%
Leadenhall Unit Trust
U
100%
Vanquish I Unit Trust
U
100%
Vanquish II Unit Trust
U
100%
Vanquish Properties GP Limited
OS
100%
Vanquish Properties GP Nominee 1 Limited
OS
100%
Vanquish Properties GP Nominee 2 Limited
OS
100%
Vanquish Properties GP Nominee 3 Limited
OS
100%
Vanquish Properties GP Nominee 4 Limited
OS
100%
Vanquish Properties GP Nominee A Limited
OS
100%
Vanquish Properties LP Limited
OS
100%
Liberte House, 19-23 La Motte Street, St Helier, JE1 4BP
The Two Rivers Trust
U
100%
Kenya
Merchant Square, Block D, 5th Floor, Riverside Drive,
Westlands, P.O. 29300623 Nairobi
responsAbility Africa Limited
OS
100%
Name of entity
Share
class
% held
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
323
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group
(no shares held directly by the Parent Company, M&G plc or its nominees) (continued)
Luxembourg
1, Rue Hildegard von Bingen L-1282
Prudential Loan Investments 1 S.à r.l.
OS
100%
3, Rue Gabriel Lippmann, L-5365 Munsbach
M&G Real Estate Debt Fund SCSp, SICAV-
RAIF – REDF 8
LPI
71%
M&G REDF 8 S.à.r.l
OS
100%
M&G REDF 9 S.à.r.l
OS
100%
M&G Specialty Finance Fund 2 GBP SCSp
LPI
47%
Prudential Loan Investments SCSp
LPI
100%
Two Snowhill Birmingham S.à r.l.
OS
100%
5, Heienhaff, Nidderaanwen, 1736
Infracapital Partners IV G.P S.à r.l.
OS
100%
Infracapital Partners IV SCSp
LPI
51%
M&G Real Estate Debt Carried Interest GP
S.à r.l
OS
100%
M&G REDF 7 S.à.r.l
OS
100%
M&G SFF (CIP GP) S.à r.l.
OS
100%
M&G SFF (GP) S.à r.l.
OS
100%
M&G SFF 2 (CIP GP) S.à r.l.
OS
100%
M&G SFF 2 (GP) S.à r.l.
OS
100%
Prudential Loan Investments GP S.à r.l.
OS
100%
responsAbility BOP S.à r.l.
OS
100%
Three Snowhill Birmingham S.à r.l.
OS
100%
5, Rue Jean Monnet, L-2180
responsAbility Asia Climate Fund, SICAV-RAIF
OS
48%
responsAbility Global Micro and SME
Finance Fund
U
29%
6, Rue Eugène Ruppert, L-2453
Infracapital Greenfield Partners II GP S.à r.l
OS
100%
Infracapital Partners III GP S.à r.l
OS
100%
8, Rue Lou Hemmer, 1748 Senningerberg Niederanven
M&G Alternatives CV SCSp
LPI
100%
M&G Alternatives GP S.à r.l.
OS
100%
15, Boulevard F.W. Raiffeisen, L-2411
responsAbility Agriculture Partners SLP
LPI
61%
responsAbility Sustainable Food - Asia II (GP),
S.à r.l.
OS
100%
responsAbility Sustainable Food - Asia II, SLP
LPI
85%
responsAbility Sustainable Food - Latam I (GP),
S.à r.l.
OS
100%
responsAbility Sustainable Food - Latam I, SLP
LPI
73%
responsAbility Sustainable Food Asia - II
Partners, SLP
LPI
94%
responsAbility Sustainable Food Latam - I
Partners, SLP
LPI
94%
responsAbility Agriculture (GP), S.à r.l.
OS
100%
Name of entity
Share
class
% held
16, Boulevard Royal, L-2449
Luxembourg Specialist Investment Funds (2)
FCP - M&G Real Assets Fund
U
100%
Luxembourg Specialist Investment Funds (2)
FCP - M&G Private Equity Opportunities Fund
U
100%
M&G (Lux) Asian Bond Allocation EUR Fund
U
100%
M&G (Lux) Asian Bond Allocation GBP Fund
U
100%
M&G (Lux) Asian Bond Allocation USD Fund
U
100%
M&G (Lux) Emerging Markets Corporate
ESG Bond Fund
U
57%
M&G (Lux) Blackrock Europe ex UK Equity
Fund
U
99%
M&G (Lux) Europe ex UK Equity Fund
U
100%
M&G (Lux) Global Enhanced Equity Premia
Fund
U
99%
M&G (Lux) Investment Funds 1 - M&G (Lux)
Better Health Solutions Fund
U
100%
M&G (Lux) Investment Funds 1 - M&G (Lux)
Diversity and Inclusion Fund
U
68%
M&G (Lux) Investment Funds 1 - M&G (Lux)
Emerging Markets Hard Currency Bond Fund
U
85%
M&G (Lux) Investment Funds 1 - M&G (Lux)
Global Artificial Intelligence Fund
U
97%
M&G (Lux) Investment Funds 1 - M&G (Lux)
Nature and Biodiversity Solutions Fund
U
96%
M&G (Lux) Investment Funds 1 - M&G (Lux)
US Corporate Bond Fund
U
100%
M&G (Lux) Investment Funds 1 - M&G (Lux) US
High Yield Bond Fund
U
100%
M&G (Lux) Investment Funds 1 - M&G (Lux)
Emerging Markets Bond Fund
U
63%
M&G (Lux) Managed Cautious (Euro) Fund
U
100%
M&G (Lux) Managed Growth (Euro) Fund
U
100%
M&G (Lux) Pan European Smaller Comp Fund
U
98%
M&G (Lux) Reserved Investment Fund (2),
SCA SICAV-RAIF
U
100%
M&G (Lux) Reserved Investment Funds (2)
GP S.à r.l.
OS
100%
M&G (Lux) Sterling Liquidity Fund
U
83%
M&G (Lux) Sustainable Emerging Markets
Corporate Bond Fund
U
21%
M&G (Lux) Sustainable Optimal Income Bond
Fund
U
98%
M&G Asia Living Property Fund
LPI
100%
M&G Asia Property Fund
U
43%
M&G Catalyst Capital Fund
U
100%
Name of entity
Share
class
% held
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
324
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group
(no shares held directly by the Parent Company, M&G plc or its nominees) (continued)
M&G Catalyst Credit Fund
U
100%
M&G Corporate Credit Opportunities ELTIF
U
100%
M&G European Living Property Fund (GP)
S.à.r.l
OS
100%
M&G European Living Property Fund SCSp,
SICAV-RAIF
LPI
45%
M&G European Property Fund SICAV-FIS
U
29%
M&G European Secured Property Income
Fund FCP-FIS
OS
100%
M&G European Value Add GP S.à r.l.
OS
100%
M&G Funds (1) GSAM Global Emerging
Market Equity Fund
U
99%
M&G Luxembourg S.A.
OS
100%
M&G Private Credit GP S.à.r.l.
OS
100%
M&G Private Credit SCSp SICAV-RAIF
U
100%
M&G Real Estate Debt GP S.à r.l.
OS
100%
M&G Real Estate Funds GP S.à r.l.
OS
100%
M&G Real Estate Funds Management S.à r.l.
OS
100%
M&G Real Estate Funds SCSp, SICAV-RAIF
U
99%
M&G Secure Income S.à r.l.
OS
100%
M&G UK Mortgage Income Fund
U
64%
M&G UK Property Fund
U
98%
M&G UK Residential Property Fund
U
30%
M&G Corporate Credit Opportunities S.à r.l.
OS
100%
M&G Real Estate Debt Carried Interest
GP S.à r.l.
OS
100%
20, Rue de la Poste , 2346 Ville-Haute
EUREV CI GP S.à r.l.
OS
100%
M&G European Value Add Hold Co S.à r.l.
OS
100%
M&G European Value Add Partnership SCSp
LPI
100%
Prudential Investment (Luxembourg) 2 S.à.r.l.
OS
100%
Schoolhill S.à r.l.
OS
100%
26, Boulevard Royal, L-2449
Eastspring Investments SICAV-FIS Africa
Equity Fund
U
100%
39, Avenue John F. Kennedy, L-1855
responsAbility Management Company S.A.
(In liquidation)
OS
80%
42-44, Avenue de la Gare L - 1610
BauMont General Partner S.à r.l.
OS
65%
BauMont General Partner Two S.à r.l.
OS
100%
BauMont Real Estate Two SCSp
(Luxembourg) SICAV-RAIF
U
44%
Namibia
Unit 3, 2nd Floor, Ausspann Plaza, Dr Agostinho Neto Road,
Private Bag 12012, Ausspannplatz, Windhoek
MandG Investments (Namibia) (Pty) Limited
OS
75%
MandG Investments Unit Trusts (Namibia)
Limited
OS
75%
Name of entity
Share
class
% held
Peru
Av. 28 de Julio 753, Miraflores, Provincia de Lima, 15074
responsAbility America Latina SAC
OS
100%
Portugal
Rua Latino Coelho, 87 1050-134, Lisbon
Regen Blue, Unipessoal LDA
OS
89%
Rua Do Paco, No 37 - Pacos dos Negros, 2080-500 Fazendas
de Almeirim
AG-Horti-Investments-Investimentos EM
Portugal, LDA
OS
100%
AG-Management, LDA
OS
99%
Poland
02-670 Warszawa, Pulawska 182
Prudential Polska sp. z.o.o
OS
100%
Republic of Korea
Jongno 1-ga, Kyobo Building, Seoul
M&G Real Estate Korea Co Limited
OS
67%
Twentieth floor, 136, Sejong-daero, Jung-gu, Seoul
LB Professional Investors Private Real
Estate Fund No. 10 (Centropolis)
U
34%
Singapore
9 Raffles Place, #26-01 Republic Plaza, 048619
responsAbility Singapore Pte Limited
OS
100%
138 Market Street, CapitaGreen #35-01, 048946
M&G Investments (Singapore) Pte Limited
OS
100%
M&G Real Estate Asia Holding Company Pte
Limited
OS
67%
M&G Real Estate Asia Pte Limited
OS
67%
South Africa
PO Box 44813, Claremont, Western Cape, Cape Town, 7735
M&G Pan African Bond Fund
U
100%
M&G SA Equity Fund
U
94%
Protea Place, 40 Dreyer Street, Claremont, 7708
MandG Investment Managers (Pty) Limited
OS
100%
MandG Investments Life South Africa (RF)
Limited
OS
100%
MandG Investments Southern Africa (Pty)
Limited
OS
50%
MandG Investments Unit Trusts South
Africa (RF) Limited
OS
100%
Spain
Calle Fortuny, 6 - 4 A, 28010, Madrid
M&G RE Espana, 2016, S.L.
OS
100%
Switzerland
Zollstrasse 17, Zürich, ZH, 8005
M&G International Investments Switzerland AG
OS
100%
responsAbility Investments AG
OS
100%
responsAbility Ventures I Services AG
OS
100%
Name of entity
Share
class
% held
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
325
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group
(no shares held directly by the Parent Company, M&G plc or its nominees) (continued)
Taiwan
Floor.33 (Unit B-1), No.7, Sec.5, Road.Xinyi,110, Taipei
M&G Investments (Taiwan) Limited
OS
100%
Thailand
62 Thaniya BTS Building, Silom Road, Suriyawongse, Bangrak,
Bangkok, 10500
responsAbility Thailand Limited
OS
100%
United Kingdom
1 Carter Lane, London, EC4V 5ER
Silverfleet Capital II WPLF LP
LPI
100%
10 Fenchurch Avenue, London, EC3M 5AG
Active Growth Logistics Partnership LP
LPI
50%
AGLP GP Limited
OS
50%
BWAT Retail Nominee (1) Limited
OS
50%
BWAT Retail Nominee (2) Limited
OS
50%
Canada Property Holdings Limited
OS
100%
Capacity (Dartford) Management Company
Limited
OS
100%
Carraway Guildford General Partner Limited
OS
100%
Carraway Guildford Limited Partnership
LPI
100%
Cribbs Causeway JV Limited
OS
100%
Cribbs Mall Nominee (1) Limited
OS
100%
Cribbs Mall Nominee (2) Limited
OS
100%
Edger Investments Limited
OS
100%
EF IV Schoolhill GP Limited
OS
100%
Embankment GP Limited
OS
100%
Embankment Nominee 1 Limited
OS
100%
Embankment Nominee 2 Limited
OS
100%
Fundsdirect ISA Nominees Limited
OS
100%
Fundsdirect Nominees Limited
OS
100%
IFDL Personal Pensions Limited
OS
100%
Investment Funds Direct Group Limited
OS
100%
Investment Funds Direct Holdings Limited
OS
100%
Investment Funds Direct Limited
OS
100%
M&G (ACS) BlackRock Japan Equity Fund
U
100%
M&G (ACS) BlackRock UK All Share Equity
Fund
U
100%
M&G (ACS) Blackrock US Equity (2) Fund
U
99%
M&G (ACS) BlackRock US Equity Fund
U
99%
M&G (ACS) Value Partners China Equity Fund
U
100%
M&G (ACS) China Fund
U
98%
M&G (ACS) Earnest Partners US Small Cap
Value Fund
U
99%
M&G (ACS) Granahan US Small Cap Growth
Fund
U
99%
M&G (ACS) Japan Equity Fund
U
99%
Name of entity
Share
class
% held
M&G (ACS) Japan Smaller Companies Fund
U
98%
M&G (ACS) Manulife US Equity Fund
U
99%
M&G (ACS) Matthews China Equity Fund
U
98%
M&G (ACS) MFS US Large Cap Equity Fund
U
99%
M&G (ACS) UK Listed Equity Fund
U
97%
M&G (ACS) UK Listed Mid Cap Equity Fund
U
98%
M&G (ACS) William Blair US Large Cap Equity
Fund
U
99%
M&G Alternatives GP1 Limited
OS
100%
M&G Alternatives GP2 Limited
OS
100%
M&G Alternatives Investment Management
Limited
OS
100%
M&G BlackRock Canada Equity Fund
U
98%
M&G BlackRock UK 200 Equity Fund
U
99%
M&G Corporate Services Limited
OS
100%
M&G Emerging Markets Monthly Income Fund
U
93%
M&G FA Limited
OS
100%
M&G Feeder of Property Portfolio
U
69%
M&G Financial Services Limited
OS
100%
M&G Fitzrovia GP Limited
OS
50%
M&G Fitzrovia Limited
OS
100%
M&G Fitzrovia Limited Partnership
LPI
50%
M&G Fitzrovia Nominee 1 Limited
OS
50%
M&G Fitzrovia Nominee 2 Limited
OS
50%
M&G Founders 1 Limited
OS
100%
M&G Funds (1) Artisan Part Emerging Market
Debt Fund
U
98%
M&G Funds (1) Asia Pacific (ex Japan) Equity
Fund
U
96%
M&G Funds (1) Blackrock Asia Pacific (ex
Japan) Equity Fund
U
100%
M&G Funds (1) Blackrock Emerging Markets
Equity Fund
U
100%
M&G Funds (1) Franklin Temp India Equity
Fund
U
98%
M&G Funds (1) India Equity Fund
U
74%
M&G Funds (1) Lazard Emerging Market Debt
Fund
U
97%
M&G Funds (1) Lazard Global Emerging
Markets Equity Fund
U
99%
M&G Funds (1) Manulife China Bond Fund
U
100%
M&G Funds (1) MFS Global Emerging Markets
Equity Fund
U
99%
M&G Funds (1) Sterling Investment Grade
Corporate Bond Fund
U
84%
M&G Funds (1) UK Gilt
U
100%
Name of entity
Share
class
% held
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
326
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group
(no shares held directly by the Parent Company, M&G plc or its nominees) (continued)
M&G Funds (1) US Corporate Bond Fund
U
99%
M&G Funds (1) US Short Duration Corporate
Bond Fund
U
88%
M&G Funds (1) Wellington Impact Bond Fund
U
100%
M&G Group Limited
OS
100%
M&G IMPPP 1 Limited
OS
100%
M&G International Investments Nominees
Limited
OS
100%
M&G Investment Funds (1) - M&G European
Sustain Paris Aligned Fund
U
55%
M&G Investment Funds (10) - M&G China Fund
U
95%
M&G Investment Funds (10) - M&G Global AI
Themes Fund
U
90%
M&G Investment Funds (10) - M&G Global
High Yield ESG Bond Fund
U
61%
M&G Investment Funds (10) - M&G Positive
Impact Fund
U
32%
M&G Investment Funds (2) - M&G Gilt & Fixed
Interest Income Fund
U
52%
M&G Investment Funds (2) - M&G Global High
Yield Bond
U
50%
M&G Investment Funds (3) - M&G Dividend
Fund
U
48%
M&G Investment Funds (4) - M&G Sustainable
Multi Asset Balanced Fund
U
31%
M&G Investment Funds (4) - M&G Sustainable
Multi Asset Cautious Fund
U
49%
M&G Investment Funds (4) - M&G Sustainable
Multi Asset Growth Fund
U
67%
M&G Investment Funds (7) - M&G Global
Convertibles Fund
U
83%
M&G Investment Management Limited
OS
100%
M&G Managed Growth Fund
U
21%
M&G Management Services Limited
OS
100%
M&G Nominees Limited
OS
100%
M&G PFI 2018 GP1 Limited
OS
100%
M&G PFI 2018 GP2 Limited
OS
100%
M&G Platform Nominees Limited
OS
100%
M&G Property Portfolio
U
89%
M&G RE UKEV (GP1) LLP
LPI
100%
M&G RE UKEV 1 Limited
OS
100%
M&G RE UKEV 1-A LP
LPI
50%
M&G Real Estate Limited
OS
100%
M&G Real Estate UKEV (GP) LLP
LPI
100%
M&G RPF GP Limited
OS
100%
M&G RPF Nominee 1 Limited
OS
100%
Name of entity
Share
class
% held
M&G RPF Nominee 2 Limited
OS
100%
M&G Securities Limited
OS
100%
M&G Shared Ownership LP
LPI
48%
M&G Social Investment GP1 Limited
OS
100%
M&G Social Investment GP2 Limited
OS
100%
M&G Trustee Company Limited
OS
100%
M&G UK Property GP Limited
OS
100%
M&G UK Property Limited Partnership
LPI
100%
M&G UK Property Nominee 1 Limited
OS
100%
M&G UK Property Nominee 2 Limited
OS
100%
M&G UK Shared Ownership Limited
OS
100%
M&G UK Social Investment GP LLP
LPI
100%
M&G UKEV (SLP) General Partner LLP
LPI
100%
M&G Wealth Advice Limited
OS
100%
M&G Wealth Holding Company Limited
OS
100%
M&G Social Investment GP1 Limited
OS
100%
M&G UK Social Investment InfraCap Limited
OS
100%
M&G UK Social Investment Partners LP
LPI
100%
M&G Wealth Investments LLP
LPI
100%
M&G Wealth Solutions Limited
OS
100%
Manchester JV Limited
OS
50%
Manchester Nominee (1) Limited
OS
100%
MEVA UK Propco 1 Limited
OS
100%
Minster Court Estate Management Limited
OS
56%
Pacus (UK) Limited
OS
100%
PGDS (UK One) Limited
OS
100%
PPM Capital (Holdings) Limited
OS
100%
PPMC First Nominees Limited
OS
100%
Property Partners (Two Rivers) Limited
OS
100%
Pru Limited
OS
100%
Prudence Limited
OS
100%
Prudential Corporate Pensions Trustee Limited
OS
100%
Prudential Equity Release Mortgages Limited
OS
100%
Prudential Financial Planning Limited
OS
100%
Prudential Pensions Limited
OS
100%
Prudential Portfolio Management Group
Limited
OS
100%
Prudential Real Estate Investments 1 Limited
OS
100%
Prudential Real Estate Investments 2 Limited
OS
100%
Prudential Real Estate Investments 3 Limited
OS
100%
Prudential Staff Pensions Limited
OS
100%
Prudential UK Real Estate General Partner
Limited
OS
100%
Prudential UK Real Estate Limited Partnership
LPI
100%
Name of entity
Share
class
% held
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
327
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group
(no shares held directly by the Parent Company, M&G plc or its nominees) (continued)
Prudential UK Real Estate Nominee 1 Limited
OS
100%
Prudential UK Real Estate Nominee 2 Limited
OS
100%
Prudential Unit Trusts Limited
OS
100%
Prutec Limited
OS
100%
PVM Partnerships Limited
OS
100%
RD Park (Hoddesdon Phase 1) Management
Company Limited
OS
64%
Selly Oak Shopping Park (General Partner)
Limited
OS
100%
Selly Oak Shopping Park (Nominee 1) Limited
OS
100%
Selly Oak Shopping Park (Nominee 2) Limited
OS
100%
Selly Oak Shopping Park Limited Partnership
LPI
63%
Smithfield Limited
OS
100%
Stableview Limited
OS
100%
The First British Fixed Trust Company Limited
OS
100%
The Project Hoxton LP
LPI
100%
The Prudential Assurance Company Limited
OS
100%
Vanquish Properties (UK) Limited Partnership
LPI
100%
Wessex Gate Limited
OS
100%
Westwacker Limited
OS
100%
Wrap IFA Services Limited
OS
100%
12 Conduit Street, London, W1S 2XH
BauMont Real Estate Capital Limited
OS
65%
BREO Neptune GP LLP
LPI
100%
Pilot Peak Capital Limited
OS
100%
19 Canning Street, Edinburgh, EH3 8EH
BauMont Co-Invest General Partner Limited
OS
100%
BauMont Core Plus General Partner One LLP
LPI
100%
29 Wellington Street, Leeds, LS1 4DL
M&G Credit Income Investment Trust plc
OS
22%
36-38 Botolph Lane, London, EC3R 8DE
Global Futures and Options Holdings Limited
OS
23%
5 Central Way, Kildean Business Park, Stirling, FK8 1FT
Prudential Distribution Limited
OS
100%
Prudential GP Limited
OS
100%
Prudential Lifetime Mortgages Limited
OS
100%
Prudential UK Services Limited
OS
100%
ScotAm Pension Trustees Limited
OS
100%
5 Westgate, North Cave, Brough, HU15 2NG
Regenerate European Sustainable
Agriculture LP
LPI
100%
50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
Name of entity
Share
class
% held
Condor F3 GP LLP
LPI
100%
Digital Infrastructure Investment Partners SLP
GP LLP
LPI
100%
Genny GP 2 Limited
OS
100%
Genny GP Limited
OS
100%
George Digital GP 1 LLP
LPI
100%
George Digital GP 2 Limited
OS
100%
George Digital GP Limited
OS
100%
GGE GP Limited
OS
100%
Green GP Limited
OS
100%
Infracapital (AIRI) GP Limited
OS
100%
Infracapital (Belmond) GP Limited
OS
100%
Infracapital (GC) GP Limited
OS
100%
Infracapital (Gigaclear) GP 1 Limited
OS
100%
Infracapital (Gigaclear) GP 2 Limited
OS
100%
Infracapital (Gigaclear) GP LLP
LPI
100%
Infracapital (IT PPP) GP Limited
OS
100%
Infracapital (Leo) GP Limited
OS
100%
Infracapital (Novos) GP Limited
OS
100%
Infracapital (Sense) GP Limited
OS
100%
Infracapital (TLSB) GP Limited
OS
100%
Infracapital DF II GP LLP
LPI
100%
Infracapital DF II Limited
OS
100%
Infracapital Employee Feeder GP 1 LLP
LPI
100%
Infracapital Employee Feeder GP Limited
OS
100%
Infracapital Greenfield DF GP LLP
LPI
100%
Infracapital Greenfield Partners 1 SLP GP1
Limited
OS
100%
Infracapital Greenfield Partners 1 SLP GP2
Limited
OS
100%
Infracapital Greenfield Partners I Employee
Feeder LP
LPI
76%
Infracapital Greenfield Partners I SLP EF GP
LLP
LPI
100%
Infracapital Greenfield Partners I SLP LP
LPI
36%
Infracapital Greenfield Partners I SLP2 LP
LPI
100%
Infracapital Greenfield Partners I Subholdings
GP Limited
OS
100%
Infracapital Partners II Subholdings GP Limited
OS
100%
Infracapital Partners IV Subholdings GP LLP
LPI
100%
Infracapital Partners IV Subholdings GP1
Limited
OS
100%
Infracapital Partners IV Subholdings GP2
Limited
OS
100%
Infracapital Partners IV Subholdings Nominee
Limited
OS
100%
Infracapital Partners IV Subholdings SLP LP
LPI
100%
Infracapital SLP II LP
LPI
40%
Kestrel F4 GP LLP
LPI
100%
London Fenchurch Employee Feeder F4 SP LP
LPI
100%
Name of entity
Share
class
% held
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
328
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group
(no shares held directly by the Parent Company, M&G plc or its nominees) (continued)
London Fenchurch F4 Employee Feeder SP
GP LLP
LPI
100%
London Fenchurch GP1 Limited
OS
100%
London Fenchurch GP2 Limited
OS
100%
London Fenchurch SLP LP
LPI
100%
London Green Investments II SLP GP1 Limited
OS
100%
London Green Investments II SLP GP2 Limited
OS
100%
London Green Investments II SLP1 Employee
Feeder GP LLP
LPI
100%
London Green Investments II SLP2 GP Limited
OS
100%
London Green Investments II SLP GP1 Limited
OS
100%
London Green Investments SLP GP2 Limited
OS
100%
London Stone Investments F3 Employee
Feeder GP LLP
LPI
100%
London Stone Investments F3 I Limited
OS
100%
London Stone Investments F3 II Limited
OS
100%
London Stone Investments F3 SP GP LLP
LPI
100%
London Fenchurch F4
Employee Feeder SP GP LLP
LPI
100%
M&G Alternatives GP LLP
LPI
100%
M&G Black Seed GP LLP
LPI
100%
M&G Catalyst Sustainable Agriculture GP LLP
LPI
100%
M&G PFI 2018 GP LLP
LPI
100%
M&G PFI Carry Partnership 2016 LP
LPI
100%
M&G Real Estate UK Enhanced Value LP
LPI
50%
M&G RED II Employee Feeder GP Limited (In
liquidation)
OS
100%
M&G RED III SLP GP Limited (In liquidation)
OS
100%
M&G UKEV (SLP) LP
LPI
80%
M&G Black Seed GP LLP
LPI
100%
M&G Catalyst Sustainable Agriculture GP LLP
LPI
100%
M&G Catalyst Sustainable Agriculture GP Mem
ber No.1 Limited
OS
100%
M&G Catalyst Sustainable Agriculture GP Mem
ber No.2 Limited
OS
100%
M&G Catalyst Sustainable Agriculture LP
LPI
100%
Marble SLP LP
LPI
100%
Merlin D5 GP LLP
LPI
100%
Mole GP1 Limited
OS
100%
Mole GP2 Limited
OS
100%
Ox GP1 Limited
OS
100%
Ox GP LLP
LPI
100%
PPM Managers GP Limited
OS
100%
PPM Managers Partnership CI VII (A) LP
LPI
100%
Rads Omega Limited
OS
100%
Rads Gamma Limited
OS
100%
Stein LP
LPI
100%
Name of entity
Share
class
% held
7 Albemarle Street, London, W1S 4HQ
Cathedral Approach Estate Management
Company Limited
OS
50%
Barratt House, Cartwright Way, Bardon Hill, Coalville, LE67 1UF
Optimus Point Management Company Limited
OS
52%
Berkeley House, 19 Portsmouth Road, Surrey, KT11 1JG
St Edward Homes Limited
OS
50%
St Edward Homes Partnership
LPI
50%
St Edward Strand Partnership
LPI
50%
Bow Bells House, 1 Bread Street, London, EC4M 9HH
Two Rivers LP
LPI
100%
Buckingham Corporate Services Limited, First Floor, 85 Great
Portland Street, London, W1W 7LT
Prudential Greenfield GP LLP
LPI
100%
Prudential Greenfield GP1 Limited
OS
100%
Prudential Greenfield GP2 Limited
OS
100%
Clearwater Court, Vastern Road, Reading, RG1 8DB
Foudry Properties Limited
OS
50%
C/O Regenerate Group, 2nd Floor Marshalls Mill, Marshall Street,
Leeds, LS11 9YJ
RESA Holdings (UK) Ltd
OS
100%
First Floor, 85 Great Portland Street, London, W1W 7LT
Aqua GP LLP
LPI
100%
Digital Infrastructure Investment Partners GP
LLP
LPI
65%
Digital Infrastructure Investment Partners GP1
Limited
OS
100%
Digital Infrastructure Investment Partners SLP
GP1 Limited
OS
100%
Digital Infrastructure Investment Partners SLP
GP2 Limited
OS
100%
Dudok GP LLP
LPI
100%
Dudok GP1 Limited
OS
100%
Dudok GP2 Limited
OS
100%
Genny GP 1 LLP
LPI
100%
ICP (Finch) GP 1 Limited
OS
100%
ICP (Finch) GP 2 Limited
OS
100%
ICP (Finch) GP LLP
LPI
100%
Infracapital (Churchill) GP 1 Limited
OS
100%
Infracapital (Churchill) GP LLP
LPI
100%
Infracapital F1 GP2 Limited
OS
100%
Infracapital F2 GP Limited
OS
100%
Infracapital F2 GP1 Limited
OS
100%
Infracapital GP 1 LLP
LPI
100%
Name of entity
Share
class
% held
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
329
39 Related undertakings (continued)
Other subsidiaries, joint ventures, associates and significant holdings of the Group
(no shares held directly by the Parent Company, M&G plc or its nominees) (continued)
Infracapital GP Limited
OS
100%
Infracapital Greenfield Partners I GP Limited
OS
100%
Infracapital Greenfield Partners I LP
LPI
22%
Infracapital Greenfield Partners II
Subholdings (Euro) GP LLP
LPI
100%
Infracapital Greenfield Partners II
Subholdings (Sterling) GP LLP
LPI
100%
Infracapital Greenfield Partners II
Subholdings GP1 Limited
OS
100%
Infracapital Greenfield Partners II
Subholdings GP2 Limited
OS
100%
Infracapital Partners II LP
LPI
26%
Infracapital Partners III Subholdings (Euro)
GP LLP
LPI
100%
Infracapital Partners III Subholdings
(Sterling) GP LLP
LPI
100%
Infracapital Partners III Subholdings GP1
Limited
OS
100%
Infracapital Partners III Subholdings GP2
Limited
OS
100%
Infracapital Partners LP
LPI
33%
Infracapital SLP Limited
OS
100%
Pesca GP LLP
LPI
100%
Prudential Greenfield LP
LPI
100%
Radler GP LLP
LPI
100%
Radler GP1 Limited (In liquidation)
OS
100%
Radler GP2 Limited (In liquidation)
OS
100%
First Floor, Boundary House, 91-93 Charterhouse Street,
London, EC1M 6HR
Innisfree M&G PPP LLP
LPI
35%
Falcon House, Eagle Road, Plymouth, Devon, PL7 5JY
My Continuum Wealth Limited
OS
100%
Continuum (Financial Services) LLP
LPI
100%
Management Offices, The Mall at Cribbs Causeway, Bristol,
BS34 5DG
Cribbs Causeway Merchants Association
Limited
OS
20%
Marble Arch House, 66 Seymour Street, London, W1H 5BX
Highcross Leicester (GP) Limited
OS
50%
Prydis Accounts Ltd, The Parade, Liskeard, Cornwall, England,
PL14 6AF
My Continuum Financial Limited
OS
75%
My Continuum Financial Nominee Limited
OS
100%
Name of entity
Share
class
% held
Sixth Floor, 65, Gresham Street, London, EC2V 7NQ
WS Prudential Risk Managed Active 2
U
21%
WS Prudential Risk Managed Active 3
U
23%
WS Prudential Risk Managed Active 4
U
32%
WS Prudential Risk Managed Active 5
U
30%
WS Prudential Risk Managed Passive Fund 1
U
41%
The Media Centre, 7 Northumberland Street, Huddersfield,
HD1 1RL
Sandringham Financial Partners Limited
OS
100%
Sandringham Financial Partners Limited
PS
39%
York House, 45 Seymour Street, London, W1H 7LX
Fort Kinnaird GP Limited
OS
50%
Fort Kinnaird Limited Partnership
LPI
50%
100 Victoria Street, London, SW1E 5JL
Bluewater REIT
U
25%
United States of America
14006 Riverside Dr Ste 17 Sherman Oaks, CA, 91423-1944
Sherman Oaks Fashion Associates LP
LPI
50%
559 Pacific Avenue, San Francisco, CA 94133
Sky Fund V Onshore LP
LPI
26%
300 Atlantic Street, Suite 600, Stamford, CT 06901
HCR Canary Fund LP
LPI
99%
1209 Orange Street, Wilmington, DE 19801
Fashion Square ECO LP
LPI
50%
Westland Garden State Plaza Sponsor 1 LP
LPI
50%
251 Little Falls Drive, Wilmington, DE 19801
M&G Investments (Americas) Inc.
OS
100%
M&G Investments (USA) Inc.
OS
100%
2711 Centerville Road, Suite 400, Wilmington, DE 19808
Aldwych LP
LPI
100%
Old Kingsway LP
LPI
100%
Randolph Street LP
LPI
100%
SMLLC
LPI
100%
SOFA Holding LP
LPI
100%
874 Walker Road, Suite C, Dover, DE 19904
PPM America Private Equity Fund III LP
LPI
50%
PPM America Private Equity Fund IV LP
LPI
50%
PPM America Private Equity Fund V LP
LPI
50%
PPM America Private Equity Fund VI LP
LPI
40%
PPM America Private Equity Fund VII LP
LPI
46%
300 E Lombard Street, Baltimore, MD 21202
NAPI REIT, Inc.
OS
99%
Garden State Plz Mall, Routes 4 &17, Paramus, NJ 07652
Westland Garden State Plaza LP
LPI
50%
Name of entity
Share
class
% held
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Notes to the consolidated financial statements continued
330
2024
Restated
i
2023
As at 31 December
Notes
£m
£m
Assets
Non-current assets
Investments in subsidiaries
A
9,678
9,623
Deferred tax assets
B
136
138
Total non-current assets
9,814
9,761
Current assets
Loans
C
519
804
Current tax assets
B
8
2
Accrued investment income and other debtors
D
19
3
Cash and cash equivalents
E
12
27
Total current assets
558
836
Total assets
10,372
10,597
Equity
Share capital
F
120
119
Share premium
F
383
379
Capital redemption reserve
11
11
Shares held by employee benefit trust
G
(9)
(26)
Treasury shares
G
(6)
(21)
Equity-settled share-based payment reserve
88
81
Retained earnings
Brought forward retained earnings
6,285
7,252
Profit/(Loss) for the year
714
(480)
Other movements in retained earnings
(472)
(487)
Total retained earnings
6,527
6,285
Total equity
7,114
6,828
Liabilities
Non-current liabilities
Subordinated liabilities and other borrowings
H
3,176
3,676
Provisions
I
7
7
Accruals, deferred income and other liabilities
J
1
1
Total non-current liabilities
3,184
3,684
Current liabilities
Accruals, deferred income and other liabilities
J
74
85
Total current liabilities
74
85
Total liabilities
3,258
3,769
Total equity and liabilities
10,372
10,597
i
The format of the statement of financial position has been changed to align to the requirements of IAS 1 to present subtotals for current and non-current
assets and for current and non-current liabilities. In the financial statements for the year ended 31 December 2023, Provisions were presented within
Accruals, deferred income and other liabilities but are now presented separately on the face of the statement of financial position.
The Notes on pages 333 to 340 are an integral part of these financial statements.
The financial statements on pages 331 to 340 were approved by the Board and signed on its behalf, by the following Directors
on 18 March 2025:
Andrea Rossi
Kathryn McLeland
Group Chief Executive Officer
Chief Financial Officer
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Company financial statements
Company statement of financial position
331
Share
capital
Share
premium
Capital
redemption
reserve
Shares
held by
employee
benefit
trust
Treasury
shares
Equity-
settled
share-
based
payment
reserve
Retained
earnings
Total
equity
£m
£m
£m
£m
£m
£m
£m
£m
As at 1 January 2024
119
379
11
(26)
(21)
81 6,285 6,828
Profit for the year
—
—
—
—
—
—
714
714
Total comprehensive income for the year
—
—
—
—
—
—
714
714
Dividends paid to equity holders of M&G plc
—
—
—
—
—
—
(468)
(468)
Proceeds from shares issued to settle
employee share option schemes
—
4
—
—
—
—
—
4
Shares distributed by employee trusts or from
treasury shares
—
—
—
37
—
—
(37)
—
Vested employee share-based payments
—
—
—
—
—
(33)
33
—
Expense recognised in respect of share-based
payments
—
—
—
—
—
40
—
40
Shares issued to, acquired by or transferred to
employee trusts
1
—
—
(20)
15
—
—
(4)
Net increase in equity
1
4
—
17
15
7
242
286
As at 31 December 2024
120
383
11
(9)
(6)
88
6,527
7,114
Share
capital
Share
premium
Capital
redemption
reserve
Shares
held by
employee
benefit
trust
Treasury
shares
Equity-
settled
share-
based
payment
reserve
Retained
earnings
Total
equity
£m
£m
£m
£m
£m
£m
£m
£m
As at 1 January 2023
119
370
11
(70)
(47)
91
7,252
7,726
Loss for the year
—
—
—
—
—
—
(480)
(480)
Total comprehensive loss for the year
—
—
—
—
—
—
(480)
(480)
Dividends paid to equity holders of M&G plc
—
—
—
—
—
—
(462)
(462)
Proceeds from shares issued to settle employee
share option schemes
—
9
—
—
—
—
—
9
Shares distributed by employee trusts or from
treasury shares
—
—
—
71
4
—
(71)
4
Vested employee share-based payments
—
—
—
—
—
(42)
42
—
Expense recognised in respect of share-based
payments
—
—
—
—
—
32
—
32
Shares issued to, acquired by and transferred to
employee trusts
—
—
—
(27)
22
—
—
(5)
Tax effect of items recognised directly in equity
—
—
—
—
—
—
1
1
Other movements
—
—
—
—
—
—
3
3
Net increase/(decrease) in equity
—
9
—
44
26
(10)
(967)
(898)
As at 31 December 2023
119
379
11
(26)
(21)
81
6,285
6,828
The Notes on pages 333 to 340 are an integral part of these financial statements.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
Company financial statements continued
Company statement of changes in equity
332
Basis of preparation and accounting policies
(a) Basis of preparation
These separate financial statements for the year ended 31 December 2024 have been prepared in accordance with UK Generally
Accepted Accounting Practice, including Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and Part 15
of the Companies Act 2006.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of UK-
adopted international accounting standards, but makes amendments where necessary in order to comply with the Companies Act
2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
The financial statements have been prepared on a going concern basis under the historical cost basis and are presented rounded
to the nearest million pounds sterling, see Note 1 of the Group financial statements for information of the Directors’ assessment of
the going concern basis.
The format of the statement of financial position has been changed for the year ended 31 December 2024 to present subtotals for
current and non-current assets and for current and non-current liabilities. This change has been made in order to provide
additional information within the primary statements and comply with Schedule 1 of the Regulations. The prior year figures in
respect of the year ended 31 December 2023 have been re-presented in the new format to ensure comparability.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in
accordance with FRS 101:
– Statement of compliance with IFRS
– Outstanding shares comparative
– Requirement for minimum of two primary statements, including statement of cash flows
– Additional comparative information
– Capital management disclosures
– Statement of cash flows
– Financial instruments disclosure
– Effect of IFRSs issued but not effective
– Related party transactions with wholly-owned subsidiaries
– Presentation of a third statement of financial position
The Company has taken advantage of the exemption in Section 408 of the Companies Act 2006 not to present its own income
statement in these financial statements. The auditors' remuneration for audit and other services is disclosed in Note 9 of the Group
financial statements. During the year, the Company had two (2023: two) employees.
(b) Judgements in applying accounting policies and sources of estimation uncertainty
A full list of the Company’s material accounting policies is provided in Section (c) of this Note below.
The preparation of these financial statements require management to apply judgement in relation to certain accounting policies. In
addition, management have to make estimates and assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses arising during the year. Estimates are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The area which required management to apply critical accounting estimates and assumptions which were material to the financial
statements is as follows:
Financial statement area
Key estimate and assumptions
Accounting
policy
Note
Impairment of
investment in
subsidiaries
When assessing impairment of subsidiaries where indicators of impairment exist the
carrying value is compared to the recoverable amount, which is the higher of fair
value less cost of disposal and value in use. The determination of the recoverable
amount, especially in relation to the value in use calculation requires the use of
various assumptions that can have a material impact on the calculation.
(c) (ii)
A
(c) Material accounting policies
(i) Dividend income
Dividend income from investments is recognised when the right to receive payments has been established.
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Basis of preparation and accounting policies (continued)
(c) Material accounting policies (continued)
(ii) Investment in subsidiaries
Investment in subsidiaries is stated at cost less, where appropriate, allowances for impairment. Investments are reviewed annually
to assess whether there are indicators of impairment. Where indicators of impairment exist, the carrying value of the investment in
the subsidiary is compared against its recoverable amount, which is the higher of the fair value less cost to sell or the value in use,
with any resulting impairment recorded in the income statement.
Investment in subsidiaries under common control transactions which are acquired as part of a group reorganisation are recorded
at fair value of the consideration received, which is deemed to be the cost at the point of initial recognition. Any gains and losses
arising on disposal of subsidiaries are recorded in profit or loss.
(iii) Financial instruments
Initial recognition
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for
managing the instruments. Financial instruments are initially measured at fair value plus, for financial instruments not measured at
fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue.
Classification and measurement
Financial instruments are classified and measured at either amortised cost or FVTPL.
Financial instruments measured at amortised cost
Financial instruments are held at amortised cost if both of the following conditions are met:
– The instruments are held within a business model with the objective of holding the instrument to collect the contractual cash
flows; and;
– The contractual terms of the instrument give rise on specified dates to cash flows that are Solely Payments of Principal and
Interest (SPPI) on the principal amount outstanding.
Note 1.5.5 of the Group financial statements provides further details on these conditions.
Financial instruments measured at FVTPL
All financial instruments held by the Company that do not meet the criteria for being measured at amortised cost, or are
mandatorily required to be measured at fair value under IFRS 9, are measured at FVTPL. This includes instruments that are held for
trading or are part of a portfolio that is managed on a fair value basis.
Subsequent measurement
After initial measurement, loans, cash and cash equivalents, accrued investment income and other debtors and subordinated
liabilities and other borrowings are all measured at amortised cost, using the Effective Interest Rate (EIR) method, less allowance
for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss.
Any gain or loss on derecognition is recognised in profit or loss.
Financial instruments at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend
income, are recognised in the income statement.
Reclassification of financial assets and liabilities
The Company does not reclassify its financial instruments subsequent to their initial recognition, apart from the exceptional
circumstances in which there has been a change in business model. The Company’s accounting policy for derecognition mirrors
the Group's which is outlined in Notes 1.5.5(ix)-(x) of the Group financial statements.
Impairment of financial assets
Impairment losses on financial assets measured at amortised cost are measured using an expected credit loss impairment model.
Impairment losses representing the expected credit loss in the next 12 months are recognised unless there has been a significant
increase in credit risk from initial recognition, in which case, lifetime expected losses are recognised. Where relevant, the Company
makes use of the exemption available for financial instruments with low credit risk, for which, an assessment of a significant
increase in credit risk is not required.
Further detail on the Company's accounting policies for cash and cash equivalents and subordinated liabilities and other
borrowings are provided in (iv) and (x).
(iv) Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand with an original maturity date of 90 days or less. Cash and cash
equivalents are initially recognised at fair value and subsequently carried at amortised cost using the Effective Interest Rate (EIR)
method and are subject to the impairment requirements of IFRS 9.
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Basis of preparation and accounting policies (continued)
(c) Material accounting policies (continued)
(v) Tax
Current tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
reporting date and any adjustment to income tax payable in respect of previous years. Current tax is charged or credited to the
income statement, except when it relates to items recognised directly in equity or other comprehensive income.
Deferred tax
Deferred taxes are provided under the liability method for all relevant temporary differences. IAS 12 ‘Income Taxes’ does not
require all temporary differences to be provided for, in particular, the Company does not provide for deferred tax on undistributed
earnings of subsidiaries where the Company is able to control the timing of the distribution and the temporary difference created is
not expected to reverse in the foreseeable future. Deferred tax assets are only recognised when it is more likely than not that
future taxable profits will be available against which these losses can be utilised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled,
based on tax rates (and laws) that have been enacted or substantively enacted at the end of the reporting period.
(vi) Share capital and share premium
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its
liabilities. Shares are classified as equity when their terms do not create an obligation to transfer assets. The nominal value of
shares issued is recorded in share capital.
Where the consideration received from the issue or sale of existing shares exceeds the nominal value recorded in share capital, the
difference is recorded in share premium. Share premium is recorded net of share issue costs.
(vii) Treasury shares
Where the Company purchases its own share capital , the consideration paid, including any attributable transaction costs, is shown
as a deduction from total shareholders’ equity.
(viii) Capital redemption reserve
The capital redemption reserve arises from the cancellation of shares following the Company’ share buy-back programme in 2022.
(ix) Dividends
Dividends are recognised when the obligation becomes certain, i.e., when the dividend is no longer at the discretion of the
Company. In the case of interim dividends, this occurs when the dividends are paid. For final dividends, this occurs when they are
recommended by the Board and approved by shareholders.
(x) Subordinated liabilities and other borrowings
Subordinated liabilities include loan notes issued by the Company which are classified as financial liabilities as they have a fixed
repayment date and do not represent a residual interest in the net assets of the Company on liquidation. The notes rank junior to all
other liabilities of the Company in the event of liquidation, but above share capital.
Subordinated liabilities are initially recognised at fair value, net of transaction costs and are subsequently accounted for on an
amortised cost basis using the effective interest method. Under the effective interest method, the difference between the
redemption value and the initial value at recognition is amortised through the income statement to the expected date of maturity.
(xi) Share-based payments
All share-based payments made to employees for services rendered are measured based on the fair value of the equity instrument
granted. The fair value takes into account the impact of market-based vesting conditions and non-vesting conditions, but excludes
any impact of non-market-based vesting conditions. The related share-based payment expense is recognised over the vesting
period. The fair value may be determined using an option pricing model such as Black-Scholes, where appropriate, taking into
account the terms and conditions of the award.
For equity-settled share-based payments, the fair value of service rendered is based on the fair value of the equity instrument at
grant date which is not remeasured subsequently. The share-based payment expense is based on the number of equity
instruments expected to vest over the vesting period, with the corresponding entry to equity.
For cash-settled share-based payments, the fair value of service rendered is based on the fair value of the related liability to the
equity instrument granted. The fair value equity instrument granted is remeasured at each reporting date with any changes
recognised in the share-based payment expense for the period.
A cancellation of an award without the grant of a replacement equity instrument is accounted for as an acceleration of vesting.
Accordingly, any share-based payment expense that would have been recognised over the remaining vesting period is recognised
immediately.
On vesting or exercise, the difference between the expense charged to the income statement and the actual cost to the Company
is transferred to retained earnings.
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335
Basis of preparation and accounting policies (continued)
(c) Material accounting policies (continued)
(xii) Provisions and contingent assets and liabilities
Provisions are recognised on the statement of financial position when the Company has a present legal or constructive obligation
resulting from a past event, it is probable that a loss will be made in settling the obligation and the amounts can be estimated
reliably.
Provisions are measured based on management’s best estimate of the expenditure required to settle the obligation at the
reporting date. Provisions are discounted and represent the present value of the expected expenditure where the effect of the
time value of money is material.
Contingent liabilities are possible obligations of the Company where the timing and amount are subject to significant uncertainty.
Contingent liabilities are not recognised on the statement of financial position, unless they are assumed by the Company as part of
a business combination. Contingent liabilities are however disclosed, unless they are considered to be remote. If a contingent
liability becomes probable and the amount can be reliably measured it is no longer treated as contingent and is recognised as a
liability.
Contingent assets which are possible benefits to the Company are only disclosed if it is probable that the Company will receive the
benefit. If such a benefit becomes virtually certain, it is no longer considered contingent and is recognised on the statement of
financial position as an asset.
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336
A. Investment in subsidiaries
2024
2023
As at 31 December
£m
£m
Cost at 1 January
11,779
11,759
Capital contribution into subsidiaries
173
30
Disposal of subsidiaries
(1)
(10)
Return of capital
(3)
—
Cost at 31 December
11,948
11,779
Impairment at 1 January
(2,156)
(1,223)
Impairment of subsidiaries
(115)
(933)
Disposal of impaired subsidiaries
1
—
Impairment at 31 December
(2,270)
(2,156)
Investment in subsidiaries at 31 December
9,678
9,623
(i) Direct subsidiaries
The direct subsidiaries of the Company as at 31 December 2024 are listed below:
Company name
Country of incorporation
or registration
Nature of business
% held
M&G Corporate Holdings Limited
United Kingdom
Holding company
100%
M&G Group Regulated Entity Holding Company Limited
United Kingdom
Holding company
100%
Prudential Capital Holding Company Limited (In Liquidation)
United Kingdom
Holding company
100%
Prudential Capital Public Limited Company
United Kingdom
Service company
100%
Prudential Financial Services Limited
United Kingdom
Holding company
100%
Details of the Company’s related undertakings are given in Note 39 of the Group financial statements.
(ii) Capital contributions
On 14 March 2024 the Company increased its investment in Prudential Financial Services Limited through the purchase of
172,000,000 £1 ordinary shares for cash consideration of £172m. The additional £1m relates to capital contributions arising from
share-based payments to employees of subsidiaries.
On 1 March 2023 the Company increased its investment in Prudential Financial Services Limited through the purchase of
22,500,000 £1 ordinary shares for cash consideration of £23m. The additional £7m relates to capital contributions arising from
share-based payments to employees of subsidiaries.
(iii) Disposals and return of capital
On 25 May 2024 the Company derecognised its fully impaired investment in Prudential Property Services Limited following the
winding up of the company.
On 19 December 2024 the Company received a £3m return of capital from its subsidiary M&G Corporate Holdings Limited.
On 18 September 2023 the Company redeemed £10m of equity capital in its subsidiary Prudential Capital Holding Company
Limited through the cancellation of 9,999,000 £1 ordinary shares.
(iv) Impairment
As at 31 December 2024, indicators of impairment existed for two of the Company’s direct subsidiaries, M&G Group Regulated
Entity Holding Company Limited (M&GGREH) and Prudential Financial Services Limited (PFSL).
M&GGREH
M&GGREH is the main subsidiary of the Company and acts as the main holding entity for the Group’s regulated businesses. The
continued adverse impacts of market volatility on the global economy and its resulting implications on the Company’s market
capitalisation and potential future business performance were considered an impairment indicator by management in the years
ended 31 December 2024 and 31 December 2023.
During the year ended 31 December 2023, an impairment of £933m was recognised in relation to the Company’s investment in
M&G Group Regulated Entity Holding Company Limited (M&GGREH). No impairment was recognised during the year ended
31 December 2024.
An impairment assessment was undertaken in relation to the subsidiary by comparing its recoverable amount with the carrying
value. The recoverable amount of the subsidiary was based on its value in use. As the subsidiary acts as a holding company with no
operations, the value in use was determined as the sum of the values in use of the underlying subsidiaries in which the subsidiary
has investment in. At 31 December 2024, the M&G Group Limited (MGG) and The Prudential Assurance Company Limited (PAC)
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337
A. Investment in subsidiaries (continued)
(iv) Impairment (continued)
collectively represented 97% (2023: 96%) of the carrying value of M&GGREH. The values in use of these material indirect
subsidiaries were determined based on discounted cash flows and standard growth models based on management forecasts.
The value in use calculation of the underlying subsidiaries is based on a set of economic, market and business assumptions used to
derive the cash flow forecasts. The calculation is particularly sensitive to a number of key assumptions as follows:
– In respect of MGG, the value in use was calculated using a standard growth model, using a discount rate of 11%, based on a
weighted average cost of capital approach, and a long-term growth rate of 2%. At 31 December 2024, a simultaneous increase
of 50bps in the discount rate and 50bps decrease in the growth rate would result in the carrying value of MGG reducing by
£235m. This would result in an impairment of £235m recorded by the Company in respect of M&GGREH.
– In respect of PAC, the value in use was calculated using a dividend discount model, using a discount rate of 10.4%, based on a
cost of equity approach, and a long-term growth rate of 2.5% to determine the terminal value. At 31 December 2024, a
simultaneous increase of 50bps in the discount rate and a 50bps decrease in the growth rate would result in the carrying value
of PAC reducing by £644m. This would result in an impairment of £644m recorded by the Company in respect of M&GGREH.
The impairment recorded at 31 December 2023 reflected a reduction in the valuation of PAC in combination with the impact of
write-downs in the value of the asset management and platform businesses, MGG and Investment Funds Direct Limited (IFDL)
respectively, recorded in previous years. As the headroom on the valuation of PAC had been eroded, the impairment losses
previously recognised in respect of the investment in MGG and IFDL crystallised.
PFSL
PFSL is a direct subsidiary of the Company and acts as an intermediate holding company within the Group. In 2024, the Company
injected £172m into PFSL to aid PFSL in complying with regulatory capital requirements arising from the inclusion of My Continuum
(Financial Services) LLP as PFSL’s indirect subsidiary. Following the sale of Continuum from M&G Wealth Advice Limited to M&G
Wealth Holding Company Limited (as detailed in Note 2.2 of the Group financial statements), PFSL received dividends from its
subsidiaries. PFSL subsequently paid a dividend of £195m to the Company, recognised as dividend income on the Company’s
income statement. The resultant Company carrying value of PFSL being greater than the net asset value of PFSL was considered
an indicator of impairment. An impairment of £115m was recognised in relation to the Company’s investment in PFSL for the year
ended 31 December 2024 (2023: £nil).
No impairment was recognised in relation to any other of the Company’s subsidiaries (2023: none).
B. Tax
(i) Deferred tax assets and liabilities
Under IAS 12, deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the
liability settled, based on tax rates (and laws) that have been enacted or substantively enacted at the end of the reporting period
Deferred tax assets are recognised to the extent that they are regarded as recoverable, that is to the extent that, on the basis of all
available evidence, it can be regarded as probable that there will be suitable taxable profits from which the future reversal of the
underlying temporary differences can be deducted or tax losses utilised. Deferred tax assets and liabilities are only offset when
there is both a legal right to set off and an intention to settle on a net basis.
Deferred tax in the statement of financial position
The table below shows movements on deferred tax assets during the year:
2024
2023
For the year ended 31 December
£m
£m
As at 1 January
138
141
Income statement
(1)
(4)
Equity and other comprehensive income
(1)
1
As at 31 December
136
138
Of the £136m (2023: £138m) deferred tax assets at 31 December 2024, £69m (2023: £77m) relates to short-term timing differences
arising on the subordinated notes and £63m (2023: £56m) on tax losses carried forward. The remaining £4m (2023: £5m) relates to
the deferred tax asset on share-based compensation.
Unrecognised deferred tax
Retained earnings of overseas subsidiaries are expected to be re-invested indefinitely or remitted to the UK free from further
taxation by virtue of Parent Company exemptions on dividends from subsidiaries and on capital gains on disposal. Consequently,
the Company does not consider there to be any significant taxable temporary differences associated with investments in
subsidiaries, branches, associates and joint arrangements.
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B. Tax (continued)
(ii) Current tax
2024
2023
For the year ended 31 December
£m
£m
Net corporation tax asset as at 1 January
2
8
Income statement
62
57
Corporation tax paid
(56)
(63)
Net corporation tax asset as at 31 December
8
2
Net current tax assets at 31 December 2024 were £8m (2023: £2m) and are expected to be settled within 12 months.
C. Loans
As at 31 December 2024 the Company had provided loans to Prudential Capital plc, a direct subsidiary of the Company, of £519m
(2023: £804m) which are repayable on demand. Accrued interest as at 31 December 2024 was £1m (2023: £1m) and is presented
within Accrued investment income and other debtors.
D. Accrued investment income and other debtors
2024
2023
As at 31 December
£m
£m
Amounts owed by Group undertakings
17
2
Other
2
1
Total accrued investment income and other debtors
19
3
Analysed as:
Expected to be settled within one year
2
1
No contractual maturity
17
2
Total accrued investment income and other debtors
19
3
Amounts owed by Group undertakings are unsecured, interest free and are repayable upon demand with no fixed date of
repayment, with the exception of accrued interest due on loans provided to Prudential Capital plc totalling £1m (2023: £1m).
E. Cash and cash equivalents
2024
2023
As at 31 December
£m
£m
Cash
12
27
Total cash and cash equivalents
12
27
F. Share capital and share premium
Details of the Company’s share capital and share premium are given in Note 21 of the Group financial statements.
Details of the dividends paid on the ordinary shares by the Company are provided in Note 12 of the Group financial statements.
Note 12 in the Group financial statements also includes information regarding the second interim dividend proposed by the
Directors for the year ended 31 December 2024.
G. Shares held by employee benefit trusts and other treasury shares
Details of the Company’s shares held by trusts and other treasury shares are given in Note 22 of the Group financial statements.
H. Subordinated liabilities and other borrowings
Details of the Company’s subordinated liabilities are given in Note 26.1 of the Group financial statements. The Company has access
to revolving credit facilities totalling £1.5bn which remained undrawn as at 31 December 2024 and 31 December 2023. Further
details are given in Note 26.2 of the Group financial statements.
I. Provisions
2024
Restated
i
2023
As at 31 December
£m
£m
Staff benefits
7
7
Total provisions
7
7
i
In the financial statements for the year ended 31 December 2023, Provisions were presented within Accruals, deferred income and other liabilities on the
face of the statement of financial position. Provisions are now presented separately on the face of the statement of financial position.
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339
J. Accruals, deferred income and other liabilities
2024
Restated
i
2023
As at 31 December
£m
£m
Amounts owed to Group undertakings
32
35
Accrued interest on subordinated debt
33
42
Other
10
9
Total accruals, deferred income and other liabilities
75
86
Analysed as:
Expected to be settled within one year
42
50
Expected to be settled after one year
1
1
No contractual maturity
32
35
Total accruals, deferred income and other liabilities
75
86
i
This note has been restated to exclude balances which were reported within Accruals, deferred income and other liabilities in the financial statements for
the year ended 31 December 2023 but which have subsequently been presented as Provisions on the face of the statement of financial position.
Amounts owed to Group undertakings are unsecured, interest free and are repayable upon demand with no fixed date of
repayment.
K. Related party transactions
The Directors and key management personnel of the Company are considered to be the same as for the Group. See Note 35 of the
Group financial statements for further information.
There were no other related party transactions in the years ended 31 December 2024 and 31 December 2023 other than those
noted in Note A, Note C, Note D and Note J of the Company financial statements.
L. Contingencies and related obligations
Details of the Company’s contingencies and related obligations are given in Note 33 of the Group financial statements.
Intra-group capital support arrangements
The Company and PAC have put in place intra-group arrangements to formalise circumstances in which capital support would be
made available by the Company. While the Company considers it unlikely that such support will be required, the arrangements are
intended to provide additional comfort to PAC and its policyholders.
M. Share-based payments
Details of the Company’s share-based payments are given in Note 37 of the Group financial statements.
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340
S.1 Alternative performance measures
Overview of the Group’s key performance measures
The Group measures its financial performance using a number of key performance measures (KPM). The Group also uses a number
of alternative performance measures (APM), which are most commonly derived from the financial statements prepared in
accordance with the IFRS financial reporting framework or the Solvency II requirements, but are not defined under IFRS or
Solvency II. The APMs are used to complement and not to substitute the disclosures prepared in accordance with IFRS and
Solvency II, and provide additional information on the long-term performance of the Group.
A list of the APMs used by the Group along with their definitions and how they can be reconciled to the nearest IFRS or Solvency II
measure, where applicable, is provided in the table below.
All information included in this section does not form part of the independent audit performed by the external auditor.
The Group’s KPMs are summarised below, along with which of these measures are considered APMs by the Group.
Assets under
management and
administration
(AUMA)
APM,
KPM
Closing AUMA represents the total market value of all assets managed, administered or advised on
behalf of clients at the end of each financial period and is a key indicator of the scale of the business.
Assets managed by the Group include those managed on behalf of our institutional and wholesale
clients.
Assets administered by the Group include assets for which we provide investment management
services, in addition to assets we administer where the client has elected to invest in a third party
investment manager.
Assets under advice are advisory portfolios where clients receive investment recommendations such
as Strategic Asset Allocation & model portfolios but retain discretion over executing the advice.
AUMA includes assets recognised on the consolidated statement of financial position, together with
certain assets managed and/or administered by the Group belonging to external clients not included
within the consolidated statement of financial position and, as a result, this measure is not directly
reconcilable to the financial statements.
Net flows from
open business
APM,
KPM
Net flows from open business consists of net client flows from Asset Management, PruFund,
Shareholder annuities and the elements of Other Life which are open to new business. It excludes net
flows from our Traditional with-profits business, platform and certain elements of Other Life closed to
new business.
Adjusted
operating profit
before tax
APM,
KPM
Adjusted operating profit (AOP) before tax is the Group’s non-GAAP alternative performance
measure, which complements the IFRS GAAP measures and is useful as it allows a deeper
understanding of the Group's performance over time. It is therefore key to decision-making and the
internal performance management of our operating segments.
Certain adjustments that are considered to be non-recurring or strategic, or due to short-term
movements not reflective of longer-term performance are made to the IFRS result before tax to
determine adjusted operating profit before tax. Adjustments are in respect of short-term fluctuations
in investment returns, mismatches arising on the application of IFRS 17, costs associated with
fundamental Group-wide restructuring and transformation, profits or losses arising on business and
corporate transactions, impairment and amortisation in respect of acquired intangible assets, and,
where relevant, profit/(loss) from discontinued operations. Included in AOP before tax are the results
of the intercompany buy-in transaction executed between the trustees of M&G Group Pension
Scheme (M&GGPS) and PAC which are eliminated from the IFRS results before tax on consolidation.
AOP before tax for the Life segment does not include the impact of any margins on investment
management fee earned by other Group entities and these are recognised in the Asset Management
segment as they emerge.
The AOP methodology is described in Note 3.2, along with a reconciliation of AOP before tax to IFRS
result after tax.
Key performance
measure
Type
Definition
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341
S.1 Alternative performance measures (continued)
Overview of the Group’s key performance measures (continued)
Key performance
measure
Type
Definition
Operating
change in
Contractual
Service Margin
APM,
KPM
Operating change in Contractual Service Margin (CSM) is an APM introduced on the adoption of IFRS
17 in 2023 and supplements the AOP metric for the Life segment.
Operating change in CSM represents changes resulting from new business, interest accretion,
experience changes and release of CSM but excludes the impact of short-term market movements,
mismatches arising on the adoption of IFRS 17 and restructuring costs. The impact on these items
also includes the intercompany buy-in transaction, consistent with AOP.
For the Variable Fee Approach business, operating change in CSM does not include the variance
between long-term expected returns and actual returns and the impact of the mismatch arising on
the application of the General Measurement Model to the non-profit business written in the With-
Profits Fund, similar to the methodology for AOP.
The APM is a useful measure of economic value generated as it includes the impact of new business
and management actions taken during the year, which are not included in AOP.
IFRS result after
tax
KPM
IFRS result after tax demonstrates to our shareholders the financial performance of the Group during
the relevant period on an IFRS basis.
Underlying
capital
generation
APM
For insurance entities and their underlying subsidiaries, underlying capital generation includes the
expected Solvency II surplus capital generated from in-force business and the impact of writing new
life insurance business. For non-insurance entities, underlying capital generation is equal to adjusted
operating profit before tax, with certain adjustments made in respect of items that do not reflect the
underlying result. It also includes other items such as head office expenses and debt interest costs
that contribute to the underlying capital position of the business.
Operating capital
generation
APM,
KPM
Operating capital generation is the total capital generation before tax, adjusted to exclude market
movements relative to those expected under long-term assumptions and to remove other non-
operating items, including shareholder restructuring and other costs. Management use this as an
indicator on the longer-term components of the movements in the Group’s surplus capital as it is less
affected by short-term market volatility and non-recurring items as total capital generation.
Total capital
generation
APM,
KPM
Total capital generation measures the change in surplus capital during the period, before dividends
and capital movements. Management consider it to be integral to the running and monitoring of the
business, our decisions on capital allocation and investment, and ultimately our dividend policy.
Surplus capital is the amount by which eligible own funds exceed SCR under Solvency II.
Shareholder
Solvency II
coverage ratio
APM,
KPM
Management focuses on a shareholder view of the Solvency II coverage ratio, which is considered to
provide a more useful reflection of the capital strength of the Group. The shareholder view includes
future with-profits shareholder transfers, but excludes the shareholders’ share of the ring-fenced
with-profits estate.
The regulatory Solvency II capital position considers the Group’s overall own funds and solvency
capital requirement (SCR).
The shareholder Solvency II coverage ratio is the ratio of own funds to SCR, excluding the
contribution to own funds and SCR from the Group’s ring-fenced With-Profits Fund. Own funds
assume transitional measures on technical provisions which have been recalculated using
management’s estimate of the impact of operating and market conditions at the valuation date. Both
the shareholder view and the regulatory view reflect eligible own funds, in line with the thresholds set
by the regulator that set out how much capital of each tier can be used to demonstrate solvency.
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342
S.2 Adjusted operating profit before tax
(i) Reconciliation of adjusted operating profit/(loss) before tax by segment to IFRS (loss)/profit before tax
2024
2023
i
For the year ended 31 December
£m
£m
Asset Management
289
242
Life
746
755
Corporate Centre
(198)
(200)
Total segmented adjusted operating profit before tax
837
797
Short-term fluctuations in investment returns
(643)
(171)
Mismatches arising on application of IFRS 17
(333)
(41)
Amortisation of intangible assets acquired in business combinations
(115)
(39)
Profit on disposal of business and corporate transactions
11
—
Restructuring costs and other
(106)
(141)
IFRS (loss)/profit before tax and non-controlling interests attributable to equity holders
(349)
405
IFRS profit before tax attributable to non-controlling interests
17
16
IFRS (loss)/profit before tax attributable to equity holders
(332)
421
i
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. The comparatives for Life and Corporate
Centre have been restated to reflect the revised segments and the adjustment of some advice-related costs.
(ii) Adjusted operating profit/(loss) before tax by segment and source
2024
2023
i
For the year ended 31 December
£m
£m
Core Asset Management
218
188
Performance fees (including carried interest) and investment return
71
54
Total Asset Management
289
242
With-profits: PruFund
226
236
With-profits: traditional
222
263
Shareholder annuities
308
331
Other Life
(10)
(75)
Total Life
746
755
Corporate Centre
(198)
(200)
Adjusted operating profit before tax
837
797
i
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. The comparatives for Life and Corporate
Centre have been restated to reflect the revised segments and the adjustment of some advice-related costs.
Adjusted operating profit before tax arising from the Asset Management segment is further analysed in the table below:
2024
2023
For the year ended 31 December
£m
£m
Fee-based revenue
1,043
1,025
Asset Management operating expenses
(774)
(791)
Investment return
36
24
Adjusted operating profit attributable to non-controlling interests
(16)
(16)
Adjusted operating profit before tax
289
242
Adjusted operating profit/(loss) before tax arising from with-profits business is further analysed below:
2024
2023
Traditional
PruFund
Traditional
PruFund
For the year ended 31 December
£m
£m
£m
£m
CSM release
i
198
221
238
242
Expected return on excess assets
36
18
35
33
Other
(12)
(13)
(10)
(39)
With-profits
222
226
263
236
i
The CSM release for the with-profits business is included on an expected basis, calculated as the CSM at start of the period updated to reflect long-term
expected investment returns multiplied by the expected amortisation factor for the period.
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S.2 Adjusted operating profit before tax (continued)
(ii) Adjusted operating profit/(loss) before tax by segment and source (continued)
Adjusted operating profit/(loss) before tax arising from shareholder annuities is further analysed in the table below:
2024
2023
For the year ended 31 December
£m
£m
Expected return on excess assets
147
205
CSM release
113
96
Risk adjustment unwind
21
19
Asset trading and portfolio management actions
—
2
Experience variances
2
9
Other provisions and reserves
25
—
Shareholder annuities
308
331
S.3 Operating change in Contractual Service Margin (CSM)
The CSM balances split by line of business disclosed in Note 24 include the CSM attributable to policyholders arising from non-
profit annuities written in the With-Profits Fund and the CSM in respect of M&G Group Limited (MGG) future profits from the
management of PAC assets that arises on consolidation of the Group entities. The change during the year in the CSM attributable
to policyholders and the CSM from the MGG future profits from the management of PAC assets is not included in operating change
in CSM and is included in non-operating and other changes in the CSM.
The CSM arising on the underlying products based on the actual investment management charges applied to the policies and
excluding the CSM attributable to policyholders is shown in the tables below.
The amortisation factor for the CSM each year is based on the CSM in the table. Operating change in CSM and reconciliation to
total CSM is further analysed in the tables below:
With-
profits:
PruFund
With-
profits:
Traditional
Shareholder
annuities
Other Life
Total (before
policyholder
and group
adjustments)
Policyholder
and group
adjustments
Total
2024
2024
2024
2024
2024
2024
2024
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening CSM
1,721
1,342
1,221
187
4,471
1,012
5,483
Interest accreted on the CSM
143
140
37
7
327
—
327
Expected return in excess of risk-free on CSM
177
132
—
—
309
—
309
Release of CSM to adjusted operating profit
(221)
(198)
(113)
(17)
(549)
—
(549)
New business
71
—
17
12
100
—
100
Assumption changes and variances
(71)
(51)
231
(2)
107
—
107
Operating change in CSM
99
23
172
—
294
—
294
Market and other impacts
i
(32)
244
(13)
(6)
193
231
424
Release of CSM to non-operating
(17)
(21)
—
(6)
(44)
(124)
(168)
Non-operating and other changes in CSM
(49)
223
(13)
(12)
149
107
256
Closing CSM
1,771
1,588
1,380
175
4,914
1,119
6,033
i
Market and other impacts includes measurement mismatches relating to accounting for reinsurance contracts. Note, 2024 also includes £144m
reallocation from With-profits PruFund to Traditional due to a refinement of the CSM across the two sub-segments.
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344
S.3 Operating change in Contractual Service Margin (CSM) (continued)
With-
profits:
PruFund
iii
With-
profits:
Traditional
Shareholder
annuities
Other Life
Total (before
policyholder
and group
adjustments)
Policyholder
and group
adjustments
Total
2023
2023
2023
2023
2023
2023
2023
For the year ended 31 December
£m
£m
£m
£m
£m
£m
£m
Opening CSM
1,757
1,466
1,206
170
4,599
1,117
5,716
Interest accreted on the CSM
137
142
30
7
316
—
316
Expected return in excess of risk-free on CSM
202
167
—
—
369
—
369
Release of CSM to adjusted operating profit
(242)
(238)
(96)
(14)
(590)
—
(590)
New business
ii
108
—
42
12
162
—
162
Assumption changes and variances
39
(4)
60
3
98
—
98
Operating change in CSM
244
67
36
8
355
—
355
Market and other impacts
i, ii
(307)
(239)
(21)
17
(550)
5
(545)
Release of CSM to non-operating
27
48
—
(8)
67
(110)
(43)
Non-operating and other changes in CSM
(280)
(191)
(21)
9
(483)
(105)
(588)
Closing CSM
1,721
1,342
1,221
187
4,471
1,012
5,483
i
Market and other impacts includes measurement mismatches relating to accounting for reinsurance contracts.
ii
New business includes £22m in relation to the intercompany buy-in transaction that occurred in September 2023 which is eliminated on consolidation for
IFRS purposes in 2023 and appears as reconciling item in Market and other impacts in the table above. Furthermore, as noted above, the margins on
investment management fee earned by Group entities are excluded. Therefore, the numbers above for New business differ to the values for contracts
initially recognised in the period in Note 24.3 analysis by measurement component.
iii
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. Comparatives for 2023 are presented on the
new segment basis. PruFund UK and non-UK business were previously presented separately in ‘Wealth’ and ‘Life’ operating segments respectively.
S.4 Assets under management and administration (AUMA) and net client flows
(i) Net client flows
Net flows
from open business
Net flows
other
Total net
client flows
2024
2023
2024
2023
2024
2023
For the year ended 31 December
£bn
£bn
£bn
£bn
£bn
£bn
Institutional Asset Management
ii
(0.9)
(0.7)
—
—
(0.9)
(0.7)
Wholesale Asset Management
ii
—
1.5
—
—
—
1.5
Other Asset Management
—
—
—
—
—
—
Total Asset Management
(0.9)
0.8
—
—
(0.9)
0.8
With-profits: PruFund
(0.9)
1.0
—
—
(0.9)
1.0
With-profits: traditional
–
–
(4.8)
(4.2)
(4.8)
(4.2)
Shareholder annuities
(0.2)
(0.4)
–
–
(0.2)
(0.4)
Other Life
ii
0.1
0.3
(2.8)
(2.2)
(2.7)
(1.9)
Total Life
iii, iv
(1.0)
0.9
(7.6)
(6.4)
(8.6)
(5.5)
Corporate assets
—
—
—
—
—
—
Total
(1.9)
1.7
(7.6)
(6.4)
(9.5)
(4.7)
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345
S.4 Assets under management and administration (AUMA) and net client flows (continued)
(ii) Detailed AUMA and net client flows
2024
As at 1
January
Gross
inflows
Gross
outflows
Net client
flows
Market /
Other
movements
As at 31
December
For the year ended 31 December
£bn
£bn
£bn
£bn
£bn
£bn
Asset Management
154.2
30.4
(31.3)
(0.9)
6.5
159.8
Institutional Asset Management
98.2
12.7
(13.6)
(0.9)
(1.2)
96.1
Wholesale Asset Management
55.0
17.7
(17.7)
—
7.8
62.8
Other Asset Management
1.0
—
—
—
(0.1)
0.9
Life
i
188.0
10.3
(18.9)
(8.6)
5.7
185.1
With-profits: PruFund
61.2
5.6
(6.5)
(0.9)
3.7
64.0
With-profits: traditional
65.0
0.2
(5.0)
(4.8)
1.4
61.6
Shareholder annuities
15.8
0.9
(1.1)
(0.2)
(0.5)
15.1
Other Life
46.0
3.6
(6.3)
(2.7)
1.1
44.4
Corporate assets
1.3
—
—
—
(0.3)
1.0
Total
ii
343.5
40.7
(50.2)
(9.5)
11.9
345.9
2023
As at 1
January
Gross
inflows
Gross
outflows
Net client
flows
Market /
Other
movements
As at 31
December
For the year ended 31 December
£bn
£bn
£bn
£bn
£bn
£bn
Asset Management
154.2
33.1
(32.3)
0.8
(0.8)
154.2
Institutional Asset Management
99.2
14.8
(15.5)
(0.7)
(0.3)
98.2
Wholesale Asset Management
53.9
18.3
(16.8)
1.5
(0.4)
55.0
Other Asset Management
1.1
—
—
—
(0.1)
1.0
Life
i, iii
186.4
11.2
(16.7)
(5.5)
7.1
188.0
With-profits: PruFund
58.3
7.0
(6.0)
1.0
1.9
61.2
With-profits: traditional
67.5
0.3
(4.5)
(4.2)
1.7
65.0
Shareholder annuities
15.4
0.7
(1.1)
(0.4)
0.8
15.8
Other Life
45.2
3.2
(5.1)
(1.9)
2.7
46.0
Corporate assets
1.4
—
—
—
(0.1)
1.3
Total
ii
342.0
44.3
(49.0)
(4.7)
6.2
343.5
i
£156.1bn of AUMA of Life is managed internally by the Group’s Asset Management business (31 December 2023: £160.3bn), includes the net transfers to
Asset Management of £3.6bn at 31 December 2024.
ii
£18.0bn of total AUMA relates to assets under advice (31 December 2023: £14.1bn).
iii
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. Comparatives for 2023 are presented on the
new segment basis. PruFund includes both UK and non-UK.
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346
S.4 Assets under management and administration (AUMA) and net client flows (continued)
(iii) AUMA by asset class
2024
On-balance sheet AUMA
i
External AUMA
Total
For the year ended 31 December
With-
profits
Unit-
linked
Shareholder
backed
annuities &
other long-
term business
Corporate
assets
Total on-
balance
sheet
Other
Life
ii
Wholesale
Institutional
Total
external
Total
AUMA
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Investment property
8.7
—
0.6
—
9.3
—
0.1
15.0
15.1
24.4
Reinsurance contract
assets
—
0.1
1.2
—
1.3
—
—
—
—
1.3
Equity securities and
pooled investment funds
77.8
11.4
0.1
0.1
89.4
—
34.9
13.2
48.1
137.5
Loans
0.5
—
1.2
—
1.7
—
—
8.4
8.4
10.1
Debt securities
31.9
2.5
12.1
0.8
47.3
—
26.4
55.4
81.8
129.1
of which Corporate
19.0
1.5
8.4
0.8
29.7
—
14.2
34.6
48.8
78.5
of which Government
12.1
1.0
3.2
—
16.3
—
12.9
9.3
22.2
38.5
of which ABS
0.8
—
0.5
—
1.3
—
(0.7)
11.5
10.8
12.1
Derivatives
iii
(0.7)
—
(1.4)
(0.1)
(2.2)
—
(0.1)
(0.6)
(0.7)
(2.9)
Deposits
iv
8.2
1.2
1.5
—
10.9
—
—
—
—
10.9
Cash and cash
equivalents
0.8
0.1
0.5
0.8
2.2
—
1.5
4.7
6.2
8.4
Other
1.1
0.1
0.2
0.3
1.7
—
—
—
—
1.7
Other AUMA
25.4
Total
v
128.3
15.4
16.0
1.9
161.6
—
62.8
96.1
158.9
345.9
2023
On-balance sheet AUMA
i
External AUMA
Total
For the year ended 31 December
With-
profits
Unit-
linked
Shareholder
backed
annuities &
other long-
term business
Corporate
assets
Total on-
balance
sheet
Other Life
Wholesale
Institutional
Total
external
Total
AUMA
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Investment property
8.8
—
0.6
—
9.4
—
0.1
14.4
14.5
23.9
Reinsurance contract
assets
—
0.1
1.2
—
1.3
—
—
—
—
1.3
Equity securities and
pooled investment funds
78.1
9.9
—
0.2
88.2
4.4
27.7
14.4
46.5
134.7
Loans
0.6
—
1.3
—
1.9
—
—
8.9
8.9
10.8
Debt Securities
31.8
2.0
12.7
1.0
47.5
1.2
25.8
56.7
83.7
131.2
of which: Corporate
20.5
1.3
8.7
1.0
31.5
1.2
16.6
37.5
55.3
86.8
of which: Government
10.3
0.7
3.4
—
14.4
—
10.7
8.7
19.4
33.8
of which: ABS
1.0
—
0.6
—
1.6
—
(1.5)
10.5
9.0
10.6
Derivatives
iii
0.1
—
(1.3)
(0.1)
(1.3)
—
0.3
(0.4)
(0.1)
(1.4)
Deposits
iv
7.8
1.2
1.5
—
10.5
—
—
—
—
10.5
Cash and cash
equivalents
0.9
0.2
0.6
0.8
2.5
0.1
1.1
4.2
5.4
7.9
Other
1.0
0.1
0.3
0.4
1.8
—
—
—
—
1.8
Other AUMA
22.8
Total
v
129.1
13.5
16.9
2.3
161.8
5.7
55.0
98.2
158.9
343.5
i
On-balance sheet AUMA does not include consolidated funds included in the segmented statement of financial position by business type in Note 32.1.
ii
Further to the revision of the Group’s segments, as disclosed in Note 3, balances previously included in Other Life are now in External Wholesale AUMA.
iii
Derivative assets are shown net of derivative liabilities.
iv
Deposits are shown net of unsettled reverse repos.
v
Included in total AUMA of £345.9bn (2023: £343.5bn) is £18.0bn (2023: £14.1bn) of assets under advice.
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347
S.4 Assets under management and administration (AUMA) and net client flows (continued)
(iv) AUMA by geography
2024
2023
For the year ended 31 December
£bn
£bn
UK
i
250.2
254.2
Rest of Europe
i
67.9
63.2
Asia-Pacific
14.1
12.5
Middle East and Africa
11.0
11.4
Americas
2.7
2.2
Total AUMA
ii
345.9
343.5
i
Rest of Europe at 31 December 2023 includes £6.4bn of non-UK PruFund business previously presented in UK and now restated.
ii
£18.0bn of total AUMA relates to assets under advice (31 December 2023: £14.1bn).
S.5 Solvency II capital position
Solvency II overview
The Group is supervised as an insurance group by the Prudential Regulation Authority (PRA). Individual insurance undertakings
within the Group are also subject to the supervision of the PRA (or other supervisory authorities) on a solo basis under the Solvency
II regime.
The Solvency II surplus represents the aggregated capital (own funds) held by the Group less the Solvency Capital Requirement
(SCR). Own funds is the Solvency II measure of capital available to meet losses, and is based on the assets less liabilities of the
Group, subject to certain restrictions and adjustments. Available own funds reflect all capital available to the Group and eligible
own funds are net of restrictions applied in line with the thresholds set by the regulator that limit the amount of each tier of capital
that can be used to demonstrate solvency. The SCR is calculated using the Group’s Internal Model, which calculates the SCR as the
99.5th percentile (or 1-in-200) worst outcome over the coming year, out of 100,000 equally likely scenarios, allowing for the
dependency between the risks the business is exposed to.
Estimated reconciliation of IFRS shareholders’ equity to Group Solvency II own funds
2024
2023
As at 31 December
£bn
£bn
IFRS shareholders’ equity
3.3
4.1
Deduct goodwill and intangible assets
(1.4)
(1.5)
Net impact of valuing policyholder liabilities and reinsurance assets on Solvency II basis
12.4
12.2
Impact of introducing Solvency II risk margin (net of transitional measures)
(0.3)
(0.3)
Impact of measuring assets and liabilities in line with Solvency II principles
1.0
1.0
Recognise own shares
—
0.1
Other
(0.1)
0.1
Solvency II excess of assets over liabilities
14.9
15.7
Subordinated debt capital
2.5
3.1
Ring-fenced fund restrictions
(5.8)
(7.2)
Deduct own shares
—
(0.1)
Eligible own funds restriction
—
(0.2)
Solvency II eligible own funds
11.6
11.3
The key items in the reconciliation are explained below:
– Goodwill and intangible assets: these assets are not recognised under Solvency II as they are not readily available to meet
emerging losses.
– Policyholder liability and reinsurance asset valuation differences: there are significant differences in the valuation of technical
provisions between IFRS 17 and Solvency II. One of the key drivers of the increase in equity moving from IFRS 17 to Solvency II is
the requirement to hold a CSM and risk adjustment under IFRS 17; these are removed under Solvency II. In addition, IFRS 17
captures the shareholder share of surplus assets on the With-Profits Fund in shareholder equity whereas 100% of with-profits
surplus assets are captured in Solvency II excess of assets over liabilities, however this is subsequently restricted by the ring-
fenced fund restrictions. This increase in equity is partially offset by differences in the liability discount rate; the IFRS 17 discount
rate includes an illiquidity premium whereas Solvency II uses a risk-free rate for with-profits business and applies a matching
adjustment for annuity business. This results in an increase in with-profits and shareholder-backed annuity liabilities on moving
from IFRS 17 to Solvency II.
– Solvency II risk margin (net of transitional measures): the risk margin is a significant component of technical provisions required
to be held under Solvency II. These additional requirements are partially mitigated by transitional measures which allow the
impact to be gradually introduced over a period of 16 years from the introduction of Solvency II on 1 January 2016.
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S.5 Solvency II capital position (continued)
Estimated reconciliation of IFRS shareholders’ equity to Group Solvency II own funds (continued)
– Subordinated debt capital: subordinated debt is treated as a liability in the IFRS financial statements and in determining the
excess of assets over liabilities in the Solvency II balance sheet. However, for Solvency II own funds, the debt can be treated as
capital.
– Ring-fenced fund restrictions: any excess of the own funds over the solvency capital requirement from the With-Profits Fund is
restricted as these amounts are not available to meet losses elsewhere in the Group.
– There are limits, prescribed by the regulator, on the amount of different types of own funds that can be used to demonstrate
solvency. While the capital remains available to the Group, where the sum of capital classed as Tier 2 and Tier 3 exceeds 50% of
the regulatory Group Solvency Capital Requirement, own funds must be restricted by this amount to determine eligible own
funds. At 31 December 2023, the sum of capital classed as Tier 2 and Tier 3 exceeded 50% of the regulatory Group Solvency
Capital requirements by £216m. At 31 December 2024 the sum of capital classed as Tier 2 and Tier 3 has not breached the limit
and there is no eligible own funds restriction.
Composition of own funds
The Group’s total estimated own funds are analysed by Tier as follows:
2024
2023
As at 31 December
£bn
£bn
Tier 1 (unrestricted)
8.6
7.9
Tier 2
2.5
3.1
Tier 3
0.5
0.5
Eligible own funds restriction
—
(0.2)
Total eligible own funds
11.6
11.3
The Group’s Tier 2 capital consists of subordinated debt instruments. The terms of these instruments allow them to be treated as
capital for the purposes of Solvency II. The instruments were originally issued by Prudential plc, and subsequently substituted to
the Parent Company, as permitted under the terms and conditions of each applicable instrument, prior to demerger. The details of
the Group’s subordinated liabilities are shown in Note 26. The Solvency II value of the debt differs to the IFRS carrying value due to
a different basis of measurement on the respective balance sheets.
The Group's Tier 3 capital of £0.5bn (2023: £0.5bn) relates to deferred tax asset balances.
As stated above, the eligible own funds restriction at 31 December 2023 reflects the fact that the sum of Tier 2 and Tier 3 capital
exceeds the threshold set by the regulator for the purpose of demonstrating solvency, although the capital above this threshold
remains available to the Group. At 31 December 2024 the sum of capital classed as Tier 2 and Tier 3 has not breached the limit and
there is no eligible own funds restriction.
Estimated shareholder view of the Solvency II capital position
The Group focuses on a shareholder view of the Solvency II capital position, which is considered to provide a more relevant
reflection of the capital strength of the Group.
The estimated shareholder Solvency II capital position for the Group is shown below:
2024
2023
As at 31 December
£bn
£bn
Shareholder Solvency II eligible own funds
8.5
8.9
Shareholder Solvency II SCR
i
(3.8)
(4.4)
Solvency II surplus
4.7
4.5
Shareholder Solvency II coverage ratio
ii
223%
203%
i
Included in the SCR at 31 December 2024 is an amount of £175m (2023: £175m) held in respect of any potential future legislative change which would
impact our residential ground rent portfolio.
ii
Shareholder Solvency II coverage ratio has been calculated using unrounded figures.
The Group’s shareholder Solvency II capital position excludes the contribution to own funds and SCR from the ring-fenced With-
Profits Fund. Further information on the ring-fenced With-Profits Fund’s capital position is provided in the ‘Estimated With-Profits
Fund view of the Solvency II capital position’ section below. In accordance with the Solvency II requirements, these results include:
– A Solvency Capital Requirement which has been calculated using the Group’s Internal Model.
– Transitional measures, which are presented assuming a recalculation as at the valuation date, using management’s estimate of
the impact of operating and market conditions.
– A matching adjustment for non-profit annuities, based on approval from the PRA.
– M&G Group Limited and other undertakings carrying out financial activities consolidated under local sectoral or notional sectoral
capital requirements.
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S.5 Solvency II capital position (continued)
Estimated shareholder view of the Solvency II capital position (continued)
Breakdown of the shareholder Solvency II SCR by risk type
The shareholder undiversified capital requirement is presented by risk type below.
2024
2023
i
As at December
£bn
£bn
Equity
1.6
1.8
Property
0.7
0.8
Interest rate
0.3
0.4
Credit
1.3
1.5
Currency
1.0
1.1
Longevity
1.0
1.2
Lapse
0.5
0.5
Operational and expense
2.1
2.2
Sectoral
ii
0.5
0.6
Total undiversified
9.0
10.1
Diversification, deferred tax and other
(5.2)
(5.7)
Shareholder SCR
3.8
4.4
i
Diversification, deferred tax and other includes adjustments to the SCR for expected changes in own funds over the next year; the inclusion of this
component is a presentational change at 31 December 2024, and the results at 31 December 2023 have been restated on a consistent basis.
ii
Includes entities included within the Group’s Solvency II capital position on a sectoral or notional sectoral basis, the most material of which is M&G Group
Limited.
Sensitivity analysis of the Group’s Solvency II surplus and shareholder Solvency II coverage ratio
The estimated sensitivity of the Group’s shareholder Solvency II coverage ratio to significant changes in market conditions are
shown below. All sensitivities are presented after an assumed recalculation of transitional measures on technical provisions and
recalculation of the eligible own funds restriction. The sensitivity results demonstrate the effect of an instantaneous change in a
key assumption while other assumptions remain unchanged. In reality, changes may occur over a period of time and there may be a
correlation between the risks.
2024
2023
For the year ended 31 December
Surplus
£bn
Shareholder
coverage ratio
%
Surplus
£bn
Shareholder
coverage ratio
%
Base (as reported)
4.7
223%
4.5
203%
20% instantaneous fall in equity markets
4.1
212%
3.9
189%
20% instantaneous fall in property markets
4.3
214%
4.1
193%
50 bps reduction in interest rates
4.7
219%
4.4
196%
100 bps widening in credit spreads
4.6
220%
4.3
200%
20% credit asset downgrade
i
4.6
219%
4.3
198%
i
Average impact of one full letter downgrade across 20% of assets exposed to credit risk.
Estimated With-Profits Fund view of the Solvency II capital position
The With-Profits Fund view of the Solvency II capital position represents the standalone capital strength of the Group’s ring-fenced
With-Profits Fund. This view of Solvency II capital takes into account the assets, liabilities, and risk exposures within the ring-
fenced With-Profits Fund, which includes the With-Profits Sub-Fund (WPSF) and Defined Charge Participating Sub-Fund (DCPSF).
The estimated Solvency II capital position for the Group under the With-Profits Fund view is shown below:
2024
2023
As at 31 December
£bn
£bn
With-Profits Fund Solvency II own funds
8.9
9.6
With-Profits Fund Solvency II SCR
(3.1)
(2.4)
With-Profits Fund Solvency II surplus
5.8
7.2
With-Profits Fund Solvency II coverage ratio
i
284%
403%
i
With-Profits Fund Solvency II coverage ratio has been calculated using unrounded figures.
The fall in ratio reflects a distribution of excess surplus from the With-Profits inherited estate and an increase in the SCR. A
component of the increase in SCR arises from a full rebuild of the prospective with-profits modelling.
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S.5 Solvency II capital position (continued)
Estimated regulatory view of the Solvency II capital position
The estimated Solvency II capital position for the Group under the regulatory view is shown below:
2024
2023
As at 31 December
£bn
£bn
Solvency II eligible own funds
11.6
11.3
Solvency II SCR
(6.9)
(6.8)
Solvency II surplus
4.7
4.5
Solvency II coverage ratio
i
168%
167%
i
Solvency II coverage ratio has been calculated using unrounded figures.
The results include transitional measures, which are presented assuming a recalculation as at the valuation date, using
management’s estimate of the impact of operating and market conditions. As at 31 December 2024, the recalculation has been
performed and the positions are aligned, reflecting changes to the UK’ prudential regime allowing recalculation of the transitional
measures at each reporting date. As at 31 December 2023, the recalculation has been approved for the reporting date and the
positions were aligned.
S.6 Capital generation
The level of surplus capital is an important financial consideration for the Group. Capital generation measures the change in surplus
capital during the reporting period, and is therefore considered a key measure for the Group. It is integral to the running and
monitoring of the business, capital allocation and investment decisions, and ultimately the Group’s dividend policy.
The overall change in Solvency II surplus capital over the period is analysed as follows:
Total capital generation is the total change in Solvency II surplus capital before dividends and capital movements, and capital
generated from discontinued operations. As set out in the overview of the Solvency II capital position, as at 31 December 2024
there is no restriction to eligible own funds (2023: £216m restriction) as the sum of Tier 2 and Tier 3 capital does not exceed the
threshold set by the regulator.
Operating capital generation is total capital generation before tax, adjusted to exclude market movements relative to those
expected under long-term assumptions and to remove other non-operating items, including shareholder restructuring and other
costs as defined under adjusted operating profit before tax. It has two components:
i Underlying capital generation, which includes: the underlying expected surplus capital from the in-force life insurance business;
the change in surplus capital as a result of writing new life insurance business; the adjusted operating profit before tax and
associated regulatory capital movements from Asset Management; and other items, including head office expenses and debt
interest costs.
ii Other operating capital generation, which includes non-market related experience variances, assumption changes, modelling
changes and other movements.
Dividends and capital movements primarily represent external dividends paid to shareholders, the impact of any share buy-back
programme and changes to the capital structure of the Group, such as issuing or repaying debt instruments. Also included within
capital movements are the Solvency II impact of the Group’s share-based payment awards over and above the amount expensed in
respect of those awards, and the surplus utilised or generated from transactions relating to the acquisition of business as defined
by IFRS.
The expected surplus capital from the in-force life insurance business is calculated on the assumption of real-world investment
returns, which are determined by reference to the risk-free rate plus a risk premium based on the mix of assets held for the
relevant business. For with-profits business, the assumed average return was 6.8% for the year ended 31 December 2024
(2023: 6.0%). For annuity business, the assumed average return on assets backing capital was 5.6% for the year ended
31 December 2024 (2023: 6.6%).
The Group’s capital generation results in respect of the years ended 31 December 2024 and 31 December 2023 are shown below
alongside a reconciliation of the total movement in the Group’s Solvency II surplus. The reconciliation is presented showing the
impact on the shareholder Solvency II own funds and SCR, which excludes the contribution to own funds and SCR from the
Group’s ring-fenced With-Profits Fund. The shareholder Solvency II capital position, and how this reconciles to the regulatory
capital position, is described in detail in the previous section of this supplementary information.
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S.6 Capital generation (continued)
For the year ended 31 December
Asset Management
Life
Corporate Centre
Total
2024
2023
2024
2023
i
2024
2023
i
2024
2023
£m
£m
£m
£m
£m
£m
£m
£m
Underlying capital generation
261
246
616
726
(233)
(220)
644
752
Other operating capital generation
51
50
233
229
5
(35)
289
244
Operating capital generation
312
296
849
955
(228)
(255)
933
996
Market movements
(59)
(507)
Restructuring and other
(135)
49
Tax
153
36
Eligible own funds restriction reversal/
(restriction)
216
(216)
Total capital generation
1,108
358
2024
2023
Own funds
ii
SCR
ii
Surplus
Own funds
ii
SCR
ii
Surplus
For the year ended 31 December
£m
£m
£m
£m
£m
£m
Underlying capital generation
Asset Management
Asset Management
254
7
261
215
31
246
Asset Management
underlying capital
generation
254
7
261
215
31
246
Life
i
With-profits: PruFund
292
(53)
239
337
(97)
240
In-force
217
47
264
247
14
261
New business
75
(100)
(25)
90
(111)
(21)
With-profits: traditional
158
32
190
165
17
182
Shareholder annuities
215
(18)
197
349
18
367
Other
(8)
(2)
(10)
(54)
(9)
(63)
Life underlying capital
generation
657
(41)
616
797
(71)
726
Corporate Centre
i
Interest & head office cost
(235)
2
(233)
(226)
6
(220)
Underlying capital generation
676
(32)
644
786
(34)
752
Other operating capital generation
Asset Management
21
30
51
15
35
50
Life
12
221
233
(23)
252
229
Corporate Centre
(7)
12
5
(17)
(18)
(35)
Operating capital generation
702
231
933
761
235
996
Market movements
(281)
222
(59)
(417)
(90)
(507)
Restructuring and other
(160)
25
(135)
16
33
49
Tax
44
109
153
(46)
82
36
Eligible own funds restriction
216
—
216
(216)
—
(216)
Total capital generation
521
587
1,108
98
260
358
Dividends and capital movements
(924)
—
(924)
(440)
(1)
(441)
Total (decrease)/increase in Solvency II surplus
(403)
587
184
(342)
259
(83)
i
Previous operating segments ‘Life’ and ‘Wealth’ have been replaced with one new operating segment, ‘Life’. The comparatives for Life and Corporate
Centre have been restated to reflect the revised segments and the adjustment of some advice-related costs.
ii
Own funds and SCR movements shown as per the shareholder Solvency II capital position, and do not include the own funds and SCR in respect of the
ring-fenced With-Profits Fund.
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352
S.7 Financial ratios
Included in this section are details of how some of the financial ratios used to help analyse the performance of the Asset
Management business are calculated.
(i) Cost/income ratio
Cost/income ratio is a measure of cost efficiency which analyses costs as a percentage of revenue.
2024
2023
For the year ended 31 December
£m
£m
Total Asset Management operating expenses
774
791
Adjustment for revaluations
i
(4)
(5)
Total Asset Management adjusted costs
770
786
Total Asset Management fee-based revenue
1,043
1,025
Less: Performance fees and carried interest
(35)
(30)
Total Asset Management underlying fee-based revenues
1,008
995
Cost/income ratio
76%
79%
i
Reflects the revaluation of provisions relating to performance based awards that are linked to underlying fund performance. M&G Group hold units in the
underlying funds to hedge the exposure on these awards.
(ii) Average fee margin
This represents the average fee revenue yield on fee business and demonstrates the margin being earned on the assets we
manage or administer.
2024
2023
Average
AUMA
i
Revenue
Revenue
margin
ii
Average
AUMA
i
Revenue
Revenue
margin
ii
For the year ended 31 December
£bn
£m
bps
£bn
£m
bps
Wholesale Asset Management
57
316
56
54
310
58
Institutional Asset Management
97
368
38
96
376
39
Internal
160
324
20
155
309
20
Total Asset Management
314
1,008
32
305
995
33
i
Average AUMA represents the average total market value of all financial assets managed and administered on behalf of clients during the financial period.
Average AUMA is calculated using a 13-point average of monthly closing AUMA for full-year periods.
ii
Fee margin is calculated by annualising underlying fee-based revenues earned, which excludes performance fees, in the period divided by average AUMA
for the period. Fee margin relates to the total margin for internal and external revenue.
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353
S.8 Credit risk
The Group’s exposure to credit risk primarily arises from the annuity portfolio, which hold substantial volumes of public and private
fixed income investments on which a certain level of defaults and downgrades are expected.
While the with-profits and unit-linked funds have large holdings of assets subject to credit risk, the shareholder results of the
Group are not directly exposed to credit defaults on assets held in these components of business. However, the shareholder is
indirectly exposed to credit risk from these components of business in relation to the future value of shareholder transfers from
with-profits business and charges levied on unit-linked and asset management business. The direct exposure of the Group’s
shareholders’ equity to credit default risk in the Other component is small in the context of the Group.
Credit risk is managed through a robust credit and counterparty framework which includes: policies, standards, appetite
statements, limits and triggers (including relevant governance and controls); investment constraints and limits on the asset
portfolios, in relation to credit rating, seniority, sector and issuer, and counterparties in particular for derivatives, reinsurance and
cash; and a robust credit rating process.
The credit ratings, information or data contained in this report which are attributed and specifically provided by Standard & Poor’s,
Moody’s and Fitch and their respective affiliates and suppliers (Content Providers) is referred to here as the Content. Reproduction
of any Content in any form is prohibited except with the prior written permission of the relevant party. The Content Providers do
not guarantee the accuracy, adequacy, completeness, timeliness or availability of any Content and are not responsible for any
errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such Content. The
Content Providers expressly disclaim liability for any damages, costs, expenses, legal fees, or losses (including lost income or lost
profit and opportunity costs) in connection with any use of the Content. A reference to a particular investment or security, a rating
or any observation concerning an investment that is part of the Content is not a recommendation to buy, sell or hold any such
investment or security, nor does it address the suitability of an investment or security and should not be relied on as investment
advice.
Exposure of debt securities by sector
The exposure of annuities and other long-term business to debt securities is analysed below by sector:
2024
2023
As at 31 December
£m
£m
Government
3,311
3,470
Real Estate
2,805
2,906
of which residential
1,634
1,735
of which commercial
1,171
1,171
Financial
2,627
2,852
Utilities
1,551
1,772
Industrial
424
370
Consumer
414
387
Communications
312
315
Other
735
685
Total
12,179
12,757
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Other
information
356 Supplementary climate metric and modelling information
360 Shareholder information
361
Glossary
365 Contact us
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355
Scenario modelling results (public assets)
As part of our forward-looking analysis we use Aladdin Climate
to model our public asset portfolios (equities, corporate debt
and sovereign debt) against three scenarios to help us to
assess the relative financial impacts of climate change across
different global decarbonisation outcomes. This analysis is
based on a bottom-up approach, and provides estimates of the
financial impact on all issuers modelled, including on asset
valuations. This year we have added exposure data, to show
the proportion of modelled assets invested in each sector. We
have also split out corporate bonds with known use of
proceeds (UoP), where debt is tied to specific sustainability
objectives. As last year, the orderly and disorderly scenarios
show transition impacts only, and hot house physical effects.
Unlike our top-down ORSA scenario modelling, which is about
testing the resilience of our balance sheet, this exercise is more
focused on interrogating our portfolios, to understand potential
risk exposures and outliers, including so-called asset stranding
where issuers could experience a significant deterioration in
their financial strength and prospects. There are a few high-
level observations from our modelling for 2024:
– Equity valuations are affected the most across all three
scenarios, with the corporate debt transition-related impacts
concentrated in a few sectors. The valuation effects on known
use of proceeds are more muted, reflecting smaller transition
and physical risk exposure of this group of assets.
– Looking at the sectoral breakdown it is clear that the orderly and
disorderly scenario impact is most pronounced in the energy
sector (excluding listed corporate debt with known use of
proceeds), with downside risk in other resource-intensive
sectors such as materials and industrials – where significant
change is required align with the transition. Our exposure to
energy and materials is relatively small, but we have more
sizeable holdings in industrials. We continue to focus our
climate-related stewardship on high-emitting issuers, notably
through our asset manager Hot 100 engagement programme.
Consumer discretionary issuers are also impacted more severely
by transition effects, and we have fairly large exposure to this
sector.
– The results continue to indicate that the negative impacts on
asset values will be felt more evenly across all sectors in the
hot house scenario given that the model only considers
physical risk impacts (with weak global efforts to transition).
We acknowledge that the model very likely understates the
risks in this scenario, including potential climate system
tipping points and second-order impacts on economies.
We are very wary of ‘false precision’, given significant
complexity and uncertainties involved in modelling climate
impacts, so these results need to be viewed alongside other
qualitative and quantitative information. Further details on
limitations of the modelling can be found on page 359.
Climate adjusted value impact by sector (current to 2050)
i
Sector
Exposure
ii
Orderly
Disorderly
Hot house
Real Estate
£7.8bn
(5.2%)
% change
in value as
a result of
scenario
conditions
Consumer Discretionary
£14.1bn
(9.3%)
Consumer Staples
£8.6bn
(5.7%)
> 0%
Health Care
£8.1bn
(5.3%)
0% -2%
Financials
£51.9bn
(34.1%)
-2% -5%
Communication Services
£9.6bn
(6.3%)
-5% -15%
Materials
£7.6bn
(5.0%)
-15%
-35%
Utilities
£11.1bn
(7.3%)
< -35%
Information Technology
£9.4bn
(6.2%)
Industrials
£16.0bn
(10.6%)
Energy
£6.1bn
(4.0%)
Sovereign debt
£40.6bn
N/A
N/A
N/A
N/A
N/A
N/A
Debt
UoP
iii
Equity
Debt
UoP
iii
Equity
Debt
UoP
iii
Equity
i
The orderly and disorderly scenarios presented in this heatmap reflect transition risk impacts only with a coverage of 95%, and the hot house
scenario reflects physical risk impacts only having a coverage of 95%. Further details on methodology and limitations can be found on page 359.
ii
Exposure refers to the proportion of modelled listed equity and listed corporate bonds with known and unknown use of proceeds AUMA (£151.9bn)
invested in each sector. Issuers with no sector designation (£1.6bn, 1% of AUMA) are not included in the heatmap.
iii
Known use of proceeds (UoP) refers to green, sustainability and social bonds, where the debt funding is tied to specific sustainability-related objectives.
For sovereign debt the results do not differentiate between known and unknown use of proceeds.
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356
Scenario modelling results (Private assets)
We continue to use the global insurance broker and risk adviser Marsh to assess our real estate and infrastructure exposure to
physical climate risk. Marsh uses XDI which quantifies the cost of extreme weather and climate change impacts to physical assets,
taking into account asset-specific information – how different types of assets in a specific location will perform in different physical
conditions. The scenarios used in this model are based on Representative Concentration Pathway (RCP) 2.6 and 8.5, as produced
by the IPCC. These broadly align to the public asset orderly and hot house scenarios. Importantly, the modelling does not consider
transition and second-order impacts which could affect asset values. Further details on limitations can be found on page 359.
Real estate
For our directly owned real estate equity portfolio, the physical risk exposure has increased slightly from last year’s levels, although
it is still a relatively small share of assets that are at high risk from climate-related hazards. Under each scenario, assets were rated
low, medium or high risk (high risk meaning at least 1% of an asset’s value being at risk of damage per year).
The key findings of our real estate analysis are:
– under an orderly scenario (RCP 2.6) between 7.0% (2023: 5.9%) and 10.0% (2023: 8.8%) of assets will be rated high risk by 2050
and 2100 respectively; and
– under a hot house scenario (RCP 8.5) these percentages increase to 7.8% (2023: 6.5%) and 12.4% (2023: 11.3%).
For real estate assets, the physical risk is driven by exposure to hydro-meteorological hazards such as floods (eg as a result of their
proximity to the coast). The outputs presented here are limited to the aggregate risk level per scenario, but in our analysis we also
look at reinstatement value, which refers to the estimated cost of rebuilding an asset after complete destruction.
Infracapital
Model results were analysed for asset locations that were identified as medium or high risk. Compared with last year the results
have fallen across the two scenarios, partly due to the disposal of assets that were categorised as high risk. The key findings from
our Infracapital assessment are:
– under an orderly scenario (RCP 2.6) between 6.0% (2023: 8.3%) and 8.1% (2023: 10.3%) of assets will be rated high risk by 2050
and 2100 respectively; and
– under a hot house scenario (RCP 8.5) these percentages increase to 6.4% (2023: 8.6%) and 9.9% (2023: 11.6%).
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357
Metric definitions
Financed Carbon Emissions (FCE) represent the absolute
greenhouse gas emissions associated with a portfolio of
investments where there is available reported data or
estimates. Financed emissions can be influenced by factors
such as market movements, coverage and portfolio
transactions, which are unrelated to real-world emissions.
Carbon footprint refers to FCE normalised by the market value
of a portfolio (GHG emissions per million pounds of
investment). This indicator is useful for comparative purposes,
but similar to FCE is sensitive to financial factors that do not
relate to decarbonisation, including changes in market value.
Carbon footprint is used to monitor progress against our net
zero interim targets.
Weighted Average Carbon Intensity (WACI) provides a single
metric summing the individual emissions intensities of issuers
in a portfolio based on their weightings, indicating our portfolio
exposure to carbon-intensive issuers.
For both carbon footprint and WACI the current portfolio value
is based on market value and is limited to assets for which all
data necessary for the calculation of financed carbon emissions
is available. For private assets, the emissions-related metrics
reported are FCE and carbon footprint only.
We use data sourced from third-party data providers (eg MSCI
and Bloomberg) to calculate the emissions metrics. While we
perform high-level checks on the data received, we are reliant
on the accuracy of the source data received from these third-
party vendors.
Details on the calculation methodology, data sources and
limitations of each metric produced are available in our
Environmental Metrics Basis of Reporting 2024 available on our
website.
High-level methodology
We have licensed two different climate models from third-party
providers to undertake scenario analysis at the asset/issuer
level: Aladdin Climate for financial assets (the ‘equities and
bonds model’ covering public listed equities, corporate and
sovereign public debt) and Marsh for assessing the private
portfolio’s real estate and infrastructure exposure to physical
climate risk. Physical climate risk of the private portfolio is
modelled by Marsh using XDI, which quantifies the cost of
extreme weather and climate change impacts to physical
assets, taking into account asset-specific information – how
different types of assets in a specific location will perform in
different physical conditions.
Both models are leveraging the extensive expertise and
experience from third-party providers with strong capabilities
in climate scenario modelling, and were selected following
extensive proof-of-concept exercises. However, climate
change scenario modelling is an inherently complex area, so
the results presented on pages 80-81 and 356-357 need to be
interpreted with assumptions, judgements and limitations in
mind.
These include the nature of scenario modelling itself, data
limitations and specific model limitations from our modelling
counterparties.
The models provide outputs based on the following scenarios:
– An orderly scenario, which is aligned with Representative
Concentration Pathway (RCP) 2.6 and predicts a temperature
rise below 2°C by the end of the century, aligned with the
Paris Agreement. Important context for this scenario is that
the world currently remains significantly off target in
restricting the temperature rise to below 2°C, yet the
industry often refers to this as a ‘best case’ and it provides a
valuable reference point against other scenarios.
– A disorderly scenario, which is aligned with RCP 2.6 and
predicts a temperature rise lower than 2°C by the end of
century. However, climate action to achieve this is not taken
until 2030, which delays transition impacts and makes them
more drastic. This scenario is limited in that it assumes
coordinated policy action at a global level by 2030. This
scenario is useful to explore disruptive transition risk
dynamics, and is only applicable to the equities and bonds
model.
– A hot house scenario, which is aligned with RCP 8.5 and
predicts an average temperature change above 3°C by the
end of the century, assuming no global response to climate
change beyond what has already been committed to. This
scenario is widely used in industry to represent a ‘worst-
case’ outcome and provides a valuable comparison with the
RCP 2.6 scenario as a high-risk future.
Key assumptions: transition risk
As countries around the world increase energy demand and
transition to greener energy sources, a key assumption is the
energy requirements and mix in each region under each of the
three scenarios. Projections include both energy reduction and
change in the energy mix, and show the high-level requirement
of a complete phase-out of coal in the transition assumptions,
as well as significant reductions in gas, replaced primarily by
renewables such as solar, wind and hydro energy.
These impacts – notably emissions trajectories, energy
demand and supply mix, carbon prices and electrification
assumptions – drive major model results.
Key assumptions: physical risk
For the equities and debt modelling, macro-level assumptions
about how physical risks will impact GDP pathways are applied
across all sectors, essentially allowing for implicit estimation of
second-order impacts (eg supply chain impact). By contrast, for
the real estate and infrastructure model, physical risk data from
Marsh, using XDI, is used to calculate direct impacts at specific
location, meaning that outputs of the model represent the
projected impact due to direct physical damage to each asset,
and do not take into account second-order financial impacts
(eg business interruption and rising insurance premiums).
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Data limitations of scenario analysis
There are a number of limitations impacting our scenario
analysis, reflecting the current industry-wide challenges of
climate modelling.
The scenarios adopted do not account for non-linear change
and the possible crossing of climate system tipping points. As a
result, there are financial impacts, including at a regional level,
that are not fully captured, leading to a likely underestimation of
risk.
An important aspect is the input data, since for most assets
modelled we have used company-specific data sourced from
third parties such as Aladdin, Evora or Bloomberg. Many
publicly-listed companies are measuring and reporting their
emissions, which is a required data point for the calculation of
climate-related metrics. However, among smaller and privately
owned companies, this data is not commonly reported.
Another area of data limitation relates to lack of high-quality,
comprehensive and reliable data upon which the model
assumptions are based. Models are developed using proxies
where data gaps are present, to ensure we obtain the widest
coverage possible.
Another aspect of data limitations relates to the lack of
historical data points to calibrate and validate the model
outputs. In particular, the lack of historical data on the
relationship between climate risks and financial outcomes
makes it difficult to interpret modelled outcomes far into the
scenario horizon with confidence.
Despite these limitations, scenario analysis provides us with
useful information that can inform investment decision-making.
Limitations of the public assets climate
change model
At the counterparty and portfolio level, the model assumes no
change to the composition of investment portfolios. While such
assumptions are necessary for model feasibility, they do impact
on the reliability of the results. One of the other limitations of
the equities and debt model is the timeline. The scenario
analysis provides outputs up to 30 years in the future, and while
this helps to provide an estimate of the adjustment in valuation
by 2050, there are aspects of the scenario interplay beyond
2050 that are not explored. Importantly, the current version of
the equities and bonds model provides separate assessments
of physical and transition risks, which reduces our ability to
assess the interdependencies across those climate risk
transmission mechanisms.
This transition module in particular only takes into account
Scope 1 & 2 GHG emissions. There are some industries, such as
automotive, that are known to be significant climate
contributors owing to high Scope 3 emissions, yet these
impacts are not explicitly explored. Measurement and reporting
of Scope 3 emissions is expected to improve and will be
incorporated into the analysis in future as scenario analysis
matures.
When assessing physical risk, the geographic distribution of a
company’s financial activity and dependencies is crucial. In the
absence of such information, the model follows a top-down
approach in determining climate shocks at sectoral level
through macroeconomic pathways.
As a result of these limitations, the model results need to be
interpreted taking the following caveats into consideration:
– Being a static asset portfolio, we have not modelled likely
investment or asset allocation actions to mitigate against
climate-related impacts. For example, in a disorderly
scenario we would likely have to carry out significant
reallocation across both asset classes and geographies to
align with rapidly changing policies.
– We recognise the transmission pathway interdependencies
across physical and transition risks, so the model results
need to be interpreted taking this limitation into
consideration.
Limitations of the private assets climate
change model
The real estate and infrastructure model uses climate peril data
to model the direct impact of physical climate impacts globally.
In some geographies there is limited data, and the model uses a
range of underlying source data at various resolutions to
provide the necessary coverage for the projected perils. Similar
to the equities and debt securities climate change model, the
outputs provided by the real estate and infrastructure
modelling assumes a number of key factors remain constant, in
particular the current level of regional physical defence actions
is assumed to remain unchanged. Although national defences
may be upgraded in the future this is not considered within the
physical climate risk projections.
Importantly, the scenario analysis for private assets only
assesses direct physical risk and does not capture other
potential climate-related impacts for those assets. It is
important to bear this in mind when interpreting the results and
also consider possible second-order impacts of physical risk
(eg business disruption) as well as the impacts from transition
modelling (eg asset valuation change due to a deterioration in
economic conditions).
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M&G plc maintains a corporate website containing a wide range
of information relevant for private and institutional investors,
including the Company’s financial calendar: www.mandg.com
Annual General Meeting
M&G plc’s Annual General Meeting (AGM) is expected to be
held at our offices at 10 Fenchurch Avenue, London EC3M 5AG
on 30 April 2025 at 10:30am. A poll will be called on all
resolutions and the voting results, including all proxies lodged
prior to the meeting, will be displayed at the meeting and
subsequently published on the Company’s website. Full details
will be included in the AGM Notice.
In accordance with relevant legislation, shareholders holding
5% or more of the fully paid up issued share capital are able to
require the Directors to hold a general meeting. Written
shareholder requests should be addressed to the General
Counsel and Company Secretary at the registered office.
Documents on display
The terms and conditions of all Directors’ appointments are
available for inspection at the Company’s registered office
during normal business hours and at the AGM. Inspection of
these documents may also be undertaken virtually. Please
email Group Secretariat at GroupSecretariat@mandg.com if
you wish to view any of these documents and arrangements
will be made with you.
Company constitution
M&G plc is governed by the Companies Act 2006, other
applicable legislation and regulations, and provisions in its
Articles of Association (Articles) which are available on the
Company’s website. The Company’s Articles state that the
Board may appoint Directors but that those Directors are
required to offer themselves up for re-election annually at the
AGM. The Articles can only be amended with shareholder
approval.
Electronic communications
Shareholders are encouraged to elect to receive shareholder
documents electronically by registering with Shareview at
www.shareview.co.uk. Shareholders who have registered will
be sent an email notification whenever shareholder documents
are available on the Company’s website and a link will be
provided to that information. When registering, shareholders
will need their shareholder reference number which can be
found on their share certificate or other correspondence from
the Company.
Please contact Equiniti if you require any assistance or further
information.
Share dealing services
The Company’s registrar, Equiniti, offer a postal dealing facility
for buying and selling M&G plc ordinary shares; please see the
Equiniti address below. They also offer a telephone and
internet dealing service, Shareview, which provides a simple
and convenient way of selling M&G plc shares. For telephone
sales, call +44 (0)345 603 7037 between 08:00 and 16:30,
Monday to Friday, and for internet sales log on to:
www.shareview.co.uk/dealing.
ShareGift
Shareholders who have only a small number of shares, the
value of which makes them uneconomic to sell, may wish to
consider donating them to ShareGift (Registered Charity
1052686).
The relevant share transfer form may be obtained from Equiniti.
Further information about ShareGift may be obtained on +44
(0)20 7930 3737 or from www.ShareGift.org.
Shareholder enquiries
For enquiries about shareholdings, including dividends and lost
share certificates, please contact the Company’s registrar:
Registrar
M&G plc’s share register is managed and administered by
Equiniti.
Online
www.shareview.co.uk
By post
Equiniti Limited, Highdown House, Yeoman Way, Worthing,
West Sussex, BN99 3HH UK
By telephone
Tel +44 (0)371 384 2543
Lines are open from 08:30 to 17:30 (UK), Monday to Friday.
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Adjusted operating profit
before tax (AOP)
Is one of the Group’s non-GAAP alternative performance measures, which complements the
IFRS GAAP measures and is useful as it allows a deeper understanding of the Group's
performance over time. It is defined in the alternative performance measures section on page
341.
Alternative performance
measure (APM)
Is a financial measure of historic or future financial performance, financial position or cash flows,
other than a financial measure defined under IFRS or under Solvency II regulations.
Asset-backed security
(ABS)
A security whose value and income payments are derived from and collateralised (or backed) by
a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid
assets that are unable to be sold individually.
Asset Management cost/
income ratio
Represents total operating expenses, excluding revaluation of provisions for employee
performance awards divided by total fee-based revenues, excluding performance fees.
Assets under management
and administration (AUMA)
Represents the total market value of all financial assets managed, administered or advised on
behalf of clients.
Asset Management average
fee margin
Is calculated from fee-based revenues earned in the period, excluding performance fees, divided
by average AUMA for the period. It demonstrates the revenue margin that was earned on the
assets we manage and administer.
Board
The Board of Directors of the Company.
Bonuses
Bonuses refer to the non-guaranteed benefit added to participating life insurance policies and
are the way in which policyholders receive their share of the profits of the policies. There are
normally two types of bonus:
– Regular bonus: expected to be added every year during the term of the policy. It is not
guaranteed that a regular bonus will be added each year, but once it is added, it cannot be
reversed, also known as annual or reversionary bonus.
– Final bonus: an additional bonus expected to be paid when policyholders take money from the
policies. If investment return has been low over the lifetime of the policy, a final bonus may not
be paid. Final bonuses may vary and are not guaranteed.
Business Plan
A written document that describes our business, containing objectives, strategies, sales,
marketing and financial forecasts.
Chief Operating Decision
Maker
The Group Executive Committee.
Climate Action 100+
(CA100+)
CA100+ is an investor-led initiative to ensure the world’s largest corporate greenhouse gas
emitters take necessary action on climate change.
Company/Parent Company
M&G plc, a public limited company incorporated in England and Wales with registered number
11444019 whose registered office is 10 Fenchurch Avenue, London EC3M 5AG, United Kingdom.
Contractual Service Margin
(CSM)
Represents unearned profit on contracts, recognised in profit or loss as the service is provided
over the life of the contracts.
Demerger
The demerger from the Prudential Group in October 2019.
Director
A Director of the Company.
Earnings per share (EPS)
Refer to accounting policy 1.5.23 on page 212.
Employee benefit trust
(EBT)
Is a trust set up to enable its Trustees to purchase and hold shares to satisfy employee share-
based incentive plan awards.
Energy Attribute
Certificates (EAC)
EACs allow businesses to track the origin of electricity, prove the consumption of renewables,
and meet clean energy targets.
Enterprise Value Including
Cash (EVIC)
Is the sum of a company’ market capitalisation and total debt, without deduction of cash and
cash equivalents.
ESG
ESG stands for Environmental, Social, and Governance. ESG is a framework that helps
stakeholders understand how an organisation is managing risks and opportunities related to
environmental, social and governance criteria.
Expected Credit Loss (ECL)
Expected credit loss impairment loss being the present value of the difference between
contractual cash flows due and expected to be received, based on the lifetime probability of
default. It applies to all credit exposures not measured at fair value through profit or loss.
Fair value through profit or
loss (FVTPL)
Is an IFRS measurement basis permitted for assets and liabilities which meet certain criteria.
Gains or losses on assets or liabilities measured at FVTPL are recognised directly in the income
statement.
Financial Conduct Authority
(FCA)
The body responsible for supervising the conduct of all financial services firms and for the
prudential regulation of those financial services firms not supervised by the Prudential Regulation
Authority (PRA), such as asset managers and independent financial advisers.
Term
Definition
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361
FRC Stewardship Code
The UK Stewardship Code sets high stewardship standards for those investing money on behalf
of UK savers and pensioners, and those that support them. It comprises a set of 12 ‘apply and
explain’ principles for asset managers and asset owners, and a separate set of six principles for
service providers.
Group
The Company and its subsidiaries.
Group Executive Committee
(GEC)
Is composed of board officers and senior-level executive management. It is the Group’s most
senior executive decision-making forum.
Institutional Investor Group
on Climate Change (IIGCC)
Works with business, policy makers and fellow investors to help define the investment practices,
policies and corporate behaviours required to address climate change.
International Financial
Reporting Standards (IFRS)
Are accounting standards issued by the International Accounting Standards Board (IASB). Our
consolidated financial statements are prepared in accordance with UK-adopted International
Accounting Standards (IAS). Any reference to IFRS refers to those which have been adopted for
use in the UK unless specified otherwise.
Intergovernmental Panel on
Climate Change (IPCC)
Created to provide policymakers with regular scientific assessments on climate change, its
implications and potential future risks, as well as to put forward adaptation and mitigation
options.
International Sustainability
Standards Board (ISSB)
The IFRS Foundation announced the formation of the ISSB in November 2021 at COP26; the
intention is for the ISSB to deliver a comprehensive global baseline of sustainability-related
disclosure standards that provide investors and other capital market participants with
information about companies’ sustainability-related risks and opportunities to help them make
informed decisions.
Key performance measure
(KPM)
The Group measures its financial performance using the following key performance measures:
IFRS result after tax, adjusted operating profit before tax, operating change in CSM, net flows
from open business, AUMA, shareholder Solvency II coverage ratio, total capital generation and
operating capital generation.
Leverage ratio
The leverage ratio is calculated as the nominal value of debt as a percentage of the Group’s
shareholder Solvency II available own funds.
Long-Term Incentive Plan
(LTIP)
The part of an executive’s remuneration designed to incentivise long-term value for shareholders
through an award of shares, with vesting contingent on employment and the satisfaction of
stretching performance conditions linked to the Group's strategy.
M&G Group Limited (MGG)
MGG is a private limited company incorporated in England and Wales with registered number
00633480 whose registered office is 10 Fenchurch Avenue, London EC3M 5AG, United
Kingdom.
MGG is the holding company of the Group’s asset management business, M&G Investments.
Net client flows
Represents gross inflows less gross outflows. Gross inflows are new funds from clients. Gross
outflows are withdrawals made by clients during the period.
Net flows from open
business
Net flows from open business consists of net client flows from Asset Management, PruFund,
Shareholder annuities and the elements of Other Life which are open to new business. It
excludes net flows from our Traditional with-profits business, platform and certain elements of
Other Life closed to new business.
Net promoter score (NPS)
Net promoter score is a measure of the willingness of a company’s clients to recommend its
products or services to others.
Network for Greening the
Financial System (NGFS)
Is a group of central banks and supervisors committed to sharing best practices, contributing to
the development of climate and environment-related risk management in the financial sector and
mobilising mainstream finance to support the transition toward a sustainable economy.
Net-Zero Asset Owner
Alliance (NZAOA)
Is a member-led initiative of institutional investors committed to transitioning their investment
portfolios to net-zero GHG emissions by 2050 – consistent with a maximum temperature rise of
1.5°C.
Non-profit business
Contracts where the policyholders are not entitled to a share of the company’s profits and
surplus, but are entitled to other contractual benefits. Examples include pure risk policies (such
as fixed annuities) and unit-linked policies.
Operating capital
generation
Is the total capital generation before tax, adjusted to exclude market movements relative to those
expected under long-term assumptions and to remove other non-operating items, including
shareholder restructuring costs.
Operating change in
Contractual Service Margin
(CSM)
Is one of the Group’ key alternative performance measures and represents changes resulting
from new business, interest accretion, experience changes and release of CSM but excludes the
impact of short-term market movements, mismatches arising on the adoption of IFRS 17 and
restructuring costs.
Term
Definition
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Own Risk and Solvency
Assessment (ORSA)
The ORSA is the Group’ ongoing processes for identifying, assessing, controlling, monitoring and
reporting the risks to which the business is exposed, and of assessing the own funds necessary
to ensure that the Group's solvency needs are met at all times.
Own funds
Own funds refers to the Solvency II measure of capital available to meet losses, and is based on
the assets less liabilities of the Group, subject to certain restrictions and adjustments. Available
own funds reflect all capital available to the Group. Eligible own funds are net of restrictions
applied in line with the thresholds set by the regulator that limit the amount of each tier of capital
that can be used to demonstrate solvency.
Paris Agreement
Is an agreement within the United Nations Framework Convention on climate change, dealing
with greenhouse gas emissions mitigation, adaptation, and finance, agreed in 2015.
Partnership for Carbon
Accounting Financials
(PCAF)
Is a global partnership of financial institutions that work together to develop and implement a
harmonised approach to assess and disclose the greenhouse gas emissions (GHG) associated
with their loans and investments.
Principles for Responsible
Investment (PRI)
PRI is a United Nations-supported international network of financial institutions. It works together
to understand the investment implications of ESG factors and support its network of investor
signatories in incorporating these factors into their investment and ownership decisions.
Prudential Regulation
Authority (PRA)
Is the body responsible for the prudential regulation and supervision of banks, building societies,
credit unions, insurers and major investment firms in the UK.
Prudential Assurance
Company (PAC)
The Prudential Assurance Company Limited (PAC) is a private limited company incorporated in
England and Wales with registered number 00015454 whose registered office is 10 Fenchurch
Avenue, London EC3M 5AG, United Kingdom.
PruFund
Our PruFund proposition provides our retail customers with access to smoothed savings
contracts with a wide choice of investment profiles.
Renewable Energy
Guarantees of Origin
(REGO)
The REGO scheme provides transparency to consumers about the proportion of electricity that
suppliers source from renewable generation.
Sustainability Accounting
Standards Board (SASB)
Is a framework that sets standards for the disclosure of financially material sustainability
information by companies to their investors.
Science Based Targets
initiative (SBTi)
The SBTi defines and promotes best practice in science-based target setting. Targets are
considered ‘science-based’ if they are in line with what the latest climate science deems
necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2°C
above pre-industrial levels and pursuing efforts to limit warming to 1.5°C. Science-based targets
show organisations how much and how quickly they need to reduce their greenhouse gas (GHG)
emissions to prevent the worst effects of climate change.
Scope 1 emissions
Emissions from: fuel combustion; company vehicles; fugitive emissions.
Scope 2 emissions
Emissions from: purchased electricity, heat and steam.
Scope 3 emissions
Emissions from: purchased goods and services; business travel; employee commuting; waste
disposal; use of sold products; transportation and distribution (up and downstream);
investments; leased assets; and franchises.
Sustainable Finance
Disclosure Regulation
(SFDR)
The EU’s SFDR is a regulation designed to make it easier for investors to distinguish and
compare between the many sustainable investment strategies that are now available within the
European Union; the framework classifies asset managers’ funds as either an article 6, 8, or 9
funds depending on their level of sustainability, and regardless if they are promoting their fund as
an ESG investment.
Shareholder Solvency II
coverage ratio
Is the ratio of eligible own funds to solvency capital requirement (SCR), excluding the
contribution to own funds and SCR from our ring-fenced With-Profits Fund.
Société d’investissement à
Capital Variable (SICAV)
A SICAV is an open-ended investment fund offered by European financial companies, similar to
the UK’s unit trust. SICAVs are effectively share companies aimed at collectively investing the
assets collected through the public offering of shares, whose value amounts to the net worth of
capital account divided by their number.
Solvency capital
requirement (SCR)
SCR represents the 99.5th percentile (or 1-in-200) worst outcome over the coming year, out of
100,000 equally likely scenarios, allowing for the dependency between the risks the business is
exposed to. The SCR is calculated using our Solvency II Internal Model.
Solvency II
A regime for the prudential regulation of insurance companies that was introduced by the EU on
1 January 2016, now modified by the PRA’s 2024 reforms.
Solvency II surplus
Solvency II surplus represents the eligible Own Funds that we hold less the solvency capital
requirement.
Term
Definition
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Taskforce on Nature-
Related Financial
Disclosures (TNFD)
Is an international initiative that builds on a model developed by the TCFD. Its mission is to
provide a framework for how organisations can address nature-related risks and opportunities
with the ultimate goal of channelling capital flows into positive action.
Task Force on Climate-
Related Financial
Disclosures (TCFD)
Created by the Financial Stability Board (FSB) to develop consistent climate-related financial risk
disclosures. The FCA require all premium listed companies to disclose, on a comply or explain
basis, against the recommendations of the TCFD. The TCFD has now been disbanded with the
IFRS Foundation (ISSB) taking over the monitoring of companies climate-related disclosures
from the FSB.
Total capital generation
Is the total change in Solvency II surplus capital, on an eligible own funds basis, before dividends
and capital movements, and capital generated from discontinued operations.
Total Shareholder Return
(TSR)
TSR represents the growth in the value of a share plus the value of dividends paid, assuming that
the dividends are reinvested in the Company’s shares on the ex-dividend date.
Transitional Measures on
Technical Provisions
(TMTP)
Transitional measures on technical provisions are an adjustment to Solvency II technical
provisions, to smooth the impact of the change in the regulatory regime on 1 January 2016. This
decreases linearly over 16 years following the implementation of Solvency II, but may be
recalculated in certain cases, subject to agreement with the PRA.
UK Corporate Governance
Code (The Code)
Corporate Governance is the system of rules, practices and processes that are put in place to
manage and control a company. It is underpinned by the UK Corporate Governance Code issued
in 2018.
Unit-linked policy
A policy where the benefits are determined by the investment performance of the underlying
assets in the unit-linked fund.
Value Share BPA
A transaction which comprises a traditional BPA buy-in arrangement and a separate reinsurance
contract with a captive reinsurer that transfers some of the insurance and investment risk back to
the sponsor of the originating pension scheme, thereby allowing the sponsor to participate in the
risk and reward generated from the transaction.
With-profits business
Contracts where the policyholders have a contractual right to receive, at the discretion of the
Company, additional benefits based on the profits of the fund, as a supplement to any
guaranteed benefits.
With-Profits Fund
The Prudential Assurance Company Limited’s fund where policyholders are entitled to a share of
the profits of the fund. Normally, policyholders receive their share of the profits through bonuses.
It is also known as a participating fund as policyholders have a participating interest in the With-
Profits Fund and any declared bonuses.
Term
Definition
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Registered office
M&G plc
10 Fenchurch Avenue
London
EC3M 5AG
United Kingdom
Website
www.mandg.com
Telephone
+44 (0)207 626 4588
Registered number
11444019
M&G plc is incorporated and registered
in England and Wales. M&G plc is a holding
company, some of whose subsidiaries
are authorised and regulated, as applicable,
by the Prudential Regulation Authority and
the Financial Conduct Authority.
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Disclaimer on forward-looking statements
This document may contain certain ‘forward-looking statements’ with
respect to M&G plc (M&G) and its affiliates (the Group), its plans, its current
goals and expectations relating to future financial condition, performance,
results, operating environment, strategy and objectives. Statements that are
not historical facts, including statements about M&G’s beliefs and
expectations and including, without limitation, statements containing the
words ‘may’, ‘will’, ‘could’, ‘should’, ‘continue’, ‘aims’, ‘estimates’, ‘projects’,
‘believes’, ‘intends’, ‘expects’, ‘plans’, ‘seeks’, ‘outlook’ and ‘anticipates’, and
words of similar meaning, are forward-looking statements. These statements
are based on plans, estimates and projections which are current as at the
time they are made, and therefore persons reading this announcement are
cautioned against placing undue reliance on forward-looking statements. By
their nature, forward-looking statements involve inherent assumptions, risk
and uncertainty, as they generally relate to future events and circumstances
that may not be entirely within M&G’s control. A number of factors could
cause M&G’s actual future financial condition or performance or other
indicated results to differ materially from those indicated in any forward-
looking statement. Such factors include, but are not limited to: changes in
domestic and global political, economic and business conditions; market-
related conditions and risk, including fluctuations in interest rates and
exchange rates, the potential for a sustained low-interest rate environment,
corporate liquidity risk and the future trading value of the shares of M&G;
investment portfolio-related risks, such as the performance of financial
markets generally; legal, regulatory and policy developments, such as, for
example, new government initiatives and regulatory measures, including
those addressing climate change and broader sustainability-related issues,
and broader development of reporting standards; the impact of competition,
economic uncertainty, inflation and deflation; the effect on M&G’s business
and results from, in particular, mortality and morbidity trends, longevity
assumptions, lapse rates and policy renewal rates; the timing, impact and
other uncertainties of future acquisitions or combinations within relevant
industries; the impact of internal projects and other strategic actions, such as
transformation programmes, failing to meet their objectives; changes in
environmental, social and geopolitical risks and incidents, pandemics and
similar events beyond the Group’s control; the Group’s ability along with
governments and other stakeholders to measure, manage and mitigate the
impacts of climate change and broader sustainability-related issues
effectively; the impact of operational risks, including risk associated with
third-party arrangements, reliance on third-party distribution channels and
disruption to the availability, confidentiality or integrity of M&G’s IT systems
(or those of its suppliers); the impact of changes in capital, solvency
standards, accounting standards or relevant regulatory frameworks, and tax
and other legislation and regulations in the jurisdictions in which the Group
operates; and the impact of legal and regulatory actions, investigations
and disputes. These and other important factors may, for example, result
in changes to assumptions used for determining results of operations or
re-estimations of reserves for future policy benefits. Any forward-looking
statements contained in this document speak only as of the date on which
they are made. M&G expressly disclaims any obligation to update any of the
forward-looking statements contained in this document or any other
forward-looking statements it may make, whether as a result of future
events, new information or otherwise except as required pursuant to the UK
Prospectus Rules, the UK Listing Rules, the UK Disclosure and Transparency
Rules, or other applicable laws and regulations. This report has been
prepared for, and only for, the members of M&G, as a body, and no other
persons. M&G, its Directors, employees, agents or advisers do not accept or
assume responsibility to any other person to whom this document is shown
or into whose hands it may come, and any such responsibility or liability is
expressly disclaimed. Nothing in this report should be construed as a profit
forecast. The information contained in this document does not constitute an
offer to sell or otherwise dispose of or an invitation or solicitation of any offer
to purchase or subscribe for any securities in the Group.
Information provided in climate and sustainability disclosures
Climate and sustainability-related disclosures are subject to greater
uncertainty than other disclosures, given challenges with current data
availability and reliability, the nascent and evolving nature of relevant models
and methodologies and other factors, such as the developing regulatory
landscape and market practice. As such, the disclosures included in this
Annual Report and Accounts may be amended and updated, as market
practice and data quality and availability develop, and underlying
judgements, assumptions and estimates change. These factors could also
lead to actual achievements, results, performance or other future events or
conditions differing from those stated, implied and/or reflected in any
forward-looking statements or metrics included in our climate and
sustainability disclosures.
Disclaimer
In preparing the climate and sustainability content included within the
Group’s Annual Report and Accounts, we have:
– made key judgements, estimations and assumptions, for example in
relation to financed emissions, measurement of climate risk and
scenario analysis.
– used climate and sustainability models, methodologies and data most
appropriate and suitable as at the date on which they were used, but
which are subject to certain limitations. These limitations relate to (but
are not limited to): the nascent and evolving nature of methodologies
in this area which results in limited availability of reliable climate and
sustainability-related data; data gaps; limited ability to rely on
historical data; the limited standardisation of climate and
sustainability-related data; and future uncertainty (due to, amongst
other factors, changing projections arising from technological
development and legal, regulatory and policy change).
– used climate and sustainability models, methodologies and data in this
Annual Report and Accounts that may have been made available by
third parties or other public sources – The methodologies,
interpretations or assumptions underpinning that information may not
be capable of being independently verified and may therefore be
inaccurate. While the Group bears primary responsibility for the
information included in this annual report, it does not accept
responsibility for the external input provided by any third parties for
the purposes of developing the information included in this Annual
Report and Accounts;
– noted that there are external factors which are outside of our control,
such as changes in accounting and/or reporting standards,
improvements in data quality and data availability, or updates to
methodologies and models and/ or updates or restatements of data
by third parties, which could affect the climate and sustainability
content within the Annual Report and Accounts. In particular, we note
that, as climate and sustainability-related models, methodologies and
data, market principles and reporting standards evolve and mature,
and data quality and availability in this area improves, this may impact
the metrics, data, and targets included in the climate and sustainability
content within this Annual Report and Accounts. As such, we may look
to review and further develop our approach accordingly to reflect such
developments. In future reports, we may present some or all of the
information for this reporting period, using updated or more granular
data or improved models or methodologies. We may also need to re-
baseline, restate, revise, or recalculate information included in our
climate and sustainability-related data on the basis of such updated
information.
M&G plc Annual Report and Accounts 2024
Strategic Report
Governance
Financial information
Other information
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M&G plc
10 Fenchurch Avenue
London
EC3M 5AG
United Kingdom
+44 (0)207 626 4588
mandg.com