Suncorp shares surge as it flags retreat from ‘marketplace’ strategy

Suncorp shares have jumped after the insurer turbocharged its returns and flagged a shift in strategy.

Suncorp has announced the departure of Pip Marlow.

Shares in Suncorp have risen more than 4 per cent after the banking and insurance giant turbocharged its returns to shareholders and signalled a retreat from its unpopular ‘marketplace’ strategy.

Handing down an 84 per cent drop in full-year profit, acting CEO Steve Johnston said the company plans to pay shareholders a special distribution of 39 cents per share from the proceeds of the sale of its life business. Investors will also receive a 44c per share fully franked final dividend, bringing the full year dividend payout to 70c per share.

“This means we will be returning over a billion dollars of capital to shareholders, equivalent to 83 cents per share, over the next ten weeks,” Mr Johnston said.

Suncorp shares were up 4.45 per cent at $13.28 in late morning trade.

The sharp decline in net profit, to just $175 million, was largely due to a $910m non-cash loss on the sale of the group’s life business, as well as increased natural hazard, regulatory and compliance costs, it said. The insurance and banking giant posted a cash profit of $1.115bn for the year, up 1.5 per cent from the year prior.

Pip Marlow, the executive tasked with delivering on the failed marketplace strategy, will leave the company at the end of the month, the group said.

Commenting on the shift away from its ambitions to be the Amazon of financial services, acting CEO Steve Johnston admitted the group “hadn’t always got it 100 per cent right”.

“We acknowledge the more aspirational elements of the marketplace component of the strategy, and the associated third-party revenues that were assumed to flow from those activities, have been too ambitious relative to where our business is at and the funds we have available to invest,” Mr Johnston said.

Former Suncorp CEO Michael Cameron. Picture: Annette Dew

Mr Johnston’s comments come just two months after the man who initiated the strategy, Michael Cameron, stepped down as CEO.

The acting CEO said the focus going forward would be on improving performance in its core operations, embracing regulatory change and delivering efficiencies by reducing duplication.

“The sum of all this work will be a more resilient Suncorp, with an investment thesis built around high yield and system plus growth,” Mr Johnston said.

The insurance arm of the business posted a 13.7 per cent decline in profit to $588m for the year, largely driven by higher natural hazard claims costs. Gross written premiums rose 1.3 per cent to $8.2bn.

Net profit in the banking division shrank 1.4 per cent to $364m, as challenging operating and economic conditions combined with higher regulatory and compliance costs, Suncorp said.

Alongside the bumper 39c per share payout proposed following the sale of the life business, Suncorp plans to embark on a share consolidation program that will reduce the number of shares on issue by 2.9 per cent. Both are subject to shareholder approval at the upcoming annual general meeting.

At 12.45pm (AEST), shares in Suncorp had jumped 59.5 cents, or 4.7 per cent, to $13.30.5.