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Results: Suncorp shares lift on earnings beat

This morning Suncorp Group Ltd (ASX: SUN) reported its financial results for the full year ending June 30, 2019. Below is a summary of the results with comparisons to the prior year. 

  • Statutory net profit $175 million, down 83.5%, includes a $910m after tax non-cash loss on sale of the Australian Life Insurance and Participating Wealth Business
  • Cash profit of $1,115m, up 1.5%
  • Profit after tax from ongoing functions of $1,220, up 1%
  • Underlying insurance trading ratio 12.3%, up 1.7%
  • Diluted cash earnings per share 84.05cps
  • Final fully franked dividend of 44cps, takes full year ordinary dividends to 70cps on 81.2% payout ratio, compared to 85.8%
  • Proposal to pay an additional 39cps special dividend to return proceeds from Life Insurance sale
  • Insurance Australia profit of $588m, down 13.7%, gross written premium +10%
  • Insurance New Zealand profit of NZ$245m, up 81.5%, gross written premium 8.4%
  • Bank Common Equity Tier 1 ratio 9.28%

Suncorp shares are up 3.2% to $13.21 with its cash profit of $1.115 million marginally ahead of consensus forecasts and the 39 cents per share special dividend also likely to be fuelling investor interest. 

The group’s official dividend policy is to pay out 60% to 80% of cash earnings, although it’s worth noting it has been marginally ahead of that over the past couple of years to support what is a juicy fully fully franked yield of 5.29% plus franking credits today. 

If we account for the potential 39 cents per share special dividend the yield balloons to 8.2%, although FY19’s interim dividend is historical and investors need to account for the variable of FY20’s interim payout.

Outlook

Suncorp declined to provide guidance for FY 2020 other than to state it continues to look to pull out costs and grow gross written premiums on healthy operating profit margins.

It also flagged balance sheet and capital management as important issues that are taking on a whole new dimension given debt and cash rates in Australia and globally are sinking ever lower. This is another point for investors in insurers like Suncorp, Insurance Australia Group Ltd (ASX: IAG) and QBE Insurance Group Ltd (ASX: QBE) to keep in mind. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of Insurance Australia Group Limited. 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 Scott Phillips.

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