Monday, November 2, 2009

Suncorp to lose Sunshine State shine

suncorp insurance

The Queensland-based Suncorp banking and insurance group is set for a major board shakeup, with shareholders voting to abolish a rule that 40 per cent of directors must live in the Sunshine State.

The State Government yesterday announced it would scrap the legal obligation created when Suncorp, Metway and QIDC merged in 1996, a law change the State Opposition last night described as "a pity".

Suncorp, which labels itself Australia's fifth largest bank and runs insurance firms AAMI, GIO and Apia, suggested the move at its annual general meeting at the Brisbane Convention and Exhibition Centre yesterday.

The 11-member board faced a barrage of criticism from angry shareholders following news the company's after-tax profits fell 40 per cent to $338 million last financial year - the second consecutive drop in its annual earnings.

Suncorp chairman John Story acknowledged the business had been "affected more than most" by the global financial crisis, combined with a second year of severe weather events including the Black Saturday bushfires and Queensland floods. These events created a stream of insurance claims.

Mr Story responded to investor criticism about the unwieldy size of the company's board by proposing an amendment to its constitution to provide "greater flexibility in the process of board renewal".

Treasurer Andrew Fraser later announced the government would allow the changes to take effect, saying the relaxation of the 40 per cent local board rule would allow the company to "secure its future as a national and international institution".

"Suncorp will continue to be a Queensland company, headquartered in Brisbane with a Queensland-based managing director," he said in a statement.

Opposition treasury spokesman Tim Nicholls told the Liberal National Party would not oppose the law change as it wanted to see the company thrive.

"But I'm disappointed they reckon they can't find directors of a suitable calibre in Queensland," he said.

The move came amid shareholder unrest over the company's poor financial results and a 63 per cent cut in dividends compared with the previous year.

Investors at the AGM clapped as a number of speakers called on Mr Story and the rest of the board to resign or take pay cuts to reflect the results.

Mr Story said he understood why people were concerned.

"We've had a disappointing financial outcome," he told after the meeting.

"I fully understand the shareholders are disappointed with the outcome. I feel their pain."

New chief executive Patrick Snowball, a former British Army soldier and financial services executive, said he would look for ways to reduce complexity and duplication in the Suncorp Group.

Mr Snowball, who started in his new role two months ago, assured shareholders the group would not sell its banking division, which he described as a core part of the business.

In a warning to predators, he said: "My polite message to those who seek to target us is: Get your tanks off our lawn."

Mr Snowball offered no guarantees the bank would keep its home loan interest rate rises aligned to the Reserve Bank's cash rate increases. After the meeting, he said the bank would make "appropriate" decisions.

Suncorp's remuneration policy, which included no short term incentives to executives or increases in salaries or directors fees, was yesterday supported by 96 per cent of shareholders.

Financial reports showed the group's provision for bad debts rose to $710 million in 2008-09 - a tenfold increase on the previous year.