The Suncorp Group Ltd (ASX: SUN) share price is up 1% after the business reported its FY24 result.
Suncorp is one of the larger insurers in Australia with a number of brands including AAMI, GIO, Bingle, Apia, Shannons, Terri Scheer and Vero.
Suncorp FY24 result
Here are some of the highlights from the report:
- General insurance gross written premium (GWP) increased 13.9% to $14.1 billion
- Natural hazards of $1.23 billion, $125 million below allowance
- Net investment returns of $661 million, up 46%
- Cash earnings increased 16.6% to $1.37 billion
- Group net profit after tax (NPAT) increased 11.8% to $1.2 billion
- Full-year dividend of $0.78 per share
Suncorp said the last three years have been “very challenging” for all insurance companies with “inflation, natural hazards and a fundamental resent in global reinsurance markets.”
The GWP growth occurred thanks to both unit growth and targeted price increases.
Operating expenses increased 8.5% to $2.5 billion, reflecting “growth related expenditure, inflationary pressures on wages and technology costs” and an increase in bank costs. This was partly offset by benefits from productivity and the delivery of strategic initiatives.
Net investment income increased thanks to a “strong underlying yield on the interest-earning portfolio and stronger equity markets.”
The margin for the general insurance increased to 12% in the second half, with the full-year increasing from 10.6% to 11.1%. This improvement was supported by revenue growth, the impact on earnings from increases in response to higher input costs, and from efficiency gains in the business.
The business said the net proceeds from the sale of Suncorp Bank is unchanged at around $4.1 billion, with the majority expected to be returned to owners of Suncorp shares “around” the first quarter of the 2025 calendar year.
FY25 outlook
Suncorp said its GWP growth is expected to be in the “mid to high single digits”, primarily driven by increases in average written premiums albeit with moderating premium rates as the reinsurance market stabilises and inflationary pressures ease slightly in some portfolios.”
Operating expenses are expected to be “broadly flat” including the investment required to support strategic investments and continue to grow the business.
The underlying insurance trading ratio (ITR) will be supported by the “continued earn through of elevated premium rates as inflation begins to moderate.”
Investment yields are expected to reduce as market expectations for interest rates decline in an expectation of stabilisation of inflation.
In terms of the dividend, Suncorp said it’s expecting to remain “disciplined” with its active capital management, with a dividend payout ratio at the mid-point of between 60% to 80% of cash earnings.
It looks like it could be another solid year for the company, but the Suncorp share price is up 33% in the past year, so I wouldn’t call it a good buy at the current valuation because the market is already aware of the positive story. There are other ASX dividend shares I’d rather buy.
