Legal & General Group PLC (LSE:LGEN) is the favoured play among UK life insurers for analysts at Barclays, ahead of results from the sector later this month.
The broker said life insurers enter the reporting season facing a degree of cautiously negative sentiment, as pedestrian macro trends prevail, while IFRS17 brings added uncertainty, with disclosure to date varying widely.
"With most UK life names offering attractive yields and strong cash profiles, we like L&G (rated 'overweight') for its scope for growth," Barclays said.
Most UK life insurers have strong cash generation profiles to support sustainable dividends (L&G, Phoenix, Aviva, and M&G all yield 8-10%), Barclays noted, and most generate new business from institutional decision makers through bulk annuities or workplace savings (L&G, Phoenix, Just, Aviva), and have excess cash to support growth (L&G, Phoenix, Aviva).
However, "with its leading position in bulk annuities and and vertically integrated structure", Barclays considers L&G to be differentiated from peers.
M&G PLC (LSE:MNG) ('underweight') is its least preferred UK insurer "due to its low growth and high leverage compared to peers".
Barclays explained the UK life insurers will be reporting under IFRS17 for the first time in their first-half results and cautioned that without full pro forma detail and sufficient data for trend analysis, forecasting is "challenging".