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Suncorp profits fall by over 80%

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The Suncorp group recently released its 2019 full-year results and announced a 83.5 per cent fall in net profits after tax.

The group’s profits in its 2018 full-year results were $1.059 billion, but this year had fallen to $175 million driven by the loss on sale of the life business and increased regulatory and compliance costs. 

Suncorp completed the sale of its life business to TAL in February for a total consideration of $746 million which was higher than the forecast of $725 million.

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However, it still meant a non-cash loss on sale at $910 million reflecting more prudent provisioning for separation costs. 

The group plans to distribute the balance of the sale via a $506 million pro-rate capital return equivalent to 39 cents per share subject to approval. 

Suncorp’s full year cash profits were up by 1.5 per cent to $1.115 billion despite slight drops in the earnings of both its Australian insurance business and its banking and wealth business. 

Suncorp’s acting chief executive Steve Johnston said these results landed largely as flagged at the half-year results, resulting in 67 per cent of the full-year cash profit being delivered in the second half. 

“While our full-year performance is not as strong as we had hoped, we exited [financial year 2019] with a solid base to build on into FY20,” he said. 

Mr Johnston said that he had a mandate to drive the business forward and that included going digital and improving the usage of data. 

“The changes we are announcing today bring an increased focus to delivering value from the digital assets that have been built over the past two years,” he said. 

The key focus would be on improving performance in its three businesses, insurance across Australia and New Zealand and its banking business. 

“In banking we are focused on a digital-first approach to products and functionality; fast tracking our preparations to being open banking ready; ‘winning’ Queensland in direct; improving broker servicing and fulfilment; and maintaining a low-risk/high-quality credit book,” said Mr Johnston. 

Mr Johnston also said that Suncorp would prioritise embracing the changes brought about by the royal commission. 

“We are remediating where necessary and investing in a range of projects which, in aggregate, will strengthen trust and lead to better customer outcomes,” he said. 

Like all banks, Suncorp was making a move into digital which Mr Johnston said they already had a good foundation due to its network of APIs and digital core. 

“Our progress here is most obvious in the bank where our customers have shown a high propensity to interact with us digitally and where a series of incremental investments in FY20 will provide us with full digital banking capability,” he said.

“Further demonstrating the flexibility of what we have built, in FY20 we will be focused on the digitisation of our insurance business. 

These changes along with regulatory action is expected to cost the group somewhere between $175 million and $225 million. 

Mr Johnston also announced a new leadership structure change bringing together digital, marketing, customer and strategy to be led by executive Lisa Harrison. 

Ms Harrison’s appointment has meant that current chief executive of customer marketplace Pip Marlow has left the business. 

“I’m proud of the team’s achievements in driving an innovation lens and improvements in customer experiences that we’ve introduced to Suncorp, over nearly three years,” said Ms Marlow. 

Ms Johnston will be responsible for group, customer and digital strategy, digital distribution, brand and marketing along while contact centres, stores and intermediary distribution teams will move from the customer marketplace function into the insurance and bank operations.

 

Suncorp profits fall by over 80%
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Eliot Hastie

Eliot Hastie

Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms. 

Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.

Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).

You can email him on: [email protected]

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