Suncorp books $568m in cyclone season costs as inflation plagues premium pricing
Listed insurer Suncorp has assured investors its premium pricing was running ahead of inflation after revealing the mounting costs of cyclone season.
A summer of storms and cyclones has slapped Suncorp with $568m in claims, but the listed insurer has assured investors that premium prices were running ahead of costs.
In a market update on Monday, Suncorp said catastrophe losses had been muted thanks to a lucky miss from Cyclone Kirrily, but warned prior year reserves would sap profits by up to $107m.
Suncorp said its natural catastrophe losses were running at less than half its full year allowance, but noted it was facing a further 500 claims for damage linked to Cyclone Kirrily, which hit North Queensland in recent days.
Suncorp said its $568m in claims was set against its budget of $1.36bn for natural catastrophe costs for the full financial year.
This comes as Suncorp prepares to reveal its first half results to the market on February 26.
Suncorp said it expected to recover $14m from the Cyclone Reinsurance Pool to cover claims costs associated with Cyclone Jasper, which bore down on Queensland in December.
Cyclone Jasper has slugged Suncorp with at least $56m in claims costs, with the Insurance Council of Australia noting the natural catastrophe had cost more than $202m across the insurance industry.
Suncorp chief executive Steve Johnston said the insurer had benefited after Cyclone Kirrily missed population centres, with the storms instead heading inland.
“While this means we have seen less damage than expected in the more densely populated coastal communities in North Queensland, we are seeing significant rainfall and storms in southern parts of the state, and we will be closely monitoring the movements of the system over coming days,” he said.
“Since late November we have experienced a series of extreme weather events right along the East Coast, with teams continuing to progress customer claims across Queensland, New South Wales and Victoria.”
Suncorp said it had a comprehensive reinsurance program to pick up losses from major catastrophes, with losses set to be capped at $350m for the first event.
However, the full limit on Suncorp’s reinsurance pool remains unused for the insurers’ second half, with losses for individual events so far limited to below the cap.
Suncorp said it was also moving to strengthen its prior reserves as it moved to sign off its first half results.
This will see Suncorp book a $107m pre-tax net impact driven by costs inflation largely in motor claims.
But Mr Johnston said Suncorp’s earnings would be supported by “strong top line growth across the general insurance businesses” revealing gross written premium growth was running “ahead of guidance”.
“We continue to closely manage insurance pricing to respond in line with input costs such as reinsurance and inflation on repairing homes and cars, while also being mindful of the affordability challenges facing our customers,” he said.
“Pleasingly, in the first half we have seen more insurance customers choosing our home and motor products, with strong unit growth in both key portfolios.”
Offering guidance, Suncorp said underlying margins were running around “the midpoint” of 10-12 per cent.
But the insurer noted the margin in the first half was “at the lower end of that range, as expected”.
Suncorp also reiterated the potential sale of its banking arm to ANZ in a $4.9bn deal was due to cost $70m.
A decision on the bank sale is due on February 20.
Shares in Suncorp closed down 0.42 per cent at $14.21.
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