Suncorp Group recorded a net profit after tax (NPAT) of $453 million for the year to 30 June 2011.* This result, which is down 42% on the previous year, was achieved despite a once in a lifetime series of major events across Australia and New Zealand affecting all operating businesses.
Profit after tax from the General Insurance, Life and Banking businesses was $625 million (2010: $823 million).
General Insurance
General Insurance profit after tax for the year reduced to $392 million (2010: $557 million). The cost of natural hazard events was $325 million above expectations. Additional reinsurance protections were $232 million.
Improvements in long-tail claims management and reduced claims handling costs resulted in reserve releases that lifted the insurance profit by $310 million.
The underlying insurance trading result (ITR) ratio improved from 9% to 10.8%, after eliminating the impact of abnormal weather events, reserve releases and other one-offs. Premium income increased 3.6% to $7.28 billion (2010: $7.03 billion). Gross written premium in the home and motor classes was up 11.5% and 4.4% respectively.
The New Zealand operations reported a pre‑tax ITR loss of $203 million (2010: profit $70 million). Although the Group's comprehensive reinsurance program ensured protection against approximately A$2.5 billion in claims arising from the Christchurch earthquakes, we incurred substantial costs purchasing additional reinsurance cover.
Suncorp Bank
Suncorp's Core Bank reported a profit after tax of $259 million (2010: $268 million).
Core loans increased 6.1% to $39.6 billion (2010: $37.3 billion) with good growth coming in all sectors. The Core Bank margin improved to 1.9% (2010: 1.8%).
Bad debt expenses at $51 million remained stable despite the impact of the regional Queensland and Brisbane floods.
The Non-core Bank incurred an after tax loss of $175 million (2010: $224 million). The run-off of this portfolio progressed ahead of expectations with total lending reducing to $7.7 billion, down $4.9 billion for the year. Impairment losses reduced significantly to $274 million (2010: $428 million).
Suncorp Life
Suncorp Life's net profit after tax was $149 million (2010: $222 million). Profit was impacted by economic conditions in Australia and New Zealand, leading to higher than expected claims and policy lapses.
Life in-force premium increased 4.3% to $818 million (2010: $784 million) with strong growth of 44% in the sale of life products in the direct channel.
Suncorp Life's embedded value remained stable at $2.4 billion.
Capital and dividend
Suncorp Group's strong capital position remains well protected with conservative targets and a surplus capital of $1.245 billion above the Group's operating targets. Accordingly, the Board has increased the target dividend payout ratio to between 50% and 70% of cash earnings (excluding divestments). The final dividend of 20 cents brings the total payout ratio to 70%, at the top end of the Group's increased target payout ratio (excluding divestments).
* Group net profit after tax ($453 million) is the sum of the profit after tax from Business Lines ($625 million) and items added and deducted at the Group level. These include loss on sale of subsidiaries, investment income on capital held at the Group level, consolidation adjustments, amortisation of acquisition intangible assets, and the related income tax benefit.