Prudential PLC (LON:PRU) was a weak spot on Wednesday as Citigroup downgraded its rating for the UK insurer to ‘neutral’ from ‘buy’ on trade war concerns in a cautious review of the European insurance sector.
The US broker also reduced its target price for the Pru to 2,081p, down from 2,186p previously, albeit with the stock changing hands this morning at 1,860.5p, down 1.2% on Tuesday’s close.
In a note to clients, Citigroup’s analysts said: “2018 performance has again started well for European Insurance yet we are mindful of new risks facing the sector at a time when other retail industries are being transformed.”
They noted that while the flat yield curve remains confined to the US and UK for now, if it spreads to Europe this could threaten life sales.
The analysts added that a deepening global trade war would make Prudential and Dutch peer Aegon look vulnerable.
They also pointed out that new consumer regulation, heightened awareness of data privacy and the new need to report data breaches under GDPR increase headline risks.
Meanwhile, the analysts added, banks are fighting more strongly in P&C and IT impairments might be on the rise.
Over the medium term, they concluded, Property & Casualty looks challenging and life sales may face headwind, hence they move to a more ‘neutral’ position on the European insurance sector.