Volatile investment markets and an increase in natural disasters have taken their toll on takeover target Suncorp’s (ASX: SUN) annual profit with the banking and insurance giant reporting a 34.1 per percent drop in annual net profit to $673 million in FY22.
The result comes despite a big upswing in loans and record growth in insurance premiums in the second half for the group.
Natural disasters, led by 35 separate weather events that resulted in 130,000 insurance claims, saw Suncorp’s natural hazards allowance blow out by $101 million during the year.
Volatility in investment markets delivered another blow, with a net loss of $190 million dramatically reversing the previous year’s $453 million profit.
Suncorp, which is subject to a $4.9 billion takeover of its banking business by ANZ Banking Group (ASX: ANZ), recorded a 12.2 per cent fall in banking profits to $368 million for the year, largely due to compressed margins and increased operating expenses.
However, the group’s home lending portfolio rose 9 per cent during the year with the momentum picking up in the second half. Total bank deposits grew by 15.9 per cent while transaction accounts increased by 20.6 per cent.
The gains highlight Suncorp’s appeal to ANZ, whose takeover has been criticised in some quarters for its potential to lessen banking competition and the prospect of job losses within the business.
However, Suncorp CEO Steve Johnston says the rationale for the sale, which is still subject to regulatory approval, is ‘compelling’.
“With the ability to focus exclusively on our insurance businesses, Suncorp will become a leading trans-Tasman insurer and have a louder voice in advocating for greater resilience and mitigation measures to better protect our customers and the community,” he says.
“Our insurance strategy is delivering and once the sale process is complete, we will be able to do more, and faster.”
The company has appointed its general counsel Belinda Speirs as group executive for completion and transition to oversee the sale process.
Despite the rise in claims over the year, Suncorp’s insurance business delivered gross written premium growth of 9.2 per cent during the year, with the second half delivering 10.7 per cent year-on-year growth - a record for the company.
But the bottom line for the insurance business slumped to $174 million from $574 million a year earlier, driven by the combined pre-tax impact of more than $700 million in losses from investment markets and natural hazards.
NSW, with 41,276 claims, accounted for almost a third of the flood claims for Suncorp followed by Queensland at 37,313 and Victoria at 25,483.
“First and foremost, we have thrown our full support behind our customers, many of whom have been displaced by the far-reaching impacts of the La Niña weather pattern,” says Johnston.
“At the same time, we have maintained our focus on executing our strategic initiatives and this has allowed us to offset increasing inflationary pressures, particularly in home and motor vehicle repairs.”
Suncorp has lifted its natural hazard allowance to $1.1 billion for FY23, reflecting the increased exposure of its portfolio to the latest round of natural disasters.
The group is paying a final dividend of 17c per share, taking the full-year payout to 40c.
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