Group net profit after tax up 44.3%* to $560 million, cash earnings up 62.9% to $588 million
Interim fully franked ordinary dividend of 33 cents per share, representing a payout ratio of 71% of cash earnings
Insurance Australia gross written premium of $4.8 billion, up 9.0%^, driven by the pricing response to inflation and increased natural hazard and reinsurance costs
Suncorp New Zealand gross written premium of NZ$1.2 billion, up 12.2% benefitting from price momentum
General Insurance underlying insurance trading ratio of 10.0%, up from 8.0% (excluding COVID-19 impacts)
Suncorp Bank home lending up $2.6 billion over the half or 10.4% (annualised). Net interest margin of 2.03%, up 13 basis points, and cost-to-income ratio reduced to 49.9%
Common Equity Tier 1 held at Group of $290 million, with increased levels of capital held across the business units
FY23 financial targets reaffirmed
Sale of Suncorp Bank on track, subject to regulatory and government approvals
Suncorp Group Limited (ASX: SUN | ADR: SNMCY) today reported improved earnings, with continued strong top-line growth across the Group, improved underlying margins and positive investment returns. The result also benefitted from the release of $150 million of the provision for potential business interruption claims, following the resolution of the second industry test case.
Group net profit after tax of $560 million, was up by 44.3%, while cash earnings increased 62.9% to $588 million. The Group has reaffirmed its FY23 targets.
The Group reported gross written premium (GWP) growth of 9.0%, excluding Emergency Services Levies (ESL) and portfolio exits, in its Australian general insurance business, and 12.2% in New Zealand. The Group's underlying Insurance Trading Ratio (ITR) increased from 8.0% (excluding COVID-19 impacts) in 1H22 to 10.0% in 1H23. The improved ratio was supported by strong top-line growth, improving expense ratios and an increase in investment yields but impacted by increased natural hazards, reinsurance costs and claims inflation.
In the Bank, annualised growth in home lending of 10.4% provided further evidence of the continued turnaround in performance. The Bank’s cost-to-income ratio decreased to 49.9% from 57.6%, driven by revenue growth and cost management.
While the underlying business demonstrated strong momentum, the Group's results were impacted by elevated natural hazard activity. The prevailing La Niña weather pattern across Australia and New Zealand led to eight separate weather events and around 53,000 natural hazard claims for 1H23. This resulted in the Group exceeding its natural hazard allowance by $99 million. The Group’s full year natural hazard allowance is $1,160 million and the Group retains strong protection through its comprehensive reinsurance program.
Volatility continued in investment markets in the half, although the impact of higher running yields more than offset any mark-to-market losses across the Group’s $15.0 billion investment portfolio. The net gain from yields and investment markets was $287 million compared to $61 million in 1H22.
Group operating expenses*** fell by 3.1% to $1,349 million, largely reflecting efficiency benefits from the strategic program of work, as well as a decrease in project investment relative to the prior period, more than offsetting the impact of the inflationary environment.
The Board has determined to pay a fully franked interim ordinary dividend of 33 cents per share. The Group’s half year dividend payout of 71% of cash earnings is towards the middle of the target payout ratio range of 60% to 80%.
Appropriate capital buffers have been maintained in the heightened risk environment, in-line with the Group’s prudent approach to capital management. The Common Equity Tier 1 (CET1) held at Group improved to $290 million from $248 million at the end of the previous half, with increased levels of capital also held within the General Insurance and Bank businesses.
The sale of Suncorp Bank to ANZ Banking Group remains on track and is expected to complete in the second half of calendar year 2023, subject to approvals.
Suncorp Group CEO Steve Johnston said the Group had delivered a strong set of results for the half despite ongoing economy-wide inflationary pressures and the impacts of eight natural hazard events, largely due to the La Niña climate pattern.
“Suncorp’s priority has been supporting our customers impacted by these severe weather events, while also continuing to work hard to return customers to their homes following the Australian East Coast floods almost one year ago,” Mr Johnston said.
“In addition, through a dedicated focus on executing our strategic initiatives as outlined to the market two years ago, our three businesses have continued to build on the good momentum achieved over this time to deliver top-line growth with improved margins and productivity,” he said.
“Our Australian and New Zealand businesses have achieved strong growth in premiums, while unit growth across our consumer portfolio demonstrates the value of our products and brands, particularly in an inflationary environment. Our Best-in-Class claims program has allowed us to be more disciplined in leveraging scale to deliver lower aggregate inflation outcomes. The Bank continued to grow its home and business lending portfolios and customer deposits.
“Pleasingly, we remain on track to achieve our FY23 targets, which is testament to the strength and resilience of our business amid significant headwinds, and demonstrates our ability to create long-term shareholder value while meeting the evolving needs of our customers and other stakeholders.
“We firmly believe our ability to continue to manage the risks associated with a changing climate, drive a more resilient Australia and New Zealand through our products and advocacy and create further long-term shareholder value will be enhanced as a dedicated Trans-Tasman insurance company. We continue to engage constructively with the relevant regulatory and government stakeholders as the bank sale process remains underway.”
* All changes refer to the prior corresponding period unless otherwise stated.
^ Excluding emergency services levies and portfolio exits.
*** Excludes emergency services levies, transitional excess profits and losses provision and Wealth expenses.