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Suncorp Group Ltd: New Operating Model and COVID-19 Update

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Suncorp Group Limited (ASX: SUN) is an Australian and New Zealand company that specialises in providing financial service to consumers (banking, insurance and superannuation). Suncorp has a market capitalisation of A$11.8 billion.

 

SUN

 

What has Suncorp announced today?

Suncorp announced today a large re-structuring of the company’s operational model along with a FY20 COVID-19 update. Changes to Suncorp’s operational model include four main aspects. Firstly, accountability for the performance of Insurance (Australia) is to be assumed by two executives. One executive is to be focused on underwriting, distribution, brands, marketing, product design and innovation; and the other executive is to be responsible for all aspects of claims management and operations. Secondly, Suncorp will be combining several Insurance (Australia) and Group functions to create a more streamlined and efficient operational structure. Thirdly, greater end-to-end operational accountability within Banking and Wealth and Suncorp New Zealand to drive improved performance. Finally, aligning Group Strategy and Technology to fast-track digital and automation capabilities and opportunities.

Suncorp’s Insurance Product and Portfolio will now have a Chief Executive Officer, which will oversee insurance distribution channels including contact centres, digital channels and intermediated partnerships as well as customer strategy, brand and marketing, product and pricing, and innovation. Current Chief Customer & Digital Officer, Lisa Harrison, has been appointed to the role.

A new Chief Operating Officer will also be added to their structure, this role will lead all aspects of claims management and operations and some Group functions including real estate management and procurement. Paul Smeaton has been appointed to this role.

Regarding Suncorp Banking and Wealth, Clive van Horen has been appointed to the vacant CEO Banking & Wealth role. This will allow Suncorp’s Banking and Wealth will have accountability for all Banking and Wealth operations, customer strategy, finance, marketing and digital distribution, with several functions moving from centralised teams.

This new structure is aimed at improving competitiveness of the bank through faster decision making, greater digital capability and the ability to address the direct expense base.

Suncorp also expected the FY21 natural hazard allowance to increase by $90 million to $130 million. Further details on this will be presented in the FY20 results.

Suncorp’s FY20 COVID-19 update shows that in Insurance (Australia) motor claims frequency is 25% lower compared with the corresponding period. Regarding Suncorp’s Banking and Wealth business, 15.6 thousand home loan deferrals and 3.3 thousand small business loan deferrals were reported. This represents around 11% of the value of the book.

What is the market reaction to Suncorp’s announcement?

The market reaction to Suncorp’s announcement today is negative. Suncorp’s share price is down around 3.2% and is currently trading at A$8.935. The reason why this market reaction is negative is attributed to the fact that the Australian market today is up around 0.8%. Suncorp has a forward P/E ratio in the high-teens and has an annual dividend yield of around 5.8%.

 


Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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