This article will focus on some of the noteworthy insurance shares in the UK, which are deemed worthy of adding to your watch-list.
You should notice the fact that insurance shares, or any other investment vehicles, do come with a certain amount of risk. Whether or not you should add these to your portfolio depends on various contributing factors.
If you are a DIY investor, then it is wise to do some groundwork before adding any financial instrument to your portfolio.
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).
The information in this article is for general guidance only. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.
General Information
Let us begin by discussing the types of insurance available for individuals or businesses in the UK. There are multiple types of insurance available in the UK, out of which some have been listed below.
Car insurance
This is a mandatory requirement for all the drivers in the UK who own a car.
This type of insurance provides coverage for damages or injuries caused in an unfortunate event of a car accident.
Home Insurance
Home insurance offers coverage for damages or losses to a house during events such as theft, fire, or flooding.
Travel Insurance
Travel insurance offers coverage for unexpected events that can occur during the time of travel like trip cancellations, lost luggage, or medical emergencies.
Life Insurance
Life insurance is the common type of insurance that provides financial aid in the unfortunate event of the policyholder’s death.
Health Insurance
With health insurance, you get coverage for medical expenditures such as private medical treatment, surgery, and consultation.
Pet Insurance
Pet insurance has been becoming popular in the last few years, which is related to pets.
This is for dealing with the veterinary expenses for your beloved pets and offers financial support when your pet is suffering from an illness or injury.
Business Insurance
Business insurance offers coverage for businesses towards losses due to events like property damage, liability claims, and business problems.
You might also be hearing about other types of insurance in the UK such as income protection insurance, critical illness insurance, and liability insurance.
While getting insurance, It’s essential to research and understands the coverage offered by each type of insurance before making any decisions.
Now, let us take a brief look at what insurance shares mean, and what are the tips involved while choosing one.
Insurance shares are the shares that represent ownership in an insurance company.
After going public, the shares of an insurance company can be bought and sold on a stock exchange like shares of other public companies.
When you buy an insurance share, you become a partial owner of the insurance company and are entitled to a portion of its profits.
There are certain factors that can influence the value of an insurance share including:
— The company’s financial performance
— Changes in the regulatory environment
— Market conditions
Investors who are enthusiastic about investing in insurance shares should carefully research certain aspects of the company.
Such aspects include the financial well-being of the company and its position in the industry, especially before making any investment in those companies.
Tips for selecting Insurance Shares
Selecting insurance shares is not an easy task, yet I am going to offer some tips that come in handy while making an informed decision.
The company’s financial well-being
Before investing, understanding the financial strength and stability of the company can be a key factor.
Research the company’s financial reports such as its balance sheet, income statement, and cash flow.
This assists you in getting the information necessary to assess its profitability, liquidity, and solvency.
The company’s market position
The company’s market share also plays an important role and you should look for competitive advantage and growth.
A company deemed a market leader in a growing industry will prove to be helpful in providing stable returns.
The regulatory environment
The insurance industry is heavily regulated just like any other industry in the financial sector.
Hence, the changes in the regulatory environment are said to have a considerable impact on the performance of insurance companies.
Find all the details on the regulatory developments of a company regarding how they are going to have an effect.
The company’s management
The quality of the management of a company can also have a significant influence on its performance.
Consider the experience and track record of the company’s management so that you can have a better understanding.
At the same time, assess whether the company has a sound strategy for growth.
Dividends
Most insurance companies offer dividend payments to their shareholders, which is considered a steady source of income.
Try finding the details about the company’s dividend history and assess whether it will continue paying dividends in the future as well.
Portfolio diversification
Limiting your investments to a single company, sector, or asset class can decrease your potential for getting more profits.
It even puts your investment portfolio at risk as you won’t be able to offset losses (if any occur).
Adding to that, the insurance company’s performance can be affected by a variety of factors.
To avoid putting your profitability at risk, try to diversify your portfolio by investing in multiple insurance companies, sectors, and asset classes.
Finally, It’s wise to conduct your own research and take advice from a financial advisor before making any investment-related decisions.
Having covered all the general information about insurance shares, let us now have a look at the insurance industry in the UK.
The insurance industry in the UK
The insurance industry in the UK is a significant part of the country’s economy.
This specific industry is said to have a long history that goes back to the 17th century, with the establishment of Lloyds.
As of recent times, the UK insurance industry is considered an industry leader on a global scale.
It is said to comprise several large and popular insurance companies, most of which, most have headquarters located within the country.
The insurance industry is said to have more than 300,000 employees and generates a revenue of around billions of pounds each year.
As I said earlier, this industry is held accountable for a wide range of insurance products and services.
Most insurance products and services include car insurance, home insurance, life insurance, health insurance, business insurance, etc.
Like any other financial industry in any other country, the insurance industry is heavily regulated in the UK.
It is overseen by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
These regulators oversee the insurance industry to ensure that the companies are operating fairly and transparently.
These regulators are also responsible for making sure that the companies have adequate financial resources.
Substantial financial resources are required by an insurance company to meet its responsibilities to policyholders.
You might already know that the financial sector in the UK has faced a lot of challenges over the past two decades.
The insurance industry is no exception from that as it also had to face several challenges.
Some of the major challenges include the Brexit situation, low-interest rates, and the impact of the COVID-19 pandemic.
Nonetheless, the majority of insurance companies have reshaped themselves to deal with these challenges.
Some insurance companies in the UK are even continuing to provide stable returns to investors.
Ultimately, the insurance industry has become an important part of the country’s economy.
Not only does it provide financial security to individuals and businesses, but it also assists in creating jobs and revenue for the country.
Best Insurance Shares worth watching in 2023
Now, let us have a look at some of the best insurance companies in the UK, which are worthy of being added to your watchlist.
Prudential plc
Prudential plc, which is traded as LSE: PRU, has a market capitalization of £33.65 billion. By the time of writing this, i.e., 27 February 2023, the share price of Prudential plc is £12.2.
Prudential plc was founded in the year 1848 and has its headquarters located in London, UK.
Let us have a look at some of the important aspects of Prudential share, which help have a better understanding.
— The company is currently profitable.
— According to some analysts, the company is set to grow more than 20% per year over the next three years.
— Regarding the financial position, the company is said to have a low debt level, which makes it less risky.
— Dividends are too low.
— The share price of Prudential has been stable for the past three months.
— The profit margins of Prudential have improved while making it profitable.
— Having a considerable amount of financial data available, analysts can provide information about Prudential.
— There haven’t been any concerning events that would impact the performance of this company.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
Talking about the company, Prudential plc is a UK-based international life insurance and financial services company.
It is said to have operations in over 20 countries worldwide, which cover services such as:
— Insurance products & services
— Investment management
— Retirement planning
There are multiple subsidiaries operating under Prudential plc which include:
— Prudential Corporation Asia
— M&G Prudential
— Jackson National Life Insurance Company
— Eastspring Investments
Prudential plc offers a diversified range of products and services such as insurance products, savings products, investments, and pensions.
Prudential plc had more than 26 million customers in 2019, and in that year, it had over £657 billion in assets under management.
Prudential is also said to practice sustainable and responsible business methods. Because of this reason, it even received recognition for its efforts.
Apart from being listed on the London Stock Exchange, it is also a constituent of the FTSE 100 Index.
The company has a strong reputation for financial stability and has received high ratings from credit rating agencies such as Standard & Poor and Moody’s.
According to certain statistics from the internet, some wall street analysts also suggest a buy rating for prudential.
Legal & General Group Plc
Legal & General Group Plc is another insurance company on our list that is deemed worthy of adding to your watchlist.
It is being traded as LON: LGEN and has a market cap of £15.15 billion. By the time of writing this, the share price of Legal & General Group Plc is around £2.53.
Let us have a look at some of the important aspects of this company, which help us have a better understanding.
— The company is currently profitable.
— According to some analysts, the company’s earnings are set to grow more than 6% per year over the next three years.
— Regarding the financial position, the company is said to have a low debt level, which makes it less risky.
— The dividends of LGEN are sustainable at a rate of 7.38%.
— The share price of LGEN has been stable for the past three months.
— The profit margins of LGEN are extremely low (-8460%) compared to the previous year (17.5%).
— One of the major drawbacks of this company is the debt, which is not covered by the operating cash flow.
— This company is also making a lot less revenue compared to its peers in the insurance industry.
— Having a considerable amount of financial data available, analysts can provide information about LGEN.
— There haven’t been any concerning events that would impact the performance of this company.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
Legal & General Group Plc is an insurance company that provides a wide range of insurance products and services.
LGEN is known to have operations across various countries, including the UK and the US.
The company is categorized into four segments, which are:
— Legal & General Retirement
— Legal & General Investment Management
— Legal & General Capital
— Legal & General Insurance
The Retirement segment provides annuity contracts, lifetime mortgages, workplace savings solutions, etc.
The Investment Management segment offers investment management services including index funds, fixed-income funds, equity management, and real assets.
The Capital division provides investment strategy services and direct investment services.
The Insurance segment is responsible for products such as health, disability, and accident insurance. It also provides annuities and other savings and death benefit products.
Apart from the services and products mentioned above, LGEN is also involved with:
— Real Estate Investments
— Construction
— Financial Intermediation
— Pension Tracing
— Pension transfers
— Other investment and advisory services.
Based on the analyst ratings from wall street, LGEN is said to come under the category of moderate buy.
Aviva plc
Aviva plc is traded as LON: AV and has a market cap of £12.37 billion. By the time of writing this, i.e., 27 February 2023, the share price of AV is £4.4.
Let us have a look at some of the important aspects of this company, which are helpful for having a better understanding.
— The company is not profitable as of now, yet it has been profitable if we consider the 5-year average.
— According to some analysts, the company’s earnings are set to grow more than 60% per year over the period of the next three years.
— Regarding the financial position, the company is said to have a low debt level, which makes it less risky.
— Dividends of AV are not well covered, and there are at a rate of 5.68%.
— The share price of AV has been stable for the past three months.
— This company doesn’t provide enough data to cover the details regarding profit margins.
— Having a considerable amount of financial data available, analysts are able to provide information about Aviva.
— There haven’t been any concerning events that would impact the performance of this company.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
Aviva plc offers a wide range of services related to insurance, investment, retirement, and savings products.
These services are provided by Aviva in several countries including the UK, Ireland, Canada, etc., among others.
Some of the products offered by Aviva include:
— Life insurance
— Long-term health insurance
— Long-term accident insurance
— Savings
— Pension
— Annuity products
— Pension fund management
— Lifetime mortgage products.
The company also provides insurance coverage for individuals as well as small to medium-sized businesses.
These include coverage for motor vehicles, medical expenses, property, and liability risks such as employers’ and professional indemnity liabilities.
Adding to that, Aviva plc provides investment management services for institutional pension funds.
It also offers retail investment products such as investment funds, unit trusts, open-ended investment companies, and individual savings accounts.
Such investment products are provided to various entities such as:
— Third-party financial institutions
— Pension funds
— Public sector organizations
— Investment professionals
— Private investors.
The products of Aviva are marketed through a network of insurance brokers and the MyAviva platform.
Before getting its name, this company was previously known as CGNU plc and changed its name to Aviva plc in July 2002.
It was founded in 1696 and the headquarters of Aviva plc is located in London, UK.
According to some analysts, It is either considered to be under the category of a moderate buy or hold.
Admiral Group plc
Admiral Group plc is traded as LSE: ADM and this company has a market cap of £6.65 billion.
By the time of writing this, the share price of Admiral Group plc is around £21.96.
Let us have a look at some of the important aspects of this company, which are helpful for having a better understanding.
— The company is currently profitable.
— According to some analysts, the company’s earnings are set to grow at a rate of 11% per year over the period of the next three years.
— Regarding the financial position, the company is said to have a low debt level, which makes it less risky.
— The dividend track record of ADM is unstable, which is something that falls in the category of the drawbacks of the company.
— The share price of ADM has been stable for the past three months.
— The profit margins of this company are lower compared to that what they were last year.
— Having a considerable amount of financial data available, analysts are able to provide information about Admiral Group plc.
— There haven’t been any concerning events that would impact the performance of this company.
— This company does not have any negative shareholders’ equity. Usually, negative shareholders’ equity is a sign that shows that a company is in financial distress.
Admiral Group plc offers financial services in several countries which include (but are not limited to):
— United Kingdom
— Spain
— Italy
— France
— Canada
— India
— United States.
The product offerings of ADM include insurance products like motor, household, travel, and pet insurance.
This company also offers personal lending products with the help of Admiral Loans. The company’s operations are carried out through various segments such as UK Insurance, International Insurance, Admiral Loans, etc.
The subsidiaries are:
— Admiral
— Admiral Money
— Apparent, Balumba
— Bell
— Diamond
— Elephant
— Elephant Auto
— ConTe.it
— Gladiator
— L’Olivier
— Veygo
— Qualitas Auto
In addition to insurance products, Admiral Group plc offers legal services as well. Admiral Group plc was established in 1993 and has its headquarters located in Cardiff, UK.
Admiral Group plc gets a hold rating from the analysts, which is based on the analyst ratings from most sources.
Pained by financial indecision?
Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.
