Suncorp is bracing for higher regulatory costs as it complies with recommendations from the Hayne royal commission.

The insurer has expanded its regulatory activities budget by $50 million to $140 million for this financial year.

“As we go into 2019/20, there are a number of other factors; we’re just sort of in the business planning process at the moment,” CEO Michael Cameron said.

“The big issue really is to get a feel over the next few months of what the ongoing regulatory costs will be.

“Now, we may not spend that money; we may. But I think to call it out today as an expectation is a prudent thing to do.”

Regulatory project costs doubled to $39 million in the December half, which produced a 44.7% decline in group after-tax profit to $250 million.

The Australian general insurance arm suffered a 43.2% drop in after-tax net profit to $133 million as improved margins failed to offset increased natural hazard claims and weaker investment results.

The combined operating ratio worsened 2.2 percentage points to 98.2%.

Last December’s Sydney hailstorm and other natural hazards affected earnings. Natural disaster losses were $580 million, far exceeding the $360 million Suncorp had provisioned for the period. The gross loss from the Sydney storm alone reached $370 million.

“There’s been a couple of major factors this year, of course, and this half that weren’t pleasing around the natural hazards and the investment performance,” Mr Cameron said.

Suncorp has raised its natural hazard allowance from $720 million to $820 million in 2019/20. It also plans to buy another $200 million in natural perils reinsurance.

In New Zealand the general insurance business more than doubled its half-year after-tax profit to $NZ103 million ($99 million), aided in part by benign weather.

“While this is a pleasing result, the reality is that natural hazard events could hit us at any time,” Suncorp New Zealand CEO Paul Smeaton said.