Suncorp Group Ltd., an Australian lender and insurer, declined after reporting a lower-than-expected dividend and amid concerns flooding in January will dent full-year profit.
Suncorp shares fell 0.9 percent to A$11.56 in Sydney, its biggest drop since Feb. 11. The benchmark S&P/ASX 200 Index gained 0.3 percent. Suncorp said it will pay an interim dividend for the six months ended Dec. 31 of 25 Australian cents a share, compared with the median forecast of five analysts surveyed by Bloomberg News for 27 cents.
While benign weather and reduced claims in the first half helped the Brisbane-based company increase net income by 48 percent, flooding and a cyclone in Queensland state in January has already taken natural hazard claims to as much as A$417 million ($431 million), compared with a full-year allowance of A$520 million, Suncorp said. The dividend payout ratio was 52 percent of cash earnings, less than the full-year target of 60 percent to 80 percent, according to a regulatory filing.
“We are conservative at the interim for reasons such as the weather,” Chief Executive Officer Patrick Snowball said in an interview with Bloomberg Television. While the insurer had a strong balance sheet, insurers were facing the most volatile part of the year for claims, he said.
The payout ratio “is at odds with a company who claims to have a very strong capital position and potential for further special dividends in the future,” said Andrew Adams, an analyst with Credit Suisse Group AG. “With up to A$417 million of their weather allowance already used to date, it does highlight the downside risk to second half earnings.”
Net income rose to A$574 million in the six months ended Dec. 31 from A$389 million a year earlier, the company said. That compared with a forecast of A$567.7 million based on the average of three analyst estimates compiled by Bloomberg. Gross written premium increased 9.6 percent to A$4.23 billion.
Operational efficiencies, revenue growth, favorable investment markets and relatively benign weather conditions all contributed to the improved result, the company said in the statement.