Suncorp FY24 Earnings Call Highlights

Suncorp (ASX: SUN) shares opened flat on Monday after reporting a relatively weaker-than-expected FY24 result.

FY24 Results Summary

• General insurance underlying profit after tax up 28.8% to $1.10bn

• Net profit after tax up 11.8% to $1.19bn

• Cash earnings up 16.6% to $1.37bn

• Final dividend of 44 cents per share

• Total dividend for FY24 of 78 cents per share

• Net proceeds from the sale of the Bank of $4.1bn, with the majority expected to be returned to shareholders around the first quarter of 2025

The cash earnings figure was 3.5% below consensus expectations of $1.42 billion.

Earnings Call Highlights

The below topics have all been answered by Group CEO Steven Johnston, CEO (Consumer Insurance) Lisa Harrison and CEO (Commercial & Personal Injury Insurance) Michael Miller.

Inflation impact: "The improvement in margin reflects the earn-through of the premium rises that were necessary given the higher input costs, in particular, from reinsurance, natural hazards and inflation."

Unit growth trends: "We’ve seen unit growth with customers still seeing the value of insurance in the products we offer despite the increase in pricing required to address higher input costs."

Reinsurance pricing trends: "Pleasingly, we have successfully placed our FY25 reinsurance program with some stability returning to the global reinsurance market after three years of disruption ... The pricing response began to earn through, reflecting GWP growth of over 17%... the significant increase in reinsurance costs post those events."

FY25 guidance: "FY25 underlying margins remaining at the top end of the 10% to 12% range."

FY25 natural hazard allowance: " .... has increased by $200 million to $1.56 billion, reflecting unit growth, continued inflationary pressure, and the removal of the Queensland Quota Share arrangement."

Motor price adjustments: "Motor GWP increased by over 16% with premium increases reflecting continued inflation albeit with some signs of the pressure easing in the second half."

Capital management: "We remain committed to returning the bank sale proceeds to shareholders ... majority of the return likely in the form of return of capital with a smaller fully franked special dividend component."

Investment income: "Investment income benefited from high underlying yields and strong equity markets ... The average underlying yield on tech reserves in Australia was 5.3%, with strong manager performances, and in New Zealand, underlying yield has increased to 4.9%."

Analyst Q&A Highlights

Has premium cycle peaked with stabilisation in reinsurance pricing and moderation of inflation: “I think inevitably, we've been through a very hardening cycle ... inflation has moderated. Some supply chain challenges are still there ... particularly on the Home side ...”

What's driving costs in the home portfolio: “It is what we call escape of liquids, which is water damage inside the home ... flexi pipes ... failing at a greater rate.”

How will reduced reliance on reinsurance translate into returns and ROE: “We managed to secure the program, what I call constructively ... we assume slightly greater risk ... we’ll tend to run our margin towards the top end of that range.”

New Zealand outlook: “We probably saw the moderation of inflation at a faster rate in New Zealand than we did in Australia ... in terms of growth perspective... mid- to high-single digits is relevant for us.”

On capital returns: "We will put in place that buyback facility, perpetual buyback facility, and we'll use that facility to repatriate capital to shareholders."

On pricing: "We would be looking to price ahead of inflation."

This article was generated with the support of AI and reviewed by an editor.