Prudential shares fall as Societe Generale cuts rating to 'sell'

Prudential shares fell on Thursday as Societe Generale lowered its rating on the stock to ‘sell’ from ‘hold’ and cut its target price to 1,250p from 1,400p.

Societe Generale said Prudential is on its list of least preferred stocks as it believes it is most vulnerable to the “growing cocktail” of variable annuity risks.

“Not only are Pru’s future sales and earnings looking challenged, but also the back-book may come under pressure,” the broker said.

“Its hedging has been effective so far but has not been tested in a bear market.”

The financial services company reduced its earnings per share forecasts for fiscal years 2017 and 2018 by 3% and 4% respectively, due to lower estimates for variable annuity sales and profit margin.

Societe Generale also cut its dividend per share expectations by 5% for 2017 and 9% for 2018.

Shares in Prudential fell 3.04% to 1,405.50p at 0938 BST.