Australian primary insurer Suncorp Group Limited has reported a rise in group net profit after tax (NPAT) of 5.4% to $582 million, as General Insurance gross written premium (GWP) rose 16.3% to $6.9 billion on the back of customer growth, targeted pricing response to inflation, and increased natural hazard and reinsurance costs.
The improvement in earnings is primarily driven by a significant improvement in investment returns, stated the insurer.
There was a strong equity market performance, higher running yields and favourable mark-to-market movements across the General Insurance business, resulting in higher net investment income of $396 million, compared to $167 million in H1 2023. The Group’s fixed interest and inflation-linked bond portfolio continued to support returns.
General Insurance’s underlying insurance trading ratio (UITR) was reported at 10.2%, while the underlying insurance services ratio (UISR) increased to 8.1% from 7.9%, supported by improved investment yields and ongoing improvements to the business.
As announced earlier, the cost of natural hazard events was $568 million for the period, coming in $112 million below the insurer’s allowance in the period.
Suncorp New Zealand benefitted from a relatively benign weather period with no natural hazard events over the half, whilst Australia was impacted by six significant weather events which occurred through November and December. The insurer is currently managing around 45,000 natural hazard claims in H1 2024.
Suncorp’s natural hazard allowance for FY24 remains $1.36 billion. The carrier highlights its comprehensive reinsurance program in place for major events, noting that the full limits remain available on all of its reinsurance covers going into the second half of the financial year.
Regarding prior year reserves, net of the impact of loss component movements, Suncorp reveals strengthening of $107 million across several portfolios. The reserve strengthening was driven by a combination of external challenges, including ongoing inflationary pressures in supply chains causing higher repair costs and extended repair times in the motor portfolio.
Other losses after tax increased $28 million to $55 million, partially driven by restructuring costs of $11 million associated with the insurer’s new operating model and higher joint venture profit shares.
Steve Johnston, Chief Executive Officer, Suncorp Group affirmed that it was a challenging half for customers and the Group amid ongoing inflationary pressures and the impact of severe weather events that hit Australian communities in November and December.
“Against this backdrop, the Group has continued to work hard to support its customers while also delivering improved earnings driven by increased customer demand for our products and services and positive investment performance over the half,” Johnston stated.
“Net investment returns were up significantly from $167 million in 1H23 to $396 million, and this has been a key contributor to our reported earnings and profit for the half.
“Our Australian and New Zealand general insurance businesses achieved strong premium growth, with customer growth across both our home and motor portfolios. This remains a good indication of the value our customers continue to see in our products and brands, and the protection they provide,” he added.
“The growth in gross written premiums is also reflective of targeted price increases in response to higher reinsurance costs, ongoing supply chain inflationary pressures resulting in higher repair costs for cars and homes, and an elevated level of natural hazards. We remain acutely alert to the affordability challenges facing customers and continue to focus on driving greater efficiencies in our own business. We are vocal advocates of policy reform and mitigation investment that helps reduce the risk of extreme weather to people and communities, which are critical in reducing insurance premiums for consumers, particularly in high-risk locations.
“Our teams right across the country have been supporting customers impacted by the severe weather events experienced across the east coast of Australia since November 2023. Over the half, these resulted in around 45,000 claims at a cost of $568 million, which remains within our natural hazard allowance of $1,360 million for the 2024 financial year. While our business remains well protected through our comprehensive reinsurance program, more needs to be done to protect people before disaster strikes.
“We continue to see intense industry-wide competitive pressure in both deposits and lending, which we are carefully balancing. Last week we welcomed the Australian Competition Tribunal’s decision to grant authorisation for the proposed sale of Suncorp Bank to ANZ Banking Group, which acknowledged the competitive banking environment for customers. The decision brings us one step closer to becoming a dedicated Trans-Tasman insurer proudly headquartered in Queensland.
“We look forward to continuing to engage constructively with the Queensland Government and Federal Treasurer on the remaining approvals and remain fully committed to Suncorp Bank while the process continues,” said the CEO.
