Suncorp cut its payouts to shareholders after announcing a sharp drop in profits for the 2021-22 fiscal year.
The Brisbane-based company, which wants to sell its regional bank to ANZ, revealed on Monday that its annual net profit had fallen by 34.1%, due to volatility in the investment market and the cost of record highs. rain and flooding in the final months of the fiscal year. .
Suncorp reported net income of $681.0 million for the year through June, up from $1.03 billion a year earlier.
Suncorp’s cash profit fell 36.7% to $673.0 million.
Dividends were cut – the final 17 cents per share was down from a payout of 40 cents per share and a special offer of 8 cents per share for 2020-21.
The lower final for 2021-22 brought the full-year payout to 40 cents per share, nearly half of the 74 cents per share paid for 2020-21.
Investors didn’t like that and sent shares down 4.6% to $11.11 yesterday. This is where the shares were in early July, before ANZ Bank’s proposed sale was announced and sent the shares higher.
CEO Steve Johnston sounded optimistic in his comments, saying “in a challenging year, the company maintained momentum on its key strategic initiatives.”
“We are proud of what we have accomplished this year and the hard work we have put in over the past three years means we are able to reaffirm our goals for FY23,” he said.
Nowhere in the company’s strategy statements was there an objective to report lower profit, but the insurance arm of the company (primarily AAMI, GIO, APIA) was hit hard by the storms, floods and rain.
This had a dramatic impact on Suncorp, which said prevailing La Niña weather conditions in Australia and New Zealand had resulted in 35 separate weather events and around 130,000 natural hazard claims in the year to June 30th.
“This led the Group to exceed its natural hazards provision by $101 million, with significant recoveries made under the Group’s reinsurance program.
“The volatility in investment markets, including rapidly rising yields and widening credit spreads, has resulted in market value losses on the Group’s investment portfolios of $14.9 billion.
Net loss due to investment market volatility was $190 million, compared to a profit of $453 million a year earlier. Since the Group holds its fixed rate investments to maturity, the majority of these FY22 book losses are expected to turn into profits in future periods, meaning increased contributions from its portfolio.
“At the same time, we maintained our focus on executing our strategic initiatives, which allowed us to offset rising inflationary pressures, particularly in home and auto repairs.
“One of the highlights of this result is the growth in GWP (gross written premium) that has been achieved and the increase in the underlying ITR, which demonstrates that we can meet client needs and make good progress against our strategic initiatives.
“We are proud of what we have accomplished this year and the hard work we have put in over the past three years means we are able to reaffirm our goals for FY23.”
Insurance Australia recorded GWP growth of 9.2% over the full year, excluding portfolio exits, which extended to all portfolios.
Suncorp’s insurance business in New Zealand recorded GWP growth of 14.1%, with “growth in both intermediary and direct distribution channels”.
Mr Johnston said the decision to sell Suncorp Bank to ANZ Banking Group, announced on July 18, followed a comprehensive strategic review. The sale remains subject to regulatory and governmental approvals, with a targeted completion time of approximately 12 months.
“The strategic rationale for the sale is compelling. With the ability to focus exclusively on our insurance business, Suncorp will become one of Transtasmania’s leading insurers and have a stronger voice to advocate for greater resilience and mitigation measures to better protect our customers and the community.
“Our insurance strategy is paying off and once the sales process is complete, we can do more and faster,” he said.