Why the Suncorp (ASX:SUN) share price is in focus

The Suncorp Group Ltd (ASX: SUN) share price is one to watch today after the company announced a bumper cash earnings result for 1H 2021.

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ASX share price on watch represented by surprised man with binoculars

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Suncorp Group Ltd (ASX: SUN) shares will be on watch today after the company announced a 39.5% increase in half-year cash profit. At Monday’s close, the Suncorp share price was sitting at $10.44.

Why is the Suncorp share price in focus?

Suncorp reported its results for the half-year ended 31 December 2020 (1H 2021) this morning. That announcement was headlined by a 39.5% increase in cash profit to $509 million.

Strong earnings across all businesses, including insurance (Australia), banking & wealth and Suncorp New Zealand helped boost profits.

Group net profit after tax fell 23.7% on the prior comparative period (pcp) to $490 million. It’s worth noting the 1H 2020 figure included a $293 million gain on the sale of the Capital S.M.A.R.T and ACM Parts businesses in October 2019.

The Suncorp share price will be one to watch this morning following the latest earnings update. That included a 109.8% surge in insurance (Australia) profit to $258 million.

Suncorp also announced a fully franked interim dividend of 26 cents per share. That represents a 65.2% payout of cash earnings compared to 89.5% in 1H 2020.

Suncorp CEO Steve Johnston said the result demonstrates the focus on core businesses and digitisation is yielding results. 

The Aussie insurer recorded $1,026 million of excess common equity tier 1 (CET1) after dividends. All businesses are holding CET1 at or above targets with $789 million held at the group.

Suncorp hailed a renewed brand strategy and increased digitisation as key initiatives.

However, it wasn’t all positivity from the Aussie insurer. It will be interesting to see how the Suncorp share price responds as investors process the latest update, including an “uncertain” outlook for 2021.

The coronavirus pandemic and its economic impact remain front of mind for the Aussie insurer. Suncorp’s catastrophe reinsurance covers remained fully intact at 31 December 2020 with availability to be used throughout FY2021.

Mr Johnston said Suncorp enters the second half of the year in “good shape”. According to the company, momentum is building across Suncorp’s segments while the balance sheet remains “very strong”.

Foolish takeaway

The Suncorp share price is one to watch this morning after the company reported a significant increase in cash earnings. Suncorp’s payout ratio dipped below 1H 2020 numbers while its balance sheet remains intact.

The Suncorp share price has fallen 16.6% in the last 12 months to $10.44 as at Monday’s close while the S&P/ASX 200 Index (ASX: XJO) is down 1.9% in the same period.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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