Looking for undervalued blue-chip stocks? Try the insurance sector, says this influential American b

Morgan Stanley has taken a look at the European insurance stocks and singled out two in the UK with potentially significant upside – almost 45% in one case.

In a wide-ranging note, the American bank said the sector had been a recent underperformer “driven by lower dividend and earnings revisions”.

It marked Prudential PLC (LON:PRU) in the life and pensions sector as possibly re-rating once investors zone in on its growth prospects in Asia after its demerger.

Reflective of Morgan Stanley’s bullish view, the target price of 1,706p a share is around 30% ahead of its current valuation.

Among the general insurers, Lancashire Holdings (LON:LRE) is significantly undervalued, the bank thinks. Its target price is around 45% ahead of the prevailing stock price.

Also seen as having further to run are Direct Line (LON:DL.) and Phoenix Group Holdings (LON:PHNX).

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