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Suncorp earnings preview: what to expect ahead of full-year results

As we approach Suncorp’s 2019 earnings release, analysts continue to like the insurance giant, with the Wall Street Journal noting that six out of 12 analysts covering the stock rate it as a buy.

Suncorp (ASX: SUN) Source: Bloomberg

Suncorp Group Ltd (ASX: SUN), the banking, insurance and superannuation heavyweight has failed to gain much traction in the last six months, with its share price underperforming the ASX 200 by a good margin.

However, as we draw closer to the company’s full-year results, set to be announced August 7 – the company's performance over the next six months, opposed to its last six – will likely be the primary focus for investors.

Here’s some of the key things investors may want to focus on ahead of Suncorp’s full-year results:

Less volatility, hopefully

Suncorp Group Ltd's Australian insurance segment reported profits some 44% lower in the 2019 first-half, as a costly write-down and a string natural hazards wreaked havoc with the company’s bottom-line.

One of these natural hazards alone generated 31,000 insurance claims.

By comparison, Suncorp’s New Zealand business saw impressive profit growth of 82% as weather remained good and working claims improved.

Barring these isolated events, the company continues to tout a robust financial position, maintaining a dividend payout ratio of 81% – on a dividend yield of 5.5%.

Though Suncorp’s first-half losses likely disappointed investors, Suncorp’s CEO and Managing Director, Michael Cameron highlighted that the company:

‘Remains well placed to mitigate the impact of further natural hazard events in 2H19 through a combination of its main catastrophe program, dropdown aggregate protection and natural hazard aggregate protection.’

Suncorp, though influential, cannot control the weather.

Such a proactive response not only speaks to the strength of Suncorp’s management; but potentially bodes well for the company’s 2019 full-year results.

Suncorp: the digital bank?

Suncorp’s focus on digitising a number of its key offerings has been a standout for the company in recent times.

The company saw impressive digital growth in the first-half of 2019, with Suncorp’s CEO pointing that:

‘Digital users [were] up 17% since June, and as I said earlier, 40% of the December hailstorm claims were made digitally.’

This new-found digital focus has already helped bolster the company’s banking arm; with Suncorp noting that:

‘Deposits on the other hand have grown well above system, reflecting improved digital capabilities.’

In a post-Royal Commission world, investors are also likely pleased to know that Suncorp is focusing on maintaining a profitable, but centrally low-risk home loan book.

Finally, during the FY2019 results, investors will likely be keen to see further growth stemming from Suncorp’s digital initiatives. Ultimately, this focus on digitisation remains a key trend across the financial sector as a whole and doesn’t look like slowing down any time soon.

The 2019 financial year and beyond

Even though Suncorp Group Ltd saw its profits hurt by volatile weather conditions and costs associated with the Royal Commission in the first-half, analysts continue to like the multi-faceted financial company.

Specifically, according to the Wall Street Journal, of the 12 analysts covering the company, six rate it a buy, three a hold and only two a sell. Overall, Suncorp’s consensus rating is overweight.

Suncorp has projected top line growth across the group of between 3 to 5% for the 2019 fiscal year. Though modest, for such a mature company valued in excess of A$17 billion, this growth rate appears reasonable.

Finally, Suncorp has further maintained that for the 2019 full-year and beyond, the company ‘will seek to maintain an ordinary dividend payout ratio of 60% to 80% of cash earnings and remains committed to returning surplus capital to shareholders.’

Year-to-date the Suncorp Group Ltd share price has underperformed the ASX 200 benchmark, rising a touch over 8% in that period.

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