Banking and life insurance lift Suncorp Group's half-year result

Bernard Kellerman
Suncorp Group's net profit after tax for the first half of fiscal 2015 increased by 15.1 per cent to A$631 million, supported by improved results in its banking (A$176 million, up from $105 million in the corresponding first half) and life insurance operations.

This led CEO Patrick Snowball to praise his company's "multi-brand, multi-channel approach." Ratings agency Standard & Poor's Rating was also impressed, saying in a note to clients that these two divisions "add earnings diversity and growth potential to the group and, as such, ... are not expected to be sold under current group strategy."

The banking division performed well relative to group targets, with solid improvements in its cost-to income ratio, net interest margin, and levels of nonperforming loans and gross impaired assets.

Earnings for Suncorp's general insurance division were lower relative to the prior half year due to flat revenue and claim costs from the Brisbane storms in November 2014.

The general insurance division's operating performance remains solid, with a reported combined operating ratio of 94 per cent.

Although average premium levels and unit count across the group's general insurance product lines stalled over the half year due to intensifying competition, in the second quarter policy retention returned to more normalised levels following targeted pricing initiatives.

Despite some rate discounting, Suncorp maintained its margin by passing on incremental benefits from its cost-saving initiatives.

Claims and lapse experience for the life division were also better than the group's rebased assumptions; however, these anticipate further deterioration in lapse rates in fiscal years 2015 to 2016 as the industry restructures.

Suncorp Group has proposed paying an interim dividend of 38 cents per share.