- Cash Earnings: $1,372 million.
- Net Profit After Tax (NPAT): $1,197 million.
- Underlying Profit After Tax (GI Business): $1,104 million, a 29% increase from the prior year.
- Underlying ITR: 11.1% for the full year, 12% in the second half.
- Claims Managed: Over 100,000 claims, including 12 weather events in Australia and one in New Zealand, with an estimated cost of $1.2 billion.
- Final Dividend: $0.44 per share, representing a payout ratio of 72% of cash earnings.
- Consumer Business Growth: 10% in home and 16% in motor.
- Commercial and Personal Injury GWP Growth: Strong growth across all portfolios, particularly in fleet and commercial property.
- New Zealand GI Business Premium Growth: 17%.
- Bank NIM: Contracted to 182 basis points for the year, recovering in the second half.
- Bank Sale Proceeds: Expected net proceeds around $4.1 billion.
- Investment Income: Significant increase due to high underlying yields and strong equity markets.
- Consumer GWP Growth: 13.8% overall, with home portfolio growing over 10% and motor GWP increasing by 16%.
- Commercial and Personal Injury GWP Growth: Over 11%.
- New Zealand GWP Growth: Over 17%.
- Group Operating Expenses: Increased by 8.5%.
- GI Operating Expense Ratio: Improved by 80 basis points to 13.9%.
- Common Equity Tier 1 (CET1): Held at group of $203 million.
- Final Dividend: $0.44 per share, with a full-year payout ratio of 72%.
Release Date: August 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Suncorp Group Ltd (SNMCY, Financial) reported an increase in cash earnings to $1,372 million and net profit after tax of $1,197 million for the financial year 2024.
- The underlying profit after tax in the General Insurance (GI) business increased by 29% to $1,104 million, with an underlying ITR improvement to 11.1% for the full year.
- The consumer business achieved growth of 10% in home insurance and 16% in motor insurance, reflecting strong unit growth and average written premium increases.
- The New Zealand GI business reported premium growth of 17%, driven by pricing increases and solid unit growth, particularly in the consumer portfolio.
- The Board declared a final fully franked dividend of $0.44 per share, representing a payout ratio of 72% of cash earnings for the full year.
Negative Points
- The CFO, Jeremy, was absent from the earnings call due to a minor surgical procedure, which may have impacted the depth of financial insights provided.
- The bank's FY24 performance showed a decline in profit due to competitive pressures on NIM, lower other operating income, and higher expenses.
- The Queensland CTP portfolio faced challenges, including a $39 million onerous contract provision and the need for scheme reform due to margin disparities among participants.
- The GI business experienced elevated water and fire claims, contributing to sticky inflation in the home insurance portfolio.
- The capital position at June 30 showed a reduction in the GI CET1 ratio from 1.22 times to 1.15 times PCA, partly due to changes in capital targets and higher capital usage driven by growth and inflation.
Q & A Highlights
Q: With the stabilization of reinsurance pricing and a moderation of inflation, has the premium cycle peaked?
A: Steven Johnston (CEO): We've been through a hardening cycle impacting premiums across consumer and commercial portfolios. Inflation is moderating, but supply chain challenges persist, especially in home insurance. We are adjusting premium rates accordingly, aiming to stay ahead of inflation.
Q: Given the sticky inflation in Queensland CTP, do you expect it to remain elevated, and are there any notable court decisions affecting this?
A: Steven Johnston (CEO): There are individual factors, including some court cases, but the main challenge is the lack of allowance for superimposed inflation by the regulator. This discrepancy affects our view of the scheme's performance.
Q: Can you explain the increase in cost per policy in the home portfolio?
A: Steven Johnston (CEO): The increase is driven by water damage (escape of liquids) and fire claims. Open-plan homes and delayed damage detection due to COVID-19 have exacerbated severity. Additionally, construction costs, including labor, remain high.
Q: How do you plan to manage reinsurance costs and their impact on returns?
A: Steven Johnston (CEO): We have seen stability return to the global reinsurance market. We decided not to renew the Queensland quota share due to changed economics. We are exploring other reinsurance structures that make commercial sense and align with our strategic priorities.
Q: Can you clarify the inflation outlook for home and motor insurance?
A: Steven Johnston (CEO): Inflation is moderating in motor insurance, but home insurance faces sticky inflation due to water and fire claims. We expect inflation to moderate in FY25, but it will remain a focus area.
Q: What is your strategy for maintaining market share while managing pricing and inflation?
A: Steven Johnston (CEO): We aim to price ahead of inflation while maintaining sustainable margins. We are focused on growing our portfolios, particularly in low and medium peril exposures for home insurance and maintaining system-level growth in motor insurance.
Q: How do you plan to use Tier 2 debt following the bank sale?
A: Steven Johnston (CEO): We will recalibrate some of the stranded funding costs into higher gearing in the general insurance entity. Over time, the residual will be amortized through growth or as instruments mature.
Q: Can you explain the capital position and its impact on future returns?
A: Steven Johnston (CEO): The capital position remains strong. We plan to maintain a 60-80% dividend payout ratio, with a disciplined approach to land around 70%. We will use a perpetual buyback facility to repatriate excess capital to shareholders.
Q: How do you plan to achieve your market share goals in commercial lines?
A: Miichael Miller (CEO - Commercial and Personal Injury Insurance): We will focus on both platforms and traditional underwriting. Investments in technology and strong relationships with brokers will help us grow market share.
Q: What are your expectations for claims inflation in personal motor insurance?
A: Lisa Harrison (CEO - Insurance Product & Portfolio): We expect claims inflation to moderate in FY25. Factors include labor inflation and parts costs, but we are seeing some easing in second-hand car prices and other areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
