Australian insurer Suncorp has said that natural catastrophe losses from bushfires and storms have used up around half the protection available in its aggregate reinsurance program.
The company expects to have only around half of its AU $300 million (US $200 million) natural hazard aggregate protection (NHAP) reinsurance coverage left, after incurring an estimated $155 million of losses in January alone.
Suncorp said last month that it was anticipating recoveries under its reinsurance program following an “unprecedented” start to both the bushfire and the storm season in Australia.
The devastating outbreak of fires that has dragged on since November has become the costliest bushfire event ever for the country, and re/insured losses were only compounded further by severe hailstorms and heavy rainfall in January.
Despite these catastrophe losses, Suncorp managed to post a net profit after-tax of AU $642 million (US $430 million) for the half year ending December 2019, although results were inflated by the $293m after-tax profit from the sale of its Capital SMART and ACM Parts businesses.
Looking only at the performance of business lines, profit after-tax declined 6.2%, reflecting lower reserve releases, an increase in regulatory project costs, and a contraction in the home lending book.
This included profit of $123 million (down 3.9%) for the Insurance Australia segment, $171 million (down 6.0%) for Banking and Wealth, and $108 million (down 10.0%) for Suncorp New Zealand.
“While there is more work to do, we’re confident in the progress made across each of our four strategic priorities,” said Suncorp CEO Steve Johnston. “This was achieved against the backdrop of challenging economic conditions and significant natural disasters, including storms and bushfires.”
Johnston remains confident that additional investment in the Group’s reinsurance program means that Suncorp is well protected against natural hazards going into the second half of the year.
“We remain confident in the resilience of the Group and we will continue to take a strategic approach to protect the consistency of our earnings by strengthening our core businesses, supported by appropriate risk selection, and significantly strengthened reinsurance arrangements,” he explained.
“Looking ahead, we will continue to build our portfolio of brands while focusing on adding value through our digital platforms and shaping the business to better drive operational excellence and efficiency.”