Suncorp first half profit to jump on strong insurance result

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Insurer and regional bank Suncorp-Metway Ltd expects to report up to a 45 per cent surge in first half profit following a following a strong contribution from its insurance division.

But the expected improved profit will only take Suncorp’s earnings to just below where they were two years before.

Net profit for the six months to December 31 will be between $355 million and $375 million, Brisbane-based Suncorp said in a statement on Wednesday.

That compares with the $258 million profit reported in the first half of 2008/09 after Australia’s biggest general insurer was hit by higher claims from severe weather conditions and bad debts at its bank.

Suncorp reported a profit of 384 million for the 2007/08 first half.

“The improved result is primarily due to a strong contribution from the general insurance business which has benefited from more favourable weather conditions and enhanced returns from the investment portfolios,” Suncorp said.

The final result is subject to completion of its accounts and final review by the Suncorp board and external auditors.

Suncorp has benefitted from improved weather conditions, just like rival Insurance Australia Group Ltd (IAG), as the country moves to a dryer El Nino pattern with less rain, storms, hail and flooding, resulting in fewer claims.

IAG announced last week that it had more than doubled its first half insurance profit.

Suncorp and IAG have also been increasing premiums to rebuild insurance margins, which had deteriorated over recent years.

Shares in Suncorp gained 18 cents, or 2.01 per cent, to $9.12 by 1109 AEDT. The stock has almost doubled from the $4.55 12-year low close on March 3, but is still less than half its peak of over $21 reached in February 2007.

Chief executive Patrick Snowball has been seeking to rebuild the company and has said he intends to keep the three divisions of insurance, banking and wealth management, contrary to speculation that Suncorp will divest its bank.

Mr Snowball took up his position in September after the previous chief, John Mulcahy, left early in 2009 following boardroom pressure and a falling share price.

To rebuild the bank unit, which was hit by rising bad debts during the financial crisis, Suncorp divided the lending portfolio into two parts, core and non-core. The core operation is focussed on personal banking, mortgages and lending to small and medium sized businesses.

Suncorp is gradually running off and disposing its non-core bank assets including lease finance, structured finance, development finance and property investment.

Detailed results for the half year to December 31 will be released on February 24.

AAP

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