Australia:Suncorp reports net profit after tax of around US$800m for FY2024

Brisbane-headquartered Suncorp Group yesterday reported an increase in earnings driven by improved underlying margins, positive investment returns and natural hazard costs below allowances.

Group net profit after tax (NPAT) for the financial year ended 30 June 2024 (FY24) was A$1,197m [$801m] (pcp A$1,071m) while cash earnings increased to A$1,372m (pcp $1,177 m). Suncorp Bank, which was sold to ANZ on 31 July 2024, contributed NPAT of A$379m (pcp A$470m).

Suncorp CEO Steve Johnston said, “While the headline results represent strong increases on the prior year it’s important to point out that the past three years have been very challenging for all insurance companies with inflation, natural hazards, and a fundamental reset in global reinsurance markets. It’s pleasing that we navigated these challenges, and the complexity of the bank sale, and our earnings have rebounded to roughly where they were previously.”

In the general insurance business, gross written premium (GWP) increased by 13.9% reflecting both unit growth and targeted price increases in response to higher costs from reinsurance, natural hazards, and claims inflation.

The underlying insurance trading ratio (UITR) or margin for 2H2024 in the general insurance business increased to 12.0%, with the full year increasing from 10.6% to 11.1%. The improvement was supported by revenue growth, the impact on earnings from price increases in response to higher input costs and efficiency gains in the business.

Higher net investment income of A$661m was driven by a strong underlying yield on the interest-earning portfolio and stronger equity markets.

The total cost of natural hazard events was A$1,235m, A$125m below the Group’s allowance. The Group managed 12 separate weather events in Australia and one event in New Zealand, as well as events covered by the Cyclone Reinsurance Pool (CRP). The Group’s natural hazard allowance for FY25 is A$1,560m with a comprehensive reinsurance program placed successfully at a cost broadly in line with the prior year. 

Total net reserves for the year were strengthened by A$124m, largely in the first half across several portfolios. compulsory third party (CTP) releases were below the reserve release assumption of 0.7% driven by broad-based superimposed inflation in Queensland.

Total Group operating expenses increased 8.5% to A$2.5bn, largely reflecting growth-related expenditure, inflationary pressures on wages and technology costs and an increase in bank costs. This was partly offset by benefits from productivity and the delivery of strategic initiatives during the year, resulting in improved insurance expenses ratios.

Other losses after tax increased by A$28m to A$103m, driven by higher external interest expenses and minority interest profits. The Group incurred Bank separation costs of A$151m after tax throughout the year.

Suncorp’s board has determined to pay a fully franked final ordinary dividend of 44 Australian cents per share. This brings the total fully franked ordinary dividends for FY24 to 78 Australian cents per share. The Group’s full-year dividend payout ratio of 72% of cash earnings is around the middle of the target payout ratio range of 60% to 80%.

Mr Johnston said the result demonstrated momentum across the business and set a strong foundation for the insurer’s FY25-27 plan.

“While the bank sale process continued through the year, our insurance portfolios have remained focused on improving our underlying business and customer experiences. As a pureplay insurer, we now look forward to investing in our business and delivering greater value for our customers and communities as well as our shareholders," he said.

Mr Johnston said that with the bank sale complete and the reinsurance markets stabilising, Suncorp was now in a position to consider other covers and alternative reinsurance structures.

FY24 Result

Strategy Update

Following the successful completion of the sale of Suncorp Bank and the announced sale of New Zealand Life, Suncorp is positioning itself as a focused, Trans-Tasman general insurer centred around three operating divisions: consumer, commercial and personal injury and Suncorp New Zealand.

The organisation has strong market positions in each division with ambitions to maintain or grow market share with clear financial parameters. Suncorp’s FY25-27 strategy focuses on generating appropriate risk-adjusted returns within each portfolio, supported by improved resilience across the business with increased investment in growth, a robust natural hazards allowance, focused management of expenses, and less reliance on prior year reserve releases.

The strategy is also enabled by investment in two strategic initiatives: platform modernisation and operational transformation. These will focus on continuing to upgrade the organisation’s core systems, including the policy administration system, and deploying new artificial intelligence capabilities.