Bank of America Securities reinstated coverage of the United Kingdom insurance sector on Thursday, highlighting dividend yields that range from 4.8% to 7.6%. The sector’s yields sit above the broader UK market’s 3.3% yield and exceed the European insurance average of 4.7%.
The firm issued a buy rating on Aviva with a price objective of 800 pence and on Admiral Group with a target of 4,200 pence. Legal & General, M&G and Standard Life were each reinstated with neutral ratings and price objectives of 310 pence, 345 pence and 970 pence respectively.
Aviva, which has underperformed its peers year‑to‑date, derives roughly 40% of operating profit from UK life insurance and about 35% from UK property and casualty. The stock trades at 11.8 times projected 2027 earnings and is expected to deliver 11% annual earnings‑per‑share growth from 2025 to 2028. Over the next three years, Aviva aims to return 24% of its market capitalisation to shareholders, driven by the integration of Direct Line and a capital‑light expansion strategy. Together with Standard Life, Aviva boasts the sector’s strongest coverage ratios.
Admiral Group has gained 35% year‑to‑date on the back of improved motor‑insurance pricing. The broker is projected to achieve about 8% annual earnings‑per‑share growth between 2025 and 2028 and trades at 14.2 times projected 2027 earnings, below its roughly 16‑times 10‑year average.
Legal & General’s recent share‑buyback has supported its valuation, while Standard Life could lift its 2027 estimated yield by roughly 2.6 percentage points if it returns half of its excess cash to shareholders after completing its deleveraging plan. The insurer also faces integration of Aegon UK and has a strategy update scheduled for 30 November.
BofA identified growth opportunities across workplace pensions, retail savings, institutional and retail annuities, and protection products. It flagged risks including margin pressure from narrowing credit spreads, heightened competition, higher investment spending, shifts in business mix and policy uncertainty ahead of the UK Budget, which could affect cash flows and bond markets. Competition in the UK pension risk‑transfer market may also pressure Legal & General’s volumes and margins.
