On 4 August Suncorp released their full year results to 30 June 2015 (FY15) with a net profit after tax of $1,133m, in line with market estimates
Generally the results were good for debt holders but we note that Suncorp continues to return excess capital to shareholders via special dividends, thus reducing the capital buffer below debt. We continue to expect Suncorp to call their subordinated debt securities at first opportunity and consider their bonds ‘fair value’ at current levels.
Key figures from the results included:
- Group net profit after tax (NPAT) of $1,133m (FY14 $730m) and in line with market estimates
- General Insurance NPAT of $756m (FY14 $1,010m) with the decline due to a higher than average level of net natural hazard claims in the past year ($1,068m net claims versus $595m allowance)
- Increase in the underlying insurance trading ratio (UITR) to 14.7% (FY14 14.3%)
- Continued improvement in the banking division with Bank NPAT of $354m (FY14 $228m) as net interest margins increased significantly to 1.85% (FY14 1.72%)
- Suncorp Life NPAT of $125m (FY14 $92m) with an underlying NPAT of $113m (FY14 $84m) due to positive claims and lapse experience
- Suncorp New Zealand Operations, across General and Life Insurance, provided geographical diversification with an after tax contribution of A$175m (FY14 A$110m)
- Final ordinary dividend of 38c plus a 12c special dividend. Total annual dividends of 88c per share represents 100% of the Group’s NPAT. As highlighted a number of years back, Suncorp has excess capital levels and have chosen to return this excess capital to shareholders at the expense of a larger capital buffer for debtholders
- Notwithstanding the 100% dividend payout ratio, capital levels remain very strong with General Insurance Common Equity Tier 1 (CET1) 1.40 times the prescribed capital amount or PCA and Bank CET1 at 9.15%
- As at 30 June 2015 on an ex-dividend basis, Suncorp Group will hold $570m of capital above its operating targets
The company has highlighted the following medium term ‘key
targets’:
1. ‘Above system’ growth in key target markets
2.
Optimisation benefits of $170m in the 2018 financial year
3. ‘Meet or beat’
an underlying insurance trading ratio of 12% through the cycle
4.
Sustainable return on equity of at least 10%
5. An ordinary dividend payout
ratio of 60% to 80% of cash earnings
6. Continuing to return surplus capital
to shareholders
Further details can be found at the following link: http://www.suncorpgroup.com.au/investors/key-dates-events/full-year-results-30-june-2015-0