This morning, Suncorp (SUN), the now pure-play East Coast insurer, delivered solid full-year 2026 results that were ahead of expectations. The HNW Portfolios have a 3% weight to SUN.
Key Points:
- Profits Up: Suncorp’s profits were up 5% to $1,042 million. The underlying business has been operating well with margins at the top end of guidance, led by a structural tailwind in pricing in Consumer and growth in the
- Commercial and Personal Injury portfolios. Higher interest rates continue to benefit SUN, with the company having a net investment return on its float of $533 million.
- Natural Hazards: Cats were $254M above allowance, though this was expected as virtually all of the weather events occurred in the first half. While annoying for shareholders and stressful for policyholders, without storms and property damage, there would be no need for insurance.
- Rewarding Shareholders: SUN announced a final dividend of $0.52 with an additional $0.10 special dividend, both fully franked. In conjunction with these dividends, SUN announced a new $250 million on-market share buyback to occur over the next year. In FY26, SUN’s last buyback decreased the share count by 2%.
- Outlook: Over the next year, SUN management expects premium growth of between 3% and 5% with margins close to 12% and investment returns continuing to be strong.
CEP Strategy: SUN is now a pure domestic insurer providing portfolio exposure to rising insurance premiums across Eastern Australia as well as higher interest rates; the company has re-rated now that it is a pure-play insurer. We have preferred SUN over IAG as our domestic insurance exposure as it is much cheaper, is supported by strong cash flows in the coming years and has the potential to benefit greatly from AI innovation. AI aids in fraud detection, pricing and reducing claims handling costs. SUN trades on 15x forward earnings with a 5% yield.
SUN finished up +3.3% to $19.18
