If you’re looking to build a long-term blue-chip portfolio, you might be considering buying UK insurance companies. While generally not the most exciting of shares, insurance companies can offer a nice mix of capital growth and dividends for long-term investors.

With the share prices of key FTSE 100 insurance companies down significantly in 2016, investors might be wondering whether there’s trouble ahead in the insurance sector or whether now is the time to buy.

Woodford favourite

A favourite stock of legendary fund manager Neil Woodford, Legal & General (LSE: LGEN) has struggled so far this year. The stock is down around 19% year-to-date and is currently trading at around 220p after almost hitting 300p in early 2015. Is this a cause for concern?

The key driver of the share price fall has been uncertainty in relation to new european-wide regulation to be introduced shortly, ‘Solvency II’.

Solvency II will require insurance companies to hold certain levels of capital in an effort to reduce the risk of insolvency and therefore protect consumers, and analysts have questioned whether Legal & General’s dividend is sustainable under the new regulation.

There’s also been concern as to whether the insurance company has potentially dangerous oil exposure in its debt portfolio.

In my mind, these fears are overblown. Reassuringly, Legal & General recently announced that its Solvency II capital levels stood at 169% of the requirements and that its exposure to the oil and gas sector stood at just 5.2%.

It can pay to be greedy when others are fearful, and with the stock trading on a PE ratio of 11.9 and sporting a yield of over 6%, the current situation looks like an opportunity to me. And if there’s one investor I don’t mind riding the coat-tails of, it’s Neil Woodford.

Turnaround stock

Aviva (LSE: AV) has also struggled this year falling around 18%. While Aviva’s PE ratio of 18.50 looks quite expensive, this falls to just 8.81 on next year’s consensus earnings.

Having struggled over the last fews years, after the acquisition of Friends Life plc, I believe Aviva has the potential to be a classic turnaround stock. Results in March were excellent, with operating profit up 20% to £2.7bn and a 15% hike in the dividend. Solvency II capital stood at 180%.

The company said that the Friends Life acquisition had gone “faster and better than expected” and this should contribute to acquisition synergies and enhanced profits going forward.

Solid dividend cover  

A discussion of UK insurers wouldn’t be complete without mentioning Prudential (LSE: PRU), the UK’s largest insurer. The insurance giant had a strong run between 2011 and 2015, with the share price more than triple-bagging in this time.

However Prudential hasn’t been immune to the general insurance sell-off and is down almost 15% this year on fears that one of its key growth markets, Asia, may see subdued growth.

While Prudential’s dividend yield of 2.99% is smaller than the other two companies, its dividend coverage ratio is around 2.1 (the highest of the three) indicates that it may be the safest dividend.

And with the company reporting Solvency II capital of 190% and earnings per share growth of 30% for 2015, at the current PE ratio of 12.85 this is a solid company trading at an attractive price.

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Edward Sheldon owns shares in Legal & General plc and Aviva plc. 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.