Are Aviva plc, Direct Line Insurance Group PLC And Admiral Group plc Set To Soar?

Direct Line (LSE: DLG) today reiterated its guidance for the full year, despite operating in a relatively competitive environment. Its full-year combined operating ratio is expected to be between 92% and 94%, with third quarter premiums having risen to £845m, up from £820m in the comparable period in 2014.

Upbeat prospects

Encouragingly, Direct Line’s operating costs fell by 6.5% versus the third quarter of 2014, with claims handling expenses also dropping by 3.1%. Given the increasingly competitive nature of the car insurance market, as well as the softening of the home insurance market, such cost cuts are very timely as Direct Line seeks to obtain a prudent mix between volume growth and margin expansion.

Looking ahead, Direct Line states that capital returns to its investors are dependent upon new rules in 2016 governing capital requirements. With the company’s shares yielding 5% and trading on a price to earnings (P/E) ratio of 14.5, they appear to offer both good value for money now and upbeat income prospects for the long term.

Progressing well

Similarly, Aviva (LSE: AV) also appears to be worth buying, with the company’s merger with Friends Life progressing well according to its recent update. In fact, the value of its new business increased by 25% in the first nine months of the year, with cost savings of £91m having already being achieved from the merger. And, looking ahead, Aviva is seeking further acquisitions through which to increase its dominance of the insurance market.

While Aviva’s shares have disappointed in 2015, with them being flat year-to-date, much of this has been due to poor investor sentiment rather than lacklustre financial performance. However, with the merger integration proceeding as planned, it seems likely that the market will begin to warm to Aviva in the coming months and years. With its shares trading on a P/E ratio of 11.1 and yielding 4.3%, they appear to be well-worth buying right now.

Supremely enticing

Meanwhile, Admiral (LSE: ADM) continues to offer a supremely enticing yield of 5.9%, which makes it one of the highest yielding stocks in the FTSE 100. Certainly, there have been well-founded concerns regarding the company’s ability to pay its forecast dividends, since they equate to almost all of its forecast earnings in each of the next two financial years. However, with Direct Line’s results indicating that the outlook for the motor insurance industry may be brighter than previously thought, Admiral’s profitability could be upgraded moving forward.

With Admiral’s shares having risen by 23% since the turn of the year, they now trade on a P/E ratio of 16.3. Although this is higher than for a number of its sector peers, the prospect of improving market sentiment could push its rating higher. As such, it appears to still be worth buying at the present time.

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Peter Stephens owns shares of Admiral Group, Aviva, and Direct Line. 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.