In a year dominated by the Financial Services Royal Commission our purpose has never been more relevant and being a responsible, transparent and ethical company is at the heart of our response to the Commission’s findings and recommendations.
As part of our aim to continually improve, we are undertaking a number of measures to strengthen our business. This includes investing $155 million in governance and regulatory programs. While these come at a significant cost, we see it as an opportunity to further improve our processes and deliver better outcomes for customers. That, in turn, will create a more resilient and sustainable Suncorp.
#Financial performance
Suncorp’s financial year 2019 net profit after tax (NPAT) was $175 million. Cash profit, which is the basis upon which we calculate our dividend payments, was $1,115 million. Accordingly, the full year ordinary dividend is 44 cents per share, fully franked, slightly below last year’s payment. The difference between the NPAT and cash profit is predominately explained by the loss on sale of the Australian Life Business which was finalised in February. The decision to divest the Australian Life Business, and the successful completion of the sale to TAL, will further de-risk and simplify our business. As part of the sale transaction, we have agreed a 20-year partnership with TAL which will see us continue to distribute life insurance products under our portfolio of market leading brands.
The Board has committed to return the proceeds of the sale to shareholders in the form of a $506 million return of capital with a related share consolidation. The proposed capital return follows the payment of a 8 cents per share, fully franked, special dividend from the sale proceeds on 3 May 2019. If approved by shareholders at the AGM, the return of capital payment will be made on 24 October 2019 and will bring the total capital returned to shareholders from the sale to $610 million, slightly above the $600 million previously advised.
The Australian Insurance business has delivered a profit after tax (PAT) of $588 million which is a reduction of 13.7 per cent on the prior year. The insurance performance was impacted by a series of natural hazard events, including the Townsville floods and Sydney hailstorm, resulting in an increase of $155 million above our natural hazard allowance. Underlying margins, which adjust for weather and investment market volatility, have improved over the year.
The Banking & Wealth business has delivered a PAT of $364 million, which is a small reduction on the prior period. This reflects a slowdown in the housing sector and increased competition for both mortgages and deposits. Impairment losses remain very low reflecting the high-quality nature of the bank’s lending book.
The New Zealand business has delivered a PAT of $245 million, an 81.5 per cent increase on the 2018 financial year. Strong growth in written premium, improvements in claims management and a benign year for natural hazards contributed to this record profit.
At the Group level, regulatory and remediation costs of $155 million were also well above our expectation but, as I pointed out, these will result in better outcomes for our customers. The Business Improvement Program (BIP), has again exceeded targets, partially offsetting these higher regulatory project costs. The program surpassed its original target for 2018–19 of $225 million, with net benefits of $280 million for the year.
#Embracing a digital future
We continue to invest in technology with a focus on ensuring our systems and processes are efficient, while at the same time making it easier for our customers. Nearly half of motor claims during the Sydney hailstorm were lodged online, with a third being completed by the customer through zero-touch functionality. This process has also extended to GIO, Suncorp, Shannons and Apia home insurance customers. Our focus is on using technology to deliver best-in-class services that benefit our customers while also streamlining processes for our people.
In 2018–19 we also added new functionality within the Suncorp App. The App is gaining traction, with more than 525,000 downloads since August 2018. It was also awarded the Best Innovation in Customer Experience at this year’s RFi Banking Awards. Importantly, the App and our broader digital program positions us well for the introduction of Open Banking and can be leveraged more broadly going forward.
#Being recognised
Pleasingly we have maintained gender balance of women in leadership and have been recognised as an Employer of Choice for Gender Equality by the Workplace Gender Equality Agency for the sixth year running. This award recognises Suncorp’s focus on being a leader for workplace gender equality and building an inclusive culture.
It was also great to see our people being recognised by the industry with our New Zealand business awarded Direct General Insurance company of the year and our Bank named Money Magazine’s Bank of the Year and Business Bank of the Year for the second consecutive year. This award recognised the Bank’s investment in new digital capabilities, sharp focus on listening to customer feedback and ongoing commitment to ensuring all customers have access to competitive rates and flexible, rewarding products.
#Outlook
Over the planned period we are focused on driving a digital strategy that will strengthen our core businesses and improve customer outcomes. In 2019-20 we are:
- Aligning Suncorp to improving the performance of our core businesses
- Embracing regulatory change in order to build trust and improve customer outcomes
- Leveraging our investment in digital and data
- Driving operational excellence, removing duplication and optimising the Group’s cost base
- Creating a more resilient Suncorp delivering high yield and above system growth
To deliver on our strategy, we are simplifying our operating model to make it easier for our people to work together, to help our customers and importantly, to execute on our priorities.
This change, also enables Suncorp to build on our strong digital foundations. We are ready to scale, leverage and extend our digital capability to deliver even more benefits to our customers as well as our business.
To drive this, we are creating a new function called Customer & Digital – this dedicated team will have the mandate to responsibly grow and evolve our business.
We are also aligning our contact centres, stores and intermediary teams together with our Banking and Insurance operations. This will remove duplication and complexity and improve accountability. It also allows us to adapt more quickly to changing community expectations and to execute our priorities faster.
Our achievements would not have been possible without the hard work and dedication of our people. It has been a challenging but productive year and I would like to thank them for their perseverance and their ongoing commitment to supporting our customers. I would also like to thank you, our shareholders, for your continuing support.