Natural catastrophes hit Suncorp half-year earnings

14 February 2022

Natural catastrophe claims and lower investment market returns reduced Suncorp first-half earnings, offsetting pricing gains that underpinned a jump in gross written premium (GWP).

Net profit for the six months to December 31 fell 21% to $388 million from $490 million as the Australian and New Zealand divisions weakened, while the banking result improved.

Natural hazard claims costs of $695 million were $205 million more than expected for the first half of the financial year as the group responded to 19 natural peril events during the period.

Insurance Australia profit after tax fell 55.8% to $114 million, with October a costly month for catastrophes.

The division’s GWP rose 7.5% to $4.47 billion led by the consumer portfolios. Home grew 8.3% due to natural hazard and reinsurance costs and motor was up 7.8% in a reflection of underlying inflation and higher sums insured.

“While we have been challenged by the La Nina climate pattern and the operational impacts of COVID-19, we continue to deliver against our strategic priorities and have good momentum as we move into the second half,” CEO Steve Johnston said.

S&P Global Ratings says Suncorp’s revenue growth exceeded its expectations and the insurer’s earnings are expected to improve in the second half, with reinsurance arrangements to moderate potential natural hazard losses.

“Underlying profitability remains sound and within our expectations,” S&P said. “Suncorp-Metway Bank also continues to provide a strong contribution to the group, underscoring the benefits of the group’s diversity.”

Suncorp says it remains on track to achieve an underlying insurance trading ratio of 10-12% next financial year, as targeted in its three-year improvement program.

“While natural hazards and investment markets have clearly impacted this result, there are many proof points to demonstrate progress towards the targets included in our FY23 plan,” Mr Johnston said.