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Why Aviva plc Is Still Beating RSA Insurance Group plc, Prudential plc And Old Mutual plc

The insurance sector has been resurgent since the end of the recession, and shares are still flying. But which is the best of the sector? I reckon it’s still Aviva (LSE: AV)(NYSE: AV.US), whose shares are up 18% over the past 12 months.

That takes in a new 52-week record close of 546p in morning trading on Wednesday, which has led Aviva to double in value since the depths of mid-2012.

Prudential

Prudential (LSE: PRU) shares have actually done even better with a 130% gain to 1,606p, but that was with a significantly lower dividend and has left them on a higher valuation in fundamental terms, and I’d say that still makes Aviva the long-term winner. Despite its strong share-price gains, Aviva is still on a predicted P/E of 11.5 for the year just ended in December 2014, with results due on 5 March.

Forecasts for this year and next would drop the P/E to 11 and 9.5 respectively, with nice rises in earnings and dividends on the cards. And a P/E multiple so much below the long-term FTSE average of around 14 seems very cheap to me for a stock with a forecast dividend yield of 4.7% by 2016.

Prudential lives up to its name and pays a mdest but very well-covered dividend, but it’s set to yield only 2.5% in 2015, on a P/E of 15.

RSA

RSA Insurance (LSE: RSA) has strong forecasts, too, but we still haven’t seen a dividend recovery. In fact, for the year to December 2014 we’re currently expecting a further drop of 36% to yield just 1.5% on the current share price of 446p — with results due on 26 Feb.

There’s nice growth penciled in for this year and next, with a mooted 2016 dividend yield of 5%. But even after the shares have had a flat year, we’re still looking at P/E levels of 12 and 11 for 2015 and 2016.

Old Mutual

Then there’s dark horse Old Mutual (LSE: OML), which is already set to deliver a 4% dividend for 2014, rising to 4.9% by 2016. And we have P/E values on a par with Aviva, dropping to 10 based on 2016 forecasts. But the sentiment doesn’t seem to be with the firm, whose shares have gained only 50% since mis-2012, to reach 548p.

Old Mutual could be a good runner in the next 12 months if 2014 results come out as expected, due on 27 February. But my money would still be on Aviva with its successful turnaround in the bag and its valuation still too low.

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Alan Oscroft has no position in any shares mentioned. 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.