This week, the person who led Suncorp Group Ltd (ASX: SUN) through the GFC and one of the worst periods of natural disasters for an insurance company in recent memory, Suncorp CEO Patrick Snowball, announced he will be retiring from his position.
Taking the role in 2009 after the general insurer's stock went from a 2007 high of $19 to a deep low of around $4.50 in 2009, Mr. Snowball will leave the company a much stronger business and financially solid. Now the stock stands around $14.79.
It is a favourite among dividend investors who have enjoyed rising dividends, as well as three special dividends in the last three years – more than doubling total dividends within the last four years.
Business restructure generating big savings
Mr. Snowball won't be the CEO when Suncorp's current simplification program is to be completed in 2016, yet he oversaw the business restructure that will generate around $265 million in cost savings by 2016.
Suncorp is using those savings to upgrade computer systems, keep its insurance products priced competitively, and increase the bottom line. Analysts are forecasting that by 2017, earnings per share could be about double that of financial year 2014's 57.1 cents per share.
Suncorp's new direction
Suncorp is growing, yet more competition from smaller discount insurance companies could hamper that growth. The next CEO, who should be chosen by later this year, has to take over the transformed Suncorp and make it a stronger financial service provider.
With new management changes, there could also be changes to the business structure itself. Suncorp operates Suncorp Bank, the fifth-largest bank in Australia. If Suncorp and the new CEO want to concentrate on the core insurance business, it could be time to sell or even spin off the banking arm.
Because Suncorp is based in Queensland, the Bank of Queensland Limited (ASX: BOQ) might be a possible tie-up for a strong regional bank. Bendigo and Adelaide Bank Ltd (ASX: BEN) could be a good combination for regional diversification.
One other possibility is that Wesfarmers Ltd (ASX: WES) may be interested in the bank since it is considering entering into financial services more. Both Wesfarmers and Woolworths Limited (ASX: WOW) are looking for new markets that are big enough to move the needle for the retail giants and bank lending is one very big option.
For investors, I would stick with your Suncorp stock and perhaps start building up your position. The company is on good financial footing and projected to grow at a good rate.
There could also be more capital returns to shareholders in the near future, so with that amount of good cards turned up for the insurer, I believe the stock could be a good earner in your portfolio.
