The insurance business is far from an easy place to make money given the industry's exposure to natural disasters and to competitive pricing pressures for what is essentially a commodity service. As such, it can be equally hard for investors to make money from insurance stocks, however, with a couple of leading insurance stocks recently underperforming the market, value opportunities may have emerged.
In the past 12 months the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has lost just over 1%. In comparison two blue chip insurers have outperformed the index, while two other blue chip insurers have underperformed.
Outperformers
QBE Insurance Group Ltd (ASX: QBE) has bounced back strongly in the last year after a dismal period of underperformance in the preceding years. In the past 12 months, QBE's share price has risen 21% to trade at $13.50.
With consensus earnings (provided by Morningstar) for financial year (FY) 2016 of 107 cents per share (cps), the global insurer is trading on a forward price-to-earnings (PE) ratio of 12.6x.
AMP Limited (ASX: AMP) is also enjoying a period of relative outperformance after enduring a preceding period of underperformance. The stock has gained 7% in the last 52 weeks with the share price currently trading near $6 a share.
Based on consensus earnings for FY 2016, AMP is expected to earn 41 cps, implying a PE ratio of 14.5x.
Underperformers
In contrast to QBE and AMP the share prices of the following two insurers have struggled in the past 12 months. However over the longer term of five years they have vastly outperformed QBE and AMP and are arguably better underlying businesses.
Insurance Australia Group Ltd's (ASX: IAG) share price is down 9.5% over the year to the $5.50 level.
Consensus earnings per share (EPS) for FY 2016 are for 40 cps which means investors can currently acquire shares in IAG on a forecast PE of 13.9x.
Suncorp Group Ltd (ASX: SUN) has recorded a 7% fall in its share price to $13.30.
With consensus earnings showing a rise in Suncorp's EPS from 87 cps in FY 2015 to 101 cps in FY 2016, the stock is trading on a forecast PE of 13.2x.
