M&G to take £230m one-off hit from ground rent cap

(Sharecast News) - Asset manager M&G said on Tuesday that it expects to take a one-off hit of £230m from the government's proposed cap on ground rents. Under the current proposal, existing annual ground rents are set to be capped at £250 from 2028 for a transition period of 40 years, at the end of which all ground rents would be reduced to zero.

M&G noted that it is directly exposed to £722m of ground rent assets through its Prudential Assurance Company shareholder fund.

"M&G's strong financial position and our ongoing prudent approach to capital allocation mean we are well placed to absorb and manage this impact," it said.

It said that under the proposed changes, it would expect its shareholder solvency II coverage ratio to reduce by around one percentage point.

Should the proposed changes be approved in the current form, the writedown in valuation of M&G's relevant assets is expected to lead to a circa £230m one-off reduction in the Group Solvency II Own Funds.

From 2028, M&G said it would expect a reduction of about £15m in annual adjusted operating profit and underlying capital generation, due to lower surplus assets in its annuity book.

Chief executive Andrea Rossi said: "M&G fully supports the Government's objective to strengthen leaseholder protection and tackle remaining egregious ground rents. However, we are disappointed that we have not been able to agree a proportionate solution that works for all parties.

"Thanks to the quality of our business model and our disciplined approach to capital management, we today reconfirm the adjusted operating profit growth and capital generation targets announced in March 2025, and our existing progressive dividend policy."

At 1010 GMT, M&G shares were down 0.1% at 306.10p.