Suncorp's insurance and banking businesses have suffered a hit from the COVID-19 crisis. Image by Dave Hunt/AAP PHOTOS

Financial Services

Virus hit, pay errors add to Suncorp costs

2020-05-12 14:21:27

Insurance and banking giant Suncorp will take a hit of $133 million on account of the coronavirus crisis and has revealed incorrect payments to staff will cost it up to $70 million.

Suncorp says COVID-19 will have a range of impacts across its businesses due to the expected sharp deterioration in the economy, increased unemployment and a decline in residential and commercial property prices.

“We have already received thousands of requests for financial hardship from both our bank and insurance customers and have provided discounts and premium waivers to 12,300 insurance customers in Australia and New Zealand and approved $4.05 billion in loan deferrals,” group chief executive Steve Johnston said in a statement on Monday.

Suncorp outlined a pre-tax net loss of $205 million in its investment portfolio for the March quarter on account of volatility due to the COVID-19 crisis, although it said some of the losses had been recouped in April.

It is also expecting an increase in claims across its 500,000 landlord policies for loss of rental income but has seen a decline in claim lodgements in the consumer motor insurance business since the introduction of mobility restrictions in March. 

It expects gross written premiums in the insurance business to be negatively affected by hardship and lower economic activity and said it its lending portfolio is likely to contract in the June quarter.

Larger rivals including Westpac, NAB and ANZ have already announced additional provisions for coronavirus-related losses after social distancing measures introduced in March led to a standstill in economic activity.

But unlike some of its larger rivals, Suncorp did not defer shareholder payouts and said it will consider any final ordinary dividend during the normal process of preparing the year-end accounts.

That seemed to cheer investors, with Suncorp share jumping 45 cents, or 5.0 per cent, to $9.36 each by 1410 AEST.

In February, Suncorp said a surge of bushfire and hailstorm claims had hit first-half profit, with the insurer’s bottom line also hurt by higher regulatory costs and an increasingly competitive mortgage market. 

Suncorp said group costs for the year were estimated to be slightly above $2.7 billion, including pay and leave entitlements remediation to some employees of $40 million to $70 million.

It said an internal review of pay and leave practices started in November 2019 had found inconsistencies in rostering and pay systems, which may have led to errors in payments of overtime, shift penalties and public holiday loadings.

Suncorp Bank will also take a non-cash impairment charge of $90 million to write down the value of the deposit and transaction modules of the core banking platform.

In a separate announcement, Suncorp Bank also announced the resignation of its newly appointed CEO Lee Hatton after just three months in the job.

It said Ms Hatton was moving to a Sydney-based financial technology company – which media reported as Afterpay – and a recruitment process was underway to consider internal and external candidates. 

Bruce Rush, executive general manager deposits and payments, will be the acting CEO for the banking and wealth unit.