Suncorp Group announces 2024 half year financial results



Suncorp Group announces 2024 half year financial results

#Key points

Group net profit after tax (NPAT) up 5.4%* to $582 million, cash earnings up 13.8% to $660 million

Interim fully franked ordinary dividend of 34 cents per share, representing a payout ratio of 65% of cash earnings

General Insurance Gross Written Premium (GWP)up 16.3% to $6.9 billion, reflecting customer growth and targeted pricing response to inflation, and increased natural hazard and reinsurance costs

General Insurance underlying insurance trading ratio (UITR)of 10.2%, up from 10.0%, and an underlying insurance services ratio (UISR) of 8.1%, up from 7.9%

Suncorp Bank Home lending up $1.2 billion or 2.2% over the half (4.3% annualised). Net interest margin (NIM) decreased 23 basis points to 1.80%, and cost to income ratio increased to 58.4%

Common Equity Tier 1 capital held at Group of $237 million, with appropriate levels of capital maintained across the business units

Proposed sale of Suncorp Bank granted authorisation by Australian Competition Tribunal, subject to Financial Sector (shareholdings) Act and Metway-Merger Act amendments. Completion expected to be around the middle of calendar year 2024

Suncorp Group Limited (ASX: SUN | ADR: SNMCY) today reported improved earnings, primarily driven by a significant improvement in investment returns. Group NPAT of $582 million, was up 5.4%, while cash earnings increased 13.8% to $660 million.

Strong equity market performance, higher running yields and favourable mark-to-market movements across the General Insurance business, resulted in higher net investment income of $396 million, compared to $167 million in 1H23. The Group’s fixed interest and inflation-linked bond portfolio continued to support returns.

GWP growth of 16.3% in the General Insurance business reflected customer growth and targeted price increases required to respond to increasing reinsurance costs, elevated natural hazard experience and ongoing inflationary pressures. The Group's UITR of 10.2%, improved moderately from 10.0%, supported by improved investment yields and ongoing improvements to the business. The Bank demonstrated modest lending growth of $1.2 billion or 2.2% in the Home portfolio over the half, as growth was consciously balanced against industry-wide competitive pressures in deposits and lending that impacted NIM. 

The total cost of natural hazard events was $568 million, $112 million below the Group’s allowance in the half. Suncorp New Zealand benefitted from a relatively benign weather period with no natural hazard events over the half, whilst Australia was impacted by six significant weather events which occurred through November and December. This resulted in the Group managing around 45,000 natural hazard claims in 1H24. 

The Group’s natural hazard allowance for FY24 remains $1,360 million, and the Group has a comprehensive reinsurance program in place for major events. The full limits remain available on all the Group’s reinsurance covers going into the second half of the financial year.

Prior year reserves, net of the impact of loss component movements, were strengthened by $107 million across several portfolios. The reserve strengthening was driven by the combination of external challenges, including ongoing inflationary pressures in supply chains, resulting in higher repair costs and extended repair times in the motor portfolio. The Group has responded to these challenges including with appropriate pricing and bringing on new repair capacity. 

Total Group operating expenses increased 7.0%** to $1.21 billion, largely reflecting growth related expenditure and inflation. Insurance expense ratios declined supported by the benefits from productivity and strategic initiatives, and operating leverage. 

Other loss after tax increased $28 million to $55 million, partially driven by restructuring costs of $11 million associated with the Group’s new operating model and higher joint venture profit shares.

The Board has determined to pay a fully franked interim ordinary dividend of 34 cents per share. The Group’s half year dividend payout ratio of 65% of cash earnings is within the target payout ratio range of 60% to 80%.

CET1 capital held at Group is $237 million, with improving General Insurance and Bank capital ratios. 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. 

Suncorp Group CEO Steve Johnston said it was a challenging half for customers and the Group amid ongoing inflationary pressures and the impact of six severe weather events that battered Australian communities in November and December.

“Against this backdrop, the Group has continued to work hard to support its customers while also delivering improved earnings driven by increased customer demand for our products and services and positive investment performance over the half,” Mr Johnston said. 

“Net investment returns were up significantly from $167 million in 1H23 to $396 million, and this has been a key contributor to our reported earnings and profit for the half,” he said. 

“Our Australian and New Zealand general insurance businesses achieved strong premium growth, with customer growth across both our home and motor portfolios. This remains a good indication of the value our customers continue to see in our products and brands, and the protection they provide.

“The growth in gross written premiums is also reflective of targeted price increases in response to higher reinsurance costs, ongoing supply chain inflationary pressures resulting in higher repair costs for cars and homes, and an elevated level of natural hazards. We remain acutely alert to the affordability challenges facing customers and continue to focus on driving greater efficiencies in our own business. We are vocal advocates of policy reform and mitigation investment that helps reduce the risk of extreme weather to people and communities, which are critical in reducing insurance premiums for consumers, particularly in high-risk locations,” he said.

“Our teams right across the country have been supporting customers impacted by the severe weather events experienced across the east coast of Australia since November 2023. Over the half, these resulted in around 45,000 claims at a cost of $568 million, which remains within our natural hazard allowance of $1,360 million for the 2024 financial year. While our business remains well protected through our comprehensive reinsurance program, more needs to be done to protect people before disaster strikes."

Mr Johnston said the Bank demonstrated modest home lending growth of 2.2% over the half, with asset quality remaining sound within our conservative portfolio. 

“We continue to see intense industry-wide competitive pressure in both deposits and lending, which we are carefully balancing,” Mr Johnston said.

“Last week we welcomed the Australian Competition Tribunal’s decision to grant authorisation for the proposed sale of Suncorp Bank to ANZ Banking Group, which acknowledged the competitive banking environment for customers. 

“The decision brings us one step closer to becoming a dedicated Trans-Tasman insurer proudly headquartered in Queensland. 

"We look forward to continuing to engage constructively with the Queensland Government and Federal Treasurer on the remaining approvals and remain fully committed to Suncorp Bank while the process continues.” 

*All changes refer to the prior corresponding period unless otherwise stated.
**Excludes emergency services levies, transitional excess profits and losses (TEPL) provision, commission and restructuring expenses.

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