Suncorp has announced its results for the full-year 2019, revealing that its net profit (after-tax) declined by 83.5% year-on-year to AUD 175 million, driven by an AUD 899 million net loss on the sale of its Australian Life Insurance businesses.
At just AUD 175 million, the Australian insurer’s net profit (after-tax) fell significantly from the AUD 1.05 billion recorded in 2018, and which includes a decline in profits in both its Australia Insurance and Banking & Wealth segments, and a AUD 910 million after-tax non-cash loss on sale of the Australian Life Insurance and Participating Wealth Business.
Overall, cash earnings increased by 1.5% to AUD 1.1 billion and profit after-tax from ongoing functions increased by 1% to AUD 1.2 billion, which was impacted by AUD 129 million in natural hazard costs above allowance, a 76% hike in regulatory project costs, an increase in compliance costs, and an increasingly competitive, slowing mortgage market.
By segment, and Suncorp reveals that the Insurance (Australia) result declined by 13.7% to AUD 588 million. General insurance gross written premiums increased by 1.3% to AUD 8.3 billion while net earned premiums increased by 1.4% to AUD 7.3 billion. Net incurred claims in the segment increased by 7.7% year-on-year, to AUD 5.5 billion.
The increase in net incurred claims is a result of higher natural hazard costs in the period, as well as the impact of risk-free rate movements and claims inflation.
Suncorp notes that a stronger performance in the second-half of the year benefited from reinsurance protection, with the firm announcing in February plans to acquire an additional AUD 200 million of natural perils reinsurance protection after losses hit its H1 2019 result. At the same time, the insurer has increased its natural hazard allowance from AUD 720 million to AUD 820 million.
In Banking & Wealth, profit (after-tax) declined by 1.4% to AUD 364 million, with Suncorp highlighting challenging operating and economic conditions combined with higher regulatory and compliance costs.
Suncorp’s New Zealand General Insurance business produced a profit (after-tax) of AUD 245 million, which is an increase of 81.5% on 2018 and which is a result of strong top-line growth and favourable working claims experience.
Gross written premiums grew by more than 10% and net incurred claims fell by 4.1% in the segment in 2019, supported by a benign natural hazard experience.
Acting Chief Executive Officer (CEO), Steve Johnston, said: “In a watershed year for the industry, dominated by the Financial Services Royal Commission, Suncorp’s purpose has never been more relevant. Despite higher natural hazards and a significant increase in regulatory costs, the core businesses remain resilient.
“To create a more sustainable company which delivers high yield and above system growth, Suncorp is focused on improving the performance of its core banking and insurance businesses. We are embracing regulatory change to strengthen trust and improve customer outcomes, leveraging our investments in digital and data, and driving efficiencies to optimise the Group’s cost base.”
