The M&G (LSE:MNG) share price has been pretty stagnant over the last 12 months. But it recently took a 10% hit as investors mulled over its 2024 results. Management successfully delivered on some of its medium-term targets, yet customer net outflows continue to offset positive progress being made.
Throw in the impact of a sector-wide accounting standards change that wiped £760m off the balance sheet’s equity line, and it’s not surprising to see the stock price slip.
But has this created a buying opportunity for long-term investors? Let’s take a look.
A mixed bag of results
Like many insurance enterprises, M&G’s been pushing ahead with its cost savings initiatives. The group’s asset management business’s cost-to-income ratio improved year on year from 79% to 76%. That was thanks to a combination of higher revenues and lower expenses. And at the same time, the company has increased its cumulative savings target by the end of 2025 to reach £230m from £200m.
On the other hand, the rise in popularity of bulk purchase annuities (BPAs) is causing pension funds to change investing tactics and pull money out of stocks. Pension funds make up a big chunk of M&G’s customer base. So the impact of such decisions is showing up in the financials.
In 2024, the firm’s PruFund offer saw client net cash outflows land at £0.9bn – worse than expected. Higher interest rates and a shift from deficit to surplus are both acting as tailwinds for the BPA market. And it’s a big boost for insurance companies specialising in such transactions. They’re expected to stick around while interest rates remain elevated.
Sadly for M&G, the company has limited exposure to this space compared to its peers. And while it’s attempting to capitalise on this tailwind, net cash outflows might continue to plague its financials moving forward.
Where’s the share price going?
Given this mixed bag of results and rival firm Phoenix Group Holdings seemingly stealing the show, what do analysts expect over the next 12 months? Looking at the latest share price targets, the average consensus suggests the M&G share price could reach as high as 225p by this time next year. Compared to the current trading price, that means a £1,000 investment could grow to £1,106.
Of course, forecasts are never set in stone. Despite the optimistic stock price outlook, most institutional investors – nine out of 15 — have a Hold rating on the business.
There continues to be growing uncertainty surrounding its net cash outflows. Rivals don’t appear to suffer from this to the same extent. Yes, there’s positive progress being made in other areas of the business. But I think there are more interesting opportunities for investors to consider elsewhere.
