Protect Your Portfolio With Admiral Group plc, Prudential plc And Aviva plc

The past few months have been turbulent for investors. After a rough August and September, the market roared back in October, racking up one of the best monthly gains since the financial crisis. Then the market collapsed by nearly 10% during November, rallied towards the end of the month and has spent most of December plunging to a two-month low. 

But amid the volatility, the performance of three stocks in particular has stood out.

Shares in Admiral (LSE: ADM), Prudential (LSE: PRU) and Aviva (LSE: AV) have all proved to be safe havens in the market turbulence. Indeed, over the past three months, these three stocks have all outperformed the wider FTSE 100 by around 8%, excluding dividends.

Further, over the last 12 months, the shares of Admiral, Prudential and Aviva have all registered a positive performance, compared to a decline of 5% for the FTSE 100. 

Top picks

Prudential and Aviva are two of my favourite companies. Both are on my watch list. In many ways, the two companies were built with the long-term investor in mind. Both companies have been around for more than a century and their primary lines of business – life insurance and retirement savings – guarantee recurring cash flows for decades.

Similarly, Admiral is one of my favourite insurers. The company has achieved above-average growth since its founding in 1993, during a period when the UK motor insurance industry as a whole has been lossmaking (2013 was the only year in recent history when the UK motor insurance sector has reported an underwriting profit).

Amid this hostile operating environment, Admiral is on track to have tripled revenues over the past five years. Over the same period, the company has returned a total of £1.1bn to investors via both regular and one-off dividend payouts. This cash return works out to be around 90% of Admiral’s net income generated over the period. 

Pension plays

Aviva dominates the UK pension and retirement savings market and Prudential is more of an international savings provider and asset manager. And an international presence has helped Prudential grow faster than its peers during the past five years. Its earnings per share have increased at a compound annual rate of around 26% since 2009. Over the same period, the company has hiked its dividend payout by approximately 13.2%. 

According to City analysts, Prudential’s EPS are set to grow 14% this year and a further 11% for 2016. The company’s shares currently support a dividend yield of 2.7% and trade at a forward P/E of 13.6. 

Looking for income? 

At present, Aviva is trading at a forward P/E of 10.5, although due to integration costs associated with the Friends Life merger, EPS are expected to fall by 8% this year. However, next year City analysts are expecting EPS growth of 11%.

Based on these forecasts, Aviva is trading at a 2016 P/E of 10.9. The shares currently support a dividend yield of 4.1% and analysts expect Aviva’s yield to hit 4.8% next year.