Suncorp Group (SUN) shares jumped by close to 5% at one stage yesterday after the company confidently forecast a stronger 2014-15 and met investor hopes with a special payment, on top of a higher normal dividend payout.
The shares hit a day’s high of $14.78, and ended up 2.7% at $14.51, as investors cheered the 30c a share extra dividend, which many analysts had forecast.
In fact it’s the third special annual payout in a row.
Suncorp also announced a final dividend of 40c a share compared with the 30c a share last year, bringing the full year dividend to $1.05.
And, Suncorp suggested in its outlook that it could see growth of 4% to 6% across its businesses this financial year.
SUN 1Y – Suncorp shares jump on strong profit result
Suncorp, which owns insurance brands such as AAMI and GIO, reported a profit of $730 million for the year ended June 30, up 49% from 2012-13’s $491 million.
The results include a $496 million after-tax write-down of goodwill and intangible assets in the group’s under-performing life insurance arm.
That’s the result of badly designed and priced income protection and other similar life products, mostly sold as group policies to various groups such as industry super funds.
The AMP is another financial group to have been hurt by losses and write-downs in this area of what should really have been a fairly boring and predictable insurance operation.
Analysts had forecast a $680 million to $700 million net profit for the year.
Suncorp operates a number of major insurance brands – besides AAMI and GIO, there’s APIA and Shannons which are the best known.
It also operates Suncorp-Metway Bank, based mostly in Queensland. The life business is a smaller business, but is currently the major headache for the group’s management.
Suncorp reported a 5.1% rise in full-year gross written premium to $8.725 billion.
The group’s banking division reported retail and business lending rose 5% to $49.8 billion, and life insurance premiums were up 8.5% to $852 million.
“We’ve achieved significant milestones in simplifying our business and delivering ongoing cost savings,” chief executive Patrick Snowball said in yesterday’s statement.
“We’ve made appropriate investments in technology, data and business intelligence and we’ve taken the necessary measures to account for fundamental changes in the life insurance industry.”
Suncorp Life, the company’s life insurance division, posted an underlying profit of $84 million, down 30% because of revised assumptions and increased reinsurance arrangements.
Suncorp wrote down $500 million in the division as high unemployment rates, anaemic consumer confidence and rising mental health problems spur a spate of claims across the industry.
Mr Snowball has previously warned of further weakness in the group’s life business over the next three to four years.
The company held out the chance of a fourth special payment in the current financial year when it said:
"The Group has $215 million of franking credits available after the payment of the declared dividends.
"Suncorp remains committed to its full-year target dividend payout ratio of 60% to 80% of cash earnings and returning to shareholders any capital deemed surplus to the needs of the business," the company said.
