AMP slumps on sector pessimism

AMP has been caught up in market disappointment with insurance updates from Westpac and CBA.

AMP shares have slumped 4 per cent during afternoon trade as sentiment was hit by disappointing updates from the Commonwealth Bank and Westpac on their respective insurance arms.

In a release to the market this morning Westpac said insurance claims in the third quarter were “higher relative to the quarterly average of the first half of 2016,” due to a lift in life claims and the impact of severe storms on the east coast.

It followed yesterday’s mixed full-year report from CBA that showed a 37 per cent decline in insurance income in the six months to June 30 compared to the first half.

Similarly to Westpac, CBA pointed to weakness in life insurance as well as the impact of “weather-related event claims”.

While the effect of the damaging east coast storms on insurers has previously been flagged by several companies and was again highlighted in Suncorp’s results last week, the life insurance reports caused sentiment on AMP to dampen significantly.

The financial services giant has a sizeable life insurance operation, which was seen as the key lag on its full-year profit report in February.

AMP most recently admitted to the market in May the first quarter of calendar 2016 had not shown any improvement as it proceeds with a plan to “fix and strengthen” the division.

“The first quarter proved challenging for our life insurance business with ongoing volatility in our claims experience,” the company said in May.

“We have previously advised that we expect volatility in these results while we continue to fix and strengthen the life business, but we remain committed to our strategy and confident that we are on the right track.”

The commentary from Westpac and CBA offset a solid life unit result from Suncorp, with investors wary ahead of AMP’s profit update next week.

AMP is due to report its half-year numbers on August 18.

At 2.50pm (AEST), AMP shares traded down 4.2 per cent at $5.625, against a broader market fall of 0.6 per cent.