Shares in Suncorp rose 4.9% yesterday after it announced plans to distribute the $506 million surplus from the Australian Life Insurance business to shareholders, plus a share consolidation.
Shareholders have already received a fully franked special dividend of 8 cents a share in May, and will now receive a capital return of 39 cents per share from the sale of the business to Japanese insurer, Dai-Ichi for $725 million.
Suncorp also plans to reduce the number of shares on issue by about 3% by converting every share into 0.971 shares.
It has also announced a fully franked final dividend of 44 cents a share, up 4 cents a share.
Investors loved the result, glossing over a slump in net profit to applaud the capital returns and higher dividends, the shares ended up 4.8% at $13.32.
The reason for the shareholder largesse is easy to see – an 8.2.5% fall in post-tax net profit to $175 million.
While cash earnings edged up 1.5% to $1.1 billion, Suncorp took a $910 million loss on the sale of Australian Life Insurance and Participating Wealth Business.
It revealed a $130 million ‘natural hazard cost’ in its insurance arm increased regulatory project costs, increased compliance costs, and a more competitive, slowing home mortgage market.
Suncorp is also scrapping its so-called marketplace strategy to refocus on banking and insurance, admitting its former chief executive’s plan had confused customers.
Suncorp acting CEO Steve Johnston said the company had been too ambitious and failed to explain what it had been trying to achieve.
“Clearly there are areas where we haven’t got it 100 percent right or we haven’t clearly explained our intent,” Mr. Johnston said on Wednesday.
“The more aspirational elements of the marketplace component of our strategy and the associated third-party revenues that were assumed to flow from those activities were too ambitious relative to where our business is at and the funds that we have available to invest.”
Customer marketplace boss Pip Marlow will go at the end of this month, with 15-year company veteran Lisa Harrison leading a new customer and digital unit.
Suncorp will align its Australian contact centers, stores and intermediary distribution teams with its banking and insurance operations.
2018-19 revenue from continuing operations rose 9.6% to $15.6 billion.
The company confirmed it would hand another $506 million back to shareholders from the sale of the life unit.
The total return to shareholders from the sale of the Australian Life Insurance business will come to $610 million, meaning around $115 million remains in the business.
