UK life insurers set to catch up next year, Nomura says

10th Dec 2015 15:06

(ShareCast News) - Shares in UK life insurers will catch-up with their European peers next year after underperforming in 2014, as Solvency II proved to be a more acute headwind for them, Nomura told clients on Thursday.Yet developments for them had generally been better than expected for them, so clarity on Solvency II positions should help them recover some of the lost ground.Names with high yields and dividend growth such as Aviva and Legal and General should do best, the broker explained.Indeed, the bulk annuities pipeline was said to be remaining strong, flows into drawdown/hybrid products should pick-up in 2016 and corporate pension flows should recover, analyst Fahad Changazi said.Aviva remained his top-pick, Changazi said. Nonetheless, he trimmed his target price on the shares from 690p to 670p, while staying at a 'buy'. His call on Legal&General remained at 'buy' and his target price at 300p.As well, St.James's still had some of the best growth prospects and was "ideally" placed to be a long-term beneficiary of the pension changes in Britain, the analyst added. The stock's target price was raised from 1040p to 1075p and his 'buy' recommendation reaffirmed.Prudential on the other hand would continue to be held back by the adverse macroeconomic sentiment in Asia and upcoming regulatory changes Stateside.Changazi lowered his target to 1630p from 1645p but he stuck by his 'neutral' recommendation on the shares.Finally, following a period of underperformance versus the sector the analyst said he considered Standard Life as "fairly valued" and in consequence bumped up his recommendation from 'neutral' to 'neutral'.The target price was kept at 410p.