5 Insurers With Huge Potential: Aviva plc, Prudential plc, RSA Insurance Group plc, Old Mutual plc And Legal & General Group Plc

Aviva plc (LON: AV), Prudential plc (LON: PRU), RSA Insurance Group plc (LON: RSA), Old Mutual plc (LON: OML) And Legal & General Group Plc (LON: LGEN) have great potential, argues this Fool.

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cityThe insurance sector is often overlooked by many investors, possibly because the financial industry group also contains the arguably more interesting banking sector. However, there’s a great mix of growth prospects, yields and good value shares on offer in insurance shares. Here are five that could be strong performers over the medium to long term.


Aviva (LSE: AV) has experienced a sharp turnaround in its fortunes since it cut its dividend in March 2013. After falling by around 20% in the aftermath of the cut, shares in Aviva have bounced back to gain 73% over the last 15 months. However, that doesn’t mean that shares are overpriced at current levels – they still trade on a price to earnings (P/E) ratio of just 11.2, which is far lower than the FTSE 100‘s P/E of 14.2.

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Although shares in Prudential (LSE: PRU) are towards the top end of their 52-week trading range, they still only trade on a P/E of 14.3. Certainly, this is slightly above the index P/E, but Prudential offers double-digit growth prospects, which is roughly double those of the FTSE 100. Therefore, it could be argued that Prudential should be trading on an even higher P/E to take into account its higher growth prospects.


Shares in RSA (LSE: RSA) are experiencing a rough ride at present, with the non-life insurer losing over 20% in the last year alone. However, the company is in the midst of a turnaround and could prove to be a strong medium to long term play. That’s because it has the right management team that has experience in turnarounds (Stephen Hester was previously CEO of RBS) and is reshaping the balance sheet to deliver more return and less risk. Trading on a P/E of 12.3, RSA could see market sentiment strengthen over the medium term as its turnaround plan starts to take hold.

Old Mutual

For investors who are seeking a decent, well-covered yield, Old Mutual (LSE: OML) fits the bill. That’s because it currently yields 4.4% and its dividends are covered twice by profit. This means there is scope for them to increase at a brisk pace, since the company could afford to pay out a higher proportion of earnings as a dividend. Indeed, profits are forecast to increase by 11% next year, which shows that Old Mutual, on a P/E of just 11.2, could prove to be a winning play.

Legal & General

Also offering a great yield of 4.7%, Legal & General (LSE: LGEN) could have a great future. It offers attractive value at current prices, with shares in the company currently trading on a P/E of 13.7 and a price to book ratio of 2.4. Better still, earnings per share (EPS) are forecast to increase by 8% this year and 10% next year, which shows that Legal & General could experience a continuation of the improved market sentiment that has propelled shares upwards by 25% over the last year alone.

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Peter owns shares in Aviva, RSA and Old Mutual.

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