Relief was also the emotion with Suncorp’s update yesterday, judging by the investor reaction yesterday to new losses.
Investors pushed up the shares by more than 4% by the close – a reaction similar to those seen with Pendal and Cochlear where what would be regarded as bad news, was seen as prudence, with share price rises as a result.
Suncorp shares ended at $9.28, up 4.1% after the company told the ASX its insurance division took a $205 million hit from market volatility in the March quarter. Those losses were trimmed in April’s rally.
It also warned of higher provisions for bad loans and the underpayment of some of its employees. If the losses from market volatility don’t change by June 30, with the bad debt provision and the maximum amount involved in short paying staff of $70 million, Suncorp is facing a $400 million hit to profit for the full year.
That will be on top of other charges from natural disasters such as bushfires and higher reinsurance costs which cut the company’s interim profit (before one-off items) to $396 million from $422 million.
In a wide-ranging market update on Monday, Suncorp revealed the impact of COVID-related volatility and said its banking division would take a $133 million hit from provisions for the potential economic damage caused by the pandemic.
Suncorp also said it is also expecting an increase in claims across its landlord policies for loss of rental income but has seen a decline in claim lodgements in the consumer motor insurance business since the introduction of mobility restrictions in March.
Suncorp banking chief Lee Hatton is departing after only three months in the job after she took a job with Afterpay.
Suncorp became the latest major Australia company to reveal historical underpayments of staff, saying early analysis pointed to errors in its payment of overtime, shift penalties, and public holiday loadings.
It estimated the combined costs of reimbursing staff and correcting errors in its systems would be between $40 million and $70 million.
Suncorp joins the likes of Coles, Woolworths, and Super Retail Group in admitting to short=changing managers and employees.
Suncorp said it had initiated an internal review of pay and leave practices in November 2019, as referenced in the accounts for December 2019 half-year accounts.
“Preliminary analysis of historical data identified inconsistencies in relation to the Group’s rostering and pay systems, which may have led to errors in payments of overtime, shift penalties, and public holiday loadings.
“While it is too early to determine individual impacts, the analysis to date has identified potential instances of underpayments and overpayments. The Group’s remediation efforts will focus on individuals who are eligible for additional payments.
“Based on preliminary analysis and assumptions, Suncorp estimates that the costs to remediate those eligible for additional payments, as well as the cost of implementing new processes to prevent this happening again, are expected to be between $40 – $70 million which will be recognised in FY20,” the company said in Monday’s update.
Suncorp said it has self-reported to the Fair Work Ombudsman and has engaged Deloitte to assist with this matter.
“The Board Risk Committee will convene out-of-cycle regular meetings specifically to monitor progress of the review; ensure remediation processes are timely and accurate and are regularly communicated to employees and shareholders; and test that new processes are sufficiently robust so that this does not reoccur.”
