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Shares in Aviva, Legal & General, and Phoenix Group have all delivered great returns this year. Especially when you factor in the big dividends that these FTSE insurance stocks pay.
Looking ahead, these stocks could continue to reward investors. However, there’s another insurance stock with much more potential, according to City analysts.
Running out of steam soon?
Looking at broker share price targets, analysts don’t seem to believe that Aviva, Legal & General, and Phoenix Group can climb much higher.
Currently, the average price target for Aviva is actually 2% below the current share price. For Legal & General and Phoenix, the targets are 2% and 4% above current share prices, respectively.
Of course, these stocks could provide much higher returns due to the big dividends yields on offer. Currently, these stocks yield between 6% and 9%.
Overall, however, total returns are not expected to be huge over the next 12 months. Factoring in dividends, the average expected total return is about 9%.
Three times the return?
Now, the stock that analysts see more potential in is good old Prudential (LSE: PRU). It’s had a rough few years due to economic weakness in China but it’s now making a major comeback, having jumped from 637p to 923p this year.
Analysts believe it can climb much higher over the next 12 months. Currently, the average price target is 1,188p, which is 29% higher than today’s share price.
Note that there’s a 2% dividend yield on offer from this stock. So if the average analyst price target is achieved, investors would be looking at total returns of about 31% – more than three times the average expected return from Aviva, Legal & General, and Phoenix Group.
Share price catalysts
Why are analysts so bullish here?
Well, one reason is that the company’s guidance has been very encouraging lately. Back in March, the insurer said that it was expecting new business profit, earnings per share, and dividends per share to all rise by more than 10% this year.
Another reason is that the current valuation looks low relative to the long-term potential associated with its key markets of focus, Asia and Africa. Currently, Prudential has a price-to-earnings (P/E) ratio of just 10 when you look at the earnings per share forecast for next year.
Insurance penetration rates in Asia are low and there is continued, and growing, demand for long term savings and protection products across our markets, alongside a need for wealth management and retirement planning, particularly in our higher income Asian markets.
Prudential CEO Anil Wadhwani, March 2025
Worth a look
Of course, there are no guarantees that Prudential shares will get to 1,188p any time soon. While the stock is in a strong uptrend right now, this trend could go into reverse if economic conditions in Asia suddenly take a turn for the worse.
I think the set-up looks attractive today, however. On a P/E ratio of 10, I believe the stock is worth considering.
