Suncorp (ASX: SUN) has announced a new operating model for its business. Are Suncorp shares a buy?
What is Suncorp?
Suncorp is a $12 billion insurance and banking company. It has its own brand of products but also operates under names like AAMI, GIO, Apia and Shannons. It also operates a regional banking division called Suncorp Bank.
Here’s Suncorp’s new plan
Suncorp is going to turn to a new operating model and organisational structure to drive improvement in the performance of core businesses.
Accountability for the performance of the insurance division will be assumed by two executives. One will be focused on underwriting, distribution, brands, marketing, product design and innovation. The other will be responsible for claims management and operations. Current insurance CEO Gary Dransfield will leave Suncorp.
The company is going to combine a number of insurance and group functions to create a more streamlined and efficient organisation.
Suncorp also said there will be greater end-to-end operational accountability within the banking & wealth and Suncorp New Zealand divisions to drive improved performance.
The final key operating change will be aligning its group strategy and technology to fast-track digital and automation capabilities and opportunities.
Suncorp has appointed Clive van Horen as the new banking and wealth CEO. The company said this brings significant retail and business banking experience in Australia and internationally.
The FY21 main catastrophe reinsurance program has been finalised with a similar structure as previous years, with new aggregate excess of loss cover purchased for FY21 providing $400 million of cover for events in excess of $5 million once the retained cost of these events reaches $650 million.
The FY21 natural hazard allowance is expected to increase by $90 million to $130 million (in FY20 it was $820 million).
Excluding investment market movements and bank impairment losses, COVID-19 impacts on the FY20 profit are expected to be broadly neutral.
Suncorp management comments
Suncorp CEO Steve Johnston said: “The work we have done over the past 12 months puts us in a strong position to deal with the dual challenges of increasing natural hazard costs and a global pandemic. We entered COVID-19 with a significantly de-risked business and a strong balance sheet and through this period further strengthened our funding, liquidity and capital buffers.
“At the same time, COVID-19 has resulted in changes such as the faster adoption of digital channels by customers and new, more innovative and agile internal ways of working. It has changed out perspective on what is possible.”
Improving the business is always a good choice. But it’s a shame that Suncorp hasn’t made much overall progress since the GFC. Suncorp isn’t the type of business I’d invest in. It’s cyclical and isn’t growing internationally. For growth and dividends from a financial share I’d rather buy Magellan (ASX: MFG) or Macquarie (ASX: MQG).
3 stocks to own in July 2020...
Amidst the COVID-19 confusion, there are some companies still growing FAST (think: online meetings through Zoom, streaming companies like Netflix and eHealth services provided by Teledoc).
While the world grapples with COVID-19, some companies are still growing rapidly. The entire cloud computing market is valued around $US210 billion but if you ask me, it seems clear as day that this market is only going to get bigger in 2020 and beyond.
That's why our top investment analyst has just identified 3 growth stocks in a net cash position, with strong competitive forces... and obvious tailwinds at their back. He owns all three of them right now!
Claim a FREE investing report on our analyst's "3 best share ideas for the cloud revolution" when you create a free Rask Australia account.
Our report is 100% free and unlocks hundreds of hours of bonus content.
Disclaimer and warning: This information is published by The Rask Group Pty Ltd and contains general financial advice and information. That means, the information/advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms of Service and Financial Services Guide before using this website.
Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.