Aviva’s DLG deal pushes insurance past FTSE All-Share

Analysis by Peel Hunt showed the UK insurance sector delivered a total return of 19% in 2024, well ahead of the 9.5% achieved by the FTSE All-Share Index and a significant leap from the 5% the industry returned in 2023.

We believe there is scope for a recovery in price performance as the FY24 reporting season kicks off.

According to Andreas Van Embden, research analyst at investment bank Peel Hunt, the “solid performance” was broad-based but primarily delivered by the outperformance of the specialty reinsurance market (24%), followed by life insurance (17%) and UK motor (15%).

Peel Hunt was quick to point out that the UK motor was result was largely thanks to the takeover premium for the Direct Line Group, rather than the line becoming significantly more profitable in 2024.

At a stock level, Just Group was the major outperformer of 2024 (93%) followed by Beazley (60%), and DLG (45%).

The under-performers were Prudential (-27%), Sabre (-3%) and L&G (flat).

According to Van Embden the UK insurance sector was trading well (27%) at the start of 2025 above its 12-month lows but has sold off (-11%) from its highs.

Van Embden said: “Whether this is driven by some profit-taking towards the end of the year or uncertainty about 2025 is difficult to gauge at this point.

“However, we believe there is scope for a recovery in price performance as the FY24 reporting season kicks off.

“From an insurance underwriting perspective, we expect risk-adjusted underwriting returns in the non-life sector will remain attractive across commercial specialty (re)insurance classes in 2025 and should show an improvement in UK motor.

“We believe the pricing environment will remain adequate across the commercial lines sector for several years.

“In contrast, there is a risk that rate adequacy may deteriorate in UK motor in 2026.”