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Suncorp sees 16.3% growth in insurance premiums, bank profits face challenges

EditorOliver Gray
Published 26/02/2024, 10:34 am
Updated 26/02/2024, 10:34 am
© Reuters - Suncorp Group Ltd (ASX:SUN) announced an improvement in earnings today, largely due to a significant boost in investment returns.

The Group's net profit after tax (NPAT) rose by 5.4% to A$582 million, while cash earnings saw an increase of 13.8% to $660 million.

The robust performance of equity markets, higher running yields, and favourable mark-to-market movements in the General Insurance business contributed to a higher net investment income of $396 million, compared to $167 million in the first half of 2023. The Group’s fixed interest and inflation-linked bond portfolio continued to support returns.

Suncorp recorded a 16.3% growth in gross written premiums (GWP) in the General Insurance business, reflecting customer growth and targeted price increases. These increases were necessary to manage rising reinsurance costs, elevated natural hazard experiences, and ongoing inflationary pressures.

Despite industry-wide competitive pressures impacting net interest margins (NIM), the company's home loan portfolio saw modest growth of 2.2% or $1.2 billion. The total cost of natural hazard events was $568 million, $112 million below the Group’s allowance for the period.

The Group's operating expenses rose 7.0% to $1.21 billion, primarily due to growth-related expenditure and inflation. However, insurance expense ratios declined, supported by productivity and strategic initiatives, and operating leverage.

The Board declared a fully franked interim ordinary dividend of 34 cents per share, representing a payout ratio of 65% of cash earnings, which falls within the target payout ratio range of 60% to 80%.

Suncorp Group CEO Steve Johnston acknowledged the challenging half for customers and the Group, citing ongoing inflationary pressures and the impact of severe weather events. Despite these challenges, the Group managed to deliver improved earnings, driven by increased customer demand for its products and services, and positive investment performance.

Johnston also highlighted the growth in gross written premiums in response to higher reinsurance costs, ongoing supply chain inflationary pressures, and an elevated level of natural hazards. He emphasized the company's commitment to driving efficiencies and advocating for policy reform and mitigation investment to reduce insurance premiums for consumers, particularly in high-risk locations.

The CEO also touched on the Bank's modest home lending growth of 2.2% over the half, amidst intense industry-wide competitive pressure in both deposits and lending. He welcomed the Australian Competition Tribunal’s decision to grant authorisation for the proposed sale of Suncorp Bank to ANZ Banking Group, bringing Suncorp one step closer to becoming a dedicated Trans-Tasman insurer.

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