Suncorp Group has reported it remains upbeat even though its net profit after tax (NPAT) took a 24% hit during the first half of the 2021 financial year.
On Tuesday, the company recorded NPAT of AU$490 million. Meanwhile, cash earnings lifted nearly 40% compared to the prior year to AU$509 million, which the company attributed to an increased focus on its core businesses and the decision to rejig its operating model to fast track its digital and data-driven transformation.
The decision was made last July when the company stood up a new business function called technology and transformation and appointed CIO Adam Bennett, who joined the group from the Commonwealth Bank of Australia, to lead it.
"Over the past year, we have refocused our strategy, continued to implement the ongoing regulatory program of work, improved our customer service, reinvigorated our brands, further digitised our business, and become more efficient ... We are seeing improved momentum in our Australian and New Zealand insurance businesses as evidenced by strong top-line growth, while our bank is also delivering improved performance," Suncorp Group CEO Steven Johnston said of 1H21 results.
During the half year, the group reported that its banking business saw the number of digitally active customers increase by 7.8% on December 2019, taking the total proportion of digitally active personal bank customers to 53.3%.
Suncorp App, meanwhile, saw average monthly logins per customer increase to 17.9, almost double when compared to the same period the previous year.
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Additionally, Suncorp reported a "material increase" in the proportion of new home loans and deposit accounts originating via a digital channel. For instance, the proportion of home lending settlements initiated via the digital channel in the half almost doubled to nearly 14%, while the proportion of deposit accounts that originated online increased by 4% to 63%.
As a result of the ongoing technology transformation, the group saw operating expenses remain in line with the prior period at AU$1.34 billion. Of that, AU$10 million was due to higher technology costs, including the deployment of a new enterprise-wide telephony platform and increased cloud usage.
An additional AU$36 million expense was also reported in the other profit/loss after tax line, which Suncorp was charges partly related to the restricting costs involved in implementing of the group's new operating model.
"These comprise AU$23 million of redundancy costs following the implementation of the new operating model last year and a further AU$13 million of real estate and bank store optimisation costs, as we seek to optimise our real estate footprint following COVID-19," Johnston said.
Suncorp also provided an update on its three-year digital transformation plan. It highlighted that some of the key initiatives to be delivered would include introducing digital, data, and automation capabilities across its insurance, banking, and Suncorp New Zealand business, which are aimed at simplifying products and processes.
"Optimising distribution through an integrated digital‐first approach is key to improving customer experience and transforming our cost base. Today, 75% of our sales and service activities are voice-based. COVID-19 has allowed us to envisage a future where that percentage will fall significantly. We need to invest to meet this changing customer need," Johnston said.
Looking ahead, the group said while it remains uncertain given the COVID-19 pandemic and its economic impact, it expects operating expenses, including restructuring charges, to come in around AU$2.8 billion in FY21 and FY22, and return to around AU$2.7 billion by FY23.
"Suncorp enters the second half of FY21 in good shape, with momentum starting to build across our businesses and our balance sheet remaining very strong," Johnston said.
"The group's three-year plan addresses customers' growing preference for digital and evolves how we work and serve our customers as technology changes."
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