Legal & General Group PLC (LSE:LGEN) and M&G PLC (LSE:MNG) are rated as ‘buys’ amongst the UK’s life insurance market, as analysts at Deutsche Bank highlighted its expectations for growth.
The German bank meanwhile rates Aviva PLC (LSE:AV.) and Phoenix Group Holdings PLC (LSE:PHNX) as ‘hold’.
“Full year 2023 results highlighted that the UK Life Insurers are increasingly prioritising growth,” Deutsche said in a note.
“This is evident in commentary around using capital to invest (mainly organically).
“As such, whilst income is clearly a key attraction for the UK Life names, we believe incremental deployment of capital will be used to: (a) grow the top and bottom lines, via increasing distribution and reducing costs, (b) optimising the balance-sheet, via debt reduction and ALM; before considering excess capital return.”
L&G, in March, increased pension-based operating profits by 10% in 2023 to generate £886 million in a year that saw record appetite for de-risking among legacy pension providers. Some £50 billion in PRTs was transacted in the UK, with L&G leading on some of the landmark deals, including the British Steel Pension Scheme and Boots Pension Scheme transfers.
It announced a firm-wide operating profit of £1.67 billion for 2023, basically flat from £1.66 billion in 2022, while adjusted profit before tax nearly halved to £561 million.
Aviva results, also in March, showed the insurer had exceeded its operating profit target in 2023 with a 9% increase to £1.47 billion, up from £1.35 billion in 2022. Management had guided for operating profits between £1.42 billion and £1.45 billion but warned the actual number might be nearer the bottom than the top given the dismal weather in Britain this winter.
The FTSE 100-listed insurance multinational announced a £300 million share buyback
Elsewhere, M&G PLC (LSE:MNG) (M&G PLC (LSE:MNG)) reported solid results, with capital generation better than expected.
Helped by strong net inflows to its asset management arm of £1.1 billion, up 450% year-on-year, operating capital generation in the second half of the year came in at £491 million, which was £85 million better than City analyst expectations. Management maintained guidance for £2.5 billion of cumulative capital generation by the end of 2024.