In its review of the insurance sector, UBS also cut its recommendation for peers Standard Life and Phoenix from 'neutral' to 'sell' on valuation grounds.

The broker said: "After strong share price performance in 2012, the sector no longer offers such clear value, and fundamentals look challenging".

However, the broker raised its rating for St James's Place from 'neutral' to 'buy', saying it expects "positive operational momentum to drive further multiple expansion, despite market trends".

UBS said that the Retail Distribution Review (RDR) which became effective on January 1st is "likely to reduce IFA distribution capacity, and it remains unclear if auto-enrolment will offset this".

The broker said: "Further ahead, reduced pension deductibility and the threat of more to come mean we have low expectations for life growth.

"This explains our preference for internationally-diversified Prudential and Aviva (both 'buy'). The Pru's Asian footprint and the Aviva turnaround also differentiate them sharply from domestic life peers."

UBS added that non-life insurance stocks offer more value than life insurance and retained its 'buy' rating for Direct Line.

BC

Related share prices
Aviva (AV.) share price
Prudential (PRU) share price
Standard Life (SL.) share price
Phoenix Group Holdings (DI) (PHNX) share price
Direct Line Insurance Group (DLG) share price