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Suncorp Reports 41 Per Cent Jump In Net Profits
Brisbane based bancassurance group Suncorp-Metway reported a 41 per cent leap in first half net profits, but despite delivering robust profits growth, Suncorp lowered its interim dividend payment, saying it had to improve insurance margins.
Suncorp cuts its interim dividend by 25 per cent to 15 cents, and the stock tanked as a result, losing almost 6.3 per cent immediately after the announcement. Suncorp says it is seeking to preserve capital in the face of volatility and an uncertain regulatory environment.
First half profits for the six months ending December 31st came in at $364 million.
Suncorp chief Patrick Snowball says he was pleased by the result, but that the group would continue to remain cautious and conservative over the short term.
“By retaining higher levels of capital, we will be in the strongest possible position to deal with any unanticipated short-term issues that may present over the next six months,” chairman John Story said.
The strong first half performance of the company, which contrasts with declines in the previous two years, resulted from a strong contribution by its general insurance unit, which felt the effects of favourable weather conditions, and a recovery in equity markets during the time frame.
“While the headline numbers are strong, once you peel back the benefits of a more favourable weather environment and improving investment markets you arrive at a margin that needs to improve. The focus of our general insurance strategy is to simplify and better align our front end, reduce brand overlap and improve revenues. At the back end, our goal is to aggregate spend, reduce complexity and drive out cost.” Mr. Snowball said.
Suncorp says that it has maintained high credit quality of its $37 billion core bank portfolio, which reflects both high security and low risk, however its non core banking portfolio continue to record impairment charges.
The group’s Life business saw a 23 per cent drop in net profit to $105 million.
Suncorp says it intends to sell 50 per cent stakes it owns in the insurance arms of both the Royal Automobile Club of Queensland and the Royal Automobile Association of South Australia back to the motoring clubs.
“While the joint ventures have proven to be good investments for Suncorp, the next phase of our development requires a full-time focus on our core operations,” Snowball said.
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