M&G Shares Fall as Company Reveals £722m Direct Exposure to Ground Rent Assets

M&G (LON: MNG) shares slipped 1.5% to 302p on Tuesday after the group confirmed it is directly exposed to £722 million of ground rent assets that would be hit by the Government’s proposed Leasehold Reform Bill.

The Government plans to cap existing annual ground rents in England and Wales at £250 from 2028 for a 40-year transition period, before reducing them to zero.

M&G said the proposal would trigger a substantial write-down in the value of its holdings, though it reaffirmed its financial targets.

The company said the changes would result in “a c. £230 million one-off reduction in the Group Solvency II Own Funds,” with a limited £140 million impact on its Solvency II surplus due to allowances already made. Its Shareholder Solvency II coverage ratio is expected to fall by around one percentage point.

M&G also warned of an ongoing profitability hit once the rules take effect. It expects “a c. £15 million reduction in annual adjusted operating profit and underlying capital generation,” before any mitigating actions such as cost control or balance sheet optimisation.

Chief executive Andrea Rossi said M&G supports the aim of improved leaseholder protection but criticised the scale of the reforms. “We are disappointed that we have not been able to agree a proportionate solution that works for all parties,” he said.

The group cautioned that the proposals could harm the UK’s appeal to long-term investors, describing the solution as “disproportionate” and warning it may set “a worrying precedent” for future policy interventions.