Suncorp forecasts solid financial performance for 2005
Suncorp has reported a strong start to the current financial year, affirming it is on track to achieve a healthy improvement in underlying earnings.
Addressing the Suncorp Group's annual general meeting of shareholders, Chairman John Story said improvement in the underlying strength of company operations was significant last financial year as evidenced by the 61% increase in net profit to a record $618 million and the record full-year dividend of 70 cents.
"It is pleasing to note that this performance has also been reflected in the share price which reached record levels this month," he said.
"Since June 2003, the share price has risen by about 40%. Suncorp is now capitalised at $8.7 billion, and is ranked among the 25 largest listed companies in Australia."
Mr Story said Total Shareholder Return was at an average compound rate of return of approximately 20% since 1996, meaning a shareholder who invested $10,000 in Suncorp in 1996, and reinvested the dividends, would now have an investment worth approximately $41,000.
"This is a satisfying result, achieved after significant work to restructure and improve the fundamentals of the organisation, and it vindicates the faith our shareholders have placed in Suncorp. The diversified financial services strategy is fully developed and Suncorp is focussed on its goal to become Australia's most desirable financial services company."
2004/2005 Outlook
CEO John Mulcahy said improvements across banking, insurance and wealth management, evidenced in the first quarter, would translate into good growth in underlying profit this year.
"Business conditions remain favourable. The economy is expanding steadily, interest rates, inflation and unemployment are under control and business confidence is high," he said.
"We would not expect profits to grow by another 61% this year but we remain confident about our earnings outlook and plan for a healthy improvement in underlying profit.
"Competition in banking continues to be as intense as ever, but that is healthy, and we are seeing no signs of a deterioration in industry fundamentals. While lending growth in the housing segment has moderated from the unsustainably high levels of recent years, the slowdown has been anticipated and is manageable.
"Business banking lending continues to be healthy and we remain confident that we will continue to outpace system growth rates.
"Retail deposit inflows have continued to be strong, and we are seeing growth in the deposit book exceeding system growth rates consistently. Net interest margins have remained stable for the first quarter and the credit quality of the book is exceptionally good.
"Therefore, as we outlined at the time of our results in August, we continue to expect to deliver banking profit growth, before tax, greater than single digits.
"In General Insurance, premium growth in the first three months was in accordance with our expectations, and was on track to reach at least 6% for the year. While competition is strong, we are confident that the various initiatives being implemented in general insurance will enable us to take market share from our competitors.
"Overall claims costs continue to demonstrate favourable trends, and there have been no major claims events to date, although we are only just entering the storm season. We continue to expect to report an insurance trading margin of between 11% and 14%, and probably towards the top end of that range.
"Wealth Management sales showed tentative signs of improvement in the first quarter, buoyed by increased investor confidence and easing property markets. Healthy equity markets also contributed to increases in planned and experience profits.
"We remain confident of achieving a double digit increase in underlying profit in wealth management in the full year."
Mr Mulcahy said customer solutions, customer service and culture were the focus of the organisation and were fundamental to meeting stakeholder needs and delivering strong financial performance.
"We continue to have the highest rate of product penetration in the Australian financial services industry and customer service remains one of our prime areas of differentiation. Underpinning this is a strong team with a culture of high performance," he said.
International Financial Reporting Standards (IFRS)
Chairman John Story said the financial services sector faced an enormous challenge to prepare for comprehensive changes, through IFRS, to the way Australian companies reported their accounts.
"The benefits that this will deliver are questionable, the international adoption of these standards is unlikely to be uniform and the compliance costs are high. Suncorp's accounts are already complex so this is a formidable challenge. We have budgeted $10 million for this purpose and that excludes the considerable costs of management time," he said.
"We will comply but it represents a significant burden, with little commensurate benefit."
Contact:
| Michelle Barry | Catherine Hughes |
| Phone 07 3835 5125 Mobile 0419 717 835 |
Phone 07 3835 5183 Mobile 0409 640 055 |
27 October 2004
next steps
For more information contact Suncorp Public Affairs, on 07 3835 5183 or 0409 640 055
