Proactive Investors - Aviva PLC (LON:AV), M&G PLC (LON:MNG), Phoenix Group Holdings (LON:PHNX), and Legal & General Group PLC (LON:LGEN) have been named as UBS's top UK life insurance picks.
The bank cites Aviva's diversified business model and high 2024 estimated total capital return yield as key reasons for its preference.
According to a research note, the UK bulk annuity market has reached approximately £10 billion year-to-date in 2023.
This is over 30% of all transactions completed in 2022. Pension Insurance Corporation PLC has been the dominant player with a £6.5 billion deal with RSA.
UBS reports that Aviva has been the most active player in the market. L&G and Phoenix, on the other hand, have been lagging. However, their volumes may catch up by the end of 2023.
UBS highlights that Hymans, a leading pension consultant, has provided a positive outlook for the bulk annuity market. It expects a £50 billion per annum market in the foreseeable future, with some years even topping £70 billion.
L&G remains the least preferred pick by UBS due to high asset risk. The management has not provided clarity on potential incremental capital returns from higher bulk annuity volumes. UBS believes that L&G's 5% dividend growth guidance to 2024 is unlikely to be updated before a new permanent CEO joins.