Suncorp announces HY25 financial results

Suncorp Group Limited (ASX: SUN | ADR: SNMCY) today reported Net Profit After Tax (NPAT) of $1,100 million (pcp: $582 million). The result includes a one-off gain on sale ($252 million) of Suncorp Bank, which completed on 31 July 2024. Other factors that supported the result include favourable natural hazard experience, positive investment returns and the nonrecurrence of prior year reserve strengthening, which impacted the prior period. 

Cash earnings, which backs out the gain on sale of Suncorp Bank and other non-cash items, increased to $860 million (pcp: $660 million). The underlying general insurance trading ratio (UITR) of 11.8% and growth in gross written premium of 8.9% were both in line with guidance. 

The Suncorp Board has confirmed the first tranche of the return of capital associated with the Bank sale will occur on 5 March, amounting to $3.00 per share. A fully franked special dividend of 22 cents per share, associated with the sale, will be paid alongside the interim ordinary dividend of 41 cents per share on 14 March.

Suncorp CEO, Steve Johnston said: “These results reflect our discipline in executing strategic and operational priorities. We have delivered to our commitments, we are financially strong and resilient, and we have created future capacity to invest in initiatives to support our customers.”

“It is pleasing to be returning the net proceeds of the sale of the Bank to shareholders. It’s significant that we have been able to deliver the same net proceeds that we forecast when the transaction was announced almost 1,000 days ago. We also completed the sale of Asteron Life on 31 January 2025, positioning Suncorp as a simplified pure-play general insurance company.

“Over the last six months we have continued our focus on improving how we serve customers, including expanding our claims team and supply chains. We have redoubled our efforts to address those claims that have remained unresolved from prior year events. Increases in customers’ premiums are now moderating, with home construction and car repair costs showing signs of stabilisation, margins approaching or within our target ranges and reinsurance markets remaining constructive.

“We have focused on investing to improve customer experiences with digital interactions now 61% across sales and service, and more than 41% for claims, increasing to around 70% during weather events. We saw an uplift in our claims Net Promoter Score by 6 points over the half, testament to the improvements we are making in this area.”

The total cost of natural hazards was $503 million, $277 million below the company’s allowance in the half. The Group benefited from a benign natural hazard period, with 6 weather events above $10 million in Australia in the half, and no significant weather events in New Zealand. Suncorp has a comprehensive reinsurance program in place for major events with full limits available on all covers going into the second half of the financial year.

Gross written premium (GWP) in the General Insurance business increased by 8.9% reflecting both unit growth and the pricing response to claims inflation and a higher natural hazards allowance.

Net investment income contributed $374 million to the result (pcp: $396 million), supported by the continuation of high underlying yields on the interest-earning portfolio and strong equity markets.

Total net reserve releases were $18 million, compared to a strengthening of $161 million in the pcp. The release largely related to the Compulsory Third Party (CTP) business and was in line with expectations, with the net outcome across all other portfolios largely neutral. Significant reserve strengthening in the prior period was a result of external challenges, particularly supply chain pressures in the Motor portfolio.

General Insurance operating expenses increased 7.4%^^^ to $855 million, largely reflecting increased project expenditure to deliver strategic initiatives and investment in growth. Insurance expense ratios declined as management continued to focus on driving operating efficiency.

Other loss after tax from continuing operations increased $13 million to $47 million, driven by higher external funding expenses and the accounting for improved minority interest profits. This was partly offset by several non-recurring items including a benefit from reserve movements relating to the application of IFRS17 in New Zealand Life.

The Board has determined to pay a fully franked interim ordinary dividend of 41 cents per share. Suncorp’s half year dividend payout ratio of 60.6% of cash earnings is within the target payout ratio range of 60% to 80%. As Suncorp is in the process of returning the $4.1 billion Bank sale proceeds, the dividend reinvestment plan will be suspended for this half.

Excess Common Equity Tier 1 (CET1) to mid-point of target (excluding the dividends and proforma for the return of capital from the Bank sale) is $781 million. Suncorp will continue to be disciplined in managing capital and remains committed to returning capital in excess of the needs of the business to shareholders.

Mr Johnston said Suncorp is now a simpler, more resilient, and focused business that consistently delivers for customers and shareholders.

“We have proven to have a disciplined approach to capital management with the amount and quality of capital superior to our peers. This approach has served shareholders well over time with Suncorp one of the few financial services companies not undertaking large-scale, dilutive capital raisings during COVID,” he said.

“Our commitment to return capital in excess of the needs of the business and our robust capital position as at 31 December 2024 means we have the capacity for further capital management initiatives, most likely the establishment of an on-market buy-back facility. We will update the market further once the Bank proceeds have been returned to shareholders.”

“Our customer base shows our brands and services are valued, as we know cost-of-living pressures continue to challenge many Australians and New Zealanders,” Mr Johnston said.

“Our strategy continues to focus on improving how we deliver contemporary and affordable insurance products to keep pace with the evolving expectations of customers. We have significant programs of work well underway to deliver on our plan and our ambition to be the leading Trans-Tasman insurer by FY27.

“Every year, we pay around $10 billion in claims, and we recognise our past communications and practices did not always meet our customers’ expectations. We are investing in enhancing our claims and complaints processes to provide timely support.

“Since 2022, we have expanded our home claims team by more than 150 permanent full-time employees and established an on-call Lodgement Response Team so we can quickly scale up for major weather events. In the last half we have identified and supported around 6,400 customers who are experiencing vulnerability, and our team has undertaken over 3,100 hours of training to improve how we support these customers.

“We have invested in a new state-of-the-art Disaster Management Centre in our Brisbane head office – a high-tech facility designed to enhance our response before, during and after extreme weather events. We are also rolling out five new Mobile Disaster Response Hubs to respond faster and reach more customers sooner in impacted communities.

“Late last year, we announced the location of our new office in Townsville, with a commitment to hire an extra 120 people to support customers in one of Australia’s most disaster-prone regions.”

Mr Johnston said that globally, insurers and their customers were on the front line of the impacts of climate change.

“Severity and frequency of extreme weather is becoming an increasingly large part of everyone’s premiums through natural hazard budgets and reinsurance protection,” he said.

“While we benefited from good weather conditions well below our expectations this half, over the last five years, we have delivered in line with our increasingly robust natural hazard budget.

“Suncorp remains committed to working with Governments, other insurers, banks, technical experts, community organisations and homeowners to reduce Australia’s exposure to natural hazard risks. Reducing risk will not only protect lives, homes and businesses, but it will also go a long way in reducing the risk of a claim, in turn ensuring Australians and New Zealanders can access affordable, fit-for-purpose insurance.

“It's a topic worthy of debate at the forthcoming Australian Federal election. We believe the aim should be a dollar-for-dollar pre and post disaster spending ratio. For every dollar spent mopping up after disasters, a dollar is invested in mitigation. That will equate to a multi-year, multi-billion-dollar investment in the future resilience of our nation.”

Mr Johnston said there has been constructive discussions with the Queensland Government on a range of sensible reform options for the state’s CTP scheme. “Our focus is on creating a more sustainable and competitive scheme, while not adding to the cost-of-living burden for motorists or reducing their ability to receive benefits from the scheme.”