Sharechat Logo

Suncorp's NZ insurance business posts 57% drop in first-half profit on quake costs

Thursday 9th February 2017

Text too small?

Suncorp Group's New Zealand insurance units posted a 57 percent decline in first-half profit, mainly reflecting the Kaikoura earthquake and additional 'over-cap' claims from the 2010/11 Canterbury earthquakes.

Suncorp New Zealand’s general insurance and life insurance businesses had a profit of $37 million, down from $87 million a year earlier. The decline was mostly in Suncorp's NZ general insurance business, which operates Vero Insurance and AA Insurance in a joint venture, recording a 72 percent drop in profit to $19 million. Its life insurance businesses, Asteron Life and AA Life (a JV), had a 5.3 percent drop in earnings to $18 million.

The parent company today reported a 1.3 percent gain in first-half profit to A$537 million while also saying it was looking at strategic alternatives for its life insurance arm, which could include a sale or partnership. Suncorp's New Zealand life insurance business isn't covered in the review.

The parent company's results pack, released to the ASX today, shows operating expenses for New Zealand rose to A$203 million from A$186 million, offsetting lower expenses from Suncorp's insurance and banking & wealth businesses across the Tasman. The parent's results show net costs for natural hazard events included A$28 million of internal reinsurance on the Kaikoura earthquake. That was the Australian group's third-largest of 11 natural disaster events in the first half after storms in South Australia and Victoria in November and December.

Net of internal reinsurance, the Kaikoura earthquake costs were $20 million.

"Risk of further aftershocks from the Kaikoura earthquake remain over the coming months, however, the SNZ balance sheet remains well protected by the group reinsurance programme," the company said. "Reinstatement of catastrophe cover following the Kaikoura event will result in higher reinsurance expenses for the FY2017 year."

The parent's accounts show that net incurred claims from New Zealand rose 23 percent to $372 million. The actual claims expense in New Zealand soared 179 percent to $1.33 billion but was offset by a 455 percent surge in reinsurance and other recoveries to $955 million. Its insurance trading ratio dropped to 3.8 percent from 14.8 percent.

SNZ recorded the strongest gain in gross written premiums in home insurance, which rose 8.7 percent to $226 million in the first half. Commercial insurance rose 1 percent to $298 million while motor insurance rose 6.5 percent to $164 million.

The parent company today announced "an optimisation programme" for its Australian Life insurance division and is exploring "strategic alternatives" for that business. Suncorp NZ chief executive Paul Smeaton said the New Zealand life business was "out of scope" for the optimisation programme and operates as a strategically important standalone entity.

Suncorp's ASX-listed shares rose 0.2 percent to A$13.05 and have gained 20 percent in the past 12 months.

BusinessDesk.co.nz

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares gain as A2 calms critics with strong sales
NZ dollar may extend rally on signs of gradual Fed rate increases
Larry Ellison's NZ yacht company key to America's Cup rival
Port of Tauranga eyes record $101mln 2019 profit on cargo growth
Marsden Maritime eyes benefits from upper North Island transport study
NZ screen sector needs special employment carve-outs to stay competitive
A2 shares climb 7.7% as Chinese formula sales grow
NZ software firm SwipedOn sells for $11 million
AWF Madison drops 3.7% as failed construction firms dent earnings
Genesis partners with Tilt in Taranaki wind farm

IRG See IRG research reports