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Queensland-based financial institution Suncorp (ASX: SUN) has detailed the full impact of COVID-19 on its business, as well as major staff underpayments across the group today.
In a company update Suncorp says it is well capitalised to ride out the COVID-19 pandemic, despite expecting a $133 million impact due to the coronavirus crisis.
The announcement coincides with an update on Suncorp's pay and leave entitlements review, with Suncorp expecting costs to remediate underpaid staff to land in the range of $40 to $70 million.
Unlike other major financial institutions Suncorp will not be embarking on a capital raise to increase its cash buffer, as it claims it entered the pandemic in a sound financial position.
Group Excess Common Equity Tier 1 at 31 March 2020 was $682 million, and the company will rely on its conservative investment portfolio with more than 94 per cent of investments in cash and fixed income securities.
According to Suncorp the impact of COVID-19 will materialise in reduced consumer motor claims volumes, increased landlord loss of rent claims and negative market-to-market movements on its investment portfolio.
Costs during FY20 are now going to be slightly above $2.7 billion including the pay and leave entitlements remediation program.
According to Suncorp Group CEO Steve Johnston the company was quick to respond to the COVID-19 crisis by realigning its business, supporting its customers, and protecting its stakeholders to prepare for the post-COVID-19 environment.
Johnston says the company has already received thousands of requests for financial hardship relief from both Suncorp's bank and insurance customers and has provided discounts and premium waivers to 12,300 insurance customers in Australia and New Zealand and approved $4.05 billion in loan deferrals.
"A key priority for us is to ensure our customers are protected and prioritising those most in need," says Johnston.
"We have launched several support packages and financial hardship options, and we have been working closely with industry bodies, government and regulators to ensure a coordinated response."
The bushfire crisis at the beginning of 2020 forced Suncorp to mobilise on an extraordinary scale; the company set up customer support teams in bushfire affected areas to assist impacted customers with claims lodgements, access to emergency funds and temporary accommodation.
So far Suncorp has delivered a claims response to the 12 declared events with over 72,000 claims lodged across its company.
For bushfire customers, 70 per cent of property claims and 80 per cent of motor claims have been finalised, while for storm, hail & flood customers over 30 per cent of the 35,000 consumer home claims and almost 60 per cent of the 28,000 consumer motor claims have been finalised.
As for the underpayments issue, Johnston says he is disappointed to have let team members down, and the company is implementing processes to ensure a problem of this scale does not occur again.
"As a Suncorp employee of long standing I am incredibly disappointed that we have let our people down there is no excuse and we need to get this right," says Johnston.
"I want to offer my sincere apologies to those who may have been affected."
Suncorp says it is still too early to determine individual impacts, but the group will recognise $40 to $70 million in remediation payments in its FY20 results.
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