M&G ploughs on with £410m dividend despite regulator warning insurers to hold off

M&G will go ahead with a £400 million-plus dividend for shareholders despite Bank of England caution about insurers making payouts in the crisis.

The Chelsea Flower Show sponsor, spun out of Prudential last year, said it was financially strong enough to pay and its decision was the “right thing” to do for shareholders.

Like others M&G has been embroiled in a debate about whether insurers should pay dividends due to the uncertainty of the Covid-19 crisis.

The Bank of England warned the insurance sector in March about dishing out cash because of fears of looming financial stress.

Some insurers, like Aviva and RSA, suspended dividends while Legal & General and Phoenix Group pushed on with the payout to the cheer of many fund managers in the City.

M&G today confirmed it would pay shareholders an 11.92p ordinary dividend and a 3.85p special dividend after deciding it was healthy enough to make the payment.

The company’s solvency position, a measure of financial strength, fell to 168% at the end of March from 176% but this is still “robust,” said analysts at Bank of America.

A long-term plan to churn out £2.2 billion of capital by 2022 remains unchanged. That backs the dividend and suggests M&G can meet payouts.

Chief executive John Foley said the firm wanted to “do the right thing by our shareholders” and make good on the payout promise.

“Many of our shareholders are income funds or individual savers who rely on these payments for part of their retirement income,” he said.

M&G has also bought a IFA portal called Ascentric with 90,000 customers from pension mutual Royal London for an undisclosed sum.