Suncorp blames storms, reforms for half-year profit dip
Suncorp says investment in strategic programs, Victorian hailstorms and increased regulatory costs are to blame for a 15.8% drop in first-half profit to $452 million.
Investment in the business improvement program contributed to a 5.7% increase in operating expenses for the half.
However, the improvement program is expected to deliver net benefits of $10 million, $195 million and $329 million in this financial year and the next two respectively, and bring operating costs down to $2.7 billion in 2018/19.
It supports “digitisation of customer experiences”, optimisation of sales and service channels, redesign of the claims supply chain, smarter procurement and streamlining the business.
Natural disasters cost the group $395 million – $65 million above the period’s allowance – driven primarily by hail in Victoria, which has a current cost estimate of $167 million.
Regulatory reforms affected compulsory third party premium income and home insurance fire service levies, which reduced headline growth rates.
The group says it had to manage an extra $17 million in costs due to increased regulation.
Gross written premium (GWP) decreased 7% to $4 billion in the half.
Investment income from insurance funds increased 242.9% to $120 million, while total investment income was $192 million, representing an annualised return of 3.2% for the half-year.
Australian home and motor insurance GWP increased 3.9% on the corresponding period of 2016, with 1.5% growth in commercial lines.
Suncorp’s New Zealand profit improved 81% to $67 million. New Zealand general insurance GWP increased 7.6%.
New Zealand CEO Paul Smeaton says the improved result is due to strong growth and the absence of major disasters following the previous year’s earthquake-affected result.
The general insurance business delivered profit of $NZ50 million ($46 million), with premium increases, strong unit growth and strong claims management offsetting increased reinsurance premiums and claims cost inflation, particularly in motor insurance.