Suncorp’s Buy-Back and Capital Strength Face Inflation and Weather Risks

Strategic Transformation Completed

Suncorp Group Limited has closed FY25 with a landmark $1.823 billion net profit after tax, a figure buoyed by the successful divestment of its banking and New Zealand life insurance businesses. These sales mark the culmination of a multi-year simplification strategy, positioning Suncorp as a focused general insurer across Australia and New Zealand.

CEO Steve Johnston highlighted the company’s commitment to delivering value for customers and shareholders through this streamlined business model. The divestments have allowed Suncorp to concentrate resources on enhancing insurance products and services, while maintaining robust profitability and capital strength.

Financial Performance and Operational Highlights

Underlying the headline profit were $252 million and $99 million gains from the sales of Suncorp Bank and New Zealand Life respectively, alongside favourable natural hazard experience that was $205 million below allowance. Gross written premiums rose 6.3% to $15.009 billion, reflecting pricing adjustments to counter claims inflation and increased natural hazard allowances. However, growth moderated in the latter half of the year as inflationary pressures eased and competition intensified.

The underlying insurance trading ratio (UITR) improved to 11.9%, driven by the earn-through of prior pricing increases and disciplined cost management. Operating expenses increased modestly due to strategic investments in digital transformation and customer experience initiatives, yet the total expense ratio fell to 18.6%, underscoring operational efficiency.

Divisional Performance Amid Challenges

Consumer Insurance delivered a profit after tax of $686 million, supported by premium growth and improved claims management despite elevated fire and water claims. Motor insurance unit growth slowed in the second half due to competitive pricing incentives, while home insurance units remained flat.

The Commercial and Personal Injury Insurance segment posted a 10.8% profit increase to $422 million, with strong growth in Platforms and tailored lines portfolios. However, higher loss ratios in personal injury and CTP portfolios tempered margin expansion.

Suncorp New Zealand’s general insurance business saw profit after tax nearly double to NZ$398 million, benefiting from prior year pricing increases and moderated claims inflation. The sale of the New Zealand Life business was completed in January 2025, with a seven-month profit contribution of NZ$21 million.

Capital Management and Shareholder Returns

Suncorp’s capital position remains robust, with Common Equity Tier 1 capital $997 million above the midpoint of its target range. The company announced an on-market share buy-back program of up to $400 million commencing September 2025, reflecting confidence in its capital strength and commitment to returning excess capital to shareholders.

The Board declared a fully franked final dividend of 49 cents per share, maintaining a payout ratio of 70.8% of cash earnings. This follows a capital return and special dividend earlier in the year totaling $3.22 per share, derived from the Bank sale proceeds.

Looking Ahead – Navigating Affordability and Resilience

As inflationary pressures ease and reinsurance markets stabilize, Suncorp anticipates mid-single digit premium growth in FY26. The company continues to advocate for initiatives to improve insurance affordability and resilience, including mitigation investments, customer incentives, and regulatory reforms.

Strategic investments in digital capabilities and artificial intelligence are expected to enhance customer experience and operational efficiency. Suncorp’s disciplined capital management and focus on sustainable returns position it well to navigate the evolving insurance landscape.