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Hayne pain, natural hazards, volatility smash Suncorp profit

Emma Rapaport with AAP  |  14 Feb 2019Text size  Decrease  Increase  |  
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Suncorp's (ASX: SUN) first-half profit has almost halved to $250 million, with the financial services provider citing the impact of natural hazards, volatile investment markets and regulatory costs stemming from the banking royal commission.

The drop from $452 million in the prior corresponding period was made more dramatic by a $145 million writedown on the sale of its Australian life insurance business, but profit from ongoing operations still declined 11 per cent.

Profit from the insurance arm slumped 43.2 per cent to $133 million, while profit from the banking and wealth unit fell 3 per cent to $183 million, driven by a decline in net interest margin over the six months to 31 December partly related to rivals' aggressive mortgage pricing.

Suncorp result 2019

“Natural hazards, investment performance and unforeseen regulatory costs will impact our full year cash return on equity,” chief executive and managing director Michael Cameron said.

Suncorp said it was still working through the matters raised by Commissioner Hayne, and that it would take time for it to properly assess their impact on the business.

“The financial services industry today faces a great deal of change,” Cameron said.

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“This includes future policy settings, shifts in regulation, and material impacts on business and distribution models.

“I acknowledge the importance of the royal commission process, and accept that Suncorp has, at times, fallen short of community expectations.”

Suncorp anticipates their investment in “regulatory projects” following the royal commission recommendations to exceed the original estimate of $90 million by $50 million in FY19.

Cameron says the business is well placed to meet original expectations and achieve sustainable growth.

At 1140 AEDT, Suncorp shares were down 50 cents, or 3.7 per cent, at $12.99. The insurer will pay a fully franked interim dividend of 25 cents per share.

SUNCORP'S SIX MONTHS

  • Net profit down 45pct to $250m
  • Revenue up 4.3pct to $7.509b
  • Fully franked interim dividend down 7.0 cents to 26 cents

More to come.

. Emma Rapaport is a reporter for Morningstar Australia.

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