M&G PLC (LSE:MNG), the fund manager, has decided to use its excess capital to reduce its debt pile and improve the quality of its balance sheet.
Up to £450 million worth of bonds will be redeemed through tender offers for outstanding lower-grade Tier 2 and Tier loan notes.
“We would expect the £216m restriction to Tier 2 and Tier 3 capital reported at the 2023 FY Results to become immaterial following the conclusion of these deleveraging actions, which would meaningfully improve the efficiency of M&G's balance sheet,” said a statement.
M&G announced a final dividend costing £311 million with its 2023 results, but even with that outlay added its financial ratio Solvency II was 203% or well above its regulatory requirement.
“Based on a deleveraging of up to £450m, we estimate that the Q1 2024 pro-forma Group Solvency II coverage ratio would remain comfortably above the top end of the target operating range of 160%-190%,” said the statement.
Andrea Rossi, M&G chief executive, added: "Today's announcement demonstrates the strength of our commitment to investors, and our continued focus on delivering on our three strategic priorities: Financial Strength, Simplification, and Growth.
"Deleveraging and improving the efficiency of our balance sheet are key priorities for us, and these actions represent an important step towards the achievement of our target leverage ratio of 30% or less by 2025.”
M&G Shares rose slightly to 203.5p.