The Suncorp Group Ltd (ASX: SUN) share price is down 4.07% in early trade this morning.
Shares in the S&P/ASX 200 Index (ASX: XJO) banking and insurance giant closed yesterday trading for $13.75. At the time of writing, Suncorp shares are changing hands for $13.19 apiece.
This comes following the release of Suncorp’s full-year results for the financial year ending 30 June (FY23).
Here are the highlights.
Suncorp share price slides despite earnings and profit lift
- Net profit after tax (NPAT) of $1.15 billion, up from $681 million in FY22
- Cash earnings of $1.25 billion, up from $673 million in FY22
- Gross written premium (GWP) across Australia and New Zealand up 10.8% year on year
- Fully franked final dividend of 27 cents per share, bringing the full-year dividend to 60 cents per share, up from 40 cents per share in FY22
What else happened during the financial year?
Atop the increase in GWP in its Australian and New Zealand insurance segments, the Suncorp share price is failing to lift off despite its bank home lending growing 9.1% from the prior year to $54.8 billion.
The bank reported a net interest margin (NIM) of 1.96%.
The full-year dividend of 60 cents per share represents a payout ratio of 60% of cash earnings. This comes in at the bottom end of management’s target payout ratio range of 60% to 80% and could be pressuring the Suncorp share price today.
Management said this reflects the company’s “prudent and disciplined approach to managing capital in the context of the current environment, the FY24 reinsurance renewal and as it works through the Tribunal process relating to the sale of the Bank”.
Commenting on its ongoing divestment efforts, Suncorp CEO Steve Johnston said:
Suncorp will support ANZ Group Holdings Ltd (ASX: ANZ) through the next step of the merger authorisation process as it relates to the sale of Suncorp Bank, being a referral of the ACCC’s recent decision not to approve the transaction to the Australian Competition Tribunal for review.
We remain fully committed to supporting Suncorp Bank while the process continues.
While Suncorp doesn’t expect any change in the net proceeds, should the transaction go through, the costs have gone up due to the delays. Suncorp now forecasts costs will be in the range of $575 million to $600 million, up from an expected $500 million previously.
On the insurance front, the company was impacted by weather events across Australia and New Zealand for the majority of the financial year. This led to 15 separate weather events and around 130,000 natural hazard claims.
As a result, Suncorp exceeded its natural hazard allowance by $97 million.
What did management say?
Commenting on the full-year results that have yet to boost the Suncorp share price, Johnston said:
Our dedicated focus on digitising and automating, reinvigorating our leading brands, becoming more efficient and improving how we serve our customers, has helped us to deliver strong top-line growth across our businesses and improve underlying margins.
On the insurance front, Johnston added:
While Suncorp Group remains well protected through its comprehensive reinsurance program, over the last few years floods, fires and other natural disasters has resulted in a continued reassessment of risk by our reinsurance partners. This, combined with broader inflationary pressures across the economy, continues to impact the cost of reinsurance across the industry…
What’s next?
Looking to what could impact the Suncorp share price in the year ahead, the company said the “operating environment remains challenging”.
Despite easing supply chain pressures, Suncorp said geopolitical and economic uncertainty, along with ongoing inflationary pressures continue to drive investment market volatility.
And the weather may throw up some issues as well, with the Bureau of Meteorology flagging the likelihood of an El Niño as 70% this year.
Suncorp added, “Global reinsurance markets remain structurally disrupted and in a hardening cycle reflecting adverse recent natural hazard experience and inflationary pressures.”
Suncorp share price snapshot
With this morning’s fall factored in, the Suncorp share price is up 18% over 12 months.
