It's finally happened.
It was the straw that broke the camel's back.
The final nail in the coffin, some may say.
As I watched the share price plunge below $10, once again, it dawned on me that I'd become one of those 'long suffering' shareholders I often write about. Perhaps I had too much belief in a management team that, admittedly, had a very poor history of actually fulfilling that promise. Perhaps I was lured in by the appeal of a big dividend yield if all went to plan. Or perhaps it was just a good turnaround story that I hoped would come true.
Warren Buffett's sage words ring true all too often 'turnarounds seldom turn'. This has been the case more times than we can count, but investors are so often caught up in the romance of a company turning around its fortunes, to the benefit of long-term shareholders, that they forget how terrible the statistics are.
Australia's big insurance company
Mr Buffett made a lot of his fortune from his insurance investments, putting the surplus capital to good use to make investments in great companies. Sadly, this is not what other listed insurance companies generally do, making the comparison next-to useless.
Listed insurance companies are struggling at the moment partly because they cannot invest their surplus capital and receive a decent return, as a result of record low interest rates in the developed world. This directly hits the bottom line (profit) and has done so for the last five or so years. It's also been a tough market for Australian insurance companies in general where insurance has become a commodity via new, low-cost competitors, and the prevalence of online quoting.
Where to from here?
QBE Insurance Group Ltd (ASX: QBE) and its management team has finally worn me down. I continue to hold but I think the end of my shareholding will be near. My colleague Regan has sold his shares (read here) and succinctly summed it up: QBE Insurance still doesn't come close to meeting the measures I consider for an attractive investment. For what it's worth, I don't think any of the other listed insurers like Insurance Australia Group Ltd (ASX: IAG) offer a much more attractive target at this stage.
