The Suncorp Group Ltd (ASX: SUN) share price will be on watch today after the banking and insurance giant released a trading update.

How is Suncorp performing?

This morning Suncorp released a comprehensive update on how the coronavirus pandemic is impacting its businesses.

According to the release, the significant market volatility seen over recent months has resulted in $205 million mark-to-market losses on its investments portfolio to March 31.

It would have been worse had the company not had hedging strategies put in place.

In addition to this, the company’s Insurance business has been impacted both positively and negatively by the pandemic. It has been negatively impacted by landlord loss of rent claims, but positively impacted by motor claims frequency.

In respect to landlord claims, Suncorp expects there to be an increase in claims frequency and severity for loss of rent claims.

However, it advised that the precise impact is hard to predict given the legislative responses at Federal and State levels. The company is hopeful that many landlords and tenants will reach amicable arrangements, which would not trigger their policies.

Whereas with motor claims, the company notes that the introduction of restrictions in March has led to a reduction in claims lodgements in the consumer motor portfolio. This dynamic is also evident in commercial motor, albeit to a lesser extent.

However, with restrictions easing, it has already observed a discernible rise in lodgements over the last two weeks.

Finally, the company is expecting a modest drag on its gross written premium (GWP) growth in FY 2020. This is a result of take-up of hardship relief options, and the weaker operating environment.

Suncorp Bank.

In response to the pandemic, Suncorp Bank has included a $133 million management overlay within the third quarter collective provision. This also includes appropriate amounts for its exposure to commercial segments.

This takes the total collective provision balance to $234 million, more than double the equivalent number in the first half.

Management advised that this is underpinned by its view of unemployment reaching 11.5% and an 11% reduction in house prices, with property prices remaining depressed for a prolonged period of time.

Positively, management notes that the company is currently well capitalised, with capital levels in excess of what is required to cover the expected deterioration due to the pandemic.

What about dividends?

Suncorp advised that it will consider any final dividend in its normal year end process.

Though, consistent with maintaining a robust balance sheet, management and the board will adopt a conservative mindset when making decisions about any final dividend. This will involve consideration of its capital position, the outlook for the economy, and APRA’s guidance on dividends.

More reading

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• Is Santos the best ASX 200 energy share?
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If I had $1,000 to invest into ASX shares right now, I’d go for Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). The Soul Patts share price looks really good to me right now.

About Soul Patts

Soul Patts is an investment conglomerate that has been going since the early 1900s. It’s invested in a variety of different industries and businesses such as TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and Clover Corporation Limited (ASX: CLV).

It’s also invested in a number of unlisted businesses such as swimming schools, agriculture and resources. I really like that it may be about to expand into data centres.

Why I’d invest $1,000 at this Soul Patts share price

There are few investments listed on the ASX that have outperformed the ASX index as consistently over the long-term as Soul Patts. Its investment diversification strategy has been very good. It means that management can look at almost any potential investment.

At the time of writing the Soul Patts share price is down by 23% since 20 February 2020. I think that’s a sharp fall for a business that’s defensive and has a promising long-term future.

I’m a big fan of the company investing in small caps on the ASX. Its investments in shares like TPG and New Hope Corporation Limited (ASX: NHC) were tiny at the start, but they have grown tremendously. Soul Patts may be able to find the next opportunity with these investments.

I think it’s important to remember that interest rates are now incredibly low. With share prices a lot lower I think it makes sense to invest in shares. Soul Patts has a grossed-up dividend yield of 4.8% and it has increased its dividend every year since 2000. 

At this share price, I think Soul Patts looks like a very solid buy under $18. I’ll probably be buying shares next time trading rules allow.

More reading

• 2 ASX shares that every investor should own
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• Why I’m even more confident about the Soul Patts share price
• How to make a $1 million share portfolio by investing $1,000 a month
• 2 ASX shares to build a diversified dividend portfolio

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last year, S&P/ASX 200 Index (INDEXASX: XJO) energy share Santos Ltd (ASX: STO) announced an agreement to purchase the Australian west LNG assets of ConocoPhillips (NYSE: COP). For US$1.39 billion, the company would acquire an estimated ~16% earnings per share accretion in 2020.

But then everything went wrong. Santos has been buffeted on both sides during the past 2 months through no fault of its own. The pandemic has effectively killed off demand while the Saudi-Russian oil price war has created a supply glut. A perfect storm that would have killed off a less well-managed company.

Nevertheless, Santos is well placed to weather this storm. It has used the current crisis to drive a transformative action plan. 

A disciplined ASX energy share

On 23 March 2020, Santos announced a $550 million (38%) reduction in 2020 capital expenditure. Santos also announced a $50 million reduction in 2020 cash production costs and is targeting a free cash break-even point of US$25/bbl. For a large scale capital intensive company, this is an outstanding effort. 

Even with the strains of coronavirus, Santos has produced the highest Cooper Basin gas production in 9 years. The company also generated $265 million of free cash flow in Q1 of CY2020. 

Strong balance sheet

The company is carrying more than US$3 billion in liquidity. This comprises US$1.15 billion in cold hard cash and US$1.9 billion in committed yet undrawn debt facilities.

In a wise tactical move, Santos unloaded a 25% stake in the Darwin LNG facility and the Bayu-Undan gas field to South Korean energy group SK E&S. It also has a letter of intent signed to sell-down a 12.5% interest in Barossa to JERA. This will allow Santos to pay for the ConocoPhillips acquisition in cash and $750 million 2-year debt.

Santos has also managed to sustain consistent pricing amid these turbulent times. The company has ~70% of volumes tied to prices via fixed price domestic gas sales, and oil hedged at an average floor price of US$39/bbl.

Add to this Santos has full control over current capital expenditure decisions with all major capital projects yet to take final investment decisions.

Foolish takeaway

The oil and gas sectors remain the blood of nations. For this reason, they remain the main industry globally to be protected by private armies. Oil and gas are likely to stay that way for the foreseeable future until genuine scalable alternatives emerge in the energy markets.

While the oil price is low now, it will rise again over time. Santos is, in my view, the best-placed ASX energy share to emerge from the pandemic structurally stronger than it was in January 2020. Its share price remains 41% down year-to-date.

More reading

• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday
• Which is the cheapest ASX bank stock on the market?
• 3 ASX 200 shares to buy before the market rebounds

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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