ClearView scraps dividend payout

ClearView boss Simon Swanson has warned shareholders not to expect a dividend this year.

Simon Swanson, CEO of ClearView. Picture: Hollie Adams

ClearView boss Simon Swanson has warned shareholders not to expect a dividend this year, but says it is on sound financial footing to ride out the coronavirus crisis and is expecting a rise in the number of people taking out life insurance policies in the coming months.

The intention to scrap the dividend comes days after the prudential regulator issued a directive to banks and insurers, ordering them to “seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer”.

“In light of APRA’s guidance to limit capital distributions it’s highly unlikely we’ll be paying a dividend this year,” Mr Swanson told The Australian.

The financial services group suspended its dividend in 2019 and had previously guided to reassessing its dividend policy at the end of the financial year.

The biggest negative impact to the business from COVID-19 would not be due to mortality rates but instead be seen in the income protection segment and lapse rates, Mr Swanson warned.

“It’s not even (due to) COVID-19 directly: for those people who are on claims, they’ll go longer than they usually do because people can’t get to see a doctor or occupational therapist, for example.

“Secondly, if unemployment increases dramatically, obviously lapse rates will occur in the industry as well,” he said.

The federal government’s JobKeeper announcement was significant for the life insurance industry for this reason, Mr Swanson added.

“Unprecedented times call for unprecedented actions and I think that’s where we are, so I can only support (the JobKeeper policy),” he said.

Mr Swanson also flagged that a lift in life insurance sales was likely in the near term due to the pandemic.

“In every disaster or crisis, life insurance sales normally increase because people become more fearful. In the global financial crisis people took out more life insurance because of the uncertainty.

“So there’s lots of pluses and minuses when you look through this ... we’ll presumably get more life insurance sales, but we’ll also get lapses and income protection claims,” he said.

In an update to the market on Thursday, ClearView said it was unable to provide guidance out to June 30 due to the fluidity of the crisis.

But it revealed it has undertaken stress-test scenarios of its business over the next two years.

“ClearView’s regulatory capital position appears resilient to each of these scenarios. These will continue to be closely monitored and potential actions in response have been developed and are being considered,” the wealth manager said as it cautioned that profitability would be “very sensitive” within each scenario, in particular to claims and lapse assumptions.

Alongside the COVID-19 update, the wealth manager announced that chairman Bruce Edwards would exit the company on June 30, with current board member Geoff Black proposed as the likely replacement.

“I leave the business in far better shape than it was when I started. It’s increased its size, market share and has a strong life insurance, superannuation and financial advice business and goes into these uncertain times with a very strong balance sheet,” Mr Edwards said.