Legal & General the top pick in changing UK life insurance sector, says Berenberg

Berenberg has said that Legal & General remains its 'preferred play' in the life insurance sector following the recent major shake-up of the annuity and savings markets in the UK.The broker called it a "brave new world" for the industry which will be transformed by the end of quasi-compulsory annuitisation, the introduction of a corporate pension fee cap, and the Financial Conduct Authority's inquiry into pre-2000 savings and insurance products. "While the fall-out from the changes will undoubtedly affect sales and sentiment in the near term, this appears to be manageable and, looking further forward, we expect the impact to be more positive. "Having more flexible pensions should encourage longer-term savings volumes, with lower fees adding a positive tailwind. Overall, we expect this to drive an acceleration of the transition towards a low-cost, scale approach, with consolidation likely to follow - we expect the UK insurance and savings landscape to ultimately become a highly regulated, highly commoditised, oligopolistic marketplace."Legal & General, rated 'buy', provides an "attractive entry point" given its recent sell-off, Berenberg said, adding that the company is "well placed to meet the ever-changing UK life insurance landscape".The other key 'buy' in the sector is Prudential due to its Asian growth engine, the broker said.Closed life consolidator Resolution has been raised from 'sell' to 'hold', with "limited downside risk" now seen from the stock's current level. However, Aviva is still rated as a 'sell' by Berenberg given that expectations - especially for dividends - "are getting ahead of themselves". The broker said that the stock is fully valued compared with the sector.A 'hold' recommendation has been left on Phoenix Group and Standard Life, while St James's Place has been kept at 'buy'.BC