Brisbane-based Suncorp has left interim dividend unchanged despite reporting profit growth in its core insurance and banking businesses.
The financial conglomerate on Tuesday said cash earnings – a smoothed measure used in the financial sector – rose 39.5% to $509 million in the first half.
Statutory net profit after tax fell 23.7%, after profits in the same half last year were boosted by the sale of formerly key asset -its smash repair arm.
The interim dividend was left steady at 26 cents a share.
CEO Steve Johnston said the results showed its focus on improving its core business, technology upgrades, and greater efficiency were paying off for the group.
“We are seeing improved momentum in our Australian and New Zealand insurance businesses as evidenced by strong top-line growth, while our Bank is also delivering improved performance,” he said in the statement to the ASX.
In its biggest division, Australian insurance (AAMI, GIO, Suncorp, APIA, Shannons), profits more than doubled to $258 million, helped by strong premium growth, better investment returns, and the release of reserves.
Its banking arm saw an 11% rise growth in profit to $190 million, as it posted a wider net interest margin – the cost of funding compared to what it charges for loans.
That came from lowering interest rates charged to customers more slowly than its funding costs fell after the Reserve Bank’s rate cuts. As well the bank, like its peers, cut deposit rate faster than lending rates in another boost to margin.
Investors liked the news despite no lift in dividend. The shares rose 2.7% to $10.73 which was a good result on a day when the market peaked in the first few minutes of trading and then made a long slide into the red.
That’s the equal highest the shares have been since March 2020, when they were falling in the great pandemic sell-off.
Investors were also encouraged by the news that the company wants to boost returns and to that end will make greater use of automation and stop offering products including travel insurance and personal loans.
Mr Johnston said Suncorp would invest in insurance underwriting capability, and COVID-19 had shown it could make far more sales digitally, rather than “voice-based” sales (Call centres).
It will also cut some of its products, including a move to stop writing personal loans, instead focusing more on mortgages, and it will also cease offering new travel insurance.
Mr Johnston said that Suncorp needed further simplification after it recently sold businesses including quitting life insurance.
“Following the sale of the Life and Capital S.M.A.R.T. businesses we have continued to review our portfolio. This has led to us to taking the tough decisions to exit intermediated Vero Australian consumer and construction policies, the underwritten travel portfolio and we will now no longer offer personal loans in our bank,” he said.
