Suncorp Group to return $4.1 B bank sale proceeds to shareholders in first quarter of 2025.

About Suncorp Group Limited

Suncorp Group Limited, (Suncorp, the Group, ASX: SUN) offers home, contents, and car insurance, and owns the brands AAMI, GIO, Shannons and Vero.

Steady FY24 Insurance Result

Suncorp’s General Insurance business achieved a steady FY24 result in terms of Gross Written Premium and Net Profit.

Gross Written Premium (GWP) increased by 13.9 percent to $14.1 billion and was supported by both unit growth and higher insurance premiums. Higher reinsurance costs, as well as higher natural hazards claims and claims inflation were passed on to customers. The total cost of natural hazard events was $1,235 million, $125 million below the Group’s allowance. The Group’s natural hazard allowance for FY25 is $1,560 million.

This resulted in the Underlying Insurance Trading Ratio or margin in the June 2024 half-year in the General Insurance business increasing to 12 percent, with the full year result improving from 10.6 percent to 11.1 percent. The stronger margin benefited from efficiency gains in the business and higher net investment income of $661 million. Net investment returns in the prior financial year were $451 million. Rising investment income was helped by higher yields on fixed income securities and stronger equity markets.

The overall FY24 Group Net Profit After Tax (NPAT) was $1,197 million, up 12 percent from the FY23 result of $1,071 million, while cash earnings increased to $1,372 million, up from $1,177 million. The Bank, which was sold to ANZ on 31 July, contributed NPAT of $379 million, compared to $470 million in FY23. The Group incurred bank separation costs of $151 million after tax throughout the year. Total Group operating expenses increased 8.5 percent to $2.5 billion, reflecting growth related expenditure, inflationary pressures on wages and technology costs. This was partly offset by benefits from productivity and improved insurance expenses ratios.

On 25 September 2024 Suncorp will pay a 44 cents fully franked Final Dividend, taking the full year dividend to 78 cents, representing a payout ratio of 72 percent of cash earnings. The Group’s dividend payout policy is to return 60 to 80 percent of cash earnings to shareholders.

Sale of Suncorp Bank to Australia and New Zealand Banking Group

Net proceeds from sale of Suncorp Bank are $4.1 billion with most proceeds expected to be returned to shareholders around the first quarter of calendar year 2025. The return will be primarily by way of a capital return and accompanying pro rata share consolidation and a smaller fully franked special dividend component. This implies that Suncorp may announce a pro-rata off-market share buy-back in January 2025.

In addition to the bank sale, on 4 April 2024, Suncorp announced that it had sold its New Zealand Life Insurance business, which is expected to complete around the end of January 2025. The estimated net proceeds from the sale of the New Zealand Life business are around $270 million. This sale may supplement the small special franked dividend to accompany the capital return funded by the proceeds of the Suncorp Bank divestment.

The Future

The impacts of climate change, resulting in higher pricing of risk by global reinsurers, and persistent high inflation have converged to put upward pressure on insurance pricing. In response to ongoing inflationary pressures, Suncorp has expanded its motor repairer panel and invested in technology and process improvement to improve end-to-end customer experience and claims costs.

The Group has confirmed Gross Written Premium growth is expected to be in the mid to high single digits, and that reinsurance premium rates are stabilising and inflationary pressures easing slightly in some portfolios. The Underlying Insurance Trading Ratio is targeted towards the top of the 10% to 12% range and operating expense ratios are expected to be broadly flat. This cost estimate includes the investment required to support strategic investments and continue to grow the business.

With the bank sale now complete and the reinsurance markets stabilising, Suncorp is set to focus exclusively on growing the insurance business. This may incorporate other types of insurance cover and alternative reinsurance structures.

As a well-capitalised single purpose entity, the business is positioned as a focused, trans-Tasman General Insurer centred around Consumer, Commercial & Personal Injury and Suncorp New Zealand. Suncorp has strong market positions in each division with ambitions to maintain or grow market share with clear financial parameters. This strength together with plans to modernise the Insurer’s core systems, including the policy administration system, and deploying new Artificial Intelligence capabilities, should sustain earnings growth well into the future.