Kick Off: AMP Limited v QBE Insurance Group Ltd

Both firms have left shareholders wanting but AMP would appear the crowd favourite.

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Judging by the share price performance of AMP Limited (ASX: AMP) in recent months – the diversified financial services provider would appear to be the crowd favourite over QBE Insurance Group Ltd (ASX: QBE) heading into today’s match of the Motley Fool’s ASX World Cup.

Over the past six months AMP’s share price has soared 26%; in contrast QBE’s shares have gained just 5.6%, which would clearly suggest odds-on favourite status to AMP. In fact, the market has sided with AMP over the past year and five-year timeframes too, however when the head-to-head record is stretched out over 10 years both firms have lacklustre records and performances far below the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).

Here’s a look at some key stats:

  AMP QBE   Insurance Group
Market   Cap $15.7   billion $14   billion
FY   2014 P/E ratio 15.9x 10.8x
FY   2014 Yield 4.7% 4.5%
Price/Book Value (Dec 2013) 1.9x 1.2x

Operations

AMP is largely a domestically-focussed service provider of a variety of wealth protection insurance products and also of financial planning, advice and funds management services. AMP holds a significant market share in Australian and enjoys a tailwind from the growing self-managed super fund (SMSF) sector and the superannuation industry in general.

Meanwhile QBE has transformed itself into a major global general insurer and reinsurer with worldwide operations. New management has set about streamlining its multitude of businesses with the formation of a major Asian hub amongst the outcomes of this process.

When it comes to operations the relative simplicity of AMP is appealing, AMP scores the FIRST GOAL!

Valuation

Putting these two giants head-to-head, QBE certainly looks appealing on valuation grounds. As the table above shows, QBE trades just above book value, on an undemanding PE ratio – especially considering what would appear to be a depressed level of earnings, and on a decent yield.

On the other hand AMP looks closer to full value with the shares having enjoyed a strong run recently.

On valuation, QBE scores a GOAL!

Growth

QBE was certainly viewed as a blue-chip growth stock for many years, however the company has taken a stumble and its growth reputation has been brought into question. The growth-by-acquisition strategy appears a thing of the past.

AMP’s mature domestic growth options are limited, however a recent initiative to undertake a joint venture in China has had initial success and could offer an exciting growth opportunity for the firm, but it shouldn’t be forgotten that succeeding in China is no easy task.

On growth, QBE shoots but misses. AMP shoots and just manages to sneak past the keeper for a GOAL.

Full Time

A 2-1 win to AMP! It wasn’t the most convincing of wins given spectators know that QBE’s potential for a turnaround is enormous, however on the day QBE just wasn’t able to get over the line. Keen supporters of QBE are unlikely to have lost hope given their belief in reversion to the mean.

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Motley Fool contributor Tim McArthur owns shares in QBE Insurance Group Ltd.

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