Suncorp Group earnings results

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7 August 2019

Results 

Full Year 2019

Full Year 2018

Change

Cash Earnings ($m)

1,115

1,098

+1.5%

Bloomberg Consensus ($m)

1,115

 

 

Net Profit After Tax (NPAT) ($m)

175

1,059

-83.5%

Australian Insurance Gross Written Premiums (GWP) ($m)

8,245

8,137

+1.3%

Banking & Wealth Profit after Tax ($m)

364

369

-1.4%

NZ Insurance GWP ($m)

1,566

1,422

+10.1%

Final Dividend ($)

0.44

0.40

+10%

Suncorp Group (SUN) profit hit by sale of life insurance business

Results

  • Financial services firm, Suncorp Group (SUN) reported a slight improvement to its full year cash earnings to $1.12 billion, in line with Bloomberg consensus, while net profit after tax (NPAT) fell 83.5% from the prior year to $175 million.

Drivers

  • Group NPAT was slugged by a $910 million after tax loss, attributed to the sale of its Australian life insurance business. The result was also impacted by increased regulatory and remediation costs of $155 million, much of which had been flagged during its 1H19 results back in February. But profit after tax from continuing operations improved on the year before. 
  • Higher natural hazard costs, with claims rising 7.7%, saw profit decline for its Australian Insurance arm by 13.7% but written premiums rose to $8.2 billion. The NZ Insurance business was the strongest performer, recording an 81% jump in profit helped by a 10% improvement in premiums and a decline in natural hazard claims.
  • Banking and wealth profit also slipped slightly due to the subdued residential property market along with increased competition and elevated funding costs. Net Interest Margins (NIM) fell 5bps to 1.79% as the home lending portfolio grew 0.4% and impairment losses came in at 2bps. 

Dividend

  • Suncorp announced a final dividend of $0.44 per share which is a 10% lift on the year before. The dividend will be paid on 25 September 2019 with the ex-div date of 14 August. The total ordinary dividend for the year was $0.70, with a payout ratio of 81.2%. SUN also paid a special dividend in May this year of $0.08 per share.  
  • Suncorp is also looking to further return capital to shareholders in October 2019 via a share consolidation, equating to a $0.39 per share return, subject to shareholder approval.

Outlook

  • Looking forward, Suncorp aims to focus on its core businesses of banking and insurance while also looking to modify its digital capabilities. SUN has increased its FY20 natural hazard allowance to $820 million and has projected regulatory costs of $155 million. 

Share price

  • Investors have responded positively to the full year result with SUN shares lifting by as much as 5% immediately following the release. However, SUN has underperformed the broader market year-to-date in 2019 with its share price advancing ~5.5% while the ASX 200 has gained close to 15%.  

 


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