Sales pitch sparks rout

SUNCORP’S decision to spend up to $100 million to spruce up sales of its insurance-banking products yesterday spooked investors.

The stock closed 93¢, or 6.4 per cent, lower at $13.57 yesterday, wiping $1.2 billion from its market capitalisation.

Full-year profit results for Brisbane-based Suncorp, which employs almost 13,400 staff, were slightly weaker than expected.

The result featured an improvement in Suncorp’s powerhouse insurance business, whose brands include AAMI and Apia. But its banking and wealth management arm was weaker, along with its earthquake-hit New Zealand division.

“We are very, very happy with where the business is positioned and certainly excited about the momentum that we’ve got going into ’18,” Suncorp chief executive Michael Cameron said.

The surprise was Suncorp speeding up spending from several years to outlay up to $100 million this financial year

to build its idea of a financial marketplace, which is akin to an Apple store of finance products.

The money would be spent on items, including creating a marketplace app and continuing refreshing Suncorp’s brand. Suncorp argued this would pay off in terms of customers in the long term.

“The obvious area of concern is the $100 million spend,” Mr Cameron said.

“It’s hard with one or two slides and a few sentences to explain why you want to accelerate and spend more money, and I think at the moment they’re (investors) cautious about the benefits associated.”

He said over the next few weeks he would meet investors to explain the reasoning.

“I try to run the organisation ... for the long-term value of both customers and shareholders. Sometimes you have to sail through a difficult few weeks or few months while things get digested,” he said.

Bell Potter analyst TS Lim was concerned that, even with additional spending, Suncorp “don’t get the benefits from it”. “It seems never-ending,” Mr Lim said of Suncorp’s expenditure.

Suncorp’s overall approach of a financial marketplace has mixed reviews among industry sources. Some view it as a reheating of the company’s failed cross-selling model in the 2000s, but others see a logic to the strategy.

Suncorp’s net profit rose 3.6 per cent to $1.075 billion for the full year. After years of bleeding customers, Mr Cameron said among positives for Suncorp was growth.

“We’ve actually (now) grown customers by 147,000 organically, with a further 252,000 acquired through the entry into the South Australian CTP scheme,” he said.

The Australian insurance arm’s overall profits rose from $558 million to $723 million.