3 Insurance Stocks Set To Boost Your Returns: Aviva plc, Prudential plc And Direct Line Insurance Group PLC

These 3 insurance stocks could be worth buying right now: Aviva plc (LON: AV), Prudential plc (LON: PRU) and Direct Line Insurance Group PLC (LON: DLG)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Keen investors may have noticed that Warren Buffett is a big fan of the insurance sector. That’s at least partly because the business entails insurance companies receiving income from customers, investing it, then paying out roughly the same in claims as they received, while keeping the returns from the investments. If payouts for claims increase, premiums go up and this means that, in the long run, insurance can prove to be a very profitable space.

Valuations

Despite this money-making potential, insurance companies in the FTSE 100 continue to offer excellent value for money. In fact, while the FTSE 100 is at an all-time high and there are question marks regarding its potential to move higher throughout the course of the year, the insurance sector holds tremendous opportunity.

For example, Aviva (LSE: AV) (NYSE: AV.US) currently has a price to book (P/B) ratio of just 1.75, which indicates that its shares could move significantly higher. Furthermore, Aviva has a price to earnings (P/E) ratio of just 11.6, which is considerably lower than the FTSE 100’s P/E ratio of 16. In fact, if Aviva were to have the same P/E ratio as the FTSE 100, it would mean its shares trading an incredible 38% higher than their current level and, with Aviva’s bottom line set to grow by 16% next year, it is difficult to justify such a low valuation versus the wider index.

Should you invest £1,000 in Barclays right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barclays made the list?

See the 6 stocks

The same is true of Prudential (LSE: PRU) (NYSE: PUK.US). Certainly, there is uncertainty regarding its new CEO and the strategy that will be employed moving forward. However, the company’s share price appears to more than fully reflect this risk, with Prudential having the potential to become a top notch income play in future.

In fact, while Prudential currently yields just 2.4%, it has increased dividends per share at an annualised rate of 10.8% during the last five years. This rate of growth shows little sign of slowing, with Prudential expected to bump up dividends by 12% next year and, looking ahead, a continuation of this trend seems likely and could push the company’s share price much higher.

Certainly, there have been strong performers within the insurance sector. For example, shares in Direct Line (LSE: DLG) have risen by 35% in the last year but, as with Aviva and Prudential, they could have much further to go. That’s because Direct Line trades on a P/E ratio of just 12.2, which indicates that investor sentiment could pick up markedly. And, with the company’s shares having a beta of just 0.6, it could prove to be less volatile than the wider index and, therefore, a relatively defensive option.

So, while many investors may feel that the FTSE 100 could be due a pullback, Aviva, Prudential and Direct Line show that there is still excellent value for money within the insurance sector. And, with bright futures and excellent dividend potential, all three companies could boost your returns over the medium to long term.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Aviva. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »

Investing Articles

Prediction: Unilever to outperform the FTSE 100 over the next 12 months

The FTSE 100 has made a strong start to 2025, but Stephen Wright thinks a popular dividend stock could be…

Read more »

Investing Articles

I just bought this legendary S&P 500 tech stock for my ISA, 27% off its highs

This S&P 500 stock has tanked over the last month and Edward Sheldon has snapped it up for his portfolio…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 beaten-down stocks to consider for an ISA after the massive market sell-off!

The stock market has had a sudden meltdown! Yet our writer thinks these two growth stocks look attractive candidates for…

Read more »