Suncorp Sees Large Drop in Full Year Profits

Post by Sharat on August 25, 2009 · Under Business News, Company News, Life Insurance, banking · Comment 

Bancassurance group Suncorp-Metway recorded a 40 per cent drop in full year profits, with the result coming in at the lower end of its guidance.

Net profit for the year ending June 30th dropped to $348 million, down from $583 million in the previous year. Profits at the bancassurance group where weighed down by the impact of unstable financial markets and in particular the credit markets, storm claims, increased credit impairment and higher bad debt charges.

Earlier in the month, Suncorp had provided guidance, warning that full year net profit would decline to between $340 million to $360 million.

“The 2009 financial year coincided with the most volatile period in Australian financial services history and, although underlying performance remained solid, each of our businesses was impacted by unfavourable operating environments,” chairman John Story said.

Suncorp said its final dividend would be 20 cents per share down from 55 cents a share in the previous year and in line with guidance.

The group said it would pay a final dividend of 20 cents per share, in line with guidance and down from 55 cents a share a year ago.

Suncorp’s new Chief Executive Patrick Snowball, is set to take up the position on September 1st and analysts expect Mr. Snowball, a former insurance executive, to outline a strategy of converting the company into a pure play insurer and jettisoning the group’s banking business.

Earlier in the year Suncorp made significant changes to its banking business such as phasing out non-core lending , the company said pre-tax earnings at its banking arm fell to $117m, from $633m a year ago, feeling the drag of an increase in bad debts.

Full year credit impairment charges increased tenfold and stood at $710 million, compared with $71 million in the previous year

“The difficult economic conditions adversely impacted bad debt expenses for the year,” Suncorp said.

The bancassurance group said it would continue with the strategy of winding down its non-core loan portfolio.

Suncorp’s total loan portfolio declined 1.1 per cent, whilst deposits grew by 13.2 per cent to 21.4 billion.

The group’s insurance business recorded pre-tax earnings of $573 million, up from $307 million in the previous yea, with gross written premium growth of 6 per cent.

Suncorp Life recorded net earnings of $115m, up from $111m a year ago, but excluding items such as annuities market adjustments, underlying earnings fell 16.4 per cent to $122m.

Suncorp’s tier-one capital ratio at the end of the financial year, a closely watched indicator of financial health, was a robust 11.31 per cent, after the groups raised more than $1 billion in capital during the year.


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