Berenberg lifts target price for M&G but keeps 'hold'

22nd Dec 2023 10:23

(Sharecast News) - Berenberg has hiked its target price for life insurance group M&G from 208p to 225p after updating its estimates for the IFRS 17 accounting adjustments.

"M&G is one of the few companies in the insurance sector that has benefited from the transition to IFRS 17 as the standard allows M&G to recognise a greater portion of future shareholder transfers from its with-profits fund within shareholders equity, relative to the old standard," said analyst Thomas Bateman.

"This process is essentially bringing forward profit recognition on M&G's with-profits business, whereas IFRS 17 has had the opposite impact on the annuity portfolios of its peer group, with profit recognition being deferred."

However, the broker has kept a 'hold' rating on the stock, which trades at 8.5 times 2025 earnings for a 2024 estimated dividend yield of 9.3%.

Berenberg said it would turn more positive on M&G if retail asset management net fund flows show consistent positive trends, "which would likely lead to more optimistic commentary on the dividend from management".