Suncorp FY earnings jump 42pc despite pandemic challenges
Suncorp Group shares surged after it said it was weathering the Covid-19 storm and the challenges of climate chang.
Suncorp Group says it is weathering the Covid-19 storm and the rising challenges of climate change with improved performances at both its insurance and banking division for the 2021 financial year.
The Brisbane-based financial group reported on Monday a 42 per cent jump in cash earnings to $1.06bn for the year ended June 30 with net profit up 13 per cent to $1.03bn.
Suncorp shares rose 7.84 per cent to $12.79 as it rewarded shareholders with increased dividend payouts and announced an on-market share buyback of up to $250 million.
Suncorp said the significant improvement in cash earnings was driven by increased performances at its key Australian businesses despite the impact of rolling lockdowns on its customers over the year. However, profit in New Zealand dropped by 18 per cent, largely as a result of increased natural hazard costs.
Suncorp’s insurance business delivered its strongest growth since 2013, with gross written premiums in Australia up 5.5 per cent. Home lending rose by 0.8 per cent in the second half of the year.
Suncorp chief executive Steve Johnston said the result had been delivered against a challenging external backdrop of Covid-19 and the La Nina weather pattern. “While the uncertainty from COVID is far from over, we have good momentum,” Mr Johnston said.
He said climate change continued to pose serious challenges for Suncorp with the company dealing with 23 separate events, around 50,000 event claims and over $1 billion in natural hazard claims costs in the past year. Natural hazard costs had exceeded Suncorp’s allowance by $60 million.
Suncorp was committed to advocating for a more resilient Australia in the face of a “changing climate” pointing to its One House initiative that sought to see how extreme weather resilience could be incorporated into future house design.
The pandemic had accelerated the digital migration of its customers, with Suncorp having a target of 70 per cent of all insurance sales to be conducted online.
“Since the start of the pandemic, the number of our customers dealing with us online has increased materially,” he said. “This is a magic opportunity for us to transform how we do business.”
Suncorp last year announced it was closing 19 branches as it continued to adapt its business model to a post-Covid environment. Mr Johnston said there were no plans to shut further branches but the company would continue to monitor foot traffic at its various outlets.
He declined to comment on speculation Suncorp would sell its banking operations, noting the company was working to improve the performance of that side of the business.
Ord Minnett Queensland state manager David Lane said the result was an excellent one, with strong cash profit. “Management rewarded shareholders with a large increase in dividends,” said Mr Lane.
Mr Johnston said that while rolling lock downs had been particularly tough on small businesses, he was confident the economy would bounce back quickly once vaccine rates increased.
“The vaccine rollout is ramping up,” said Mr Johnston, who said all his board and leadership team were either fully vaccinated or are awaiting their second dose.
Over the course of the year, the group had provided Covid-19 support to more than 85,000 customers and contributed $9m to a range of community programs.
The group will pay a final ordinary dividend of 40c a share, plus an 8c special dividend, both fully franked.
“We have a long-term commitment to return capital to shareholders that is surplus to the requirements of the business,” said Mr Johnston. “But we continue to have a robust capital buffer as we navigate difficult times. After the proposed returns, we will continue to hold almost $400 million in excess capital.”
Suncorp Group chief financial officer Jeremy Robson said the majority of customers who received COVID hardship support last year had now returned to normal performance.
“In respect of the current lockdowns, while it is still early days, we have only seen a small number of customers apply for relief,” said Mr Robson.
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