Suncorp (ASX:SUN): 18 months removed from retail banking, is it faring better?

In July 2024, Suncorp (ASX:SUN) ceased to be in retail banking following the sale of this division to ANZ. This came after a 2 year battle to get the deal through.

Now the company is a pure-play insurer, it must be looked at with a different lens. It’d never stack up to the Big 4, but does it stack up to the giants of the insurance sector including QBE (ASX:QBE) and Insurance Australia (ASX:IAG).

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Overview of Suncorp

Suncorp is relatively new, having been founded in 1996 through a 3-way merger of Queensland’s State Government Insurance Office (SGIO), the Queensland Industry Development Corporation (QIDC) and Metway Bank. The trio merged to create a diversified financial services company operating insurance, banking and wealth businesses under one roof.

Through the 2000s and 2010s it built a sizeable general insurance franchise (brands such as AAMI, GIO, Vero and others) while also growing Metway into what became Suncorp Bank.

For many years, Suncorp ran that integrated model – combining insurance with retail, business and mortgage banking – as a mid-sized player in Australia’s financial sector. Over time, Suncorp divested other non-core bits, sold its life insurance business and streamlined its portfolio, but the bank remained an important earnings and diversification pillar until the early 2020s.

No longer a bank

In July 2022 Suncorp agreed to sell its retail bank to ANZ for about A$4.9bn. That deal was aimed at reshaping Suncorp into a pure-play insurer and return substantial capital to shareholders.

It took 2 years to complete the deal as the transaction attracted regulatory scrutiny: the Australian Competition & Consumer Commission initially blocked it, but in February 2024 the Australian Competition Tribunal authorised the takeover and the Federal Treasurer later approved under financial sector ownership laws.

After satisfying a Queensland statutory requirement, the sale completed on July 31 2024, with ANZ welcoming around 3,000 employees and roughly 1.2 million Queensland customers into its fold. ANZ viewed the acquisition as adding scale and improving competitive positioning against the majors, financed partly by a large equity raise and expected cost synergies (roughly $500m annually). As for Suncorp, the company sponsoring Brisbane’s Lang Park saw this as a chance to get out of retail banking.

Better off in insurance?

Insurance is a peculiar industry to be in. It may appear to be all you have to do is sit back, collect premiums and hope you won’t have to pay them out. But…companies have to invest premiums, and they may need to pay them out.

Let’s look at its FY25 results. Its statutory profit was $1.8bn, well ahead of $1.2bn the year before, driven by one-off gains from the bank and insurance sales as well as improved investment returns and natural hazard experience.

The reconciliation of profit drivers shows that cash earnings — a key operating measure that strips out one-off sale gains and other non-cash items — was A$1.49bn, also up from FY24, with underlying insurance profitability supported by premium growth and disciplined underwriting.

Investment income was robust at A$766m, up from around A$661m previously, while the Gross Written Premium (GWP) across the general insurance portfolio was A$15.0bn, up about 6% on the year before. Natural hazard costs, always a key volatility factor in Australian insurers, totalled A$1.36bn, but were favourable to the year’s allowance by roughly A$205m despite Suncorp responding to 17 declared weather events and more than 120,000 related claims.

From a shareholder returns perspective, the board announced total ordinary dividends of A$0.90 per share. But, in addition to dividends, the company returned capital from the bank sale, distributing A$3.00 per share and a fully-franked special dividend of $0.22, and signalled an on-market share buy-back of up to A$400m commencing in September 2025.

What does the future hold?

Commentary from management highlighted that the simplified business structure — now squarely focused on general insurance — delivered resilience through disciplined pricing, improved customer metrics such as Net Promoter Scores, and robust capital buffers.

The company emphasised that the underlying insurance trading ratio remained strong at 11.9%, a key measure of underwriting profitability and well within target ranges, and that reinsurance strategies and investment positioning continue to underpin returns. One recent event to note were destructive winds in South-east Queensland and Victoria in October 2025 – the company expects a $220-260m impact.

For FY26 guidance, Suncorp has given fairly specific forward indicators: it expects GWP to grow in the mid-single digits as pricing moderates in some portfolios, and for its underlying insurance trading ratio to sit in the top half of its 10–12% target range. Suncorp also flagged higher natural hazard allowances for FY26 to build resilience and reaffirmed its disciplined capital management with dividends in the mid-range of 60-80% of cash earnings and continuation of the share buy-back program. In the longer-term, it has spruiked the potential of AI and asserted that benefits would flow to customers in ‘delivering more personalised and affordable insurance products’. Only time will tell there.

Analysts’ mean target price of $20.34 per share, up 17% from the current price. In FY26, Revenues are expected to increase from $13.2bn to $13.9bn although its profit is expected to fall to $1.1bn. For FY27, profits are expected to rebound to $1.3bn and revenues to $14.4bn. The company is trading at a P/E of 16.8x.

Conclusion

Suncorp is in better shape now that its gotten out of retail banking and its future looks bright. But as with any other insurer, there is always the risk of payout events causing a dent in its profits as well as detriorating financial markets impacting investments. This is key for investors to weigh up in making decisions on whether or not to buy.