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3 Insurance Titans Set To Deliver Stunning Returns: RSA Insurance Group plc, Prudential plc And Legal & General Group Plc

Today I am looking at three insurance plays I believe are poised to shoot for the stars.

RSA Insurance Group

Although RSA Insurance’s (LSE: RSA) results this morning missed forecasts, I believe that investors can take plenty of heart from the firm’s performance during the past year. The business swung back into profit in 2014 as its extensive asset disposal and cost-cutting programme kicked into gear. And with RSA upping its cost reduction target today, to £210m from £180m previously, and continuing to enjoy resurgent performance in key regions, I believe that the bottom line should keep on expanding.

This view is shared by the City, with brokers expecting RSA to deliver earnings growth of 50% for 2015, leaving the business changing hands on a P/E ratio of just 12.5 times predicted earnings — a reading below 15 times is generally considered terrific value. And further growth to the tune of 8% is predicted for next year, pushing the earnings multiple to a lip-smacking 11.8 times.

Today’s positive results prompted RSA to crank its dividend policy back into gear, with the company rewarding shareholders with a token payment of 2p per share. And the prospect of further strong profits growth is expected to drive the dividend to 17.3p this year and 22p in 2016, figures which create juicy yields of 3.8% and 4.9% correspondingly.

Prudential

I believe that life insurance leviathan Prudential (LSE: PRU) (NYSE: PUK.US) is a great way to play encouraging demographics in emerging regions, where rising personal income levels — combined with relatively-low product penetration — promises to keep new business rolling. On top of this, Prudential has both the commitment and the cash to keep acquisitions ticking along nicely, a scheme which should also propel revenues higher.

Prudential is expected to keep its proud record of annual earnings growth rolling, with the number crunchers anticipating expansion of 5% for 2014. Growth is expected to accelerate this year to 14%, resulting in a P/E multiple of just 14.6 times, while a further rise of 11% in 2016 pushes the ratio still lower to 13.1 times.

And this bubbly outlook underpins predictions of further dividend hikes, with an anticipated full-year payout of 35.7p for last year expected to advance to 39.1p in 2015 and 43.4p in 2016. Consequently yields rocket to 2.4% and 2.7% for these years, readings which I expected to keep marching higher as business flows keep on surging.

Legal & General Group

Like Prudential, Legal & General (LSE: LGEN) is also a great way to cotton onto developing markets, regions in which it has also invested huge sums to expand its exposure. But the company is also expanding its product and service offerings to latch onto other changing demographic trends, from rising populations and evolving welfare legislation through to rising digitalisation, a promising precursor to future growth.

Legal & General’s sterling recovery from the fallout of the 2008/2009 financial crisis shows no signs of slowing, and the business is expected to record earnings expansion of 13% for 2014. Although growth is anticipated to slow this year and next, this still clocks in at a healthy 10% and 8% respectively, producing reasonable P/E multiples of 14.3 times and 13.4 times.

Consequently the insurance giant is expected to maintain its position as a top-drawer income pick, with an estimated dividend of 11.3p for last year expected to rise to 13p in 2015 and 14.4p in 2016. These projections produce gigantic yields of 4.8% for this year and 5.3% for 2016.

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Royston Wild 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.