Suncorp says strong premium growth is set to continue following gains put through in the first half in response to accelerating inflation and amid impacts from continuing natural disasters.

Insurance growth for the remainder of the year will be driven mainly by pricing as margin is prioritised over volume, with the company on track to achieve its forecast for an underlying insurance trading ratio of 10-12%, CEO Steve Johnston told a briefing last week.

“We’ll continue to adjust pricing to take account of claims frequency and increased inflationary input costs, but with a particularly focus on June 30 reinsurance renewals,” he said.

Suncorp first half profit rose 44.3% to $560 million supported by rising gross written premium (GWP), business interruption reserve releases and improved investment returns.

The business interruption provision has been reduced by $150 million as a result of the second industry test case, which went largely the way of insurers. The company has retained a $29 million provision, with “the key remaining uncertainty” the potential for future legal challenges.

Insurance Australia after tax earnings rose 142.1% to $276 million while GWP, excluding the emergency services levy and portfolio exits, grew 9% to $4.84 billion, largely driven by the consumer business.

The New Zealand general and life result increased 2.5% to $83 million, as premium increases were put through, while claims costs increased.

Natural hazard costs for Suncorp across Australia and New Zealand totalled $679 million in the half, exceeding the $580 million allowance, but the company says reinsurance will cap Auckland flood losses at $NZ50 million ($45.6 million).

“While we have been impacted by the La Nina conditions recently, there is an expectation that these extreme weather conditions are becoming neutral,” Chairman Christine McLoughlin told shareholders in a letter. “However, the global reinsurance markets remain in a hardening phase due to elevated natural hazard events and the inflationary environment, which will continue to impact the cost of reinsurance.”

S&P Global Ratings says Suncorp is strongly positioned to withstand industry headwinds such as higher natural hazard claims, hardening reinsurance prices and claims inflation.

“We expect solid premium rate increases, ongoing claims efficiency initiatives, and improving investment market valuations to offset wide-ranging industry challenges,” it says.

Moody’s Investors Service Vice President Frank Mirenzi says the first-half earnings are credit positive, with high levels of premium growth and a strong underwriting performance, as reflected in a combined operating ratio of 94.5%.

“Over the second half of the year, we expect increasing prices to benefit the insurance business, however the credit cycle may turn, raising risks and credit costs for the bank,” he said.

Suncorp says it expects to complete the sale of the banking division to ANZ in the second half of the calendar year, subject to regulatory clearances.