AMP and QBE Insurance lag peer group

The last 12 months have been great for many sharemarket investors with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) rallying 21.5%. The key over the past year has really been to avoid the mining and mining services sector, with most other sectors faring well, including the insurance sector.

In both a relative and absolute sense most insurance stocks have performed well, however two widely held companies, namely AMP (ASX: AMP) and QBE Insurance (ASX: QBE) have lagged their peers.

In QBE’s case, it was forced into a capital raising in early 2012 after stretching its balance sheet too far. This ultimately had ramifications for its stock price, causing the insurer to underperform for much of 2012. QBE has recently begun to find favour with the market again, however with a share price return of 19% over the past year, it has underperformed the index.

Much of AMP’s undoing has occurred in just the last month on account of losses in its income protection business. As such, returns for shareholders tally around 22% over the past year, compared with closer to a 40% return just a couple of months ago.

In contrast, Suncorp (ASX: SUN), Insurance Australia Group (ASX: IAG) and NIB Holdings (ASX: NHF) have all significantly outperformed the index with returns of 53%, 60% and 39% respectively. Suncorp’s decision to sell off its ‘bad bank’ has impressed the market, while Insurance Australia Group’s conservative approach and NIB’s ability to grow market share have seen these insurers favoured over AMP and QBE.


Source: Google Finance

Foolish takeaway

One-year returns are just that – one-year returns – in isolation they tell investors very little. However in the case of NIB, its market-beating performance is perhaps acknowledgement of its impressive ability to grow in the niche health insurance market and is one company investors may want to further investigate. Also, given that last year’s laggards often become this year’s top performers, AMP and QBE may be two companies worth monitoring as well.

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Motley Fool contributor Tim McArthur owns shares in QBE Insurance and NIB Holdings.

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