Saga 'will have to cut float price'

"The market for flotations is getting tired," he said. "You just have to look at the number of recently floated companies trading below the float price."

Mr White said that while Saga had some attractive features, such as a loyal customer base that was part of a growing demographic group, it was trying to present itself as a consumer brand when it was really an insurance company.

"Saga is basically an insurer being dressed up as a branded consumer company – that's not right," he added, pointing out that about 80pc of Saga's profits came from insurance, mostly car and home cover. "It's an ugly duckling being sold as a beautiful swan.

"As an insurer it should be compared with companies such as esure and Aviva. When you do that, Saga looks expensive." Most of the interest in Saga's flotation will come from private investors, he suggested.

Another fund manager, speaking on condition of anonymity, was even more critical.

"The valuation is extraordinary, it's a joke," he said. "I wouldn't touch it at all. If you value Saga's profits in the same way as another insurer such as Direct Line, its valuation would be half of that at which it is coming to the market. Some of the research reports are insane, comparing Saga with highly rated consumer companies." He added that the company still had very large borrowings.

"I think the private equity owners will sell at the highest price they can. This is private equity trying to pull a fast one in my mind. Personally I think they will struggle to get the float away, but I may be wrong. Most of the major institutions are saying no way as far as I can work out, but there is big demand from retail investors, ie Saga customers."

James Ross, manager of the Henderson UK Alpha fund, said: "Saga looks interesting from the point of view that it's a very strong brand and has favourable demographics and cross-sell opportunities. But this has to be balanced against a full valuation for what is currently a financial services company with a large exposure to the depressed UK motor insurance market."

But investors betting in the "grey market" on how Saga shares will fare once they are floated have a more bullish view. They value the shares at 255p, according to IG, one website that produces a grey market price. While these investors have accurately predicted the share price of newly floated companies such as Royal Mail, their price for Saga shares has fluctuated widely in recent days.

• See all our investment stories on your Facebook page – like us at facebook.com/telegraphinvesting

more