The Suncorp Group Ltd (ASX: SUN) share price is up more than 4% after the insurance business reported its FY25 first half result.
Suncorp operates a number of insurance businesses including Suncorp, AAMI, GIO, Bingle, Apia, Shannons, Terri Scheer, CIL Insurance, Vero, Essentials by AAI, AA Insurance and Asteron Life.
HY25 result
Here are some of the highlights for the six months to 31 December 2024:
- General insurance gross written premium (GWP – how much insurance it sold) increased 8.9% to $7.8 billion
- Natural hazard costs of $503 million ($277 million below allowance)
- Cash earnings up 30% to $860 million
- Net investment returns $374 million ($396 million last year)
- Statutory net profit up 89% to $1.1 billion
- Ordinary dividend of $0.41 per share
- Special dividend of $0.22 per share
- Capital (cash) return of $3.00 per share
The company is sending investors $3.22 of cash per share to shareholders as a result of the sale of Suncorp Bank to ANZ Group Holdings Ltd (ASX: ANZ), which resulted in a one-off gain on the sale of $252 million (included in the statutory profit figure). Net proceeds from the sale amount to $4.1 billion.
The Suncorp Bank sale was completed on 31 July 2024.
Divisional performance
Suncorp said its consumer insurance division experienced GWP growth of 10.2%, with the motor portfolio seeing a 1.4% rise of units and an 8.9% increase of average written premium (AWP). I think the consumer insurance division is integral for the overall Suncorp share price.
Home GWP grew 10.2% thanks to AWP growth, driven by price rises reflecting a higher natural hazard allowance and ongoing claims inflation pressures.
Net incurred claims for the consumer insurance division rose by 4.2% to $2.55 billion because of its larger portfolio and working claims inflation in the home portfolio.
The consumer insurance profit after tax more than doubled to $423 million.
Commercial and personal injury insurance profit after tax grew by $14 million to $208 million. GWP increased 9.7% thanks to growth in all portfolios, though net incurred claims increased 10% to $1.36 billion because of portfolio growth and a change in product mix.
Suncorp New Zealand saw its general insurance business’ net profit after tax rise from NZ$80 million to NZ$229 million. It benefited from a benign natural hazard claims experience and prior price rises. NZ GWP rose 6% to NZ$1.5 billion while net incurred claims decreased 4.2% to NZ$594 million.
New Zealand Life sale
On 31 January 2025, the company completed the sale of its New Zealand life business to Resolution Life NOHC for NZ$410 million, plus excess capital.
Outlook for the Suncorp share price
Suncorp said it expects its GWP growth to be in the “mid to high single digits as pricing moderates in line with easing inflationary pressures in some portfolios, particularly in New Zealand”.
The company said its FY25 expense ratio is expected to improve by around 90 basis points (0.90%) with “some phasing of operating expenses in the second half.”
The natural hazard allowance is set over the full financial year and remains “the best guidance to natural hazard experience for FY25.”
Suncorp noted it wants to be a growing business with a “sustainable” return on equity (ROE) expected to be above the through-the-cycle cost of equity. In other words, it wants to make enough profit for Suncorp shareholders to be appealing for how much shareholder money is currently in the business.
The period included helpful inflation of premiums, low hazard costs and solid investment returns. It couldn’t get much better for Suncorp shares, hence the rise of more than 40% of the Suncorp share price.
Insurance seems like a somewhat cyclical industry to me, so with the Suncorp share price trading at close to an all-time high (not seen since the GFC), I don’t think this is the right time to invest in the company. There are other ASX dividend shares I’d rather buy first.
