Suncorp Group (ASX: SUN) has increased net profit after tax (NPAT) for the half year to December 2012 by 47.6% to $574 million with its general insurance division the stand-out performer as the insurer pushed through higher premiums in response to the catastrophic weather events endured recently.
Investors could be forgiven for having expected a bruised and battered result from the Queensland-exposed Suncorp. In reality, the results to December are impressive, with costs associated with Cyclone Oswald and other weather events actually occurring post December 2012. On current estimates Suncorp expects Cyclone Oswald to result in net claims of around $200 million.
Pleasingly, the board raised the dividend by 25% on the previous corresponding period to 25 cents per share. Despite the increase, at a 52% payout ratio it is still below the payout target range. Suncorp has also improved its capital levels within the insurance division and within the banking division, while at the same time continuing to de-risk the balance sheet by shrinking the ‘non-core bank’, which dragged the NPAT results down by $143 million. CEO Patrick Snowball and his team have also been driving hard at delivering cost reductions across the group; one-off project costs amounting to $275 million are expected to flow through to annualised savings of $200 million from the 2016 financial year.
With fellow insurers AMP Limited (ASX: AMP), Insurance Australia Group (ASX: IAG), and QBE Insurance (ASX: QBE) due to report in the coming week, it’s possible we could see dividend increases as a theme emerging across the sector.
Like food and healthcare, insurance is a necessity, which helps to ‘recession proof’ insurance companies. Their businesses, however, are complicated and require detailed analysis to understand and value. Warren Buffett, who is often described as the world’s greatest investor (and I wholeheartedly agree!), is famous for investing in insurance companies. However, this doesn’t mean insurance companies are right for every investor and it should be noted that Buffett has been very selective and only owns a small handful of insurers.
Looking for an even better income investment idea? Click here now to get The Motley Fool’s special FREE report, “3 Stocks for the Great Dividend Boom”. The report lists the names, stock symbols, and full research for our three favourite income ideas, all completely free!
The Motley Fool’s purpose is to help the world invest, better. Enter your email in the box at top right for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Tim McArthur owns shares in QBE Insurance.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
- 3 ASX stocks to buy now to get rich later – October 20, 2016 1:34pm
- Why this fund manager is worried about the sustainability of bank dividends – October 18, 2016 7:56am
- Here’s why I might buy these 2 beaten-up share bargains – October 17, 2016 4:18pm