Suncorp to Raise $900 Million as CEO Departs

Suncorp (SUN) CEO John Mulcahy has announced that, after six years leading the group, he will step down from his current role – at the same time as the group slashed its profit forecast and unveiled a capital raise of up to $1.302 billion. The shares were placed in a trading halt at A$7.13 yesterday, which compares with the underwritten part of its offer at $4.50 apiece to raise $900m – a 37% discount. The group said it could also raise a further $402m via an offer to retail shareholders.

During his tenure, Mulcahy earned $7.6m in cash and will reportedly receive a $2.4m payout. He also holds 1.3 million shares worth an estimated $9.26m (based on yesterday's closing price) and another 400,000 incentive shares worth $2.8m. The Brisbane bank and insurer warned its half-yearly net profit after tax would be $260m - 45% below expectations. The company recorded bad debts to the tune of $355m for the first half of the financial year, owing to numerous insurance claims that resulted from a number of bad storms in the state.

Mulcahy says a $1.302 billion capital raising, including a fully underwritten $390 million placement, a partially underwritten entitlement offer of up to $912 million, and a $100 million dividend reinvestment plan, will further strengthen the group and enable it to take advantage of the changes under way in the financial services sector. The raising will lift Suncorp’s adjusted common equity (ACE) ration to 6.86%, up from 3.89% as at December 31.

Suncorp said its general insurance business would reports profits of $240m to $260, down by close to half. However, even that weak result depends on reinsurance recoveries from the storms in Queensland last year, which are yet to be finalised. The former Commonwealth Bank of Australia executive said the CEO’s departure was not linked to the Promina deal or a lack of market confidence in his abilities.