Suncorp flags special dividend

SUNCORP is tipped to reward shareholders with another special dividend later this year after posting a strong rebound in profits because of lower claims from natural disasters.

In a further step on Suncorp's road to recovery after a turbulent few years, it said on Wednesday net profits had jumped by almost a half to $574 million in the six months to December 31.

It declared a fully franked interim dividend of 25¢, up 25 per cent.

Suncorp's insurance arm underpinned the result, with a sharp increase in profit margins due to buoyant financial market conditions and lower insurance claims from natural disasters.

While its shares were sold off after it paid out a smaller share of profits than expected, analysts said the company was holding excess capital, some of which it was likely to return to shareholders later this year.

The company now expects to enter the second half of the year with about $1.3 billion more capital than is required by regulators, and analysts expect it to repeat last year's move to top up the final dividend with special distribution of 15¢ a share.

This comes after the business was battered by massive insurance claims in 2011 and its banking arm's near-death experience during the global financial crisis.

The Deutsche Bank analyst Kieren Chidgey said Suncorp was unlikely to keep all of its surplus capital and he expected a 31¢ final dividend plus a special dividend of 15¢ at the end of the year.

"We continue to see capital management as likely at the [full-year] result," Mr Chidgey said.

The Suncorp chief executive, Patrick Snowball, argued the business had now reached the end of its turnaround story, pointing to a 58 per cent jump in half-year earnings compared with 2009, when he was appointed to the job.

He acknowledged the interim dividend was lower than some had expected. The payment was 52 per cent of cash profits compared with its intended payout ratio of 60 to 80 per cent of profits, but he said he planned a "healthy" dividend later this year, weather permitting.

"I recognise that the payout ratio is below our full-year target range," he told analysts. "But as you are by now aware we are always conservative at the half-year, and ex-tropical cyclone Oswald was a reminder of why our interim dividend might still be slightly lower than you'd otherwise expect, given the strong operating performance in the first half and also the strong balance sheet."

Floods and bushfires have cost $417 million this year so far. Its allowance for 2012-13 is $520 million.

Suncorp shares fell 0.9 per cent, or 11c, to $11.56.