Three years ago Suncorp’s stock was getting smashed. Now the Brisbane-based insurer and bank has a smash repair business. In Riverwood, Sydney, Suncorp’s Q-Plus smash repairs shop encompasses an area bigger than the Melbourne Cricket Ground.
Suncorp has two joint venture smash repair businesses, Smart and Q-Plus, which together with Suncorp repair about 2,060 vehicles a week. Q-Plus saves Suncorp $500 per vehicle and Smart saves Suncorp $400 per vehicle, Suncorp says. Suncorp can pay up to 400 per cent more in mark-ups on spare parts, according to the company. Suncorp customers are able to get their motor vehicles back two weeks earlier than they use to.
A smash repairs business seems a curious move by Suncorp chief executive Patrick Snowball, an ex British Army officer. But Snowball has engineered a turnaround in the business since he took over the company in September 2009. In the year before Snowball’s hiring, Suncorp’s stock had fallen 27 per cent after a spate of bad loans to Gold Coast property developers and Babcock & Brown while the group’s reliance on wholesale financing almost forced the sale of its bank to ANZ.
Suncorp shares were trading at $7.75 on September 1, 2009. Today they climbed as high as $12.65, a 63 per cent increase from September 2009.
And Oxford graduate Snowball says he has planted a “flag on the hill” for the group to achieve 10 per cent plus return on shareholder capital. He wants as much as 9 per cent annual growth and an insurance trading result of 12 per cent or more annually. Today, Snowball repeated his commitment to pay as much as 80 per cent of profits back to shareholders as dividends and to “return any excess capital to shareholders”. Meanwhile, Suncorp Personal Insurance chief Mark Milliner says Snowball’s executives march to the mantra of “discipline” and “execution”.
Despite his predecessor John Mulcahy’s mistakes, Snowball has been helped by the government guarantee covering wholesale access to funds by Australian financial institutions, a mining boom in Suncorp’s home state, a drop in bad and doubtful debts and the New Zealand’s economy exit from recession.
But it’s doubtful the credit cycle can get any better for Suncorp or any other Australian bank. Inclement weather and the resulting insurance losses seem an annual feature rather than random events. Still, Suncorp’s shares, up 62 per cent in the last 12 months and 24 per cent this year, at 1240 AEST had gained 27.5 cents, or 2.2 per cent, to $12.615. The S&P/ASX200 Index was up 11.643, or 0.2 per cent, to 4,971.50.