First comes the expense of a major acquisition; then – eventually – come the profits from synergies. That’s the theory, anyway, and it’s also what Suncorp expects. The transition costs from its $1.4 billion acquisition of GIO last year have been a factor in a lower profit for the past financial year.

A decrease in the Brisbane-based allfinanz company’s general insurance profit – $110 million compared with $163 million for 2000/01 – has been blamed on falling investment returns and the transition costs of the GIO acquisition.

Chairman John Lamble and Acting CEO Chris Skilton are waiting for the dramatically higher premiums to make themselves obvious on the bottom line. Mr Lamble said the results reconfirm that the company is in line with previous forecasts of increased underwriting profit. Addressing shareholders at the group’s AGM, he said that making forecasts at this time is particularly difficult, due to “external events” such as drought, the downturn in housing, falling stockmarkets, the prospects of a Gulf war and terrorism in Bali.

“Nevertheless, assuming no unusual claim events, or a further deterioration in investment returns, we should report a very strong improvement in underlying operating performance for the full year,” he said.

He said the outlook was supported by continued progress in the integration of the GIO general insurance business, acquired by Suncorp in June 2001.

Mr Skilton confirmed that the integration program was on track and the company achieved synergies and savings worth $154 million at the end of September. He said the company expects to achieve total savings worth $240 million a year by next June. “We continue to expect that outcome for the full year, assuming no major catastrophes or unusual claims patterns.”