Suncorp and Commonwealth Bank profits jump, financials rally boosts ASX in late trade — as it happened

Suncorp reported a 69% jump in full-year profit, yet it’s one of today’s worst-performing stocks.

By 12:45pm AEST, its share price was down 2.1% to $13.46.

In its results announcement, the insurer warned of challenges posed by high inflation and the financial impact of adverse weather events (ie. natural disasters).

Suncorp’s lower-than-expected dividend also weighed on its share price.

Australia’s second-largest insurer announced a fully franked final dividend of 27 cents per share (which was lower than consensus estimate of 40 cents, and Citi’s estimates of 39 cents).

“The operating environment remains challenging,” Suncorp said, forecasting an insurance gross written premium growth of around 10% in fiscal year 2024 (compared with a 10.8% growth seen in previous year for combined Australia and New Zealand units).

“The dividend will likely disappoint some and the guidance, while largely as expected, suggests a relatively tough 1H24 with the lingering issues in motor inflation we expected,” analysts at Citi wrote in a research note.

Lower end of shareholder payout, higher costs ahead

Suncorp’s full-year dividend payout ratio was 60% of its cash earnings, at the lower end of its range of 60% to 80%.

Analysts at Citi said they believed the ordinary payout reflects a significant drain on the capital of the company.

Suncorp posted annual cash earnings of $1.25 billion, compared with $673 million a year earlier, helped by improved underlying margins and a significant turnaround in investment returns.

Net gain from yields and investment markets was $724 million for the year, compared with a loss of $190 million in 2022, the company said in a statement.

The insurer also flagged an increase in costs related to the $4.9 billion divestment of banking unit to ANZ Group to between $575 million and $600 million (up from $500 million) after the ACCC blocked the deal.

– Reuters