AAP
Suncorp-Metway Ltd has increased first half profit by 41 per cent, as flagged earlier in the month, as the insurer and regional bank says it is now stable and ready for future growth.
Net profit rose to $364 million for the six months to December 31 compared with $258 million the year before, Brisbane-based Suncorp said in a statement on Wednesday.
Suncorp had said on February 10 that net profit would be between $355 million and $375 million.
Gross written premium, the benchmark measure of insurance revenue, rose 4.4 per cent to $3.49 billion. Suncorp is Australia's biggest general insurer as measured by gross written premium.
Net interest income at the banking division declined 24 per cent to $471 million.
New group chief executive Patrick Snowball said while the increase in profit was pleasing, Suncorp would maintain a cautious and conservative approach to managing its business.
"Although there is still a lot of hard work ahead of us to ensure Suncorp realises its full potential, this result has laid a sound foundation for the group's future success," he said in a statement on Wednesday.
Suncorp chairman John Story said the group was keen to return capital to shareholders if it can deal with short term issues that present over the next six months.
Suncorp declared an interim dividend of 15 cents, which was slightly below the bottom end of the group's target payout ratio of 50 per cent to 60 per cent of cash earnings.
"By retaining higher levels of capital, we will be in the strongest possible position to deal with any unanticipated short term issues that may present over the next six months," Mr Story said.
"Should these events not occur and as the non-core banking book runs off, it remains the board's firm position that capital in excess to normal operating requirements should be returned to shareholders."
Suncorp's general insurance after tax profit of $347 million, was up 89 per cent from the same period a year ago.
The result featured the positive impacts of a less volatile claims environment and improved returns from investment portfolios.
Its insurance trading results was $401 million or 12.8 per cent of net earned premium.
Mr Snowball said while the general insurance assets had delivered satisfactory returns over the half year, there was still a significant amount of work to improve margins.
"While the headline numbers are strong, once you peel back the benefits of a more favourable weather environment and improving investment markets you arrive at a margin that needs to improve," he said.
The banking net tax profit of $4 million came after a $224 million pre-tax profit for the core bank offset a $211 million pre-tax loss for the non-core bank.
The core bank's focus on retail deposit gathering was successful, with the ratio of retail deposits to lending increasing to the top end of the target 60 per cent to 70 per cent range.
Suncorp said credit quality across the $37 billion core bank portfolio remained sound.
"In the core bank, our key priority is to remain focussed on ensuring our deposit to lending ratio remains within our target range," Mr Snowball said.
"However, the good progress we have made to date means we are now in a position to restore growth in our personal, SME and agribusiness target markets."
Meanwhile, Suncorp's life insurance net profit was $105 million, down 23 per cent.
Superannuation and investment funds under administration were up 4.6 per cent to $13 billion while profit was down 24 per cent to $19 million.
In asset management, funds under management were up 6.5 per cent to $25 billion contributing to a $7 million profit.
