Suncorp’s Stable Outlook Maintained Despite Earnings Concerns: S&P

Suncorp Group Ltd. has received a vote of confidence from S&P Global Ratings with a stable outlook. This is underpinned by the expectation that the group will uphold strong capital and earnings. However, S&P has downgraded its long-term issuer credit rating due to the diminished earnings diversity after the divestment of its banking division and the impending sale of its life insurance arm.

The company has a significant capital plan in store. It aims to return a whopping $2.5b (A$4.1b) of excess capital from the bank sale to shareholders in the first half of 2025, contingent on business requirements. There are also intentions to funnel additional surplus to its property and casualty (P&C) business or distribute it among shareholders over time.

The P&C business, a major force in Australia and New Zealand, is a cornerstone of Suncorp’s creditworthiness. In 2024, it logged a $622.8m ($1b) profit after tax. S&P foresees a gentle upward trend in profits over the next three years, spurred by rate hikes, albeit with lower investment returns. Suncorp’s prudent capital management and reinsurance safeguards, strengthened post-bank sale, along with adjusted targets factoring in tax changes and reduced diversification, are also key aspects of its current financial landscape.

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