Insurance stocks jitter as Goldman reviews ratings
SHARES in the UK’s biggest life insurers moved significantly yesterday after stockbroker Goldman Sachs published a review of the companies’ ratings.
Its analysis concluded that a massive upswing in demand for financial protection would not benefit listed life insurers as new alternatives such as the government-sponsored National Employment Savings Trust would grab market share.
“Worryingly, we cannot come up with a solution to the problems faced by the industry, and consequently we are cautious on the sub-sector,” the report said.
Instead it said growth is likely to come from outside the UK, with emerging markets best positioned to generate growth for UK life insurers.
Goldman ranked Old Mutual its top sector pick because its valuation did not reflect its fast-growing emerging markets business as well as its large UK wealth management platform.
“Old Mutual will be lower-risk and faster-growing than the rest of the sector,” it said.
Asia-focused Prudential’s shares rose more than 2.5 per cent was also added to the buy list from neutral for its “stand-out strategy”.
But life consolidator Resolution and insurer Standard Life were both cut to a sell rating due to the low growth expected in the UK. “We believe that Resolution’s UK business is relatively unattractive,” it said.
Aviva, St James’s Place and Legal & General were cut to neutral. It said Aviva had ended “a period of outperformance which has left inadequate potential upside to justify a buy”.