Suncorp Group Ltd shares flat on profit result – Is it a buy?

Shares in banking and insurance giant Suncorp Group Ltd (ASX: SUN) have fluctuated but remain flat in early trade on Thursday after the company released its half-yearly report for the six months ending December 31.

The subdued share price follows a rebound in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) after two horror trading sessions which have wiped tens of billions of dollars off the market.

Here are the key points from Suncorp’s interim result:

  • Group net profit after tax was $530 million, down from $631 million in the prior corresponding period (pcp)
  • The general insurance division contributed $297 million in profits, down from $419 million in the pcp
  • The banking division contributed $194 million in profits, up from $176 million in the pcp
  • The Life insurance division contributed $53 million in profits
  • A fully franked interim dividend of 30 cents per share (cps) has been declared with shareholders to receive payment on April 1


The newly installed CEO of Suncorp Mr Michael Cameron noted that the foundations of the Suncorp strategy remain unchanged and that the journey of simplification has been successful.

He also noted that in the medium term, Suncorp’s key targets are to broaden its customer relationships, improve underlying profit and achieve a sustainable return on equity of at least 10%.

A dividend pay-out target of between 60% and 80% of cash earnings was also confirmed.

Tough time for insurers

While the interim results from Suncorp weren’t unexpected due to an update provided by the group in mid-December, the market certainly appears to be discounting the outlook for Suncorp and its peers.

Suncorp’s share price is down around 24% over the past six months, while QBE Insurance Group Ltd’s (ASX: QBE) share price has slumped about 31% and even the Warren Buffett-backed Insurance Australia Group Ltd (ASX: IAG) is down 14%. All three are trading at levels close to their respective 52-week lows.

While the market arguably has these complex insurance businesses accurately priced, it is also possible that after the large and broad decline in share prices there is value to be uncovered within the insurance sector, but investors should tread carefully.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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