IAG upgrade puts pressure on Suncorp
Sydney Morning Herald
Friday February 5, 2010
SUNCORP-METWAY will face increasing pressure from investors to update the market about its improving financial performance before its half-year results, as analysts forecast profits would be better than expected after its main rival upgraded earnings.Brokers expect an equally strong interim result from Suncorp, owner of the AAMI, GIO and Vero brands, and expect this to translate into a full-year net profit of about $800 million, a further gain on the most recent expectations.With Insurance Australia Group alerting the market to an insurance margin improvement that could produce an $80 million pre-tax rise to $488 million at the halfway stage, analysts say Suncorp will also have benefited from lower claim payouts and good cost control.RBS is looking for a group first-half net profit of $387 million, a $119 million improvement on the same period last year, as its insurance, banking and wealth management operations enjoy better performances.If calmer weather results in fewer storms, floods and bushfires, Suncorp could produce a full-year profit of $783 million by the end of June, said RBS, which maintained its "buy" recommendation on Suncorp's shares.UBS responded to IAG's profit upgrade by saying Suncorp was its top pick in the insurance sector and forecasting a huge rise in the group's net earnings to $806 million for this financial year. Part of the benefit will come from lower bad debt charges at its banking arm, UBS said.Unlike IAG, which had advised investors of better margins to come from its insurance division, Suncorp has shied away from providing any guidance as it went through an overhaul of its operations led by its new chief executive, Patrick Snowball.That was being given as a reason why the company has felt less of a need to follow IAG in briefing the market about its improved performance before it releases its first-half results at the end of the month."If we had anything material to release to the market, then we would," a Suncorp spokesman said in response to the latest profit upgrades.Suncorp's shares closed unchanged at $9.27.
© 2010 Sydney Morning Herald