Insurance News: 03 Feb 2010
THE changes being wrought at Suncorp-Metway under the recently appointed chief executive, Patrick Snowball, have received a significant boost from one of the main ratings agencies, which is expecting the bancassurance group to report improved profits later this month...
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The consolidation of Suncorp's insurance operations under one corporate umbrella - Vero Insurance - has seen Fitch assign one of its highest ratings, A+, to the new entity and provide a vote of confidence in Mr Snowball since he took on the top job last September.
Fitch's review of Suncorp's financial standing has also lent weight to Mr Snowball's declaration that the group will hang on to its previously loan-stressed banking business, which was close to being sold to ANZ Bank at the height of the global financial crisis 18 months ago.
With the banking arm now better capitalised, Fitch has concluded that it is less likely to be a drain on the insurance division, which includes the brands AAMI, GIO and Vero.
Fitch was ''pretty comfortable'' with the bank division, its associate director of financial institutions, John Birch, told BusinessDay.
Suncorp last year split its $50 billion-plus loan book into a ''good bank'' and ''bad bank''of which the latter is slowly being wound down. The group intends to keep the lower-risk banking operations including its retail branch network.
But it is the dominant insurance side of the group that has largely attracted the attention of Fitch, which said the A+ rating with a stable outlook reflected its strong business franchises and their respective market positions. These were now ''adequately capitalised'' and had ''satisfactory financial leverage''.
Huge payouts caused by storms, floods and bushfires have blighted the insurance sector's profits over the past two years. But the latest financial reporting season, covering the six months to December 31, is expected to see a recovery in bottom line earnings.
Suncorp, which reports its interim results on February 24, is forecast by Deutsche Bank to turn in first half net profits of $400 million, the bulk of that from its insurance operations. That compares with $258 million for the corresponding period 12 months ago and only $348 million for the whole of the 2009 financial year.
Fitch indicated that greater amounts of capital will be generated as a result of the higher earnings which, kept within the business, will help support its rating of Suncorp.
At the same time, the agency says wide-ranging management changes, including Mr Snowball's arrival, the appointment of a new finance director and chief risk officer and an overhaul of divisional bosses, have strengthened the group, not weakened it.
SOURCE: Danny John - Sydney Morning Herald
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