Aviva plc, Legal & General Group Plc And Prudential plc Have Completely Thrashed This Market

When I did a portfolio spring clean earlier this year there were two stocks I didn’t even consider dumping: insurance giants Aviva (LSE: AV) and Prudential (LSE: PRU).

I’m glad I held onto them, because both have thrashed the wider stock market, as has the other big name in the life sector, Legal & General Group (LSE: LGEN).

How To Crush The Market

While the FTSE 100 has stagnated over the last 12 months, Aviva is up 25%, L&G is up 16% and the Pru is up 18%.

That’s tremendous performance in what should have been a difficult period, given market stagnation, and Chancellor George Osborne’s radical pensions overhaul, which instantly halved annuity sales.

Pru’s Aim Is True

Pru has smashed analyst expectations again, with double-digit growth year-to-date in both new business profits and annual premiums across its three life businesses in the UK, US and Asia.

Its asset management business also saw net inflows of £9.6bn, including strong performance in the UK.

The Pru share price is up 150% over the last three years, and although its 2.23% dividend yield disappoints, there is plenty of scope for progression on that front.

A Legal Matter

L&G also has momentum on its side, its share price up 136% over three years. Q3 results showed impressive growth in revenues, operating profits, customers and net cash, and a continuing strong return on equity.

Individual annuity sales fell 60%, but the bulk annuity market is more than compensating, while its investment management business saw total assets increase by £82bn to £676bn.

Its 3.8% yield trumps both Prudential and the FTSE 100 average of 3.5%.

Viva Aviva

Aviva is playing catch up with its runaway rivals, but I bought it as a recovery play, and it is steadily getting there. Its net asset value is up 10% year-to-date, new business is up 15% by value and its general insurance combined ratio has improved to 95.9%. 

Aviva may lack Prudential’s exposure to fast-growing Asian markets, but its tighter focus on the UK and Europe has served it well. Although its 2.8% yield hardly thrills.

Reassuringly Expensive

All three insurers benefit from low interest rates (which force savers to consider more dynamic alternatives), ageing Western and Asian populations, and the push to encourage private pension provision.

Success comes at a price, however. All three look expensive right now, with L&G and the Pru trading at around 16 times earnings, and Aviva at 24 times.

Given their breakneck growth, that may be a price worth paying.

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Harvey Jones holds shares in Aviva and Prudential. 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.