Suncorp (ASX:SUN) has forecast a slowdown in premium income growth for the current financial year, a development that may disappoint some investors. However, to offset this, shareholders can anticipate a substantial payout in the March quarter of next year from the $4.9 billion proceeds of the company’s bank sale to ANZ.
Directors announced in Monday’s profit release that the net proceeds from the bank sale remain largely unchanged at approximately $4.1 billion, with the majority slated for return to shareholders around the first quarter of 2025. This will be distributed through a combination of a special dividend and a buyback, subject to tax rulings and the availability of franking credits.
Now solely focused on insurance following the completion of the bank sale on July 31, Suncorp reported a nearly 17% increase in annual cash earnings for the year ended June. This growth was driven by positive net investment returns, higher returns on the interest-earning portfolio, and lower-than-expected natural hazard claims.
Similar factors contributed to QBE’s solid earnings growth for the six months to June 30, although the company also predicted slower premium growth in the coming six to twelve months.
Suncorp’s net investment returns surged 46.6% to $661 million, underpinned by a strong underlying yield on its interest-earning portfolio and robust equity markets. This represented a half-on-half increase of $210 million, offsetting almost the entire $215 million rise in the company’s cash earnings for the six months. In other words, insurance and banking operations combined to add only $5 million to cash earnings during the half-year.
General insurance gross written premiums climbed 14% to $14.1 billion for the year, driven by price increases that offset the impact of natural hazards and higher reinsurance costs. Suncorp anticipates a deceleration in premium growth to the mid to high single digits for the 2024-25 financial year.
Australia’s second-largest insurer by market capitalisation recorded full-year cash earnings of $1.37 billion, compared to $1.18 billion in the previous year. This fell short of market expectations of around $1.52 billion.
The Brisbane-based company declared a final dividend of 44 cents per share, representing a 63% increase from the prior year’s 27 cents. This brings the total dividend for the year to 78 cents per share, up 30% from the 60 cents paid in 2022-23.
QBE, the country’s largest insurer, also delivered a strong performance, lifting its interim dividend by 41% to 24 cents per share.