Suncorp's cash profit rose 39.5% in the first half to $509 million driven by earnings momentum across its Australian and New Zealand insurance operations and in banking and wealth.

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

Suncorp has put through pricing increases to reflect higher costs on home insurance and to improve commercial margins while the firm is moving to enhance its underwriting, boost its digital distribution capability and improve its claims processes, 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 as the result benefitted from mark-to-market gains on insurance investment funds, while gross written premium rose 4% to $4.3 billion

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

Mr Johnston says the market is hardening in personal lines in response to natural hazard cost increases, while Suncorp and other insurers have taken remediation action on commercial portfolios to lift margins.

“There’s underlying inflation in those books, so we need to maintain discipline around that,” he says. “So price increases potentially will keep going through, but over time I think they won’t be of the magnitude that we might have seen in the past two to three years.”

Suncorp today 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.

CFO Jeremy Robson says policies citing the outdated Quarantine Act have been progressively updated and about 90% of the book is on the revised wording, while only a small number of business interruption claims have been received to date.

The company is confident on wordings citing the Biosecurity Act, particularly after a court ruling on Victoria’s Vanilla Lounge cafe last year, while policies with prevention of access wordings where there is a physical damage requirement are also not expected to respond, Mr Robson says.

A second business interruption test case to be filed by the Insurance Council of Australia should not have significant implications for the provision, he says.

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

Suncorp 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.

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) driven by a strong performance in the direct motor and home portfolios.

The life business contributed a record first half contribution of $NZ29 million ($27 million), reflecting “favourable mortality experience” and investment market returns.

S&P Global Ratings says the earnings result is “solid and supportive” of the current ratings and outlook and the group benefitted from an investment market bump, sound premium growth and better-than-expected reserve releases.

“The group now has a total provision of $214 million for business interruption claims, which is conservatively based, in our view,” S&P said.