Bernstein reiterates 'outperform' rating on Prudential, ups target price

Analysts at Bernstein took a fresh look at life insurance firm Prudential on Thursday, reiterating their 'outperform' recommendation on the group's shares, as well as upping their target price as a result of some tweaking to its post-FY17 results estimates.

Bernstein said the sale of a portion of Prudential's UK annuity book to Rothesay and its decision to switch to a SOTP valuation framework, given the company's plan to list M&G Prudential separately, were the principal driving forces for upping its target price, noting that "excluding this", it would have modestly increased estimates on the London-based group.

"We have long felt that Prudential shares traded at a discount to SOTP, and management has long seemed to be happy to provoke SOTP debate but not particularly inclined to take any dramatic action that would crystallise the SOTP value. That has changed, as management's plan to list M&G Prudential separately from the rest of the Group has moved the SOTP debate from theory to reality.

"In recognition of this step we move to a SOTP valuation framework for Prudential, which results in our target price increase from 1950p to 2250p," read Bernstein's Thursday morning research note.

Edward Houghton and his team of analysts pointed out that while "much remains to be determined" at Prudential, as it stands, their overall sense was that the transition to SOTP valuation "is the most salient point" for Prudential's investors.

As of 1400 GMT, shares had dipped 2.08% to 1,857.50p.