Suncorp shines on Snowball

Suncorp finally has thrown off the shackles of its troubled commercial and property loan portfolio, facing a brighter future.

Patrick Snowball has left nothing to chance in Suncorp’s results.

The numbers landed smack in the middle of the guidance he handed down just weeks ago with the four year program to rid the company of its troublesome property and commercial loan portfolio finally completed.

The 32.1% drop to $491 million represents a clearing of the decks. For investors, however, it has taken a back seat with the focus now firmly on the sweeteners; the lifted 30c final dividend and the fully franked 20c special dividend, which also were flagged a month back.

In addition to pledging a payout ratio of between 60% and 80%, Suncorp has dangled a carrot in the form of a promise to “continue to return surplus capital” with many analysts pencilling in further special dividends within the next two years.

General insurance was the standout performer, coming in slightly better than expected with an $883 million contribution to earnings that 79% up on last year.

The banking division, which once formed the backbone of the company but since has provided so much heartache, stripped $343 million from earnings after it offloaded the non-core bank for around 90c in the dollar (see Cliona O'Dowd's Collected Wisdom).

It now will concentrate on personal banking, small and medium enterprises and agribusiness and has extended its reach interstate to spread its business base. Impairments in the core division have eased substantially.

As with QBE and IAG, life insurance is problematic with earnings this year of $60 million well below last year’s $250 million as a result of policy lapses and increased disability claims.

Capital management is heading in the right direction, heading towards its 8% core target while margins edged higher in each of the three main divisions.

The now removed non-core bank will probably weigh on investor sentiment for some time. But Suncorp – once a bank with an insurance arm – has now transformed itself into an insurance company with a banking division.

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