M&G: new chief may yield value at lower risk than a break-up

{"text":[[{"start":12.58,"text":"M&G’s fund managers have supported numerous corporate demergers in the name of unlocking shareholder value. "},{"start":18.797,"text":"Indeed, the same logic was part of M&G’s separation from Asia-focused insurer and savings group Prudential at the end of 2019. "}],[{"start":27.47,"text":"That move popped the joint valuation for a while. "},{"start":30.799,"text":"After this, Pru slipped on China worries and M&G moved sideways. "},{"start":35.153999999999996,"text":"Some investors are now mooting a further break-up of the UK savings and investments group. "}],[{"start":40.989999999999995,"text":"Schroders mulled a bid for M&G at the beginning of last year. "},{"start":44.73199999999999,"text":"It would have hung on to asset management while disposing of the life and pension businesses. "},{"start":49.361999999999995,"text":"The deal foundered over concerns about a culture clash and slumping investment flows. "}],[{"start":54.849999999999994,"text":"These turned positive in the first half of this year for the first time since the demerger. "},{"start":59.678999999999995,"text":"A higher price for the group’s most valuable division should be warranted. "}],[{"start":null,"text":"

"}],[{"start":63.98,"text":"At £5.6bn, M&G’s market value is just a hair below its listing value. "},{"start":70.02199999999999,"text":"A group valuation multiple of 10 times forward earnings is well below 14 times for Schroders. "},{"start":75.652,"text":"M&G’s lower rating reflects slower growth and its reliance on unfashionable savings and pension products. "}],[{"start":82.50999999999999,"text":"These include a large back book of annuities and with-profit insurance policies, along with the flagship PruFund, which remains open to new business. "}],[{"start":91.27999999999999,"text":"The with-profits businesses might be worth 20 per cent of own funds, or £3bn. "},{"start":96.70899999999999,"text":"Other insurance businesses could attract £4.5bn, including net debt, equating to 76 per cent of own funds, think analysts at RBC. "},{"start":105.91399999999999,"text":"Add in £2.4bn for the asset management business on a 14 times multiple and any savings a consolidator might find. "},{"start":113.41899999999998,"text":"That implies 40 per cent upside from a break-up over the current price. "}],[{"start":null,"text":""}],[{"start":118.33999999999999,"text":"However, a deal would have to be all or nothing. "},{"start":121.50699999999999,"text":"A partial sale of the back book, for example, would scupper a dividend currently yielding over 8 per cent. "},{"start":127.42399999999999,"text":"Meanwhile, M&G is tipped to benefit from Solvency II reforms. "},{"start":131.69199999999998,"text":"Its shares have outperformed peers by nearly 40 per cent this year. "}],[{"start":136.56,"text":"Investors should wait and see whether a new chief executive can squeeze more value from M&G with lower risk than a break-up. "}],[{"start":143.1,"text":""}]],"url":"https://creatives.ftacademy.cn/album/80384-1660663821.mp3"}