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Suncorp Declines Most Since August on Flood Claims

Feb. 20 (Bloomberg) -- 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.

To contact the reporter on this story: Narayanan Somasundaram in Sydney at nsomasundara@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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