UBS has put Aviva PLC back at the top of its UK domestic life insurance preferences, arguing the insurer’s year-to-date underperformance has opened what it sees as an attractive entry point despite renewed debate around the future profitability of motor insurance.
The broker said the stock’s lag reflects investor focus on the potential for autonomous vehicles to push premiums lower, a sensitivity UBS flagged given that around 25% of Aviva’s business is motor insurance following its Direct Line acquisition. Even so, UBS sees meaningful upside from here, forecasting roughly 50% total shareholder return potential over the next three years, driven by about 30% earnings-per-share growth and around 20% of market capitalisation returned via dividends.
UBS also reiterated its positive stance on Phoenix Group Holdings PLC, pointing to a return on equity above 20%, capital generation yield of about 15% and a low payout ratio.
Beyond the existing investment case, UBS said Phoenix has been linked in media reports to a possible acquisition of Aegon’s UK business, with the review expected to be completed toward mid-2026.
UBS expects Phoenix to reset its three-year targets this year or early next year and anticipates cumulative total cash generation could rise to £5.5bn for 2027–29, versus £5.1bn under the current plan, leaving around £1bn of excess cash generation after costs and distributions. In the absence of M&A, UBS expects a recurring £150m a year buyback could be announced at FY26 results and paid from 2027.
M&G PLC, UBS analysts said, has meanwhile outperformed peers year-to-date as momentum in European asset managers lifted sentiment, a move the broker considers broadly justified given recent sector updates. And, it still screens fairly valued, analysts noted, and in UBS’s view, offers a 7.5% FY28E yield2, with attention at FY25 results on 12 March likely to centre on international expansion of asset management, private assets, capital-light bulk annuities and the rollout of PruFund onto third-party platforms. UBS raised its price targets for Phoenix and M&G, keeping Phoenix at Buy with an 810p target and retaining a Neutral rating on M&G with a 300p target.