Insurance gains see SUN deliver
Suncorp-Metway Limited (SUN) saw a surge in general insurance profit help the company’s overall bottom line to improve 41% to a $364 million profit for the six months to 31 December. Despite the increase in profit the financial services company said it would cut its dividend to 15c per share, under the Group’s payout target ratio of between 50% and 60% of company profit.
Commenting on the result, chief executive Patrick Snowball said the increase in profitability was pleasing, however he would maintain a ‘cautious and conservative’ approach in the short term.
“We have achieved our immediate priority of stabilising the Group’s position, we have reinforced our capital and reserve positions and a new executive team has been appointed. Our priority now is to drive improved financial results from all of our businesses,” Mr Snowball said.
Mr Snowball emphasised his focus on creating efficiencies and streamlining the back office structure.
”As part of an overall program of simplification, Mr Snowball announced the Group’s intention to sell its 50% participation in the joint venture insurance arms of the Royal Automobile Club of Queensland (RACQ) and the Royal Automobile Association of South Australia (RAA) back to the respective motoring clubs,” the company said in a statement.
The key driver to the result was in the company’s key general insurance division, where profit was $347 million, an increase of 88.6% on the prior corresponding period’s figure of $184 million.
The result was helped by fewer unfavourable weather events and favourable returns from investment portfolios.
Meanwhile gross written premium increased by 4.4%, and by this measure makes Suncorp Australia’s largest general insurer.
Looking across the company’s divisions, banking profit weighed on the result.
Overall the profit there was $4 million, down from $60 million in the previous corresponding period, with the core bank making a pre-tax profit of $224 million and the non-core bank making a pre-tax loss of $211 million.
The non-core banking loss came on the back of $272 million in impairment charges.
”While banking interest revenue has decreased from $2.7 billion to $1.9 billion, total revenue for the Group has increased as a result of an increase of $197 million in insurance premiums and stronger investment returns than the previous period,” Suncorp said.
Meanwhile, chairman John Story attempted to justify the lower than normal dividend.
”We believe that in the short term it is important that we retain higher levels of capital within the business to ensure we can successfully manage through all known risks or any short term issues that may occur over the next six months,” Mr Story said in a letter to shareholders.
At the close Tuesday, Suncorp shares were trading at $9.21.
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