Suncorp recorded a 51.8% rise in first-half general insurance profit after tax to $510 million, as higher premium growth lifted its key Consumer Insurance and Commercial and Personal Injury divisions in Australia.

Total general insurance gross written premium (GWP), including its New Zealand business, grew 16.3% to $6.87 billion in the July-December period, the business announced this morning.

At the group level, overall net profit after tax went up 5.4% compared with a year earlier to $582 million, net investment returns improved to $396 million from $167 million, and cash earnings grew 13.8% to $660 million.

In New Zealand, the business benefited from relatively benign weather, with no natural hazard events in the half, while in Australia there were six “significant” weather events from November to December. The six events have to date prompted 45,000 claims and cost about $568 million – $112 million below Suncorp’s first-half allowance.

Suncorp Group CEO Steve Johnston says the first-half performance “reflects strong growth across the group and positive investment performance from higher running yields and mark-to-market gains”.

Consumer Insurance profit surged to $203 million from $32 million, reflecting continued momentum in revenue and improved investment income. The home portfolio achieved GWP growth of 12%, with unit growth of 2.1% and average written premium (AWP) growth of 9.9%. Motor GWP was up 18.2%, with gains across mass and niche brands; unit growth was 2.3% and AWP growth was 15.9%.

“It’s pleasing to see the consumer portfolios are performing strongly, particularly given the significant pricing that has been required to address input cost inflation and rising reinsurance costs,” Mr Johnston said in an earnings call this morning.

Commercial and Personal Injury net profit declined $37 million to $194 million after the previous corresponding period benefited from the release of a business interruption provision of $124 million. Excluding the release, profit after tax was up 34.5%.

GWP growth was achieved across all portfolios in Commercial and Personal Injury and was particularly strong across commercial tailored lines and workers’ compensation. Commercial GWP grew 16% and workers’ compensation gained 19.7%.

The New Zealand general insurance business also delivered better earnings, with net profit rising 3.3% to $NZ94 million ($88 million). Suncorp says the business benefited from the benign natural hazard experience and improved investment income, but increased reinsurance and commission costs partially offset the gains.

Suncorp expects GWP growth in the low to mid teens for this financial year, primarily driven by increases in AWP as the business responds to increased input costs, including from reinsurance, natural hazards and supply chain inflation.

“An underlying [insurance trading ratio] around the midpoint of the 10% to 12% range remains the target for FY24,” Suncorp said.

The group says it is aware consumers are facing affordability challenges, the result of premium rises pushed through by the insurer and the industry after the 2022 floods and other catastrophes.

The price adjustments have helped address inflationary pressures, but Suncorp has indicated premiums are still expected to trend upwards in the near future.

CFO Jeremy Robson says written premium is now running ahead of cost of policy, but “that hasn't always been the case and there’s a catch-up element to this ... [it] needs to come through to get margins back to where we want it”.

Mr Johnston says the issue of insurance affordability cannot be solved by any one party.

Suncorp provided a five-year time series showing its natural hazard costs from 2018-19 to 2022-23. “Over my 20 years at Suncorp, I’ve always come to believe that around 100,000 claims per year ... it’s a bad year. You can see that within that five years ... we’ve been hitting that level and sometimes comfortably ahead of that level,” Mr Johnston said.

Over the same five-year period, he says, Suncorp’s aggregate gross natural hazard costs have reached nearly $10 billion.

“The cost of natural hazards and reinsurance, which are material inputs into pricing in insurance, have increased by $1 billion ... that is 54% ... you can see the cost per policy over the last few years for home and motor has increased substantially,” Mr Johnston said.

“Put simply, the impacts of climate change, a reassessment of Australia and New Zealand risk by our global insurance partners, the planning mistakes of the past and now inflation have converged to put the upward pressure on insurance pricing that we are currently experiencing.”