Suncorp earnings increased in the first half as higher premiums contributed to gains and the company says improvements it’s making in underwriting, distribution and claims will drive future growth.

CEO Steve Johnston says the company has entered the second half in “good shape”, but the broader economic outlook remains uncertain given the COVID-19 pandemic and the expected winding back of government support programs.

The group reorganised the insurance business last year and plans to make targeted investments in pricing analytics and capability to enhance underwriting, while also boosting digital distribution and claims capabilities, he says.

“We are now deep into the process of improving our business,” he told insuranceNEWS.com.au. “These programs will start to build over the next six months and will build on the momentum that is already embedded in the business.”

Insurance Australia profit jumped to $258 million from $123 million buoyed by accounting value increases on insurance investment funds and a 4% gain in gross written premium (GWP) to $4.3 billion.

In personal lines, home average written premium rose 7.6% as the insurer priced for higher natural hazard costs, while motor GWP increased 5.3% supported by rate and unit growth.

“With the alignment of the commercial portfolio largely finished last year, commercial GWP grew 3.2% from good ongoing premium rate momentum, partially offset by lower retention in SME packages,” CFO Jeremy Robson told a results briefing.

The Australian business combined operating ratio was 98.3% compared to 98.7% a year earlier.

Suncorp has increased its business interruption provision to $214 million from $195 million, to account for possible impacts from national lockdowns last year and the second Victorian COVID-19 wave.

Mr Robson says a second business interruption test case the Insurance Council of Australia is preparing should not have significant implications for the provision.

“There are some things that are being tested that would have a very modest impact on the numbers,” he said. “Most of the things that are being tested wouldn’t impact the number.”

New Zealand net profit jumped 19.4% to $NZ129 million ($121 million) buoyed by both the life and general businesses.

General insurance GWP grew 5.4% to $NZ923 million ($865 million), with direct motor and home performing strongly, while the life business provided a record first half contribution of $NZ29 million ($27 million), reflecting “favourable mortality experience” and investment returns.

Suncorp's overall cash profit from insurance operations, banking and wealth rose 39.5% in the half to $509 million.

Statutory net profit declined 23.7% to $490 million, with the prior year result boosted by proceeds from the sale of the Capital Smart crash repair and ACM Parts businesses.

Moody’s Investors Service Vice President Frank Mirenzi says the result is underpinned by an improved economic outlook with credit impairment charges significantly lower and a strong recovery in investment markets.

“Increasing insurance premium rates support revenue growth, and the group maintains very high levels of excess capital,” he said.