Suncorp has signalled a need to “get ahead” of claims inflation after reporting a drop in full-year earnings, driven partly by a blowout in natural hazard costs.

Net profit after tax tumbled to $1.03 billion in 2025-26, down 43.7% on the previous year, which had one-off gains from the sale of Suncorp Bank and New Zealand Life. Cash earnings dropped 28.2% to $1.04 billion.

Suncorp exceeded its $1.77 billion natural hazard allowance by $254 million and paid out more than $10 billion in overall claims, a record for the insurer, CEO Steve Johnston told this morning’s earnings briefing.

The insurer dealt with 32 separate weather events across Australia and New Zealand, including 18 declared natural hazard incidents of more than $10 million each. It managed more than 120,000 natural hazard claims.

Mr Johnston says the 2025-26 results “is a good outcome in a year where natural hazard costs exceeded our allowance”.

Gross written premium grew 2.7% to $15.4 billion, but underwriting profit declined 23.2% to $1.18 billion. The underlying insurance trading profit rose 4.5% to $1.64 billion and the underlying insurance trading ratio stood at 11.8%, at the upper end of Suncorp’s 10%-12% target range.

In Australia, consumer insurance underwriting profit fell 52.9% to $312 million, but commercial and personal injury insurance recorded a 46.4% rise in underwriting profit to $486 million. The New Zealand division reported an 18.1% earnings drop to $NZ403 million ($335.74 million).

Mr Johnston says “elevated levels” of inflation persist and pricing to inflation is a key focus.

“Inflation is the biggest driver of our pricing position …  if you get behind, it takes a long time to catch up … our pricing discipline is to get ahead of inflation as best we can and be prospective around our pricing as best we can,” he said.

“We’d like to be there or thereabouts, or slightly ahead in terms of our assessment of inflation, not only underlying [consumer price index] but insurance inflation and particularly as it flows through the supply chain. And I expect that will remain elevated over the medium term.”

Within consumer insurance, motor claim costs increased due to portfolio growth and inflationary pressures, while home recorded higher average claim costs.

“In particular, the average escape of liquid claims costs were elevated. Industry-wide construction and labour inflationary pressures persisted, compounded by greater claims complexity,” Suncorp said.

This financial year, GWP growth of 3%-5% is expected, reflecting pricing for inflationary pressures in the consumer and personal injury portfolios.

Suncorp has set a natural hazards allowance of $1.8 billion, excluding claims handling expenses and profit commission from its FY27 reinsurance arrangement.

Investment bank Jefferies says the insurer’s new five-year reinsurance structure should lower hazard-induced earnings volatility.

As reported in a Breaking News bulletin this morning, Suncorp has announced a significant shake-up of its executive team.