Despite strong gains from Suncorp's (ASX: SUN) insurance division, full-year profit decreased by 32% to $491 million.
Shareholders were expecting the profit since the company advised late last month that the sale of its bad bank loans to Goldman Sachs would result in heavy losses. The loss incurred from the sale was $632 million but, excluding one-off items, underlying profit still managed to grow 19%to $1.23 billion.
In its full-year report released this morning, the company's long-term potential was centre stage. "Suncorp and its stakeholders can now focus on the true value of the Group". In addition the company's focus on its 'One Company, Many brands' and operational efficiencies have helped the company deliver strong results in number of divisions.
Key results include:
- General insurance gross written premium (GWP) up 8% to $8,589 million
- Core bank lending up 9.5% to $47.5 billion
- Life risk individual in-force premium up 8.7% to $785 million
Suncorp general insurance performed strongly in the past year thanks to increasing premiums and less claims. General insurance profit was $883 million, up from $493 million in 2012. Top-line growth, operational efficiencies and favourable investment movements enabled an insurance trading result ratio of 13.1%.
Strength in general insurance buoyed the poor results in banking which realised a loss after tax of $343 million compared to a profit after tax of $26 million in 2012. In addition, Suncorp Life "was impacted by adverse experience particularly disability claims and lapses" and resulted in a profit of $60 million compared to $251 million last year.
Foolish takeaway
Shareholders were prepared for poor results from Suncorp, but today's report will likely affect the share price in the short term. This Fool remains confident in the company's medium-term outlook, but at current prices it's not a bargain. Basic EPS was 38.42 cents to 30 June, down from 56.68 cents in the previous period, which will make the stock expensive on current valuations going forward. Investors looking for a 'bargain' could perhaps eye off other companies such as Challenger (ASX: CGF) or Insurance Australia Group (ASX: IAG).
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Motley Fool contributor Owen Raszkiewicz owns shares in Challenger.
