Broker snap: Friends may attract interest after demerger

3rd Jul 2009 11:59

The demerger of Friends Provident's asset management subsidiary F&C has received court approval and has taken place today, resulting in a downward adjustment in the share price.Broker Panmure Gordon believes that having offloaded its 52% stake in F&C Asset Management the life assurance company could well be involved in consolidation activity within the sector, though it suggests that had buy-out specialist Resolution been interested in Friends it would have made its move before the demerger."We maintain the view that Friends Provident is strategically hampered by its positioning in the UK Life market, where its key product lines are Group Pensions (a competitive market place) and Protection (housing market exposed)," the broker's analyst Barrie Cornes said.Cornes rates the shares a "hold". "Although the valuation appears attractive with a 2009E dividend yield of 6%, we think that there are better opportunities elsewhere in the UK life sector, and would highlight Prudential and Aviva as the obvious switch candidates," Cornes concludes.