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Pru, L&G and Just Retirement ‘set to struggle’ post-Brexit

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Prudential, Legal & General and the Just Retirement Partnership group have been earmarked as firms that could suffer if the recent market volatility following the EU vote continues.

An analyst’s note published by JP Morgan Cazenove this morning says some firms are better positioned than others to cope with the share price falls seen on Friday after the UK decided to leave the EU.

The note examines whether firms have enough capital under Solvency II requirements to withstand sustained market volatility.

Analyst Ashik Musaddi says due to the risk of credit defaults, downgrades to credit ratings and the prospect of a cut to interest rates, the three firms would struggle on capital.

Musaddi says: “If this is the beginning of the volatility then we believe the group of insurers that would struggle the most are Prudential, L&G and the Just Retirement Partnership group as the starting capital position isn’t very impressive.”

The analyst note goes on to explain that Just Retirement Partnership shares may come under added pressure due to a potential decline in bulk annuities business in the event lower interest rates continue.

Conversely, the JP Morgan Cazenove note argues the falls in the share price of St James’s Place, which fell to 521p in early trading on Friday, “look aggressive”.

It says if this is the end of market volatility, the share price falls seen for L&G may also be overly harsh.

Musaddi says: “In light of uncertainty around volatility, we would remain positioned with insurers that have strong stock of capital such as SJP, Standard Life and Aviva, yet offer strong flow of capital to shareholders in the form of dividends.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Well, here we go again. More scaremongering to keep the markets volatile – wasn’t it this sort of reporting that started the run on NPI and Northern Rock?

  2. Indeed. Right now, the biggest threat to the markets seems to be coming from journalists trying to keep the drama going. Let’s all settle down. The fundamentals of the economy haven’t changed. There is still the same amount of people eating, working and playing in the UK as there was last Thursday and businesses have to cater for them. Only 6% of UK firms actually export and even they shouldn’t be affected for a few years – giving plenty of time for a rethink of strategy.
    Undoubtedly Brexit will mean changes but we need to stop reacting like there’s a meteor just been spotted heading for Earth and it’s only three days away.

  3. I agree, all of the politicians and big business scaremongering pre Thursday’s vote has not come to fruition. No wars yet (David C!), no £30bn black hole (George O!), no Pension demise (Baroness A!). Just Keep Calm and Carry On.

  4. Oh how nice it must be to be an Ostrich. The FSTE100 – 52 week high has been 6,800. You are being sanguine because it is at 6,100. If things had been ‘normal’ over the last 8 years where should it be today? 7,500 or more? There is rejoicing because the FTSE 250 (the UK barometer) recovered 3.6% after losing 14.2% and is down some 13% since this time last year.

    Vodafone, EasyJet, JP Morgan, HSBC, Nissan, Honda and goodness knows who else are reviewing their positions. Deutsche Bourse is wondering whether the proposed merger is now worthwhile. Branson has scrapped a merger that would have created about 3,000 jobs because of the result. Is this just the top of the iceberg? I’m certainly not as complacent as the other posts on this site.

  5. No doubt about it we are in for a very bumpy ride.
    Please don’t play it down and I am not a scaremonger either.

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