NCR Suncorp's Steve Johnson
Published on August 21st 2020 in

Suncorp increases net income in a challenging environment

Suncorp has reported full-year net income of $913 million, up from $175 million last year, but acknowledged comparisons are difficult given the divestments of its life business and crash repairer Capital Smart.

Cash earnings of $749 million were down 32.8% on the previous corresponding period, partly because of reduced profit from the Insurance Australia division, which was down 33.9%.

While Suncorp says the FY20 impact of the pandemic on the general insurance businesses is “broadly neutral”, excluding the impacts of investment markets, it has recognised $85 million in additional claims provisions and risk margins to cover COVID-19 uncertainty, including landlord loss of rent and potential business interruption claims.

S&P Global Ratings said the full-year earnings are “sound” despite ‘particularly challenging operating conditions’. “Defensive management actions and a conservative balance sheet structure subdued the effects of heightened natural hazard claims, material market volatility, and strengthened provisions,” the ratings agency said. “Suncorp’s credit quality benefits from steady property/casualty insurance operations, sound business diversity, and solid capital adequacy, with the results broadly consistent with our expectations and outlook.”

S&P says the pandemic and catastrophic bushfire and storm season muted headline earnings, but on an underlying basis the group’s performance remained strong. “Although investment market movements moderated Suncorp’s earnings, we regard its investment performance to be better than its peers. The group’s provisions and risk overlays against further potential losses related to COVID-19 appear reasonably conservative and we expect Suncorp’s operating performance and capital adequacy will remain resilient in fiscal 2021.”

Suncorp Group CEO Steve Johnston says it has been a challenging year with COVID-19 set to result in ‘long-lasting economic disruption and fundamentally change the way we live’. “Suncorp entered the COVID-19 crisis in a solid position and responded quickly to keep our people safe and our customers in need protected through access to financial relief measures,” he said. “At the same time, we have maintained the financial and operational strength of our business. The strength of our balance sheet has enabled the board to determine a fully franked final ordinary dividend of 10 cents per share, and it’s pleasing we are able to deliver on our commitment to shareholders by paying a modest final dividend.”

“While our financial performance, particularly in the second half, has not been immune from the negative impacts of COVID-19, there were a number of highlights which demonstrate the Group has solid foundations. Digital channels helped drive favourable growth in our Australian motor and home insurance portfolios, and natural hazard costs remained in line with allowance because of our strengthened reinsurance program,” added Johnson.

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