Suncorp Raises Dividend After Annual Profit Jumps 69%

By Alice Uribe

SYDNEY--Suncorp said its annual net profit rose by 69%, driven partly by an improvement in margins and a significant turnaround in investment returns, while flagging increasing premiums into fiscal 2024.

The Australian general insurer reported a net profit of 1.15 billion Australian dollars (US$753 million) for the 12 months through June. Its cash earnings, a measure tracked by analysts that excludes certain costs and one-time items, rose to A$1.25 billion, from A$673 million a year earlier.

Suncorp attributed the profit uplift to fiscal 2022 being impacted by mark-to-market losses on investment portfolios. It said the group had completed its three-year plan to FY 2023, achieving its key financial and operational targets.

"Our Australian and New Zealand businesses have achieved strong growth in premiums, while unit growth across consumer portfolios demonstrates the value of our products and brand," Chief Executive Steven Johnston said. "Our underlying business is significantly more resilient today than it was when we laid out the three-year plan in 2020."

Suncorp said the operating environment remained challenging and expects gross written premium growth of around 10% in fiscal 2024. This, the insurer said, comes as it responds to increased input costs, including from reinsurance, natural hazards and supply chain inflation.

For fiscal 2023, Suncorp's Australian insurance unit's gross written premium rose by 11% to A$10.16 billion on year, while its New Zealand unit rose 14% to 2.44 billion New Zealand dollars (US$1.48 billion) compared to fiscal 2022. The insurer said this reflected targeted price increases required to address material rises in reinsurance and natural hazard costs and economy-wide inflation.

Australian insurers generally have been hiking premiums partly in response to higher reinsurance prices and claims costs which includes larger repairs expenses. Some analysts believe recent strong premium rate rises may take time to fully earn through for insurers, but companies should benefit when this happens alongside potentially receding claims inflation.

For Suncorp's banking unit, annual profit after tax totalled A$470 million, versus A$368 million in the previous year, while its net interest margin rose by 3 basis points to 1.96%.

"The Bank's continued growth in home lending demonstrates the benefits of improved broker and customer experiences," said Johnston.

Australia's competition regulator last week rejected ANZ's proposed A$4.9 billion acquisition of Suncorp's banking unit due to competition concerns. ANZ in July last year agreed to buy Suncorp's bank, saying it could accelerate the growth of its retail and commercial businesses.

Suncorp on Wednesday reaffirmed its commitment to support ANZ in its referral of the decision to the Australian Competition Tribunal. While there was no change to the expected net proceeds from the transaction, it said there have been some offsetting changes in the component parts.

"In particular, the group now expects the separation and other costs to increase from A$500 million to between A$575 million to A$600 million given the delay in completion as well as further clarity on the programme requirements," said Suncorp.

Directors of the company declared a final dividend of A$0.27/share, up from A$0.17/share a year earlier, but said the full-year dividend payout ratio of 60% of cash earnings is at the bottom of the target payout ratio range of 60% to 80%.

Suncorp said it maintained its commitment to a 60-80% dividend payout ratio, but that the lower payout in fiscal 2023 reflected some significant shifts in capital, and as it worked through the tribunal process relating to the sale of its bank.

Write to Alice Uribe at alice.uribe@wsj.com

(END) Dow Jones Newswires

August 08, 2023 19:17 ET (23:17 GMT)

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