On Friday, UBS adjusted its stance on Phoenix Group Holdings (PHNX:LN) (OTC: PHXXF), downgrading the stock from Buy to Neutral and reducing its price target to £5.30 from the previous £6.10. The revision follows the company's first half of 2024 results, which revealed a solvency ratio that fell short of expectations by 5 percentage points.
The firm's analyst cited increased risks to the insurance company's solvency as the primary reason for the downgrade, based on revised forecasts post the 1H24 results. Despite the downgrade, the analyst noted that with a forecasted 9.9% yield for the fiscal year 2025, the risk-reward profile for Phoenix Group appears balanced at the current valuation.
In the broader insurance subsector, UBS expressed a preference for Aviva (LON:AV), maintaining a Buy rating on the stock due to its diversified quality. Legal & General (L&G) also remains favored, recommended as a Buy for its attractive valuation. The analyst's preferred order within the subsector is Aviva, followed by L&G, then Phoenix Group, with M&G trailing.
Phoenix Group's revised price target of £5.30 represents a 13% decrease from the previous target of £6.10. This adjustment reflects the analyst's recalibrated expectations after the half-year financial results did not meet the projected solvency levels.
The report concluded with a comparison within the insurance subsector, suggesting that while Phoenix Group's current outlook has been tempered, other players like Aviva and L&G are seen as more favorable investment opportunities based on the firm's criteria.
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