Big claims drag Suncorp profit down
Suncorp’s full-year net profit has slumped 48% due to a big spike in weather-related claims, but the bancassurer is taking heart from continued growth in its commercial lines businesses.
The Brisbane group recorded total net profit of $556 million, well down on the $1.06 billion reported last year. CEO John Mulcahy says the major factor was a surge in weather-related claims, which cost $415 million or more than double the annual claims provision of $200 million.
December storms in the western Sydney suburb of Blacktown alone cost Suncorp $170 million.
Despite the weaker headline figures, Suncorp has recorded a 3% increase in gross written premium (GWP) in commercial lines, a figure Mr Mulcahy regards as “outstanding” given ongoing soft market conditions.
Overall gross written premium also increased by 3% to $6.4 billion as Suncorp lifted premium rates in home and motor classes to recoup weather-related losses. Home and personal motor portfolios achieved growth of 8% and 5% respectively.
But pre-tax income from general insurance operations was just $307 million against $835 million last year.
Investment returns sustained a $232 million loss, reflecting the effect of depressed equity and fixed interest markets. The company released $251 million of reserves to bolster returns to shareholders.
The combined ratio blew out to 97.4% against a relatively profitable prior year figure of 91.6%.
Mr Mulcahy says Suncorp is at the mercy of external events like any other financial provider. But he says the group “is responding to current market conditions with a renewed focus on cost management by reducing discretionary spending, reducing duplication and looking for ways to reach its integration end-state business model more quickly”.
Suncorp has adjusted reinsurance arrangements to minimise any further exposure to bad weather and lifted provision for claims to $240 million.
The company expects an insurance margin of between 10-12% this financial year, with an increase in GWP of between 4-6%. Mr Mulcahy says near the halfway point of its three-year integration of Promina, Suncorp is on track to meet its synergy targets.
The Brisbane group recorded total net profit of $556 million, well down on the $1.06 billion reported last year. CEO John Mulcahy says the major factor was a surge in weather-related claims, which cost $415 million or more than double the annual claims provision of $200 million.
December storms in the western Sydney suburb of Blacktown alone cost Suncorp $170 million.
Despite the weaker headline figures, Suncorp has recorded a 3% increase in gross written premium (GWP) in commercial lines, a figure Mr Mulcahy regards as “outstanding” given ongoing soft market conditions.
Overall gross written premium also increased by 3% to $6.4 billion as Suncorp lifted premium rates in home and motor classes to recoup weather-related losses. Home and personal motor portfolios achieved growth of 8% and 5% respectively.
But pre-tax income from general insurance operations was just $307 million against $835 million last year.
Investment returns sustained a $232 million loss, reflecting the effect of depressed equity and fixed interest markets. The company released $251 million of reserves to bolster returns to shareholders.
The combined ratio blew out to 97.4% against a relatively profitable prior year figure of 91.6%.
Mr Mulcahy says Suncorp is at the mercy of external events like any other financial provider. But he says the group “is responding to current market conditions with a renewed focus on cost management by reducing discretionary spending, reducing duplication and looking for ways to reach its integration end-state business model more quickly”.
Suncorp has adjusted reinsurance arrangements to minimise any further exposure to bad weather and lifted provision for claims to $240 million.
The company expects an insurance margin of between 10-12% this financial year, with an increase in GWP of between 4-6%. Mr Mulcahy says near the halfway point of its three-year integration of Promina, Suncorp is on track to meet its synergy targets.