Suncorp will make greater use of automation and stop offering products including travel insurance and personal loans, under a plan to cut costs and lift returns, after the insurer posted a 39.5 per cent lift in cash earnings.
The financial conglomerate on Tuesday said cash earnings – a smoothed measure used in the financial sector – rose 39.5 per cent to $509 million in the first half, with profit growth in its core insurance and banking businesses. Net profit after tax fell 23.7 per cent, after profits in the same half last year were pumped up by an asset sale.
Chief executive Steve Johnston said the results showed its focus on improving its core business, technology upgrades, and greater efficiency were paying off for the group.
“We are seeing improved momentum in our Australian and New Zealand insurance businesses as evidenced by strong top-line growth, while our bank is also delivering improved performance,” he said.
Suncorp will pay an interim dividend of 26c a share, which is unchanged compared with last year.
In its biggest division, Australian insurance, profits more than doubled to $258 million, helped by strong premium growth, better investment returns, and the release of reserves.
Its banking arm delivered 11.1 per cent growth in profit to $190 million, as it posted a wider net interest margin – the cost of funding compared to what it charges for loans.
Mr Johnston, who has said the company would try to lift returns since his appointment as in September 2019, also provided an update on its three-year strategy, which aims to lift returns above its cost of equity by 2023.
Under the plan, Suncorp said its cost base would be $2.8 billion for the next two years, before falling by $100 million in 2023 due to efficiency gains.
Mr Johnston said it would invest in insurance underwriting capability, and COVID-19 had shown it could make far more sales digitally, rather than “voice based” sales.
It will also cut some of its products, including a move to stop writing personal loans, instead focusing more on mortgages, and it will also cease offering new travel insurance.
Mr Johnston’s speaking notes for an investor presentation say further simplification is needed, after it recently sold businesses including quitting lift insurance.
“Following the sale of the Life and Capital S.M.A.R.T. businesses we have continued to review our portfolio. This has led to us to taking the tough decisions to exit intermediated Vero Australian consumer and construction policies, the underwritten travel portfolio and we will now no longer offer personal loans in our Bank,” Mr Johnston said.
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Source: Thanks smh.com