Suncorp-Metway (SUN) has reported a 27.5% fall in first half profit due to increased payouts from bad weather and the fallout from the global credit crisis.
Australia’s second-largest home and car insurer said net profit for the six months to December 31 was $382 million, down from $527 million in the previous corresponding period.
Insurance profit dropped by 55% to $172 million as storm-related claims in western Sydney, Lismore in northern New South Wales and New Zealand totalled $280 million in the half.
But Suncorp upgraded its banking division outlook and now expects full year profit growth before bad debts of 10 to 12%.
Suncorp chief executive John Mulcahy said external factors are likely to impact the group’s outlook for the full financial year.
"We expect that global credit markets will remain volatile in the short term with little prospect of immediate contraction in credit spreads," he said.
"In the event credit spreads widen further it is likely the banking sector will move to adjust its lending rates to appropriately reflect the increased cost of funds.”
"This gives us confidence that the full year impact of the credit crunch will be no more than our October 2007 forecast of $10 million to $15 million pre-tax."
Shares in Suncorp fell by 6% to $14.60 at market open this morning, extending their decline over the past 12 months to 33%.
Profit from banking operations rose 6.2% to $307 million from a year earlier. Suncorp is Australia’s sixth- biggest bank.
The value of fixed-income investments dropped by $85 million in the General Insurance division. However, the wealth management business posted 28% profit growth to $125 million in the half as funds under management rose to $27.1 billion.
The integration of Promina Group is expected to increase annual earnings by $325 million – $100 million a year more than initially estimated and in-line with its February forecast. Suncorp will incur a one-time implementation cost of $375 million related to the takeover, the company said.
Shares in Suncorp dropped 7.86% to close down at $14.31.
