Suncorp earnings results

CommSec CommSec

 

15 February 2019

Results ($m)

Half Year 2019

Half Year 2018

Change

Australian Insurance Gross Written Premiums 

4,101.0

4,004.0

+2.4%

Net Incurred Claims 

2,855.0

2,724.0

+4.8%

Australian Insurance NPAT 

133.0

234.0

-43.2%

Banking & Wealth NPAT 

182.0

191.0

-4.7%

Net Profit 

250.0

452.0

-44.7%

Cash Earnings 

413.0

472.0

-12.5%

Interim Dividend ($)

0.26

0.41

-36.6%

Suncorp (SUN) profits slide on natural hazard claims 

 

Results

  • Queensland based financial institution, Suncorp (SUN) posted a 12.5% slide in half year cash earnings to $413m; a result which was above most analyst expectations. 

Drivers

  • The fall in earnings was largely due to a stronger than expected lift in natural hazard claims which pushed its insurance earnings down 43%. The lift in claims was well telegraphed to investors in an update on 3 Jan 19. The December hailstorms in NSW and South East Queensland made the difference, with costs of $250m and more than 24,500 customer claims received. Premiums received from customers rose strongly however in both Australia and New Zealand, which provided a small boost. 
  • Its Banking division posted a near 5% slide in earnings, with efforts to control costs falling short of sufficiently offsetting softer revenue. The bank has experienced a slowdown in residential mortgage growth following increased competition and worsening margins due to challenges facing banks. Its Net Interest Margin of 1.79% was below the 1.82% six months earlier and well below the 1.86% recorded 12 months ago.  

Dividend

  • SUN has declared a $0.26 per share interim dividend, payable to eligible investors on 2 April and will trade ex-dividend on 20 February. This is a 36% drop on last year’s interim distributions which included a $0.08/share special dividend. 

Outlook

  • SUN expects its underlying performance to be largely in-line with prior estimates, which would indicate a strong recovery in 2H19. Following the Royal Commission’s recommendations, it expects investment in regulatory projects in FY19 to exceed the original estimate of around $90m by $50m. 
  • It will increase its natural hazard allowance from $720m to $820m for FY20 and purchase an additional $200m in natural perils reinsurance to help reduce the volatility in earnings caused by natural hazards. 

Share price

  • SUN shares fell by close to 4% following the future outlook, however remains 3.5% firmer so far this calendar year.  

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