Australian insurer Suncorp has reported its results for the first half of the fiscal year for 2023, during which time it grew its net profits by 44.3% despite natural hazard losses exceeding the its H1 budget by some AUD 99 million.
In addition to improved earnings, Suncorp saw continued strong top-line growth across H1, as well as better underlying margins and positive investment returns.
The result also benefitted from the release of $150 million of the provision for potential business interruption claims, following the resolution of the second industry test case.
But while the underlying business demonstrated strong momentum, the group’s results were impacted by elevated natural hazard activity, which drove costs of $679 million well above the half year allowance of $580 million.
Suncorp reports that the prevailing La Niña weather pattern across Australia and New Zealand led to eight separate weather events and around 53,000 natural hazard claims for H1 2023.
The most costly of these was flooding in Victoria during October, which resulted in a net cost to Suncorp of $202 million, with the Sydney East Coast Low of July the next-most-costly at $89 million.
For the full fiscal year, which runs until June 30th, Suncorp’s natural hazard allowance is $1,160 million.
The group already recorded costs of up to $410 million from five natural hazard events across Australia and New Zealand during the opening quarter of this financial year, suggesting the erosion of some of its reinsurance aggregate deductible.
And it’s also important to note that losses for H1 do not account for the catastrophic flooding that impacted New Zealand in January, which Suncorp has warned could trigger its reinsurance cover.
Suncorp’s Aggregate Excess of Loss (AXL) treaty for FY23 provides $400 million of cover in excess of a retention of $850 million for loss events above $10 million, with losses for the first half of the year having eroded $399 million of the AXL deductible, the company reports.
The group’s comprehensive reinsurance program also provides additional protection for New Zealand losses, meaning losses from the recent flood event will be capped at NZ $50 million, net of reinsurance cover.
Breaking down Suncorp’s H1 performance metrics a bit further, net profit for the period increased 44.3% to $560 million, while cash earnings increased 62.9% to $588 million, which allowed the group to re-affirm its targets for the full year.
The company also recorded gross written premium growth of 9.0%, excluding Emergency Services Levies (ESL) and portfolio exits, in its Australian general insurance business, and 12.2% in New Zealand.
Volatility continued in investment markets in the half, although the impact of higher running yields more than offset any mark-to-market losses across the Group’s $15.0 billion investment portfolio.
The net gain from yields and investment markets was $287 million compared to $61 million in H1 2022.
“Through a dedicated focus on executing our strategic initiatives as outlined to the market two years ago, our three businesses have continued to build on the good momentum achieved over this time to deliver top-line growth with improved margins and productivity,” said Suncorp CEO Steve Johnston.
“Our Australian and New Zealand businesses have achieved strong growth in premiums, while unit growth across our consumer portfolio demonstrates the value of our products and brands, particularly in an inflationary environment,” he continued.
“We firmly believe our ability to continue to manage the risks associated with a changing climate, drive a more resilient Australia and New Zealand through our products and advocacy and create further long-term shareholder value will be enhanced as a dedicated Trans-Tasman insurance company.”
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