Key insights
- Goldman Sachs downgraded M&G due to valuation concerns after a significant rally. The price target was cut to 320p. Factors driving the rally, including a partnership with Dai-ichi Life and improving asset management flows, are now largely priced in. GS revised EPS estimates downwards due to higher interest rates and lower equity markets impacting AUM. Limited near-term capital returns are expected.
Investing.com -- Goldman Sachs downgraded M&G Plc (LON:MNG) to “neutral” rating on Tuesday, cutting its 12-month price target to 320p from 330p, after the British insurer’s shares rose more than 50% over the past 12 months, outperforming UK life peers and the STOXX600 by approximately 30-35 percentage points, sending shares down.
The stock was trading at 297.2p as of April 20, implying 7.7% upside to the revised target.
Analysts said M&G’s 1-year forward consensus price-to-earnings multiple had moved "towards the top-end of its historical range," while its dividend yield was "close to its lowest level since listing," now screening towards the middle of the sector.
The 2027 estimated total capital return yield ranked second-lowest among life insurance stocks in Goldman Sachs coverage.
Three factors drove the share price rally, according to the broker: a partnership announced May 30, 2025 with Japan’s Dai-ichi Life, the country’s largest insurer, expected to generate at least $6 billion of flows over five years; improving asset management and PruFund net flows throughout 2025; and an approximately 11% upgrade to 2027 consensus operating profit estimates since the start of 2025.
As part of the Dai-ichi transaction, the Japanese firm intends to acquire approximately 15% of M&G via on-market purchases, subject to regulatory approvals.
Goldman Sachs revised its model to reflect first-quarter 2026 market movements, reducing 2026-2030 EPS estimates by approximately 3% on average, driven by higher interest rates and lower equity markets weighing on asset management AUM.
The new 2026 EPS estimate stands at 29.41p, down from 30.23p, with 2027 at 32.61p versus 33.69p previously.
The brokerage’s operating profit and operating capital generation estimates are now "broadly in line with Visible Alpha Consensus Data." Goldman Sachs does not expect additional capital returns in the near term despite M&G’s Solvency II ratio improving to 242% in 2025 from 203% in 2023, noting "a debate on how deployable its excess capital is."
M&G’s 2027 targets, including adjusted operating profit annual growth of 5% or more, approximately £2.7 billion of operating capital generation over 2025-27, and an asset management cost income ratio of approximately 70%, remain within reach, with Goldman Sachs estimating 7.3% CAGR for operating profit growth and £2.8 billion in total operating capital generation over the period.
The 12-month price target of 320p is based on an unchanged approximately 1.1x price-to-adjusted tangible book value multiple, which Goldman Sachs said remains above the approximately 0.8x implied by the sector regression line, reflecting M&G’s "relatively capital-light business model."