At least Suncorp Metway shares managed to hang onto some of their early gains yesterday from the released annual figures for the June 30 year that looked much sounder than those produced for 2009 and 2008.
There seemed to be few quibbles with the way the bank and insurer came to produce a solid rise in profit in 2010; the insurance business survived another tough year from weather-related claims and the dud loans in the banking side appear to be losing less, while the basic banking business is turning around.
The shares rose more than 5% in early trading to a high of $8.21 before the wider market began weakening.
That saw Suncorp shares finish at $7.97, up 19c, or 2.4%, while the broader market was sold off and lost 1.4% in a rotten day’s trading.
It was Suncorp’s best profit for three years as the company earned $780 million, the highest level since 2007 and more than double the weak $348 million earned in 2009.
Final dividend is 20c a share, making 35c for the year, down from 40c a share in 2009 when the total payout exceed the cash profit.
This year’s payout is around 58% of cash eps of 60.8c.
Suncorp said margins from its insurance business, which accounts for nearly 75% of total profit, stood at 9.6% and it was looking to lift this by at least 3 percentage points by 2012.
Suncorp said bad debt charges fell 43% and the non-core bank’s loan portfolio fell by $4.9 billion.
"We stabilised the Group, strengthened its balance sheet and capital position, appointed a new executive team and laid the foundations for sustainable growth by restructuring operations," chief executive Patrick Snowball said in yesterday’s statement.
The sale of the LJ Hooker unit and Suncorp’s joint venture interests in RACQ Insurance and RAA Insurance contributed pre-tax profits of $215 million which were used to help offset the impact of the amortisation of the cost of the Promina acquisition.
Suncorp operates under several insurance brands including Promina, AAMI, Australian Pensioners, GIO and Suncorp.
QBE Insurance last week reported a 39% fall in first half earnings while larger rival, Insurance Australia Group reports today, but has already revealed more big losses in the UK and warned of a poor profit for the year to June 30.
In its statement yesterday, Suncorp said the general insurance profit after tax was $557 million, up 34%.
"This result has been achieved despite adverse natural hazard events that were $165 million above natural hazard allowances, a $75 million pretax charge as a result of increasing the expectation for wage inflation to 4.5% and a revision to the methodology in deferring acquisition costs which resulted in a one-off $47 million charge," the company said.
In the so-called core bank, which is the continuing and profitable banking part of Metway, the profit after tax was $268 million, with a full year net interest margin of 1.80%.
The margin against lending assets was 2.06% for the year. Both measures improved during the second half of the year.
The co-called non-core bank, where all the dud loans, especially property, are located, lost $224 million after tax.
"The run-off of the portfolio progressed ahead of expectations with total lending reducing 28% or $4.9 billion over the year. Impairment losses continued to trend lower over the course of the year.
"Momentum is building in the life business, with solid underlying profit after tax of $192 million, up 6.7%.
"Market adjustments came to $30 million, resulting in net profit after tax, including non-controlling interests, of $222 million. The embedded value of Suncorp Life grew 12.2% to $2.4 billion."
Suncorp said the combined profit after tax from its major business areas was $823 million, up 36.7%.
"The sale of the LJ Hooker subsidiary and the Group’s joint venture interests in RACQ Insurance and RAA Insurance contributed pre-tax profits of $215 million. Other significant items included the amortisation of intangible assets of $210 million and the final costs of integration totaling $59 million.
"The Group net profit after tax of $780 million was up 124% on the prior year. Cash earnings per share (excluding the proceeds of divested assets) which forms the basis of the Group’s dividend payout policy was 60.8 cents."
