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Prudential’s (PRU) merger of its UK life insurance division with its M&G fund management business ‘makes enormous sense’ according to Shore Capital, which has reiterated its ‘buy’ rating on the stock.
Prudential yesterday announced it would be combining its two major UK operations into one group, M&G Prudential, in a move it said could save £145 million a year.
Shore Capital analyst Eamonn Flanagan said the move would help the group ‘to drive out costs and to deliver a unified proposition to the market’.
‘In so doing, Pru now has three fully formed, unified, distinct and financially robust divisions across Asia, the US and the UK,’ he added, flagging he was likely to upgrade his sum-of-the-parts valuation to ‘at least’ £22.50. The shares were flat at £18.39 yesterday.
‘With the stock trading at a c.19% discount to this figure, we reiterate our “buy” recommendation,’ he said.
‘The strength of the group’s business model across the world is unparalleled, to us, and it has a formidable balance sheet to match.
‘The operations in Asia and the US are “best in class” in our view in their respective territories, with the UK / M&G likely to become so in due course.’