M&G plc: Shopping or sharing?

Research evidence excerpt

M&G plc: Shopping or sharing?

Barclays | M&G plc

N: M&G plc is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays Bank PLC and/or

an affiliate.

Valuation Methodology: We use a residual income method, with an explicit forecast period of 5 years followed by 30 years of growth declining to a

long-term average of 4%. We assume a decline in ROE to the European Life Insurance sub-sector cost of equity over the same 30-year valuation

period. We assume no residual earnings after that date. We estimate the company's cost of equity at 10.5% from a combination of historical implied

levels, weak earnings growth and our assessment of relative risks versus peers.

Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: M&G is exposed to market movements that affect

it directly through shareholder-funded business assets under management in its asset management and with-profits businesses, with a reduction or

increase in flows in those businesses also a potential risk. M&G's new business volumes and longer-term earnings could be positively or adversely

affected by changes to the regulatory environment, competition and changing consumer demand in its respective product lines. Downside risks

include slower-than-expected growth in AuM, or the cost to income ratio not decreasing at the rate we anticipate.

Disclaimer:

This publication has been produced by Barclays Research Department in the Investment Bank of Barclays Bank PLC and/or one or more of its affiliates

(collectively and each individually, "Barclays").

It has been prepared for institutional investors and not for retail investors. It has been distributed by one or more Barclays affiliated legal entities listed