Suncorp profits hit by 'triple whammy'
Sydney Morning Herald
Saturday August 8, 2009
A €śTRIPLE WHAMMY€ť of bad debts, huge weather-related insurance claims and volatile financial markets will cut Suncorp-Metway's annual net profits by more than a third and continue to leave the bancassurance group exposed to predators such as ANZ and QBE.In a warning that confirmed expectations of a second successive year of bad results, the Brisbane financial services combine disclosed yesterday its 2009 post-tax earnings would be $340-$360 million.That compares to the corresponding 12 months to June 30 last year when the group turned in $556 million of net profit.The one saving grace is the already reduced final dividend will be fixed as forecast €“ at 20 cents a share, making 40 cents for the full year. Investors last time received a total of $1.07 a share.Suncorp was forced to reveal the material difference in its bottom line result after the ASX asked it to explain a near 10 per cent rise in its share price between Tuesday and Thursday this week.More than 26 million shares changed hands over that period €“ almost three times the recent average daily amount €“ which drove Suncorp's stock from $7.37 to $8.16.That trading encompassed comments made on Wednesday by the ANZ chief executive, Mike Smith, that his bank was still interested in the acquisition of a regional lender, widely assumed to be Suncorp.An approach by ANZ last October to buy Suncorp's banking arm was knocked back by the troubled group, whose insurance businesses, AAMI, Vero and GIO, are also thought to be of interest to the highly acquisitive Sydney insurer QBE.Suncorp told the ASX yesterday that while it was unaware of any €śunannounced information€ť that would explain the sudden rise in its shares, it was due to disclose its annual results which would show a marked difference on 2008.It then released a separate statement that revealed the effect of bad loan provisions, large storm and bushfire insurance claims and falling investment values on its three major operations.Banking would turn in a pre-tax amount of just $100-$130 million because of impairment charges as high as $730 million. General insurance is set to contribute $560-$580 million before tax although its underwriting profit margin would be lower than previously expected, at 7.5 per cent to 8 per cent of its gross written premium or revenue.Suncorp Life, its wealth management operation, will produce about $100-$120 million, either in line or just below last year. Its investment income has been hit by falling markets.As a consequence, the whole group will turn in a cash profit €“ the industry's preferred measure of underlying performance €“ of $510-$530 million.Analysts at Deutsche Bank said one-off hits appeared to be behind the lower outcome and expressed relief that the two main €śfear factors€ť dogging the group €“ its bad debt position and capital requirements €“ had not worsened since the last update. The likely final result was €śnot as scary as the headline [figure] suggested,€ť James Coghill, the bank's insurance analyst, said in a note to clients yesterday.Suncorp's shares closed 10c down at $7.90 after bouncing back from lows yesterday of $7.63.
© 2009 Sydney Morning Herald
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