Suncorp Bank's CEO and Managing Director Michael Cameron (right) with Chairman Ziggy Switkowski. File picture: AAP Image/Dan Peled
Suncorp Bank's CEO and Managing Director Michael Cameron (right) with Chairman Ziggy Switkowski. File picture: AAP Image/Dan Peled

Suncorp profits, shares slide after ‘messy’ results

SUNCORP has seen profits dip after a battering from hail and increased spending on improving the business, with shares diving on a result analysts described as "messy".

Queensland's biggest company, whose brands include AAMI, Apia and GIO, pointed on Thursday to growth in its insurance and banking arms, and promised better results going ahead. Yet profits for the six months to December fell 16 per cent to $452 million for Brisbane-based Suncorp.

Shares fell 62.5c to $12.695 in early morning trade.

Analysts also raised some concerns - Suncorp's earnings on a cash basis of $472 million were 8 per cent below what market watchers were expecting, according to a note from brokers Morgans.

 

The analysts said that the insurance arm seems to be behind the lower-than expected result, with a spike incurring in claims costs.

UBS analysts said one disappointing aspect of the result was a squeeze in underlying margins. While Suncorp was forecasting a better result in 2019, UBS said the "market will first need to digest one of Suncorp's messiest (half-earning results) on record".

Still, the overall result confirmed an industry trend of premiums rising in the insurance market. Suncorp's accounts showed premiums in Australia for motor and home insurance rose an average of 3.4 per cent, while the amount of policies lifted 0.5 per cent.

"We're now building momentum," Suncorp chief executive Michael Cameron said.

In the previous corresponding period, motor premiums had risen by low single digits and home premiums in the low to middle single digits.

Suncorp Bank's CEO and Managing Director Michael Cameron (right) with Chairman Ziggy Switkowski. File picture: AAP Image/Dan Peled
Suncorp Bank's CEO and Managing Director Michael Cameron (right) with Chairman Ziggy Switkowski. File picture: AAP Image/Dan Peled

Still, hail storms in Victoria were among disasters that ate into the bottom line, with the insurance arm's profits dipping from $358 million to $234 million.

Suncorp's banking arm also saw a boost, with lending up 8.7 per cent. That was due to a jump in both home and small-medium business loans. Profits, however, were down from $208 million to $197 million.

Suncorp said it was continuing with its controversial program to create a financial marketplace. That includes launching in the next six months a new app that will let customers access insurance, banking, wealth management and some products from other customers.

The business has also been making investments on areas such as improving its supply chain and streamlining costs. That has lead to some job cuts, although Suncorp has been quiet on actual numbers of staff lost.

Dividends stayed flat despite the profit fall, at 33c per share.

Mr Cameron predicted the company's result would improve in the second half of fiscal 2018, and 2019 and 2020 would see a "significant uplift in performance".



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