REG - M&G PLC - M&G plc Half Year 2025 Results
Wed 07:00
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RNS Number : 7372X M&G PLC 03 September 2025
M&G plc half year 2025 results
STRONG NET FLOWS FROM OPEN BUSINESS OF £2.1BN
ASSET MANAGEMENT COST-TO-INCOME RATIO IMPROVED FROM 77% TO 75%
RESILIENT CONTRIBUTION FROM LIFE ACROSS OPERATING PROFIT AND CAPITAL
GENERATION
Adjusted
Net Flows from Open Business(i) Operating Profit Before Tax Operating Capital Generation Shareholder Total Dividend
Solvency II Ratio per Share
£2.1bn £378m £408m
230% 6.7p
H1 2024: £(1.1)bn H1 2024: £375m H1 2024: £486m
YE 2024: 223% H1 2024: 6.6p
Andrea Rossi, Group Chief Executive Officer, said:
"I am pleased with our progress over the first six months of the year. A key
highlight is the positive £2.1 billion net flows from open business, a £3.2
billion improvement from the same period last year. This is a strong result
underpinned by £2.6 billion net inflows from external clients in Asset
Management.
"This growth has been supported by our market leading investment performance
and continued international expansion. Today, 58% of our Asset Management
third party AUMA comes from International clients, up from 37% five years ago.
This cements our position as a leading international active asset manager,
with an established footprint in Europe and growing access to attractive Asian
markets.
"In May, we also announced a long-term strategic partnership with Dai-ichi
Life, becoming their preferred asset manager for Europe. We expect this
collaboration to generate at least $6 billion of new business flows over the
next five years, and to further support our international growth ambitions.
"In Asset Management, while growing, we also continue to focus on efficiency,
as we reduced the cost-to-income ratio from 77% to 75%. We expect this
positive trend to continue, as we further improve our operating leverage
through cost discipline and top-line growth.
"We are broadening our product offering in Life, with the planned launch of
our With-Profits Bulk Purchase Annuity (BPA) early next year. This solution
will be a key competitive advantage in the UK retirement market. PruFund
continues to deliver strong investment outcomes and, thanks to the smoothing
mechanism, protected its clients from the market volatility in April. This
performance has generated increased client demand, improved sales, and has led
to positive net inflows since June.
"The balanced and diversified nature of our business model, as well as the
momentum across our Asset Management and Life businesses, gives me confidence
for the future. We continue to build on our strong foundations to deliver
long-term growth for our customers, clients and shareholders, which is
high-quality and diversified across products, segments, and markets."
i Net flows from open business consist of net client flows in
Asset Management, PruFund, Shareholder annuities and the elements of Other
Life which are open to new business.
Financial highlights
- Adjusted operating profit of £378 million (30 June 2024: £375 million)
improved year-on-year due to underlying positive momentum, despite an £8
million foreign exchange loss in Asset Management.
- Increased Asset Management revenue of £514 million (30 June 2024: £499
million) and stable costs of £388 million, absorbing the impact of inflation
and of investment in the business to support growth, led to a cost-to-income
ratio of 75%. The resulting £15 million higher core result offset lower
performance fees and investment income.
- In Life, adjusted operating profit improved for both PruFund and
Traditional With-Profits to £112 million (30 June 2024: £98 million) and
£120 million (30 June 2024: £108 million) respectively. This fully offset a
lower contribution from shareholder annuities of £113 million (30 June 2024:
£132 million) following a decrease in the return on excess assets.
- Profit after tax of £248 million increased meaningfully year-on-year (30
June 2024: £56 million loss). This was primarily driven by a significant
improvement in short-term fluctuations in investment returns and mismatches
arising on application of IFRS 17.
- Operating capital generation of £408 million (30 June 2024: £486
million) continued to be strong, with the underlying result of £331 million
increasing by 11% compared to the same period last year. Operating capital
generation excluding new business strain of £443 million is in line with the
new 2025-2027 cumulative target of £2.7 billion.
- Strong operating capital generation led to an improved Shareholder
Solvency II coverage ratio of 230% (31 December 2024: 223%) after absorbing
the impact of paying the 2024 second interim dividend in May.
- The 2025 first interim dividend of 6.7 pence per share (30 June 2024: 6.6
pence per share) is in line with our progressive dividend policy. The first
interim dividend is payable on 17 October 2025.
Operational highlights
- Continued to drive international expansion and broadened the product
offering in both Asset Management and Life, to position the Group for
long-term sustainable growth that is high-quality and diversified across
products, segments, and markets.
- Delivered strong investment performance to clients. As of 30 June 2025,
75% of our mutual funds ranked in the upper two performance quartiles over
three years and 71% over five years; in Institutional Asset Management, over
80% of funds by AUMA outperformed their benchmarks on a three and five-year
basis.
- Reduced net client outflows in UK Institutional Asset Management to £1.3
billion (30 June 2024 net outflows of £2.4 billion), while continuing to
achieve strong and improving net client inflows in International Institutional
Asset Management of £3.2 billion (30 June 2024 net inflows of £1.9 billion).
- Improvement in Wholesale Asset Management, with net inflows of £0.7
billion (30 June 2024 flat flows), across both Public Fixed Income and Equity
funds, as well as across the UK OEIC and international SICAV range.
- Integrated PruFund on FNZ technology, which will enable access to the
£0.7 trillion UK digital platform market, and also completed the
whole-of-market launch of our new individual Fixed-Term Annuity product.
- Continued to build Bulk Purchase Annuity (BPA) capabilities, improving our
ability to quote on deals and optimise pricing, while progressing the
development work to bring to market a With-Profits BPA with a planned launch
for early 2026.
- Continued to progress our transformation programme, achieving £213
million of cost savings since launch, almost 95% of the total upgraded cost
saving target of £230 million.
Outlook
- M&G is well positioned to navigate the current uncertain economic and
geopolitical environment due to its diversified business model, international
footprint, compelling products and services, investment capabilities and
expertise.
- The progress achieved in the first six months of the year underpins our
continued confidence in the delivery of our strategic priorities and financial
targets, as we remain focused on delivering great customer, client and
shareholder outcomes.
- Our strategic priorities are clear: Maintain our financial strength, build
on the progress already achieved in simplifying the business, and deliver
profitable growth in the UK and internationally.
For the six months ended 30 June For the year ended 31 December
Performance highlights(i) 2025 2024 2024
Adjusted operating profit before tax (£m) 378 375 837
IFRS profit/(loss) after tax (£m) 248 (56) (347)
Operating change in contractual service margin (CSM) (£m) 65 99 294
Operating capital generation (£m) 408 486 933
Total capital generation (£m) 354 813 1,108
Shareholder Solvency II coverage ratio (%) 230% 210% 223%
Dividend per share (p) 6.7 6.6 20.1
Assets under management and administration (AUMA) (£bn) 354.6 346.1 345.9
Net flows from open business(ii) (£bn) 2.1 (1.1) (1.9)
i Definitions of key performance measures are provided in the
Supplementary information section of the Interim Financial Report.
ii Net flows from open business 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 consist of net client
flows in Asset Management, PruFund, Shareholder annuities and the elements of
Other Life which are open to new business.
Enquiries:
Media Investors/Analysts
Irene Chambers +44(0)7825 696815 Luca Gagliardi +44(0)20 8162 7301
Irene.Chambers@mandg.com Luca.Gagliardi@mandg.com
Will Sherlock +44(0)7786 836562
Will.Sherlock@mandg.com
James Gallagher +44(0)7552 374245
James.Gallagher@mandg.com
Notes to editors
1. The condensed consolidated financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting ('IAS 34'), as adopted by
the UK, and the Disclosure and Transparency Rules of the Financial Conduct
Authority based on the consolidated financial statements of M&G plc.
2. 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 30 June 2025 and
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 30 June 2024, the
recalculated transitional measures did not align to the approved regulatory
position and therefore the estimated Solvency II capital position differed
from the position disclosed in the formal regulatory Quantitative Reporting
Templates of the same date.
3. Total number of M&G plc shares in issue as at 30 June 2025 was
2,408,265,808.
4. A live webcast of the Half Year 2025 Results presentation and Q&A will be
hosted by Andrea Rossi (CEO) and Kathryn McLeland (CFO) on Wednesday 3(rd)
September at 10:00 BST. Register to join at:
https://www.sparklive.lseg.com/MG/events/348d59e8-3db8-42be-a902-ae0135ea5f2d
Or dial in by phone in the UK: +44 800 524 4258
The Results presentation will be available to download from 07:00 BST on our
Results, reports and presentations web page:
https://www.mandg.com/investors/results-reports-and-presentations
Dividend to be paid in October 2025
Ex-dividend date 11 September 2025
Record date 12 September 2025
Payment of dividend 17 October 2025
About M&G plc
M&G plc is a leading international savings and investments business,
managing money for around 4.5(i) million retail clients and more than 900(i)
institutional clients in 39(i) offices worldwide. As at 30 June 2025, we had
£354.6 billion of assets under management and administration. With a heritage
dating back more than 170 years, M&G plc has a long history of innovation
in savings and investments, combining asset management and insurance expertise
to offer a wide range of solutions. We serve our retail and savings clients
under the M&G and Prudential brands in the UK and Europe, and under the
M&G Investments brand for asset management clients globally.
i As at 31 December 2024.
Additional Information
M&G plc, a company incorporated in the United Kingdom, is the ultimate
parent company of The Prudential Assurance Company Limited (PAC). PAC is not
affiliated in any manner with Prudential Financial, Inc., a company whose
principal place of business is in the United States of America or Prudential
plc, an international group incorporated in the United Kingdom.
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.
Management statement
The first half of 2025 has seen significant global market volatility in
reaction to US policy announcements. Our business model to gather assets and
invest for the long term has prevailed against this backdrop as AUMA has
increased by 3%, with our capital position remaining strong, adjusted
operating profit increasing and our IFRS result after tax returning to profit.
We have also made good progress across our strategic priorities - particularly
in relation to growth in Life and Asset Management both individually and
combined through the synergies of the businesses working together. This
positions us well to meet evolving client needs and to deliver profitable
growth for our shareholders.
Delivering on our strategy
We have continued to progress against our three strategic pillars of financial
strength, simplification and growth during the first half of 2025, with a
particular focus on international growth in Asset Management alongside the
on-going development of our product offering and distribution channels in
Life.
Asset Management
In Asset Management we have continued to focus on delivering strong investment
performance, to build our presence across international markets and to
capitalise on our strength and expertise in both public and private markets.
Asset Management had net inflows of £2.6 billion for the six months ended
30 June 2025 (30 June 2024: £0.5 billion net outflows). Institutional Asset
Management secured a large international equities mandate win which
contributed to a significant improvement in net inflows to £1.9 billion
(30 June 2024: £0.5 billion net outflows). Wholesale Asset Management
performed well with net inflows of £0.7 billion compared to net £nil flows
for the same period in 2024, following strong fund performance with 75% and
71% of Wholesale funds ranked in the upper performance quartiles over three
and five years (31 December 2024: 63% and 59%). The growth in our Asset
Management net flows is underpinned by our continued diversified international
expansion across several markets, with 58% of Asset Management AUMA now coming
from International clients.
Consistent with our growth pillar, in May we announced our strategic
partnership with Dai-ichi Life Holdings, Inc (Dai-ichi) one of Japan's largest
listed life insurers, becoming their preferred asset manager for Europe. In
recognition of M&G's compelling investment case and growth potential,
Dai-ichi intends (subject to regulatory approvals) to acquire a shareholding
of c.15% in M&G plc, creating significant alignment to capture long-term
value creation opportunities across an array of strategic initiatives. The
partnership will accelerate both our expansion in European private markets and
open new potential sources of business flows in Japan and across Asia, as well
as the potential to collaborate on life insurance propositions also in Europe
and Japan.
Alongside these strategic partnerships, we have continued to enhance our
expertise in private assets through the completion of the acquisition of a
controlling stake in P Capital Partners (PCP), complementing our established
private and structured credit teams and broadening our client offering.
Following the success of the Leadenhall development in London in 2024, in
April M&G Real Estate, along with its development partners and an
investment by the With-Profits Fund, secured the largest single office letting
deal (by square footage) in the European Market since Covid restrictions
lifted at the state-of-the-art College Square scheme in Dublin.
Our Asset Management cost-to-income ratio improved to 75% for the six months
ended 30 June 2025 (30 June 2024: 77%) as we continued to focus on cost
discipline, absorbing the impact of inflation and business growth in the
period.
Life
In the Life business we celebrated two key milestones in our journey to
reposition the segment to drive profitable growth with the successful launch
of our new fixed term annuity product, the Prudential Guaranteed Income Plan,
powered by the With-Profits Fund, and the integration of PruFund on FNZ
technology which will enable access to the digital platform market, creating
an exciting new distribution channel for retail customers and advisers. The
Prudential Guaranteed Income Plan, launched earlier this year and now
available to all advisors, guarantees income for a fixed term between five to
15 years, is a fully digital proposition and is designed to flexibly meet
customer needs in retirement. Our expanded proposition range allows advisors
to create tailored retirement income solutions for customers leveraging both
our smoothed fund range and guaranteed income options.
In relation to Bulk Purchase Annuities (BPAs), we are continuing to strengthen
our capabilities including improving our ability to quote on deals and
implementing longevity reinsurance for new business. We have written £0.3
billion of new BPA business so far this year, including the most recent deal
completed in August, as we maintain pricing discipline and are pleased to have
been named joint Run-On Provider of the year at this year's Professional
Pensions UK Pensions Awards for our innovative Value Share product launched in
2024.
PruFund remains a core element of our retirement proposition and has continued
to perform well over the period. Client sentiment towards PruFund is impacted
by both equity market volatility, and interest rate movements which can impact
the attractiveness of PruFund compared to cash and low risk guaranteed
solutions. In the six months to 30 June 2025 net outflows from PruFund were
£0.6 billion (30 June 2024: £0.6 billion net outflows) following the
heightened volatility in global financial markets after the announcement of
the broad-based tariff measures by the United States. With a recovery in the
markets following April's announcement, compounded with PruFund's strong
investment outcomes and further interest rate reductions, we have seen a
narrowing of outflows in the later part of the period.
Our financial strength has allowed us to reaffirm our commitment to UK
economic growth, as we became a signatory of the Mansion House Accord, a
voluntary agreement to invest at least 10% of defined contribution (DC)
default funds in private markets by 2030, with at least 5% of the total
allocated to the UK. Reaffirming our commitment to the Mansion House
agreements is aligned with our purpose to give everyone real confidence to put
their money to work and continues to build on our track record in private
markets investment.
We have achieved all this while continuing to improve customer and adviser
experiences, recognising that we need to continue to make it easier for people
to access our growing range of products.
Delivering for our shareholders
We are pleased with our AUMA growth of 3% to £354.6 billion in a period which
saw volatile equity markets. Growth in both Institutional and Wholesale net
inflows in the Asset Management business were supported by positive market
movements and inorganic growth through acquisition. Overall net client inflows
from open business were £2.1 billion (30 June 2024: £1.1 billion outflows)
with much improved net inflows from Asset Management, slightly offset by Life
net outflows mainly experienced in PruFund during the period.
Adjusted operating profit before tax (AOP) increased to £378 million for the
six months ended 30 June 2025 (30 June 2024: £375 million) with the result
for Asset Management marginally decreasing to £128 million (30 June 2024:
£129 million) and an increase in Life AOP to £344 million (30 June 2024:
£340 million). In Asset Management, revenue has increased and we have
remained disciplined on cost which has led to an improvement in the
cost-to-income ratio to 75%. However this improvement has been offset by a
reduction in performance fees and investment income. In Life, an increase in
adjusted operating profit for both PruFund and Traditional with profits
business following higher opening contractual service margin as a result of
yield increases over 2024, was mainly offset by a decrease in the result for
shareholder annuities following lower return on excess assets. Over the six
months ended 30 June 2025 we have continued to make steady progress on our
transformation efforts, and have now delivered cost savings of £213 million
against our upgraded target of £230 million by the end of 2025.
The strategic actions taken in the period to grow the business and generate
inflows set out above will benefit our target announced in March of adjusted
operating profit annual growth of 5% or more on average over the three years
2025-2027.
Operating change in Contractual Service Margin (CSM) reduced to £65 million
(30 June 2024: £99 million) primarily due to assumption changes and
variances in shareholder annuities. The closing CSM of £6.0 billion
(31 December 2024: £6.0 billion) demonstrates a strong store of future
value.
Our IFRS result returned to a profit after tax attributable to equity holders
of £248 million (30 June 2024: £56 million loss) due to significant
reductions in losses on short-term fluctuations in investment returns and
mismatches arising on the application of IFRS 17, which was impacted by a
significant non-recurring loss in 2024.
Underlying capital generation increased to £331 million (30 June 2024: £297
million) with improved results across all segments. Operating capital
generation was £408 million (30 June 2024: £486 million) with the improved
underlying capital generation partly offsetting a reduced benefit from
management actions in the period. As we announced in our annual report and
accounts in March, we are targeting cumulative operating capital generation
(excluding new business strain) of £2.7 billion for the three years to 2027
and we are on track with £443 million delivered for the six months to
30 June 2025.
Total capital generation was £354 million (30 June 2024: £813 million) with
the the six months to 2024 benefitting from the reversal of an eligible own
funds restriction in the period.
The continued strength of our financial position and shareholder Solvency II
coverage ratio of 230% (30 June 2024: 210%) allows us to declare an interim
ordinary dividend of 6.7 pence per share (30 June 2024: 6.6 pence per share),
payable on 17 October 2025. This is in line with our progressive dividend
policy announced in March.
Financial Review
AUMA and net client flows
Assets under management and administration (AUMA) grew by £8.7 billion to
£354.6 billion (31 December 2024: £345.9 billion) in the six months ended
30 June 2025 following net inflows from open business of £2.1 billion
(30 June 2024: £1.1 billion net outflows) and favourable market movements.
Net flows from open business primarily includes flows from Asset Management,
PruFund, Shareholder annuities and advice and have increased mainly due to a
return to net inflows in Asset Management. In line with our key priorities for
our Life business, a further bulk purchase annuity (BPA) transaction
contributed £0.2 billion net inflows from open business following its
completion in March 2025.
The following table shows an analysis of net client flows by segment:
Net client flows
Net flows Net flows Total net AUMA(i)
from open business other client flows
For the six months ended 30 June For the year ended 31 December For the six months ended 30 June For the year ended 31 December For the six months ended 30 June For the year ended 31 December As at 30 June As at 31 December
2025 2024 2024 2025 2024 2024 2025 2024 2024 2025 2024 2024
£bn £bn £bn £bn £bn £bn £bn £bn £bn £bn £bn £bn
Institutional Asset Management(ii) 1.9 (0.5) (0.9) - - - 1.9 (0.5) (0.9) 102.9 97.8 96.1
Wholesale Asset Management(ii) 0.7 - - - - - 0.7 - - 65.2 56.1 62.8
Other Asset Management - - - - - - - - - 0.7 1.0 0.9
Total Asset Management 2.6 (0.5) (0.9) - - - 2.6 (0.5) (0.9) 168.8 154.9 159.8
With-profits: PruFund (0.6) (0.6) (0.9) - - - (0.6) (0.6) (0.9) 64.7 62.9 64.0
With-profits: traditional(iii) - - - (2.3) (2.3) (4.8) (2.3) (2.3) (4.8) 64.8 63.7 61.6
Shareholder annuities (0.3) (0.2) (0.2) - - - (0.3) (0.2) (0.2) 15.2 15.2 15.1
Other Life(ii, iii) 0.4 0.2 0.1 (2.3) (1.3) (2.8) (1.9) (1.1) (2.7) 40.1 48.3 44.4
Total Life(iv, v) (0.5) (0.6) (1.0) (4.6) (3.6) (7.6) (5.1) (4.2) (8.6) 184.8 190.1 185.1
Corporate assets - - - - - - - - - 1.0 1.1 1.0
Total 2.1 (1.1) (1.9) (4.6) (3.6) (7.6) (2.5) (4.7) (9.5) 354.6 346.1 345.9
i £18.4 billion (£17.1 billion as at 30 June 2024, £18.0
billion as at 31 December 2024) of total AUMA relates to assets under advice.
ii £5.7 billion AUMA at 31 December 2024 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 £2.8 billion AUMA previously in Other life is presented in
With-profits: traditional from 1 January 2025 better reflecting the nature of
the business.
iv £155.6 billion of AUMA of Life is managed internally by the
Group's Asset Management business (£158.7 billion as at 30 June 2024,
£156.1 billion as at 31 December 2024).
v Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. Comparatives for 30 June
2024 are presented on the new segment basis. PruFund includes both UK and
non-UK.
Asset Management
Asset Management AUMA of £168.8 billion (31 December 2024: £159.8 billion)
has grown in the first half of 2025, with net inflows of £2.6 billion
(30 June 2024: £0.5 billion net outflows) and positive market and other
movements of £6.4 billion (30 June 2024: £1.2 billion).
Institutional Asset Management net client inflows have grown to £1.9 billion
(30 June 2024: £0.5 billion outflows). International inflows were £3.2
billion (30 June 2024: £1.9 billion) as a large mandate win of £2.2 billion
in the Netherlands alongside improved flows in our structured credit channel
helped drive increased inflows, partly offset by redemptions in South Africa
and Australia. Net client inflows in International were partly offset by
continued outflows in the UK, though these have reduced to £1.3 billion
(30 June 2024: £2.4 billion outflows) as defined benefit corporate pension
schemes' de-risking strategies continue to have an impact, though we have seen
success in winning fixed income and structured credit mandates.
Institutional AUMA increased £6.8 billion to £102.9 billion as at 30 June
2025 (31 December 2024: £96.1 billion), with £2.7 billion of the AUMA
increase being due to the acquisition of P Capital Partners (PCP).
Institutional AUMA also benefited from market movements of £2.2 billion, with
major equity and bond markets improving.
Our expertise in private markets, which offers private fixed income,
alternatives, real estate and infrastructure equity offerings, remains a key
component of our Institutional investment capability, and represents a
resilient, high-margin source of revenues. Our private assets under management
increased to £76.7 billion of AUMA as at 30 June 2025 (31 December 2024:
£74.1 billion) due to the acquisition of PCP.
In Wholesale Asset Management, net inflows increased to £0.7 billion
(30 June 2024: net nil flows) following strong fund performance, with
improvements seen over three and five years performance, aligning to our
business model to invest for the long-term to deliver attractive outcomes to
our customers and clients. 50%, 75% and 71% of our Wholesale funds ranked in
the upper performance quartiles over one, three and five years as of 30 June
2025 (31 December 2024: 53%, 63%, and 59% over one, three and five years).
Wholesale AUMA increased £2.4 billion to £65.2 billion as at 30 June 2025
(31 December 2024: £62.8 billion), benefitting from market and other
movements of £1.7 billion, for similar reasons to Institutional.
Life
Net client outflows from open business, which primarily comprises PruFund,
shareholder annuities and advice, reduced slightly to £0.5 billion for the
six months ended 30 June 2025 (30 June 2024: £0.6 billion).
PruFund, our insurance-based smoothing solution offering a blend of public and
private investments to clients, had net client outflows of £0.6 billion
(30 June 2024: £0.6 billion net client outflows). PruFund experienced
increased outflows in April at the time of heightened market volatility
following the announcement of broad-based tariff measures by the United
States. PruFund net outflows narrowed from May and in the month of June
returning to a net client inflow position following a recovery in the markets,
strong investment performance and interest rate falls in the first half of
2025 which can increase the attractiveness of multi-asset investment
solutions.
Shareholder annuities net client outflows of £0.3 billion (30 June 2024:
£0.2 billion) include the gross client inflows of £0.2 billion from new BPA
business so far this year, offset by consistent outflows from annuities in
payment of £0.5 billion (30 June 2024: £0.5 billion). Other life net client
inflows from open business of £0.4 billion (30 June 2024: £0.2 billion)
includes stable inflows from advice of £0.4 billion.
Total net client flows from the Life business were £5.1 billion outflows
(30 June 2024: £4.2 billion). Expected net outflows for our traditional
with-profits business of £2.3 billion (30 June 2024: £2.3 billion),
increased outflows from our adviser platform business, following our strategic
repositioning announced in 2024 and expected run-off from our other small
closed books of business add to the net client outflows from open business.
Total Life AUMA reduced by £0.3 billion to £184.8 billion (31 December
2024: £185.1 billion) with the net client outflows being largely offset by
positive market and other movements of £4.8 billion (30 June 2024: £6.3
billion) driven by improving equity and bond markets.
Earnings
Adjusted operating profit before tax
Adjusted operating profit before tax has increased by £3 million to £378
million benefitting from a £4 million increase in Life offsetting a marginal
decrease in Asset Management.
The following table shows an analysis of adjusted operating profit before tax
by segment:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Asset Management 128 129 289
Revenue(i) 514 499 1,008
Costs (388) (388) (774)
Performance fees 7 13 35
Investment income and minority interest (5) 5 20
Life(ii) 344 340 746
With-profits: PruFund 112 98 226
With-profits: traditional 120 108 222
Shareholder annuities 113 132 308
Other Life (1) 2 (10)
Corporate Centre(ii) (94) (94) (198)
Adjusted operating profit before tax 378 375 837
i £154 million of revenue is in respect of assets managed on
behalf of Life (six months ended 30 June 2024: £160 million, year ended
31 December 2024: £324 million).
ii Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. The comparatives for 30 June
2024 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 revenue increased to £514 million (30 June 2024: £499
million) while operating costs remained at £388 million. A continued focus on
cost discipline has allowed us to offset the impact of inflation on the
operating costs and also reinvest to support growth. The benefits of our
continued focus on delivering growth are reflected in the increased revenue
which includes the income earned by BauMont following our acquisition in
October 2024. Together, this leads to a continuing improvement in the
cost-to-income ratio for the Asset Management business, reducing it to 75%
(31 December 2024: 76%).
Revenue earned by Institutional Asset Management was £300 million (30 June
2024: £294 million), including BauMont revenue, and in Wholesale Asset
Management, revenue increased to £214 million (30 June 2024: £205 million).
The increases reflect fees earned on higher average AUMA, in particular
equities funds which have seen inflows.
The average revenue margin for Asset Management remained at 32 bps for the six
months ended 30 June 2025 (31 December 2024: 32 bps). Average revenue
margins in the Institutional Asset Management business remained at 38 bps,
while Wholesale Asset Management revenue margins reduced marginally to 55 bps
from 56 bps mainly due to the concentration of new flows in lower margin
funds.
Asset Management adjusted operating profit before tax reduced marginally to
£128 million for the six months ended 30 June 2025 (30 June 2024: £129
million) as reductions in performance fees and investment income offset the
increase in revenue. Investment income fell £10 million to £3 million
reflecting foreign exchange revaluation losses as USD weakened against GBP.
Investment income relates to returns on seed investments, units held to hedge
management incentive schemes, interest income on cash balances and any foreign
exchange revaluation impacts. Performance fees includes carried interest which
reduced due to timing of events that crystallise the recognition of the
income.
Life
Adjusted operating profit before tax from our Life business was £344 million
for the six months ended 30 June 2025 and increased by £4 million compared
to 30 June 2024 with improved contribution from with-profits business due to
an increase in Contractual Service Margin (CSM) release. This was partly
offset by lower expected return on excess assets and negative experience
variances in shareholder annuities.
With-profits: PruFund
The table below shows a further analysis of the adjusted operating profit
before tax from PruFund:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
CSM release to adjusted operating profit 110 103 221
Expected return on excess assets(i) 5 9 18
Other (3) (14) (13)
PruFund adjusted operating profit before tax 112 98 226
i Excess assets net of financial liabilities.
The CSM for PruFund is primarily based on the expected value of future
shareholder transfers. The CSM at the start of 2025 is higher than the start
of 2024, following the increase in yields over 2024. There has also been an
increase in CSM amortisation rate to 11.1% (2024: 10.9%), reflecting a small
change in the run-off profile of the PruFund business. These two factors
result in an increase in the amount of CSM released to adjusted operating
profit to £110 million (30 June 2024: £103 million).
The expected return on excess assets decreased by £4 million to £5 million
(30 June 2024: £9 million). The expected rate of return is set at the start
of the reporting period and a fall in 1-year risk-free rates over 2024
contributed to a lower expected rate of return in 2025 of 6.2% compared to
6.8% in 2024. The opening value of excess assets in the With-Profits Fund has
also fallen following an increase in longer term yield curves over 2024 which
has resulted in lower surplus assets being allocated to PruFund. This combined
with the lower expected rate of return has driven the decrease in expected
return on excess assets.
The reduction in other losses of £11 million to £3 million (30 June 2024:
£14 million) is primarily due to a reduction in expected expense overrun on
writing new PruFund business.
With-profits: traditional
The table below shows a further analysis of the adjusted operating profit
before tax from traditional with-profits business:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
CSM release to adjusted operating profit 107 90 198
Expected return on excess assets 15 18 36
Other (2) - (12)
Traditional adjusted operating profit before tax 120 108 222
As outlined above for PruFund, the CSM for traditional with-profits at the
start of 2025 is higher than at the start of 2024 and similarly there has also
been an increase in CSM amortisation rate to 13.1% (2024: 12.8%). 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 higher
opening position is the main contributor to the increase in the amount of CSM
release to adjusted operating profit to £107 million (30 June 2024: £90
million).
The expected return on the shareholders' share of excess assets in
traditional-with profits decreased by £3 million to £15 million (30 June
2024: £18 million) for the same reasons described above for PruFund.
Shareholder annuities
The table below shows a further analysis of the adjusted operating profit
before tax from shareholder annuities:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Expected return on excess assets 61 74 147
CSM release 55 48 113
Risk adjustment unwind 10 9 21
Asset trading and portfolio management actions 6 3 -
Experience variances (19) (2) 2
Other provisions and reserves - - 25
Shareholder annuities adjusted operating profit before tax 113 132 308
Shareholder annuities adjusted operating profit before tax has decreased by
£19 million to £113 million (30 June 2024: £132 million). The recurring
source 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 £13 million to £61
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 5.6% for 2024 to 5.2% for 2025, driven
by a reduction in the 1-year risk-free rate. The rise in longer-term risk-free
rates has driven the reduction in excess assets.
The release of the CSM to adjusted operating profit for shareholder annuities
was £55 million in the six months ended 30 June 2025 compared to £48
million for the six months ended 30 June 2024. The main driver of the
increase is due to a higher opening CSM following longevity assumption changes
made in the second half of 2024. The CSM released represents 7.8% of the 2025
CSM before amortisation (2024: 7.6%).
Experience variances in the period include a £8 million payment in relation
to a legacy contract and higher than expected expenses.
Other provisions and reserves of £25 million in the year ended 31 December
2024 related to a change in persistency assumptions to reflect experience on
the lifetime mortgages book. For the six months ended 30 June 2025 there had
been no further change in persistency assumptions.
The credit quality of fixed income assets in the annuity portfolio remains
strong in the first half of 2025. 99% of the debt securities held by the
shareholder annuity portfolio are investment grade and 74% are A or above. In
addition, 82% of the shareholder annuity portfolio is held in debt securities
categorised as either Risk Free or Secured (including cash). The downgrade
experience (defined as movements in notching across all credit ratings and,
otherwise, letter downgrades) in the first six months of 2025 has been
relatively light, with less than 4% of bonds in the shareholder annuity
portfolio subject to a downgrade.
Other Life
The decrease in Other Life of £3 million to £1 million loss (30 June 2024:
£2 million profit) is primarily due to higher interest income in 2024.
Corporate centre
The loss in Corporate Centre remained at £94 million for the six months ended
30 June 2025 (30 June 2024: £94 million) as a reduction in finance costs on
subordinated debt, following repurchase and redemption of the subordinated
notes in June and July 2024, was offset by a reduction in interest income and
profit from our treasury operations. Underlying Head Office expenses were
broadly flat on the six months ended 30 June 2024.
Operating change in Contractual Service Margin (CSM)
Operating change in CSM decreased to £65 million in the six months ended
30 June 2025 (30 June 2024: £99 million). Assumption changes and variances
are the main contributor to the reduction offset partly by increased new
business contribution.
The following table shows a breakdown of the operating change in CSM:
For the six months ended 30 June For the year ended 31 December
2025 2024(i) 2024
£m £m £m
With-profits: PruFund 97 74 99
With-profits: traditional 17 46 23
Shareholder annuities (49) (24) 172
Other - 3 -
Operating change in CSM 65 99 294
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. Comparatives for 30 June 2024
are presented on the new segment basis. PruFund UK and non-UK business were
previously presented separately in 'Wealth' and 'Life' operating segments,
respectively.
With-profits: PruFund
The following table provides an analysis of the key drivers of the operating
change in the CSM for PruFund:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Expected real-world return 155 159 320
Release of CSM to adjusted operating profit (110) (103) (221)
New business 45 34 71
Assumption changes and variances 7 (16) (71)
With-profits: PruFund operating change in CSM 97 74 99
The expected real-world return on the CSM for PruFund business more than
offsets the release of the CSM to adjusted operating profit, resulting in a
net contribution to operating change in CSM of £45 million (30 June 2024:
£56 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 7.8% for 2025 (2024: 8.2%), driven by a reduction in the 1-year
risk-free rate while the opening Variable Fee increased reflecting a rise in
the longer-term yield curve in 2024, and this resulted in the expected
real-world return being broadly stable.
PruFund new business contribution to the CSM increased to £45 million
(30 June 2024: £34 million). The rise, relative to the six months ended
30 June 2024, is due to an increase in the projected future shareholder
transfers driven by an increase in longer-term risk-free rates over 2024, with
gross inflows into PruFund consistent with prior period.
Assumption changes and variances of £7 million (30 June 2024: £16 million
loss) mainly relate to benefits from model improvements. 2024 included a loss
from persistency experience compared to our long term assumptions.
i The Variable Fee is the amount of the Group's share of the fair value of the
underlying items less fulfillment cash flows that do not vary based on the
returns on underlying items. Further information is provided in Note 1.5
Accounting policies of the 2024 Annual Report & Accounts.
With-profits: traditional
The following table provides an analysis of the key drivers of the operating
change in the CSM for traditional with-profits:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Expected real-world return 135 137 272
Release of CSM to adjusted operating profit (107) (90) (198)
New business(i) 2 - -
Assumption changes and variances (13) (1) (51)
With-profits: traditional operating change in CSM 17 46 23
i Consists of increments on legacy business.
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
£28 million (30 June 2024: £47 million). Similar to PruFund, the expected
rate of return decreased to 7.8% for 2025 (2024: 8.2%), while the opening
Variable Fee increased resulting in the expected real-world return being
broadly stable at £135 million (30 June 2024: £137 million).
The loss from assumption changes and variances of £13 million (30 June 2024:
£1 million) is primarily a result of improvements in prospective with-profits
modelling for future bonus rates.
Shareholder annuities
The following table provides an analysis of the key drivers of the operating
change in the CSM for shareholder annuities:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Interest accreted on the CSM 17 16 37
Release of CSM to adjusted operating profit (55) (48) (113)
New business 7 6 17
Assumption changes and variances (18) 2 231
Shareholder annuities operating change in CSM (49) (24) 172
Interest accreted on the CSM is calculated based on the opening CSM including
new business, assumption changes and variances. The interest rate is based on
the forward curve 'locked in' at IFRS 17 transition date (1 January 2022) and
has slightly reduced to 2.1% (2024: 2.3%) due to a small decrease in the
five-year point on the curve. The impact of this reduction mostly offsets the
slight increase in interest accreted following longevity assumption changes
made in the second half of 2024 and results in a £1 million increase in
interest accreted on the CSM.
The contribution from new business to the operating change in CSM includes the
bulk annuity transactions completed and other top-ups on existing business in
each year.
The loss from assumption changes and variances is £18 million (30 June 2024:
£2 million gain) due to the impact of increased expense provisions which are
partly offset by favourable longevity experience.
IFRS result after tax
The following table shows a reconciliation of adjusted operating profit before
tax to IFRS result:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Adjusted operating profit before tax 378 375 837
Short-term fluctuations in investment returns (12) (284) (643)
Mismatches arising on application of IFRS 17 2 (119) (333)
Amortisation and impairment of intangible assets acquired in business (11) (19) (115)
combinations
Profit on disposal of business and corporate transactions 5 11 11
Restructuring costs and other(i) (37) (29) (106)
IFRS profit/(loss) before tax and non-controlling interests attributable to 325 (65) (349)
equity holders
IFRS profit attributable to non-controlling interests 8 8 17
IFRS profit/(loss) before tax attributable to equity holders 333 (57) (332)
Tax (charge)/credit attributable to equity holders (85) 1 (15)
IFRS profit/(loss) after tax attributable to equity holders 248 (56) (347)
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 6 which include costs allocated to the With-Profits
Fund.
The IFRS result after tax attributable to equity holders for the six months
ended 30 June 2025 is a profit of £248 million (30 June 2024: £56 million
loss). Adjusted operating profit before tax has been marginally offset by
losses on non-operating items.
Losses from short-term fluctuations in investment return significantly reduced
in the six months to 30 June 2025 to £12 million (30 June 2024: £284
million). These losses primarily comprise £50 million (30 June 2024: £101
million) on the hedging instruments held to protect the Solvency II capital
position from falling equity markets, due to rises in equity values in each
period. There were also losses of £23 million (30 June 2024: £151 million)
on interest rate swaps purchased to protect PAC's Solvency II capital position
against falls in interest rates, driven by rises in longer-term risk-free
rates in the six months ended 30 June 2025 which were lower than those
experienced over 2024. The losses were largely offset by £37 million of
foreign exchange gains (30 June 2024: £4 million losses) on USD denominated
subordinated loan notes due to weakening of the currency against GBP over the
six months ended 30 June 2025.
Mismatches on the application of IFRS 17 primarily relates to a mismatch which
occurs in relation to non-profits business in the With-Profits Fund reduced to
almost nil in the six months to 30 June 2025 (30 June 2024: £114 million
loss). The mismatch increased in the six months to 30 June 2024 due to a
revised fair value calibration of the business in the With-Profits Fund to
allow for the UK reforms to Solvency II.
Amortisation and impairment of intangible assets arising on business
combinations was £11 million (30 June 2024: £19 million). The six months to
30 June 2024 included an impairment of £12 million in relation to the
M&G Wealth Platform business with no further impairment in 2025.
In the six months ended 30 June 2025, restructuring costs and other of £37
million (30 June 2024: £29 million) includes £11 million (30 June 2024:
£10 million) in relation to actions taken to reduce our cost base, £8
million (30 June 2024: £8 million) of investment spend in building out
capacity in our Asset Management business and £6 million (30 June 2024: £5
million) on transformation within the finance function.
The equity holders' tax charge for the six months ended 30 June 2025 is £85
million (30 June 2024: £1 million credit) representing an effective tax rate
of 25.5% (30 June 2024: 1.8%). Excluding non-recurring items, the equity
holders' effective tax rate is 26.1% (30 June 2024: 10.5%). This rate
diverges from the anticipated tax benefit at the UK statutory effective rate
of 25.0% (2024: 25.0%), mainly due to the adverse effects of non-deductible
expenses and differences in the taxation of the life insurance business.
Capital and liquidity
Capital generation
Operating capital generation of £408 million (30 June 2024: £486 million),
although reduced compared to the same period in 2024, continues to be strong
with improved underlying capital generation of £331 million (30 June 2024:
£297 million). Total capital generation was £354 million for the six months
ended 30 June 2025 (30 June 2024: £813 million) with the six months to 30
June 2024 benefitting from the reversal of an eligible own funds restriction
in the period.
The following table shows an analysis of total capital generation:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Asset Management 136 118 261
Life(i) 289 283 616
Corporate Centre(i) (94) (104) (233)
Underlying capital generation 331 297 644
Other operating capital generation 77 189 289
Operating capital generation 408 486 933
Market movements (35) 27 (59)
Restructuring and other (61) (21) (135)
Tax 42 105 153
Eligible own funds restriction - 216 216
Total capital generation 354 813 1,108
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. The comparatives for 30 June
2024 for Life and Corporate Centre have been restated to reflect the revised
segments and the adjustment of some advice-related costs.
Underlying capital generation
Underlying capital generation increased in the six months ended 30 June 2025
to £331 million (30 June 2024: £297 million) with improved results across
all segments.
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Asset Management 136 118 261
Life(i) 289 283 616
With-profits: PruFund 115 96 239
- In-force 126 134 264
- New business (11) (38) (25)
With-profits: traditional 80 94 190
Shareholder annuities 99 96 197
Other life (5) (3) (10)
Corporate Centre(i) (94) (104) (233)
Underlying capital generation 331 297 644
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. The comparatives for Life and
Corporate Centre for 30 June 2024 have been restated to reflect the revised
segments and the adjustment of some advice-related costs.
In Asset Management, underlying capital generation increased to £136 million
(30 June 2024: £118 million) benefitting from higher revenue and a capital
release in the six months ended 30 June 2025, mainly from reduced market
risk.
Underlying capital generation from PruFund increased to £115 million
(30 June 2024: £96 million). In-force business generated £126 million
(30 June 2024: £134 million) reflecting the impact of reductions in the
expected real-world return on the present value of shareholder transfers from
8.2% pa in 2024 to 7.8%% pa in 2025 following a fall in 1-year risk-free rates
over 2024. New business strain from the PruFund business has decreased to £11
million (30 June 2024: £38 million) mainly due to a reduction in new
business expense overrun, with gross inflows consistent with prior period.
Traditional with-profits business generated underlying capital of £80
million, a decrease on the prior period (30 June 2024: £94 million). The
decrease in underlying capital generation is driven by the impact of
reductions in the expected real-world return on the present value of
shareholder transfers, as noted for PruFund.
The contribution to underlying capital generation from shareholder annuities,
was broadly in line with the same period last year at £99 million (30 June
2024: £96 million). The capital strain of writing new bulk purchase annuities
reduced by £21 million to £13 million in 2025 (30 June 2024: £34 million)
mostly offset by a reduction in the expected return due to lower surplus
assets in the annuity portfolio and a lower expected rate of return.
Corporate Centre negative contribution has improved including the impact of a
reduction in the debt coupon payments following the subordinated debt
deleveraging actions announced in June 2024 and a release of capital held by
our Treasury function in respect of market risk.
Operating capital generation
Operating capital generation decreased to £408 million in the six months
ended 30 June 2025 ( 30 June 2024: £486 million). An increase in underlying
capital generation is more than offset by a reduction in other operating
capital generation.
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Underlying capital generation 331 297 644
Model improvements (6) - 160
Assumption changes (30) - 163
Management actions and other (incl. experience variances) 113 189 (34)
Other operating capital generation 77 189 289
Operating capital generation 408 486 933
Other operating capital generation has decreased to £77 million (2024: £189
million) with benefits from management actions partly offset by losses from
model improvements, experience variations and assumption changes.
Assumption changes of £(30) million (30 June 2024: £nil) reflect an
increase in relation to investment management expense assumptions which
reduces own funds.
Management actions and other largely reflect a £140 million benefit from
increasing the level of equity hedging on the with-profits business, in line
with increased equity exposure, and a £41 million beneficial impact following
new longevity reinsurance on certain bulk purchase annuity business. This is
partly offset by unfavourable non-market experience variances of £52 million
(30 June 2024: £12 million) mainly in relation to expenses. Additionally, in
the six month period to 30 June 2024 there was a £62 million benefit from
distribution of excess surplus from the with-profits inherited estate.
Total capital generation
Total capital generation was £354 million for the six months ended 30 June
2025 (30 June 2024: £813 million).
Market movements over the six months to 30 June 2025 have resulted in a
negative impact of £35 million (30 June 2024: £27 million gain). The main
driver of market movements is a loss of £94 million (30 June 2024: £104
million gain) arising from a fall in the present value of shareholder
transfers less equity hedges, due to the actual return achieved on the
With-Profits Fund over the six months to 30 June 2025 being lower than the
expected real-world return. Additionally there has been a loss on interest
rate swaps, designed to protect the Solvency II capital position in a falling
interest rate environment, of £23 million (30 June 2024: £151 million).
These losses are partly offset by the movement in Solvency Capital
Requirements and risk margin net of TMTP attributable to market movements
which is a benefit of £64 million compared to £96 million in the six months
ended 30 June 2024 driven by the lower than expected actual return on the
With-Profits Fund.
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.
In the six months to 30 June 2024 a pre-existing restriction of £216 million
was released following the subordinated debt deleveraging actions announced in
June 2024. There is no eligible own funds restriction at 30 June 2025 and
31 December 2024.
Restructuring costs and other movements loss of £61 million (30 June 2024:
£21 million) have increased as the six months ended 30 June 2024 benefitted
from the implementation of the Solvency UK reforms which resulted in a £53
million capital reduction. Restructuring costs have also increased by £8
million, as set out in the IFRS result after tax section.
Capital generation with respect to tax has reduced to £42 million over the
six months to 30 June 2025 (30 June 2024: £105 million). Benefits from
current tax credits of £29 million (30 June 2024: £8 million) and the loss
absorbing capacity of deferred tax of £28 million (30 June 2024: £53
million) were partly offset by a reduction in net deferred tax assets of £15
million (30 June 2024: £23 million increase).
Capital position
Shareholder Solvency II surplus and ratio
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£bn £bn £bn
Own Funds 8.3 8.7 8.5
SCR 3.6 4.1 3.8
Shareholder Solvency II coverage ratio 230% 210% 223%
The Group's shareholder Solvency II coverage ratio increased to 230%
(31 December 2024: 223%). Shareholder Solvency II surplus remained at £4.7
billion as at 30 June 2025 (31 December 2024: £4.7 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 £4.2
billion (30 June 2024: £4.3 billion). The stable surplus reflects the total
capital generation of £354 million offset by negative capital movements.
These were mainly the payment of dividends to shareholders and the impact of a
£89 million capital movement in relation to intangible assets acquired in the
P Capital Partners acquisition. The reduction in SCR is largely driven by an
increased level of equity hedging.
Our With-Profits Fund continues to have a substantial Solvency II surplus and
a coverage ratio of 303% (31 December 2024: 284%). The increase in surplus
and ratio reflects expected surplus from in-force business and positive market
movements.
The regulatory Solvency II coverage ratio of the Group as at 30 June 2025 is
170% (31 December 2024: 168%). This view of solvency combines the shareholder
position and the With-Profits Fund, but excludes all surplus within the
With-Profits Fund.
Leverage Ratio
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Nominal value of subordinated debt(i) 2,754 2,784 2,788
Shareholder Solvency II own funds(i) 8,265 8,714 8,525
Leverage ratio 33% 32% 33%
i The £300m of subordinated debt redeemed on 20 July 2024 has
been excluded from both the Nominal value and the own funds for 30 June 2024.
The leverage ratio is defined as the nominal value of the 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 section
above. Our leverage ratio has remained at 33% (31 December 2024: 33%).
Liquidity
The following table shows the movement in cash and liquid assets held by the
Group's holding companies during the period:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Opening cash and liquid assets at the beginning of the period 730 977 977
Cash remittances from subsidiaries 432 541 909
Corporate costs (70) (59) (121)
Interest paid on core structural borrowings (83) (98) (188)
Debt repurchase and redemption(i) - (150) (450)
Cash dividends paid to equity holders (321) (311) (468)
Shares purchased by employee benefits trust (15) - (4)
Acquisition of and capital injections into subsidiaries (1) (62) (22)
Interest income(ii) 15 21 36
Other 28 32 61
Closing cash and liquid assets at the end of the period(ii) 715 891 730
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 13 for further
information.
ii Closing cash and liquid assets at 30 June 2025 included a
£660 million (£859 million as at 30 June 2024, £705 million as at
31 December 2024) intercompany loan asset with Prudential Capital plc, which
acts as the Group's treasury function. Interest income is in relation to these
loans.
The cash and liquid assets held by the Group's holding companies of £715
million at 30 June 2025 has reduced only marginally since the start of the
year. Cash remittances from subsidiaries reflect the underlying strength of
their capital position and are £432 million in the six months to 30 June
2025 (30 June 2024: £541 million). The slightly higher remittances in 2024
facilitated, in part, the payment of the repurchase and redemption of £450
million of subordinated notes in June and July 2024. The impact of the lower
subordinated debt also results in a reduction in interest paid on these
structural borrowings to £83 million (30 June 2024: £98 million) while the
reduced cash balances attracted lower interest income of £15 million
(30 June 2024: £21 million).
Cash dividends paid to equity holders increased to £321 million (30 June
2024: £311 million) following the announcement of our progressive dividend
policy and the higher dividend per share declared in March 2025.
Other movements in cash and liquid assets held by the holding companies
represent the payments that arise in the normal course of business, including
Group tax relief of £18 million (30 June 2024: £29 million).
Risk management statement
Overview of risk profile
The principal risks we are currently facing and to which we will continue to
be exposed remain broadly unchanged from those detailed in the 2024 Annual
Report and Accounts, which are: business environment and market forces;
sustainability and ESG; financial (investment, credit, market, corporate
liquidity and insurance); operational (including resilience, third party
suppliers and technology); change; people; regulatory; reputational; and
conduct risks.
The following is highlighted as notable in relation to our principal risks:
- The nature of financial crime threats is evolving, and there are
continuing rigorous regulatory expectations. A dedicated Financial Crime
programme, established in 2024, progresses with activities to strengthen,
mature, and optimise our financial crime framework, processes and controls, as
well as implement an enhanced target operating model.
- Positive progress on the risk and control environment continues across
M&G plc in building on the risk and control foundations previously put in
place. Management attention and implementation work is focused on embedding
the Risk Management Framework, including driving further consistency in
group-wide Key Control Assessments across the business.
- The investment and economic landscape remains challenging as a result of
geopolitical and economic instability in many parts of the world. Recent
global events have introduced a new level of macro-economic risk, which makes
saving for the future more challenging. The drivers include market volatility;
risk of economic downturns; and factors including monetary policy and
geopolitics. Geopolitical risk remains elevated with the conflicts in the
Middle East and Ukraine, risk of US tariffs impacting global economic growth,
and ongoing tensions between China and the US. Within the UK market, there are
ongoing fiscal and legislative risks, including potential changes in
legislation resulting from the Government's stated intent to pursue leasehold
reform.
- With respect to technology and artificial intelligence (AI), there are a
range of emerging risks driven by the fast pace of technological advancement,
including AI-enhanced malicious cyber-attacks, AI-assisted disinformation, and
the opportunity costs of failing to optimise new technology to drive better
outcomes for our clients and operational efficiency.
- The quantum of regulatory change and our business growth in new markets
and products will impact our regulatory footprint. We remain focused on
adapting to meet the expectations of our regulators, including on Consumer
Duty and operational resilience.
Statement of Directors' responsibilities
The Directors confirm that these condensed consolidated interim financial
statements have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the interim management report includes a true and
fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have occurred during the first six
months and their impact on the condensed consolidated interim financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
- material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report.
The maintenance and integrity of the M&G plc website is the responsibility
of the Directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that might have occurred to the condensed
consolidated interim financial statements since they were initially presented
on the website.
The Directors of M&G plc are listed in the M&G plc annual report for
31 December 2024.
A list of current Directors is maintained on the M&G plc website:
www.mandg.com.
By order of the board:
Andrea Rossi
Kathryn
McLeland
Group Chief Executive
Officer Chief
Financial Officer
2 September
2025
2 September 2025
Independent review report to M&G plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed M&G plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Interim financial
report of M&G plc for the six month period ended 30 June 2025 (the
"period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
- the condensed consolidated statement of financial position as at 30 June
2025;
- the condensed consolidated income statement and condensed consolidated
statement of comprehensive income for the period then ended;
- the condensed consolidated statement of cash flows for the period then
ended;
- the condensed consolidated statement of changes in equity for the period
then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim financial report of
M&G plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Interim financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim financial report, including the interim financial statements, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the Interim financial report in accordance with
the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority. In preparing the Interim financial
report, including the interim financial statements, the directors are
responsible for assessing the group'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 to cease operations, or have no realistic alternative
but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim financial report based on our review. Our
conclusion, including our Conclusions relating to going concern, is based on
procedures that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
2 September 2025
Condensed consolidated income statement (unaudited)
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
Note £m £m £m
Insurance revenue 4 1,986 1,978 4,095
Insurance service expenses (1,451) (1,425) (2,971)
Net expenses from reinsurance contracts held (21) (15) (28)
Insurance service result 514 538 1,096
Interest revenue from financial assets not measured at fair value through 291 340 683
profit or loss (FVTPL)
Interest revenue from financial assets measured at FVTPL 1,517 1,272 2,666
Net change in investment contract liabilities without discretionary (226) (224) (461)
participation features (DPF)
Net credit impairment losses - (11) (15)
Other investment return(i) 3,715 3,097 5,813
Investment return 5,297 4,474 8,686
Finance expenses from insurance contracts issued (4,184) (4,196) (8,426)
Finance expenses from reinsurance contracts held (25) (50) (10)
Net insurance finance expenses (4,209) (4,246) (8,436)
Net insurance and investment result 1,602 766 1,346
Fee income 5 527 508 1,029
Other income 31 25 70
Administrative and other expenses 6 (1,394) (1,147) (2,566)
Finance costs 6 (68) (50) (121)
Movements in third party interest in consolidated funds (148) 96 363
Share of profit from joint ventures and associates 9 11 24
Profit before tax(ii) 559 209 145
Tax charge attributable to policyholders' returns 7 (226) (266) (477)
Profit/(loss) before tax attributable to equity holders 333 (57) (332)
Total tax charge (311) (265) (492)
Less tax charge attributable to policyholders' returns 7 226 266 477
Tax (charge)/credit attributable to equity holders 7 (85) 1 (15)
Profit/(loss) for the period 248 (56) (347)
Profit/(loss) for the period:
Attributable to equity holders of M&G plc 243 (62) (360)
Attributable to non-controlling interests 5 6 13
Total profit/(loss) for the period 248 (56) (347)
Earnings per share:
Basic (pence per share) 8 10.1 (2.6) (15.1)
Diluted (pence per share) 8 10.0 (2.6) (15.1)
i Other investment return consists of dividend income of
£1,031m (30 June 2024: £1,133m, 31 December 2024: £1,923m), net gains on
financial assets measured at FVTPL of £2,115m (30 June 2024: £1,586m,
31 December 2024: £3,336m), rental income from investment properties of
£454m (30 June 2024: £461m, 31 December 2024: £947m), net gains on
investment properties of £452m (30 June 2024: £54m net losses, 31 December
2024: £340m net losses) and foreign exchange losses of £337m (30 June 2024:
£29m, 31 December 2024: £53m).
ii 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 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 policyholder returns is
removed from the Group's total profit/(loss) before tax in arriving at the
Group's profit/(loss) before tax attributable to equity holders. As the net of
tax profit 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.
Condensed consolidated statement of comprehensive income (unaudited)
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Profit/(loss) for the period 248 (56) (347)
Items that may be reclassified subsequently to profit or loss:
Exchange movements arising on foreign operations(i) 2 (10) (16)
Other comprehensive income/(loss) on items that may be reclassified 2 (10) (16)
subsequently to profit or loss
Items that will not be reclassified to profit or loss:
Gain on remeasurement of defined benefit pension scheme 6 30 52
Tax on remeasurement of defined benefit pension scheme (1) (8) (13)
Other comprehensive income on items that will not be reclassified to profit or 5 22 39
loss
Other comprehensive income for the period, net of related tax 7 12 23
Total comprehensive income/(loss) for the period 255 (44) (324)
Attributable to equity holders of M&G plc 251 (50) (336)
Attributable to non-controlling interests 4 6 12
Total comprehensive income/(loss) for the period 255 (44) (324)
i Of the exchange movements arising on foreign operations, £3m
gain is attributable to equity holders of M&G plc (six months ended
30 June 2024: £10m loss, year ended 31 December 2024: £15m loss) and £1m
loss is attributable to non-controlling interests (six months ended 30 June
2024: £nil, year ended 31 December 2024: £1m loss).
Condensed consolidated statement of financial position (unaudited)
As at 30 June 2025 As at 31 December 2024
Note £m £m
Assets
Goodwill and intangible assets 1,754 1,714
Deferred acquisition costs 21 19
Defined benefit pension asset 10 44 45
Investment in joint ventures and associates accounted for using the equity 270 284
method
Property, plant and equipment 1,495 1,654
Investment property 14,239 14,385
Deferred tax assets 7 449 487
Insurance contract assets 11 45 39
Reinsurance contract assets 11 1,020 1,043
Equity securities and pooled investment funds 66,167 64,890
Loans 4,474 4,135
Debt securities 64,492 69,775
Derivative assets 1,673 1,085
Deposits 18,202 15,794
Current tax assets 71 65
Accrued investment income and other debtors 3,082 2,506
Assets held for sale(i) 1,301 1,466
Cash and cash equivalents 5,283 4,838
Total assets 184,082 184,224
Equity
Share capital 120 120
Share premium reserve 385 383
Shares held by employee benefit trusts (16) (9)
Treasury shares (6) (6)
Retained earnings 14,389 14,435
Other reserves (11,643) (11,642)
Equity attributable to equity holders of M&G plc 3,229 3,281
Non-controlling interests 40 42
Total equity 3,269 3,323
Liabilities
Insurance contract liabilities 11 140,867 141,264
Reinsurance contract liabilities 11 295 280
Investment contract liabilities without discretionary participation features 12 10,947 12,144
(DPF)
Third party interest in consolidated funds 9,343 9,484
Subordinated liabilities and other borrowings 13 6,352 6,486
Defined benefit pension liability 10 251 258
Deferred tax liabilities 7 710 705
Lease liabilities 404 425
Current tax liabilities 141 81
Derivative liabilities 2,622 3,202
Other financial liabilities 1,365 1,018
Provisions 99 114
Accruals, deferred income and other liabilities 6,220 4,367
Liabilities held for sale(i) 1,197 1,073
Total liabilities 180,813 180,901
Total equity and liabilities 184,082 184,224
i Assets held for sale as at 30 June 2025 includes £26m
(31 December 2024: £92m) of seed capital classified as held for sale as it
is expected to be divested within 12 months and £447m of investment property
(31 December 2024: £468m). Additionally £793m (31 December 2024: £906m)
of assets held for sale and £1,178m (31 December 2024: £1,073m) of
liabilities held for sale are in relation to the Group's consolidated
infrastructure capital private equity vehicles. Other assets held for sale
total £35m (31 December 2024: £nil) and other liabilities held for sale
total £19m (31 December 2024: £nil).
Condensed consolidated statement of changes in equity (unaudited)
Share capital Share premium Shares held by employee benefit trusts Treasury shares Retained earnings Other reserves Total equity attributable to equity holders of M&G plc Non-controlling interests Total equity
£m £m £m £m £m £m £m £m £m
As at 1 January 2025 120 383 (9) (6) 14,435 (11,642) 3,281 42 3,323
Profit for the period - - - - 243 - 243 5 248
Other comprehensive income for the period - - - - 5 3 8 (1) 7
Total comprehensive income for the period - - - - 248 3 251 4 255
Non-controlling interests arising through business combinations - - - - - - - 5 5
Dividends paid to equity holders of M&G plc - - - - (321) - (321) - (321)
Dividends paid to non-controlling interests - - - - - - - (11) (11)
Proceeds from shares issued to settle employee share option schemes - 2 - - - - 2 - 2
Shares distributed by employee trusts or from treasury shares - - 8 - (8) - - - -
Vested employee share-based payments - - - - 32 (32) - - -
Expense recognised in respect of share-based payments - - - - - 25 25 - 25
Shares issued to, acquired by or transferred to employee trusts - - (15) - - - (15) - (15)
Tax effect of items recognised directly in equity - - - - 3 3 6 - 6
Net increase/(decrease) in equity - 2 (7) - (46) (1) (52) (2) (54)
As at 30 June 2025 120 385 (16) (6) 14,389 (11,643) 3,229 40 3,269
Share capital Share premium Shares held by employee benefit trusts Treasury shares Retained earnings Other reserves Total equity attributable to equity holders of M&G plc Non-controlling interests Total equity
£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 period - - - - (62) - (62) 6 (56)
Other comprehensive income for the period - - - - 22 (10) 12 - 12
Total comprehensive loss for the period - - - - (40) (10) (50) 6 (44)
Dividends paid to equity holders of M&G plc - - - - (311) - (311) - (311)
Dividends paid to non-controlling interests - - - - - - - (11) (11)
Proceeds from shares issued to settle employee share option schemes - 2 - - - - 2 - 2
Shares distributed by employee trusts or from treasury shares - - 30 - (30) - - - -
Vested employee share-based payments - - - - 30 (30) - - -
Expense recognised in respect of share-based payments - - - - - 21 21 - 21
Shares issued to, acquired by or transferred to employee trusts - - (16) 16 - - - - -
Tax effect of items recognised directly in equity - - - - 1 (3) (2) - (2)
Net increase/(decrease) in equity - 2 14 16 (350) (22) (340) (5) (345)
As at 30 June 2024 119 381 (12) (5) 14,873 (11,655) 3,701 38 3,739
Share capital Share premium Shares held by employee benefit trusts Treasury shares Retained earnings Other reserves Total equity attributable to equity holders of M&G plc Non-controlling interests Total equity
£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 - - - - 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 - - - - (468) - (468) - (468)
Dividends paid to non-controlling interests - - - - - - - (13) (13)
Proceeds from shares issued to settle employee share option schemes - 4 - - - - 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 - 40
Shares issued to, acquired by or transferred to employee trusts 1 - (20) 15 - - (4) - (4)
Tax effect of items recognised directly in equity - - - - 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
Condensed consolidated statement of cash flows (unaudited)
For the six months ended 30 June For the year ended 31 December
2025 Restated(i) 2024
2024
£m £m £m
Cash flows from operating activities:
Profit before tax 559 209 145
Non-cash and other movements in operating assets and liabilities included in
profit before tax:
Investments (1,082) 348 4,167
Other non-investment and non-cash assets (392) (144) 837
Insurance and reinsurance contract liabilities (401) (464) (930)
Investment contract liabilities (1,189) 149 (370)
Other liabilities (including operational borrowings) 3,000 348 (3,041)
Interest income and expense and dividend income included in (2,559) (2,425) (4,773)
profit before tax
Other non-cash items 589 (152) 286
Operating cash items:
Interest receipts 1,845 1,554 3,312
Interest payments (158) (168) (359)
Dividend receipts 949 1,065 1,917
Tax paid(ii) (198) (224) (514)
Net cash flows from operating activities(iii) 963 96 677
Cash flows from investing activities:
Purchases of property, plant and equipment (75) (151) (289)
Proceeds from disposal of property, plant and equipment - 2 21
Net cash paid on acquisition of subsidiaries, joint ventures and (33) (9) (31)
associates(iv)
Divestment in subsidiaries by consolidated private equity vehicles(v) 112 300 451
Acquisition of additional interest in subsidiary (13) - -
Net cash flows from investing activities (9) 142 152
Cash flows from financing activities:
Interest paid (83) (98) (188)
Lease capital repayments (25) (12) (28)
Repurchase of subordinated debt - (150) (450)
Proceeds from shares issued 2 2 5
Dividends paid to equity holders of M&G plc (321) (311) (468)
Dividends paid to non-controlling interests (11) (11) (13)
Net cash flows from financing activities (438) (580) (1,142)
Net increase/(decrease) in cash and cash equivalents 516 (342) (313)
Cash and cash equivalents at 1 January 4,838 5,148 5,148
Effect of exchange rate changes on cash and cash equivalents (71) (1) 3
Cash and cash equivalents at end of period 5,283 4,805 4,838
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 condensed consolidated income statement or profit for the six
months ended 30 June 2024 or total equity attributable to shareholders as at
30 June 2024. See Note 1.1 for further information.
ii Tax paid for the six months ended 30 June 2025 includes £91m
(30 June 2024: £138m, year ended 31 December 2024: £299m) paid on profit
taxable at policyholder rather than shareholder 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 £50m (30 June 2024: £12m, year ended 31 December
2024: £25m) of cash paid, net of £17m (30 June 2024: £3m, year ended
31 December 2024: £4m) cash acquired. Refer to Note 2.2 for further
information on shareholder acquisitions made in the period. In the year ended
31 December 2024, £14m of cash paid related to the acquisition of
subsidiaries, joint ventures and associates held by the With-Profit Fund, net
of £4m cash acquired. No such amounts were paid or acquired in the six months
to 30 June 2025 and the six months to 30 June 2024.
v Divestment in subsidiaries by consolidated private equity
vehicles represents the amount received or paid in relation to the sale or
purchase of underlying investee companies held by the Group's consolidated
private equity vehicles. As at 30 June 2025, £112m (30 June 2024: £300m,
year ended 31 December 2024: £451m) relates to divestment in these vehicles.
1 Basis of preparation and material accounting policies
1.1 Basis of preparation
The condensed consolidated financial statements for the six months ended
30 June 2025 comprise the condensed consolidated financial statements of
M&G plc ('the Company') and its subsidiaries (together referred to as 'the
Group'). The condensed consolidated financial statements are unaudited but
have been reviewed by our auditors, PricewaterhouseCoopers LLP.
The condensed consolidated financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting (IAS 34), as adopted by the
United Kingdom, and the Disclosure Guidance and Transparency Rules sourcebook
of the United Kingdom's Financial Conduct Authority. The accounting policies
and the key sources of estimation uncertainty applied in the condensed
consolidated financial statements are consistent with those that applied in
the annual 2024 consolidated financial statements, except for the new
standards, interpretations and amendments that became effective in the current
period, as stated in Note 1.2 below.
The condensed consolidated financial statements are stated in million pounds
sterling, the Group's presentation currency.
The condensed consolidated financial statements do not include all the
information and disclosures required in the Group's annual consolidated
financial statements and do not comprise statutory accounts within the meaning
of section 434 of the Companies Act 2006. The Group's 2024 Annual Report and
Accounts for the year ended 31 December 2024 was delivered to the Registrar
of Companies. The report of the auditors PricewaterhouseCoopers LLP on those
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498 of the Companies Act 2006.
Restatement of prior period information
The comparative condensed consolidated statement of financial position as at
30 June 2024 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 condensed consolidated income
statement or profit for the six months ended 30 June 2024 or total equity
attributable to shareholders as at 30 June 2024.
The impact of the restatement on the condensed consolidated statement of
financial position is set out in the table below:
As at 30 June 2024 as previously reported Adjustments As at 30 June 2024 restated
£m £m £m
Condensed consolidated statement of financial position:
Assets:
Cash and cash equivalents 5,400 (595) 4,805
Other 183,283 - 183,283
Total assets 188,683 (595) 188,088
Liabilities:
Subordinated liabilities and other borrowings 8,094 (595) 7,499
Other 176,850 - 176,850
Total liabilities 184,944 (595) 184,349
In the condensed consolidated statement of cash flows, Cash and cash
equivalents at 1 January 2024 has been reduced by £442m (see also Note 1.1 in
the Group's 2024 Annual Report and Accounts for the year ended 31 December
2024) and at 30 June 2024 by £595m. The movement in other liabilities, net
cash flows from operating activities and net increase/(decrease) in cash and
cash equivalents have been adjusted by £153m.
Going concern
The Directors have 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
condensed consolidated financial statements.
To satisfy themselves of the appropriateness of the use of the going concern
assumption in relation to the condensed 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).
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 condensed 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
The Group has adopted the following amendment which became effective from
1 January 2025:
- Lack of exchangeability (Amendments to IAS 21), issued in August 2023.
The above amendment does not have a material effect on these condensed
consolidated financial statements.
In addition, the following standards have been issued which are effective for
periods beginning on or after 1 January 2027 (subject to endorsement by the UK
Endorsement Board):
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 in 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 the standard 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 these condensed 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
- Annual improvements to IFRS accounting standards- Volume 11, issued in
July 2024 and effective from 1 January 2026.
These amendments are not expected to have a material impact on the Group.
2 Group structure and products
2.1 Group composition
An extract of the Group structure that gives an overview of the composition of
the Group can be found in the notes to the Group's 2024 consolidated financial
statements. M&G plc is the holding company of the Group.
2.2 Corporate transactions
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.
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 (31 December 2024: £7m) has been
recognised in respect of the Group's obligation under the call option
arrangement.
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)
Intangible assets and related deferred tax liability arising on acquisition:
Investment management agreements and co-investment contracts 8
Segregated client mandates 1
Deferred tax liability (2)
Goodwill 13
The goodwill of £13m represents revenue synergies with BauMont expected to
benefit from M&G's broader client network and investor related functions.
Intangible assets identified relate to BauMont's existing investment
management agreements and co-investment contracts and existing segregated
client mandates, recognised at fair values of £8m and £1m respectively. The
valuations were based on the multi-period excess earnings method and the key
assumptions used in measuring the fair value were the revenue projections,
related profit margins and the discount rate.
The revenue and profit before tax included in the condensed consolidated
income statement in respect of BauMont were £4m and £1m respectively.
P Capital Partners acquisition
On 3 June 2025, M&G FA Limited (MGFA), a wholly owned subsidiary of the
Group, acquired 70% of the issued 'A' share capital of
P Capital Partners (PCP), for a purchase consideration of £90m. The acquired
shareholding gives MGFA 68% of voting equity interest in PCP.
PCP is now part of the Group's Asset Management segment, underpinning our
strategic growth plans by broadening our client offering in the private and
structured credit sector. PCP operates as an Alternative Investment Fund
Manager, regulated in Sweden. The company offers private debt predominantly to
non-sponsored and founder-led borrowers in northern Europe.
The purchase consideration includes £50m of cash consideration paid at the
completion date and deferred consideration of £40m, payable in three
tranches. On the first anniversary of the acquisition £26m will be paid,
unconditionally. On or after the second anniversary of the acquisition, £10m
contingent on a revenue hurdle being achieved, will be paid. Finally, a third
deferred consideration estimated to be £4m is payable in relation to
providing the PCP founder-sellers a share of benefit anticipated from the
utilisation of tax losses built up prior to the acquisition date. The deferred
consideration is recognised as a financial liability on the condensed
consolidated statement of financial position.
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. The proportionate goodwill method has been used to account for
the transaction and therefore only a proportionate share in the recognised
amounts of the net assets acquired are attributable to the non-controlling
interest. Net assets acquired of £6m, as recognised on the acquiree's
statement of financial position, are provisionally recognised. An amount of
£89m is presented as goodwill within Goodwill and intangible assets on the
condensed consolidated statement of financial position, in relation to the
acquisition of PCP.
The revenue and profit before tax included in the condensed consolidated
income statement in respect of PCP were £1m and £nil respectively.
2.3 Insurance and investment products
A full description of the main contract types written by the Group's insurance
entities can be found in the notes to the Group's 2024 consolidated financial
statements.
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 were revised during 2024 to reflect a change in
management structure. Our previous operating segments, 'Life' and 'Wealth'
were replaced with one new operating segment: 'Life'. Comparatives for the six
months ended 30 June 2024 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.
Life
The Life business operates in the savings and pensions market and includes
corporate risk solutions, individual life and pensions, international
solutions and advice.
Corporate risk solutions consists of our bulk purchase annuity (BPA) business
along with workplace pensions. During 2023, the Life business re-entered the
BPA market and transacted with certain schemes to secure the annuity benefits
of immediate and deferred annuity members. This activity continues and
included the completion of the Group's first Value Share BPA deal in November
2024.
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, protection plans 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.
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 and should be read in
conjunction with the accounting policies in the Annual Report and Accounts:
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 including the
CSM generated on expected new business over the period, 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 2025 are 7.8% pa
(2024: 8.2% pa).
- 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 varies for PruFund and
Traditional business due to differing maturity profiles; for PruFund the
factor used for 2025 is 11.1% pa (2024: 10.9% pa) and for Traditional is 13.1%
(2024: 12.8% pa) .
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
2025, the expected return is 6.2% pa (2024: 6.8% pa).
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 2025,
the long-term expected investment returns for shareholder annuities are 5.2%
pa (2024: 5.6% pa). 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.
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. For non-profit business in
the With-Profits Fund it is the CSM release for the period;
- 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.
- The elimination on consolidation of the results of the intercompany buy-in
transaction executed between the trustees of M&GGPS and PAC in 2023.
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.
3.3 Analysis of Group adjusted operating profit before tax by segment
For the six months ended 30 June For the year ended 31 December
2025 2024(i) 2024
£m £m £m
Asset Management 128 129 289
Life 344 340 746
Corporate Centre (94) (94) (198)
Total segmented adjusted operating profit before tax 378 375 837
Short term fluctuations in investment returns(ii) (12) (284) (643)
Mismatches arising on application of IFRS 17(iii) 2 (119) (333)
Amortisation and impairment of intangible assets acquired in business (11) (19) (115)
combinations
Profit on disposal of business and corporate transactions 5 11 11
Restructuring costs and other(iv) (37) (29) (106)
IFRS profit/(loss) before tax and non-controlling interests attributable to 325 (65) (349)
equity holders
IFRS profit attributable to non-controlling interests(v) 8 8 17
IFRS profit/(loss) before tax attributable to equity holders(vi) 333 (57) (332)
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. Comparatives for the six
months ended 30 June 2024 are presented on new segment basis.
ii Losses from short-term fluctuations in investment return
significantly reduced in the six months to 30 June 2025. These losses
primarily comprise £50m (30 June 2024: £101m, 31 December 2024: £98m) on
the hedging instruments held to protect the Solvency II capital position from
falling equity markets, due to rises in equity values in each period. There
were also losses of £23m (30 June 2024: £151m, 31 December 2024: £227m)
on interest rate swaps purchased to protect PAC's Solvency II capital position
against falls in interest rates, driven by rises in longer-term risk free
rates in the six months ended 30 June 2025 which were lower than those
experienced over 2024. The losses were largely offset by £37m of foreign
exchange gains (30 June 2024: £4m losses, 31 December 2024: £8m losses) on
USD denominated subordinated loan notes due to weakening of the currency
against GBP over the six months ended 30 June 2025.
iii Mismatches arising on application of IFRS 17 primarily relates to
a mismatch which occurs in relation to non-profits business in With-Profits
Fund reduced to almost nil in the six months to 30 June 2025 (30 June 2024:
£114m loss, 31 December 2024: £239m loss). The mismatch increased in the
six months ended 30 June 2024 due to a revised fair value calibration of the
business in the With-Profits Fund to allow for the UK reforms to Solvency II
and further in the year ended 31 December 2024 following longevity assumption
changes.
iv 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 6 which
include costs allocated to the With-Profits Fund. In the six months to
30 June 2025, restructuring costs and other of £37m (30 June 2024: £29m,
31 December 2024: £106m) includes £11m (30 June 2024: £10m, 31 December
2024: £44m) in relation to actions taken to reduce our cost base, £8m
(30 June 2024: £8m, 31 December 2024: £21m) of investment spend in
building out capacity in our Asset Management business and £6m (30 June
2024: £5m, 31 December 2024: £17m) on transformation within the finance
function.
v 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.
vi The tax charge attributable to equity holders of £85m (30 June
2024: £1m credit, 31 December 2024: £15m charge) results in an IFRS profit
for the period of £248m (30 June 2024: £56m loss, 31 December 2024: £347m
loss) as presented in condensed consolidated income statement.
3.4 Analysis of Group revenue by segment
The following table shows revenue by segment for the Group:
For the six months ended For the year ended 31 December
30 June
2025 Restated(i, ii) Restated(ii)
2024 2024
£m £m £m
Life 1,986 1,978 4,095
Total insurance revenue 1,986 1,978 4,095
Asset Management(iii) 442 429 864
Life 85 79 165
Total fee income 527 508 1,029
Total 2,513 2,486 5,124
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. Comparatives for the six
months ended 30 June 2024 are presented on new segment basis.
ii Following a review of the presentation of Group revenue by
segment, comparative amounts for the six months ended 30 June 2024 and the
year ended 31 December 2024 have been restated from those previously reported.
Interest revenue is no longer included, and fee income is presented on a
consolidated basis, net of inter-segment fee income.
iii Asset management fee income is net of inter-segment fee income of
£79m (30 June 2024: £83m, 31 December 2024: £179m).
The Group has a widely diversified client base. There are no clients whose
revenue represents greater than 10% of fee income.
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.
For the six months ended 30 June 2025
With-profits Unit-linked liabilities Annuity and other long-term business Total
£m £m £m £m
Amounts relating to the changes in the liability for remaining coverage:
Expected incurred claims and other expenses 769 17 608 1,394
Change in the risk adjustment for non-financial risk for the risk expired 13 - 17 30
CSM recognised in profit or loss for the services provided 280 5 84 369
Revenue recognised for incurred policyholder tax 147 4 - 151
Amounts relating to the recovery of insurance acquisition cash flows:
Allocation of premium 25 - 17 42
Total insurance revenue 1,234 26 726 1,986
For the six months ended 30 June 2024
With-profits Unit-linked liabilities Annuity and other long-term business Total
£m £m £m £m
Amounts relating to the changes in the liability for remaining coverage:
Expected incurred claims and other expenses 769 19 581 1,369
Change in the risk adjustment for non-financial risk for the risk expired 11 - 17 28
CSM recognised in profit or loss for the services provided 266 4 71 341
Revenue recognised for incurred policyholder tax 202 3 - 205
Amounts relating to the recovery of insurance acquisition cash flows:
Allocation of premium 19 - 16 35
Total insurance revenue 1,267 26 685 1,978
For the year ended 31 December 2024
With-profits Unit-linked liabilities Annuity and other long-term business Total
£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
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 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.
5 Fee income
The following table disaggregates management fee revenue by segment:
For the six months ended 30 June For the year ended 31 December
2025 2024(i) 2024
£m £m £m
Management fees 447 436 876
Rebates (7) (10) (18)
Performance fees and carried interest 2 3 6
Total Asset Management fee income 442 429 864
Investment contracts without DPF 18 19 37
Platform fees 15 16 32
Advice fees 52 44 96
Total Life fee income 85 79 165
Total fee income 527 508 1,029
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. Comparatives for the six
months ended 30 June 2024 are presented on new segment basis.
6 Administrative and other expenses
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Staff and employment costs 454 465 939
Acquisition costs incurred:
Investment contracts without DPF 8 9 16
Other contracts 83 70 151
Acquisition costs deferred:
Other contracts (8) (1) (7)
Amortisation of deferred acquisition costs:
Investment contracts without DPF - - 4
Other contracts 6 5 7
Depreciation of property, plant and equipment 71 79 164
Impairment of property, plant and equipment(i) 214 35 76
Amortisation of intangible assets 13 16 26
Impairment of goodwill and intangible assets(ii) 67 27 149
Restructuring costs 69 58 180
Interest expense 147 132 298
Commission expense 80 77 149
Investment management fees 62 55 141
Property-related costs 113 102 222
Other expenses 392 375 852
1,771 1,504 3,367
Less amounts directly attributable to insurance results:
Expenses attributed to insurance acquisition cash flows incurred during the (75) (67) (140)
year
Other directly attributable expenses (302) (290) (661)
Total administrative and other expenses 1,394 1,147 2,566
i Consists of impairment of certain property, plant and
equipment, including property, plant and equipment classified as held for
sale, held through the Group's infrastructure capital private equity vehicles
of £214m (30 June 2024: £35m, 31 December 2024: £76m).
ii Includes impairment of certain goodwill and intangible assets
held through the Group's infrastructure capital private equity vehicles of
£65m (30 June 2024: £14m, 31 December 2024: £38m).
In addition to the interest expense shown above of £147m (30 June 2024:
£132m, 31 December 2024: £298m), the interest expense incurred in respect
of subordinated liabilities for the six months ended 30 June 2025 was £68m
(30 June 2024: £50m, year ended 31 December 2024: £121m, both net of a
£29m gain attributable to the cancellation of the 5.56% subordinated notes in
June 2024). This is shown as finance costs in the condensed consolidated
income statement.
7 Tax
7.1 Tax charged/(credited) to the consolidated income statement
7.1.1 Income statement tax charge/(credit)
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Total current tax charge 263 249 504
Total deferred tax charge/(credit) 48 16 (12)
Total tax charge 311 265 492
7.1.2 Allocation of profit/(loss) before tax and tax charge between equity
holders and policyholders
The profit before tax reflected in the condensed consolidated income statement
for the six months ended 30 June 2025 of £559m (30 June 2024: £209m, year
ended 31 December 2024: £145m) 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 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 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/(loss) before tax in arriving at the Group's
profit/(loss) before tax attributable to equity holders. As the net of tax
profit 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).
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
Equity holders Policyholders Total Equity holders Policyholders Total Equity holders Policyholders Total
£m £m £m £m £m £m £m £m £m
Profit/(loss) before tax 333 226 559 (57) 266 209 (332) 477 145
Tax (charge)/credit (85) (226) (311) 1 (266) (265) (15) (477) (492)
Profit/(loss) for the period 248 - 248 (56) - (56) (347) - (347)
7.1.3 Equity holders' effective tax rate
The equity holders' tax charge for the six months ended 30 June 2025 was
£85m (30 June 2024: £1m tax credit, 31 December 2024: £15m tax charge)
representing an effective tax rate of 25.5% (30 June 2024: 1.8%, 31 December
2024: (4.5)%). The equity holders' effective tax rate of 25.5% is close to the
UK statutory rate of 25.0% (30 June 2024: 25.0%, 31 December 2024: 25.0%)
and any difference is primarily due to the detrimental impact arising from
non-deductible expenses and difference in the taxation of life insurance
business.
7.1.4 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 of £626m (30 June 2024: £448m, 31 December 2024: £636m), 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 assessed the top-up tax to be booked for the six months
ended 30 June 2025 to be £nil. A credit of £1m has been included in the tax
charge at 30 June 2025 (30 June 2024: £nil, 31 December 2024: £1m charge)
to adjust the amount being provided for in relation to prior years. 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.
7.2 Current tax assets and liabilities
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 30 June 2025, PAC has recognised a total policyholder tax credit of
£114m (31 December 2024: £114m) in respect of its claim against HMRC. Of
this amount, £40m (31 December 2024: £40m) has been paid by HMRC leaving a
tax recoverable balance of £74m (31 December 2024: £74m) recorded as an
amount of tax due from HMRC. PAC will be entitled to interest on the tax
repaid. The settlement is now expected to be finalised during the second half
of 2025 at which point PAC should receive full and final payment.
7.3 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.
The table below shows the closing deferred tax assets and liabilities. The
asset and liability balances are different from those disclosed on the
condensed 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.
For the six months ended 30 June 2025 For the year ended 31 December 2024
£m £m
Unrealised gains on investments (697) (697)
Balance relating to insurance and investments contracts (154) (147)
Other short-term timing differences 75 79
Deferred acquisition costs 12 18
Defined benefit pensions (27) (28)
Capital allowances 17 18
Tax losses carried forward 489 516
Share based payments and deferred compensation 24 23
Net deferred tax liability (261) (218)
Assets 959 998
Liabilities (1,220) (1,216)
Net deferred tax liability (261) (218)
The net deferred tax liability at 30 June 2025 of £261m has increased by
£43m during the period from £218m at 31 December 2024. The increase is
predominantly due to a decrease in the deferred tax asset on tax losses
carried forward during the period and an increase in balances relating to
insurance and investment contracts. The losses carried forward of £489m
(31 December 2024: £516m) relate primarily to PAC and M&G plc. A
deferred tax asset has been recognised on the full excess losses, trade losses
and shareholder losses and a proportion of the capital losses on the basis
that the Group considers it is probable that sufficient future taxable profits
and UK capital gains will be available against which these losses can be
utilised. It is estimated the losses on which a deferred tax asset have been
recognised will be utilised in less than 14 years. The deferred tax asset on
losses is measured at the tax rates that are expected to apply to the period
when the asset is realised.
7.3.1 Unrecognised deferred tax
At the end of the reporting period, the Group has unused tax losses of £634m
(30 June 2024: £456m, 31 December 2024: £644m) for which no deferred tax
asset is being recognised. The Group's unused tax losses primarily relate to
capital losses in the UK of £626m (30 June 2024: £448m, 31 December 2024:
£636m). 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.
8 Earnings per share
Basic earnings per share (EPS) for the six months ended 30 June 2025 was
10.1p (30 June 2024: (2.6)p, 31 December 2024: (15.1)p) and diluted EPS was
10.0p (30 June 2024: (2.6)p, 31 December 2024: (15.1)p). Basic EPS is based
on the weighted average ordinary shares in issue 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 table shows details of basic and diluted EPS:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Profit/(loss) attributable to equity holders of M&G plc 243 (62) (360)
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
Millions Millions Millions
Weighted average number of ordinary shares outstanding 2,398 2,382 2,388
Dilutive effect of share options and awards 39 - -
Weighted average number of diluted ordinary shares outstanding 2,437 2,382 2,388
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
Pence per share Pence per share Pence per share
Basic earnings/(loss) per share 10.1 (2.6) (15.1)
Diluted earnings/(loss) per share 10.0 (2.6) (15.1)
As the Group made a loss attributable to equity holders of the Company for the
six months ended 30 June 2024 and the year ended 31 December 2024, the
diluted EPS is the same as the basic EPS as it is not permissible for the
diluted EPS to be greater than the basic EPS.
9 Dividends
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
Pence per share £m Pence per Pence per share £m
share £m
Dividends relating to reporting period:
First interim dividend - Ordinary 6.7 161 6.6 157 6.6 157
Second interim dividend - Ordinary - - - - 13.5 321
Total 6.7 161 6.6 157 20.1 478
Dividends paid in reporting period:
Prior year's second interim dividend - Ordinary 13.5 321 13.2 311 13.2 311
First interim dividend - Ordinary - - - - 6.6 157
Total 13.5 321 13.2 311 19.8 468
Subsequent to 30 June 2025, the Board has declared a first interim dividend
for 2025 of 6.7 pence per ordinary share, an estimated £161m in total. The
dividend is expected to be paid on 17 October 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.
10 Defined benefit pension schemes
The Group operates three defined benefit pension schemes, which historically
have been funded by the Group. The largest defined benefit scheme as at
30 June 2025 is the Prudential Staff Pension Scheme (PSPS), which accounts
for 83% (31 December 2024: 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 were 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 30 June 2025 was £253m (31 December 2024: £261m).
Subsequent to the transfer of active members from M&GGPS to PSPS,
transacted at the same time as the buy-in, a portion (11% at 30 June 2025) 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 30 June 2025 the
SASPS scheme is in surplus and the M&GGPS scheme 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 right asset 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. On 5 June 2025, the UK Government announced that it will
introduce legislation to give affected pension schemes the ability to
retrospectively obtain written actuarial confirmation that historic benefit
changes met the necessary standards. Once this legislation is effective, any
remaining uncertainty around the matter will be removed. The Group will
continue to monitor developments in relation to the matter.
The pension assets and liabilities for the defined benefit pension schemes are
as follows:
As at 30 June 2025
PSPS SASPS M&GGPS Total
£m £m £m £m
Fair value of plan assets 3,951 514 267 4,732
Present value of defined benefit obligation (3,649) (476) (253) (4,378)
Effect of restriction on surplus (296) - - (296)
Net economic pension surplus(i) 6 38 14 58
Non-qualifying insurance policies - - (12) (12)
Elimination of reimbursement right asset on consolidation - - (253) (253)
Net pension surplus/(deficit) 6 38 (251) (207)
As at 30 June 2025
PSPS SASPS M&GGPS Total
£m £m £m £m
Attributable to:
Shareholder‑backed business 2 23 (251) (226)
With-Profits Fund 4 15 - 19
Net pension surplus/(deficit) 6 38 (251) (207)
As at 31 December 2024
PSPS SASPS M&GGPS Total
£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 pension surplus/(deficit) 7 38 (258) (213)
( )
As at 31 December 2024
PSPS SASPS M&GGPS Total
£m £m £m £m
Attributable to:
Shareholder‑backed business 3 23 (258) (232)
With‑Profits Fund 4 15 - 19
Net pension surplus/(deficit) 7 38 (258) (213)
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.
11 Insurance liabilities
11.1 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:
2025
Shareholder-backed funds and subsidiaries
With-profits(i) Unit-linked liabilities Annuity and other long-term business Total
As at 30 June £m £m £m £m
Insurance contract liabilities
Insurance contract liabilities 27,968 4,142 13,550 45,660
Investment contracts with DPF liabilities 94,967 - 240 95,207
122,935 4,142 13,790 140,867
Insurance contract assets
Insurance contract assets - - 45 45
- - 45 45
Reinsurance contracts
Reinsurance contract assets 16 6 998 1,020
Reinsurance contract liabilities 1 20 274 295
2024
Shareholder-backed funds and subsidiaries
With-profits(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
i Includes non-profit business written in the with-profits
sub-funds.
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.
11.2 Determination of insurance, investment with DPF and reinsurance contract
balances for different components of business
Further information on the different types of insurance and investment
contracts written in each line of business is presented in Note 2.3 in the
notes to the Group's 2024 consolidated financial statements. 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:
11.2.1 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. 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 30 June 2025 was 41bps (31 December
2024: 39bps). 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 30 June 2025 was 145bps (31 December 2024: 149bps)
for shareholder-backed annuities and 137bps (31 December 2024: 143bps) 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 30 June 2025 was 52bps (31 December 2024:
53bps). The allowance for credit risk within the discount rate for annuities
in the With-Profits Fund as at 30 June 2025 was 55bps (31 December 2024:
56bps).
The derivation of the discount rates include consideration of any potential
future legislative change in respect of residential ground rents (further
explained in note 14.8) 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.
The tables below show the discount rates used as at 30 June 2025 and
31 December 2024.
Discount rates as at 30 June 2025
1 year 5 years 10 years 15 years 20 years 25 years 30 years
With-profits contracts 4.21% 4.08% 4.45% 4.78% 4.95% 5.01% 4.98%
Unit-linked contracts 3.80% 3.66% 4.04% 4.36% 4.54% 4.60% 4.57%
Non-profit annuities - shareholder-backed 5.24% 5.11% 5.48% 5.81% 5.98% 6.04% 6.01%
Non-profit annuities - in the With-Profits Fund 5.17% 5.03% 5.40% 5.73% 5.90% 5.96% 5.94%
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%
The tables below show the credit risk allowances for annuity business as at
30 June 2025 and 31 December 2024.
Credit risk allowances as at 30 June 2025
Shareholder-backed annuities Annuities in the With-Profits Fund
Credit risk allowance 52 bps 55 bps
Credit risk allowance as proportion of spread over swaps 25.45% 25.40%
Net of reinsurance credit reserve (£m) 432 145
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
11.2.2 Persistency and expense assumptions
The table below summarises the range of lapse rate assumptions used as at
30 June 2025 and 31 December 2024. These exclude assumptions related to
retirement rates for pension contracts, which may be as high as 100% at
certain ages. The lapse rate assumptions remain the same as at 31 December
2024 and will be reviewed ahead of the 31 December 2025 valuation.
Lapse rate assumptions
30 June 2025 31 December 2024
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
Maintenance expense assumptions (per policy)
The table below summarises the range of maintenance expense assumptions used
as at 30 June 2025 and 31 December 2024, before allowance for future
inflationary increases. The maintenance expense assumptions remain the same as
at 31 December 2024 and will be reviewed ahead of the 31 December 2025
valuation.
30 June 2025 31 December 2024
£ pa £ pa
With-profits contracts 8 - 199 8 - 199
Unit-linked contracts(i) 44 - 186 44 - 186
Non-profit annuities - shareholder-backed 36 - 68 36 - 68
Non-profit annuities - in the With-Profits Fund 37 37
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 30 June 2025. For 30 June 2025 and 31
December 2024, the range was 0.12% - 0.13% of assets under management.
11.2.3 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:
30 June 2025 31 December 2024
Confidence level (percentile of the Group's one year risk distributions) 75th 75th
Confidence level (percentile of the risk distributions over the remaining 60th 60th
lifetime)
11.2.4 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 DPF and investment contracts without DPF. The
investment contracts without DPF are within the scope of IFRS 9 and are
presented in Note 12.
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 11.2.2) 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 was fully reviewed
and updated. As part of the rebuild, changes were made to the modelling of
policyholder taxation within prospective investment returns with other less
significant changes in relation to insurance contract liabilities;
- Maintenance and, for some classes of business, termination expense
assumptions are expressed as per policy amounts (see Note 11.2.2). 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 Note 11.2.1).
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.
11.2.5 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 11.2.2). The assumed unit fund growth rates are consistent with the
discount rates applied to the cash flows (see Note 11.2.1).
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.
11.2.6 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.
No changes have been made to best-estimate assumptions for current mortality
or mortality improvements in the six months ended 30 June 2025.
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)
30 June 2025 CMI 2022 For males: 1.60% pa For males: 7.25
For females: 1.60% pa For females: 7.25
31 December 2024 CMI 2022 For males: 1.60% pa For males: 7.25
For females: 1.60% pa For females: 7.25
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 30 June 2025
and 31 December 2024.
iii The tapering of improvements to zero is set to occur between ages
90-110.
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 11.2.1. 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
11.2.2). 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
11.2.1).
CSM
The General Measurement Model 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.
11.3 Movements in 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 period as
a result of cash flows and amounts recognised in the consolidated income
statement.
The tables presented analyse changes in the estimates of the present value of
future cash flows, the risk adjustment for non-financial risk and the CSM.
11.3.1 Insurance contracts
Analysis by measurement component
For the six months ended 30 June 2025
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
£m £m £m £m £m £m £m
Opening insurance contract liabilities 134,216 613 1,908 3,943 584 6,435 141,264
Opening insurance contract assets (94) 4 - 14 37 51 (39)
Net opening balance 134,122 617 1,908 3,957 621 6,486 141,225
Changes that relate to current services
CSM recognised in profit or loss for the services provided - - (109) (223) (37) (369) (369)
Change in the risk adjustment for non-financial risk for the risk expired - (30) - - - - (30)
Revenue recognised for incurred policyholder tax (151) - - - - - (151)
Experience adjustments 9 - - - - - 9
(142) (30) (109) (223) (37) (369) (541)
Changes that relate to future services
Contracts initially recognised in the period (82) 9 - - 73 73 -
Changes in estimates reflected in the CSM (21) (5) (99) 123 2 26 -
Changes in estimates that result in onerous contract losses or reversal of 6 - - - - - 6
those losses
(97) 4 (99) 123 75 99 6
Changes that relate to past services
Adjustments to liabilities for incurred claims - - - - - - -
- - - - - - -
Insurance service result (239) (26) (208) (100) 38 (270) (535)
Finance expense from insurance contracts issued 4,003 5 62 87 27 176 4,184
Total changes in the income statement 3,764 (21) (146) (13) 65 (94) 3,649
Cash flows
Premiums received 3,247 - - - - - 3,247
Incurred claims paid and other insurance service expenses paid including (7,220) - - - - - (7,220)
investment component
Insurance acquisition cash flows (79) - - - - - (79)
Total cash flows (4,052) - - - - - (4,052)
Net closing balance 133,834 596 1,762 3,944 686 6,392 140,822
Closing insurance contract liabilities 133,938 592 1,762 3,929 646 6,337 140,867
Closing insurance contract assets (104) 4 - 15 40 55 (45)
Net closing balance 133,834 596 1,762 3,944 686 6,392 140,822
For the year ended 31 December 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
£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 39 (2) - - - - 37
those losses
(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 from insurance contracts issued 8,043 33 113 195 42 350 8,426
Total changes in the 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 (14,991) - - - - - (14,991)
investment component
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
11.3.2 Reinsurance contracts
Analysis by measurement component
For the six months ended 30 June 2025
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
£m £m £m £m £m £m £m
Opening reinsurance contract liabilities 621 (94) - (232) (15) (247) 280
Opening reinsurance contract assets (793) (44) (5) (14) (187) (206) (1,043)
Net opening balance (172) (138) (5) (246) (202) (453) (763)
Changes that relate to current services
CSM recognised in profit or loss for the services received - - - 11 2 13 13
Change in the risk adjustment for non-financial risk for the risk expired - 5 - - - - 5
Experience adjustments 5 - - - - - 5
5 5 - 11 2 13 23
Changes that relate to future services
Contracts initially recognised in the period 15 (19) - - 4 4 -
Changes in estimates reflected in the CSM (16) 1 - 9 6 15 -
(1) (18) - 9 10 19 -
Changes that relate to past services
Asset for incurred claims (2) - - - - - (2)
(2) - - - - - (2)
Insurance service result 2 (13) - 20 12 32 21
Net finance income from reinsurance contracts 26 3 - (2) (2) (4) 25
Total changes in the income statement 28 (10) - 18 10 28 46
Cash flows
Premiums and similar expenses paid (244) - - - - - (244)
Amounts recovered 236 - - - - - 236
Total cash flows (8) - - - - - (8)
Net closing balance (152) (148) (5) (228) (192) (425) (725)
Closing reinsurance contract liabilities 626 (107) - (213) (11) (224) 295
Closing reinsurance contract assets (778) (41) (5) (15) (181) (201) (1,020)
Net closing balance (152) (148) (5) (228) (192) (425) (725)
For the year ended 31 December 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
£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 (25) - - - - - (25)
of underlying contracts
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)
11.4 Expected recognition of the contractual service margin
As at 30 June 2025 As at 31 December 2024
Insurance contracts issued Reinsurance contracts held Insurance contracts issued Reinsurance contracts held
£m £m £m £m
Number of years until expected to be recognised:
0 to 1 year 613 (21) 642 (25)
1 to 2 years 570 (21) 576 (24)
2 to 3 years 531 (22) 528 (23)
3 to 4 years 484 (22) 482 (23)
4 to 5 years 440 (21) 439 (22)
5 to 10 years 1,647 (94) 1,652 (100)
10 to 15 years 968 (75) 984 (79)
15 to 20 years 538 (54) 554 (57)
20 to 25 years 287 (36) 299 (38)
Over 25 years 314 (59) 330 (62)
Total 6,392 (425) 6,486 (453)
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.
The reinsurance contracts held represents the run off of the net of
reinsurance asset and reinsurance liabilities CSM.
12 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 30 June 2025 is
£351m (31 December 2024: £316m).
The table below presents the analysis of change in investment contract
liabilities without DPF:
30 June 2025 31 December 2024
£m £m
At start of period 12,144 12,535
Premiums 167 382
Surrenders (1,532) (1,144)
Maturities/deaths (28) (138)
Total net flows (1,393) (900)
Switches 24 11
Investment-related items and other movements(i) 180 519
Foreign exchange differences (8) (21)
At end of period 10,947 12,144
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.
13 Subordinated liabilities and other borrowings
As at 30 June 2025 As at 31 December 2024
£m £m
Subordinated liabilities 3,125 3,176
Operational borrowings 30 2
Borrowings attributable to With-Profits Fund 3,197 3,308
Total subordinated liabilities and other borrowings 6,352 6,486
13.1 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.
As at 30 June 2025 As at 31 December 2024
Principal amount Carrying amount Principal amount Carrying amount
£m £m
5.625% Sterling fixed rate due 20 October 2051 £750m 817 £750m 823
6.25% Sterling fixed rate due 20 October 2068 £500m 599 £500m 600
6.50% US Dollar fixed rate due 20 October 2048 $500m 392 $500m 433
6.34% Sterling fixed rate due 19 December 2063 £700m 834 £700m 836
5.56% Sterling fixed rate due 20 July 2055 £439m 483 £439m 484
Total subordinated liabilities 3,125 3,176
Subordinated notes issued by the Company rank below its senior obligations and
ahead of any preference shares and ordinary share capital.
A description of the key features of each of the Group's subordinated notes as
at 30 June 2025 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 30 June 2025, the principal amount of all subordinated liabilities has
a contractual maturity of more than 12 months and accrued interest of £32m
(31 December 2024: £33m) is expected to be settled within 12 months.
The following table reconciles the movement in subordinated liabilities in the
period:
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
At 1 January 3,176 3,676 3,676
Amortisation(i) (14) (44) (58)
Foreign exchange movements (37) 4 8
Repurchases and redemptions - (150) (450)
At end of period 3,125 3,486 3,176
i Included within amortisation for the six months ended 30 June
2024 and the year ended 31 December 2024 is £29m 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, £300m 3.875% sterling fixed rate subordinated
loan notes. These notes were issued on 10 July 2019 with a maturity date of 20
July 2049.
The amortisation of premium on the subordinated notes based on an Effective
Interest Rate (EIR) and the foreign exchange movement on the translation of
the subordinated liabilities denominated in US dollar are both non-cash items.
14 Fair value methodology
14.1 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.
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 and loans, 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.
14.2 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.
14.3 Level 3 assets and liabilities
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 illiquidity 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.
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 Royal Institution of Chartered Surveyors
(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.
Analysis of internally valued level 3 financial instruments
Level 3 financial assets, net of financial liabilities, which were internally
valued as at 30 June 2025 were £6,081m (31 December 2024: £6,510m),
representing 4.8% of the total fair-valued financial assets net of financial
liabilities (31 December 2024: 5.0%).
Internal valuations are inherently more subjective than external valuations.
These internally valued net assets and liabilities primarily consist of the
following items:
- Debt securities of £6,894m as at 30 June 2025 (31 December 2024:
£7,085m), of which £5,123m (31 December 2024: £5,205m) 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 £1,046m (31 December 2024: £1,077m). 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 £232m as
at 30 June 2025 (31 December 2024: £275m) 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 £932m as at 30 June 2025 (31 December
2024: £952m) and a corresponding liability of £217m (31 December 2024:
£221m), 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.
- Liabilities of £4,562m as at 30 June 2025 (31 December 2024: £4,707m),
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.
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 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.
14.4 Fair value hierarchy for assets measured at fair value in the condensed
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 at 30 June 2025
Level 1 Level 2 Level 3 Total
£m £m £m £m
With-profits:
Investment property - - 13,490 13,490
Equity securities and pooled investment funds 37,784 1,340 15,536 54,660
Loans - 802 2,450 3,252
Debt securities 26,439 17,368 4,567 48,374
Derivative assets 123 1,217 - 1,340
Total with-profits 64,346 20,727 36,043 121,116
Unit-linked:
Investment property - - 102 102
Equity securities and pooled investment funds 10,571 375 83 11,029
Debt securities 1,801 1,604 33 3,438
Derivative assets 8 5 - 13
Total unit-linked 12,380 1,984 218 14,582
Annuity and other long-term business:
Investment property - - 647 647
Equity securities and pooled investment funds 186 84 2 272
Loans - - 1,222 1,222
Debt securities 3,501 4,489 3,871 11,861
Derivative assets - 171 26 197
Total annuity and other long-term business 3,687 4,744 5,768 14,199
Other:
Equity securities and pooled investment funds 145 - 61 206
Debt securities 590 229 - 819
Derivative assets - 123 - 123
Total other 735 352 61 1,148
Group:
Investment property - - 14,239 14,239
Equity securities and pooled investment funds 48,686 1,799 15,682 66,167
Loans - 802 3,672 4,474
Debt securities 32,331 23,690 8,471 64,492
Derivative assets 131 1,516 26 1,673
Total assets at fair value 81,148 27,807 42,090 151,045
As at 31 December 2024
Level 1 Level 2 Level 3 Total
£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 - - 14,385 14,385
Equity securities and pooled investment funds 46,526 1,894 16,470 64,890
Loans - 713 3,422 4,135
Debt securities 28,831 32,624 8,320 69,775
Derivative assets 47 1,012 26 1,085
Total assets at fair value 75,404 36,243 42,623 154,270
14.5 Fair value hierarchy for liabilities measured at fair value in the
condensed consolidated statement of financial position
The table below presents the Group's liabilities measured at fair value by
level of the fair value hierarchy:
As at 30 June 2025
Level 1 Level 2 Level 3 Total
£m £m £m £m
Investment contract liabilities without discretionary participation features - 10,947 - 10,947
Third party interest in consolidated funds 4,196 222 4,925 9,343
Derivative liabilities 50 2,561 11 2,622
Accruals, deferred income and other liabilities - - 217 217
Total liabilities at fair value 4,246 13,730 5,153 23,129
As at 31 December 2024
Level 1 Level 2 Level 3 Total
£m £m £m £m
Investment contract liabilities without discretionary participation features - 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
14.6 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.
For the six months ended 30 June 2025
Transfers between levels
Equity securities and pooled investments Loans Debt securities Total
£m £m £m £m
From level 1 to level 2(i, ii) - - 2,048 2,048
From level 1 to level 3(i) - - - -
From level 2 to level 1(i, ii, iii) 1,163 - 7,263 8,426
From level 2 to level 3(i) - 2 203 205
From level 3 to level 2(i) - 31 166 197
( )
For the year ended 31 December 2024
Transfers between levels
Equity securities and pooled investments Loans Debt securities Total
£m £m £m £m
From level 1 to level 2(i, ii) 70 - 3,652 3,722
From level 1 to level 3(i) 15 - 90 105
From level 2 to level 1(i, ii) 148 - 10,136 10,284
From level 2 to level 3(i) 85 5 606 696
From level 3 to level 2(i) 2 26 768 796
i The transfers in debt securities are in line with the Group's
levelling policy during the six months ended 30 June 2025 and year ended
31 December 2024.
ii 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 period.
iii During the six months ended 30 June 2025, additional information
was identified in relation to a number of debt securities with a value of
£773m now reflected within level 1.
14.7 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 assets and liabilities held for sale, are analysed in the
tables below:
For the six months ended 30 June 2025
At 1 Jan Total gains/(losses) recorded in income statement Foreign exchange Purchases/ Sales/other Transfer to held for sale Settled Issued Transfers into level 3 Transfers out of level 3 At 30 June
other
£m £m £m £m £m £m £m £m £m £m £m
Level 3 assets:
Investment property 14,385 452 (315) 391 (534) (140) - - - - 14,239
Equity securities and pooled investment funds 16,470 196 (778) 900 (1,106) - - - - - 15,682
Loans 3,422 86 (108) 605 (304) - - - 2 (31) 3,672
Debt securities 8,320 (147) (51) 711 (399) - - - 203 (166) 8,471
Derivative assets 26 1 - - - - (1) - - - 26
Total level 3 assets 42,623 588 (1,252) 2,607 (2,343) (140) (1) - 205 (197) 42,090
Level 3 liabilities:
Third-party interest in consolidated funds 5,013 (163) (261) - - - (166) 464 38 - 4,925
Derivative liabilities 12 (1) - - - - - - - - 11
Other financial liabilities 221 2 - - - - (6) - - - 217
Total level 3 liabilities 5,246 (162) (261) - - - (172) 464 38 - 5,153
For the year ended 31 December 2024
At 1 Jan Total gains/(losses) recorded in income statement Foreign exchange Purchases/ Sales/ Transfer to held for sale Settled Issued Transfers into level 3 Transfers out of level 3 At 31 December
other
other
£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
14.8 Sensitivity of the fair value of level 3 instruments to changes in
significant inputs
Level 3 asset 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:
Estimated rental value range(i) Equivalent yield range
Property type Geographical location 30 June 2025 31 December 2024 30 June 2025 31 December 2024
Investment property Industrial UK £4 to £29 £4 to £29 4.61% to 9.76% 4.67% to 10.64%
Asia/Pacific $82 to $305 $68 to $284 3.10% to 7.50% 3.08% to 7.50%
Office UK £12 to £86 £10 to £64 4.73% to 9.99% 4.73% to 10.52%
Asia/Pacific $435 to $1,187 $396 to $1,096 2.89% to 7.50% 2.87% to 7.50%
North America $47 $48 8.51% 8.00%
Residential UK £19 to £96 £8 to £97 4.25% to 6.02% 4.25% to 8.00%
Europe €203 to €329 €209 to €329 3.65% to 4.90% 3.65% to 4.90%
Asia/Pacific $220 to $877 $197 to $266 3.47% to 8.25% 3.46% to 4.55%
Retail UK £8 to £47 £10 to £55 4.74% to 8.00% 4.73% to 10.52%
Asia/Pacific $353 to $1,974 $328 to $1,808 6.75% to 8.50% 6.75% to 8.50%
Other(ii) UK £14 to £168 £8 to £168 5.50% to 6.42% 5.49% to 6.50%
Asia/Pacific $186 to $203 $180 to $194 8.00% 8.00%
i The average estimated rental value for the UK and North
America is quoted per square foot, whilst the average estimated rental value
for Europe and Asia/Pacific is quoted per square metre in line with local
practice.
ii Property type other represents hotels and student
accommodation.
Other assets:
Unobservable input 30 June 2025 31 December 2024
Retail income strips Discount rate 2.22% to 6.67% 2.11% to 6.41%
Equity release mortgages Illiquidity premium 2.96% 2.76%
Total portfolio property value £2.7bn £2.8bn
Assumed property growth rate Risk free + 1.10% Risk free + 1.10%
Private placement loans(i) Credit risk premium:
AAA to BBB+ 0.49% to 3.06% 0.32% to 3.07%
BBB to BB 0.45% to 5.66% 0.45% to 6.11%
Infrastructure fund investments Discount rate 10.00% to 12.00% 9.30% 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 £1,046m (31 December 2024:
£1,077m), of which £721m are held in the shareholder-backed fund
(31 December 2024: £743m).
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 in prior periods through the downgrade of certain senior notes.
The credit ratings of the portfolio range between A+ and BBB (31 December
2024: A+ and BBB). In addition, an incremental illiquidity spread of 0.30%
(31 December 2024: 0.30%) above the comparable spread implied by the rating
has been applied to reflect the compensation that a market participant would
require at the reporting date due to the uncertainty in future values.
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.
As at 30 June 2025
Fair value Held in shareholder-backed funds Valuation technique Most significant unobservable input Sensitivity Change in fair value Impact on IFRS profit after tax and shareholders equity(i)
£m £m £m £m
Investment property
Property in use 14,055 747 Income capitalisation and other(iii) Equivalent yield Increase by 50bps (1,219) (50)
Decrease by 50bps 1,518 62
Estimated rental value Increase by 10% 1,173 48
Decrease by 10% (1,133) (46)
Property under development 184 1 Development cost Increase by 10% 55 -
Decrease by 10% (55) -
Loans
Equity release mortgages(iv) 932 932 Discounted cash flow(v) Illiquidity premium Increase by 50bps (45) (34)
Decrease by 50bps 48 36
Current property value Increase by 10% 31 23
Decrease by 10% (40) (30)
Assumed annual property growth rate Increase by 100bps 60 45
Decrease by 100bps (87) (65)
Assumed annual property rental yield Increase by 100bps (50) (37)
Decrease by 100bps 43 32
Other mortgage and retail loans 738 - Broker quotes(vi) Broker quotes Increase by 10% 74 -
Decrease by 10% (74) -
Other commercial loans 2,002 291 Broker quotes(vi) Broker quotes Increase by 10% 200 22
Decrease by 10% (200) (22)
Equity securities and pooled investment funds 15,562 146 Net asset statements Net asset value Increase by 10% 1,556 11
Decrease by 10% (1,556) (11)
Infrastructure fund investments(vii) 232 - Discounted cash flow(viii) Discount rate Increase by 10% (20) -
Decrease by 10% 27 -
Debt securities
Private placement loans(ix) 4,855 2,828 Discounted cash flow(x) Discount rate Increase by 50bps (218) (95)
Decrease by 50bps 237 103
Retail income strips 268 234 Discounted cash flow(x) Discount rate Increase by 50bps (15) (10)
Decrease by 50bps 17 11
Unquoted corporate bonds 3,236 842 Broker quotes(vi), enterprise valuation, estimated recovery Broker quotes Increase by 10% 324 63
Decrease by 10% (324) (63)
Derivative assets 26 26 Discounted cash flow Discount rate Increase by 50bps - -
Decrease by 50bps - -
Total level 3 42,090 6,047
As at 31 December 2024
Fair value Held in shareholder-backed funds Valuation technique Most significant unobservable input Sensitivity Change in fair value Impact on IFRS profit after tax and shareholders equity(i)
£m £m £m £m
Investment property
Property in use (restated)(ii) 14,199 647 Income capitalisation and other(iii) 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 (restated)(ii) 186 - Development cost Increase by 10% 53 -
Decrease by 10% (53) -
Loans
Equity release mortgages(iv) 952 952 Discounted cash flow(v) 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 mortgage and retail loans 826 - Broker quotes(vi) Broker quotes Increase by 10% 83 -
Decrease by 10% (83) -
Other commercial loans 1,644 311 Broker quotes(vi) Broker quotes Increase by 10% 164 23
Decrease by 10% (164) (23)
Equity securities and pooled investment funds 16,359 127 Net asset statements Net asset value Increase by 10% 1,636 10
Decrease by 10% (1,636) (10)
Infrastructure fund investments(vii) 275 - Discounted cash flow(viii) Discount rate Increase by 10% (26) -
Decrease by 10% 31 -
Debt securities
Private placement loans(ix) 4,942 2,912 Discounted cash flow(x) Discount rate Increase by 50bps (242) (107)
Decrease by 50bps 302 133
Retail income strips 263 227 Discounted cash flow(x) Discount rate Increase by 50bps (12) (8)
Decrease by 50bps 14 9
Unquoted corporate bonds 2,951 696 Broker quotes(vi), 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
i Of the £6,047m (31 December 2024: £5,898m) of level 3
assets held in shareholder-backed funds, £218m (31 December 2024: £70m) 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.
ii Following a review of the categorisation of investment property
as at 31 December 2024, £340m of property previously recognised in property
under development has been reclassified to property in use, to better reflect
the nature of the property. There was no impact on balances held in
shareholder-backed funds.
iii Property in use which is valued using a valuation technique other
than income capitalisation is not considered to be material.
iv 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.
v The equity release mortgage loans of £932m as at 30 June 2025
(31 December 2024: £952m) and a corresponding liability of £217m
(31 December 2024: £221m) 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.
vi Quotes received from an external pricing service.
vii Infrastructure fund investments comprises £120m (31 December 2024:
£111m) of equity securities and pooled investment funds and £112m
(31 December 2024: £164m) 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.
viii 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.
ix Included within private placement loans is senior and junior
notes backed by residential ground rent assets with a carrying value of
£1,046m of which £721m were held in the shareholder-backed fund
(31 December 2024: £1,077m of which £743m in the shareholder-backed fund)
which may be impacted by potential future legislative change as mentioned in
other assets level 3 inputs.
x 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.
14.9 Unrealised gains and losses in respect of level 3 assets and liabilities
Unrealised gains and losses recognised in the condensed consolidated income
statement in relation to assets and liabilities classified as level 3 are
analysed as follows:
For the six months ended 30 June For the year ended 31 December
2025 Restated(i) 2024
2024
£m £m £m
Investment property 410 (56) (317)
Equity securities and pooled investment funds(i) 362 (48) 219
Loans 71 10 (70)
Debt securities (127) (151) (581)
Third party interest in consolidated funds(i) 163 197 371
Derivatives 1 (5) (5)
Other financial liabilities (2) 4 5
Total 878 (49) (378)
i Following a review of the Group's presentation on 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. The restatement results in a £37m reduction in
equity securities and pooled investment funds and a £12m reduction in third
party interest in consolidated funds.
14.10 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 condensed consolidated statement of financial position
where the fair value does not approximate the carrying value:
As at 30 June 2025
Level 1 Level 2 Level 3 Total fair Total carrying value
value
£m £m £m £m £m
Liabilities:
Subordinated liabilities and other borrowings - 5,577 305 5,882 6,352
As at 31 December 2024
Level 1 Level 2 Level 3 Total fair Total carrying value
value
£m £m £m £m £m
Liabilities:
Subordinated liabilities and other borrowings - 5,608 339 5,947 6,486
The estimated fair value of subordinated liabilities are based on the quoted
market offer price. The fair value of other borrowings 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.
15 Contingencies and related obligations
15.1 Litigation, tax and regulatory matters
In addition to the matters set out in Note 7.2 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.
15.2 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.
15.3 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 condensed consolidated income statement. The amount held within
insurance contract liabilities is £26m as at 30 June 2025 (31 December
2024: £55m).
- 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 condensed consolidated income statement. The amount held within
insurance contract liabilities is £15m as at 30 June 2025 (31 December
2024: £15m).
- 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
condensed consolidated income statement. The amount held within insurance
contract liabilities is £5m as at 30 June 2025 (31 December 2024: £13m).
The following matters are of relevance with respect to the With-Profits Fund:
15.3.1 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 is 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 £115m as at
30 June 2025 (31 December 2024: £122m) 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:
As at 30 June 2025 As at 31 December 2024
Assumption Change in 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
With-Profits Sub-Fund (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.
15.3.2 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 11 for
further details on these options and guarantees.
16 Related party transactions
The nature of the related party transactions of the Group has not changed from
those described in the Group's consolidated financial statements as at
31 December 2024.
There have been no related party transactions in the six months to 30 June
2025 which have had a material effect on the results or financial position of
the Group.
17 Post balance sheet events
There have been no significant events after the reporting period.
Supplementary information
Supplementary information
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 (KPMs). The Group also uses a number of alternative performance
measures (APMs), 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 review performed by the external
auditors. The Group's KPMs are summarised below, along with which of these
measures are considered APMs by the Group.
Key performance measure Type Definition
Assets under management and administration (AUMA) APM, Closing AUMA represents the total market value of all assets managed,
administered or advised on behalf of clients at the end of each financial
KPM 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 and model portfolios but
retain discretion over executing the advice.
AUMA includes assets recognised on the condensed 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, Net flows from open business consists of net client flows from Asset
Management, PruFund, Shareholder annuities and the elements of Other Life
KPM 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, Adjusted operating profit (AOP) before tax is one of the Group's non-GAAP
alternative performance measures, which complement the IFRS GAAP measures, and
KPM is useful as it allows a deeper understanding of 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 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 result 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 the IFRS result after tax.
Operating change in Contractual Service Margin (CSM) APM, Operating change in CSM is an APM introduced on the adoption of IFRS 17 in
2023 and supplements the AOP metric for the Life segment.
KPM
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, Operating capital generation is the total capital generation before tax,
adjusted to exclude market movements relative to those expected under
KPM 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, Total capital generation measures the change in surplus capital during the
period, before dividends and capital movements, and capital generated from
KPM discontinued operations. 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, Management focuses on a shareholder view of the Solvency II coverage ratio,
which is considered to provide a more useful reflection of the capital
KPM 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.
S.2 Adjusted operating profit before tax
(i) Reconciliation of adjusted operating profit/(loss) before tax by segment
to IFRS profit before tax
For the six months ended For the year ended 31 December
30 June
2025 2024(i) 2024
£m £m £m
Asset Management 128 129 289
Life 344 340 746
Corporate Centre (94) (94) (198)
Total segmented adjusted operating profit before tax 378 375 837
Short-term fluctuations in investment returns (12) (284) (643)
Mismatches arising on application of IFRS 17 2 (119) (333)
Amortisation and impairment of intangible assets acquired in business (11) (19) (115)
combinations
Profit on disposal of business and corporate transactions 5 11 11
Restructuring costs and other (37) (29) (106)
IFRS profit/(loss) before tax and non-controlling interests attributable to 325 (65) (349)
equity holders
IFRS profit attributable to non-controlling interests 8 8 17
IFRS profit/(loss) before tax attributable to equity holders 333 (57) (332)
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. The comparatives for Life and
Corporate Centre for the six months ended 30 June 2024 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
For the six months ended For the year ended 31 December
30 June
2025 2024(i) 2024
£m £m £m
Fee-based revenue 521 512 1,043
Asset Management operating expenses (388) (388) (774)
Investment return 3 13 36
Adjusted operating profit attributable to non-controlling interests (8) (8) (16)
Total Asset Management 128 129 289
With-profits: PruFund 112 98 226
With-profits: traditional 120 108 222
Shareholder annuities 113 132 308
Other Life (1) 2 (10)
Total Life 344 340 746
Corporate Centre (94) (94) (198)
Adjusted operating profit before tax 378 375 837
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. The comparatives for Life and
Corporate Centre for the six months ended 30 June 2024 have been restated to
reflect the revised segments and the adjustment of some advice-related costs.
Adjusted operating profit/(loss) before tax arising from with-profits business
is further analysed below:
For the six months ended 30 June For the year ended 31 December
2025 2024 20
24
Traditional PruFund Traditional PruFund Traditional PruFund
£m £m £m £m £m £m
CSM release(i) 107 110 90 103 198 221
Expected return on excess assets 15 5 18 9 36 18
Other (2) (3) - (14) (12) (13)
With-profits 120 112 108 98 222 226
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, including the CSM generated on
expected new business over the period, multiplied by the expected amortisation
factor for the period.
Adjusted operating profit/(loss) before tax arising from shareholder annuities
is further analysed in the table below:
For the six months ended For the year ended 31 December
30 June
2025 2024 2024
£m £m £m
Expected return on excess assets 61 74 147
CSM release 55 48 113
Risk adjustment unwind 10 9 21
Asset trading and portfolio management actions 6 3 -
Experience variances (19) (2) 2
Other provisions and reserves - - 25
Shareholder annuities 113 132 308
S.3 Operating change in Contractual Service Margin (CSM)
The CSM balances disclosed in Note 11 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 period 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 release each year is applied to 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
2025 2025 2025 2025 2025 2025 2025
For the six months ended 30 June £m £m £m £m £m £m £m
Opening CSM 1,771 1,588 1,380 175 4,914 1,119 6,033
Interest accreted on the CSM 72 72 17 3 164 - 164
Expected return in excess of risk-free on CSM 83 63 - - 146 - 146
Release of CSM to adjusted operating profit (110) (107) (55) (8) (280) - (280)
New business(i) 45 2 7 5 59 - 59
Assumption changes and variances 7 (13) (18) - (24) - (24)
Operating change in CSM 97 17 (49) - 65 - 65
Market and other impacts(ii) (75) (35) (2) 13 (99) 41 (58)
Release of CSM to non-operating (2) (9) - (3) (14) (59) (73)
Non-operating and other changes in CSM (77) (44) (2) 10 (113) (18) (131)
Closing CSM 1,791 1,561 1,329 185 4,866 1,101 5,967
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 six months ended 30 June £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 71 71 16 4 162 - 162
Expected return in excess of risk-free on CSM 88 66 - - 154 - 154
Release of CSM to adjusted operating profit (103) (90) (48) (8) (249) - (249)
New business(i) 34 - 6 6 46 - 46
Assumption changes and variances (16) (1) 2 1 (14) - (14)
Operating change in CSM 74 46 (24) 3 99 - 99
Market and other impacts(ii) 107 105 (5) 1 208 59 267
Release of CSM to non-operating (13) (15) - (3) (31) (53) (84)
Non-operating and other changes in CSM 94 90 (5) (2) 177 6 183
Closing CSM 1,889 1,478 1,192 188 4,747 1,018 5,765
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(i) 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(ii) (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 With-profits: Traditional new business consists of increments
on legacy business.
ii Market and other impacts includes measurement mismatches
relating to accounting for reinsurance contracts. Note, the year ended 31
December 2024 also includes £144m reallocation from With-profits PruFund to
Traditional due to a refinement of the CSM across the two sub-segments.
S.4 Assets under management and administration (AUMA) and net client flows
(i) Net client flows
Net flows Net flows Total net
from open business other client flows
For the six months ended 30 June For the year ended 31 December For the six months ended 30 June For the year ended 31 December For the six months ended 30 June For the year ended 31 December
2025 2024 2024 2025 2024 2024 2025 2024 2024
£bn £bn £bn £bn £bn £bn £bn £bn £bn
Institutional Asset Management 1.9 (0.5) (0.9) - - - 1.9 (0.5) (0.9)
Wholesale Asset Management 0.7 - - - - - 0.7 - -
Total Asset Management 2.6 (0.5) (0.9) - - - 2.6 (0.5) (0.9)
With-profits: PruFund (0.6) (0.6) (0.9) - - - (0.6) (0.6) (0.9)
With-profits: traditional - - - (2.3) (2.3) (4.8) (2.3) (2.3) (4.8)
Shareholder annuities (0.3) (0.2) (0.2) - - - (0.3) (0.2) (0.2)
Other Life 0.4 0.2 0.1 (2.3) (1.3) (2.8) (1.9) (1.1) (2.7)
Total Life (0.5) (0.6) (1.0) (4.6) (3.6) (7.6) (5.1) (4.2) (8.6)
Corporate assets - - - - - - - - -
Total 2.1 (1.1) (1.9) (4.6) (3.6) (7.6) (2.5) (4.7) (9.5)
(ii) Detailed AUMA and net client flows
As at 1 January 2025 Gross inflows Gross outflows Net client flows Market/ As at 30 June 2025
Other
movements
For the period ended £bn £bn £bn £bn £bn £bn
Institutional Asset Management 96.1 9.2 (7.3) 1.9 4.9 102.9
Wholesale Asset Management 62.8 9.5 (8.8) 0.7 1.7 65.2
Other Asset Management 0.9 - - - (0.2) 0.7
Asset Management 159.8 18.7 (16.1) 2.6 6.4 168.8
With-profits: PruFund 64.0 2.8 (3.4) (0.6) 1.3 64.7
With-profits: traditional 61.6 0.2 (2.5) (2.3) 5.5 64.8
Shareholder annuities 15.1 0.2 (0.5) (0.3) 0.4 15.2
Other Life 44.4 1.4 (3.3) (1.9) (2.4) 40.1
Life(i) 185.1 4.6 (9.7) (5.1) 4.8 184.8
Corporate assets 1.0 - - - - 1.0
Total(ii) 345.9 23.3 (25.8) (2.5) 11.2 354.6
As at 1 January 2024 Gross inflows Gross outflows Net client flows Market/ As at 30 June 2024
Other
movements
For the period ended £bn £bn £bn £bn £bn £bn
Institutional Asset Management 98.2 6.8 (7.3) (0.5) 0.1 97.8
Wholesale Asset Management 55.0 9.5 (9.5) - 1.1 56.1
Other Asset Management 1.0 - - - - 1.0
Asset Management 154.2 16.3 (16.8) (0.5) 1.2 154.9
With-profits: PruFund 61.2 2.8 (3.4) (0.6) 2.3 62.9
With-profits: traditional 65.0 0.1 (2.4) (2.3) 1.0 63.7
Shareholder annuities 15.8 0.3 (0.5) (0.2) (0.4) 15.2
Other Life 46.0 1.9 (3.0) (1.1) 3.4 48.3
Life(i) 188.0 5.1 (9.3) (4.2) 6.3 190.1
Corporate assets 1.3 - - - (0.2) 1.1
Total(ii, iii) 343.5 21.4 (26.1) (4.7) 7.3 346.1
As at 1 January 2024 Gross inflows Gross outflows Net client flows Market/ As at 31 December 2024
Other
movements
For the year ended £bn £bn £bn £bn £bn £bn
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
Asset Management 154.2 30.4 (31.3) (0.9) 6.5 159.8
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
Life(i) 188.0 10.3 (18.9) (8.6) 5.7 185.1
Corporate assets 1.3 - - - (0.3) 1.0
Total(ii) 343.5 40.7 (50.2) (9.5) 11.9 345.9
i £155.6bn of AUMA of Life is managed internally by the Group's
Asset Management business (£158.7bn as at 30 June 2024, £156.1bn as at
31 December 2024), includes £nil net transfers to Asset Management (£nil as
at 30 June 2024, £3.6bn as at 31 December 2024).
ii £18.4bn of total AUMA relates to assets under advice (30 June
2024: £17.1bn, 31 December 2024: £18.0bn).
iii Previous operating segments 'Life' and 'Wealth' have been replaced
with one new operating segment, 'Life'. Comparatives for the six months ended
30 June 2024 are presented on the new segment basis. PruFund includes both UK
and non-UK.
(iii) AUMA by asset class
As at 30 June 2025
On-balance sheet AUMA External AUMA Total
With-profits Unit- Shareholder Corporate Total on- Wholesale Institutional Total Total AUMA
linked backed annuities & assets balance external
other long- sheet
term business
£bn £bn £bn £bn £bn £bn £bn £bn £bn
Investment property 8.8 - 0.6 - 9.4 - 14.7 14.7 24.1
Reinsurance contract assets - 0.1 1.2 - 1.3 - - - 1.3
Equity securities and pooled investment funds 78.5 11.3 0.1 0.1 90.0 37.3 15.6 52.9 142.9
Loans 0.5 - 1.2 - 1.7 - 8.8 8.8 10.5
Debt securities 30.2 1.3 11.9 0.9 44.3 26.2 60.8 87.0 131.3
of which: Corporate 17.8 0.7 8.4 0.9 27.8 14.4 36.3 50.7 78.5
of which: Government 11.6 0.6 3.0 - 15.2 12.0 9.6 21.6 36.8
of which: asset-backed securities (ABS) 0.8 - 0.5 - 1.3 (0.2) 14.9 14.7 16.0
Derivatives(i) 0.6 - (1.4) 0.1 (0.7) 0.2 (0.7) (0.5) (1.2)
Deposits(ii) 8.7 1.5 1.7 - 11.9 - - - 11.9
Cash and cash equivalents 1.1 0.3 0.6 0.5 2.5 1.5 3.7 5.2 7.7
Other 1.1 0.1 0.1 0.1 1.4 - - - 1.4
Other AUMA - - - - - - - 24.7 24.7
Total(iii) 129.5 14.6 16.0 1.7 161.8 65.2 102.9 192.8 354.6
As at 31 December 2024
On-balance sheet AUMA External AUMA Total
With-profits Unit- Shareholder Corporate Total on- Wholesale Institutional Total Total AUMA
linked backed annuities & assets balance external
other long- sheet
term business
£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(i) (0.7) - (1.4) (0.1) (2.2) (0.1) (0.6) (0.7) (2.9)
Deposits(ii) 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 25.4
Total(iii) 128.3 15.4 16.0 1.9 161.6 62.8 96.1 184.3 345.9
i Derivative assets are shown net of derivative liabilities.
ii Deposits are shown net of unsettled reverse repurchase
agreements.
iii Included in total AUMA of £354.6bn (31 December 2024: £345.9bn)
is £18.4bn (31 December 2024: £18.0bn) of assets under advice.
(iv) AUMA by geography
As at 30 June As at 31 December
2025 2024 2024
£bn £bn £bn
UK 250.6 260.5 250.2
Rest of Europe 75.9 59.0 67.9
Asia-Pacific 13.9 13.2 14.1
Middle East and Africa 11.3 10.8 11.0
Americas 2.9 2.6 2.7
Total AUMA(i) 354.6 346.1 345.9
i £18.4bn of total AUMA relates to assets under advice
(30 June 2024: £17.1bn, 31 December 2024: £18.0bn).
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
As at 30 June As at 31 December
2025 2024 2024
£bn £bn £bn
IFRS shareholders' equity 3.3 3.7 3.3
Deduct goodwill and intangible assets (1.5) (1.5) (1.4)
Net impact of policyholder liabilities and reinsurance assets valued on 12.7 12.0 12.4
Solvency II basis
Impact of introducing Solvency II risk margin (net of transitional measures) (0.3) (0.3) (0.3)
Impact of measuring assets and liabilities in line with Solvency II principles 0.9 1.1 1.0
Other - 0.1 (0.1)
Solvency II excess of assets over liabilities 15.1 15.1 14.9
Subordinated debt capital 2.5 2.5 2.5
Ring-fenced fund restrictions (6.2) (6.8) (5.8)
Solvency II eligible own funds 11.4 10.8 11.6
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 difference between IFRS
shareholders' equity and Solvency II eligible own funds 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 shareholders' 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.
These are 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;
- 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;
- 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; and
- 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.
The Group's total estimated own funds are analysed by Tier as follows:
As at 30 June As at 31 December
2025 2024 2024
£bn £bn £bn
Tier 1 (unrestricted) 8.4 7.7 8.6
Tier 2 2.5 2.5 2.5
Tier 3 0.5 0.6 0.5
Total eligible own funds 11.4 10.8 11.6
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 13. 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 (31 December 2024: £0.5bn) relates to
deferred tax asset balances.
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 30
June 2025, 30 June 2024 and 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:
As at 30 June As at 31 December
2025 2024 2024
£bn £bn £bn
Shareholder Solvency II eligible own funds 8.3 8.7 8.5
Shareholder Solvency II SCR(i) (3.6) (4.1) (3.8)
Shareholder Solvency II surplus 4.7 4.6 4.7
Shareholder Solvency II coverage ratio(ii) 230% 210% 223%
i Included in the SCR at 30 June 2025 is an amount of £175m
(30 June 2024: £175m, 31 December 2024: £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; and
- M&G Group Limited and other undertakings carrying out financial
activities consolidated under local sectoral or notional sectoral capital
requirements.
Breakdown of the shareholder Solvency II SCR by risk type
The shareholder undiversified capital requirement is presented by risk type
below.
As at 30 June As at 31 December
2025 2024 2024
£bn £bn £bn
Equity 1.5 1.7 1.6
Property 0.7 0.8 0.7
Interest rate 0.3 0.4 0.3
Credit 1.3 1.3 1.3
Currency 1.0 1.1 1.0
Longevity 0.9 1.1 1.0
Lapse 0.5 0.5 0.5
Operational & expense 2.1 2.2 2.1
Sectoral(i) 0.5 0.6 0.5
Total undiversified 8.8 9.7 9.0
Diversification, deferred tax, and other (5.2) (5.6) (5.2)
Shareholder SCR 3.6 4.1 3.8
i 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.
As at 30 June 2025 As at 30 June 2024 As at 31 December 2024
Surplus Shareholder coverage ratio Surplus Shareholder coverage ratio Surplus Shareholder coverage ratio
£bn % £bn % £bn %
Base (as reported) 4.7 230% 4.6 210% 4.7 223%
20% instantaneous fall in equity markets 4.2 219% 4.0 198% 4.1 212%
20% instantaneous fall in property markets 4.3 218% 4.2 201% 4.3 214%
50bp reduction in interest rates 4.6 224% 4.5 205% 4.7 219%
100bp widening in credit spreads 4.5 227% 4.4 208% 4.6 220%
20% credit asset downgrade(i) 4.5 224% 4.4 206% 4.6 219%
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:
As at 30 June As at 31 December
2025 2024 2024
£bn £bn £bn
With-Profits Fund Solvency II own funds 9.3 8.9 8.9
With-Profits Fund Solvency II SCR (3.1) (2.1) (3.1)
With-Profits Fund Solvency II surplus 6.2 6.8 5.8
With-Profits Fund Solvency II coverage ratio(i) 303% 429% 284%
i With-Profits Fund Solvency II coverage ratio has been
calculated using unrounded figures.
The fall in ratio since 30 June 2024 primarily reflects an increase in SCR, a
component of which arises from a full rebuild of the prospective with-profits
modelling in 2024. The increase to the six months ended 30 June 2025 is
driven mainly by an increase in own funds from the expected return from
in-force with-profits business.
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:
As at 30 June As at 31 December
2025 2024 2024
£bn £bn £bn
Solvency II Eligible own funds 11.4 10.8 11.6
SCR (6.7) (6.2) (6.9)
Solvency II surplus 4.7 4.6 4.7
Solvency II coverage ratio(i) 170% 173% 168%
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 30 June 2025 and
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 30 June 2024, the
recalculated transitional measures did not align to the approved regulatory
position and therefore the estimated Solvency II capital position differed
from the position disclosed in the formal regulatory Quantitative Reporting
Templates of the same date.
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 above in the Composition of own funds
section, as at 30 June 2025, 30 June 2024 and 31 December 2024 there is no
restriction to eligible own funds 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:
- 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; and
- 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 6.2% pa for 2025 and 6.8% pa for 2024. For annuity
business, the assumed average return on assets backing capital was 5.2% pa for
2025 and 5.6% pa for 2024.
The Group's capital generation results in respect of the six months ended
30 June 2025 and 30 June 2024, and year ended 31 December 2024 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.
For the six months ended 30 June 2025 For the six months ended 30 June 2024 For the year ended 31 December 2024
Asset Life Corporate Total Asset Life(i) Corporate Total Asset Life Corporate Total
Management
Centre
Management
Centre(i)
Management
Centre
£m £m £m £m £m £m £m £m £m £m £m £m
Underlying capital generation 136 289 (94) 331 118 283 (104) 297 261 616 (233) 644
Other operating capital generation 3 73 1 77 1 189 (1) 189 51 233 5 289
Operating capital generation 139 362 (93) 408 119 472 (105) 486 312 849 (228) 933
Market movements (35) 27 (59)
Restructuring and other (61) (21) (135)
Tax 42 105 153
Reversal of eligible own funds restriction - 216 216
Total capital generation 354 813 1,108
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. The comparatives for Life and
Corporate Centre for the six months ended 30 June 2024 have been restated to
reflect the revised segments and the adjustment of some advice-related costs.
For the six months ended 30 June 2025 For the six months ended 30 June 2024(i) For the year ended 31 December 2024
Own funds(ii) SCR(ii) Surplus Own funds(ii) SCR(ii) Surplus Own funds(ii) SCR(ii) Surplus
£m £m £m £m £m £m £m £m £m
Underlying capital generation
Asset Management Asset Management 124 12 136 118 - 118 254 7 261
Asset Management underlying capital generation 124 12 136 118 - 118 254 7 261
Life(i) With-profits: PruFund 147 (32) 115 121 (25) 96 292 (53) 239
In-force 104 22 126 110 24 134 217 47 264
New business 43 (54) (11) 11 (49) (38) 75 (100) (25)
With-profits: traditional 70 10 80 78 16 94 158 32 190
Shareholder annuities 95 4 99 108 (12) 96 215 (18) 197
Other (12) 7 (5) (4) 1 (3) (8) (2) (10)
Life underlying capital generation 300 (11) 289 303 (20) 283 657 (41) 616
Corporate Centre(i) Interest & head office cost (112) 18 (94) (109) 5 (104) (235) 2 (233)
Underlying capital generation 312 19 331 312 (15) 297 676 (32) 644
Other operating capital generation
Asset Management 3 - 3 1 - 1 21 30 51
Life (61) 134 73 86 103 189 12 221 233
Corporate Centre 1 - 1 (1) - (1) (7) 12 5
Operating capital generation 255 153 408 398 88 486 702 231 933
Market movements (98) 63 (35) (57) 84 27 (281) 222 (59)
Restructuring and other (35) (26) (61) (49) 28 (21) (160) 25 (135)
Tax 10 32 42 51 54 105 44 109 153
Eligible own funds restriction - - - 216 - 216 216 - 216
Total capital generation 132 222 354 559 254 813 521 587 1,108
Dividends and capital movements (392) - (392) (771) - (771) (924) - (924)
Total (decrease)/increase in Solvency II surplus (260) 222 (38) (212) 254 42 (403) 587 184
i Previous operating segments 'Life' and 'Wealth' have been
replaced with one new operating segment, 'Life'. The comparatives for Life and
Corporate Centre for the six months ended 30 June 2024 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.
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-to-income ratio
Cost-to-income ratio is a measure of cost efficiency which analyses costs as a
percentage of revenue.
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
£m £m £m
Total Asset Management operating expenses 388 388 774
Adjustment for revaluations(i) - (2) (4)
Total Asset Management adjusted costs 388 386 770
Total Asset Management fee-based revenue 521 512 1,043
Less: Performance fees and carried interest (7) (13) (35)
Total Asset Management underlying fee-based revenue 514 499 1,008
Cost-to-income ratio 75% 77% 76%
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 revenue margin
This represents the average fee revenue yield on fee business and demonstrates
the margin being earned on the assets we manage or administer.
For the six months ended 30 June For the year ended 31 December
2025 2024 2024
Average AUMA(i) Revenue(ii) Revenue margin(ii) Average AUMA(i) Revenue(ii) Revenue margin(ii) Average AUMA(i) Revenue(ii) Revenue margin(ii)
£bn £m bps £bn £m bps £bn £m bps
Wholesale Asset Management 64 176 55 56 153 55 57 316 56
Institutional Asset Management 97 184 38 97 186 38 97 368 38
Internal 155 154 20 160 160 20 160 324 20
Total Asset Management 316 514 32 313 499 32 314 1,008 32
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 and 7-point average of monthly
closing AUMA for half-year periods.
ii Revenue margin is calculated by annualising underlying
fee-based revenues earned, which excludes performance fees, in the period
divided by average AUMA for the period. Revenue margin relates to the total
margin for internal and external revenue.
S.8 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.
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.
Debt securities
The table below presents the Group's debt securities by asset class and
external credit rating issued for each component of business.
AAA AA+ to AA- A+ to A- BBB+ to BBB- Below BBB- Other Total
As at 30 June 2025 £m £m £m £m £m £m £m
Government Sovereign debt 3,226 13,343 1,907 2,621 1,499 90 22,686
With-profits 2,529 9,999 1,797 2,455 1,426 - 18,206
Unit-linked 139 1,068 93 140 73 90 1,603
Annuity and other long-term business 553 1,708 17 26 - - 2,304
Other 5 568 - - - - 573
Quasi-sovereign and Public sector debt 129 1,396 186 386 705 248 3,050
With-profits 125 702 134 375 699 168 2,203
Unit-linked 3 72 8 11 5 1 100
Annuity and other long-term business 1 622 44 - 1 79 747
Corporate debt 856 3,151 10,065 11,530 2,403 7,839 35,844
With-profits 467 2,015 7,937 8,830 2,261 4,106 25,616
Unit-linked 40 153 593 795 75 46 1,702
Annuity and other long-term business 207 952 1,517 1,890 67 3,665 8,298
Other 142 31 18 15 - 22 228
Asset-backed securities 190 178 376 327 152 1,689 2,912
With-profits 88 115 180 243 152 1,571 2,349
Unit-linked 7 8 6 12 - - 33
Annuity and other long-term business 77 55 190 72 - 118 512
Other 18 - - - - - 18
Total debt securities 4,401 18,068 12,534 14,864 4,759 9,866 64,492
With-profits 3,209 12,831 10,048 11,903 4,538 5,845 48,374
Unit-linked 189 1,301 700 958 153 137 3,438
Annuity and other long-term business 838 3,337 1,768 1,988 68 3,862 11,861
Other 165 599 18 15 - 22 819
AAA AA+ to AA- A+ to A- BBB+ to BBB- Below BBB- Other Total
As at 31 December 2024 £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
The Group has holdings in asset-backed securities (ABS) which are presented
within debt securities on the condensed 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.
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:
As at 30 June 2025 As at 31 December 2024
£m £m
AAA 92 100
AA+ to AA- 1,021 900
A+ to A- 3,258 3,626
BBB+ to BBB- 2,591 2,391
Below BBB- 1,174 1,096
Unrated 1,730 1,751
Total 9,866 9,864
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's exposure to sovereign debt is analysed by issuer as follows:
With-profits Unit-linked Annuity and other long-term business Other Total
As at 30 June 2025 £m £m £m £m £m
Government Sovereign debt securities by country:
UK 5,719 972 1,706 524 8,921
Germany 622 16 130 - 768
Other European countries 1,118 63 328 - 1,509
Total Europe 7,459 1,051 2,164 524 11,198
United States 3,240 51 - - 3,291
Latin American countries 553 18 26 - 597
South Africa 790 139 - - 929
South Korea 885 55 - - 940
Indonesia 762 43 - - 805
Malaysia 896 52 - - 948
Singapore 243 15 - - 258
Philippines 536 32 - - 568
Thailand 455 28 - - 483
India 777 48 - - 825
Other 1,610 71 114 49 1,844
Total 18,206 1,603 2,304 573 22,686
With-profits Unit-linked Annuity and other long-term business Other Total
As at 31 December 2024 £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 American 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
As at 30 June 2025 Other European countries included £1,032m (31 December
2024: £1,248m) and other included £1,190m (31 December 2024: £1,144m) of
Supranational Government bonds.
Exposure of debt securities by sector
The exposure of annuities and other long term business to debt securities is
analysed below by sector:
As at 30 June As at 31 December
2025 2024
£m £m
Government 3,022 3,311
Real Estate 2,800 2,805
of which residential 1,644 1,634
of which commercial 1,156 1,171
Financial 2,491 2,627
Utilities 1,559 1,551
Consumer 409 414
Industrial 403 424
Communications 317 312
Other 860 735
Total 11,861 12,179
Glossary
Term Definition
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.
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-to-income ratio Represents total operating expenses, excluding revaluation of provisions for
employee performance awards divided by total fee-based revenues, excluding
performance fees and carried interest.
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 revenue margin Is calculated by annualising underlying fee-based revenues earned, 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.
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) 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.
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.
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.
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.
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.
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.
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's 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.
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.
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.
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.
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. When first implemented this decreased linearly over
16 years following the implementation of Solvency II, and was recalculated in
certain cases, subject to agreement with the PRA. Following the implementation
of the PRA's reforms on 31 December 2024, this is recalculated every valuation
period and will run off completely by 2032.
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 updated in 2024.
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.
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