Proactive Investors - Aviva PLC (LON:AV) lost out, while Legal & General Group PLC (LSE:LGEN) was seen as a 'top pick' as Deutsche Bank (ETR:DBKGn) published a sector wide review of the European insurance sector.
The German bank has taken a more upbeat view of the sector with Direct Line Inurance Group PLC and L&G among its top picks while question marks over Aviva prompted its rating to be lowered.
Deutsche said an expectation of bond yields having peaked, a generally muted outlook for credit spreads, and a continuation of ongoing [property & casualty] price increases provides “the right environment for a stronger relative performance for the European Insurers – supported by increasingly resilient balance sheets.”
“In this context, our Top Picks seek out relative laggards where momentum should be increasingly in their favour,” the bank said, highlighting Direct Line and L&G in the UK.
Within the UK life sector, which the broker said “has been unloved over the past few years,” it sees positive catalysts skewing in the favour of L&G and M&G - both of which are upgraded to ‘buy’ from ‘hold’.
But small earnings headwinds and questions around excess capital return at Aviva prompted a downgrade to ‘hold’ from ‘buy’.
Deutsche has also upgraded Direct Line to ‘buy’ from ‘hold’ and thinks “we will see evidence the group is being steered on the right path: first, via a dividend reinstatement with FY23 results; second, with margin expansion from above-market pricing; and third, with volume growth in 2024.”
Price targets for Aviva move from 495p to 485p, for L&G from 290p to 295p, M&G from 230p to 250p and Direct Line Group from 170p to 250p.
Elsewhere in the sector, the bank rates Admiral at ‘hold’, price target from 2130p to 2280p, Phoenix Group Holdings at ‘hold’, price target from 630p to 540p, and Prudential (LON:PRU) at ‘buy’, price target from 1420p to 1400p.
Shares in Aviva fell 1.7%, but Direct Line, L&G and M&G rose 0.3%, 0.5% and 1.7% respectively.